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Operator: Hello, everyone, and welcome to the Samsung Electronics 2025 Fourth Quarter Financial Results Conference Call. I will be your coordinator. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the conference over to the Investor Relations team. Please go ahead. Daniel Oh: Good morning, everyone. Thank you for joining us this morning in Seoul time. I'm Daniel Oh, Head of Investor Relations at Samsung Electronics. I'm grateful to have you with us today for our earnings call for the fourth quarter of 2025. Before we proceed, allow me to address several key administrative and legal points. For your convenience, today's webcast and slide deck are accessible via our IR website at www.samsung.com/global/ir. I would like to note that this call is being recorded, and it will remain available on our website for future reference. We appreciate your engagement and focus as we move through the results as today's session aims to deliver comprehensive insights into our financial performance and outlook. Please be aware that today's discussion may contain forward-looking statements reflecting our present, expectations of our future developments. Such statements should not be viewed as guarantees of future outcomes. Actual results may vary significantly from these projections due to numerous factors including, but not limited to, market dynamics, regulatory changes and operational environment. We respectfully seek your understanding of these important considerations as we seek to uphold transparency and accuracy. I will begin the discussion today with the highlights of our fourth quarter financial performance, followed by EVP Soon-Cheol Park, our Head of Corporate Management operations and Chief Financial Officer, with details on our business outlook and shareholder returns. I will then share a brief update on capital expenditures and sustainability initiatives. At that point, our executives will provide in-depth comments on their respective business areas. Following their presentations, we open the call to analyst questions. This call is expected to last about 1 hour, and we appreciate your time and attention throughout. Several key executives have joined us on today's call. In addition to myself and our CFO, we have with us EVP Jaejune Kim, representing Memory; joining the call for the first time, EVP Jason Shin for System LSI; For Foundry, EVP, Sukchae Kang; and returning the call, EVP Charles Hur for Samsung Display Corporation; also both joining the call for the first time, EVP Seong [ Hyuk ] Cho for Mobile eXperience; and EVP Hun Lee for Visual Display. Now let's begin with our consolidated financial performance for the fourth quarter of 2025. We delivered our highest quarterly revenue ever at KRW 93.8 trillion, up by 9% quarter-on-quarter. In the DX division, revenue declined 8% sequentially due to the fading impact of new smartphone launches and softness in home appliances in the wake of U.S. tariffs. On the other hand, the DS division showed strength with a sales increase of 33% quarter-on-quarter, driven by expanded sales of HBM and other high value-added products, thanks to stronger market prices. And Memory recorded another new all-time high for quarterly revenue, surpassing the level set 1 quarter ago. SG&A expenses were KRW 24.2 trillion, up by KRW 2.9 trillion quarter-on-quarter. And SG&A as a percentage of sales was up by 1 percentage point sequentially to 25.8%. R&D investments totaled KRW 10.9 trillion, up by KRW 2 trillion quarter-on-quarter and set a full year record of KRW 37.7 trillion, a testament to our commitment to investing for the future. Operating profit also set a new quarterly high of KRW 20.1 trillion, up KRW 7.9 trillion from the previous quarter. Operating margin also increased, rising 7.3 percentage points sequentially to 21.4%. While operating profit in the DX division declined due to the slowdown in the MX and home appliance businesses, the DS division more than compensated with its significantly stronger quarter-on-quarter performance driven by robust improvements in Memory profitability. Currency movements also worked in our favor. The sharp appreciation of the U.S. dollar and other currency had positive effect of adding approximately KRW 1.6 trillion to company-wide operating profit centered on the component businesses. More detailed fourth quarter results of each business will be presented by executives shortly. Before that, I would like to pass the conference call over to our CFO, Soon-Cheol Park, who will discuss our outlook and shareholder return. Soon-Cheol Park: Thank you, Daniel, and good morning, everyone. I am Soon-Cheol Park, CFO of Samsung Electronics. I am pleased to continue our update. We entered 2025 under difficult conditions, both at home and abroad, and the first half of the year post many challenges. Yet, thanks to the trust and support of our shareholders, the second half unfolded as we promised and marked the clear turnaround for the company. We achieved the highest annual revenue in our history. Profit in the fourth quarter also set an all-time high, and our stock price increased sharply. I am deeply grateful to our shareholders for standing with us through the challenges and this turnaround. The DS division introduced globally competitive products, including HBM4 and GDDR7, and some customers summed up our achievement with the idea, Samsung is back, sending a clear signal of the strength behind our differentiated performance. The Foundry business is primed for a major leap forward supported by its technology and the trust it has earned through recent deals with leading global clients. The DX division added to our technology leadership with TriFold smartphone and Micro RGB TVs while delivering distinct customer experiences powered by advanced AI technology across the Galaxy ecosystem. We also secured new growth drivers through strategic acquisitions, including FläktGroup in HVAC, ZF in ADAS, Xealth in digital health care and Masimo's audio business. Looking ahead to 2026, we expect several risks to persist, including continued global trade barriers and geopolitical uncertainties. To address this, we remain proactive and stay ahead of external shifts. The DS division will continually secure leadership in the AI semiconductor market by drawing on our unique position as the one semiconductor company in the world capable to delivering a true one-stop solution including logic, memory, foundry and advanced packaging. In Memory, we'll regain our core technology leadership; and in Foundry, we'll turn our expanded order opportunities secured through advanced process maturity into tangible results. For System LSI, we aim to transform the business by reinforcing our core strengths. We also drive innovation by applying AI solutions optimized for semiconductors and capture new opportunities with enhanced customer-centric products. The DX division will expand AI-driven products and constantly integrated our AI technologies across all of the DX division's device features and service ecosystem while providing the best AI experience to our customers. Through this, we aim to become the leader in the era of AI transformation. To maintain our competitive advantage, we'll secure our position by leveraging our distinctive products, diversifying our supply chain and optimizing global operations to address the issues such as compound costs and global tariff risks. Furthermore, we will continue to invest in future growth engines including HVAC, automotive electronics, medical technology and robotics to secure technology leadership in the years ahead. Company-wide, we'll strengthen our processes and improve cost efficiency by promoting AI-driven innovation and adopting digital twin technologies. Also, we'll strive to make this a year in which we deliver tangible progress in our humanoid robotics business as part of our preparations for the future. Next, our outlook for the first quarter of 2026. In semiconductor industry, we expect structural growth opportunities to increase driven by AI and server demand. In response, we will maintain our focus on profitability while monitoring macro uncertainties, including tariff impacts. For the DS division, in Memory, we believe market conditions will remain favorable, driven by AI demand and the industry-wide supply constraints. And we expect to sustain our strong performance by focusing sales on server DRAM, eSSD and other high value-added products supported by our technology leadership. In Foundry, although results may decline somewhat due to seasonal effects, we will preserve our growth momentum by advancing process maturity and securing new orders from major customers. In System LSI, while there are concerns regarding customers' cost burdens, we'll seek to maximize sales of new and high value-added products. For the DX division, the MS business will reinforce its leadership in the AI smartphone market by delivering AI experiences that enhance everyday life supported by the launch of new models. While headwind from rising component costs are expected to persist across the industry, we aim to secure profitability through improved supply stability and resource efficiency initiatives. In the VD and home appliance businesses, amid continued challenges such as intensified competition and tariffs, we expanded our presence in the high value-added product market by delivering high personalized customer experiences powered by enhanced AI technology. Moving on to the shareholder returns. The Board of Directors today approved a year-end per share dividend of KRW 566 for common stock and KRW 567 for preferred stock. On our shareholder return policy for 2024 to 2026, we committed to regular quarterly dividends of KRW 2.45 trillion from annual payout of KRW 9.8 trillion. Last year, the government introduced the separated taxation scheme for dividend income from high-dividend companies aiming to increase dividends and vitalize the capital market. To meet the requirement for 2025, the Board resolved to declare an additional dividend of KRW 1.3 trillion. The fourth quarter distribution is scheduled for payment in April following final approval at the AGM in March. Thank you. Daniel Oh: Thank you, CFO. This is Daniel again. Now I'll provide a brief update on capital expenditures. In the fourth quarter of 2025, CapEx rose by KRW 11.2 trillion from the previous quarter to KRW 20.4 trillion, with KRW 19 trillion allocated to the DS division and KRW 0.7 trillion to the display business. For the full year, total CapEx was KRW 52.7 trillion, down KRW 1 trillion from a year earlier. Of the total, the DS division accounted for KRW 47.5 trillion, while the display business represented KRW 2.8 trillion. In the Memory business, investments increased both quarter-on-quarter and year-on-year as we transition to advanced process to expand sales of high value-added products such as HBM. In the Foundry business, CapEx was up from the previous quarter driven by increased investments in the U.S. Taylor fab. For the full year, CapEx declined as we maintain our conservative investment approach overall. In Display business, CapEx decreased both in the fourth quarter and on a full year basis following the completion of 8.6 generation line. For 2026, although detailed investment plans are still being finalized, we expect Memory CapEx to increase considering the market outlook. Now I would like to highlight our sustainability performance. We are proud to be the first in the industry to develop and deploy a helium reuse system for semiconductor manufacturing. Helium is essential to the manufacturing process, and this system, which has been applied to selected production lines, enables us to recover and purify helium for redeployment, cutting annual consumption by approximately 4.7 tons and achieving a reuse rate of around 19%. This initiative not only helps stabilize the procurements of helium, which has a high import dependency, but also enhances our resource circularity in our semiconductor manufacturing process. In addition, to verify the energy-saving impacts of the SmartThings AI Energy saving mode, we partnered with Carbon Trust, a global carbon footprint verification organization, to conduct a yearlong measurement of actual energy savings -- sorry, actual energy consumption across approximately 187,000 high-efficiency washing machines in 126 countries. The results confirmed energy savings of around 5.02 gigawatt hours, equivalent to around 30% of the total energy consumption. To put that in perspective, this is enough electricity to power 14,000 households in Seoul during the hot summer season. We remain committed to strengthening our sustainability practices and delivering measurable impacts. Now let's hear from the executives for detailed commentary on their respective business unit's fourth quarter performance and outlook. First up is Jaejune Kim, EVP of the Memory business. Jaejune Kim: Good morning. This is Jaejune Kim from Memory Global Sales and Marketing. In the memory market, in the fourth quarter, demand for servers increased continuously and significantly exceeded industry supply, driven by hyperscalers' expanded CapEx in the race to establish early dominance in the AI market. In addition, for mobile and PC, the supply-demand situation remained tight as the industry supply response focused on server combined with seasonal demand effects. Under the low inventory levels and supply constraints, we expanded HBM sales and concentrated on improving profitability by addressing the demand for high value-added products for servers such as high-density DDR5, LPDDR5X and server SSDs. As result, in the fourth quarter, our sales for both DRAM and NAND matched the initial bit growth guidance. And combined with the overall market price increases, our Q-o-Q performance improved by more than it did in the previous quarter. Now let's move on to the outlook for the first quarter. In the first quarter, we expect the market will remain robust following the previous quarter as AI applications continue to drive the overall market. Thus, we plan to keep our product mix focused on high value-added products for AI. However, considering the significantly low inventory levels, we expect that Q-o-Q DRAM bit shipment growth will be limited to the low single digit. For NAND, we expect the shipment to increase by mid-single-digit percentages due to the base effect from the low bit shipment in the last quarter. Lastly, let me talk about the outlook for 2026. We anticipate that the demand for AI applications will remain strong this year. In particular, the high-performance HBM4 market should dramatically rise and the high-density trends for server DRAM is likely to keep expanding. For NAND, we expect demand growth for high-performance test products to accelerate with the introduction of PCI Gen 6 SSD, which is Key-Value SSD for AI inference. However, in the case of mobile and PC applications, we need to monitor potential decline in such shipments resulting from increased end product prices and reduced content per box driven by BOM cost pressure from rising memory market price. In an environment of rapidly growing our demand focus on AI, we aim to lead the AI era with our product competitiveness in 2026. For DRAM, targeting on GPU and ASIC that will be newly introduced in the AI market, we will proactively address customer demand by expanding supply of our HBM4 with competitive performance in a timely manner. In the meantime, we play -- we plan to continue increasing the portion of AI-related products such as high-density DDR5, SOCAMM 2, GDDR7 and so on. For NAND, we plan to focus on our demand expansion for high-density TLC-based Gen 5 SSDs in conjunction with the strong demand for Key-Value SSD for AI. In addition, while PCI Gen 6 server market is projected to rapidly expand in the second half, with the introduction of new GPU platforms, we will lead the market from the initial stage with our V9-based high-performance products. Thank you. Jason Shin: This is Jason Shin from the System LSI business. In the fourth quarter, the smartphone market continued a gradual recovery despite ongoing U.S.-China trade uncertainties and persistent regional geopolitical tensions. While demand in the premium segment remained resilient, shipment volume in the mid- to low-end segment declined, resulting in a different pace of recovery across segments. Our earnings declined quarter-over-quarter due to seasonal demand fluctuation among major customers and adjustments to new product launch schedules. However, image sensor revenue grew on the back of expanding sales of the 200 megapixels and 50-megapixel products launched in the second half of last year. In particular, we strengthened our technology leadership through the industry's first 200-megapixel image sensors, featuring 0.5 micrometer pixels. In the first quarter, external uncertainties are expected to persist while rising prices of key components are increasing cost burden for smartphone OEMs. As a result, shipments are likely to slow, particularly in the mid- to low-end segment. However, demand for high-value components is expected to remain relatively solid, supported by the launch of new premium smartphones. We plan to focus on improving earnings by ramping up supply of new SoC products and expanding our lineup of 200-megapixel image sensors while further strengthening our portfolio of high-value products. Looking ahead to 2026. Overall smartphone demand is expected to soften, while growth opportunities should continue to be concentrated in the premium segment. With the expansion of on-device AI, performance enhancements and differentiated user experience are becoming key competitive factors across devices, and demand for related semiconductors is expected to continue to increase. In SoC, we will focus on improving earnings by expanding sales based on differentiated performance and stable yields while also exploring new opportunities in the custom SoC business. In image sensors, we will continue to strengthen our competitiveness in fine pixel technology and sustain our leadership through Nanoprism technology, which enhances light sensitivity. Thank you. Sukchae Kang: Hello, everyone. This is Sukchae Kang from the Foundry business. In the fourth quarter, strong demand from AI and HPC applications continue to drive growth in advanced nodes. Meanwhile, virtual nodes sustained growth supported by demand stemming from China's localization strategy, even as non-AI and consumer segments remained stagnant and price competition intensified. We began ramping up mass production of our first generation 2 nano products and initiated shipments of 4 nano HBM-based die products. Revenue increased quarter-on-quarter, driven mainly by strong demand from U.S. and Chinese customers. However, earnings improvement was limited due to the recognition of provisions. For the 2 nano GAA process, we focused on process stabilization while developing next-generation processes on schedule. In packaging, we continue to strengthen our advanced packaging competitiveness by establishing 3D hybrid copper bonding technology for advanced nodes. Looking ahead to the first quarter. Seasonal demand softening is expected. However, the overall market is projected to continue growing, supported by price increases in advanced nodes. We expect our revenue to decline quarter-on-quarter due to seasonally weaker customer demand. For 2 nano, we expect our first generation mass production to further stabilize, and we are working to secure manufacturability and develop design infrastructure for the second generation process, targeting its mass production in the second half of the year. In addition, we are focusing on expanding specialty processes, including 4 nano RF, 8 nano eMRAM for automotive applications and 14 nano RF millimeter to enhance our technological competitiveness. On the other front, we will continue to expand orders, focusing on HPC and mobile customers. For 2026, as policy support for the global semiconductor industry continues to expand, we expect ongoing supply chain restructuring driven by increased domestic production and persistent geopolitical risks. With the full-scale entry into mass production of 3 nano and 2 nano processes, demand for the advanced nodes is expected to remain robust, led in particular by AI and HPC applications. In contrast, mature nodes are projected to face intensifying competition due to continued capacity expansion, especially in China. Based on solid demand from AI and HPC applications, we plan to broaden our customer base and target double-digit year-on-year revenue growth centered on advanced nodes along with continued improvement in earnings. In the second half, we will begin mass production of new products based on second-generation 2 nano process and prepare performance and power optimized 4 nano process for mass production. Through this effort, we will continue to stabilize advanced node and strengthen our technological competitiveness. In addition, Taylor fab in the U.S. is under construction as planned, aiming for a timely commencement of operation this year. Finally, to meet the high performance, low power and high bandwidth requirements of advanced nodes, we will continuously strengthen our business competitiveness by delivering optimized solutions that integrate logic, memory and advanced packaging technologies. Thank you. Charles Hur: Good morning, everyone. This is Charles Hur from Samsung Display. I will now brief you on our results for the fourth quarter of 2025. For the Mobile Display business, we achieved a solid result thanks to sales increase of high-end smartphones and our stable supply capability. In addition, IT and automotive performance increased quarter-on-quarter which contributed to earnings growth. For the large display business, revenue increased compared to the previous quarter, supported by market demand during the year end peak season and the improvements in productivity and product mix. Next, let me share the outlook for the first quarter of 2026. For the Mobile Display business, even though overall smartphone demand is likely to be weak due to seasonality and the memory supply and price impacts, we'll increase sales through the timely development and supply to support our major customers' new flagship smartphones. For the large display business, while overall market demand is expected to decrease, QD-OLED is likely to be relatively stable. we'll Actively respond to new product launches and keep expanding sales. Next, I'll share the outlook for 2026. In 2026, price pressure on nonmemory components is expected to intensify due to memory supply and price issues. We'll maintain profitability by expanding high value-added products and retaining our leadership in smartphone market with differentiated technologies. Also, we'll drive revenue growth through mass production of a brand-new 8.6-generation IT OLED line while expanding sales of nonsmartphone products, too. For large display, demand for high-performance products is expected to keep rising in premium TV and monitor market. We'll maintain our premium market leadership by focusing on high brightness products for TV market and continue to expand monitor sales based on QD performance advantages. Thank you. Seong H. Cho: Hi, everyone. This is Seong [ Hyuk ] Cho from the MX Strategy Marketing. Let me share our Q4 results as well as our future outlook. The smartphone market rebounded in Q4, driven by the year-end peak season effect with global demand increasing, particularly for premium products compared to the previous quarter. For the MX business, Q4 saw smartphone shipments of 60 million units, tablet shipments of 6 million units and a smartphone ASP of USD 244. Due to the fading effect of the new model launches and then lower flagship smartphone sales, both revenue and profit declined compared to the prior quarter. However, year-on-year, quarterly smartphone sales increased, resulting in revenue growth. On an annual basis, we achieved steady growth in both unit volume and sales for flagship smartphones. Notably, the strong growth of our foldable series combined with the stable sales performance of the A Series and the ecosystem products enable us to deliver double-digit profitability for the full year. Next, let me share the outlook for Q1. Overall, smartphone demand will decrease quarter-on-quarter due to seasonality trends. In the MX business, we expect to see an increase in smartphone shipments and ASP due to the launch of the new models, while tablet shipments should stay similar sequentially. We plan to drive sales growth focused on flagship models with the launch of the Galaxy S26. We will actively promote agentic AI experiences and enhance competitiveness of our products while strengthening collaboration with partners to continue leading the AI smartphone market. However, as cost pressure of the key components increases across the industry, we'll ensure stable supply through strategic partnership with major suppliers and continue to drive resource efficiencies to minimize profit erosion risks. Next, I'll share our outlook for the 2026. The smartphone market is projected to experience modest revenue growth, while volumes are expected to remain flat. However, given the heightened volatility in industry conditions, including fluctuation in memory supply, market forecast may be subject to further adjustment. For ecosystem products, while tablets are experiencing a slowdown in replacement demand, the notebook PC segment is expected to expand due to growth of the AI PCs and Windows 10 replacement demand. Additionally, the watch and TWS market are projected to grow as interest in health and fitness rises, together with the expansion of the AI features. MX will maintain our strategy focused on expanding flagship sales by delivering AI experiences that provide real benefits in daily life from the customers' perspective, along with the innovations in slimmer form factors and lightweight design. The S26 Series scheduled for release in the first half of 2026 will revolutionize the user experience with user-centric next-generation AI experience and second-generation custom AP and stronger performance, including new camera sensors. Leveraging these strengths, we will innovate the user experience and drive sales expansion. For foldable devices, we plan to strengthen our product lineup and continue form factor innovations, such as TriFold launched in December 2025, to deliver new user experiences in order to expand our customer base. Additionally, we plan to drive growth across all segments, expanding into new regions and channels as well as upselling based on stronger products to solidify our leadership in volume. In ecosystem products, we aim to increase premium product sales with superior products and more advanced and intuitive Galaxy AI features. In particular, we'll continue to enhance health AI experiences in our watches and further expand our TWS lineup in order to create new demand. For XR, we plan to deliver rich, immersive, multimodal AI experiences through diverse form factors such as next-generation AR glasses. 2026 is expected to be a challenging year due to the rising cost pressure across the industry. Nevertheless, we will maintain our focus on expanding flagship sales powered by AI leadership and pursue cost efficiency initiatives across all processes to secure profitability. Thank you. Hun Lee: Hello, everyone. I'm Hun Lee, Head of the Global Sales and Marketing team of Visual Display. I will briefly explain the market situations and share our results in the first quarter of 2025. In the first quarter, TV market demand increased compared to the previous quarter, mainly due to year-end peak seasonality, but it decreased modestly year-on-year because of continuous stagnant global TV markets. We improved the results compared to the previous quarter by expanding volume and sales during the year-end season, which was driven by strong sales of premium Neo QLED and OLED products as well as diversifying the volume-generating lineup of QLED and 75 inches above big TVs to counter competitors' aggressive pricing strategies. Next, I will review the outlook for 2026. As for TV market demand, in the first quarter of this year, it is expected to remain flat versus last year due to slowing down demand after year-end peak season and growing internal and external uncertainties. Nevertheless, demand for high value-added products such as Super Big TVs, QLED and OLED models is expected to show decent growth. In line with this, we will focus on promoting differentiated value of our AI TVs by strengthening communication of Vision AI Companion, which was introduced at CES, while focusing on enhancing sales and securing profitability by launching new models in 2026, including Super Big Micro RGB TV and maximizing marketing buzz. The TV market in 2026 is forecasted to record a modest growth in the first half, thanks to impact of global sports events like Winter Olympics and World Cup. Moreover, QLED, OLED and 75 inches above big TVs will be the key drivers of continuous growth, which will also contribute to increasing our sales portion of premium products. Especially, we will drive sales growth by targeting replacement demand driven by this global sports event and leveraging our 2026 new lineup, including Micro RGB and OLED. At the same time, we will continuously strengthen growth momentum and improve profitability by further expanding advertising service business supported by enhanced OS competitiveness. More specifically, we will improve targeting advertising together with performance-based advertising. This is end of my speech, and thank you for your undivided attention. Daniel Oh: Thank you, everyone. This is Daniel again. So that completes our presentation on the fourth quarter performance of 2025. And now we will move on to the Q&A session, which will be conducted in Korean. Questions regarding company-wide matters will be addressed by our CFO, Soon-Cheol Park, and questions for the other business segments will be answered by relevant business representatives. Please, operator. Operator: [Operator Instructions] The first question will be made by Sung Kyu Kim from Daiwa. S. K. Kim: [Interpreted] Congratulations for your good performance. I have 2 questions. First for Memory, regarding fourth quarter performance, it seems, yes, Memory has achieved very solid performance in the fourth quarter. Could you provide more color on DRAM and NAND bit growth and also the rise in ASP? I would appreciate more details. Second question has to do with MX. Could you also elaborate on your smartphone sales performance for Samsung Electronics overall for full year 2025. Also, as we expect changes to the business environment going forward, could you take us through some key strategic initiatives for 2026? Jaejune Kim: [Interpreted] Yes. Let me take your question regarding fourth quarter performance for Memory. In the fourth quarter, AI-related demand, particularly from hyperscalers, came through even stronger. And with the spread of agentic AI, inference workloads expanded significantly, leading to a significant surge in demand not only for AI servers but for conventional server applications as well. As a result, DRAM demand was strong and robust, driven by HBM and high-density, DDR5, LPDDR5X for server. Meanwhile, in NAND, we saw a rapid rise in demand for SSDs optimized for AI inference workloads, especially for key value data processing. Also as supply conditions worsen for nearline HDDs, we also saw rising replacement demand for QLC SSDs. For mobile and PC applications with the industry continuing to prioritize server shipments, supply constraints have become even tighter, prompting concerns among customers about possible memory shortage, leading to a disruption in their end products, and they are now actively securing supply. With AI server applications driving the overall market, in Q4, we responded proactively to HBM demand while directing supply primarily to the higher margining segment. As a result, bit shipments achieved a new record high consistent with our bit growth guidance from the previous quarter. And driven by higher overall market pricing and our product mix centered toward high value-added server products, DRAM ASP increased by about 40% quarter-on-quarter. For NAND bit growth, well, due to the high base effect from strong bit shipments in the third quarter, low inventory levels and also bit loss from migration of legacy processes to advanced nodes, including the discontinuation of planar NAND products, NAND bit growth inevitably declined quarter-on-quarter. But this was already factored into our bit growth guidance from the previous quarter. That being said, working within the limits of our available capacity, we focus on expanding higher-margining server SSD sales, and the server sales mix as a percentage of total sales increased by about 10 percentage points Q-on-Q, in line with our guidance. For NAND ASP, certain factors made the increase in blended ASP per bit appear somewhat muted, including a higher mix of QLC sales and phaseout of planar NAND. However, driven by a server-focused product mix, overall rise in market pricing, net ASP increased by mid-20% quarter-on-quarter. In conclusion, amid a favorable market environment driven by driven by AI, Memory delivered a record-high quarterly performance in Q4. In 2026, as we address unprecedented AI-driven demand, we intend to continue to deliver results that meet market expectations. Unknown Executive: [Interpreted] The company has consistently maintained strong leadership in smartphone volume. And for the fourth quarter of 2025 as well as for the full year, smartphone shipments increased year-over-year and outperformed the market. Furthermore, at this inflection point driven by AI, what matters most is providing better experiences to consumers and leading the direction of the market. In 2026, amid significant industry changes due to rising component prices, we will leverage our AI technology leadership and stable supply chain to expand sales of new flagship models. In the first quarter, following the successful launch of the S26 Series, we will drive revenue growth through sustained sales of foldables, which are showing strong sales momentum as well as previous [ NFE ] models. In the second half, we plan to launch new foldable products with enhanced competitiveness to pursue further growth. As for the A Series, we will accelerate efforts to discover new business opportunities in growth markets and also create conditions where consumers can purchase our devices more easily and through the broader application of competitive AI features and Knox security solutions, will drive volume expansion. Operator: The next question will be by Mr. Sei Cheol Lee from Citi Securities. Sei Cheol Lee: [Interpreted] Yes. This is Sei Cheol Lee from Citigroup. I'd like to first congratulate you on a record-high quarterly performance. Congratulations. I have some questions about HBM. It seems that we've been hearing quite a lot of good news recently about HBM4 performance from Samsung. Could you provide us an update on the status of your customer qualifications for HBM4 and your development plans for HBM4E, also an update on advanced packaging technology, also your outlook for expected HBM sales for 2026 as well? Unknown Executive: [Interpreted] Yes. Let me comment on our HBM business first. First, for HBM4, with the goal of strengthening the fundamental competitiveness of our technology, we have set our performance target high, above JEDEC standards from the outset of development. And even as major customers have been raising their performance requirements, we supplied sample shipments last year with no redesign required and have now entered the final phase of qualifications. Everything is proceeding smoothly. We are receiving positive customer feedback on the competitive performance of HBM4. Based on this input, we've already commenced production, and HBM4 is now in stable full-scale production as schedule, including HBM4 at 11.7 gigabit products, the highest performance [ bin ] pursuant to customer requirements and shipments will start in February as well. Next for HBM4E, we are planning to start sampling of standard products for customers sometime around the middle part of this year, whereas custom HBM products based on HBM4E core dies will follow in the second half of the year as we plan to roll out first wafer runs using a cross project, horizontal rollout approach to meet customer time lines. Regarding your question on HBM packaging and technology, I am aware that there is a lot of market interest toward our 16-high stacking or HCB, hybrid copper bonding technology. For the HBM3 or HBM4 16-stack product, customer demand is quite limited at this time. And since we'll be doing sampling of HBM4E 12-high product of equivalent density around midyear, we have concluded that it will not be necessary to do mass level commercialization of previous generation HBM3E or HBM4 16-high products. That being said, because we've already secured technology for TC-NCF-based 16-layer HBM packaging at mass production-ready level, even if there are changes to customer requirements, we do not foresee any issues in terms of providing a timely response. For HCB, the next-generation of advanced packaging technology, we have shipped samples based on HBM4 last quarter and have begun technical discussions, and we'll be proceeding with partial commercialization of select products at the HBM4E stage. We will continue to reinforce the competitiveness of our products, focusing on the high-end part of the HBM market where supply shortage is expected for differentiation for HBM4E and custom HBM. Building on the stability of our established 1c nanometer process, we'll continue to maintain our position as a technology leader. Next, regarding our 2026 HBM sales outlook, all production-ready capacity is currently fully booked with customer POs, and we expect 2026 HBM sales to improve substantially, increasing by more than threefold year-on-year. One thing of note is that despite our efforts to ramp up supply, major customer demand for HBM in 2026 still exceeds available supply from us. So for volumes in 2027 and beyond, major customers, are seeking to finalize supply discussions as soon as possible to secure supply. And so in the short term, we'll be focusing on expanding capacity to respond to increased demand for HBM3E while also carrying out proactive investments to secure 1c nano capacity for HBM4 and 4E at the same time and so that we can continue to scale up our HBM supply capabilities amid the surge in AI demand. Operator: The next question will be by Mr. Jay Kwon from JPMorgan. H. Kwon: [Interpreted] I will also ask 2 questions, 1 on memory and then display in this order. It seems, first for memory, AI demand has been growing faster than the pace of capacity expansions by memory suppliers and market supply shortages appear to be worsening. So if you could explain more about your business operations and directions for 2026, including your plans for portfolio mix. For display in 2026, how do you think the rise in memory prices will be impacting displays overall? And what are your expectations for full year performance as well. Jaejune Kim: [Interpreted] So let me take the first question on our 2026 business operations for Memory. Yes. So demand has been rising sharply across AI applications, whereas expansion of supply capacity remain constrained within the memory sector. we expect a significant shortage of supply relative to demand to continue across all product categories, whether it is HBMs, conventional DRAM or NAND with tight undersupply conditions expected for the time being. We've already been receiving requests from large customers, including GPU or ASIC developers and hyperscalers projected to experience a steep rise in demand for multiyear supply contracts. Given these market demand trends driven by AI servers, we believe that for DRAM, the product portfolio will have to be adjusted with a greater focus around HBM and server DDR for AI application. Also, when considering the price increases have varied across the products used in AI server applications, we may need to focus our product mix more on server DDR over HBM in the short term from a profitability perspective. However, to support the long-term health and sustainable growth of AI demand, we intend to maintain flexibility and provide a more balanced product mix between HBMs and server DDRs rather than disproportionately favoring any single product category. Also in the nonserver segment, with profitability in mind, we'll focus supply on high-performance, high-capacity products in each segment to serve the high value-add high-end market. For NAND, similar to DRAM, we continue to see strong demand from AI servers. We expect a particularly sharp rise in demand for TLC-based PCIe Gen 6 SSDs, especially for Key-Value SSD application. So our market strategy will focus on TLC product category, which provides differentiated performance expected to deliver higher margins to solidify our leadership in the server SSD market and steadily grow server SSDs as a share of total NAND revenue. Now due to limited clean room availability, supply growth is expected to be constrained in 2026 and 2027, and we expect supply shortages to continue. From the -- we have been receiving requests from customers for multiyear supply commitments, which we intend to respond to selectively to hedge investment risk while internally leveraging clean room space that we have already secured through preemptive investments to expand supply. Unknown Executive: [Interpreted] Amidst stagnation in the smartphone market and rising competition among panel makers along with other challenging business conditions, we are strengthening our leadership while delivering robust performance. In 2026, due to demand uncertainty in the smartphone market stemming from rising memory prices and increased pricing pressure on panels, we expect the year to be more challenging than any previous year. Thus, we'll significantly boost cost competitiveness through measures such as productivity improvements and we'll continually develop differentiated technologies to reinforce product competitiveness, thereby maintaining a stable revenue. Also, through the mass production at the 8.6-generation IT OLED line slated to commence this year, we expect to lead the expansion of OLED adoption in the IT market and contribute to revenue growth. Despite changes in the external environment, we'll maintain a stable profit structure to further solidify the foundation for continuous revenue growth. Operator: The next question will be by Mr. Sun Woo Kim from Meritz Securities. Sunwoo Kim: [Interpreted] This is Sun Woo Kim from Meritz. I would like to ask about your CapEx for 2026. So like you have said, there is a supply shortage and you're expecting strong AI-related demand to persist in the long term. So then what is the direction for your CapEx investments for memory this year? Unknown Executive: [Interpreted] Yes. So let me cover the Memory CapEx question. Yes, we do expect AI-related demand to continue. And as we explained last quarter, we are planning a meaningful increase in our CapEx versus last year. Up to now, we have been making preemptive investments over time and have secured new fabs and clean room space in advance, and the additional CapEx will go towards supporting utilization of the available space. This can help us build up more supply in the short term, help us build a more competitive position within the industry. Going forward, we will continue the strategy of preemptive investments. In particular, as we position ourselves for a potential long-term rise in AI-driven demand, our basic approach is to continue to invest, make advanced investments in new fab space and clean rooms. As we monitor demand trends, we may determine that capacity expansion is needed at some point, at which we'll be able to probably execute the investment quickly. The increased CapEx amount budgeted for this year, like I said, will go toward preemptively securing new fab space and clean rooms. This will help strengthen our future supply capacity while allowing us to hedge against market volatility risk. In addition, we have also been investing in our next-gen semiconductor R&D complex, NRD-K. NRD-K will be an independent, self-sustaining research complex where foundational technological research and product development can be carried out in one place, offering access to advanced infrastructure. NRD-K Phase 1 opened starting in Q2 of last year, and we'll continue to expand the complex to solidify our development capabilities in advanced processes. Thanks to our efforts over the past year to regain technology leadership, we believe we have largely been able to secure product competitiveness. Now building on this, we're actively expanding our advanced node mix. In the rapidly growing AI application market, securing high-performance, high-density products is critical, and to meet the market demands, advanced processes will become increasingly important for both DRAM and NAND. So in response this year, we'll focus on accelerating the buildup of advanced process capacity, the 1c nanometer process for DRAM and V9 for NAND. Operator: The next question will be made by Mr. Nicolas Gaudois from UBS. Nicolas Gaudois: [Interpreted] So first one is on Foundry. Could you update us on the progresses for 2 nanometer and 1.4 nanometer nodes in particular and whether you expect further major customer wins after the Tesla order last summer? And if so, in which segment will it be between mobile and HPC-AI? Also, could you comment on your process for your memory, foundry, advanced packaging turnkey strategy? And then the second question relates to Consumer Electronics, similar to what you discussed in mobile earlier. This Consumer Electronics and TV business is facing intense competition, top line margin pressure perhaps component going forward by memory shortages limiting potentially of sets -- units. How do you see demand in the year ahead? And what could actually Samsung do to overcome those challenges? Sukchae Kang: [Interpreted] Yes, let me answer your question on Foundry. First, regarding the 2 nano process, second generation, well, development is proceeding smoothly. We've been hitting our yield and performance targets and are on track to start 2 nano mass production in the second half of the year. We're working closely with key customers on PPA assessments and test chip collaboration in parallel for product designs. So technology validation is moving along as planned ahead of mass production. The 1.4 nano process is also under development, where we're hitting major milestones as planned with the goal of starting mass production in 2029. We're planning to distribute the PDK version 1.0 in the second half of next year. And with the release, we plan to initiate customer designs and ramp up early ecosystem development. Based on the progress achieved on our advanced node development, we are now in talks with mobile and HPC customers about product or commercial business collaborations. And since the Tesla award, we have been engaged in active discussions with large-scale customers from the U.S. and China. And most notably, we are expecting this year's 2 nano project awards to increase by 130% year-on-year, driven by HPC and AI applications. We are the only company in the world offering a fully integrated one-stop solution, spanning semiconductor, design, foundry, memory and advanced packaging altogether. We are actively developing and working with partners on the mass production of a range of HBM products, leveraging our one-stop solutions for 3D stacking of base dies built on logic process technology and core dies built on memory process technology. We are in talks with numerous customers seeking our one-stop solution for both product and commercialization opportunities. And so we expect this kind of turnkey business model to deliver tangible results in the mid- to long term. Unknown Executive: [Interpreted] I'll take the question on VD. Amid a challenging environment marked by prolonged stagnation in the TV market and intensifying competition, we will secure new growth drivers through next-gen devices and expand our service business, which is expected to keep growing fast. Based on our premium technological capabilities, we will continue to strengthen differentiated product competitiveness to maintain brand advantages in the premium markets. We plan to introduce new Micro RGB models ranging from 55 to 130 inches to preempt customer demand and establish a new mainstream category. Also through the introduction of a differentiated Vision AI Companion, we plan to expand AI experiences that consumers realize in their daily lives. Furthermore, we will enhance lineup efficiency, strengthen purchasing competitiveness and improve process efficiency using AI to lift overall profitability. Second, we will proactively address the market trend towards service businesses. And the global ad-based free streaming service market, Samsung TV Plus is garnering the most attention and Samsung Art Store has solidified its position in the TV art market. We will further sophisticate these services and strengthen partnerships with diverse content companies to differentiate our offerings and drive revenue growth. Operator: The next question will be by Simon Woo from Bank of America. Simon Woo: [Interpreted] I am Woo Dong-je from Bank of America I have 2 questions. First, when will the company cancel the treasury shares it currently holds? And could you please explain the scale of shareholder return resources generated in 2025? And the second question is that what impact does rising semiconductor costs have on the mobile business. And what are your corresponding strategies? Soon-Cheol Park: [Interpreted] I will take the question on the shareholder return policy. First, with respect to the treasury shares, the Board will decide the cancellation schedule and make a public disclosure in the first quarter of 2026. In addition, with the 2025 results in the books, the company's free cash flow was approximately KRW 36.5 trillion, and 50% of free cash flow, which is the basis for shareholder returns, is around KRW 18.3 trillion. Based on this, the company plans to provide KRW 9.8 trillion in regular dividends for 2025 and KRW 1.3 trillion in additional dividends. In addition, out of the KRW 8.2 trillion worth of shares acquired in 2025, excluding those reserved for employees, KRW 6.6 trillion worth will be canceled to faithfully implement the shareholder return policy. Seong H. Cho: [Interpreted] We'll move on to the MX question, and I will answer this. As memory demand for AI server has expanded, memory supply shortages for mobile devices and sharp price increases started materializing in the fourth quarter of 2025. Therefore, we expect a challenging business environment in 2026. However, since this is an industry-wide issue, our competitors will also face the same environment. Based on a stable component supply through strategic partnerships with key suppliers, we plan to respond proactively and flexibly to changes in the market and competition landscape while promoting resource efficiency activities across the entire process, thus minimizing risks of profit decrease through strategic measures. Operator: The final question will be by Mr. Young Ho Ryu from NH Investment Securities. Young Ho Ryu: [Interpreted] This is a Young Ho Ryu from NH Investment Securities. Congratulations on the good performance. I have a question on System LSI and then on your shareholder return. So for System LSI, I think it was mentioned that the rise in memory prices are placing added cost pressure for device makers in mobile and PC. So what is the impact from System LSI's perspective? And how will you respond? And 2026 is the final year of your 2024 to 2026 shareholder return policy cycle. So I know this is still early on in the new year, but have you been examining the new direction for your next cycle? And can you explain more about the additional dividend payout that was mentioned earlier? Jason Shin: [Interpreted] Yes. Let me answer your question on System LSI. So as you've noted, rising memory chip prices have been weighing on mobile set makers driving up BOM costs. Based on our analysis of the smartphone market, while the mid- to low-tier segments are experiencing significant pressure on costs, in contrast, flagship and premium segments, the device makers are expected to differentiate through on-device AI and camera performance. And as a result, we anticipate sustained demand for high-performance SoCs and sensors to continue. We will leverage our new flagship SoC and 200-megapixel image sensor products to support our customers' differentiation strategies and plan on expanding supply to flagship and premium segments. Soon-Cheol Park: [Interpreted] I'll answer the question on the company-wide matters. First of all, we are faithfully implementing the current 3-year shareholder return policy. And when it comes to a new shareholder policy, management and the Board believe enhancing shareholder value is a top priority and are actively reviewing a new active shareholder return policy based on sustainable growth. We will provide updates when the direction of the new policy is finalized. The regular dividend is KRW 371 per common share and KRW 371 per preferred share, and the additional dividend is KRW 196 per share for both common and preferred shares. In order to increase dividends and vitalize the capital markets, the government introduced a separate taxation scheme for dividend income from high dividend companies. To meet the requirements, our company must maintain a dividend payout ratio of at least 25% and increase its total dividend amount by at least 10% compared to the previous year. The company decided to join the government initiative aimed at promoting cash dividends and stimulating both the domestic stock market and real economy while meeting market expectations and offering potential tax benefits for shareholders and accordingly, resolve to pay additional dividends. Unknown Executive: [Interpreted] Thank you for the answer. I'd like to thank everybody who shared their valuable opinion. That completes our conference call for this quarter. We wish all of you and those close to you stay strong and in good health. We thank everyone for your participation today. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Emma Culver: Good afternoon, everyone, and welcome to the Bannerman Energy quarterly update webinar for the December 2025 quarter. I'm Emma Culver, Investor Relations Manager at Bannerman Energy, and I'd like to thank you all for joining us this afternoon. I'm joined today by our Chief Executive Officer, Gavin Chamberlain, who will provide a short update on Bannerman, the highlights for the quarter and all the progress that is happening at our Etango Project in Namibia. Following this, we will answer Q&A or Gavin will answer Q&A. For those of you, you're mostly familiar with Zoom, but if you're not, at the bottom of your screen, you'll see the toolbar and the option for Q&A. Please write your questions in it, and then I can move through them once Gavin finishes his overview of the quarter. For now, I'd like to hand over to Gavin. We say good morning to him in Cape Town. And thank you for joining us as it is early, but I'm sure everyone is very much looking forward to hearing from you today, Gavin. Gavin Chamberlain: Thanks, Emma. And yes, good morning to everyone from a very early Cape Town. What an exciting time to be in uranium. I think with the current movement in the spot price, it's really a really, really good industry to be in. But what I'd like to talk about today is the progress that we made in the last quarter. We're very pleased with the progress we've made and in particular our safety record of 16 years without a lost time injury really stands out as a highlight. The fact that the team on site has come to grips with moving from effectively exploration into construction and has continued to maintain an LTI-free record is really pleasing for myself and the rest of the team. On the early works construction activities, we've continued with all of them in this last quarter in line with budget and schedule with significant new contractors now on site and also progressing extremely well. Our detailed design and procurement activities have continued to advance. We are moving well into the structural steel component of the dry plant area and the wet plant is slowly but surely starting to get traction as well. In terms of long-term infrastructure, the construction of the permanent water supply line has taken off and is moving on in line with our expectations, and we're very pleased with the contractor that we appointed in that area. And obviously, I think in the last quarter, we spoke about the fact that we had done the factory acceptance test of the HPGR, that's the high-pressure grind roller, which has now successfully been delivered to site. And I think, once again, a really good proof of the fact that the plans that we've put in place in terms of importing equipment for the project have now been tested and have come through and the team on site has once again passed with flying colors. So we're very comfortable with the fact that we managed to get all of the delivery boxes on to site with no real issues in country with clearance. We finished the quarter on a strong cash balance of AUD 89 million, and we still have additional liquid assets valued at AUD 12.7 million and obviously with no debt at all at the moment. And as I said, as I started in my introduction as well, the uranium price had increased nicely to $87, but has continued this trend, and we're very pleased to see that this is now becoming a reality in our lives. Emma? I thought we'd share a couple of photographs because a number of you may have been to site already, a number of you may be joining us, which we're really looking forward to in February. But for those who haven't been or who won't have the privilege of joining us in February, these are a couple of the photographs of the progress we've made on site. What you're looking at here is the heap leach pad, which is 1 kilometer long by 300 meters wide, and we've currently completed the first 3 cells and are on schedule to complete this in line with the construction schedule. The other contract that got up and running in the quarter was the blasting, crushing and screening of the drainage material that we required for the heap leach pad. This is one of the original capital saving ideas that was put forward during the FEED phase, where we have material on site which we're actually blasting. Then we crush it and we actually then do all the sieving required to actually get it to spec, and this material will then be used in the drainage on the heap leach pad. And the other big contract that really found traction in the last quarter was the concrete contract. So they started work in the primary crusher, and it's pleasing to see that the reinforcement is already almost up to ground level, which is 50% of the tower reinforcements, it means it has already been put in place. And once again, we're very happy with the way the concrete contractor has continued. The primary crusher will continue 10 meters above ground level. So what you're looking at there is plus/minus a 30% completion in terms of concrete work. Emma? No. And over and above that, the concrete contractor has continued both with the tertiary crusher, which is shown in this photograph, and also with the stockpile tunnel foundations as well, which was quite a highlight for us. It was one of the biggest pours done in Namibia in a long time, over 1,200 cubic meters of concrete poured in one continuous pour. And we're very proud of the fact that in all of these activities, the contractor, the site management team and my own team on site have managed to continue to meet their schedule and stay within budget. And I think really at this point is I'm quite comfortable to take any questions from anyone on the call, but really our message is: we are continuing with our work. We are prepared and we are currently in line with our financing moving ahead to keep the progress going on site. Emma Culver: Great. Thanks, Gavin, and thank you, everyone. Please pop in your questions in that Q&A box, send them through so we can get chatting. James, I see that you've got your hand up, but I just need you to just type the question in for me so we can see that one coming through. Gavin, I think to start off, in terms of the number of personnel at site now, how many do we have at site? I mean, I think we're up to close to like 400. How has that process gone? And how -- has there been any significant issues on site with the increase of personnel? Gavin Chamberlain: Yes, Emma, good question. The number has climbed to just under 400. I think last I checked it was 373. So for our people to get on to site and work, they have to go through 2 processes. The one process is to get themselves medically checked and the other process is to go through our induction. And I've been really, really pleased with Wood as our safety consultant on site. They put in a really good process and managed to make sure that no one has been kept waiting to do inductions. So it's actually been a very smooth process, and I think the longest anyone took to get on to site was just under a week, which in international standards is actually significantly low and a really big positive for the team on site. And the fact that we've managed to grow effectively in the quarter from 100 all the way up to 400 is a real significant step forward and really gives me a lot of confidence around the ability of our site team to actually step this up into the next level, which is when we would get structural steel onto site. Emma Culver: Okay. And given the momentum in the spot price and ongoing progress at site, can you offer any further clarity around FID on the project and how that's progressing? Gavin Chamberlain: Emma, it's very difficult to give too much clarity. But effectively, we are still on track in terms of achieving FID in line with our current bank balance and progress, and we believe that somewhere between 6 and 12 months we will have FID finalized. What I would say is that when we do finalize FID is we're not going to have to put the project -- slow the project down. We can continue on our current time lines and achieve the target that we wanted to do, which is to get uranium into the market by 2029. Emma Culver: Okay. Thanks, Gavin. And how are we thinking or you or the team thinking about contracting strategy? Are you looking to layer in additional contracts to those that have already been? This is utility contracts. And if they're going to be more base escalating or they're going to be hybrid or market-linked given the activities? Gavin Chamberlain: Yes. So obviously, we're in a very buoyant uranium market right now. Olga herself is actually currently in the U.S. at a conference, and we're continuing to talk to all utilities, and we will continue to respond to RHPs. And what we are doing though is, as we said post placing the first 2 contracts, is new contracts will need to be signed at a price that we are comfortable with. So we will continue to price RHPs to give the message in terms of what we were looking for in terms of pricing. We're not going to be rushing in to sign contracts. We are comfortable with the coverage that we've got at the moment in terms of the pricing. But what we want to do is obviously benefit from a rising uranium market. Emma Culver: And in terms of the budget, we're saying we're tracking on budget. How far through the budget are we to-date? And how much spend remains? Now we actually have a really good slide on this, which I wish I could bring up. I may be able to. But Gavin, you may be able to speak to that even without the slide in terms of the project spend and where we're at with that? Gavin Chamberlain: Yes. So our project spend at the moment in terms of spent and committed sits at around about just under 1/3 of the overall budget. We still have 2 major contracts to place, which would be the construction contract for the structural steel and the construction contract for electrical and instrumentation. In terms of mechanical orders, we've moved ahead significantly there. And even though we haven't got a payment commitment, what we have got is got orders placed where we secured the price of mechanical equipment for a large percentage of the project at the moment. So I think we're fairly well placed in terms of understanding where the capital expenditure is going. And at the moment, we have a degree of comfort that we'll be in line with the overall budget. Emma Culver: All right. And in terms of the contractors on site, are we seeing any issues with their performance? Is there anything that is keeping you up at night, I guess, Gavin, in terms of how things are going on site with the contractors? Gavin Chamberlain: Yes. I mean, so as you know, or you may not know, is all of our contractors on site at the moment are Namibian contractors. And that's part of our strategy, where we've actually reduced the size of contracts so that the Namibian contractors are capable of actually executing the work. We've been blown away by the progress and the commitment to safety and the commitment to schedule that we've seen from these contractors. They really -- it's almost like they're going the extra mile because they want to prove that as Namibians they can actually deliver. And we are super happy with the way they're performing on site at the moment. Emma Culver: And in terms of the long-term -- the utility supply contracts in country, how are they progressing? I know that the work at the permanent water station has started. But in terms of those agreements with NamWater and NamPower, how are they progressing? Gavin Chamberlain: Yes. So NamPower is signed and sealed, and we've also paid them their first deposit. So they've actually started with the design of the substation. So from the power side, we're 100% comfortable that it's moved ahead. On NamWater side, we're still waiting for the final signed contract, but we do have a binding MoU, which allowed us to actually start with -- commence with the construction of the permanent water line. So we wouldn't have commenced with that unless we were comfortable with the MoU. So that has been signed by all parties. Unfortunately, NamWater has been slightly diverted at the moment by looking at the finalization of the second desalination plant. And at the moment, it appears that the second desalination plant would be -- will be approved by government around about midyear this year. That's the latest news that we've received. But once again, I need to stress is we do not require the second desalination plant, but it has been a distraction to NamWater. Our contract is they will supply us with water. Whether it comes from the existing desalination plant or the new one actually doesn't affect us. There's sufficient water in the existing desalination plant. Emma Culver: All right. And we have a question here, which I'm going to rephrase a little bit. But the current progress that's been made on site in terms of the construction phase, is that still preserving the upward production optionality of the extension of the expansion case? If we do see demand come in from AI, are we still well positioned to and prepared to take advantage of that? And maybe it's just speaking through, I guess, at what stage we have those key decision points to make on that extension, on that expansion and which one we would go with? Gavin Chamberlain: Yes. So from that perspective, it's a really good question, because the 2 key design implications really for the extension would be the power and water. So on both power and water at the moment, we are installing a system that is capable to actually do the extension. So with the water line, we will increase the pressure and thereby increase the flow. And in our MoU with the Department of Water, we've actually already covered the fact that we will potentially increase the supply at a point in time. So from a water perspective, we're comfortable. And from a power perspective, the overhead power lines are sized according to both projects. So we have no issues when it comes to the infrastructure. And then obviously, the existing infrastructure on site has been set out such that we can actually build the extension while we're operating the main plant. So from that perspective is, if there was a push to accelerate the building of the extension, we would be able to do that with no real issues in relation to operating the Etango-8, as we call it, versus Etango-16. Emma Culver: Okay. Thanks, Gavin. And we have a question here around, I guess, labor and workforce in Namibia. So the current capability amongst the team is very well suited for the construction of this project. And I think you had -- I mean, you've worked with many of the project team previously. You know them well. We're quite comfortable with that. But what is the strategy of sourcing and securing skills as we move into the operation phase? And how is the dynamic on the supply of labor, especially in Namibia? There could be a few of... Gavin Chamberlain: Yes. Look, I mean, there's big pressure from the Namibian government to educate and develop Namibians as well. There is already a mining training center, which was set up many years ago by Rossing, which is still functional. And there's a lot of local labor that's already going through the training courses, which is available and currently is looking for work. So there's a shortage of employment in Namibia. So I don't believe we've got a shortage of people. Where we will have a strong focus in our operational readiness will be on upskilling and making sure we've got the right skills level available to us. Recently, we've employed a new COO for Bannerman Mining Resources Namibia, who comes out of a mining environment, and one of his main functions will be to drive the operational readiness process. And Danie will actually -- his first focus is on firming up the first step in operational readiness, which is effectively how you secure your people and when you employ them. So we have a timetable around that, which is linked back to the construction schedule, and that will become the responsibility of the in-country COO. Emma Culver: And Gavin, does the surging SA rand change your thinking at all around the pace of awarding contracts for work on site? Is there any incentive to bring forward certain aspects of the construction? Gavin Chamberlain: I suppose there's always some degree of incentive. However, we've -- the way we've actually tackled contracting on the project is we have placed a number of mechanical contracts to secure vendor data, but at the same time, we secured the cost of that supply. So to a large extent, we've already actually addressed the risk around the strengthening of the SA rand. There are no specific contracts that we would place earlier driven by the financial changes in terms of exchange rate. As I said, we've got 2 big contracts to place, but those contracts are actually -- it's more important for us to get the quantities right in those contracts than it is to worry about the exchange rate at this point in time. And as people know, is the rand exchange rate does tend to yo-yo a bit. So we keep an eye on it. And at the moment, we're not planning to change any of our strategies linked to contracting. Emma Culver: Great. Thanks, Gavin. And we haven't had any other questions come in. So I think -- actually, we do have one just now. See, these last minute questions that pop in just when you think that you're going to close it off. Can we offer any insight into the proposed change in legislation around the 10% free-carry interest in new mines in Namibia? Is Etango classified as a new mine? No, it's not. I will let you speak to this, Gavin, but I think this is actually an important point. We did discuss it at the last quarter, but we have had a change in that Namibian Mining Ministry. So for those that aren't aware of the updates there, can you just touch base on that? Gavin Chamberlain: Yes. So we've got a new Mining Minister. So the minister who made the statement around the 10% has been removed from his position and there's a new Mining Minister in. We actually -- our local Chairlady had a meeting with the Mining Minister yesterday, which was very positive. And when we are in Namibia with the investors' visit, myself and Murno will also be moving -- going and actually meeting him in person. But the rhetoric around 51% ownership, et cetera, has died down significantly. In fact, we're not hearing it at all. And we are pretty confident that we're definitely an old license, not a new license. But even on the new licenses, it's died significantly. There's a lot more focus at the moment on oil and gas. That doesn't mean that we've relaxed and we're 100% comfortable, but we do believe it's not going to be affecting us, but we also don't want it to affect other mines in the future because maybe those other mines could be ours. Emma Culver: And a question here, what's the thought process around bringing a new partner into the project? How has the interest been regarding the project? As most would be aware and has been reported in the quarterly, we do have a strategic funding work stream underway. It has been underway for quite some time. Gavin, any comments on how that's progressing? I think that you're pretty happy with the team and the progress that has been made in that aspect. Gavin Chamberlain: Yes, definitely. I mean we've seen -- for the last 6 months, we've seen a huge increase in interest and in people actually talking to us. And we -- as I said, is we believe within 6 to 12 months, we will be in a position to announce our FID. And our FID, as people are aware, is 100% related to the final funding for the project. So we're very comfortable with the progress that we've made in the last couple of months. Emma Culver: All right. Thanks. So look, I'm going to close the Q&A off there. If anyone does have any additional questions, please drop me an e-mail. I think most of you have my e-mail. Please drop me a line if there are any additional questions. Gavin, thank you very much for joining us. We do have an updated video that goes for, I think, about 2.5 minutes showing progress from the December quarter on site. For those of you that want to hang around and watch that, please stay on the line, and I will share the screen and begin that video. Gavin, thanks again for joining us. Thank you to everyone for joining the call. And reach out at any point if you have any questions. Thanks very much. Gavin Chamberlain: Thanks, Emma, and thanks to everyone who attended.
Maria Caneman: Thank you for dialing in this morning. I am Maria Caneman, Head of Investor Relations here at Swedbank. Welcome to our fourth quarter 2025 results presentation. I'm joined today by our CEO, Jens Henriksson; and our CFO, Jon Lidefelt. Jens and Jon will start with their presentation, and then there will be an opportunity to ask questions. With that, I would like to hand it over to Jens. Jens Henriksson: Thank you, Maria. 2025 was a successful year for Swedbank. The target of a sustainable return on equity of 15% was achieved. During 2025, the global economy was, despite tariffs and geopolitical uncertainty, more resilient than expected. A few weeks ago, the International Monetary Fund released an update to its world economic outlook. It revised the world growth forecast slightly upwards for this year against the backdrop of a steady and resilient economy. However, with renewed global tensions and strained public finances, global growth could be curbed. In our home markets, the economic situation continues to brighten, thanks to large investments and strong private consumption. In Sweden, the recovery began in the second half of 2025 and our economist expects growth of more than 2.5% in 2026. Lithuania had a strong development in 2025, and growth is expected to pick up further this year. In Estonia and Latvia growth also is likely to rise in 2026. In these times, Swedbank has once again delivered a strong result. For the fourth quarter, we saw a return of equity of 14.7%, and the return on equity for the full year was 15.2%. Costs developed as planned and the cost-to-income ratio was 0.36, both during the quarter and for the full year. Cost control is strategically important issue and is reflected in all parts of the Bank. Credit quality is solid. Earnings per share for 2025 amounted to SEK 28.98. The Board of Directors is proposing to the Annual General Meeting, a total dividend of SEK 29.80 per share of which SEK 9.35 is a special dividend on the basis of the bank's strong capital position. Our CET1 capital buffer then amounts to 3 percentage points. Swedbank has a strong capital and liquidity position. During the past few years, we have by strengthening governance and internal controls, improved work methods and investments in new technology created a stable foundation for the bank. Now we are looking ahead with increased focus on our customers. At our Investor Day in June last year, we presented our direction, Swedbank 15/27 and it has a clear customer focus. We will strengthen our customer interactions, grow our volumes and increase our efficiency. Availability and efficiency are fundamental. Succeeding in these areas will enable us to be even more proactive, meet more customers and do more business. And in these areas, we've already made significant progress. Our availability in Sweden increased significantly last year. In 2025, we had over 30% more calls with our customers than a year before. At the end of 2024, we answered 29% of incoming calls in Sweden under 3 minutes. At the end of 2025, that figure has improved to more than 80%. We're also constantly working to increase our efficiency. Digitalization and newly developed AI tools are simplifying our work and reducing administration, and we see continued great opportunities in this area. We are now taking the next step. Our business areas will gain more influence and control in developing their businesses. To sharpen our focus on customers, business and productivity, the work of developing services and solutions should be closer to those responsible for our customers. By refining and moving roles and responsibilities and working more efficiently, we can better meet customer expectations and develop our offerings. The acquisition of Stabelo and Entercard have been completed. This will also provide us with new business opportunities and I've had the privilege of welcoming all our new colleagues to the bank. These acquisitions and the changes we are now implementing are all contributing to our 15/27 plan. We are now working to update our strategies and plans for Entercard and in connection with our next quarterly report, we will present what this entails for the bank going forward. During the year, Swedbank's lending increased by SEK 108 billion, excluding FX effects. Of these SEK 47 billion was lending to corporates. Entercard and Stabelo contributed with SEK 44 billion, and private loans increased organically by SEK 17 billion. Our mortgage portfolio is growing and during the quarter, lending and mortgages increased by SEK 23 billion, excluding currency effects in Sweden -- sorry, currency effects. Of this amount, SEK 17 billion came from the acquisition of Stabelo. Lending volumes in our own channels in Sweden increased by just over SEK 4 billion. And that means we have doubled our market share of new mortgages sold in our own channels in 2025 compared to 2024, but that is not enough. We want to grow at least in line with the market. Savings continued the positive development and net inflows to Swedbank Robur amounted to SEK 11 billion during the quarter. At the beginning of 2026, Premium and Private Banking will celebrate 2 years as its own business area. We are expanding our customer base and we strengthened our premium offering during the quarter. The corporate business is developing strongly, both in Sweden and in the Baltics. In Sweden, our market share increased by 0.5 percentage points to 15.2% at the end of November. We have a competitive offering and a strong customer focus. By building sector teams in defense, food production, and forestry and agriculture, we strengthen our capacity to advise customers in these sectors. At the same time, we continue to focus on local business relationships with small- and medium-sized companies by strengthening our local presence. On September 1, our partnership with the new investment bank SB1 Markets was officially launched. They have had a good start in Sweden and have completed several deals. And as you know, Swedbank owns 20% of the SB1 Markets. Given the geopolitical tensions, we continue to strengthen our resilience. Swedbank has a good ability and preparedness to manage the associated risks. After the end of the quarter, Swedbank was informed that the U.S. Department of Justice had closed its investigation into the bank without enforcement. That leaves us with one American investigation ongoing evolving the Department of Financial Services in New York. We cannot assess when it will be concluded, whether we will get any fines. And if we do get fines, the size of such a potential fine. Finally, let me say a few words about the bank's social commitment. In 2025, we met more than 100,000 children and young people in Sweden and educated them in personal finance. And at the end of last year, Swedbank donated EUR 10 million to the Vilnius University Foundation to support growth and prosperity in Lithuania. These are just a few examples of our efforts to create financial health and economic stability in our home markets. With that, let me hand over to our CFO, Jon, who will deep dive into the numbers. Jon Lidefelt: Thank you, Jens. Let me now walk you through the fourth quarter. We delivered a strong result with volume growth across markets and increasing income. We have continued our focus on long-term shareholder value through business growth and cost efficiency. Cost-to-income ratio in the fourth quarter was 0.36 and return on equity 14.7%. As you know, this quarter, we have consolidated both Entercard and Stabelo into our numbers. However, keep in mind that they did not add a full quarter effect. Entercard was incorporated as of December 1 and added SEK 27 billion of lending. Stabelo was incorporated as of November 4 and added SEK 17 billion of mortgages. The CET1 effect was in total 50 basis points in the quarter. As communicated earlier, we will de-risk Entercard's consumer finance business as the risk level is too high. The risk level for new lending has been adjusted. Our intention is also to divest Entercard's back book of consumer finance loans. And going forward, we will report it as held for sale. We have worked with strengthening our organization, and it will be effective as of March 1. The strategic review of Entercard is aligned with this and we will, hence, come back in conjunction with the Q1 report with more details and how this supports our 15/27 plan. Lending volumes grew by 3% in the quarter. Mortgage volumes in Sweden sold through our own channels increased by SEK 4.1 billion, while the savings banks reduced their mortgage volumes on our balance sheet by SEK 1.9 billion. Our Swedish mortgage front book market share in November sold through own channels was 11%, still below the back book market share of 18%. In total, with savings banks volumes on our balance sheet, we have a market share of 22%, the largest actor on the Swedish mortgage market. Stabelo's growth has picked up as Swedbank's strong balance sheet enables lending up to 85% in loan-to-value. In the corporate business in Sweden, the positive development continued with increasing volumes, mainly within the property management and public sector. In Baltic Banking, corporate loan demand continued to be strong across sectors, leading to a loan growth of SEK 5 billion in the quarter. Customer deposits increased in the quarter, driven by Baltic Banking, where we had a good growth in both private and corporate deposits. In Lithuania, deposits increased in the end of the year following the usual pattern due to the annual 1 month extra salary. In Sweden, private deposits decreased slightly as consumption is picking up. Corporate deposits in Sweden were impacted by end of year effects, mainly driven by the larger institutions as normal. Net interest income was unchanged compared to the previous quarter. We saw continued impact from lower rates. However, organic growth and acquisitions partly mitigated this. Higher business volumes had a positive impact of SEK 72 million in the quarter. With lower policy rates, our cash with central banks generate less income, but this is partly offset by lower wholesale funding cost. The Swedish Central Bank cut the policy rate effective as of first of October and ECB's latest rate cut was in June. By the end of the year, these policy rate changes were fully priced in. Hence, we should see the full quarterly NII effect of the rate cuts in the first quarter of 2026. Net commission income increased in the quarter, driven mainly by securities and corporate finance where the annual market maker fees contributed positively. We also had a one-off effect relating to the closure of some retail products, which were phased out several years ago. Asset management commissions benefited from strong net inflows of SEK 11 billion and positive stock market development, measured by assets under management, Robur is the largest player in the fund market in Sweden and the Baltics. Card commissions were lower in the quarter, in line with normal patterns. Net gains and losses increased from an already high level and amounted to SEK 982 million. Income was strong, driven by client trading. The treasury result was impacted by unrealized valuation effects in derivatives and equity holdings. The business activity remained high despite some seasonal slowdown towards the end of the year. Other income increased by 1%. Net insurance decreased, mainly driven by revaluation effects. A reminder of 2 things here, in the result from associated companies we now report the ownership stake of SB1 Markets and Entercard is fully consolidated since December 1. So in the fourth quarter, only 2 months are included under other income. As usual, also a reminder here that our collaboration with the savings banks include cost sharing, for IT development and administrative services. The savings banks share of the cost is included in Swedbank's total cost. And you can see the corresponding income under other income. We delivered on the 2025 cost guidance of SEK 25.3 million, which gives an underlying cost growth of around 3% adjusted for the VAT recoveries and the acquisitions. Costs in the fourth quarter were 4% higher compared to the previous quarter. But as you know, we had a number of moving parts this time. We have, during the fourth quarter, received VAT recoveries of SEK 963 million for the years 2019 to 2023. This including SEK 125 million for the year 2021. Our 2 acquisitions added SEK 180 million to the fourth quarter cost. So what does this mean for 2026? Our full year expenses for 2025 were SEK 24.5 billion. However, our underlying expenses were somewhat higher in total SEK 25.1 billion. This is due to the one-off VAT recoveries of SEK 1.5 billion, the temporary high investments of SEK 800 million and fourth quarter costs related to Entercard and Stabelo of SEK 180 million. Going into 2026, we also need to include the current run rate for our 2 acquisitions in order to have the correct starting point. These add SEK 1.6 billion, which together with our underlying expenses of SEK 25.1 billion gives a new starting point of SEK 26.7 billion. We expect costs to grow by approximately 3% in 2026, meaning costs of around SEK 27.5 billion. This is net of efficiencies, headwinds as well as investments and based on current FX rates. Strict cost control and focus on efficiency is key. Asset quality is solid. Total impairments for the fourth quarter amounted to SEK 355 million. The macroeconomic outlook has continued to improve and led to a release of SEK 186 million. Rating and stage migrations led to credit impairments of SEK 433 million mainly due to downgrades of a few corporate customers. This is partly offset by the continued release of the post-model adjustment, which now stands at SEK 131 million. The quarter also included effects from Entercard that in some increased credit impairments by SEK 415 million, mainly due to the SEK 354 million day 1 accounting effect for Stage 1 exposures. The estimated overall impact from Entercard going forward on the credit impairment ratio is an increase of 1 to 2 basis points. I feel comfortable with our strict credit origination standards and the solid collaterals that secure our lending. Our CET1 capital ratio was 17.8%. REA increased in the quarter due to lending growth and the annual revision of operational risks, which led to an increase due to the uptake of the rolling 3-year average income. Furthermore, as previously communicated, the acquisition of Stabelo and Entercard led to reduction of the CET1 capital ratio of around 50 basis points. The Board proposed a total dividend of SEK 29.8 per share of which SEK 20.45 is ordinary dividend and SEK 9.35 a special dividend. This reduces the buffer above requirement to around 300 basis points. Our capital target remains unchanged with a buffer range of 100 to 300 basis points above the requirement and over time we're targeting the midpoint, 200 basis points. To conclude, we continue to focus on growth and efficiency. We delivered strong profitability while maintaining prudent underwriting standards, strong liquidity and capital positions. With that, back to you, Jens. Jens Henriksson: Let me now summarize. Swedbank has had a successful 2025. We delivered a strong result with a return on equity of 15.2%. The Board of Directors is therefore proposing to the Annual General Meeting, a total dividend of SEK 29.80 per share of which SEK 9.35 is a special dividend on the basis of the bank's strong capital position. Swedbank is well positioned for sustainable growth and profitability. We will strengthen our customer interactions, grow our volumes and continue to increase our efficiency. The future of our customers is our focus. And with that, I give the word back to you, Maria. Maria Caneman: And we will now begin the Q&A session. I'd like to start with a kind reminder to please limit yourselves to 2 questions per turn. Operator, please go ahead. Operator: We will now begin the question and answer session. [Operator Instructions] The first question comes from the line of Andreas Hakansson from SEB. Andreas Hakansson: So first question on your net interest income. We saw some, of course, negative headwind in the fourth quarter from falling interest rates and you say that that's going to spill over into Q1. But what we've been a bit disappointed about over the last year when interest rates have been coming down is all the big -- all the banks' inability to improve mortgage margins that are now continue to be at a very, very low level. I mean the profitability of the mortgage product is today quite unsatisfactory. So my first question is, how do you see that mortgage margins could be developing over this year? Jens Henriksson: Well, I think, thank you for that question. I think it's my time to answer that. And I would say that we do not forecast on that. But as you rightly said, it is a tough competition out there. We've seen that our market share was around 5% of new loans in our own channels in 2024. It was up to around 10% in 2025. And then we have ambitions to reach at least our back book market share, which is 18%. But the competition is tough. [Audio Gap] Hello, I think I've given abrupt answer, but the answer is that the competition is tough. Andreas Hakansson: Yes. That's fine. I mean you have, of course, discounts. That's how the Swedish mortgage market work. Are you currently working with the discounts in order to improve the margins in that way? Jens Henriksson: Well, it is a competitive market, and I'm not going to talk about exactly how we meet our customers. But I think our offering, the key point is that we come as a full service bank. That means that we have attractive prices, we are much faster and we're available. And those who seek total digital solutions, they can go to Stabelo. And we've seen that they have gained market share as well. Andreas Hakansson: Right. And then my second question, on capital. And Jon, you mentioned already that it's still a 200 bps midpoint that you're targeting over time. Can I just ask you, is the timing of moving towards 200 related to the final investigation that's going on in the U.S.? Jens Henriksson: Well, I think I'd answer that in a little bit overall perspective, and that is to say that we have the capital buffer range, which is between 100 and 300 basis points and as Jon said, in our 15/27 plan, we target the middle of it, i.e. 200 basis points. And then talking about the dividend, we have a dividend policy of 60% to 70% with an earnings per share of SEK 29 gives us an ordinary dividend of, what is it, SEK 20.45. And on top of this, the Board has proposed an extra dividend in SEK 9.35. That means that we have a total dividend of SEK 29.8. And with this proposal to the AGM, Swedbank is within the capital buffer range. Further capital release continues to be a judgment call depending on several uncertainties such as the long-running U.S. investigation. Timing of IRB approvals and the uncertain world we live in, and we have no intention of holding more capital than necessary. Operator: The next question comes from the line of Gulnara Saitkulova from Morgan Stanley. Gulnara Saitkulova: Just a follow-up on the prior question. You mentioned the competitive nature of the Swedish market. And given that, could you remind us how you are approaching the defense of your back book market share? Are you prepared to be more flexible on the repricing to retain the existing customers or margin protection is a primary focus? Jens Henriksson: Well, of course, as Jon and I usually say, it's always a balance between market share and profitability. We've said that we want to increase the market share and when we work with our customers, always have individual price setting. And I think the main problem for us has been that we have not been fast enough or not available enough. And I boosted about that in my introduction because that's something we're very proud of. With fewer people working in -- with this, we've managed to reach above 80% of the calls that answer within 3 minutes. And we have had 30% more calls with our customers. And last time I checked, I think we had a waiting time of 14 or 13 seconds, I don't remember. But the key point is, we want to be available, we want to be fast, and we want to grow. Gulnara Saitkulova: And the second question on the volumes in Sweden and the Baltics. How are you thinking about the loan growth into this year? And in particular, given the fiscal stimulus in Sweden and a more constructive outlook for consumer sentiment and confidence where do you expect the loan growth in Sweden to settle? Would mid-single-digit loan growth be a fair estimate for Sweden in 2026? And how the trends differ between households and corporate lending? Jens Henriksson: Well, let me take that as well. And let me take a sort of a broader perspective in the sense that -- as I said in my introduction, the global economy has been a little bit more resilient than expected. And you saw this slightly upward revision by the IMF, but that was then closed before the trade tensions flared up again, which, of course, increased headwinds. And the good thing about Swedbank is that we operate in a region with very healthy fundamentals, strong public finances, low government debt, real wage growth, innovative companies, profitable banks and low interest rates means that our home markets remain well prepared for the future, and I mentioned the growth figures. Overall, loan demand from both corporates and private customers is still somewhat muted. In the Baltic, demand is stronger. And in terms of trade policies impacting our region, we are, as always, very close to our customers, and we can see only limited effects on companies directly exposed to increased tariffs. And the key point is that we expect growth to come from strong public investments and strong consumption. We do not go out and forecast what loan growth is what we expect for this year. But looking back at 2025, Jon talked about, we increased our loan book with SEK 108 billion with -- excluding FX effects. Operator: We now have a question from the line of Martin Ekstedt from Handelsbanken. Martin Ekstedt: So first, congratulations on the closure of the Department of Justice investigation. So just quickly, the outstanding DFS, New York investigation, how does this differ in scope from the one undertaken by the Department of Justice? That's my first question. Jens Henriksson: Well, I don't want to get into the scope. But as I said, after -- we've closed now the U.S. Department of Justice without any further action. That is, of course, a relief. But we are still on investigation by the Department of Financial Services in New York. I still do not know the timetable. We -- I still don't know whether we will get any fines and if we do get the fines, I cannot estimate the size of those. And we've been as transparent as possible during this long-running process. And when something material happens, we'll continue to adhere to that principle. Martin Ekstedt: And then secondly, we have some long-end yield curves deepening behind us now, and we've seen some upward movements on your longer-term mortgage rates as a result. But as Andreas alluded to in his question earlier, it's not really translated into mortgage margin improvement so much yet. So what is your experience currently on customers electing longer term fixed rate mortgages instead of the 3-month floating ones? That would clearly help our margins. We can see limited movement in Statistics Sweden data on a systemic level, but what is your own experience from your customer base? Jon Lidefelt: We see the interest for floating rate mortgages is still high. So we see no major movements towards fixed rates rather the opposite. Operator: The next question comes from the line of Magnus Andersson from ABG. Magnus Andersson: First of all, on lending, we saw that your loan growth in the Baltics was 10% year-on-year in local currencies. If you can tell us what you think about the sustainability of the re-leveraging that seems to take place currently? And secondly, if you could just give us some outlook about what -- if anything has changed on the bank tax front there? And secondly, just on your cost target, if you can give us some color on what is embedded there in terms of headcount development and net IT investments, please? Jens Henriksson: Well, don't get me going about bank taxes because then I need to sort of give the whole landscape. I do that, and then, Jon, you can follow up here. First, as I've done now for many quarters, let me remind you, we -- banks are an important part of our societies. We channel our customers hard earned deposits to lending thus empowering people and businesses to create a sustainable future. And to do that, we need to be profitable. And a sustainable bank is a profitable bank. We are proud taxpayers that contribute to the financing of welfare and security in our home markets. What we do not like are sector-specific taxes, retroactive measures and an unpredictable regulatory environment. What we do like is equal treatment, a rule-based system and an investment climate that fosters growth, financial stability and sustainable transformation. With that said, let me do a quick tour across our 4 home markets. In Estonia, corporate taxes are increasing. In Lithuania, corporate taxes are also up. And on top of this, since 2020, there is a 5% extra tax on banks. In Latvia, we are into the second year of 3 years with an investor tax on NII. That is bad for the investment climate and thus, the Latvian economy. During 2025, our Latvian loan portfolio increased enough to give us a deduction of 1 quarter on the investor tax. In Sweden, the government has decided on a base deduction to the bank tax while delivering the same tax revenues. The tax rate is therefore raised from 6 to 7 basis points in 2026, and the government inquiry will investigate the future design of bank tax further. Another defect of tax on the banking system is that since the end of October last year, we know we have been obliged to place an interest-free deposit of SEK 6 billion with the Riksbank. Jon? Jon Lidefelt: Thank you. If I just add the numbers on the bank tax then, in Sweden, the risk tax due to the base deduction that Jens talked about was increased to 6 basis points. That had an impact of us of SEK 50 million, around SEK 50 million. Then you have the SEK 6 billion in the Riksbank's reserve requirement that we do not get an interest rate for. The cost for that until June and then for 2026, which is the period is SEK 71 million. And we are reporting that under bank tax, and we have taken the full cost upfront in this quarter. So the total SEK 71 million is accounted for in this quarter. If I then move back to your question on cost target FTE and IT. I mean our cost target of SEK 27.5 million is inclusive of the fact that we know that we need to continue to invest quite a lot in order to make sure that we are relevant for our customers also going forward. So that is included in that. Then we do not forecast on FTEs. We have a strict hiring policy. We know that we need to continue to work heavily on efficiencies. Otherwise, we will not be able to meet our long-term objective that we set out when we presented 15/27, namely to over time in a stable [ rate environment ] to increase profit over time. In order to do so, we need to improve efficiencies. And of course, if you extrapolate that in the long run, then it will be very restrictive on FTEs and rather downwards and upwards, but we don't forecast that in the short-term. Magnus Andersson: Two follow-ups. First of all, my question regarding taxes was really, if there is anything new on the horizon in the Baltics, but it doesn't sound like it? And secondly, if you could comment on volume growth in the Baltics and the re-leverage, that's ongoing sustainability there, what do you see? Jon Lidefelt: Sorry, I forgot that one. But no, there is nothing new. The Lithuanian bank tax is falling off this year or has been falling off. Remember, though, that there is a 5% extra corporate income tax that is permanent for banks in Lithuania. The Latvia, as Jens alluded to, we have no news or any -- on any changes. Estonia, there is no bank tax, and they also withdraw the increased corporate income tax. It's not a bank tax, but they changed there. So short answer, no. When it comes to the sustainability of the growth in the Baltics, keep in mind that the loan to GDP, especially in Latvia and Lithuania, is very low, around 20% in Lithuania, both for corporate and private. So there is room to have a good and high continued increase without creating balances in that sense. The worry from our side would then rather be on the quite high salary inflation. If that is not met over time by productivity improvements and that in the longer run risk leading to some imbalances. But otherwise, the lending growth is not. In Latvia, even so that, I mean if you go back to the financial crisis, it's been a continuous de-leveraging in the society. Estonia has leveled out a bit. So I think it is sustainable as long as other things in the economy is sort of sustainable as well and then not at least then that the wage growth is in line over time with productivity. Operator: We now have a question from the line of Sofie Peterzens from Goldman Sachs. Sofie Caroline Peterzens: This is Sofie from Goldman Sachs. So my first question would be on Entercard. You mentioned a few times that you plan to de-risk and cost of risk will only be 1 to 2 basis points higher. If you look at the 2025 numbers, cost of risk would have been kind of 6 basis points roughly. How should we think about the net interest income impact from the deal -- de-risking and also the fact that you're selling some of the back book of Entercard? And then the second question would be on the VAT refunds. You had SEK 1.5 billion of VAT refunds in 2025. How should we think about VAT refunds in '26? Jon Lidefelt: Thank you, Sofie. Yes, you're right. We've put up, and I guess your question around NII and Entercard is then referring to the fact that I said that we will -- from going forward, we will report the back book of consumer finance as held for sale. It means that in the longer run, we would want to sell it. The new inflow has been adjusted. It will take some time. It's not going to happen in the near future, but over time, that will go out. I also said that we will implement a strengthening of our organization in the -- as of March 1, and that we look at the Entercard strategy in conjunction with that. So when we present the Q1 report, we will come back with more details on both those matters, how they are linked together and how they support 15/27. But there's no changes in the short-term when it comes to the back book. When it comes to the VAT, we have then 2024 that we could get something back for. The amounts are gradually shrinking a bit. And as the interest rate has come down and going forward, we have included this in our ordinary business unless something unexpected is coming in. And from this year -- from last year when we started to get the VAT back, we have also adjusted sort of how much VAT that we account for in our business. So I don't expect the same type of amounts going forward as we have had presented for 2025, it's going to be on a different level. Sofie Caroline Peterzens: Okay. And just to be clear, after 2026, we shouldn't see any more VAT refunds? Jon Lidefelt: No major ones. As I said, we have 2024 that could be up for something. We haven't applied for anything there. But compared to the amounts that we have seen now historically, it's much, much smaller amounts. Then there is always sort of small adjustments in the tax paid since -- but that's not on these major levels that we've seen. So nothing major going forward is what I expect. Operator: The next question comes from the line of Nicolas McBeath from DNB Carnegie. Nicolas McBeath: So I had a question on the implications from the DoJ investigations. So now that it's settled or closed actually without any penalties, and we are approaching the end of this investigation. Can you comment and help us understand if you have any substantial excess resources in the bank working with these investigations or with AML that you think you can reduce? There seems to be some expectations among some investors and parts of the market that there is significant potential here. So it would be helpful if you could help us kind of clarify this. Jens Henriksson: Well, when we started this work, it costs a lot of money, but we've seen that, that costs have decreased substantially. I think the last time we sort of gave it out as a special part of our cost was like more than a year ago. And I mean, we do not have -- it's very small costs associated with this. Nicolas McBeath: So that's for the investigations. Could you comment on how many employees you have in the bank working with AML and what you think is kind of the long-term level that you should be as to be compliant and be well resourced from a AML perspective? Jens Henriksson: I would say we have around 17,000 people in the bank working fighting money laundering, because that's everybody in the bank. And I think that everybody's role to do that. Then we have something called economic crime prevention, which is a group within the bank. And they always continue to adjust whether they can use new technology. And we always search for efficiencies there. The key point is this is an integral part of the bank's work and it will keep on being that way. So we don't get into the same position we were a few years ago. Nicolas McBeath: All right. And then my second question, just a question on the cost guidance. For the 2026 cost guidance, do you have any implementation costs for Entercard included? And have costs related to the consumer finance back book being excluded. So you're basing that cost guidance on some costs falling off from that business being divested? Jon Lidefelt: No, we have not adjusted the Entercard cost going forward. We have assumed sort of some efficiency gains from Entercard just as we generally do for the bank as a whole in the SEK 27.5 billion. But then you're right that in the longer run, there might be other synergies that we have on a very high level, talked about before. But when we present both the adjustments of the organization and the strategy for Entercard going forward, we will allude more on those. Operator: We now have a question from the line of Jacob Kruse from Autonomous Research. Jacob Kruse: [Technical Difficulty] Operator: The connection with the questioner has been lost. We will proceed by taking the next question, which comes from the line of Riccardo Rovere from Mediobanca. Riccardo Rovere: Just one, it's not 100% clear to me whether you think your managerial buffer for common equity Tier 1 [ purposes ] in the foreseeable future is going to be 300 or maybe the middle of the range, 200 basis points and somehow related to that. I just wanted to have an idea if you have been active in SRT or you think you could be active or something that you're looking at in the foreseeable future to optimize your capital absorption? Jon Lidefelt: Thank you, Riccardo. Yes, as Jens said, we are now in our buffer range of 100 to 300. Then the long-term target of 200 still stands. And when we will get in there, as Jens said, it's a judgment call based on the various uncertainties. I think if you look into the future that SRTs will be a tool, we have not used it now, but we're definitely not ruling it out in the future. Riccardo Rovere: Okay. And just a very, very quick follow-up. But in the foreseeable future, given maybe geopolitical tensions, do you think it's more appropriate at least for the moment to stay at 300? Jens Henriksson: Well, I think Jon answered that direct and that is that further capital release continues to be a judgment call depending on the several uncertainties such as the long-running U.S. investigation, the timing of the IRB approvals and the uncertain world we live in. And as I've said, we have no intention of holding more capital than necessary. Operator: The next question comes from the line of Markus Sandgren from Kepler Cheuvreux. Markus Sandgren: I was just going to come back to the capital question. The 100 bps you got in add-on in P2R for IRB noncompliance, is the best guess of the net effect of that and reinflation still 50 bps lower requirement net-net? Jon Lidefelt: Thank you, Markus. If you go back, if I take some time back, then we said that when we are through the IRB approvals, we expected at least 50 basis points positive impact, which then mainly was related to the fact that we have this Pillar 2 add-on in Sweden, and the fact that, that is also related to mortgages, which is under the mortgage floor. Then when we presented reports last year when we had the SREP in Q3 last year, then we concluded that they had adjusted that due to the new capital adequacy rules for standardized. So we back then got to 20 bps release. So of the 50, we had gotten 20. So in that sense, that would be 30 basis points left of that. Operator: [Operator Instructions] We now have a question from the line of Jacob Kruse from Autonomous Research. Jacob Kruse: I hope you can hear me this time. I just wanted to ask, firstly, on your AI -- where your thinking is on AI. Do you see at this point near-term opportunities to reduce staff by the deployment of AI? Or is it still more of an exploration mode? And then my second question is just on commission income. How do you think about the -- I think in the quarter, you had about SEK 100 million of one-offs? And I think it was a relatively solid quarter across most product lines. How do you think about the outlook here? Is this in line that can continue to grow? Or do you need to see a meaningful pickup in the domestic economies? Jens Henriksson: Well, first, a few words on AI and then Jon will follow up. And we've used AI for a long time. We used that in anomaly detection and we're using it more now. And one cool thing that me and the full Board was doing a few months ago was listening in on calls and you see call summarization by AI. This is a very cool feature. And that, of course, is an instrument that our customer representatives can use to be more available because they don't have to spend that much time on writing summaries. They can be there for our customers. And that's one of the reasons we're seeing that our availability has increased so much, and we have so many more calls with our customers. And we see continued use of AI within the bank. That said, we steered the bank on cost and not on FTEs. And we want -- which we're very clear for this, we want to do more business and we want to meet more customers. So that is my point on that. Jon? Jon Lidefelt: And if I then go into the NCI, yes, you're right, we had a one-off of roughly SEK 100 million part from the -- on this, which was then related to retail product that we decided to close several years ago, but that has now been running off. If you look at NCI, then -- and remember what I've said before is that we are the biggest when it comes to bank [indiscernible] and payment processing in Sweden. [ Bank Europe ] increased the commission expense for our customers by 30% in the beginning of this year. This is due to the big investments needed to transform the Swedish payment system. That is more visible. It's the same for everyone, but it's more visible for us since we are the biggest. What they also did in the fourth quarter, they added a one-off commission cost, which in our case, was around SEK 35 million that, of course, is weighing on this result. And I think this will be there as long as this is in the investment phase that the cost -- commission costs will be higher on that row and hence, weigh on the net. Card commissions are seasonally a bit lower in the quarter compared to the third quarter where you have the summer months and with people traveling and so forth. But then you also have, over time, a big movement between rows here because we are working more with concepts, both in the Baltics and Sweden, which means that some income has moved from the card line to service concepts. Over time, this is something that we believe is good both for our customers and for us. Asset Management is long-term growing. What you think you need to remember here is that we have around 40% of our fund capital denominated in U.S. dollars. And of course, the strengthening of the Swedish krona is, to some extent, and hence, counterbalancing the strong stock markets in U.S. But this is definitely over time, a good and growing income for us. And if you look at 15/27, this is an important area, and Jens also talked about now celebrating 2 years with the Premium and Private Banking business area, which is also a testament to that this is an area where we see long-term growth, and it is important and it's in our DNA. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Maria Caneman, for any closing remarks. Jens Henriksson: Well, I'll steal the word then I say thank you for calling in. And I think as Jon and I have talked about today is that Swedbank is well positioned for sustainable growth and profitability by strengthening our customer tractions, grow our volumes and continue to increase efficiency and the future of our customers, our focus. Looking forward, meeting you either on the road, on teams or next time in April. Until then, take care, and thank you for calling in.
Operator: Thank you for standing by, and welcome to the IGO December 2025 Quarterly Activities Report. [Operator Instructions] I would now like to hand the conference over to Mr. Ivan Vella, Managing Director and CEO. Please go ahead. Ivan Vella: Great. Thank you. Good morning, good afternoon, everyone. Thanks for joining us. I know it's a super busy day, lots and lots of quarterlies for the market, so you're running around. So I appreciate you dialing in, taking the time to catch up with our results. I won't spend too long as usual, just trying to hit the highlights. Kath will pick up the financials as we get further through, and then we can dive into some Q&A. Just to sort of touch the headlines first before I run through a few areas in more depth. I think safety, again, continued improvement. I've talked about this since I started the role 2 years ago, and I'm really pleased that we're making steady improvement every quarter. Team is working really hard at it. They absolutely treat this as their first priority, and the results are flowing through, which we're really pleased about. Naturally, it's never done that focus on a good mature culture is something that we'll keep working at. But I think it ties back into performance in the mine as well. And obviously, these results are largely focused around Nova. And you'll see the results from -- no, really, really strong through the last quarter, production cost. The team is doing a great job, and I've reinforced obviously, a few quarterly now. How difficult it is when you get to the end of an ore body like this or you're approaching the end of mine life? It is challenging, team is dealing with that extremely well. And we start to see where focus on good safety, good productivity, good discipline in our operations all tie together, and we're also driving great cost outcomes as well. I do recognize, of course, the benefit of the byproduct credits from copper, which is nice. It's another piece of the pie. And obviously, lithium, nickel market is fantastic for the last 12 months of this mine. But as you can see, it starts with what we control and the basics are running well. For Greenbushes, look, obviously a better quarter than the first quarter of this financial year, which was impacted by rain and grades. We've seen that grade improve. That's continuing to flow through, and we'll see that lift through the second half of this financial year. But some improved production, sales of which is just a shipment, which, to be honest, is with a very rapidly rising market, not the world that we end up seeing some improved financials on the back of that. And a lot of work is happening to get CGP up and going, CGP3 at least. That's, as we've announced already, hit first ore and produced first concentrate this month a huge focus on that ramp-up, and I'll talk more to that in due course. Kwinana, look another quarter that's sort of in line with prior quarters. I think really to call out was impacted by a shutdown that took out some of the available days of production. The team did finish the last month at about 50%, which is sort of the best that we've seen from the refinery for any sustained period. And I guess we -- as much as the lithium prices up, we continue to take the view that this has got a very challenged future. So that's I think the quick highlights. Our financials, capital further as you can see that we generated positive free cash and continue to maintain a very strong balance sheet. If I drop down a little bit further into Nova, and I touched on these points, I mean a really good operational quarter, delivering cash to the business. I talked about a stope this fire in Q1, which has been addressed and mitigated. And again, that's the sort of thing that the team naturally doesn't want to happen, had to work really hard to deal with it safely. They've done that, and it's now in the revision [ mirror ] looking forward. With the mine at this point so close to closure, we don't have the ability to flex that schedule. And so we have to deal with these things very effectively. Sales is a bit lower, just in line with shipping plan. So one less shipment for the quarter that will roll through. There's nothing really material in that. And overall, tracking really well against our end-of-life mine guidance. As I said, the performance from production was really good, and they continue to live through this quarter. So we've got some strong confidence there right through to the end of this calendar year. And of course, costs are a function of that performance. All that said, the team are working really hard to manage our costs as this line ramps down. We're certainly not looking to carry anything that we don't need to as we move towards closure in 2027. Kwinana next, just to touch on it quickly because then we can talk a bit more on Greenbushes. As I said, 35% nameplate for the quarter, 2.1 kilotonnes. We're tracking pretty much in line with our guidance as we set out for the financial year. The costs are up, and that's a function of the production through the quarter, we did take a bit out with the maintenance shut that was done and some other modifications that were done to the plant. The next slide, into Greenbushes. So look, it's a good quarter, lift on Q1 in production. Costs are still running high relative, and that's obviously largely production related. As the tonnes ramp up, we'll see that come back in. The realized price lifted to $850, which I think reflects this very close connection with the PRAs or the spot price in the market, and I'll talk more to that on the next slide. I think it's something that's very favorable, particularly in this lifting market, very buoyant market now. And the big news was obviously getting first ore through CGP3 late last year, just before Christmas. The team did find some issues as they started to run it up, stopped, fix those early in January and then got back into it. As I said, we've just seen first concentrate starting to come through. So look, the asset is working. I think they took the time, and it was down to -- go and check a few more things, hopefully avoid any more surprises, and the work in front of them now is to ramp that up, hopefully smoothly. We're going to know more by our half year results in a few weeks' time or 3 weeks away. So I think that will be a place where I can give you a more substantive update at this point, it's a bit early really to say too much until we see a few more results. I have a couple of extra slides on Greenbushes and wanted to start, as we've talked about in the last quarter, to just feeding more information to the extent I can about both the life-of-mine optimization or the strategic review that we're doing and the focus on productivity. The first thing I did want to touch on first was just on the price growth, which I'm sure everybody is following closely in the market. It's certainly moving very, very quickly. I would say, relative to the expectations that I had, fine is what it is. I'm sure we're going to have some ups and downs. We saw overnight that there was a bit of downshift with FX and others. And I think we certainly expect to see some of the curtailed supply out there start to be reintroduced. And I think this morning mentioned they were looking at that. I see more of that, which might pay for it. But really, the takeaway from this slide is the way that, that translates for Greenbushes. And as you know, when we take the average of the PRAs 1 month price trails, but it's pretty much a very close connection to the spot price that's out there, does give us a very good realized price that flows through. We don't have any of that lag or impact from contracts that might carry discounts or other frictions from a lower [ end-of-life ] in the cycle. So I expect we're going to see obviously some very attractive lifts in our realized price over the coming months. The next slide then I guess brings to life how that translates into margin, which is one of the things, again, I've called out before, I think Greenbushes is one of those few mines of any point in the world that generates extremely high margins. I think we said 64% EBITDA for the last quarter. And I think the low end was just shy of 60% at the absolute bottom of the cycle. But the thing that's really unique is it also drives fantastic cash conversion and translates into returns that flow out of the business. They don't have to be reinvested to maintain production. And this chart brings to life what that looks like if you take 1.5 million tonnes, so current production level roughly at 2,000 tonnes. And then with the lift in production that's coming through CGP3, the sort of amount of cash that's generated through that step-up just help to visualize that. The next slide talks a bit to the optimization work that's ongoing. It's a slide that I have referred to before. Just to reorient everyone, we've got an overall review of the entire mine, which is, I guess, life-of-mine optimization, I'm going to talk to one example of the kind of work that's happening there in a minute. That is significant. It's got a lot of expertise -- external expertise helping us with it. It basically goes right back to the ore body, assesses the characterization, the design of the mine, how we manage waste, tailings, grades, et cetera, top to tail. And reset that [ optimum ] mine in doing so obviously unlocks a lot of value. In parallel with that, we were also focused heavily productivity. Now these things are naturally linked. Productivity work is happening now anyway, and that's focused across a number of different streams. All of that together brings us to, I guess, our goal, which is achieving the full potential of Greenbushes. And Rob, the CEO there at Talison, is doing a great job. He has got a lot to work through and as the team he's put together are working through it. They are finding a whole range of issues, challenges and changes they need to meet. And that's part of the shift. But I mean, we've seen Nova in the short space of time, make this shift in this steady focus on production stability and safety. I don't share the safety results of Talison, but there is some challenges there as well. I think these teams are linked. And Rob's got a really good set of programs and changes in place step by step to support the team to shift that culture and focus on safety, on production reliability, stability and ultimately productivity, it will drive out more tonnes and obviously less costs as well. The example I want to refer to for the overall asset review really looks at the pit wall -- steepening pit walls is something that naturally has risk or threat and opportunity both ways. On the upside, it means a lot lower strip ratio. And in this case, you can see and I'll talk to the line in a minute, it starts to expose more metal or more material -- valuable material that otherwise might not have been accessible. On the downside, if we get it wrong, you have a geotech issue or a failure in the wall that can sterilize more. So it needs a lot of careful work and thought. The team have brought in experts to help them with that. They are maturing their geotechnical management processes and activities. They're doing all the right work to make sure that we control those risks, but ultimately unlock a lot of value. And if you look through this chart, you'll see some little dotted lines that run out into the gray patch on the right-hand side. And so that sort of pit shell, the 2023 resource shell and the '21 resource shell shows what the overall resource would be. And you can imagine if you actually did all that strip, it's a huge amount of work. The other point to note though is on top of that gray-shaded area there on the left side of that slide [indiscernible] our plants. So it will require us moving a lot of infrastructure and assets, which is extremely costly. It's not to say you can't do it. I mean that's the kind of work that other mines in the world have had to go through, but it's not very desirable. So the other way to tackle this is if you take those lines that run into the gray and you draw them straight up to the edge of the gray and you steepen that wall significantly, you can start to access that high-grade core, you can lower your strip ratio significantly, so you expose more metal, lower strip, much lower cost and ultimately drive an enormous amount of extra value out of the mine. That's the kind of example of work that's happening at the moment, wanted to do this to try and just illustrate it. So when you start to see more of the results and the information coming through as we get through the decisions, finalize our plans and we can present that back to the market; you'll understand where that's come from and just helps to give you a sense of the work that's happening. Equally, the care that we're taking to make sure that this is done properly, as many of you know, this mine is 135 years old, even we're working in is quite mature. And any change to that, we need to make sure we're done with due care and attention. The last slide then on Greenbushes just speak to the productivity stream that I mentioned earlier. We put in the sort of major areas of focus, mining being naturally a big one early. And I've put a couple of little charts in there that just illustrate the lift in productivity from the mining fleet. And that takes us to what we believe is industry average. So we're not outperforming yet, but I want to give credit to the team to [ Rob, Adam ] and the mining team, they've made a lot of focus on this. The -- a lot of issues they are working through different challenges, but I think they're really starting to see some results come through now, and that will play out in our costs, obviously, our waste movement. And the second area I want to talk about was then just production and plant performance. And that's a mix of utilization through better asset management and reliability so we get that throughput, but also recovery. So more stability will drive recoveries and then work to optimize recoveries. As part of that, we're also looking at value and use, which means what is the grade that we're selling to our customers? Is that optimum for them? What level of impurities? How much are we throttling the assets to the processing plants to achieve that? And what's the cost or value trade-offs? So we're asking those kind of questions as part of this to make sure that we really optimize this, recognizing the customers' interest and their costs, but equally, what's the best we can do with the plant. The business has run, producing SC6 and a fixed grade on impurities for a very long time, and we haven't really asked the question. And so we are at least testing it, and we'll see what makes sense. No decisions yet, but it again shows you the kind of work that's happening. And the impact on productivity from these different streams is quite significant. So that's a quick round up on the operations, a bit more on Greenbushes. I turn it over to Kath and touch on the highlights on the financials, and then we can get into some Q&A. Kathleen Bozanic: Thanks, Ivan. Hi, everybody. Sales revenue was AUD 82 million. And as Ivan indicated, it was lower due to shipment timing from Nova. Nova EBITDA was up AUD 42 million, which included some value adjustments with the inventory adjustment in the month of December. The share of net profit from TLEA rounded to zero. Positive profit at Greenbush is being offset by losses at Kwinana, and this includes our share of capital expenditures we impaired that asset to zero. I also wanted to call out again that we're pricing [indiscernible] of spodumene. So next quarter, we'll see the benefit of the [indiscernible] higher. Underlying EBITDA improved to AUD 30 million, supported by [indiscernible] and some mark-to-market movements on investments that we have. We remain laser focused on cost control, but you'll note that -- or I'd like to note that this [indiscernible] had a one-off payment for our insurance in [indiscernible] quarter. Free cash flow was positive at AUD 13 million, and our balance sheet continues to strengthen with net cash increasing to AUD 299 million. I think that summarizes [ the results ]. Ivan Vella: Thanks, Kath. Well, look, we'll turn it over to Q&A. I'm throwing a different mic. Hopefully, the sound quality is better for you. But yes, we can open up and start taking some questions. Operator: [Operator Instructions] Your first question comes from Rahul Anand from Morgan Stanley. Rahul Anand: Just the first one for me is related to CGP3. Obviously, you've started commissioning and ramp up there. What is the rough time line of you achieving that nameplate, please, just so that we can test our numbers going forward on that one? And I'll come back with a second. Ivan Vella: Yes, in simple terms, 12 months, so the end of the calendar year. Rahul Anand: Got it. Okay. Perfect. And then just on the pricing, we basically had you achieved the price during this quarter for, I guess, the months of September, October and November. And even if I apply about a 5% discount, I'm still getting to a higher price. Now obviously, I acknowledge that the shipment timings might have been a key impact here. But is that the right way to think about pricing, September, October, November? And then based on when the ships basically are loaded and leave the port, basically, you're selling -- the timing is FOB basis. Is that right? Ivan Vella: Yes, it is. We can double check it and clarify. Yes, that's -- your understanding is absolutely correct. Rahul Anand: Yes, yes. Just because looking at our numbers for the price and also for consensus, the pricing was a tad bit weaker. So I just wanted to understand if we're kind of modeling that correctly. Ivan Vella: We'll double check. I mean we obviously do reconcile that, but we'll just make sure if there's something that's in there. Whether it's tied to the shipment possibly, I'm not sure, but we'll get back to you to make sure we've got the right inputs for your model. Rahul Anand: Excellent. And if I can just slip in one more, just around sort of Greenbushes going forward. Obviously, a strong lithium price environment, and you've got a downstream partner there at the mine as well. You've talked about the age of the mine and then also you're ramping up CGP3. And if I look at your sensitivity chart in terms of the sales volumes, you've obviously got about 2 million tonnes, which is what your current plans are. Have any conversations started as yet in terms of any future expansions at the mine and how they might look like in terms of underground, above ground? What type of hurdles you guys need to cross in terms of thinking about further expansions? Anything related to growth, I guess, in the Greenbushes space? Ivan Vella: Yes. Look, there's a lot going on there, but that's included in that broader life-of-mine optimization. The existing assets, so CGP1 and 2, we believe, can offer up a lot more productivity and throughput and production. So optimizing them naturally bringing CGP3 up to its full potential as well, so that's using the existing suite of capital that we've deployed. The tailings retreatment facility, we're working through that study presently. So we know what to do there as well. So there is a lot happening in that space to recognize and drive growth from the existing capital base and make sure we've got the best from it. CGP4 is in the mix. It's one of those things that sits in the schedule, and we've got to find where the optimum place for that is. We don't have that answer yet. There's a lot of moving parts in the review that we're doing. It's very significant. But as I get more detail step by step, we will feed it out. I guess I'm just as eager as you are, of course, to have that finished because it gives us a really clear new baseline to work against. And Rob and the team are working really hard. I think we'll see some of that come through in the reserve and resource update we do later in February. And you mentioned underground. So we're certainly looking at where that fits. And as we think about the overall resource, I've talked about pit wall as one lever that obviously drives a lot of value, but equally understanding which part of the resource we want to target through the open pit versus underground and then what the schedule and sequence of that is, again, work that's underway currently. Operator: Your next question comes from Levi Spry from UBS. Levi Spry: So do we have an updated expected date for the life-of-mine optimization? Ivan Vella: No. No. Sorry, Levi. I would love that, too. I'm pressing regularly. Rob's probably getting annoyed with me. But look, they're working hard. They're making progress. I think there are some areas where they dig in, they find things that they just have to do more work on technically to make sure that we're going to make the right decisions. So I will share a clear plan or at least target once we have one, but I just don't have that to offer up. Levi Spry: Okay. So in the absence of that, so can you -- maybe you need a big second half as CGP3 ramps up. Can you just remind us of its operating parameters, maybe tonnes grade recovery, so full speed by the end of the year? What does that actually mean? Ivan Vella: Yes. I mean you're talking about the whole grade curve and so on. I mean, we've given you the nominal tonnes, 0.5 million tonnes. It will run at, I guess, design feed grade is the same as CGP2, which is about 1.8%. And it will run to, I guess, test recoveries, we are targeting higher than that. So you've seen the results of CGP2 starting to rise, the team do more work on it. I guess our goal naturally from the ramp-up is that we don't have to go through that process that we actually are hitting our grade curve from the outset and then beating it. But I'm not going to promise that at this point. It's where the team is focused. I don't know -- is that what you're looking for? I mean all those numbers we've shared previously, I'm just not sure there's nothing new at this stage that's going to change things until we get further into the ramp-up. Levi Spry: Yes. Okay. So just pushing you further on that. So just confirming on Page 7 of the preso, the 2 million tonne rate. So do we take that as being the calendar year '27 run rate? Ivan Vella: No. That was an indication of margin of that volume. It's a capacity. It's not a mine plan that we've issued as guidance yet. Levi Spry: Yes. Okay. And so the next round of meetings with TLEA and the Tianqi for guidance. So when is the '26 budgets expected to be set? Ivan Vella: We've been through that now. They're getting signed off as we speak. So that's a '26 calendar year for TLEA too. And we'll then take that and build our guidance for the '27 financial year, obviously a bit closer to the time. Operator: Your next question comes from Hugo Nicolaci from Goldman Sachs. Hugo Nicolaci: First one on your comments around Greenbushes guidance, production is sort of tracking slightly below, CapEx also below. If I try and triangulate those 2 comments, is that just in terms of stripping at the mine, is that running a little bit behind, and that's why your strip ratio has sort of fallen in the last quarter and why both production and CapEx might be lower for the year? Ivan Vella: No, they're not all linked. So stripping will come down, and we talked about this example on it, I mean we'll see a material reduction we expect in our strip ratios through that, and that will trend down. Quarterly variations is more about weather impact through Q1, obviously have less of the pit access and availability. They're now fully open, so that will look different. But the team are looking at where they keep waste, how they manage waste, the grade and sweeping of those waste stockpiles. There is a lot of changes that they're working through presently. So I don't want to try and characterize these things as just one caused the change. In terms of the production, look, it's partly grade related, which was a bit better than we saw in Q1, of course, a little bit worse than we had in our plan, and that's just a normal reconciliation we're working through. Team are getting there. And the other bigger factor is, of course, just the way that CGP3 ramps up. That's really the key unknown. Hence, what we anticipated in our guidance in terms of that start-up, we're behind. Is it not recoverable? No, not at this point, but that's what we're going to need to see in the coming weeks or months, how that goes. That will give us a gauge to how the rest of this year looks and then obviously into the rest of the calendar year. So there's a few different moving parts, but certainly wouldn't tie them all together in terms of the production outcome for Q2. Hugo Nicolaci: Got it. In terms of the CapEx timing piece, then I presume those are all works that will still need to happen. So maybe that's more of a shuffling some of the CapEx into FY '27 rather than things no longer? Ivan Vella: Yes. I mean, as I've talked about in prior quarters, I mean, Rob has got a very tight handle on CapEx. He's been very prudent, and he is pushing back on it, which is good. But we're not in a place where we're ready to down Street guidance on it yet. We'll see how -- again, how that pans out now as they run up to CGP3. Obviously, some of those costs are capitalized until we get to commercial production. So there's a bit more to come, but I don't think you should read into that, that there's a major issue that's impacting production. Hugo Nicolaci: Got it. And then just sort of second one, I think dovetailing off Rahul's question earlier around the realized pricing piece. Can you just remind us what sort of volumes are going out on the technical grade piece at the moment? And if that's also a bit of a delta there in terms of that realized pricing? Ivan Vella: Look, it's very small. It wouldn't be material enough to realized pricing. And we're talking 50,000, 80,000 tonnes in a year. So it's pretty small, right. Hugo Nicolaci: Yes. Got it. Great. And then just last one if I can, sort of back on the IGO level, and you've highlighted, obviously, the step change in potential cash generation for Greenbushes at current spodumene pricing. We're 2 months through your current quarter, basically pricing setting. Does that then enable you to start thinking about dividends back out to IGO shareholders given you have that line of sight to cash flow when you're sort of at or above your threshold for excess returns already? Or is that maybe a little bit too early for February still? Ivan Vella: Yes, too early. I mean I think we've got a very clear capital framework at Windfield, which we use to manage dividends and obviously, the debt there, obviously there were some movements in the debt. We'll work through that. We'll pay dividends out of Windfield to the shareholders of TLEA in due course, and that will be done. But again, based on that framework, very well managed and controlled. And then the key discussion will be the TLEA as to what we want to maintain there in liquidity and what shareholders might then paid out. So certainly no discussions or decisions on that at this point. The first step is to see that cash really starting to flow through Windfield. Operator: Your next question comes from Kaan Peker from RBC. Kaan Peker: Ivan, just on that framework that you talked about with Windfield, $150 million of debt paid this quarter, but no cash distribution to IGO. What's the priority now further degearing versus distribution? And as CGP3 ramps up, is there a set level or cash buffer that's required before distributions resume? I'll circle back with the second. Ivan Vella: Yes, I pick up the last part first. So we've got -- I mean, there is a cash buffer we will hold. That's not tied to CGP3 or any specific part of the asset. It's just a part of our own capital framework, and that's being managed. Naturally, we'll look at then dividends versus the debt and the balance on that, and we'll take into account things like the U.S. dollar and forward views on cash generation and so on. So all those decisions go through a pretty structured process with the Board and the shareholders. And out of that, we'll let you know how that translates. Obviously, the way this market behaves is going to be relevant. Obviously, it's very buoyant right now. And certainly, all the signals are for a very strong Europe demand. But equally, we expect to see more supply come online [indiscernible] but other production as well. So I think before we get ahead of ourselves too far, we just want to sort of see how that washes through and take a view then on how best to allocate that cash to drive maximum value for the business. Kaan Peker: So just to confirm, it's degearing currently the focus? Ivan Vella: No. Yes, no, it's not a focus. That was -- this is part of CFOs managing in a day-to-day sense. We will naturally want to pay dividends and think about our debt. So they're both important priorities. Kaan Peker: Sure. Okay. Maybe secondly, on Kwinana. Conversion costs spiked materially this quarter. How much of that reverses with utilization versus how much reflects embedded cost issues? Ivan Vella: No, it's been largely impacted by the maintenance because remember, we don't capitalize anything. Everything is expensed. And obviously, the production volume is impacted through that period. So you've got a compounding set of elements there. I think the team are working to drive out cost. And as we're looking at and we're working through '26 budget for Kwinana. There is a lot of pressure on that as to depreciate and CapEx as well. So the team naturally are trying to find ways to drive better reliability and better performance, but do that with less costs as well. And I would not take Q2 as a market that says it's trending up or that's the run rate [ look out for ]. Operator: Next question comes from Matthew Frydman from MSG Financial. Matthew Frydman: Can I ask another one on the ramp-up of CGP3, which I guess you called out as the biggest factor in the softer guidance commentary you've given? Can you give us any more information on the specific issues that have been, I guess, based and dealt with so far that you mentioned earlier on the call, was there anything specific related to equipment or fee or people or anything? And then in your view, are there any sort of key risks or checkpoints now looking forward? Or is it just a sort of steady improvement over the course of the year? Ivan Vella: Yes. I'll share what I can, Matt. It's a good question. It's equipment related. So one of the mills needed some realignment. It's not an unusual problem. Australians you kind of go, well, how that not get dealt with earlier, but it happens. I've been through a few of those. We needed some resealing, again not fantastic because it's painful to do it. It's not a big issue. It's just logistically to get back in and fix some of these things just takes a bit of time. The good news was the team used some of that downtime when they were working through some of these issues to then just go back over motors, pumps, et cetera, and pump test and check and just really get confidence. I think they changed out previous pieces so that we can get a -- hopefully be more cleaner in next phase of the commissioning and ramp up. But for anyone who's been through these things before, there's plenty of unknowns. So you have to be very careful not to get too excited one way or the other. It's still pretty early in the process to sort of see how it behaves. I think the good news is you talk about the other things that could be a factor. So fee is fine. That's all good. People and capability, we've got a great team there, lined that up well. [ Paul ] who's the project director, got an integrated team for commissioning. Strong team in place. So we feel comfortable with that. We've got great support from the vendors. We've got access to all the support equipment that we need. So there's no big risk there that we're sitting here deeply worried about. But I just think it's way too early to call or to get a real sense. I think by the time we can get to our half, I'll get a better read on how things are going. at this point, I'm pleased we've got better half, they're starting to basically run the plant and actually start to see what the recoveries are, how it's behaving and obviously look at the tuning in the reagents and all of the long steps you take in that first month or so from start. Matthew Frydman: Okay. That's helpful. Then secondly, you -- as you called out, put some additional numbers in the presentation there around some of the recent productivity improvements at Greenbushes, improved truck utilization, improved material movement. And you suggested that, that will flow through into the cost line over time. Obviously, there's a lot of moving parts that go into the final cash cost number. But I guess I'm wondering, in isolation, are you able to maybe put some dollars around some of those mining productivity improvements? I mean what's the goal for where you think you can get the cost of material movement with some of this productivity improvement? Is it $10 a tonne? Is it $7 a tonne or whatever the number is from a ballpark perspective, what's the team working towards? I suspect you'll tell me that some of that will come out in the life of mine optimization piece. But yes, just wondering if there's any sort of high-level thoughts around that at the moment. Ivan Vella: Yes, it will. I mean I don't want to give you a number yet. I mean, that is a conversation, of course, when we go through budgets and we're pressing the team. They're a bit gun shy to offer up in the first year because it's still a work in progress. But we're starting to see a profile through '26, '27, which really does show some substantive improvements in unit costs on those underlying activities, and I think that will naturally flow through. We're also, as every mine does volume [ rate ] decline. So some of it is eroded indirectly through that or offset. But the goal is net-net, we're actually beating that and both through increased throughput or production and also then the just more efficient work through less stripping and so on that we're actually continuing to strengthen our position as the lowest cost lithium rock producer in the world by a long shot and just keep on consolidating. So Rob's -- I think I've mentioned before, sort of put that broader goal out there to be the lowest cost lithium units in the world, and there's still a gap to the very best brains out there, but it's intruding range. So I think it's a good target and a good challenge for the team and the team can say, how could you run this mine differently and what needs to be true for us to start the overall cost performance and that's not going to come in a quarter or 2 of course. I guess what I'm trying to do is to the extent I can share information as we do, [ beat it ] out step by step to give you a greater insight and picture on improvements and then also give you some of those underlying productivity and performance numbers so that you can update your view of the asset. Matthew Frydman: Waiting for the study outcomes with [indiscernible]. Operator: Your next question comes from Austin Yun from Macquarie. Austin Yun: Just one quick question. Yes, most of the questions have been asked already. So just one on the base metal strategies. I think previously, you were talking about outside of lithium, you are looking at other early-stage opportunities. Just conscious that given this EPS, seems like a windfall of cash coming from the strong lithium market, how does that change your thinking of the exploration of the other opportunities? Could we see some capital being allocated to that part in addition to shareholder returns and debt repayment? Ivan Vella: Look, Austin, it's a great question. No, it really doesn't change. I mean the criteria that we've applied since I started 2 years ago, a lot of discipline, has been a big part of this real clarity around kind of returns that we're looking for from any growth needs to be in that ballpark around Greenbushes, we don't want to heavily dilute our business and trying to hit Greenbushes, as you can imagine, that's a very high bar. And so we can allocate capital first there and actually that's going to be the most accretive and most sensible thing to do, which we're focused on dealing with things that are a drag on our returns, i.e., Kwinana, which we're working through, we've been clear about that. And then to add something to it. I mean, it's difficult, hence, why we've been continue to be very disciplined. If we saw something that we felt would deliver appropriate returns, sure. The lithium price, to be honest, or having said, and the translation of that into cash doesn't really change that decision. Because we have much more cash available to us, we're not going to be more eager to make a decision there. It will be on the same criteria regard. Arguably, the best time to be doing things if you saw it was 12 months ago or 8 months ago. So it comes back to our [ own ] value, and we've got a very high bar, and that's good and bad. It's an absolute privilege to be part of the custodian of Greenbushes and it just means that our growth has to be very, very focused. That's probably all I can say at this point, Austin, but it's more of the same. Operator: Your next question comes from Daniel Morgan from Barrenjoey. Daniel Morgan: Just a simple one really. Grades at Greenbushes, I think if I'm hearing correctly, they're back above 2%. And so therefore, the implication is like just putting CGP3 to the side, not stripping that out from this question. We should expect a material lift in production for the next couple of quarters from the existing business, not CGP3, correct? Ivan Vella: Yes. Well, you'll get a lift, yes. I think it's -- I mean, not a best rate clearly equally interruption. We had a pretty good quarter, weather-wise, some rain, later than expected through Q2, but Q1 is always going to be a challenge. So there's naturally some of those impacts, [ freighted ] impact. And then the productivity is the other piece, which I know Adam and his team are working very hard on. I'm pushing and expecting to see them to deliver results through all of that hard work as well. Operator: There are no further questions at this time. I'll now hand back to Mr. Vella for closing remarks. Ivan Vella: All right. Thank you. Look, it's nice to speak with you guys. Hopefully a break before the next one. I won't say too much. I mean just to recap, I think Nova was really pleased, as I said, safety, production cost is hitting the mark. This is an operation that we focus on. It's relatively small and simple, but it's a signpost of how we want to bring our capability to operating a mine. And I think all credit to the team, they've done a great job there and set this year up very well. So that's great. Unfortunately, it's only a year to go, not another 10 is what it is, so I'll manage that through. Greenbushes, a better quarter. The big focus is CGP3. Naturally, we're very pleased to be ramping that up into a lifting and buoyant market. It's fantastic, and there's a huge amount of focus to make sure that smooth. And ideally, we meet all of our plans. That's always going to be the target. But at this stage, it's early, you just need to back the team and support them as they get through that work. All that said, I mean, this is the time when Greenbushes really shines. This is the period of lifting price, a buoyant market when you see the very best hard-rock lithium asset in the world, turn it on more production and a whole lot more margin. So we're pleased to be part of that and continue to work with the team to improve this performance. Thanks for everyone's attention and support, and we look forward to talking to you soon at the half year results. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Welcome, everyone, to Telia Company's Q4 Full Year Results Presentation. And with that, I will now hand over to Telia Company's Head of Investor Relations, Erik Strandin Pers. Please go ahead. The floor is yours. Erik Pers Berglund: Thank you, and good morning, everyone, to our Q4 call. We will do the usual routine with the management presentation followed by a Q&A. We have CEO, Patrik Hofbauer; and CFO, Eric Hageman, in the room, and we go straight ahead. Patrik, the floor is yours. Patrik Hofbauer: Thank you, Erik, and good morning to all of you. The last quarter of 2025 confirms that we are on track to reshape Telia into a much simpler, faster and more efficient company, in line with our value creation plan set out at the investor update back in September 2024. Before I go into the quarter, let me walk you through some key highlights for the full year of 2025. Looking at the financial performance, we have, for the first time in 5 years, converted the dividend with our free cash flow without any vendor financing contribution. We delivered on our EBITDA and overdelivered on our free cash flow ambition despite a challenging year for Norway and service revenue headwind in Finland and our balance sheet has strengthened. The good financial performance has also been noted by the market and resulted in a total shareholder return of 36% for 2025. We are also through the first year with our country-led operating model and the positive result when it comes to efficiency, speed and responsibility are clearly visible. The new model is also an enabler for further efficiencies and we announced a net reduction of 450 positions earlier this month. We have also come far in terms of improving our CapEx efficiency and reshaping our portfolio with the divestment of TV and Media and bid for Bredband2 and our process to exit Latvia. Throughout the year and across most markets, we have seen NPS improving, so the customer satisfaction, which confirms that we are doing the right things for our customers. In addition, our role in society is becoming increasingly important with increased demand for secure and mission-critical communications. So a lot for the organization to be proud of and to build further on in the coming years. And with that said, let's now zoom in on Q4 highlights. We again won the best network in Sweden according to umlaut's yearly survey, achieving both the highest overall score and a win in every category. But only having top-class network is not enough. And I'm happy to see that all the other efforts we do to drive customer experience is paying off with NPS increasing across the footprint. We also continue to be very disciplined on cost in Q4, which resulted in an OpEx decline by 4%. On portfolio management, we received the necessary regulatory approvals to go ahead with the bid for Bredband2 just before Christmas. And our process to exit Latvia is moving ahead. We also agreed to acquire a small fiber customer base in Finland. We saw Sweden deliver its best quarter in modern times with revenue growth reaching almost 5%, supported by business and mission-critical services, but also strong growth in consumer and an improved trend on mobile. For 2026, we see continued good financial momentum and therefore, guide for service revenue and EBITDA growth of around 2% and around 3%, respectively, and a stable CapEx level. Combined, these core building blocks are estimated to generate a free cash flow of around SEK 9 billion, a good milestone towards delivering at least SEK 10 billion in 2027. Now let's go to the financial highlights. Service revenue growth accelerated as expected, supported by strong growth in Sweden. EBITDA growth remained rather unchanged compared to the previous quarters, somewhat held back by a weak service revenue development in Finland and our decision to invest more in our core markets to capture growth. CapEx remained stable and ended a bit below our outlook of around SEK 13 billion for the year. Free cash flow came out very strong, driven by better-than-expected Q4 working capital, which Eric will elaborate more on. This strong end to the year resulted in a full year free cash flow of SEK 9.6 billion based on normalized spectrum CapEx, significantly above our outlook of around SEK 8 billion. Finally, our balance sheet remained very healthy with leverage also this quarter at 1.93x and significantly down from a year ago. Moving now to Sweden that again won the best network in umlaut survey and that also secured further long-term access to 1,800 megahertz spectrum at attractive prices. In the quarter, we also completed the 5G rollout and the 3G sunset. Customer satisfaction improved both in B2C and B2B, and we continue our strategy to step-by-step move sales from external channels to internal channels. Financially, Sweden delivered impressive service revenue growth, driven by both mobile and fixed. The consumer business had another good quarter with over 4% growth. Mission and business-critical services were a strong growth contributor, but also other areas such as our IT business, Telia [indiscernible]. Growth was well balanced, driven 50-50 from pricing and volume. This shows that we can do both pricing and attract new customers, as you can see in the healthy KPI development on the right on the slide, with strong net intake for both broadband and TV and a growing mobile ARPU driven by price changes earlier in the year. The slight decline in mobile customers was a result of a modest decline in the mobile broadband base. EBITDA growth remained strong despite including a lower year-over-year pension refund contribution as well as increased marketing spend. So all in all, Q4 was strong delivered by the team in Sweden. Let's now move east to Finland. And let me start with the financials where we had a weak quarter with service revenue down 3%, partly driven by continued weak enterprise market environment and a ramp down of noncore businesses but mostly because of non-connectivity projects for enterprise customers, which are lumpy in nature. We had a high level of revenue from these projects in Q4 last year and a relatively low level this year. The lower service revenue was the main reason why EBITDA declined 6%, but also the higher marketing spend that we flagged already in Q3. So clearly, a weak quarter, and we are far from satisfied, but we also won some new enterprise customers and our focus remains on the strategic agenda we have communicated before, strengthen profitability, simplify the business by divesting noncore assets and reducing organizational complexity and then turning around the SME segment and stabilizing the mobile market share. Underlying cost control remains tight, and we expect service revenue and EBITDA to be more stable in the coming quarters. The mobile consumer market was very active this quarter with 2 new MVNOs and a record high number of customer changing operator. We continue to focus on network and customer service quality and avoided the lowest price points in the market, even if it resulted in a net loss of customers short term. In broadband, net adds declined by 6,000 in the quarter, but this was fully driven by a cleanup of inactive subscribers. Now moving west to Norway, where service revenue was close to flat despite lower mobile wholesale revenue since mobile end user and fixed revenue improved clearly. This was mainly driven by pricing and as can be seen to the right, resulted in significant ARPU growth across our core services. EBITDA remained in negative territory as we flagged last quarter due to the decline in service revenue as well as higher cost level. Partly this was driven by phasing and partly because we have invested more into the market to capture future growth potential. We shifted the billing cycle for a large part of our customer base, which helped working capital in the quarter, and the churn effect was well in line with our own expectations. So now let's move to Lithuania, which launched 5G SA for its consumer customer and continue to deliver truly strong financial development with service revenue growth accelerating to 7%, supported again by both mobile and fixed. The acceleration, together with another quarter of great work on generating efficiencies resulted in an EBITDA growth of 13% and an EBITDA minus CapEx that remained at a record high level of SEK 1.6 billion on a rolling 12 months basis. In addition to solid financial development, Lithuania continued expanding the mobile customer base, and as you can see, also grew ARPU across all products, predominantly on the back of pricing performed earlier this year. Moving on to Estonia that had an eventful quarter operationally, receiving a recognition for best network by Rohde & Schwarz, launching a new security service for its home broadband customers and new eSIM roaming service for customers trading -- traveling outside of EU. Financially, the quarter was, however, a bit soft on service revenue, trended stable and EBITDA growth slowed down due to an unusually low cost level in the corresponding quarter last year. But like for Lithuania, cash conversion remained close to a record level also in Q4. And with that, I hand over to Eric before I come back to summarize the full year and Q4. Thank you. Eric Hageman: Thank you, Patrik. Let me now go through the financial development of the quarter and full year, starting as usual with service revenue and EBITDA. In the last quarter of 2025, service revenue growth improved to 2.1%, driven by the strong performance of our Consumer segment, which benefited from a particularly strong development in fixed, led by TV in Sweden and broadband, which grew nicely across all our markets. Mobile service revenue returned to growth despite the continued drag from wholesale in Norway. From a country perspective, Sweden's top line accelerated as expected and growth in the Baltics remained solid at around 5%. Combined, Sweden and Baltic service revenue growth more than compensated for a somewhat negative Norway and a weak development in Finland, the latter feeling the impact of increased competition, some year-on-year phasing and the previously flagged closure of the noncore e-invoicing business. But as Patrik said, we expect the service revenue trend to improve in the coming quarters, even though the overall turnaround in Finland and Norway will take time as previously explained. As a group, we ended full year '25 with 1.5% service revenue growth, a tad shy of our around 2% outlook. Excluding the wholesale revenue loss in Norway, we would have been at a 2% top line growth for the full year, which is what we guided for 2026. Sweden is expected to enjoy continued good growth, albeit at a lower rate than seen in Q4, and we expect Norway and Finland to gradually improve. Moving to EBITDA at 3.7% growth in the quarter remained solid, yet somewhat below the Q3 level because of the increased marketing spend in Finland and Norway. EBITDA margin was up again, firmly aligned with our September 2024 Capital Markets Day margin expansion promise. For the full year, the improvement was 120 basis points and is the result of profitable growth supported by the positive impact of the Change Program. Looking into 2026, we guide for around 3% EBITDA growth, supported by service revenue growth and continued work on generating efficiencies. Moving now to OpEx and CapEx. Starting on the left, also in Q3, we kept a high level of cost discipline as the Change Program continued to drive down resource cost. As a result, OpEx declined by 4.1% compared to the same period last year. We also saw lower cost for energy and bad debt in Q4, which largely compensated for slightly higher IT costs and increased spending on sales and marketing to capture identified growth opportunities in our 3 main markets. OpEx as a percentage of service revenue continued to trend down and decreased by 200 basis points to 31.9% in 2025. Whilst it's, of course, encouraging to see that we managed to do more with less, we see many more opportunities. We will not sit idle, and we will continue to make Telia simpler, faster and more efficient. Consequently, we announced early this month that we are targeting a net reduction of at least another 450 positions across the group this year. Moving on to the graph in the middle, you can see that we also remain disciplined with our capital expenditures, ending the year with SEK 12.8 billion for the full year, ahead of the improved guidance of around SEK 13 billion that we gave you at Q3 and significantly better than the initial guidance of less than SEK 14 billion that we had at the start of the year. For 2026, we expect CapEx to be below SEK 13 billion, in line with how we currently are trending and well below the SEK 14 billion of our initial and medium-term guidance. Finally, as you see on the right-hand side, EBITDA minus CapEx as a proxy for free cash flow was SEK 19 billion on a 12-month basis, a step-up of SEK 1.5 billion or 9% versus last year. We also improved our cash conversion to 60% on a 12-month rolling basis, up from 57% a year ago. Let's now have a look at our free cash flow. Free cash flow for the fourth quarter came out stronger than expected, mainly due to working capital. This was driven partly by our own initiatives, including earlier billing and better inventory management and partly by external factors such as early payments by enterprise customers. For 2025, we delivered SEK 9.6 billion free cash flow on a normalized spectrum CapEx basis, significantly ahead of our initial free cash flow of around SEK 7.5 billion that we had upgraded to around SEK 8 billion at the Q3 results. On a reported basis, free cash flow was SEK 9.3 billion after paying SEK 800 million in a final installment for the Swedish 2023 multiband auction and with ForEx headwind of more than SEK 300 million as the Swedish krona strengthened versus the euro. This year-on-year cash flow growth was structurally driven by SEK 1 billion increase in EBITDA due to profitable growth and cost savings and circa SEK 600 million in reduced interest payments as a result of lower gross debt, lower average interest paid and strong working capital inflow. Looking ahead, we currently don't expect to have any significant net contribution from working capital in 2026. And we also don't expect paid CapEx to exceed booked CapEx like it did in 2025. Together, these 2 items contributed around SEK 1.5 billion to our cash flow last year. This is not expected to be repeated this year. That sets our free cash flow starting point back to around SEK 8 billion as we head into 2026. From there, we expect to grow our free cash flow to around SEK 9 billion, as you have seen us guide for this morning. This growth will be mainly driven by increased EBITDA, which we have guided for to grow by around 3%, which is circa SEK 1 billion in absolute terms. Overall, we currently expect free cash flow to be quite back-end loaded in 2026, even more so than it was last year. We expect relatively low cash flow in Q1 as some reversal of working capital should be penciled in considering the strong inflow we had in Q4. Interest payments are also seasonally high in the first quarter, just as a reminder. We expect cash flow generation to then strengthen quarter-by-quarter as profitable growth accelerates with the impact of continuous cost improvements taking hold. You know we are very focused on improving Telia's free cash flow generation capability. We made good progress in 2025, but we aim to make more progress in 2026. Our target remains to exceed SEK 10 billion in free cash flow by 2027. Let's now briefly look at our net debt and leverage development. As you can see on the right-hand side, in Q4, our net debt increased slightly by SEK 400 million. But with EBITDA growing in equal measure, leverage was 1.93x, the same as in the third quarter. Perhaps more importantly, looking at the bottom left bar chart, we can clearly see that leverage has come down materially over the last 2 years as we have expanded EBITDA and used the cash proceeds from selling noncore assets to actively manage and strengthen our balance sheet. The benefits of this much healthier balance sheet are threefold. One, we pay significantly less interest as debt has come down materially. Two, it enables us to actively think about increasing returns to shareholders as evidenced by our proposal to the AGM to increase the dividend per share. And we can strengthen our core business via accretive acquisitions such as Bredband2 in Sweden and fiber investments in Norway and Finland. Finally, before I hand back to Patrik, I would, as usual, like to say a few words of some of the achievements we've done in the quarter and how that resonates with our value creation agenda laid out at the investor update in September '24. Firstly, free cash flow more than covered our dividends paid in 2025 and exceeds the dividend being proposed by the Board for the fiscal year 2025. Furthermore, we delivered on our commitments for 2025 in terms of EBITDA, CapEx and free cash flow. Secondly, we continue to work diligently on our active portfolio management agenda. We received the regulatory approvals related to the Bredband2 deal and significant effort was also spent on a transaction to divest Latvia, where work continues with our counterpart to ensure that we reach an agreement this year. Thirdly, and as just mentioned, our balance sheet improved again this year, ending the year at 1.93x, just below our target range of 2 to 2.5x net debt to EBITDA. Finally, we paid another quarterly dividend of SEK 0.5 per share to our shareholders. And as you have seen today, the Board of Directors proposes a dividend increase of 2.5% to the upcoming AGM. This would mean that for the first time in a long time, we will deliver on our commitment to a progressively growing dividend. And with that, I hand back over to you, Patrik. Patrik Hofbauer: Thank you, Eric. The past year was a year of significant progress for Telia as a company. Our customers are becoming more satisfied and our services are more relevant. It was also a year in which we delivered on our EBITDA and cash flow promises and made progress in both CapEx efficiency and portfolio management. We have taken several steps to create a simpler, faster and more efficient Telia. Also, the strong end to '25 confirms that although there are challenges still to overcome, we have a solid foundation in place that will enable us to deliver on our 2026 plans and our midterm plan targets for 2027. This comfort is also shared by the Board of Directors who will propose to the AGM in April a dividend raise from SEK 2 to SEK 2.05 per share. And with that, I will open up for questions. Operator: [Operator Instructions] Our first question comes from Andrew Lee with Goldman Sachs. Unknown Analyst: Here is actually [ Sofia ] from Goldman. Today, we have 2 questions. The first one is on Finland. What is your time line to reach stability on EBITDA there? And the second one is on cost cutting. So you guided to just 3% EBITDA growth of 2% service revenue growth for 2026, and you've already announced 450 headcount reduction this year. So is the EBITDA growth guide conservative? Or are there headwinds such as lost high-margin revenues greater than expected? Or is cost efficiency opportunity just not as high as you'd hoped initially? Patrik Hofbauer: I can take the first question. It's Patrik here. Regarding Finland. I mean, if we start with Finland on a broad perspective, first of all, we are not, of course, satisfied with the performance in this quarter. But we continue to focus on -- first of all, we continue to focus on our customer experience and the satisfaction. And I mean, we have also been credited for the best network and also the best customer experience, highest NPS in Finland, which we are, of course, are proud of. Then just to remind you what we're working on. I mean, we have 3 main activities in Finland. First of all is to stabilize the customer base that we're working on. The second one is to improve the profitability, which clearly you can see in the financials for 2025, where we improved the EBITDA by 4.4%. And then we want to increase the share for our SME customers. And on top, of course, we continue to simplify the business and clean up the portfolio and also in the organization. So then how does it look going forward? Well, we expect some improvements already now in Q1 and also towards the rest of the year. So we would expect improvements both when it comes to service revenues and EBITDA. And if you look at the takeout that we just also mentioned, which is the second question, and Eric will take that one. The major part is actually coming also from Finland or a big part is coming from Finland. So we are doing activities. We have a plan in place, and I think we will see improvements in this year now in 2026. Thank you. Eric? Eric Hageman: Yes. With regards to the guiding of 3% EBITDA growth for 2026, well, first and foremost, it's very much in line with our midterm ambitions. If you recall, that's a 4% CAGR over that period, '25 to 2027. And as a reminder, we did 5.2% in 2025. The other thing to remember is 2025 obviously enjoyed the great benefit of the Change Program, taking out 3,000 net positions. And of course, we will continue to find other cost savings. But the impact in 2026 from headcount -- lower headcount will be less because as we just said at that announcement, there's a net positions of 450. Operator: Our next question comes from Owen McGiveron with Bank of America. Owen McGiveron: It's McGiveron at Bank of America. First one also on Finland. Just maybe a bit more color on the weaker enterprise deal flow that you've seen in B2B. Would you say this is a continuation of kind of a tough market backdrop that we've seen across the year? Or are there idiosyncratic factors here for Telia? And then the second one, Norway growth remains challenged. Now with the new CEO in situ, how should we think about the phasing of the recovery over full year '26, noting that the comp is probably quite tough in Q1? Eric Hageman: Yes. Shall I start with Norway maybe first. So we still have 1 quarter of ICE impact in Norway, which as we said at the time was around SEK 400 million for that full contract, both revenue and EBITDA. So there's about SEK 100 million left impact in the first quarter. And then as we've said, with the investments we've done in sales and marketing and in general, how that market is developing and the impact that [indiscernible] will have, we feel quite confident that, that business will improve through the year. With regards to Finland and the weak enterprise, it actually -- it was a very strong, exceptionally strong Q4 in 2025. And these enterprise sales are always very, very lumpy. So we had quite a few in Q4 last year and a few less this year. I don't think there's anything structural on it. The macro economy that we see in Finland is in our portfolio, one of the weakest, but it's not particularly weaker now than it was last year or the year before. If anything, Patrik pointed out to what we are focusing on, which is making sure we stem the decline in mobile market share, but also capturing that opportunity in SME, small, medium-sized enterprise market is super important for us. And there, we had very, very good traction. The last point on Finland is EBITDA margin. So EBITDA went up -- margin went up 120 basis points, if I'm not wrong, this year, up from below 30% to above 31%. And there is more to be done there. This historically has been a business that was less efficient. And it's one of those things that we called out in the September '24 Capital Markets Day. Margin expansion is important for all our countries, apart from Norway because of the ICE contract, all countries have improved their margin. There is particularly more upside in Finland to go in 2026. Operator: Our next question comes from Erik Lindholm with SEB. Erik Lindholm-Rojestal: So 2 questions, if I may. I just wanted to start on Sweden, mission and business critical revenues, really strong, as you said. How are you thinking about the opportunity to drive continued growth here in '26? And is this something we should sort of expect to see driving growth for several quarters in a row? And then secondly, on Norway, you mentioned quite clear improvements in terms of ARPU in this quarter. What are you seeing in the market, I mean, both fixed and mobile that is allowing you to push through these quite large price increases? Patrik Hofbauer: Erik, I can start with the first question regarding Sweden. And we have good momentum in Sweden, as you saw also in Q3, which is very positive. It's obviously the biggest market for us and the most important one. When it comes to mission critical, we continue to see the demand that will not change compared to this year. But you cannot say it will continue in the same pace every quarter. It goes a bit up and down depending on the demand and also timing questions. But we expect to see a similar demand in that segment also in 2026 as we saw in 2025. So -- and this is one of the growth drivers that we have here in Sweden, but a very solid performance, and I would expect this will continue into the next year as well. Eric Hageman: Yes. Then on Norway, with regards to ARPU, absolutely, it was important for us to make sure that you have the right combination of volume and pricing. So quite a lot of price increase, both fixed and mobile towards the end of the year. Why is it possible was your question? Because it's a very healthy market. As many of you write, it is one of the best markets in Europe. And I would say, if you look at our Sweden performance, may be challenged by -- start to get challenged by Sweden. The other thing is we continue to invest there. So if you look at that 3-player market by continued investment in fixed, whether that is fiber, but also on network coverage on 5G, where we have a leading network that allows you actually to price that with customers. And I think thirdly, what defines that healthy market is good macro, clearly, a good macro economy. And on top of that, it's very, very rational, yes, acting by the incumbent as opposed to Finland, which really, really helps this market. Operator: Our next question comes from Andreas Joelsson with Carnegie. Andreas Joelsson: Two questions from me as well. You have touched upon it a little bit, but on the growth guidance, could you state the 3 most important factors that you expect to drive that growth to 2%? You have had some headwinds in 2025 that will fade but other than that, what are the key critical factors for the 2%? And secondly, on the balance sheet, you will now pay for Bredband2 soon. But I guess Bredband2 will generate positive cash flow, which is not included in the guidance. And then hopefully, you will divest Latvia. So in the event that you would return to below 2x leverage after you paid for the acquisition, what is the main priority for that sort of excess cash, if you could call it like that being below the leverage target? Patrik Hofbauer: Yes. I can start with the growth going forward. I mean the elements of what is important, what the question you asked, I mean, of course, it's important for us that Sweden continues to perform, especially we have the mission critical. We know that, that will continue. The demand will be there also for 2026. But then we have also pricing, which we have done. We are doing some pricing now in -- we have done recently in Norway, et cetera. So we are doing that all the time. So I think those in combination will then help us to reach the around 2%, which we are guiding on the outlook for 2026. And then, of course, we expect also some improvements in Finland and yes, then Baltics continue to drive. So I think that is overall, I feel quite comfortable on that outlook for 2026. Eric Hageman: Yes. Then with regards to the balance sheet. So when we do Bredband2, just to remind you, it's about SEK 3 billion, right? So that adds, what is it, 0.1x to what we have, which brings us then slightly above the 2x. And then let's see when Latvia materializes. So we will be close to the bottom of that range, and we feel quite comfortable with that. The second part of that question is related to what do we do when this excess cash? Maybe it's best to explain it as follows. We take, as we said at the investor update, capital allocation very seriously. And in that vein, you've seen us reduce OpEx. You've seen us reduce CapEx, and we will continue to do that going forward. Then we invest in growth, like, for example, mission critical, right? Sweden's strong performance is partly because of mission-critical accelerated that requires investments, both people and also CapEx. And then we have a balance sheet, a balance sheet that allows us to do, as I just said in the analyst presentation, accretive bolt-ons, which is great. And as cash flow continues to grow, then we can start to think about what are we going to do with regards to shareholder remuneration. Well, today, as you've heard, we announced to increase the dividend. And then let's start to get through 2026 when we start to deliver on the guidance of SEK 9 billion on a path to SEK 10 billion by 2027. And I think sequentially, we then can think about with a healthy balance sheet, what we can do in terms of shareholder returns. Operator: The next question comes from Fredrik Lithell with HB. Fredrik Lithell: I have 2 questions. The first one is really if you could elaborate a little bit on the net working capital in Q4. You have spelled out the phasing of billing and customer payments. But if you could sort of put some type of numbers on it would help a little bit. Second question is on the upcoming regulation in Sweden on B2C fixed fiber SDU. When that comes into effect, I mean, that's a stronghold for you, that market. How will you go about to defend your position there when it's going to be open for more competition? It would be interesting to hear. Eric Hageman: Competition, do you want to take that? Erik Pers Berglund: Yes. Fredrik, on B2C fiber SDU, I think that regulation has been in the -- it's been worked on for several years. It's still not in place. And once it gets in place, it will take time to implement it. So -- and some of the proposals that have come along has been a bit more positive and some a bit less positive from our point of view. So I think we need to sort of see where it lands before we can say exactly. But in general, we are regulated today, and we see that the -- hopefully, the regulation will create a more level playing field going forward. There might be some drawbacks for us, but there might also be opportunities for us to invest into networks where we're not present today. Sorry for a vague answer, but the regulation isn't really in place fully yet. So I don't think we can say more than that at this point. Patrik Hofbauer: And I can just add, I mean, it's a bit difficult, as Erik is saying, to judge where we'll end. But clearly, we have pushed for a more level playing field in the market given that we are regulated. So I think that is an opportunity for us, but we have to wait and see where the outcome will be because it has changed during the years a bit back and forth. So let's see where we'll end. I'm not even sure that there will be a regulation this year, given that we have thought this for many years now. So let's see. We will -- but I think for us, it's actually more an opportunity than a risk. That is our internal judgment so far. Eric Hageman: Yes. Then with regards to working capital, you're going to get an equally vague answer, I'm afraid. So as I said in my voice over doing the analyst presentation, it's partly planned, the work that we do, which is what making sure that you issue invoices early and that you do good management of your inventory, et cetera. All of those have benefited. But there also were external factors, as we said, which is people literally paying us that typically wouldn't pay us as we've seen in the last couple of years. Read into that what it is. Part of those planned initiatives, for example, is the way we're billing people in Norway, which had roughly a SEK 400 million impact. So it's part of the work that we did, and it also allowed us, obviously, during the year to do the free cash flow upgrades. But it was certainly more than what we had planned. I think maybe equally important is to talk about what it means for this year. And again, just to repeat that, what I said in the analyst presentation is we expect it to be neutral for 2026. Partly that is the reversal -- some reversal of the high inflow that we had in Q4. And on the other hand, the work that we continue to do to improve working capital. So where in the last 2 years, we were guiding for inflow; for 2026, we're guiding for neutral working capital. Fredrik Lithell: Okay. And in that neutral working capital, will you still have sort of pensions coming your way in that equation? Erik Pers Berglund: Pension, look, we pay pension to the people that have worked here in the past, and then we get the refund from the pension foundation, as you know. So that's normally a sort of a wash more or less. And that doesn't -- this shouldn't really affect working capital. So that's not really a part of that. But I think we expect -- as a starting point, we expect the normal sort of SEK 900 million per year refund that we usually get for 2026 as well. Eric Hageman: Yes. If you think about the growth, right, from where we guided for SEK 8 billion last year, and we're guiding for SEK 9 billion now, that increase, it's not driven by pension. And as I said, because working capital is neutral, it is also not driven by that. It is driven by our EBITDA growth. Operator: Our next question comes from Nick Lyall with Berenberg. Nicholas Lyall: It was a quick question about Swedish service revenue growth, please, and the improvement there. About half of it seems to have come from other. So could you maybe just tell us what the other bump up is? And then in mobile as well, the ARPUs improved quite strongly this quarter. So could you tell us -- is this the timing of price rises? I was surprised a little bit about your comment that you thought that growth would keep on coming, but at a lower rate. So could you just explain also why that lower rate for 2026? Is that just a function of other not being repeated? Or is there something that's going to be lower in maybe mobile or fixed as well? Patrik Hofbauer: I didn't hear all the questions, but I will try to take the first one because that one I could follow, but help me and colleagues here in the room here. So when it comes to other revenues, that is partly the mission-critical that is included in that one. So if we start there first. And then the next question was? Eric? Eric Hageman: I understood mobile ARPU. Erik Pers Berglund: Nick, go ahead. Nicholas Lyall: Yes, the mobile ARPU was quite strong in the quarter, so improved quite sharply. So is that the timing of price rises? Or is there something a bit more fundamental there? And the final question was just about, I think, Eric you mentioned about maybe slower continue... Eric Hageman: We lost you, Nick. We heard the beginning of the question. Is mobile ARPU up because of pricing or something more fundamental, I think, was the question. Nicholas Lyall: Yes pretty much on timing, yes. Erik Pers Berglund: And was the mobile ARPU question about Norway or Sweden? Nicholas Lyall: Sweden, please. Erik Pers Berglund: Yes, I think it is a smaller increase, and it is because of the ongoing amendments of the portfolio and price changes we are doing. So nothing really big there, I would say, on the pricing side. It's just the ongoing strategy. Nicholas Lyall: [indiscernible]. Eric Hageman: We hear you barely. Nicholas Lyall: I'm sorry, actually I'll try once more. And if it doesn't work, just cut me off. But you mentioned as well about the growth coming through but at a lower rate in Q4, Eric. So would that -- is that mobile and fixed at a slightly lower rate? Or is that just a function of that other revenue growth falling away? Why at a slower growth rate in Q4 for 2026, please? Eric Hageman: In Norway or which country? Erik Pers Berglund: Which country, Nick? Nicholas Lyall: Still Sweden. Eric Hageman: Still Sweden. The other is really strong. So I'm not sure what we're looking at and partly it is the bad connection, I think. But mission-critical is really driving other in Sweden. It sits in different buckets. But to be clear, that is, if you think about the strong growth in '25, but certainly also in Q4 for Sweden, which is driven partly by fixed, which is TV and broadband. But then on top of that, you have the strong growth in mission critical. Thinking about it in a slightly different way, very strong performance in consumer, up 4%, slightly less good in B2B because we've seen that takes a while, right? So... Erik Pers Berglund: And we haven't really guided per quarter. So if that was a misunderstanding, sorry about that. But there's no -- we haven't really got into that. As Eric says, consumer is strong over 4% growth and the mission critical is strong. So those are the main growth drivers in Sweden at the moment. Operator: Our next question comes from Abhilash Mohapatra with BNP Paribas. Abhilash Mohapatra: It was just around your sort of free cash flow and FX actually. So you mentioned in Q4, how there was a sort of FX headwind of SEK 300 million, which you managed to offset. Obviously, the Swedish krona has strengthened quite a lot over the last 2 or 3 months and since your Q3 results. But you still reiterated your 2027 free cash flow guide for sort of greater than SEK 10 billion. And today, obviously, you've sort of guided in line with consensus for 2026 on free cash flow. I was just wondering what steps are you sort of taking to offset what looks like a pretty material FX headwind? And also just related to that, if we didn't have that headwind, all else equal, would your free cash flow guidance be higher? Eric Hageman: So first and foremost, the SEK 300 million wasn't the Q4 effect. It's a full year 2025 effect because if not then, we were talking north of SEK 1 billion. Of course, you have to take that into account when you are guiding at some stage, you need to fix it and let's see how SEK trades versus the euro. So for us, delivering that SEK 9.3 billion or the SEK 9.6 billion depending if you look at our report on a normalized, it's obviously very good to see that in the context of all the headwinds that we saw, if you think about the Norway wholesale contract, if you think about Finland, in Q4 and if you think about FX not being or being upfront. So from our side, guiding for SEK 9 billion for this year is something that we feel very comfortable with that we, as a team, feel that we can deliver. And let's see how the year evolves. Operator: Our next question comes from Ajay Soni with JPMorgan. Ajay Soni: I've got 2 questions. The first is Finland. You mentioned there's much more upside on your EBITDA margin there. So you've obviously mentioned the FTE reduction mainly come from Finland. What are your other key priorities in this region to step up that margin? And my second one was just around your midterm CapEx ambitions. I see they're still below SEK 14 billion. Obviously, you've guided to below SEK 13 billion for this year. So is there anything you're expecting to change into 2027 where you expect CapEx to step up because obviously, the trend has been broadly on the way down. Patrik Hofbauer: I can take the question number 2 regarding CapEx, starting with that, first of all. No, we have guided on outlook for '26 at around SEK 13 billion, and we don't see -- I mean, the targets for 2027 we set back in September 2024. So they still remain and are there. And the most important part there is actually for us to deliver above the SEK 10 billion in free cash flow for that one. Then we changed the guidance for the CapEx in 2025 to SEK 13 billion, and we stick with that for 2026. We don't see that we will increase that in 2027 either. So this is just what we are just guiding at the moment for 2026 for the outlook, not for 2027 at the moment. Eric Hageman: Yes. And on Finland margin, in essence, it's a handful of things. First and foremost, we are a people-intensive industry. So making sure you have the right number of resources there is what is driving that. You already saw that this year in the EBITDA margin increase in Finland and more of that will come because as we said, a disproportionate amount of those net reductions, grow 600, net 450 because we're also growing in other parts of the organization will take place in Finland. So that naturally will help. It's also the market where we have the lowest salary inflation. So that helps us a little bit. And there are further initiatives that we are taking to make sure, yes, we are disciplined when it comes to cost. I think the other one is what type of products are you selling? And we've been very clear about last year selling this noncore e-invoicing business, which was about EUR 12 million of revenue, let's call it, SEK 150 million with pretty much no margin on it. We own more of those businesses. So rationalizing this portfolio in Finland, focusing on core, focusing on more profitable products will also help us to increase both gross profit margin, but also EBITDA margin. Those are the initiatives that we're taking. Operator: Our next question comes from Terence Tsui with Morgan Stanley. Terence Tsui: Just back to Finland again, I'm sorry, but focusing a bit more on consumer mobile. Are we seeing some structural changes in the market in your view now? Is it being a bit tougher to do more 5G upselling and the consumer being a bit more price sensitive? I'm just looking at your mobile churn number and Q4 is always seasonally high, but this year, it's much higher than what it was last year and the prior year. And then secondly, on free cash flow. Can you just repeat the comments again why you expect free cash flow generation to be a bit more back-end loaded this year? I've noticed in previous years, it's been a little bit back-end loaded, but not significantly. So just wondering why this year may be particularly different. Patrik Hofbauer: Yes. I can take the first one regarding Finland. Yes, we see some more intense competition in Q4 this year compared to previous years. And we see also more customers changing operator in this quarter. This is driven also by entrance of 2 new MVNOs coming into the market that will obviously want to take their share of the market. And also we, of course, because we want to try to defend the market share. But we have seen some more activity also on the lowest price levels, but we didn't compete. We didn't actually go into that war. So we stepped out a little bit on the lowest price levels. But clearly, we have seen an increased intensity in the market now in Q4, definitely. But let's see how that will develop now in Q1. Eric Hageman: Yes. With regards to free cash flow, yes, absolutely, it's more back-end loaded than last year. And just to give you a sense, last year, it was roughly around the numbers, 40%, 60% H1 versus H2. We're looking at around 30% to 70% for this year. So a bit more skewed towards the second half. Why is that? And also in the comments, we said a soft start to the year with regards to free cash flow. Partly it's the working capital reversal, right? The big inflow reverses mainly in Q1. So that is a lower starting point. And also the interest payments, they tend to be more H1 weighted. They are even a bit more this year. Why is that? It is because if you look at the big decrease in gross debt that we have had as a company, we still have the same number of hybrids. The payments for those are more skewed towards Q1. And yes, and the last point I would make is we had a really good Q4 performance in Sweden. We're saying that will be a bit softer in Q1. And the reason for that is the lumpier nature that we have of part of our enterprise business, including a very successful mission-critical and business-critical business. The combination of those 3 make it a slightly slow start to the year, which we prefer to tell you now rather than have any surprises when we report in April. Operator: Our next question comes from Ulrich Rathe with Bernstein. Ulrich Rathe: Two questions from me, please. The first one is you explained the EBITDA trends in the fourth quarter in Finland and Sweden, in particular, with reference to marketing, higher marketing and marketing phasing. The KPIs aren't obviously strong in mobile. I think excluding M2M, you're still losing customers after pretty encouraging results in Sweden in the second and third quarter. So my question is, how do you actually measure success of marketing if it's not the KPIs? Is it KPIs a quarter out then because it's a delayed effect? Or I think you referenced NPS earlier without actually giving numbers. Or what else do we sort of look at when we want to see whether -- how effective your investments in marketing really are, especially when you ramp it up in a given quarter? My second question is on the dividend, you highlighted the growth, but it was below market expectations. I think that was pretty clear. So why the free cash flow was above market expectations. I'm just wondering what thinking was behind setting the dividend at this particular level, appreciating its growth, but obviously slightly below what we all expected. Eric Hageman: Yes. No, we see different consensus numbers because it's very much in line what we saw with what the analyst expectations is. It's also -- we're not there to beat the analyst expectations. We have a stated dividend policy, and that stated dividend policy says that we will grow the dividend by mid to -- low to mid-single digit. And then the other point is I'm very happy that finally, we are in a place after a couple of years of keeping it flat that we're able to fulfill that based on the strong performance in 2025. I think the next one is we want to have a sustainable dividend growing because that's what ultimately is attractive for capital markets. So that's why we came up with this choice of increasing it by [ 5% ]. Patrik Hofbauer: Then when it comes to marketing, there are different ways here. What we have invested is more in marketing. This is not a short-term impact. It will give impact for a longer run regarding this. So if you pay more commissions, you get an immediate impact. But if you do marketing, that will take some time before it comes to be visible in the market. And we are measuring the KPIs that everyone else is measuring when it comes to performance marketing, et cetera. So there's nothing unique for us. So -- but I think we will not see an immediate impact on that one. We see a bit longer impact on increasing marketing spend. So this is actually for preparing us for 2026. Erik Pers Berglund: Yes. If I can build a little bit on it, it was Finland and Norway that we flagged for increased marketing this quarter. Finland is an unusual quarter in terms of the market situation. Norway is a bit of an unusual quarter when it comes to our actions because sales were actually very good, but we did a couple of things. We did increase prices quite a bit, which you can see in the ARPUs. And we did also do a billing shift where a lot of customers were asked to pay 2 bills in a month basically because we started to bill in advance, which many operators do, but we introduced that in Norway this quarter. So those things always have a predictable churn effect, and they did, and that was fine. That was in line with expectations. But considering that, I think we're quite happy with the sales in Norway. Operator: Our next question comes from Oba Agboola with UBS. Obaloluwa Agboola: Just to ask about Finland again. So there was a comment in the presentation or press release that said the financial impact of increased competition was limited. So I just wanted to understand, given the uptick in competition, how are you able to limit the impact on service revenue? And then also just a bit of color on potential phasing. Do you see Q4 as kind of the peak in mobile competition? And how should we think about competitive developments in Q1 and beyond? Erik Pers Berglund: I think I can answer the first one because it was probably in the e-mail we sent out with the report. We just wanted to be factual about the financial impact. Of course, there is financial impact from the market situation. It just in the short term, it is a bit limited. The major part was how the timing of B2B deals come in. So it's just to clarify that. And so let's see over time how that financial impact, it depends how the market situation develops, which is your second question. And it's not really, of course, in our hands. There are 2 new players in the market. We'll see how those act. But we focus, as Patrik says, on the customer experience and our basic strategic goals. Patrik Hofbauer: And also, we think it will be a bit -- I mean, -- we think we will have an improvement in the first quarter. And I think also the market will calm down a little bit. Q4 is always extremely intense when it comes to competition. This year, extra intense in Finland because of launch of the new 2 MVNOs coming into the market. So I think that is also pushing the market in Q4. So we think and believe it will be calmed down a little bit now in the beginning of the year. Obaloluwa Agboola: Okay. And just a quick follow-up. Have the 2 new MVNOs been particularly aggressive? And are there any differences in the behaviors between the 2 just initially from what you guys think. Erik Pers Berglund: So competition varies from week to week. There's been -- it's been already discussed, a very, very intensive quarters. The number of people changing operators have been the highest for many, many years. And -- but it is also the usually high campaign season. So it's -- we just have to monitor the situation and focus on our own customer base basically. Operator: Our final question comes from Siyi He with Citi. Siyi He: I have 2, please. The first one is just really a follow-up on your dividend policy, which you're guiding for low to mid-single-digit growth. But if we look at your free cash flow profile, I think underlying is growing more than 10% every year over the next 2 years. Just wondering if you can help us understand how to bridge the current dividend policy with your free cash flow ambition and whether you could -- you think there could be a scope to update on that policy? And the second question is a clarification really. I think, Eric, you mentioned that you see Sweden as a market is challenging Norway as one of the best markets in Europe. I'm wondering if you can talk about where you see the dynamic changes and whether that gives you more confidence on the growth profile in Sweden? Eric Hageman: Yes, Sweden has had an amazing 2025. If we look at the consumer growth, how B2B is holding its own, what is a more competitive market is -- I think it's a really massive result. And I think it's that -- again, go back to the investor update in September '24, we had this thing that we call the smiley face, which is including legacy, of course, you have service revenue declining for year after year that kind of bottomed out in '24. And since then, we have this growth, right? So pictorially, it looks like a smiley face. That has -- yes, that has been a massive success. And if you then look at what the competition is doing, if you look at their results where they also have profitable growth, yes, that bodes well for that market. At times, we have said the only part where that is not the case is sort of the no-frills mobile segment because there's so many brands there, but it's such a small part of our business and it doesn't really affect us as you have seen in the Q4 results. So the other one, I think, at the growth in mission critical, we said it's going to double. We have done more than that, and that continues to accelerate, which again bodes well for our path to SEK 10 billion. I think the last point that I would make is the price increases that we have seen. right? What typifies a rational market is where people are not lowering prices, but actually increasing prices. And what we have seen of our competitors, yes, even this year, they have started with increasing prices across the board, both fixed and mobile. For us as a market leader, that obviously is good because that allows us to continue to have that price differential given that we are the premium brand. So put all of those together, even though we are a 4-player market, as we sometimes say, yes, it's a very, very healthy market. So very happy with that. With regards to the dividend policy, yes, I think on several occasions, we have said, I think it was even at your conference that at some stage, we need to come out with sort of that final leg of this -- of a clear policy that says, basically, it could say something like what are you -- what is your payout ratio? How much of your free cash flow are you paying out? For us, it's -- we were on this value creation path of going from what was less than SEK 5 billion to SEK 10 billion by '27. During this period, I think we will decide what that ultimately looks like for the years beyond that, but it's a bit early days. But for now, we're very happy with the fact that we covered the dividend with our free cash flow and that we were able to go back to what our current stated policy is, which is this growing dividend per share. So we're very happy with that after 2 years of running the business. Patrik Hofbauer: Can I just add something also on Sweden also on the consumer side? I mean, we have a well-functional machinery there when it comes to convergence as well. So we have called that out in previous quarters as well, where we sell both broadband TV and mobile and especially when we focus on TV, and you see that we continue to grow in that kind of services. And it's a really appreciated service from our customers so the converged play that they have both broadband TV and mobile on top of. So we are very happy with the machinery we have in Sweden and the consumer side that actually takes that position. And we have a quite a unique position there in the Swedish market. So that's very valuable for us. Erik Pers Berglund: Operator, are there any more questions on the line? Operator: That was our last question. Thank you very much. Erik Pers Berglund: Thank you. Thanks, everyone. Many good questions today. We look forward to seeing you face-to-face in the next few days and weeks, and thank you, and goodbye.
Operator: Good day, and thank you for standing by. Welcome to the SEB Financial Results Q4 2025 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker to Johan Torgeby, CEO. Please go ahead. Johan Torgeby: Good morning, everyone, and welcome to SEB's financial results presentation for the full year of 2025 and Q4. I'll take this opportunity before we go into the material just to mention a few highlights of 2025 that we are particularly proud about. First, it is the very strong position in customer satisfaction surveys, not at least within financial institutions and corporate and investment banking. Even though we're not at the very top of private banking, we still made a meaningful improvement. Secondly, the employee engagement hit a new all-time high compared to our peers. We are now solidly placed in the top decile of happy employees within the financial industry. Also very constructive is to see our market position within CIB when it comes to league tables that we record a top level, particularly now as we've seen an activity pickup within this area. A meaningful symbolic event is that we've also established and opened our Amsterdam office. And lastly, after more than 10 years in the making, we achieved an upgrade by S&P to a weak AA rating, and we now join a very small group of banks in the world that has this formidable position when it comes to credit quality. Now flicking to Page 2 and the highlights for Q4. First, we saw a pickup in fees and commission across all divisions, offsetting the continuation of net interest income headwinds. As I mentioned, we got an upgrade by S&P. We are meeting our annual cost target and AirPlus is in line with plan. We have set the new cost target for 2026 to SEK 33.4 billion plus/minus SEK 250 million, particularly to take some -- have some room for variable compensation and other unforeseen events. The Board has proposed an ordinary dividend for 2025 of SEK 8.50 per share, plus a special dividend of SEK 2.50 per share. In addition to this, the Board has proposed a SEK 1.25 billion share buyback program for the first quarter of 2026. Flicking to Page 3, we have now received the full suite of the major customer satisfaction surveys. And we can conclude that we have maintained our position on large corporates as #1. In the Institutional Banking segment, we were #1 in Sweden, Finland, Norway, #3 in Denmark and #2 just like last year in total, and we achieved a first position in syndicated loans. Private banking improved from position 6 to 4, and we also got an award for the best Swedish equity fund of the year. On the next page, we'll go through the loan and exposure development, and we continue to see a predominantly sideline movement during the fourth quarter with some signs of improvement. Corporate lending on an FX-adjusted basis increased 3% year-on-year, and the total lending for the group increased by 2% compared to last year. Flicking to Page 5, just a very short update that we can now conclude '25 that we have adjusted or excluding all restructuring costs, a positive contribution from AirPlus, and therefore, this is EPS accretive. We are also now very well placed to grow our fee income from European payments industry given our exposure that we get with AirPlus. We're also on track to be EPS accretive, including implementation cost in 2026. Flicking to Page 6, our business plan update for 2026. We divide it in 3 simple areas: Wealth and Asset Management, Corporates and financial institutions and retail banking. And here is a selection of particular focus areas for the next year. In WAM, we want to improve our digital capabilities, and we have formed investment and Trading Solutions unit to faster develop these capabilities. We want to have more international distribution capabilities and improve our position within the pension market. For Corporates and Financial Institutions, we will continue to maintain our position, which is very strong in the Nordics and continue to selectively carefully grow outside the Nordics. We will have targeted efforts around the private capital markets. And as I previously mentioned, we expect AirPlus to contribute a bit more meaningfully during the year for the corporate payment area. In Retail Banking, it's focused on digital transformation, use data to increase sales and also go back to basics and have a simplified way of working. Flicking to Page 7. We just double-click on technology where we divide it into 2 areas. One is to work with what we have. We call that modernization of the tech stack. We have several core infrastructure transforming projects this year. And together with efficiency initiatives, we also need to increase speed of development and technological capabilities build-out. We also want to embrace new technologies and particularly, they're going to be around AI tools, both for the people that works in the bank, but also to try to get AI capabilities in front of our customers. And 2 particular projects we will focus on in the years to come. One is Sferical AI, which is the NVIDIA consortium. The other one is Qivalis, which is the stablecoin consortium with other European banks. Next page is just to say that whatever we design now in this business plan and for the future, we aim to come back to a medium- to long-term positive jaws. The last 2 years after the extreme uplift of profits coming from the sharp rate increases, we now see that we will have a different future. And whatever we do in the planning period right now, it is to at least have cost control in order to achieve positive jaws, but we do not dictate income, albeit we see some tentative signs of improvement in the year to come. With that, I'd like to hand over to Christoffer. Christoffer Malmer: Thank you, Johan. I'd now like to turn to the financials on the next slide. Before we look closer at the results for the fourth quarter, I'd like to comment briefly on the full year performance 2025. I think the year is a good example of how our diversified revenue mix provides stability over a business cycle. Lower rates continue to weigh on net interest income and net fee and commission income increased both organically and as a result of the consolidation of AirPlus. The impact from the stronger krona on our operating income has been meaningful during the year, and the stronger krona has had an impact on our operating income of about SEK 1 billion, affecting negatively both net interest income and fees and commissions. As a result of the stronger krona, the 2025 cost target has also been adjusted downwards by around SEK 500 million during the course of the year, and the final FX adjusted cost target came to SEK 32.5 billion plus/minus SEK 300 million. The reported operating expenses for the full year of SEK 32.6 billion is hence, in line with our FX adjusted cost target, and this includes the impact from the accelerated implementation program of AirPlus, which we mentioned as a potential action already in the previous quarter. This acceleration has added around SEK 100 million compared to our initial implementation cost guidance and took the total charges to around SEK 800 million for the full year. We'll come back to the annual cost target for '26 in a moment. The return on equity for the full year, adjusting for those items affecting comparability came to 14% with a cost-income ratio of 42%. Turning to the next slide and the results for the fourth quarter. The operating income of SEK 18.9 billion increased somewhat from the previous quarter despite lower interest rates continuing to weigh on our net interest income as fees and commissions increased by 8% or around SEK 500 million quarter-on-quarter. Compared to the same quarter of last year, the increase in fees and commission was 5% and 8% in constant FX. Net financial income in the quarter of SEK 2 billion is somewhat below our historical quarterly average. Operating expenses for the fourth quarter came in at SEK 8.5 billion, taking the full year cost base to SEK 32.6 billion inside our FX adjusted cost target, as I just mentioned. We can see that our efforts to continue consolidating the cost base, as stated earlier in the year, are having effects. The total number of FTEs declined during 2025 for the first time since 2018, and we will maintain the external hiring pause to continue challenge our need for external replacement hiring across the bank with continued exceptions for business-critical roles. So as such, our strategy to make room for investments in prioritized areas through consolidating prior investments remains intact. This means that even though we expect to see higher FTEs in a number of focus areas in 2026, the total FTEs in the group should remain stable. Net expected credit losses of just under SEK 400 million corresponds to 5 basis points, and overall asset quality remains stable. And the development in the quarter follows the pattern from earlier in the year with a handful of counterparties requiring provisions in specific portfolios. Imposed levies at SEK 812 million, just under our full year guidance of around SEK 3.5 billion for the year. And for 2026, we expect levies to decline slightly to around SEK 3.4 billion. So under items affecting comparability that I mentioned previously, we report a negative SEK 400 million attributable to the outcome of our annual impairment test of intangible assets. More specifically, this write-down relates to an acquisition within the Norwegian consumer card business back in 2002. And it is continued pressure on returns that has triggered a revaluation of the assets. The goodwill is written off in full, and we do not see any other intangible assets at the risk of impairment at this point. This particular asset was highlighted in our annual disclosure last year as an asset at the risk of impairment. The tax rate for the fourth quarter at 17.2%. This is, as you noticed, below our normal tax rate of around 21%, and it reflects a positive tax effect that occurred in connection with the full year closing. And going forward, we expect that the tax rate should revert to around 21%. ROE for the quarter in isolation at 13.6%, excluding those items affecting comparability, i.e., the goodwill write-down. On the next slide, we take a closer look at the development of our net interest income for the quarter. Average STIBOR rates declined by around 20 basis points over the period, which impacted our rate-sensitive deposits, particularly in Corporate & Investment Banking and in Business & Retail Banking. And as Johan mentioned, FX-adjusted lending volumes in these 2 divisions were moving largely sideways in the quarter, the results of the lower STIBOR impacted those divisions by between SEK 150 million to SEK 200 million, respectively. This delta also reflects the impact from FX headwinds. Within CIB, the net interest income in our markets business performed well and benefited from favorable market conditions, partly mitigating the negative effects from the lower rates and FX. In the Baltics, average euro rates remained largely unchanged during the quarter and net interest income in local currency increased slightly from Q3. So this represents the first quarter-on-quarter increase in net interest income in the Baltic division since 2023. Now due to the stronger krona versus the euro, the NII for the quarter in krona was largely flat. The NII in the Baltics was supported by continued strong volume growth, offsetting some of the lagging headwinds on deposit margins that has been triggered by rate cuts earlier in the year. And the volume growth in division is broad-based across all 3 countries and spans both retail, mortgages and corporates. Mortgage sales, in particular, continued to be strong, up 43% from the same quarter of last year in local FX. The contribution from our treasury operations, including some of the benefits that we enjoyed from short-term funding during Q3 remained largely unchanged and supported NII in Q4 as well. Looking forward, we continue to expect the impact from lower rates on our NII to bottom out some 3 to 6 months after the last rate cut, which then based on current rate expectations, should occur sometime in the first half of this year. Also bear in mind that the first quarter has some technical headwinds, for example, a 2-day lower day count. And we also expect a slight increase in our cost of the deposit insurance guarantee for seasonality. And of course, the FX effects we'll continue to monitor. Turning to the next slide and fee and commission income. The fourth quarter saw an increase of just over SEK 500 million compared to Q3, and this increase is broad-based with all operating divisions reporting a positive development. Within CIB, the increase was notably driven by corporate finance, equities and debt capital markets. Within BRB, the Business & Retail Banking, card fees, in particular, represented the strongest increase quarter-on-quarter, partly seasonality, but also a pickup both in the SEB Kort's traditional markets as well as in the markets of AirPlus, which, of course, has an emphasis on Continental Europe and Germany. In Wealth and Asset Management, there was higher asset values and also performance fees, which drove the increase quarter-on-quarter. Net new money for the quarter came in at SEK 6 billion with a largely even distribution from Wealth Management, Retail and the Baltic divisions. Fee and commission income in the Baltics continued to develop positively and remains on a positive trajectory supported by a number of different savings initiatives. Turning to the next slide. We'll look at the net financial income. The income came at SEK 2 billion for the quarter, which is, as I mentioned, below our 16-quarter average, but still inside the sort of standard deviation that we have seen movements around in the past. During the final quarter, we saw good performance from both FX and commodities and fixed income was more in line with its seasonal pattern of a stronger first half and a lower second half. We also had some lower market volatility impacting income in NFI. On the next slide, before we go on to the cost target for '26, just coming back to some of the AI developments and priorities that Johan mentioned briefly in the business plan presentation. In the last quarter, we introduced the SEB AI triangle that we use more as a framework as to how we engage with AI in a couple of different dimensions. We're talking about building AI into our offering; secondly, to build it into our business and running our operations more effectively; and thirdly, importantly, also supporting the AI community and growing together with AI-related companies in our part of the world. During '25, we did scale up some of our early use cases from pilots to production tools. And at the same time, we continue to roll out general purpose AI tools, so Github for Developers and the Microsoft 365 Copilot for nondevelopers to help our employees integrate AI into their everyday workflows. As we now head into '26, we'll put emphasis on a few areas where then building on the experience that we had from last year, we'll look to implement at larger scale and get AI-powered automation as a result. It's early days, but it is looking encouraging. And the areas in particular are the process-heavy parts of our value chain and on the other hand, customer-facing capabilities and ideally looking to apply AI where we get a combination of productivity gains and enhanced customer experience. Some examples include some of the customer service processes, onboarding, KYC and also parts of the mortgage process. And then finally, we'll continue to support the AI community through offering both scale-up products and services like venture debt in CIB, everyday banking and also supporting both founders and entrepreneurs in the WAM division. On the next slide, we'll look through the cost targets for 2026. And when we arrive at the number for the year, we take a couple of factors into consideration. First, we expect inflation to add around SEK 1 billion to the cost base. We expect part of this increase to be offset by efficiency gains of around SEK 700 million. This is a combination of the effects from our continued external hiring pause, efficiency gains that we've achieved through increased degree of automation as well as improved ways of working through closer integration between operating divisions, technology and business support. Now turning to investments. We make here a distinction between the ongoing investments in the business. They include the continuous work on our technology road maps, the regular system upgrades, selected hiring, incremental product development, et cetera, and this is expected to amount to about SEK 400 million. So if you add these factors together, the increase from inflation, the efficiency gains and those investments will come to an underlying cost increase of around 2%. And this is then also excluding the positive effects we're going to get from lower implementation charges at AirPlus. Now in addition to those ongoing operations, we plan to take a couple of dedicated investments in AI, regulatory and technological resilience and also building out our digital asset capabilities. So this is expected to around SEK 500 million for the year. And some of these investments we've already communicated. And a couple of them include, first of all, our initiative to secure access to sovereign compute, as Johan also mentioned, this Sferical initiative that we're expecting to ramp up during the year. Secondly, we're also investing in AI-specific tools for specific initiatives that I mentioned previously, where we're looking to scale up our activities. Thirdly, also ramping up our IRB road map initiative and here to obtain regulatory approval from relevant authorities as swiftly as possible, addressing the capital add-ons that we currently carry. Fourthly, we're also looking to invest in our operational contingency considering the geopolitical uncertainty and the backdrop we're operating in. And finally, also the build-out of the digital asset capabilities and notably our initiative that Johan also alluded to, to launch a euro-denominated stablecoin in a European banking consortium. So these are the prioritized investments, which we have wanted to make room for through our ongoing cost consolidation and the restrictive external hiring. And this, we expect will allow us to enhance operational efficiency over time. So in total, it takes the full year cost target to SEK 33.4 million plus/minus SEK 250 million for the reasons Johan mentioned. And we expect some of these additional investments to have a peak year in 2026. So the cost trajectory for the coming 3-year period should taper out. On the next slide, we turn to the development of our capital position. We closed the third quarter at the end of September with a CET1 buffer above the regulatory minimum of 360 basis points on a reported level. We also showed that we are at 290 basis points on a pro forma level, taking into account the announced but not yet fully phased in impact from our Baltic IRB models. During the quarter, we then added around 20 basis points from our retained earnings and FX contributed positively by roughly the same amount. While going the other way, the continued phase-in in the Baltics had a negative impact of around 20 as well and other REA movements had a total impact of negative 15 basis points. Now that includes the operational risk REA that we flagged in Q3, which actually in the end came in at 7 basis points, so lower than our initial estimate. So to finish the year back at our target capital range of 100 to 300, we deduct the approved buyback program of SEK 1.25 billion, which corresponds to 13 basis points and then the dividend -- the special dividend of SEK 2.50, which is another 50 basis points. So that takes us to the 300 basis points above the minimum and implying a buffer of 250 basis points on a pro forma level adjusting for the remaining phase-in in the Baltics. On the next slide, we are looking at our financial targets. And this is a familiar picture and the targets remain unchanged. So from left to right, the payout ratio with an ordinary dividend of SEK 8.50, the ratio comes out at around 54%, so in line with our target of around 50%. Secondly, the 100 to 300 basis point management buffer. We remain committed to operate within this range and as we've said, to take action if the buffer exceeds 300 basis points. And therefore, just like this year, we use a combination of continued buybacks and a special dividend to ensure that we arrive at the management buffer in line with our targets. From an ROE perspective, our ROE came to 14% underlying, which is below our 15% ROE target, and we are committed to enhancing our returns going forward, including some of the actions that Johan presented as part of the upcoming business plan. In the context of our ROE development, it is worth noting that the surplus capital in our defined benefit pension plan has continued to expand. And at the end of the year, that surplus was substantial, and there is some SEK 24 billion deducted from our CET1 capital, but included in shareholders' funds. So we have for 2025 increased the upstreaming of capital from the pension fund to the bank to around SEK 2 billion, and this compares to between SEK 1 billion and SEK 1.5 billion over the last couple of years. This additional contribution will become visible in our capital base gradually during 2026 and will be adding around 10 basis points. Nonetheless, the impact on our ROE from the pension fund surplus, which is, as I mentioned, part of our shareholders' equity is around 1.2 percentage points on our stated ROE. So bearing in mind, this impact was effectively negligible up until 2021 when the surplus was considerably smaller. So therefore, for comparability of the development of our underlying profitability, we quantify this effect. So with that, we're concluding our prepared remarks, and we are happy to take your questions, and I'll hand over to the operator. Operator: [Operator Instructions] We will now take the first question from the line of Namita Samtani from Barclays. Namita Samtani: The first one, what percentage of the workforce do you think AI will take the place of? And secondly, just on the risk-weighted assets, when you're writing new business on the lending side, particularly on the corporate side, what type of risk densities are these at? Are they lower than the average risk weighting of the corporate lending book? Christoffer Malmer: Thanks for your questions. On the percentage of the workforce impacted by AI, I think we come back to our previous comments on this topic. I think it's a bit early to conclude. As we mentioned, we have, during last year, rolled out a number of AI initiatives, both for developers and nondevelopers with very encouraging developments. We have, as part of our hiring force, external hiring force, also made sure that in the conversations we're having about replacing in the event of an exit that we have the conversation around the possibility to introduce more efficiency gains or productivity enhancements through the use of technology, including AI. But to put a number on this at this point, we do think it's a bit early, but the outlook remains encouraging for broader productivity gains. And then, of course, Namita, we also have to take the question whether we want to see more productivity from our existing resources or if there are areas where we do think that we could do the same amount of work with less. On your second question, it will very much depend on the type of business that we are adding. So the risk weight on our corporate business will then depend on the type of counterpart, the risk class, et cetera, that dictates the risk weighting. On our mortgages, as you know, that's another very transparent risk weight, which, of course, is based on our risk weight floors. And across the book, it's the risk weight of the business that we're growing into that decides. As we've highlighted in this particular quarter, it has been a relatively stable development, particularly within CIB. So you'll see that there is no meaningful impact from any REA density deviating from the average of the book. Operator: We will now take the next question from the line of Magnus Andersson from ABGSC. Magnus Andersson: Yes. I just had a question on volumes as corporate lending remains rather sluggish quarter-on-quarter. And it looks -- I know you don't want to talk about the statistics, but if they -- if the numbers tell us anything, it looks like you've been losing market share in Sweden for a while as well. So just if you can tell us anything about what you see here, if there are any signs of a potential pickup in bread and butter corporate lending during '26 or how you expect to grow back into your previous market shares. Secondly, on volumes, just in the only area that actually seems to be growing, which is the Baltics where you're growing by 10%, 11% in Latvia, Lithuania year-on-year, local currencies, 8% in Estonia, how you see the sustainability of the releveraging process that seems to be ongoing. Christoffer Malmer: Thank you, Magnus. So if I start with the first question on the CIB, I think you're right to say that it is hard looking at the numbers from [ SCB ], I guess, is what you're referring to. And we are trying to find better data to follow this more numerically to be able to conclude exactly on your question, what is our actual market share and how is it developing? Now since we have seen in the SCB data, the same trend that you have seen, we're also, of course, in discussions with CIB, whether there are any such developments. And I think a couple of things to highlight. We have a sense that we're doing the business that we like to do. So we don't get the feeling that there's a lot of business going around that we would have liked to do that we're not in. So I think that's from our perspective of our activity level. And I think the second thing could be worth highlighting is that we have had towards the back end of the year, very high activity levels. It has now, as you see in the numbers, translated into a pickup in fees and commissions in the advisory and the markets-related business, but not yet in the balance sheet-related business. So I think our best conclusion is that we are in the areas where we want to be. We are active in the dialogues where we want to be. And as the volumes start to pick up, this should materialize in increases in our balance as well. But we're monitoring this closely and would love to get better detailed numbers on exact the market share rather than relying on the SCB data. Your second question on the Baltics, you're right, that's the standout performer in terms of volume growth. And it has been a stable pickup and, of course, partly reflecting the strong macroeconomic backdrop. And I think our sense right now is that there continues to be a constructive outlook for Baltic growth with a broader momentum and the sentiment in the -- all of the 3 countries. And in areas that you're referring to in terms of leveraging and homeownership, there are indications there from a structural perspective that suggests that there's room to grow. Operator: We will now take the next question from the line of Nicolas McBeath from DNB Carnegie. Nicolas McBeath: First a question on the capital distributions here in the quarter. So why the decision to make the extra dividend combined with the slowdown in buybacks? If I annualize now the buyback pace that you're running with your latest buyback program, it's around SEK 5 billion annualized, which is SEK 5 billion less than last year. But if you wouldn't have done the extra dividend, I guess it couldn't have continued at a similar pace. So yes, why that decision to shift more to dividends from buybacks in terms of your capital distributions? Christoffer Malmer: Thank you, Nicolas. Yes. So the main point here is to solve for our 300 basis point management buffer. And with the ordinary, we're at a payout of 54%. So we're sort of in the upper end of our around 50% guidance. And then the blend of the other 2. If you look historically, we have had buybacks between SEK 5 billion, SEK 7 billion and SEK 10 billion annual pace. And we're conscious to maintain ongoing buyback track record. And as you know, we're also one of the banks in Europe that have had the longest suite of consecutive buybacks. So we want to maintain that. At the same time, we want to ensure that we maintain maximum capital flexibility. And in that context, we propose to the Board a mix of a special dividend, buybacks and ordinary. And we've also taken impact, of course, and conscious from the conversation we had around this last year that there are preferences in some camps for buybacks over dividends and in some comps, there are preferences the other way around. So we're trying to put together a balanced mix of capital distribution. And in this quarter, we wanted to -- for this year, we want to maintain buybacks, but also put a blend and a mix to get us to the 300 basis points. Nicolas McBeath: All right. Then I had a question on your NFI line, which has been now below SEK 2 billion for a couple of quarters, which is closer to the levels we saw prior to the 2022 rate hikes. And any reason to update your kind of guidance of normal NFI. And is the NFI level impacted by interest rate levels or the slope of the yield curve? If so, how? Christoffer Malmer: Yes. So on the NFI, you're right that we have been fluctuating between the -- around that SEK 2.5 billion. And this is, as you know, by definition, a difficult line to predict. And looking at some of the structural elements that you referred to, the tightening of credit spreads, the way that rates have moved, of course, there has been, for some time, a favorable development that has supported the level of NFI. But also bearing in mind that the fourth quarter, particularly in fixed income, is the seasonally weakest quarter of the year. And if you look at fixed income in isolation, it's not that different from where it was in Q4 of last year and in Q4 the year before. So I think we need to see a little bit how the seasonality plays out as we go into next year to see if there's a reason for us to revisit the level and the range that we are within at the moment. Operator: We will now take the next question from the line of Sofie Peterzens from Goldman Sachs. Sofie Caroline Peterzens: This is Sofie from Goldman Sachs. So my first question would be around the Baltic risk models. You note that the impact will be around 50 basis points, but there were some headlines a few weeks ago that the ECB had identified some deficiencies in the Baltics. Are these fully captured by the current models? Or do you need to do any additional work on that? And then my second question would be on the share buyback. So just a follow-up. So is it fair to assume that the share buyback will be SEK 125 billion quarterly run rate throughout 2026? And why didn't you kind of ask for the full year share buyback with Q4 similar to what you did last year? Christoffer Malmer: Thank you, Sofie. So for the Baltic development, we maintain our guidance, there are expectations of the impact on capital for phasing in of the IRB impact in the Baltics. So no change to that. And we also provide those pro forma numbers in the slide. On your second question, I'll come back a little bit to what I said to Nicolas. This is a -- for us, together with the board, of course, to come up with a mix of getting us down to 300 basis points. And in coming up with that mix, we take into account, of course, the dividend component, the special and the size of the buyback. And of course, last year, we were at a point where we're a much more elevated buffer level. I think we were at 460 basis points prior to distribution. And there, you remember, we took a sizable one-off deduction to a full year buyback program. And this year, we are around 360 basis points prior to distribution and then solving for the 300 together with the Board, this is the mix that we suggest and that we came up with. So I think that's the color that we can give you on that. Sofie Caroline Peterzens: But basically, it's fair to assume that you will continue with a quarterly share buyback. Christoffer Malmer: Well, as always, we take a quarter at a time and it's subject to both Board and regulatory approval as we go along. But yes, you're right, it implies a 5-year run rate for the full year -- SEK 5 billion, sorry. Operator: We will now take the next question from the line of Martin Ekstedt from Handelsbanken, please go ahead. Martin Ekstedt: So first, I just wanted to ask one on dividends. So you do a reversal back to annual dividends from previous announcement of semiannual dividends. I'm sorry if I missed part of this answer before I was a bit late on to the call. But you do this as a result of what you call in the report feedback from market participants. Could you just share a little bit more of that feedback with us and what in the end made you reverse this decision? Christoffer Malmer: Yes. So that's right. What we opened the conversation at this point last year was to look into the possibility of semiannual dividends. And the market participants, of course, it's a lot to do with listening to our shareholders and having discussions around the process within which this could be done. And one option is, of course, to have a dividend approved at the AGM and then distributed in 2 installments. But the feedback from our shareholders was that this is effectively just waiting a little bit longer for the dividend to be handed out. So the feedback on that model would also deviate a little bit from what we see in the rest of Europe, where distributions are made from current year's rolling earnings. This, however, in our jurisdiction requires an extra general meeting of shareholders. So it immediately creates a slightly bigger process and a procedure around this in order to get this into place in a shareholder-friendly way, which would then be to do the forward-leaning semiannual dividends. And this, of course, has been a conversation with primarily investors. And I think this -- the model that we would then have to introduce in Sweden would be less appreciated. Now we're not entirely ruling this out to if there is a way that we could put this in place in a shareholder-friendly way, then something we could revisit. But for now, the proposal is that we continue with 1 annual distribution. Martin Ekstedt: Okay. And then for my second question, just quickly taking a step back and focusing on your return on equity, which was 12.9% in the quarter, i.e., well below a 16% long-term target and below some of your Swedish peers as well. So I mean, we talked a bit about the costs on this call, right? But recognizing that a lot of the macro factors impacting your revenues are outside of your control. What do you think would need to happen in Sweden macroeconomically for you to close that gap to target 15% and to peers? And when do you see the timing of this, i.e., kind of a wish list macroeconomically from you guys? Johan Torgeby: I can elaborate a bit on that. Thank you. First, I'll just let us establish the baseline. So first, we have a significant surplus in our pension fund. Historically, we haven't really been talking about it because it has not been meaningful. But right now, it's actually very significant. So if you say that the SEK 24 billion of surplus, which is not available to do business, but it's included in the return on equity calculation. We don't adjust for it. It equates to 110 basis points pickup. On top of that, it is, of course, the capital that we have on -- or capital add-ons that we have, which is also outside the normal course of business as we are approving the IRB models over time. And that's another almost 200 basis points equivalent or so of a drag. So that's the baseline. So the thing that is comparable with others are, of course, without these 2, which is not a comparable number when you want to see what's the underlying profitability. So that equates to quite a lot in totality. Now what is required for top line because you're so right, you don't dictate income, I would love to, but we dictate cost and there we have a more modest trajectory going forward, as you can see from today's announcement, and we started already last year. And of course, we also now have a little bit of pause on increasing the number of FTEs in order to address efficiency and make sure shaking the tree that we have maximum optimal capital allocation also in the operational side of things that we have the right cost base. But what we do need in my book is consumption. So the -- all things look pretty promising, but it's on leading indicators. It's not really happening to the full extent. And if I look at the relative weakness for investments to really come along for that to be debt financed or equity financed, which is, of course, where we come into the picture. It is for both households and corporates to take that last step. And for me, it is consumption, and consumption is weak. I just consumed our own macroeconomics Nordic outlook the other day. And it's a pretty constructive view, and I don't think they are far off consensus. There's a strong group of consensus around a 3% growth of GDP in Sweden next year, which would have been a fairly significant acceleration. If it happens or not, we will know next year, but it's definitely the one that I'm on the watchout for income to come up, both for transactional banking, payments banking and balance sheet banking. All 3 areas will benefit from that. Operator: We will now take the next question from the line of Markus Sandgren from Kepler Cheuvreux. Markus Sandgren: So I just had 2 questions coming back to what some others have asked about. But if we're starting with the buybacks. So last year, you did SEK 10 billion for the next year, and now you're doing SEK 125 billion and then you can annualize that, of course, I guess. But Nevertheless, it seems like you really want to defend the 300 bps. So your target to be within 100 to 300, is that kind of obsolete is more like 300 plus/minus something. Is that what we should expect going forward? So that's the first one. Christoffer Malmer: Yes. I think at this point in time, considering the broader geopolitical uncertainty, the outlook that we have to Johan's previous answer, hoping, of course, that balance sheet growth should come back again. We've had tremendous tailwinds from the FX. And of course, that could go the other way. So I think at this point in time, we feel it's appropriate to be at the upper end. Just to mention also, we are on a pro forma basis, taking into account the remaining phase-in of the IRB effect in the Baltics down to 250. So to some extent, you could argue that, that's sort of moving and dipping into the buffer. But all things taken into account, I think it's cautious. And as you know, we are a cautious and a conservative bank to operate at the upper end of the range. Markus Sandgren: Okay. And then coming back to costs, as Namita was alluding to what AI can do and so on and so forth. But I mean, you were saying that you expect cost to taper off after '26. So I mean, in terms of numbers, one of your competitors has said they expect cost to grow by 2% annually until 2030. Is there something similar you're expecting? Or what should we read into this tapering off? Christoffer Malmer: Yes. So as you know, we provide annual cost targets and not the longer-term cost guidance. But what we're trying to elaborate a little bit around in the slide there is to show what that underlying cost growth is at the moment and also to highlight that some of these incremental investments we're undertaking in 2026 should peak in 2026 and then fade thereafter. And I think that the -- when it comes to the productivity gains and the efficiency gains that we're starting to see, if you look at our underlying cost growth, adjusting for the consolidation of AirPlus and the implementation charges, you'll see that it's gradually come down during the course of the year. And underlying in the fourth quarter, it is actually in that range or even a little bit below. So of course, to the extent that we can continue to enhance productivity going forward, working with the churn and the efficiency gains that we have lined up, there is, of course, a possibility to continuously improve on that cost growth. But the main message with the tapering is really to say that the current growth trajectory that we're on should taper from here going forward. Operator: We will now take the next question from the line of Riccardo Rovere from Mediobanca. Riccardo Rovere: A couple, if I may. The first one is on -- sorry to get back to loan growth, but accounting rules are the same for everyone in the loan book, corporate and retail, so forget governments, repos, collateral margin, all that stuff. The book is flat quarter-on-quarter and it's flat, kind of flat year-on-year. So the NII, considering you give the margins in your fact book and the margins are stable quarter-on-quarter and actually up versus Q2. It looks to be more a problem of absence of growth in general terms, also in retail, while the rest of the rest of Scandinavia is somehow responsive to the easing in monetary policy. So I was wondering why you don't seem to be responsive to that. And what you're planning, if you are planning anything to start resuming growth in 2026. This is the first question. The second question I had is if there is any room maybe on SRTs or something like that to keep RWA under control and eventually and so to keep the capital return as it is. And on this topic, SEK 10 billion buyback on SEK 986 billion risk-weighted assets would throw 100 basis points of capital into the fireplace to cancel at SEK 203 per share to cancel less than 2.5% of your share count. So reducing the buyback to me is the most sensible thing you could have done. So that's to be clear because the share price can move by 2.5% any minute of an hour. So canceling -- I would have canceled it personally, but reducing it and giving cash to shareholders is the best thing you can do in my view. But again, on risk-weighted assets, is there anything you can do to keep it under control on the SRTs and stuff like that? Johan Torgeby: Riccardo, Johan here. I can start with growth. So one is a constant disappointment on growth, as you are pointing out correctly in your question that the transmission mechanism, rates are going down from the central bank, banks are lowering rates and you see economic activity go up has been very disappointing. There are some signs in the retail market that things are picking up, but it's been remarkably slow to act. This is actually quite normal and very frustrating as you probably have 4- to 5-year cycles when you look at loan growth. You can just take a graph on SCB's corporate lending exposure, and you see that it moves slowly and it has not picked up. My potential explanation because I don't know why, is the capacity utilization in the industrial side on the corporate side has been fairly low. And therefore, any demand that they have met in this slightly more stabilized environment, they've been able to cover with cash at hand or existing loans and therefore, not used more capital to increase capacity. That's back to my original point on consumption. So we are looking at that, and it's one potential explanation, and it looks promising if things pan out as economists say that there will be a catch-up effect for that going forward. I also say that the leading indicators, which is typically having a 12-month lag to actual lending is the industrial sentiment indices, and they all point more than modestly. They are upwards, but not particularly impressive yet. On the retail side, there is signs of things waking up. There's clearly -- we do one, which is the house price expectations, which is a leading indicator, and that has clearly recovered. However, then you have the specifics for SEB to our earlier question around market share. So we do see that we are not performing to the best of our ability in the mortgage market, which is also partly explaining where we have some work to do there in the coming year or 2. Christoffer Malmer: On your question, Riccardo, about the SRTs, yes, I mean, as you know, we have not been active in that space historically, but it is a space that we are looking into. It is, as you also know, something that is top of the regulatory agenda in Europe, and there seems to be a lot of initiatives providing more favorable conditions for such transactions to take place. So it is something that we are looking into. Also, the pricing environment has changed there. So from an attractiveness financially speaking, it has also become increasingly attractive. So it is something that we are evaluating. And then just on your final comment, thank you for the comment on the dividend. We'll pass that also to the Board. Riccardo Rovere: Christoffer, if I may follow up very, very briefly. Have you identified in SEK billions, the maximum amount of portfolio that eventually could be part of SRT's program because that instrument -- I mean there are banks that are very active on that, and they are keeping risk-weighted assets kind of flattish or eventually down. So I was wondering what is the theoretical maximum capacity that you could have there? Christoffer Malmer: Riccardo, there is -- it's too early to share any numbers on sizes of portfolios. But one thing that we need to take into account is the regulatory environment in Sweden, which has some impact on the amount of capital release that could be achieved from an SRT. So that is one aspect into this, which then, of course, will dictate the attractiveness of the type of transaction and volume, et cetera. But no volumes to share at this point, Riccardo. Johan Torgeby: We have a hard -- thank you, Riccardo. We have a hard deadline, so we'll try to be a little bit quick. So please go ahead. Operator: We will now take the last question from the line of Shrey Srivastava from Citi. Shrey Srivastava: My first one centers around the SEK 500 million uplift from sort of AI regulatory and resilience. If you were to break this down between sort of regulatory and resilience and actual sort of AI initiatives or put another way, investments and revenue synergies versus cost synergies, where would you -- sort of would you where would you land on this, if we could just have some more color? Christoffer Malmer: Thank you. We don't break that down any further. But given that we're mentioning these 3, they all 3 have a meaningful contribution to the total number. But we don't provide an additional breakdown to that number. Shrey Srivastava: And just a second brief one. If I was look to look at your comment on the sort of uptick in investment banking activity, could we just have a little bit of color on that, specifically around if you're seeing an increase in demand from corporates operating in broader Europe around any REA initiatives. Johan Torgeby: Yes, I can take that. So generally speaking, it's a quite unusual world where the financial markets depending business lines are doing very well. It's really say that share prices are good, rates are low. It's been quite a lot of activity, very resilient financial market given the risks that we see. However, the real economy has not really performed, which is more linked to the actual funding, actual loans, house buying, factory openings. So it's a quite divided world. This seems to be -- continue. I have no reason to believe that this recent more uptick in investment banking in capital markets supported by resilient financial markets will continue until we have another, call it, situation in the market. And now we're hoping that the other part of the real economy, where you actually need new funds will come and help us. On Europe, I would say no, there are -- this is again the position where leading indicators are pointing to a better future. But I couldn't say that we have really seen it materialize yet to the point where you see -- because half of the book, of course, in corporate lending is outside Sweden. And it's quite muted still. Operator: Thank you. I would now like to turn the conference back to Johan Torgeby for closing remarks. Johan Torgeby: Yes. Thank you. And usually, we ask you to close early. Thank you for helping us with that because I know there's a lot of other calls we have today from your side. Thank you for participating. I wish you a good day. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Monika Schaller: Good morning, and thank you very much for joining us today for our Q4 and full year results press conference. A warm welcome to everyone here in the room, and of course, a warm welcome to everyone joining us virtually. As always, Christian, our CEO; and Dominik, our CFO, will share some brief remarks, and we will then move into the Q&A session. Everyone joining online, please feel free to submit questions at any time. Maybe one disclaimer, as always, unless stated otherwise, all numbers on these calls are non-IFRS and growth rates and percentage point changes are non-IFRS year-on-year at constant currencies. And with this, let's not waste any time. Over to you, Christian. Christian Klein: Yes. Thank you, Monika, and welcome, everyone, here at our headquarter in Walldorf and of course, also to those who are joining us virtually from all over the world. I have actually, from my remarks, I have 2 rather big points. First, 2025, you have seen the numbers. Let me share also some more background on these numbers and then, of course, also the outlook for 2026 and the years to come. And of course, there, I will also double down on the topic of AI. Now talking about 2025. I mean, first, when you look at the set of numbers, I would say I'm very happy with how SAP once again delivered a very successful year. You can look at cloud and software. We achieved our outlook. And please also remember, in the half year 1, we had a rough start. There were some geopolitical tensions. We -- especially in the public sector, we actually had our challenges to actually do deals. And still, we achieved our outlook for the year. We overachieved and beat our outlook for operating profit and cash flow. It's not only about cost discipline. It's also the way how we transform SAP, how we make the internal processes more efficient, how we're also now applying AI in all parts of the company. I will come later to that when it comes to 2026. Also in 2025 in Q4, we actually had our best bookings result of the year. So I know there's still some discussions out there on CCB. I will touch base on that in a moment. But actually, Q4 was our best quarter with regard to bookings. We had lower churn than expected and also the discounts we have given actually were pretty stable. So actually, net-net, a very good Q4. Now again, we started our transformation 5 years back. And we were sitting here, I was sitting here, made a pretty bold commitment about the 2025 ambition we have as a company. There were many doubts out there, but we delivered. The company delivered. I'm super thankful to our 100,000 colleagues worldwide to the customers for the trust because with RISE and GROW, we made a big bet, not only on lifting and shifting our customers to the cloud, but really helping them to transform. And what came out of that is one of the biggest success stories and definitely the biggest transformation in SAP's history. Now when you deep dive a bit on GROW, I mean, SAP, I know, is known for running large enterprises in the world. And yes, we are very proud about that. But what we also managed over the last years is that actually several thousand net new customers joined from the mid-market. Then the mid-market is actually by far now the fastest-growing market within our customer base. We are expanding our ecosystem because a lot of that will be also covered by our partners. And in 2025, and that is also -- shows the success of our cloud transformation. Actually, our public cloud business was growing 5x faster than our private cloud business. And also look at the resilience, what actually SAP in the meantime gained. We have a large recurring revenue share. We actually tripled our cloud revenue over the last year. So definitely, I would say, a huge success story. But we are living in a fast-moving industry. I would say this is probably the fastest-moving industry in the world. And so we can't rest. Now what we also did when you look at this half moon is actually we put a lot of clarity into our product strategy. I mean we said, hey, all lines of businesses have to come together on one platform. The PDP is now in the meantime the platform for integration and extensibility. We put a BTM business transformation portfolio together, again, helping our customers to do the process transformation to be world-class in enterprise architecture and also just help them to transform on the business side. We launched a lot of new innovations around sustainability, the business network and all these businesses contributing to the overall growth of SAP. Very important, obviously, is also what we did in the last years around AI and the Business Data Cloud. The Business Data Cloud now produced, in the meantime, over EUR 2 billion of order entry since its launch in January, shows the success, but even more important, shows the strategic relevance because when we talk about AI, we talk a lot about data quality. And for the customers, it's super important to have this semantic layer of bringing SAP and non-SAP data together, and that is also then resulting in the huge success of BDC within the first 12 months. But of course, we are not stopping here. I mean you have seen our total cloud backlog increased by 30% to EUR 77 billion. I mean, what a number. And that also shows why we are so confident on our guidance to accelerate total revenue growth in the years to come. I mean, with this backlog and the contract duration is around about 4 years. So you can see there is already a lot in the books, which will help us to say with confidence that SAP will be a growth company. The cloud business, when you compare this revenue growth numbers here of 26% in 2025, these are on an average, 10 percentage points faster than our peers, than our competitors, just shows how also SAP is gaining market share. So net-net, also operating profit, free cash flow, Dominik will talk about that. So no need for me to dig deeper. But also there, we beat our outlook, and that speaks for itself. On -- in Q4, we closed a lot of business, best bookings quarter. Now I can tell you -- share with you a story about all of them. I want to pick 2. And I picked those 2 just to show the relevance of SAP AI in the world going forward. H&M, we all know them, a great retailer. And they came to us and said, "Hey, our business will change a lot as a retailer." And then we prototyped together over the complete year, and we closed the deal in Q4. They wanted to see, "Okay, we are happy with your commerce platform. But in the future, our consumers expect a more personalized shopping experience." So we custom coded for them a prototype on how shopping experience will change. We brought this back into the standard. And they said, "Wow, this is exactly what we need to really address our consumer needs, the consumer trends right in the store online." Second, we talked about certain things about returns claims management, people ordering stuff, sending it back. How can we make this more efficient? How we can improve the consumer experience? Can we actually propose to the consumer a different good if they are not happy with the one thing? What if a certain good is not available in one store? Can an AI agent help to find the right store to deliver next day or even in the same evening? So -- and we showed them this was the SAP transactional application in the old world. And this is what you get with AI in the new world. And it was tremendous what they have found out on to really personalize the consumer experience to make the supply chain more dynamic, more agile with regard to also delivering the stuff faster to the consumers. And then finally, of course, they saw all the agents working together also into the back office into finance. And that is what made this deal happen. It was not only the cloud move and get rid of the legacy. It was really the AI embedded in the different parts of our apps, which made this happen. Fresenius, we did a press release already, super happy about that. We got a lot of feedback, especially in Germany, hey, you were great in patient management, but why do you not deliver the next generation. Together with Fresenius and Avelios, we are now coding on our platform a new patient management solution. And we started to do that. Avelios is our main partner here, and it will revolutionize how much more efficient we can make the doctors and the nurses to spend more time with the people in the hospital, making them more efficient, making more efficient decisions and just also make the whole operations in a hospital way more efficient than it is today. And again, AI agents taking a lot of manual work over what the nurses and the doctors had to do in the past. And we showed this to many other health care customers and they said, wow, this is it. We definitely want to join SAP in delivering the next-generation patient management. Now talking about the future of AI, talking about the future of SAP. And I know there is a general concern out there in the market about, oh, how will software sustain in the world of AI? Cannot everyone code software? I would say clearly no. Because what we are already seeing with many customers is, of course, they are doing certain -- building certain customer agents for cash flow collection, et cetera, with those LLM providers. But what you always see as a roadblock, and this is now what customers see more and more, and that's why it also explains why we sold 2/3 of our deals with AI. They, first of all, see, oh, an LLM can read when I build a cash flow agent, can read a support ticket. It could be that because of the support of an issue of the customer, customer is not paying. You can read mails, okay. But what about the P&L data? What about certain sales negotiations, deals in the pipeline? What about certain payment information, which are also necessary for the agent to understand why is this customer not paying? So it always goes together. The LLMs are super good in the unstructured data, but you need the business data and which company has petabytes of data, which we are using to which we are using to fine-tune our AI foundation, this is SAP, and we are using the world's best LLMs for the different use cases, bring this together, have a so-called knowledge graph to correlate the unstructured data with the structured data. And of course, BDC helps to bring the semantical data together for the structured data in the company. And that is the winning formula. And then the second piece is when you want to change a retailer like H&M, you cannot just go there and said, the IT embed a certain agent in my operations. You have to fundamentally rethink like we do in SAP how will I run a certain industry going forward? How will cash collection work? How will recruiting work? How will workforce management work? So our product managers are just sitting there using the rich information, knowledge what we have about industries and business processes to really redefine how these agents have to work. An inventory agent as a matter of fact, you can do an inventory. But if the inventory agent has no clue what is happening on the demand side, the inventory agent is not so intelligent, I can tell you. And then, of course, there are a lot of things that, what kind of information can I actually feed into an agent. There are certain security authorization requirements, which all sits in our beloved apps. Now super important for us is business data, business process, security and trust and, of course, completely rethink how we run those companies, our customers going forward. And so when I think about the future of AI and SAP, I'm super happy that I have our ERP. I'm super happy that I have our apps because without those apps, I wouldn't have the data. And without the data, I wouldn't have an AI. So I know there is a lot of talk about, oh, what can the LLMs take over. The LLMs can take over coding of software, for sure. I mean, because this is unstructured information code. They understand the patterns, how our developers code in the past. But everything related to business data is actually something what SAP can offer, which is pretty unique to us. So when you think about how will SAP grow its business going forward? And I find it pretty remarkable that we -- on an already heavily growing business, we said we're going to further accelerate our total revenue. Five pillars where we have a clear right to win. We cannot win everywhere, but we have 5 pillars, which are very important for our customers. When you think about SAP and UX in the past, this was not a big success story. I mean we know that Joule cannot take over today every skill of an end user, but we are getting there. And we will not only take over manual work. We will take over analytical requests. We will train Joule also with correlations to understand, not only do analytical reporting, but also give smart recommendations, how to source the best for this good, what I'm looking for, how to actually do inventory planning the best, looking into what is happening on the demand side, what is happening on the market side. So Joule will not only be connected to an LLM like GPT, Joule will be connected to our AI foundation to get the 2 worlds together. And what it will does is when you think about how often did I sit in front of my desktop or mobile typing into data into SAPs, this will completely change the design, the user experience, the simplicity. And at the end, the productivity of every end user will change. Second, I mean, this is logic. We are running business processes today, transactions, workflows, complex. We are now embedding not further features into these apps. We are embedding agents. So the agents will take over the features. And the agent will talk to each other. So we are actually infusing across the most mission-critical business process in the world, our agents, and we will train them, again, to also contextualize information because no agent can work in isolation. Otherwise, you are not running businesses. Very important in that space, in the second space, AI assistant. Not every AI assistant will look the same, for example, the cash flow example. So extensibility is key. So you're getting access in our agent builder to, first of all, understand the process better. And then you can also enhance those agents based on individual needs of a treasurer, of a person in supply chain training and so on. And we have both. We have the tool set for the developers, and we have the low-code tool set for the business users. Third, industry-specific capabilities already today, super important. I mentioned Fresenius. We had another large deal in Q4 where we could show the customer, oh, you're doing last-mile delivery with SAP. Now we're going to show you how your trucks arrive faster at your stores with AI in the future, how you can improve load optimization of your trucks with AI. So these things are super, super important because here is the value of a customer. This is how customers can differentiate in their industry. These are the main, main capabilities, for example, trade promotion for a retailer, personalized shopping experience, supply chain resiliency in manufacturing, asset management for the navies of the world. These are the things which SAP knows how we run it in the past. And now we were reimagining those capabilities with AI. Fourth, business data cloud. I mean, again, the biggest road blocker for business AI is today, data, data harmonization, data silos. This is actually what constrains our customers the most. And this is what you have seen in the numbers. BDC is a big success because SAP said, "Hey, we are not a closed shop anymore and really bringing our data together with non-SAP data, BDC and it's only in BDC, we are going to allow you to harmonize SAP data with whatever other business data you have in your company sitting in non-SAP apps. And then fifth, obviously, this is what is close to our heart for many SAP customers said, Christian, I just do the RISE journey. But guess what? We are paying $1 to SAP. I mean, not exactly $1, but we are paying them $10 more to DSI. I said that is not good. So what we are doing is, I mean, why can AI not take over certain parts of the ERP migration. Think about data migration, think about configuration of the system, think about test automation. So these things are super important. We are doing this together with our partners because they understand as well, hey, in the world of AI, it's not only about putting a consultant to work. This work can be done way easier, way faster and way more efficient. And obviously, when we talk about ERP migrations, I think about SAP, and this is definitely a big focus area for us. Then coming to our -- I mean, to be credible in AI, we need to use Joule. We need to use our own AI. And yes, does everything already work to perfection? No. But even more important is that we are a role model underpinning our great cash flow results and profit results with the use of AI. And you can ask all of our people, we are pushing this really heavily. So we mean it. So in R&D, code-generation tools, tool for developer, [ APA. ] We have thousands of developers who already see, oh, now I have much more time on developing those agents and making the agent orchestration work and less about my time producing code. In sales, already in Q4, we did a lot with AI on quoting, on pricing, on packaging, help me to find the best deal for my customer. Help me now to find in the pipeline, the best opportunities for me to close out the year. In HR, recruiting, we made the acquisition with SmartRecruiters, but also on skills, a lot will be handled, and we will work smarter with infused AI into our SuccessFactors solutions and then, of course, into our own HR operations. So in tech, innovations come at a very fast pace. The most important thing is next to having the right strategy is our people. So AI is, first of all, not only a technology who can run a company smarter, it's also about the skills of the people. So reskilling is a big topic within SAP, and we will double down on that because AI will affect every job, and we need to prepare our people for that. That doesn't mean that we need less people. I want to say this very clearly, but we need different skills. And honestly, there will be a change of the mix of the job profiles going forward. But as long as we post such great top line results, we are not thinking about restructuring, we're rather thinking about how we can reskill our existing employee base to make them fit for the next chapter of our transformation. Now when we then look forward, and in a second, I will hand over to Dominik, let me just share some geopolitical observations. I mean, SAP is, I guess, by far, the biggest tech company in Europe. But what will be very important for the future of SAP and for Europe is clearly, first of all, talent. So we really need to make sure that we are changing our education system and really our universities give us access to the best talent. That's actually working quite well. But when you think into every job the next generation has to do, it will change. And then super important, and I'm talking about this since quite a while, especially here in Germany, I see a lot of movement now, the willingness to digitize Germany. But when I think about our home market and compare this to the U.S., oh my God, the regulation, I mean, layers of layers. And that is, of course, something when we are closing deals in Q4 in the U.S., it's FedRAMP, you have clear -- we are not even talking with customers about regulation. They are clear. And here, you -- on the state level, you have regulation, everyone reads a little bit different. The [indiscernible]. Then on the federal level, you find other people who have other ideas on regulations on sovereignty. And then you come to the European layer and then you have layer and layer and layer. And now that is not good for SAP, but think about all of our start-ups where you find the same startup like an NNN in China and the U.S. And so this digital union to come together and harmonize that is of such an essential importance because it's not only about funding and access to capital, it's really about speed and the speed is especially super important for all of the great start-ups we are having. So with that, I said enough. I'm super confident about our outlook for 2026. Strategy is the right one, and we will also -- you're going to see SAP clearly as a winner in AI. And with that, Dominik, over to you. Dominik Asam: Thank you, Christian, and thank you all for joining us this morning. I'd also like to wish you all a happy and healthy year 2026. SAP's strong close to the year reflects steady execution against our priorities. As we navigated a rapidly shifting macroeconomic backdrop at the beginning of the year, we remain focused throughout the year on operational discipline and driving value for our customers in times of unprecedented technological change. Our ability to drive top line growth while consistently exceeding our profitability and cash flow expectations reflects the consistent execution against the outlook we provided at the beginning of the year. While challenges persisted, we took deliberate steps to reinforce our foundation and align the business for durable, sustainable performance. As a result, we closed the year in a position of strength and the progress we've made has set the stage for continued advancement towards our financial and strategic priorities in the years ahead. RISE and GROW with SAP, both remain core pillars of our transformation strategy, serving as go-to solutions for large-scale enterprises and high-growth midsized companies undergoing complex end-to-end transformations and modernization efforts. And as Christian just highlighted, AI and the Business Data Cloud are beginning to show real commercial impact emerging as meaningful contributors to customer decisions and deal activity. The combined momentum continues to materialize in large cloud transactions with deal volumes greater than EUR 5 million, contributing a record 71% to our cloud order entry in the fourth quarter. These results validate our role as a partner of choice, trusted by world-class organizations navigating high-stakes transformations and speed at scale. Now let me provide more details around the financial highlights. The current cloud backlog reached EUR 21 billion, up 25%. Quite frankly, this is a more pronounced slowdown than we had anticipated and more than the slight deceleration we guided at the beginning of last year. Echoing Christian's remark, the outcome reflects a deal mix weighted towards larger transformations, many of which include longer ramp periods or flexible structuring, reducing the near-term CCB contribution. Also further mounting geopolitical tensions have led to many customers putting even more emphasis on exploring sovereign Software-as-a-Service solution options. While SAP is extremely well positioned in this segment, and we have a significant pipeline of opportunities due to the trust Germany and SAP continue to enjoy on a global scale, it takes longer to negotiate these more complex transactions and also longer to deploy and ramp as compared to plain vanilla offerings done by U.S. infrastructure service vendors. This is particularly true for any state-owned and related entities as well as defense, but starts to also affect commercial customers in certain particularly sensitive geographies and industries. Total cloud backlog for the year grew 30% to a record EUR 77 billion, again, significantly exceeding our current cloud backlog and cloud revenue growth. Cloud revenue actually grew 26% year-on-year in 2025, again, primarily driven by the strong performance of cloud ERP suite. Cloud ERP suite had another notable year, reinforcing its position as a key engine of growth with an increase of 32% in 2025. By the way, if you want to make that comparable to our U.S. competitor, at a couple of percentage points, if you make this constant currency number, U.S. dollar number, then it would have been 34%. This performance is especially meaningful given the expansion of its revenue base over time, highlighting its ability to scale at a sustainable growth rate, now accounting for 86% of total cloud revenue for the year. Software licenses revenue decreased by 27%. Finally, total revenue for the full year approached EUR 37 billion, up 11%. Now down the income statement. Our non-IFRS cloud gross margin for the full year continued its upward trend from last year and expanded by another 1.6 percentage points to 75%, driving cloud gross profit up by 29%. In the fourth quarter, IFRS operating profit increased 27% to EUR 2.6 billion. Non-IFRS operating profit was up 21%. Both IFRS and non-IFRS operating profit were growing negative -- negatively impacted by approximately EUR 100 million related to a 2025 workforce transformation. In addition, IFRS operating profit growth was negatively impacted by USD 200 million related to Teradata litigation expenses. For the full year, IFRS operating profit increased to EUR 9.8 billion and non-IFRS operating profit to EUR 10.4 billion. The IFRS effective tax rate for the full year was 28.5%. The non-IFRS tax rate was 30.4%, which is below the outlook of approximately 32%, mainly resulting from an increased ability to offset foreign withholding taxes in Germany. Looking forward, we expect the midterm non-IFRS effective tax rate to be in a range of 28% to 30%, which is the lower half of the previously communicated range of 28% to 32%. Free cash flow for the full year was around down EUR 8.2 billion, i.e., at the very high end of our revised outlook range of EUR 8 billion to EUR 8.2 billion. The increase was mainly attributable to higher profitability and to lower payments for restructuring and share-based compensation. This result reflects our continued emphasis on disciplined cash management and operating efficiency building on the progress we've made in strengthening the quality and consistency of our cash flow over time. We are very proud of the progress we've made this year and the business momentum that contributed to our strong net cash position. As a result, SAP has decided to further step up its capital returns with a new 2-year share repurchase program of up to EUR 10 billion scheduled to start in February. This decision reflects our confidence in sustainable strength of the business and our continued commitment to returning capital to shareholders in a disciplined and balanced way. Finally, non-IFRS basic earnings per share in fiscal year 2025 increased by 36% to EUR 6.15. Now on to the outlook. As you've likely all seen in the quarterly statement published earlier today, we have provided this year's outlook. We expect CCB growth to moderate slightly over the course of 2026. While some deceleration is anticipated, it is expected to be meaningfully less than what we saw in 2025. At the same time, we see a path for total revenue growth to accelerate, supported by the foundation we've built and the continued strength of our business. And our operating profit outlook reflects sustained operating discipline, driving expense to revenue growth ratio towards the lower end of our long-term operating leverage objectives of 80% to 90%, lower end being good, giving us the opportunity to continue to drive non-IFRS operating profit growth significantly above revenue growth. In addition, in 2026, we expect to generate record free cash flow of approximately EUR 10 billion, supported by continued efficiency improvements and operational rigor. Overall, our guidance reflects a balanced view of the opportunity ahead grounded in disciplined execution and an ongoing commitment to long-term value creation. With now 2025 behind us, we move into 2026 focused on consistency, clarity and execution. The groundwork we've laid across both transformation initiatives and commercial performance puts us in a strong position to deliver against the guidance we outlined today. While geopolitical and trade tensions have taken a certain toll on our top line performance in 2025, the growing need for sovereignty and resilience also offers unique opportunities for those vendors that could offer technologies and tools to reduce dependencies from dominant offerings. As the largest non-U.S. software SaaS and PaaS vendor, there is no company better positioned than SAP to satisfy this rapidly growing demand. Our strategy to design a stack, which is not locked into any particular Infrastructure as a Service vendor is a particular asset in that respect. And our decision to keep developing our powerful SAP sovereign cloud infrastructure, SCI, thereby preserving capability to run Infrastructure as a Service efficiently in our own data centers brought us with another now even more valuable option to deploy our SaaS and PaaS offerings. Despite an unpredictable macro and geopolitical environment, our strategy remains clear and our execution is already driving meaningful progress across the business. Customers are choosing us as their North Star to lead mission-critical change, and we remain committed to helping them move faster scale smarter, become more resilient and modernize with confidence. Thank you. Monika Schaller: Thank you very much, Christian. Thank you, Dominik. We have 30 minutes left, and we are going to move to the Q&A session now. Could you please at the beginning, limit your input to one question only. I have a couple of questions here in the tool already, but I want to kick it off here in the room, of course. Heidi? Unknown Analyst: I have a question related to the topic you mentioned last. You mentioned the better environment in the U.S. as to regulation. And you mentioned your opportunities here given the demand as to more sovereign and resilient infrastructure and solutions offering. But are you facing hurdles there in the U.S., like kind of against the backdrop of growing tensions between the 2 countries and maybe there are some hurdles your competitors are facing here. So they might backfire. Are there any indications for that? Christian Klein: No, actually, the U.S. public sector was one of the best-performing businesses in Q4, and that has completely changed. And those customers are actually less concerned around is the software coded in Europe or somewhere else. They have a clear regulatory framework, obviously, and it has high standards for very mission critical parts of the U.S. government, for example, and still standards for other businesses in regulated industries. So there is not a debate about are you from Europe, are you from the U.S., it's really about adhering to those standards. And that, of course, when you imagine now applying AI to these parts of the world and to their companies, it's very important because now you can really focus on the business value, you can focus on the technological questions. Here, you can find in Europe customers from the same country, asking you for very, very different regulatory standards because, again, there is really this many layers of regulation and that is something where when we really want to leverage the power of Europe, and I'm all in favor for you. We need Europe more than ever. But then at a certain point, someone has to give up power and say, okay, in order to come to one Europe. We can't regulate everywhere. And I guess that is the biggest difference. Also what we have seen, by the way, in Q4, it was very visible also in all the deal closing activities we had. Monika Schaller: Thank you. Let me build on that one. We have one question from writers here in the tools to the same topic. Are your solutions intended to diversify? Or are they intended to replace offerings from non-European providers in the long term? Christian Klein: I don't see it. I mean, Phil sometimes in Germany, we are discussing forever since years now, what does sovereignty mean? And then we are getting very theoretic in, okay, does it need to be a European provider, a U.S. provider. At the end, every little piece of hardware will come at some point of time, either from the U.S. or China, if you like it or don't like it. At the end, it's really about the competitiveness. SAP needs to be more competitive. Our AI needs to be stronger than the ones from our competitors. And then the customers, no matter where in the world will buy that. Obviously, they will also tell us what the sovereignty standards are. I mean, in India, we are also now going to build a new sovereignty standard with some local partners. We do the same in France. We do -- I mean, that is becoming different. But it's still also for SAP, absolutely manageable because when you think about what did we do in the past, there was less regulatory requirements on data and cloud because cloud was -- 30 years ago was not there. But we always localized our software for over 100 countries in the world, and that's now becoming more, especially with cloud and AI. But we have done that in the past. And now we are doing the same thing, obviously, with other requirements coming towards SAP on the cloud and the AI side. Monika Schaller: [indiscernible] Unknown Analyst: You've mentioned a couple of times how the geopolitical tensions impact the business. So how do you expect these tensions to impact the business going forward? I mean, I know there is an outlook, but what impact do you see in this outlook? Do you plan for a scenario in which the tensions might even escalate and maybe a very special question, I've heard that the next SAP leadership meeting is supposed to take place in Washington, D.C. So is there a reason why you have chosen this location? And do you consider changing it against the political backdrop? Christian Klein: I can take the leadership summit question because it came to my table, I didn't think about the geopolitical tensions when we are making these decisions. But obviously, we should probably, I don't know. Look, the leadership summit, it took place in beautiful road over the last 3 years, and we are a global company. And we love to spend our time here, but I also have to support our customers worldwide. And so we made a simple decision, but a long time ago, let's just make sure that everyone lives in peace, so we do it once in the U.S. We are coming back to Europe and then we go to [ ABJ. ] That is the only thing. And sorry to say, we are still a company who has to support global customers. So we cannot make these decisions depending on what is just happening in the world. I mean, obviously, if there would be a war and otherwise, of course. But at the end, we are a global company, and we have people everywhere in the world, and they want to feel part of SAP. And if I would say to my 30,000 people in the U.S., oh, sorry, I don't come anymore. I mean, what kind of signal would we send? I mean, sorry, but this is how we do it, and I feel we are doing it in the right way. Dominik? Dominik Asam: Maybe on the outlook, first of all, I want to emphasize that 2025 was not necessarily an easy year to put it mildly in terms of trade issues, geopolitical tensions. And I find it quite remarkable that on cloud revenues, despite all these adversities, I would call it, we have been able to be really within spitting distance to the midpoint of our cloud revenue guidance. That shows you how predictable that number is by now by virtue of the high share of more predictable revenues. So for the way we now scale the guidance for next year, we have basically assumed the 2025 environment to be the new normal. So I think '25 shows that we have a resilience even if some unexpected events hit us. But of course, we're not embarking any meltdown catastrophe scenarios here in that guidance. But it's, I'd say, a good base to build on because let's all hope that it's not getting worse than what we have seen in 2025. Monika Schaller: Okay. Let me continue with questions from the tool because we have a lot of questions with regards to our share price dropped today by 10% for a short time this morning. What is the market not understanding about the company? Christian Klein: So I'm doing this job now since 6 years. I have seen a lot of ups and downs. And I -- when we were meeting here a year ago and the share price looked really great. I mean we had a great one for 2 years. It's not a reason for me to lean back and say, hey, this is now -- this is it. And so we need to make our strategy and we need to drive our execution independent of what the capital market is right now telling us. And obviously, it's not only SAP when you have followed the market in the last 6 months. I mean, they are all our competitors in the SaaS space. I mean, Alexandra, our Head of IR tells me we are in the penalty box. We are in this penalty box because there are questions around, okay, what is the future of software in times where everyone maybe can generate and code apps. I mean I already alluded to that. When you look back into all of the technological innovations over the last 10 to 20 years, it always starts with -- I mean, these phones here became so powerful because there were better chips, better hardware. And the same is with the LLMs. It always starts with the chips, with the hardware. But I'm 100% sure in order to create value on the business side, you need to move up the stack, and it always happen like that. And what I explained before that these agents need to understand business data. They need to understand business processes in order to deliver the value for our customers. This is very true. And so while there is, of course, a lot of money now going into the chip and semiconductor space, which I totally get, I'm 100% sure that we are uniquely positioned to win the ways on business AI, and we're going to prove that. And so that's why such a share price today is not nice. But at the end, it's super important that we understand our strategy, that we hear from our customers that the strategy is the right one and that we now are laser-focused on the execution of that. And then I'm going to -- and then we will also see again different times. Dominik Asam: And maybe to add some numbers around it. I mean, it's almost like a philosophical war around where the value is created. Is it on the infrastructure layer, which is currently the flavor of the month where everybody is investing. By the way, that's actually good for SAP because we are agnostic and the more money flowing into that, the more competitive that infrastructure will be to run our PaaS and SaaS services on top. We are actually deemphasizing that business. Maybe that will stabilize at some point in time because of the sovereign debate we just had before. On the other side, if I look at the SaaS and the PaaS layer, which we continue to believe for the reasons Christian mentioned, will be a key layer, we are doing actually great, especially in comparison to competitors. You have seen results of some competitors like Dynamics and ServiceNow over the night. There's others to follow. And if you then adjust to an apples-to-apples dollar comparison, we are actually far ahead of the pack in terms of growth rates. So just to give you some data on SaaS, PaaS. In 2025, we had 30% growth in U.S. dollar terms. So that's what you need to compare our competitors to. And I'd say there are some hovering around 20%. There are some hovering around 10%, some in the mid-teens, but nobody is anywhere close there. So we have a strong degree of confidence. Right now, that kind of SaaS, PaaS layer is not super appreciated by capital markets. But I think the jury is still out what ultimately will happen. And by the way, we had a similar bifurcation, I'd say, in the last big tech bubble in 2000, where telecoms and fiber optics were going through the roof, infrastructure again because that's kind of rising tide lifts all boats. And I wonder how much dark fiber today is still in the ground, which has never been lit since then. And on the other hand, by the way, the dark fiber, you can still light today, whereas the GPUs you buy will not hold for 20 years. So jury is still out on that topic, I guess. Monika Schaller: Thank you. Before I move to my M&A question here from the tool, any questions in the room? [indiscernible] Unknown Analyst: Can you hear me? Yes. I have a question about the tariffs. How are the U.S. tariffs affecting your business, both directly and indirectly via delayed spending decisions by your customers? Christian Klein: I mean there are no tariffs on software or software services, which is good. So there is no direct impact, and we hope it stays like that because we have, again, customers everywhere in the world and tariffs -- digital tariffs would immediately fire back no matter where are you in the world. And then on the indirect impact, again, we saw in half year 1 2025, that was not great on the public sector. A lot of new requirements came up. We needed new certifications. But we overcome that. And Q4 was actually really good in the U.S. public sector. And yes, so no, today, there is no actually direct or indirect impact. Let's hope it stays like that. You never know. Let's see what's happening tomorrow morning. Monika Schaller: So back to my tool. The company plans to start a share buyback program. Is there really no other idea to invest for future revenue? Christian Klein: I mean yes, I knew that the question will come. And look, it's a fair question. But look, I mean, first of all, these share buybacks, what we are also doing with these shares, we have employees, and they -- actually, we are also paying them via our shares. So we have actually employee stock programs, and that resonates really well. And so I mean, there is a mean to it. It's not just about financially buying back shares. The second piece, obviously, I mean, we didn't do larger M&A over the last years. We didn't need to. I mean, still here, look at the quotes, we are posting the accelerated total revenue will come organically. No many tech companies can say this. And so -- but going forward, obviously, would I now rule out M&A? No. We will at some point, do M&A, but then more for technological reasons, especially in the data and AI space, whenever we're going to see there is a technology out there which can help to accelerate our AI and the data platform, we have enough financial flexibility to do that. So SAP is now after that share buyback not short of money. We have the flexibility to react. And we will react, but not from a financial standpoint, we will react if we find the right technology and the right company we are believing in. Dominik Asam: May I add on the financial aspects of that, Christian. First, I want to highlight that SAP today has an extremely strong credit profile. So we have a very good rating, much better than some of our competitors. And I dare say we have managed to base that rating more and more on recurring cash generation. Think about the EUR 10 billion guidance we have put out, EUR 8.2 billion that we delivered in '25. So we don't need to hoard an excess cash pile to sustain that extremely strong creditworthiness. So that's the philosophy. And frankly, we always benchmark investments like M&A against investing in our own shares. I always say, why should we do an M&A if investing in our own shares would give us more value. So this is why we think it's part of the mix. And I think it also is evidence to the success we have in really coming up on the free cash generation massively. Monika Schaller: Thank you. [indiscernible]. Unknown Analyst: You said you won't need less people. Does this apply to Germany as well? Christian Klein: That applies especially to Germany because there are -- people here in this part of the world are super well protected, and we are also super happy with these people. We are also investing in Munich, in Berlin, and there are major hubs now in the meantime, Munich more supply chain AI, Berlin, it's a lot about data. And so yes, just still -- I mean, I mentioned some of the headwinds we are having here. We can only always share with our government. Just look at what's happening in China and the U.S. and we can always agree or disagree with certain things. And if it adheres to our values, I will stay out of that. But what happens on the economical side is they are moving super fast. And when it comes to hiring new people, you have them on board in 2 weeks, matters. If you have to reskill your workforce, there's no one you need to ask on, can I apply now these code generation tools to my workforce. There are way less regulations. And all of that is a result when we are asking ourselves, why is there not another SAP here in Europe? I mean, you probably can find some of the reasons. Not everything is related to that. You need also great entrepreneurs. You need CEOs who need to make the right decisions. But of course, also the regulatory environment is very, very important, especially for a tech company because this industry moves much faster than any other industry in the world. Monika Schaller: So we'll talk about AI in a second here on the tool. Any other questions in the room? [indiscernible]? Unknown Analyst: How important are deals with the military for your company? Christian Klein: I mean they are as important as every other deal we are closing. I mean we are running a lot of military defense companies all over the world. I mean we are super proud. We have a project going on with the Japanese Navy. We're doing a lot with Australia and so on. So they are part of our customer base as every other customer. And of course, with AI, what we are doing oftentimes there, it's not about war. It's about things how we can make them more flexible, how can we help with AI on asset management, on the maintenance of their fleets, et cetera. So that is actually what SAP is doing. It's pretty similar to what we are also doing for other industries. So yes, they are part of our customer base, yes. And I mean, maybe just from the size of the industry, the public sector is ranked #5 when you -- and we are dealing with 22 industries round about, and it's ranked #5 from a revenue perspective. Monika Schaller: So 2 questions from the tool, AI first or current cloud backlog first? Let's start with current cloud backlog. Christian Klein: Yes. I mean the one doesn't come without the other. So the AI is actually part of the backlog. And AI is -- because oftentimes numbers -- people ask, what is your AI revenue? The AI sits within our apps. So the AI brings us the apps. The AI help us to win deals in SaaS. The AI helps us to bring more developers on our platform. So it's a natural part of everything what we do. And with that, obviously, it's also part of CCB. Dominik Asam: So what's the question? What's the question on CCB? Monika Schaller: Again, explain CCB. Dominik Asam: Yes. I presume the question might refer to the fact that we have come in at 25% in actual terms and that we had anticipated post Q3 to come in at 26%. You have to understand that when we forecast CCB, it's about also the granularity of all these contracts. And if you look at -- into the specific composition of the contracts we signed, it was slightly different. So the biggest impact we've seen, and we mentioned that in the introductory remarks is that we had a lot of very large deals, 71% of deals being EUR 5 million or higher. And in these large deals, it just takes longer to ramp because the customers start to start with smaller instances in the company and then tackle the really challenging big elephant, so to speak, in the room later. And so there's a little bit of a kind of back-end loading of the ramps there. Second point is that Christian mentioned the very strong traction we had on the defense side also on the other side of the pond. And there are sometimes procurement laws in certain jurisdictions where we have very mighty procurement departments that can impose a termination for convenience on the vendor. And then we cannot put it into the current cloud backlog because that backlog needs to be contractually committed and that option to walk is there. Now in reality, that option is, of course, sometimes theoretical because these are deeply embedded systems, which are extremely sticky. So we're very confident that the revenues out of this will come. But technically, we cannot put it into current cloud backlog. And the last point is what we discussed that there is more and more customers who say, can I really afford to have an off-the-shelf standard plain vanilla U.S. hyperscaler Infrastructure as a Service? Is there a risk that, that might go away quickly for whatever political reasons and look for alternatives? And these alternatives are just about to emerge. Some of them are already up and running. Some are just certified. The certification process takes some time. They also sometimes need to be built. So also from the signing of the contract till the deployment at the customer, it takes time. So these were the 3 factors that actually explain the delta. Each of them not super big, but if they compound together, we talk about that roundabout 1 percentage point. Monika Schaller: Thank you. Any other questions in the room? No. Okay. IDC. You are saying that connecting SAP AI to industry-specific processes is critical to winning customers such as H&M. How can SAP move into AI -- move AI into the industry-specific process at scale. What is your vision for that? After all, these processes vary greatly by industry. Christian Klein: Now I have to be careful that I'm not deep -- diving too deep in our industry technological layer. I mean, first of all, there was a certain reason why always customers lean towards SAP to build industry extensions. A lot of data which sits in an ERP needs to be then also flowing through an industry capability. I mean when you do return claims management, it would be good to have the order data from the ERP. If you talk about supply chain resiliency, you need to also understand how do you produce, how to transport and so on. So you always come back to the core. So then to extend that with industry capabilities makes total sense. And that's why a lot of customers also turning to SAP. So we have the knowledge, we have the people also here in Germany, by the way, a lot, who understand these industries extremely well. Now with AI, we can, of course, completely reimagine how these certain industry capabilities will be done. I mean a machine who needs maintenance, we can actually predict this now way better than with our former asset management solution of SAP because we have agents who are getting demand signals. We have agents which can read out by an LLM then in that case, the machine instruction when something is happening, how to put the machine up faster. We're, of course, getting -- we have the data in our ERP, where are the technical people who can fix the machine. And all of these agents are orchestrating all of that to improve the uptime of the assets of the company. And these are these industry capabilities, which we know very well from the past. And now we have to make sure that we also then co-innovate with our customers the next generation of AI industry capabilities they need. And so -- and technological-wise, I mean, it's the same like in the LOBs, we need the data scientists now. We need the people who can develop the AI, but we have those people. So now it's about going into this together. And I'm sure, especially this industry AI will be a big growth driver for SAP. Can you standardize this 100%? No. I mean, such an agent will look different even within one industry. One mining company will not exactly do asset management like another mining company or the Deutsche Bahn. And this is where we, of course, have to have the extensibility layer so that customers can go into our agent builder and can see, okay, I want to actually automate that process piece on top of what SAP provided. So this fine-tuning of agents, this extension of agents is a super critical capability as part of our solutions. Monika Schaller: If we don't have any other questions in the room, I'll take the final one from the tool combing 2. AI investments. Your peers are struggling to show real AI value. What is SAP's value on AI. And how do you define sales goals in terms of AI for salespeople, if you do not measure AI revenues? Christian Klein: Yes. I mean, first on the value. I mean, I described H&M, I described Fresenius, Avelios. We are doing for other large companies in the world, last mile delivery. So we are doing it already. Now is some of that still to be developed? Yes. But I can say, I speak for everyone in this industry that these things further need to mature. The very important part is of it, do you have the AI foundation? Do you have the data? Do you have the business process understanding? And I can tick like all of that. Now do we need some time and further investments to make that happen? Absolutely. But we are on a very good track and customers are already seeing the first AI agents, and they are believing in it. Just here in Germany, we had a big health care company, they just removed all of their 120 modules they had for cash flow because our AI foundation came in together with an LLM and showed, hey, we can do this way smarter. And then last but not least, how do we measure that? I mean when we are going into now the year, I mean, obviously, we review in how many deals is AI part of that. When you sell supply chain, when you sell HR, don't go to the customer and sell it in the old way, sell them the new capabilities with AI and how we can help to transform the customers' business. That's what we are looking at. We are looking at the value proposition and then obviously connecting it to our product road map so that what we are selling can also be adopted later on. And this is how we're going to steer AI inside SAP. Monika Schaller: Sales target. Christian Klein: Yes. I mean sales targets, again, we -- the people get incentives, if they're selling value to our customers, we see high adoption and AI is part of the solution. It's not like here is a piece of AI and here is the piece of supply chain software. It needs to come together. And only when it comes together, you're going to see that you also get higher incentives because we want to, of course, sell our customers the future, and that's how we steer it and how we incentivize our people. Monika Schaller: Perfect. We're running out of time now. Thank you, Christian. Thank you, Dominik. Thank you, everyone, for joining us today virtually. Of course, also here in the room.
Alexander Bergendorf: Good morning. This is the Axfood Year-End Report 2025 Telephone Conference. And with me today are Simone Margulies, President and CEO; and Anders Lexmon, CFO. In the Investors section of our axfood.com website, you will find the presentation material for today's call. We encourage you to have that presentation at hand as you listen to our prepared commentary. After the presentation, we will be taking questions. A recording of this call will be made available on our website. So with that, I will now hand over the words to Simone. So please go to 2. Go ahead, Simone. Simone Margulies: Thank you, Alex, and good morning, everyone. We report another quarter of above market growth and stronger market positions for all our retail sales. By leveraging the strength of our business concept, we are also preparing for the future and investing in strategically important areas to continue attracting more customers, become even more efficient and strengthen our competitiveness. On this slide, you see some highlights for the quarter, highlights which we will cover during the course of this presentation. Turning to Page 3. So now as usual, I will start with a brief market overview and the review of the quarterly development. Let's go to Page 4. Market conditions in Swedish food retail continued to be characterized by a high activity level in the quarter with intense competition and continued high price awareness among consumers. Overall market growth amounted to 4.5%. Statistics Sweden reported that the annualized rate for food price inflation was 3.5%. This level was somewhat lower on a sequential basis and in absolute terms, the overall price level was quite stable. Growth in Axfood's retail sales amounted to 8.7% and 5.3% excluding City Gross. Our growth was thereby once again above the rate of the market, both including and excluding City Gross. Volume growth from increased customer traffic, strong customer loyalty and new store establishments contributed to the development. We have a long history of market share gains. With the Q4 performance, we have outperformed the market every quarter this year and are reporting our 11th consecutive year of market share gains. We are now on Page 5. Consolidated net sales for Axfood grew 4.4% in the quarter with higher volumes and positive trend in like-for-like sales in all our retail chains. We acquired City Gross in November 2024. So during the fourth quarter, we started annualizing their performance. However, only 2 months of the quarter, which is clear when you took -- look at their comparison figures. So please go to the next page, #6. Group operating profit increased to SEK 860 million, and the operating margin was higher at 3.8%. Operating profit included items affecting comparability of minus SEK 13 million related to City Gross. Last year, items affecting comparability pertained to a reevaluation of our previous minority stake in City Gross. Operating profit and margin on an adjusted basis, which excluded items affecting comparability, also increased. Adjusted operating profit was SEK 873 million and the adjusted operating margin amounted to 3.8%. The improved profitability was primarily driven by high sales volumes and good growth in both total and like-for-like sales, a stable gross margin trend and effective cost control. In 2025, we increased our focus on productivity and costs and implemented measures to improve efficiency within and between the group support functions. In the fourth quarter, we saw some effects from these measures through cost savings, not only in the various businesses, but also in joint group functions, which partly explains the positive profit development there. Let's now turn to Willys and Page 7. Willys continued to outperform the market in the fourth quarter. Growth primarily came from higher volumes as a result of an increased number of customer visits and new store establishments. Willys continues to attract new members into its customer loyalty program, Willys Plus, and see strong loyalty among its customers. Earnings grew to SEK 467 million, which corresponded to a stable operating margin of 3.7%. The increase in operating profit was primarily driven by the increased sales volumes, a stable gross margin development and good cost control. Moving on to Hemkop and Page 8. Hemkop's retail sales growth in the quarter exceeded that of the market. Hemkop saw volume growth driven by increase in customer traffic and in addition, a higher average ticket value impacted the sales development positively. Operating profit was higher at SEK 78 million, and the operating margin also increased to 3.5%. The increase in operating profit was mainly driven by the increased sales, a somewhat high gross margin and solid cost control. Earnings in the prior year was impacted by new store establishments. Turning to Page 9. City Gross demonstrated a positive performance during the fourth quarter. The financial comparison figures here obviously refer to the 2 months period November to December 2024. However, to give you a better understanding of City Gross' underlying sales performance, sales growth numbers are calculated with the full October to December period 2024 in the comparison base. While total growth was impacted by store closures, like-for-like growth was solid and amounted to 3%. City Gross reported a profit for the quarter of SEK 28 million on an adjusted basis, corresponding to an operating margin of 1.2% with positive contribution from its like-for-like growth. In addition, structure measures and efforts to streamline operations contributed to the development. As a reminder, the fourth quarter is generally a strong quarter for hypermarkets. On a reported basis, operating profit amounted to SEK 14 million, which corresponds to an operating margin of 0.6%. This included the items affecting comparability I just mentioned, which refers to structural measures, including discontinuation costs for stores and sales clearance within the nonfood assortment. Turning to Slide 10. Our restaurant wholesaler, Snabbgross delivered growth of 6% in the quarter on both a total and like-for-like basis. Higher volumes through increased customer traffic had a positive impact on sales in addition to higher ticket -- average ticket value. In terms of profitability, the quarterly development was weak. Operating profit amounted to SEK 35 million, corresponding to an operating margin of 2.5%. A lower gross margin associated with temporary market investment was not fully offset by volume growth, which had a negative impact on the earnings development in a very competitive market. Next, Page #11. During the year, Dagab has developed the group's assortment of affordable, good and sustainable food with a continued focus in the fourth quarter on ensuring that our chains can provide Swedish customers with a competitive offering. Dagab's fourth quarter net sales increased by almost 5%, driven by sales to Axfood's own concepts. Operating profit amounted to SEK 314 million and the operating margin was 1.5%. Operating profit was negatively impacted by a lower gross margin due to market investments and negative mix effects. The logistics center in Balsta, along with the high-bay warehouse in Backa and automation of fruit and vegetable warehouse in Landskrona has significantly increased Dagab's capacity and efficiency in logistics. Work continues to optimizing our new logistics structure. And later on in the presentation, I will come back to the next significant investment in our logistics structure, the facility in Kungsbacka that we plan to establish to increase capacity and efficiency also in the southern parts of Sweden. But before that, it's time for our CFO, Anders, to take you through the financials. We are now on Page 12, but please let's go to the next page, #13. And Anders, please go ahead. Anders Lexmon: Thank you, Simone. Net sales for the group increased by 6.1% to approximately SEK 89 billion. Including City Gross, retail sales increased by 16.4%. And excluding City Gross, the increase was 5.9%, which was higher than the food retail market in total, where growth amounted to 4.5%. Operating profit, excluding items affecting comparability, increased 7.4% to almost SEK 3.7 billion. The operating margin, excluding items affecting comparability, remains unchanged at 4.1%, where the City Gross acquisition impacted the margin with minus 0.2%. Then please turn to Page #14. During 2025, the cash flow was SEK 345 million, which was almost SEK 300 million higher compared to last year. We saw strong underlying operating cash flow from both for the fourth quarter and the full year, mainly due to a strong operational performance boosted by positive working capital changes. Last year was impacted by negative calendar effects in working capital. The negative cash flow from investment activities of SEK 1.7 billion was substantially lower than last year as last year was impacted by the City Gross acquisition. Excluding the City Gross effect, we have a higher pace in investments in our retail operations and a lower pace in automation investments compared to last year since we now are through with our investment in the Balsta logistics center. By year-end, Axfood utilized approximately SEK 2.7 billion of our credit facilities compared to SEK 3.1 billion by the end of Q3 and SEK 2.9 billion at year-end 2024. We are now on Page 15. During the last couple of quarters, we have seen a positive trend in the net debt development. The net debt increased with the acquisition of City Gross in Q4 last year and the dividend paid in March, but is now below 2 and excluding IFRS 16, just below 0.5. The equity ratio amounted to 21.2%, which was higher than last year and above the year-end target of 20%. Total investments, excluding leasehold and acquisition amounted to SEK 1.7 billion. In 2025, during the year, we established 9 new group-owned stores, 3 fewer stores compared to the previous year. Our investments in store modernizations have increased compared to last year. Please then turn to next page, Page #16. When we look at the capital efficiency, we had a negative development of our rolling 12-month net working capital. The impact of the City Gross acquisition has increased the KPI with approximately 0.3 percentage points on a rolling 12-month basis, which implies a positive underlying development. Capital employed has increased over the last years, mainly due to the acquisitions of Bergendahls Food and City Gross as well as the investments in Balsta. The level of capital employed increased slightly during 2025, mainly as a result of increased leasehold debt and equity. Due to the increase in capital employed, the return on capital employed decreased to 15.5% compared to last year despite an improved operating profit. And thereby, I have come to the end of my presentation and hand over to you again, Simone. Simone Margulies: Thank you, Anders. We are now on Page 17, and it's time for me to give you an update on our strategic agenda and priorities. So let's turn to Page 18. We have a clear house of brand strategy in our group, and it makes us unique in the Swedish food retail. We aim to deliver the strongest customer experiences, and we are present in all market segments with our different concepts. Our largest brands, Willys, Hemkop and City Gross made significant progress during the past year. With a clear focus on always delivering Sweden's cheapest bag of groceries, Willys once again took market share, increased its earnings and continue to expand with new store establishments. Willys has had a strong momentum for a long time and has excellent potential to reach even more customers. The aim is to open at least 10 new stores for Willys annually in the coming years by also continuously creating an even better customer experience in stores through continuous upgrades to its new store concept, Willys point 0 -- 5.0, sorry. Hemkop also gained market share during the year while improving its profitability. This was achieved through a high pace of store modernization and continuous development, focused on price value, sustainability, fresh products and meal solutions. For City Gross, it was a year of transformation with a series of improvement initiatives in many areas. Important steps forward were made, resulting in improved like-for-like sales growth, a lower cost level and positive earnings trend. We continue to work according to plan to strengthen the chain for the future to become a truly competitive player in the hypermarket segment with the aim to achieve profitability at some point during the second half of 2026. We are now on Page 19. To create the right conditions for our retail concepts to be able to succeed on the market, we leverage our strength as a group and focus on 6 strategic development areas. We elaborated these during the Capital Markets Day in September, and I would now like to go through some of our most important strategic priorities within these going forward. So please turn to Page 20. We strive to offer the market's most attractive assortment, a highly relevant offering that makes affordable, good and sustainable food available to everyone. This works includes both branded products and private labels, but now I will focus more on the latter. Because our extensive range, including the Garant and Eldorado brands, is a significant competitive edge. These products contribute to profitable growth by creating an attractive and distinctive assortment that strengthens the offerings within our various concepts. Our products represent quality and innovation, and we focus a lot on sustainability and health with a wide selection of sustainability label and organic products. In addition, we have a large selection of products with Swedish origin with more than 400 products under the Garant brand. During 2025, we continue to develop our private label offering and launched approximately 270 new products. Our total private label share of sales was diluted by City Gross and that has a lower private label share than Willys and Hemkop. The private label share continued to increase in each chain, a trend that we've seen for a long time. And in particular, now we see a strong growth also in City Gross. We are now on Page 21. We have an attractive store network, a network that we will continue to develop in the coming years by accelerating the pace of expansion while maintaining a high rate of modernization of existing stores. During 2025, we established 9 new group-owned stores. On a net basis, we have thereby expanded our network of group-owned stores with more than 100 in the last 10 years. And we aim to continue on this path also going forward. In addition to store establishments, we have continued to modernize and refurbish existing stores in a high pace. This is really about creating inspiring store environments and great experiences to drive customer traffic and profitable growth. Looking at major refurbishments from 2021, sales from these stores increased significantly more than the market and operating profit also increased. I also want to elaborate on how our house of brand strategy creates flexibility and opportunities in terms of our store presence. We can maximize the opportunity on each local marketplace by having the right concept in the right place. Last year, we converted 2 City Gross stores to Willys because we saw a better opportunity for Willys to be successful in those areas. These conversions have proven to be highly successful as both stores have experienced a substantial sales increase following the conversion. Adjusted for inflation, sales in the Bromma Blocks store in Stockholm was more than 50% higher during the September to December period last year compared to the same period the year earlier when the store was operating under the City Gross brand. And the corresponding increase for the Borlange store was more than 70% during the November to December. This really highlights the strength of our house of brand strategy and how we can leverage our strong portfolio of concepts. Next page, #22. Last year, we communicated that we are planning to establish a new highly automated logistics center in Kungsbacka to strengthen our supply chain in Southern Sweden. During the fourth quarter, we signed the agreement for the automation equipment with Witron, a market-leading dynamic warehouse and order picking systems. We have collaborated with Witron for several years as they have been our supplier of the automation solution in Balsta. The total contracted investment will amount to EUR 265 million during the period 2026 to 2031. On this slide, you can see how the investment undertaking is spread out in the next couple of years, which we communicated just over a month ago. The amount for 2026 is included in our CapEx guidance that I will provide you with shortly. We are continuing to build for the future, and this new logistics structure will create capacity for us to continue to grow and become even more competitive. We are now on Page 23. At Axfood, we have a highly ambitious agenda when it comes to sustainability and health. These are integral parts of our operations, and our scope is the entire food supply chain. During the fourth quarter, we reached a significant milestone as we completed our transition to fossil-free transports, both in our own operations and in procured transports. This is truly a great achievement, and I'm proud that we, as a group, have chosen to take a lead this way to reduce emissions. We now exclusively use renewable fuels or electricity, and we also have target to electrify 50% of our own transport fleet by 2030. Now while the impact on emissions from transition is not fully reflected in our numbers for the year, emissions from transports nevertheless went down substantially in 2025. And looking at the last 5 years period, transport emissions have decreased with approximately 70%. Another highlight during the quarter was that we applied to have 3 climate targets validated by the science-based target initiatives, and we are now on Page 24 in the presentation. We have been working on this for some time now, as you may know. For us, it is, of course, important that goals and ambitions are worked thoroughly through thoroughly. And during the process, we identified a need to develop and improve our existing climate reporting, mostly regarding Scope 3. This work now enable us to better establish a transition plan to show how we will reduce emissions in the long term. We commit to reduce emissions in our operations by at least 70% by 2030 compared to 2024, to have at least 70% of our suppliers set science-based climate targets by 2030, the latest, and to reduce flag emissions by at least 30% by 2030 compared with the base year 2024. Our application will now be revised by the SBTi, and we will come back to you when we have our targets validated. Please turn to the next page, #25. Today, we're issuing the outlook for 2026. We are continuing to invest in our business to strengthen competitiveness and create value for all our stakeholders. Investments are expected to amount to SEK 2.2 billion to SEK 2.3 billion, excluding acquisitions and right-of-use assets. The largest part of this is related to recurring investments in our operations and it also covers expansion through new stores. However, the amount also includes SEK 470 million automation investments for our future logistics center in Kungsbacka, as I just mentioned. To encourage even more customers to shop with us, we will continue to maintain a high rate of new store establishments in 2026 and beyond. Our ambition this year is to expand the store network by 10 to 15 new group-owned stores in 2026. In addition, we want to continue attracting franchisees and add new retailer-owned stores to expand our total store base. To further strengthen City Gross, we will incur SEK 50 million in structural costs in that business in 2026, which will be classified as items affecting comparability. These costs are mainly related to its store base. Moving on to the dividend on Page 26. Axfood has a strong financial position, and the Board of Directors will propose to the Annual General Meeting an increased dividend of SEK 9 per share. The dividend will be split into 2 payments, SEK 4.50 per share in March and SEK 4.50 per share in September. The dividend proposal corresponds to 83% of profit after tax, well in line with our dividend policy. Now turning to the final page of this presentation, Page 27. So let me sum up. We are summarizing a quarter and year in which we attracted growing numbers of customers with increased loyalty and strong positions in all our market segments. We are well positioned to remain a challenger and feel confident about the year ahead. We operate in dynamic markets that continue to be dominated by a strong focus on price value, and our aim is to continue to grow more than the market. That is because we have a strong business model and structure that create opportunities and competitive advantages. For us, the key to drive long-term growth and profitability is based on customer traffic, loyalty and volume growth. We have seen a strong development in all these areas over a long period also in 2025. Based on our great commitment and passion for food throughout the organization, we are leveraging the strength of our business model. And that was all for today. So now please turn to Page 28, and I hand over to the operator to open up the line for questions. Thank you. Operator: [Operator Instructions] The next question comes from Magnus Raman from SB1 Markets. Magnus Raman: I think I would like to start asking about City Gross, where we now see, if you look at the second half of '25 in total, it's a rather clear profitability that you reach H2 '25 on an adjusted EBIT basis. Could you elaborate a little bit on this in comparison to the target you set out to reach breakeven H2 '26. Should we view it that you have already achieved this target now 1 year earlier? Or is it a very big seasonality difference here that lead us to -- that you want to highlight when we look at H1 '26? Simone Margulies: Yes. Thank you very much. Within City Gross, we are in a transition, as you know. We are doing -- we're in the middle of our transformation plan and to do the turnaround. And our aim is to create a really strong core and to create a strong and competitive player within the hypermarket segment. And this is -- it comprises a lot of different initiatives, everything from the operating model to the store concept to the customer offering. We also made things -- restructuring the organization, et cetera. We're also investing in price. And within the fourth quarter, there are seasonal effects for the hypermarket segment that are in general stronger in the fourth quarter. However, we are taking really, really good steps within City Gross. But as you understand, we are in the middle of a journey, and it can go up and it can go down. And we are reiterating that in the second half of this year, we will create an attractive and profitable player within the hypermarket segment. So we are reiterating that goal. Magnus Raman: All right. Just another thing here on the like-for-like sales growth for City Gross. And forgive me if you've already mentioned this earlier in the presentation, I came in a bit later here, but you state in the table 1.5% like-for-like sales growth. And I assume that, that relates only to the November to December period. Can you say if that is correct? And then in the text, you write October to December, 3.1% like-for-like growth. Do I interpret this correctly? And so in that case, September sales, I assume must have been much stronger? Simone Margulies: To start with, yes, you have interpreted correctly. So 3% in the quarter and 1.5% for the November, December period. And that's actually -- as we talked a lot before, that's actually where it all starts. We have to have a positive growth in like-for-like, and that's why we're really, really happy to see that during the quarter. Magnus Raman: But considering that, I guess, that in the mix of these months in the normal quarter, I guess, that the last quarters, i.e., November and December must be -- should be larger. Nevertheless, October, I think I said September, I mean, of course, October, October must have been very strong for the full quarter figures to reach 3-plus percent, while the November to December was only 1.5%. Is that correct? Simone Margulies: We don't actually guide you monthly, but -- and it's also about how you say what kind of comparison figures you have, of course. I would say that we're really happy that we see the positive like-for-like growth that we've seen now for some time for City Gross. And as I told you, it's a journey, and that's why we're reiterating profitability somewhat in the second half of this year because it's -- and we're doing and taking large measures and initiatives to really create and building this strong core. And that's why we have to -- you have to look at the trend here because it can -- some months, it can go up and some months it can go down when we're doing so much changes as we do. So for us, it's about looking at the trend and it starts with the like-for-like growth, but we also made a lot of initiatives regarding cost and organizational changes and also operating model and now we're also developing the store concept. So I think it's important to see the trends. And also I think your 2 questions maybe are linked. We're on a journey, it can go up, it can go down since we're doing so much changes in the field. Magnus Raman: Right. But the trend, if we look at 2 figures, then the trend in like-for-like sales growth has been very stable because you've been delivering now on full quarters, 3 quarters in a row with above 3% positive like-for-like growth and you delivered 3 quarters on sort of adjusted operating profit level. You delivered 3 quarters in a row with sort of improving results then flat in Q3 and now a clear profit in Q4. So -- but all right thank you for the remarks. And then I'd like to ask on Dagab. You mentioned here as one explanatory factor to the weaker margin price investments from Dagab in the quarter. And I guess maybe it's been a special quarter to a certain extent, for example, with the PRO survey taking place in this quarter. Can you elaborate if you think or see that there were some temporary factors as it relates to price investments that weighed on Dagab's margin in Q4? Simone Margulies: To start with, the PRO doesn't have anything to do with this. And we do, as we always do, to deliver for Willys the cheapest bag grocers in the market and also for Hemkop and City Gross it's important to be highly competitive. So I say PRO doesn't -- we don't take that much measures about PRO. But to start -- but to go to Dagab, in Dagab, we see really good effects of the investments in -- we made in the logistics, both in Balsta, but also the fruit and vegetable in Landskrona and the new high-bay warehouse that we have automated in Backa. However, as we said, we have a negative effect in the margin, and that is due to both market investments, but also mix effects. And to elaborate a little bit more about mix effects, when we have changes in customer behaviors and also volatility commodity pricing and then that can vary from month-to-month and quarter-by-quarter. And for instance, we have very -- which we are happy to, we have good volume growth within fruit and vegetables, where we also have had deflation, and that has a negative effect in the earnings in Dagab. So I think it's important to see -- look on our result as a group, how we actually play our business model in the most efficient way. And by that, we're once again gaining market shares, the 11th year in a row and also improving our profitability as a group. Magnus Raman: Right. But do I interpret you rightly that when you then mention investments, you speak about capital investments that have been capitalized and then leading to a higher depreciation impacting results. Is that what you mean? Simone Margulies: No, it's market investment. Dagab is a supporting company for all our customers and their role is to help all the customers to be really competitive in the market and to have the right conditions to take the market development, and that is what we mean with the market investments. Magnus Raman: Exactly. That was my feeling. And then that means, of course, market investment means investment into reduced price, I guess, on certain merchandise for the retailers? Simone Margulies: Yes, it's to increase the competition. Magnus Raman: Yes, yes. And I mean -- so I mean, the quite aggressive price cuts that you took on several items in conjunction with PRO survey must have been impacting profitability somewhere in the chain, either in Willys or in Dagab or both. Isn't that correct? Simone Margulies: I have to start -- I mean, I don't like to talk about the PRO. I think Willys has handled those questions. I mean, Willys -- there are so many methodological errors in that survey. So we don't actually take that much action about that. For us, I think it's important to put our performance in the perspective of a high competition in the market from all the players. And I think that we are navigating that quite successfully since we're gaining market share. We have a high competition in the market, and we also have a consumer that is very conscious with a high focus on price and price awareness. And that's the market that we are navigating quite well, I would say, since we're gaining market share and strengthen our positions with all our brands, our strong brands. Magnus Raman: Great. Then on Snabbgross, you had a material setback in profitability in Snabbgross here in the quarter. And you mentioned temporary market investments here. So can you elaborate a little bit on that if perhaps you already did when you ran it through in the presentation, but for a reminder here on Snabbgross. Simone Margulies: Yes. Snabbgross made some marketing investment that they didn't really get the ROI on in volumes. They had a good growth with 6%, but it didn't actually -- it wasn't enough to cover the negative effects in the margin and in the profitability. So they made a weak performance for the quarter. Magnus Raman: So we should interpret that these will not be repeated, these type of investments then? Simone Margulies: As you know, I don't give any forecasts on the segments, but... Magnus Raman: No, no, without forecast but speak for itself. Simone Margulies: It was not the exact fit. So that way. Magnus Raman: Right. Okay. Okay. Great. And then on -- just looking forward then instead or not forward-looking statements, but looking at what we all know about the halving of the food VAT from 1st April. Do you think that this could -- I mean, we've had a period now where we had very high inflationary pressure where we've seen consumers trading down, so to speak, in the mix of what they consume. Do you think that the relief from the half food VAT might impact the mix in the other direction in any way? Simone Margulies: To start with, we look -- we are very positive -- we look very positive on the reduction of the VAT. I think we have a consumer that has been very cautious, and we still think that the consumer is cautious, and it's very difficult to make any forecast on how the consumer will act. They are -- I would say they're a little bit scared from the price shocks that we have experienced the last years. And also, we have a pretty high unemployment in Sweden. So we think the customer is still cautious and focus on price value and value for money. However, we hope that we will get some positive mix effect in the way that we see -- that we're hoping to see more increased, I would say, purchases within sustainability and sustainable label food, but that's what we're hoping for. We think it's difficult to give you a forecast. The customer is still very price conscious, and there is a high competition in the market. So it's difficult to give you any forecast on this. Magnus Raman: Right. And just a final one here on the falling international food commodity prices seen now for 4 months straight and also topped by the strengthening Swedish krona a bit, have you seen so far any effect as it related to your sort of dollar purchasing from this? Simone Margulies: If you look upon the commodity, we see, as you said, we had higher inflation in the beginning of the year due to dairy, meat and also to coffee, and that was stabilized in the second half of the year. And also with the strengthening of the Swedish currency, of course, it's positive, but more on a longer-term perspective for the consumers, since there's so many things that are affecting the prices. But of course, in the long-term perspective, it's positive for the consumers when we see a more stable development in the commodity pricing and also a strengthening in the Swedish currency. Operator: The next question comes from Rob Joyce from BNP Paribas. Robert Joyce: I'll go one by one as well. Just following on from the last one. So in terms of inflation you're seeing in the market, you mentioned deflation in fruit and veg. Are we seeing slowing inflation further as we start 2026? Simone Margulies: It's difficult to give any forecast on the pricing since there are so many things that are affecting. We also have a geopolitical situation. We have also, how do you say, the climate changes -- sorry, climate changes is also affecting, but we have had more stable pricing since the summer, I would say. How it will end up in the future, it's very difficult for me to give any forecast on. Robert Joyce: But in terms of the first month you've seen, are we seeing prices sort of stable versus December or will they falling slightly further? Simone Margulies: I can't give you any forecast on the pricing since there are so many things that are affecting the pricing. Robert Joyce: Okay. And then maybe you mentioned competitive intensity of the market. Are you seeing any changes in the more recent months? Has that competitive intensity stepped up any players you'd flag? Simone Margulies: I would say we have experienced a very competitive market for the last couple of years, I would say. And there has been a competition from all the competitors, I would say. So we're still in a market with high competition and also a consumer that is very price sensitive and cautious. Robert Joyce: Okay. But no real changes? Simone Margulies: No, we're pretty much in the same market as we've seen for the couple of years now. Robert Joyce: Okay. And then in terms of the VAT cut, is your expectation that, that will be immediately fully passed to consumers? Simone Margulies: Yes, definitely. The VAT is the tax, as you know, that the state put on the food. So I mean that is digitally transferred to the consumers. Robert Joyce: Okay. Okay. And in terms of historical price elasticities, I mean, I guess we don't have much data on when prices actually fall. But do you have any sort of data which suggests how consumers might react to a 6% fall in prices or 4% -- sorry, 5% probably works out? Simone Margulies: No. It's really difficult to know what the customers will do actually since we think it's very positive because the consumer have decreased their economy in the last years and by the lower VAT on food that will increase the buying power for the consumers. How they will act is difficult to forecast since they -- as I told a little bit before, they scarred from the years of high, the cost shock they've had high employment. So if they will save the money or they will buy other things than food or if they will place more money for, it's really difficult to forecast. So we actually don't do any forecast. And it's difficult also if you analyze different markets because it's been different situation in also in these markets. Robert Joyce: Okay. Understood. And just looking at the sort of the Dagab numbers now and how that -- I guess you're sharing the savings more broadly across the group. Do you think as we look to the next investment in the supply chain, we should think about that more as a kind of just cost of doing business. You need to make this investment to maintain competitiveness rather than thinking about this as a sort of SEK 300 million, SEK 400 million boost to EBIT, potentially the people that we were thinking about before from the last project? Simone Margulies: We will -- we are still negotiating regarding the building, the facility. And when we have everything set, of course, we will come back to you with the full scenario. But for us, it's important both to secure capacity for the southern part of Sweden from 2030 going forward. But also it's about strengthening our competitiveness. And when we will open the warehouse, we will have the same cost level as we have today, of course. But then, of course, we will improve our competitiveness over time. Robert Joyce: Okay. And just one more broadly, just thinking about the environment. I know over here in the U.K., when there have been certain cuts on sort of business rates, for example, the grocers in the U.K. didn't really take those to the bottom line. Is there -- what's the political environment about -- if there is a volume increase in grocery, is there room for profitability to improve? Or is it very much focused on driving that consumer experience? Simone Margulies: Could you rephrase the question? Robert Joyce: Just I guess, with the VAT cut, I mean the sort of the overall environment, when these cuts are given to grocers, the expectation is generally the consumer sees the benefit. And I've said in certain markets we cover as well, we've seen those benefits largely just passed to the consumer. But in terms of the potential volumes increasing on the back of lower prices in food, do we think that gets further invested in the consumer? Or can that drive the bottom line? Simone Margulies: Now, I understand. So first of all, as I said, we do not -- it's difficult to make forecast how the consumer will act. But the other part, we have a long-term goal -- target growth for our group set to 4.5%. And that will come from us to continue growing, attracting more customers and also improve our efficiencies within the entire group. So I mean, we're aiming and that's a long-term goal for us to strive towards. But also, I think it's important, if you look upon our figures last year and if you exclude City Gross, we're actually having a margin of 4.3%. So we're heading towards our goal, but it's set on the long term. Operator: [Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Simone Margulies: So that was all for today. Thank you all for your good questions, and see you in the next quarter.
Maria Caneman: Thank you for dialing in this morning. I am Maria Caneman, Head of Investor Relations here at Swedbank. Welcome to our fourth quarter 2025 results presentation. I'm joined today by our CEO, Jens Henriksson; and our CFO, Jon Lidefelt. Jens and Jon will start with their presentation, and then there will be an opportunity to ask questions. With that, I would like to hand it over to Jens. Jens Henriksson: Thank you, Maria. 2025 was a successful year for Swedbank. The target of a sustainable return on equity of 15% was achieved. During 2025, the global economy was, despite tariffs and geopolitical uncertainty, more resilient than expected. A few weeks ago, the International Monetary Fund released an update to its world economic outlook. It revised the world growth forecast slightly upwards for this year against the backdrop of a steady and resilient economy. However, with renewed global tensions and strained public finances, global growth could be curbed. In our home markets, the economic situation continues to brighten, thanks to large investments and strong private consumption. In Sweden, the recovery began in the second half of 2025 and our economist expects growth of more than 2.5% in 2026. Lithuania had a strong development in 2025, and growth is expected to pick up further this year. In Estonia and Latvia growth also is likely to rise in 2026. In these times, Swedbank has once again delivered a strong result. For the fourth quarter, we saw a return of equity of 14.7%, and the return on equity for the full year was 15.2%. Costs developed as planned and the cost-to-income ratio was 0.36, both during the quarter and for the full year. Cost control is strategically important issue and is reflected in all parts of the Bank. Credit quality is solid. Earnings per share for 2025 amounted to SEK 28.98. The Board of Directors is proposing to the Annual General Meeting, a total dividend of SEK 29.80 per share of which SEK 9.35 is a special dividend on the basis of the bank's strong capital position. Our CET1 capital buffer then amounts to 3 percentage points. Swedbank has a strong capital and liquidity position. During the past few years, we have by strengthening governance and internal controls, improved work methods and investments in new technology created a stable foundation for the bank. Now we are looking ahead with increased focus on our customers. At our Investor Day in June last year, we presented our direction, Swedbank 15/27 and it has a clear customer focus. We will strengthen our customer interactions, grow our volumes and increase our efficiency. Availability and efficiency are fundamental. Succeeding in these areas will enable us to be even more proactive, meet more customers and do more business. And in these areas, we've already made significant progress. Our availability in Sweden increased significantly last year. In 2025, we had over 30% more calls with our customers than a year before. At the end of 2024, we answered 29% of incoming calls in Sweden under 3 minutes. At the end of 2025, that figure has improved to more than 80%. We're also constantly working to increase our efficiency. Digitalization and newly developed AI tools are simplifying our work and reducing administration, and we see continued great opportunities in this area. We are now taking the next step. Our business areas will gain more influence and control in developing their businesses. To sharpen our focus on customers, business and productivity, the work of developing services and solutions should be closer to those responsible for our customers. By refining and moving roles and responsibilities and working more efficiently, we can better meet customer expectations and develop our offerings. The acquisition of Stabelo and Entercard have been completed. This will also provide us with new business opportunities and I've had the privilege of welcoming all our new colleagues to the bank. These acquisitions and the changes we are now implementing are all contributing to our 15/27 plan. We are now working to update our strategies and plans for Entercard and in connection with our next quarterly report, we will present what this entails for the bank going forward. During the year, Swedbank's lending increased by SEK 108 billion, excluding FX effects. Of these SEK 47 billion was lending to corporates. Entercard and Stabelo contributed with SEK 44 billion, and private loans increased organically by SEK 17 billion. Our mortgage portfolio is growing and during the quarter, lending and mortgages increased by SEK 23 billion, excluding currency effects in Sweden -- sorry, currency effects. Of this amount, SEK 17 billion came from the acquisition of Stabelo. Lending volumes in our own channels in Sweden increased by just over SEK 4 billion. And that means we have doubled our market share of new mortgages sold in our own channels in 2025 compared to 2024, but that is not enough. We want to grow at least in line with the market. Savings continued the positive development and net inflows to Swedbank Robur amounted to SEK 11 billion during the quarter. At the beginning of 2026, Premium and Private Banking will celebrate 2 years as its own business area. We are expanding our customer base and we strengthened our premium offering during the quarter. The corporate business is developing strongly, both in Sweden and in the Baltics. In Sweden, our market share increased by 0.5 percentage points to 15.2% at the end of November. We have a competitive offering and a strong customer focus. By building sector teams in defense, food production, and forestry and agriculture, we strengthen our capacity to advise customers in these sectors. At the same time, we continue to focus on local business relationships with small- and medium-sized companies by strengthening our local presence. On September 1, our partnership with the new investment bank SB1 Markets was officially launched. They have had a good start in Sweden and have completed several deals. And as you know, Swedbank owns 20% of the SB1 Markets. Given the geopolitical tensions, we continue to strengthen our resilience. Swedbank has a good ability and preparedness to manage the associated risks. After the end of the quarter, Swedbank was informed that the U.S. Department of Justice had closed its investigation into the bank without enforcement. That leaves us with one American investigation ongoing evolving the Department of Financial Services in New York. We cannot assess when it will be concluded, whether we will get any fines. And if we do get fines, the size of such a potential fine. Finally, let me say a few words about the bank's social commitment. In 2025, we met more than 100,000 children and young people in Sweden and educated them in personal finance. And at the end of last year, Swedbank donated EUR 10 million to the Vilnius University Foundation to support growth and prosperity in Lithuania. These are just a few examples of our efforts to create financial health and economic stability in our home markets. With that, let me hand over to our CFO, Jon, who will deep dive into the numbers. Jon Lidefelt: Thank you, Jens. Let me now walk you through the fourth quarter. We delivered a strong result with volume growth across markets and increasing income. We have continued our focus on long-term shareholder value through business growth and cost efficiency. Cost-to-income ratio in the fourth quarter was 0.36 and return on equity 14.7%. As you know, this quarter, we have consolidated both Entercard and Stabelo into our numbers. However, keep in mind that they did not add a full quarter effect. Entercard was incorporated as of December 1 and added SEK 27 billion of lending. Stabelo was incorporated as of November 4 and added SEK 17 billion of mortgages. The CET1 effect was in total 50 basis points in the quarter. As communicated earlier, we will de-risk Entercard's consumer finance business as the risk level is too high. The risk level for new lending has been adjusted. Our intention is also to divest Entercard's back book of consumer finance loans. And going forward, we will report it as held for sale. We have worked with strengthening our organization, and it will be effective as of March 1. The strategic review of Entercard is aligned with this and we will, hence, come back in conjunction with the Q1 report with more details and how this supports our 15/27 plan. Lending volumes grew by 3% in the quarter. Mortgage volumes in Sweden sold through our own channels increased by SEK 4.1 billion, while the savings banks reduced their mortgage volumes on our balance sheet by SEK 1.9 billion. Our Swedish mortgage front book market share in November sold through own channels was 11%, still below the back book market share of 18%. In total, with savings banks volumes on our balance sheet, we have a market share of 22%, the largest actor on the Swedish mortgage market. Stabelo's growth has picked up as Swedbank's strong balance sheet enables lending up to 85% in loan-to-value. In the corporate business in Sweden, the positive development continued with increasing volumes, mainly within the property management and public sector. In Baltic Banking, corporate loan demand continued to be strong across sectors, leading to a loan growth of SEK 5 billion in the quarter. Customer deposits increased in the quarter, driven by Baltic Banking, where we had a good growth in both private and corporate deposits. In Lithuania, deposits increased in the end of the year following the usual pattern due to the annual 1 month extra salary. In Sweden, private deposits decreased slightly as consumption is picking up. Corporate deposits in Sweden were impacted by end of year effects, mainly driven by the larger institutions as normal. Net interest income was unchanged compared to the previous quarter. We saw continued impact from lower rates. However, organic growth and acquisitions partly mitigated this. Higher business volumes had a positive impact of SEK 72 million in the quarter. With lower policy rates, our cash with central banks generate less income, but this is partly offset by lower wholesale funding cost. The Swedish Central Bank cut the policy rate effective as of first of October and ECB's latest rate cut was in June. By the end of the year, these policy rate changes were fully priced in. Hence, we should see the full quarterly NII effect of the rate cuts in the first quarter of 2026. Net commission income increased in the quarter, driven mainly by securities and corporate finance where the annual market maker fees contributed positively. We also had a one-off effect relating to the closure of some retail products, which were phased out several years ago. Asset management commissions benefited from strong net inflows of SEK 11 billion and positive stock market development, measured by assets under management, Robur is the largest player in the fund market in Sweden and the Baltics. Card commissions were lower in the quarter, in line with normal patterns. Net gains and losses increased from an already high level and amounted to SEK 982 million. Income was strong, driven by client trading. The treasury result was impacted by unrealized valuation effects in derivatives and equity holdings. The business activity remained high despite some seasonal slowdown towards the end of the year. Other income increased by 1%. Net insurance decreased, mainly driven by revaluation effects. A reminder of 2 things here, in the result from associated companies we now report the ownership stake of SB1 Markets and Entercard is fully consolidated since December 1. So in the fourth quarter, only 2 months are included under other income. As usual, also a reminder here that our collaboration with the savings banks include cost sharing, for IT development and administrative services. The savings banks share of the cost is included in Swedbank's total cost. And you can see the corresponding income under other income. We delivered on the 2025 cost guidance of SEK 25.3 million, which gives an underlying cost growth of around 3% adjusted for the VAT recoveries and the acquisitions. Costs in the fourth quarter were 4% higher compared to the previous quarter. But as you know, we had a number of moving parts this time. We have, during the fourth quarter, received VAT recoveries of SEK 963 million for the years 2019 to 2023. This including SEK 125 million for the year 2021. Our 2 acquisitions added SEK 180 million to the fourth quarter cost. So what does this mean for 2026? Our full year expenses for 2025 were SEK 24.5 billion. However, our underlying expenses were somewhat higher in total SEK 25.1 billion. This is due to the one-off VAT recoveries of SEK 1.5 billion, the temporary high investments of SEK 800 million and fourth quarter costs related to Entercard and Stabelo of SEK 180 million. Going into 2026, we also need to include the current run rate for our 2 acquisitions in order to have the correct starting point. These add SEK 1.6 billion, which together with our underlying expenses of SEK 25.1 billion gives a new starting point of SEK 26.7 billion. We expect costs to grow by approximately 3% in 2026, meaning costs of around SEK 27.5 billion. This is net of efficiencies, headwinds as well as investments and based on current FX rates. Strict cost control and focus on efficiency is key. Asset quality is solid. Total impairments for the fourth quarter amounted to SEK 355 million. The macroeconomic outlook has continued to improve and led to a release of SEK 186 million. Rating and stage migrations led to credit impairments of SEK 433 million mainly due to downgrades of a few corporate customers. This is partly offset by the continued release of the post-model adjustment, which now stands at SEK 131 million. The quarter also included effects from Entercard that in some increased credit impairments by SEK 415 million, mainly due to the SEK 354 million day 1 accounting effect for Stage 1 exposures. The estimated overall impact from Entercard going forward on the credit impairment ratio is an increase of 1 to 2 basis points. I feel comfortable with our strict credit origination standards and the solid collaterals that secure our lending. Our CET1 capital ratio was 17.8%. REA increased in the quarter due to lending growth and the annual revision of operational risks, which led to an increase due to the uptake of the rolling 3-year average income. Furthermore, as previously communicated, the acquisition of Stabelo and Entercard led to reduction of the CET1 capital ratio of around 50 basis points. The Board proposed a total dividend of SEK 29.8 per share of which SEK 20.45 is ordinary dividend and SEK 9.35 a special dividend. This reduces the buffer above requirement to around 300 basis points. Our capital target remains unchanged with a buffer range of 100 to 300 basis points above the requirement and over time we're targeting the midpoint, 200 basis points. To conclude, we continue to focus on growth and efficiency. We delivered strong profitability while maintaining prudent underwriting standards, strong liquidity and capital positions. With that, back to you, Jens. Jens Henriksson: Let me now summarize. Swedbank has had a successful 2025. We delivered a strong result with a return on equity of 15.2%. The Board of Directors is therefore proposing to the Annual General Meeting, a total dividend of SEK 29.80 per share of which SEK 9.35 is a special dividend on the basis of the bank's strong capital position. Swedbank is well positioned for sustainable growth and profitability. We will strengthen our customer interactions, grow our volumes and continue to increase our efficiency. The future of our customers is our focus. And with that, I give the word back to you, Maria. Maria Caneman: And we will now begin the Q&A session. I'd like to start with a kind reminder to please limit yourselves to 2 questions per turn. Operator, please go ahead. Operator: We will now begin the question and answer session. [Operator Instructions] The first question comes from the line of Andreas Hakansson from SEB. Andreas Hakansson: So first question on your net interest income. We saw some, of course, negative headwind in the fourth quarter from falling interest rates and you say that that's going to spill over into Q1. But what we've been a bit disappointed about over the last year when interest rates have been coming down is all the big -- all the banks' inability to improve mortgage margins that are now continue to be at a very, very low level. I mean the profitability of the mortgage product is today quite unsatisfactory. So my first question is, how do you see that mortgage margins could be developing over this year? Jens Henriksson: Well, I think, thank you for that question. I think it's my time to answer that. And I would say that we do not forecast on that. But as you rightly said, it is a tough competition out there. We've seen that our market share was around 5% of new loans in our own channels in 2024. It was up to around 10% in 2025. And then we have ambitions to reach at least our back book market share, which is 18%. But the competition is tough. [Audio Gap] Hello, I think I've given abrupt answer, but the answer is that the competition is tough. Andreas Hakansson: Yes. That's fine. I mean you have, of course, discounts. That's how the Swedish mortgage market work. Are you currently working with the discounts in order to improve the margins in that way? Jens Henriksson: Well, it is a competitive market, and I'm not going to talk about exactly how we meet our customers. But I think our offering, the key point is that we come as a full service bank. That means that we have attractive prices, we are much faster and we're available. And those who seek total digital solutions, they can go to Stabelo. And we've seen that they have gained market share as well. Andreas Hakansson: Right. And then my second question, on capital. And Jon, you mentioned already that it's still a 200 bps midpoint that you're targeting over time. Can I just ask you, is the timing of moving towards 200 related to the final investigation that's going on in the U.S.? Jens Henriksson: Well, I think I'd answer that in a little bit overall perspective, and that is to say that we have the capital buffer range, which is between 100 and 300 basis points and as Jon said, in our 15/27 plan, we target the middle of it, i.e. 200 basis points. And then talking about the dividend, we have a dividend policy of 60% to 70% with an earnings per share of SEK 29 gives us an ordinary dividend of, what is it, SEK 20.45. And on top of this, the Board has proposed an extra dividend in SEK 9.35. That means that we have a total dividend of SEK 29.8. And with this proposal to the AGM, Swedbank is within the capital buffer range. Further capital release continues to be a judgment call depending on several uncertainties such as the long-running U.S. investigation. Timing of IRB approvals and the uncertain world we live in, and we have no intention of holding more capital than necessary. Operator: The next question comes from the line of Gulnara Saitkulova from Morgan Stanley. Gulnara Saitkulova: Just a follow-up on the prior question. You mentioned the competitive nature of the Swedish market. And given that, could you remind us how you are approaching the defense of your back book market share? Are you prepared to be more flexible on the repricing to retain the existing customers or margin protection is a primary focus? Jens Henriksson: Well, of course, as Jon and I usually say, it's always a balance between market share and profitability. We've said that we want to increase the market share and when we work with our customers, always have individual price setting. And I think the main problem for us has been that we have not been fast enough or not available enough. And I boosted about that in my introduction because that's something we're very proud of. With fewer people working in -- with this, we've managed to reach above 80% of the calls that answer within 3 minutes. And we have had 30% more calls with our customers. And last time I checked, I think we had a waiting time of 14 or 13 seconds, I don't remember. But the key point is, we want to be available, we want to be fast, and we want to grow. Gulnara Saitkulova: And the second question on the volumes in Sweden and the Baltics. How are you thinking about the loan growth into this year? And in particular, given the fiscal stimulus in Sweden and a more constructive outlook for consumer sentiment and confidence where do you expect the loan growth in Sweden to settle? Would mid-single-digit loan growth be a fair estimate for Sweden in 2026? And how the trends differ between households and corporate lending? Jens Henriksson: Well, let me take that as well. And let me take a sort of a broader perspective in the sense that -- as I said in my introduction, the global economy has been a little bit more resilient than expected. And you saw this slightly upward revision by the IMF, but that was then closed before the trade tensions flared up again, which, of course, increased headwinds. And the good thing about Swedbank is that we operate in a region with very healthy fundamentals, strong public finances, low government debt, real wage growth, innovative companies, profitable banks and low interest rates means that our home markets remain well prepared for the future, and I mentioned the growth figures. Overall, loan demand from both corporates and private customers is still somewhat muted. In the Baltic, demand is stronger. And in terms of trade policies impacting our region, we are, as always, very close to our customers, and we can see only limited effects on companies directly exposed to increased tariffs. And the key point is that we expect growth to come from strong public investments and strong consumption. We do not go out and forecast what loan growth is what we expect for this year. But looking back at 2025, Jon talked about, we increased our loan book with SEK 108 billion with -- excluding FX effects. Operator: We now have a question from the line of Martin Ekstedt from Handelsbanken. Martin Ekstedt: So first, congratulations on the closure of the Department of Justice investigation. So just quickly, the outstanding DFS, New York investigation, how does this differ in scope from the one undertaken by the Department of Justice? That's my first question. Jens Henriksson: Well, I don't want to get into the scope. But as I said, after -- we've closed now the U.S. Department of Justice without any further action. That is, of course, a relief. But we are still on investigation by the Department of Financial Services in New York. I still do not know the timetable. We -- I still don't know whether we will get any fines and if we do get the fines, I cannot estimate the size of those. And we've been as transparent as possible during this long-running process. And when something material happens, we'll continue to adhere to that principle. Martin Ekstedt: And then secondly, we have some long-end yield curves deepening behind us now, and we've seen some upward movements on your longer-term mortgage rates as a result. But as Andreas alluded to in his question earlier, it's not really translated into mortgage margin improvement so much yet. So what is your experience currently on customers electing longer term fixed rate mortgages instead of the 3-month floating ones? That would clearly help our margins. We can see limited movement in Statistics Sweden data on a systemic level, but what is your own experience from your customer base? Jon Lidefelt: We see the interest for floating rate mortgages is still high. So we see no major movements towards fixed rates rather the opposite. Operator: The next question comes from the line of Magnus Andersson from ABG. Magnus Andersson: First of all, on lending, we saw that your loan growth in the Baltics was 10% year-on-year in local currencies. If you can tell us what you think about the sustainability of the re-leveraging that seems to take place currently? And secondly, if you could just give us some outlook about what -- if anything has changed on the bank tax front there? And secondly, just on your cost target, if you can give us some color on what is embedded there in terms of headcount development and net IT investments, please? Jens Henriksson: Well, don't get me going about bank taxes because then I need to sort of give the whole landscape. I do that, and then, Jon, you can follow up here. First, as I've done now for many quarters, let me remind you, we -- banks are an important part of our societies. We channel our customers hard earned deposits to lending thus empowering people and businesses to create a sustainable future. And to do that, we need to be profitable. And a sustainable bank is a profitable bank. We are proud taxpayers that contribute to the financing of welfare and security in our home markets. What we do not like are sector-specific taxes, retroactive measures and an unpredictable regulatory environment. What we do like is equal treatment, a rule-based system and an investment climate that fosters growth, financial stability and sustainable transformation. With that said, let me do a quick tour across our 4 home markets. In Estonia, corporate taxes are increasing. In Lithuania, corporate taxes are also up. And on top of this, since 2020, there is a 5% extra tax on banks. In Latvia, we are into the second year of 3 years with an investor tax on NII. That is bad for the investment climate and thus, the Latvian economy. During 2025, our Latvian loan portfolio increased enough to give us a deduction of 1 quarter on the investor tax. In Sweden, the government has decided on a base deduction to the bank tax while delivering the same tax revenues. The tax rate is therefore raised from 6 to 7 basis points in 2026, and the government inquiry will investigate the future design of bank tax further. Another defect of tax on the banking system is that since the end of October last year, we know we have been obliged to place an interest-free deposit of SEK 6 billion with the Riksbank. Jon? Jon Lidefelt: Thank you. If I just add the numbers on the bank tax then, in Sweden, the risk tax due to the base deduction that Jens talked about was increased to 6 basis points. That had an impact of us of SEK 50 million, around SEK 50 million. Then you have the SEK 6 billion in the Riksbank's reserve requirement that we do not get an interest rate for. The cost for that until June and then for 2026, which is the period is SEK 71 million. And we are reporting that under bank tax, and we have taken the full cost upfront in this quarter. So the total SEK 71 million is accounted for in this quarter. If I then move back to your question on cost target FTE and IT. I mean our cost target of SEK 27.5 million is inclusive of the fact that we know that we need to continue to invest quite a lot in order to make sure that we are relevant for our customers also going forward. So that is included in that. Then we do not forecast on FTEs. We have a strict hiring policy. We know that we need to continue to work heavily on efficiencies. Otherwise, we will not be able to meet our long-term objective that we set out when we presented 15/27, namely to over time in a stable [ rate environment ] to increase profit over time. In order to do so, we need to improve efficiencies. And of course, if you extrapolate that in the long run, then it will be very restrictive on FTEs and rather downwards and upwards, but we don't forecast that in the short-term. Magnus Andersson: Two follow-ups. First of all, my question regarding taxes was really, if there is anything new on the horizon in the Baltics, but it doesn't sound like it? And secondly, if you could comment on volume growth in the Baltics and the re-leverage, that's ongoing sustainability there, what do you see? Jon Lidefelt: Sorry, I forgot that one. But no, there is nothing new. The Lithuanian bank tax is falling off this year or has been falling off. Remember, though, that there is a 5% extra corporate income tax that is permanent for banks in Lithuania. The Latvia, as Jens alluded to, we have no news or any -- on any changes. Estonia, there is no bank tax, and they also withdraw the increased corporate income tax. It's not a bank tax, but they changed there. So short answer, no. When it comes to the sustainability of the growth in the Baltics, keep in mind that the loan to GDP, especially in Latvia and Lithuania, is very low, around 20% in Lithuania, both for corporate and private. So there is room to have a good and high continued increase without creating balances in that sense. The worry from our side would then rather be on the quite high salary inflation. If that is not met over time by productivity improvements and that in the longer run risk leading to some imbalances. But otherwise, the lending growth is not. In Latvia, even so that, I mean if you go back to the financial crisis, it's been a continuous de-leveraging in the society. Estonia has leveled out a bit. So I think it is sustainable as long as other things in the economy is sort of sustainable as well and then not at least then that the wage growth is in line over time with productivity. Operator: We now have a question from the line of Sofie Peterzens from Goldman Sachs. Sofie Caroline Peterzens: This is Sofie from Goldman Sachs. So my first question would be on Entercard. You mentioned a few times that you plan to de-risk and cost of risk will only be 1 to 2 basis points higher. If you look at the 2025 numbers, cost of risk would have been kind of 6 basis points roughly. How should we think about the net interest income impact from the deal -- de-risking and also the fact that you're selling some of the back book of Entercard? And then the second question would be on the VAT refunds. You had SEK 1.5 billion of VAT refunds in 2025. How should we think about VAT refunds in '26? Jon Lidefelt: Thank you, Sofie. Yes, you're right. We've put up, and I guess your question around NII and Entercard is then referring to the fact that I said that we will -- from going forward, we will report the back book of consumer finance as held for sale. It means that in the longer run, we would want to sell it. The new inflow has been adjusted. It will take some time. It's not going to happen in the near future, but over time, that will go out. I also said that we will implement a strengthening of our organization in the -- as of March 1, and that we look at the Entercard strategy in conjunction with that. So when we present the Q1 report, we will come back with more details on both those matters, how they are linked together and how they support 15/27. But there's no changes in the short-term when it comes to the back book. When it comes to the VAT, we have then 2024 that we could get something back for. The amounts are gradually shrinking a bit. And as the interest rate has come down and going forward, we have included this in our ordinary business unless something unexpected is coming in. And from this year -- from last year when we started to get the VAT back, we have also adjusted sort of how much VAT that we account for in our business. So I don't expect the same type of amounts going forward as we have had presented for 2025, it's going to be on a different level. Sofie Caroline Peterzens: Okay. And just to be clear, after 2026, we shouldn't see any more VAT refunds? Jon Lidefelt: No major ones. As I said, we have 2024 that could be up for something. We haven't applied for anything there. But compared to the amounts that we have seen now historically, it's much, much smaller amounts. Then there is always sort of small adjustments in the tax paid since -- but that's not on these major levels that we've seen. So nothing major going forward is what I expect. Operator: The next question comes from the line of Nicolas McBeath from DNB Carnegie. Nicolas McBeath: So I had a question on the implications from the DoJ investigations. So now that it's settled or closed actually without any penalties, and we are approaching the end of this investigation. Can you comment and help us understand if you have any substantial excess resources in the bank working with these investigations or with AML that you think you can reduce? There seems to be some expectations among some investors and parts of the market that there is significant potential here. So it would be helpful if you could help us kind of clarify this. Jens Henriksson: Well, when we started this work, it costs a lot of money, but we've seen that, that costs have decreased substantially. I think the last time we sort of gave it out as a special part of our cost was like more than a year ago. And I mean, we do not have -- it's very small costs associated with this. Nicolas McBeath: So that's for the investigations. Could you comment on how many employees you have in the bank working with AML and what you think is kind of the long-term level that you should be as to be compliant and be well resourced from a AML perspective? Jens Henriksson: I would say we have around 17,000 people in the bank working fighting money laundering, because that's everybody in the bank. And I think that everybody's role to do that. Then we have something called economic crime prevention, which is a group within the bank. And they always continue to adjust whether they can use new technology. And we always search for efficiencies there. The key point is this is an integral part of the bank's work and it will keep on being that way. So we don't get into the same position we were a few years ago. Nicolas McBeath: All right. And then my second question, just a question on the cost guidance. For the 2026 cost guidance, do you have any implementation costs for Entercard included? And have costs related to the consumer finance back book being excluded. So you're basing that cost guidance on some costs falling off from that business being divested? Jon Lidefelt: No, we have not adjusted the Entercard cost going forward. We have assumed sort of some efficiency gains from Entercard just as we generally do for the bank as a whole in the SEK 27.5 billion. But then you're right that in the longer run, there might be other synergies that we have on a very high level, talked about before. But when we present both the adjustments of the organization and the strategy for Entercard going forward, we will allude more on those. Operator: We now have a question from the line of Jacob Kruse from Autonomous Research. Jacob Kruse: [Technical Difficulty] Operator: The connection with the questioner has been lost. We will proceed by taking the next question, which comes from the line of Riccardo Rovere from Mediobanca. Riccardo Rovere: Just one, it's not 100% clear to me whether you think your managerial buffer for common equity Tier 1 [ purposes ] in the foreseeable future is going to be 300 or maybe the middle of the range, 200 basis points and somehow related to that. I just wanted to have an idea if you have been active in SRT or you think you could be active or something that you're looking at in the foreseeable future to optimize your capital absorption? Jon Lidefelt: Thank you, Riccardo. Yes, as Jens said, we are now in our buffer range of 100 to 300. Then the long-term target of 200 still stands. And when we will get in there, as Jens said, it's a judgment call based on the various uncertainties. I think if you look into the future that SRTs will be a tool, we have not used it now, but we're definitely not ruling it out in the future. Riccardo Rovere: Okay. And just a very, very quick follow-up. But in the foreseeable future, given maybe geopolitical tensions, do you think it's more appropriate at least for the moment to stay at 300? Jens Henriksson: Well, I think Jon answered that direct and that is that further capital release continues to be a judgment call depending on the several uncertainties such as the long-running U.S. investigation, the timing of the IRB approvals and the uncertain world we live in. And as I've said, we have no intention of holding more capital than necessary. Operator: The next question comes from the line of Markus Sandgren from Kepler Cheuvreux. Markus Sandgren: I was just going to come back to the capital question. The 100 bps you got in add-on in P2R for IRB noncompliance, is the best guess of the net effect of that and reinflation still 50 bps lower requirement net-net? Jon Lidefelt: Thank you, Markus. If you go back, if I take some time back, then we said that when we are through the IRB approvals, we expected at least 50 basis points positive impact, which then mainly was related to the fact that we have this Pillar 2 add-on in Sweden, and the fact that, that is also related to mortgages, which is under the mortgage floor. Then when we presented reports last year when we had the SREP in Q3 last year, then we concluded that they had adjusted that due to the new capital adequacy rules for standardized. So we back then got to 20 bps release. So of the 50, we had gotten 20. So in that sense, that would be 30 basis points left of that. Operator: [Operator Instructions] We now have a question from the line of Jacob Kruse from Autonomous Research. Jacob Kruse: I hope you can hear me this time. I just wanted to ask, firstly, on your AI -- where your thinking is on AI. Do you see at this point near-term opportunities to reduce staff by the deployment of AI? Or is it still more of an exploration mode? And then my second question is just on commission income. How do you think about the -- I think in the quarter, you had about SEK 100 million of one-offs? And I think it was a relatively solid quarter across most product lines. How do you think about the outlook here? Is this in line that can continue to grow? Or do you need to see a meaningful pickup in the domestic economies? Jens Henriksson: Well, first, a few words on AI and then Jon will follow up. And we've used AI for a long time. We used that in anomaly detection and we're using it more now. And one cool thing that me and the full Board was doing a few months ago was listening in on calls and you see call summarization by AI. This is a very cool feature. And that, of course, is an instrument that our customer representatives can use to be more available because they don't have to spend that much time on writing summaries. They can be there for our customers. And that's one of the reasons we're seeing that our availability has increased so much, and we have so many more calls with our customers. And we see continued use of AI within the bank. That said, we steered the bank on cost and not on FTEs. And we want -- which we're very clear for this, we want to do more business and we want to meet more customers. So that is my point on that. Jon? Jon Lidefelt: And if I then go into the NCI, yes, you're right, we had a one-off of roughly SEK 100 million part from the -- on this, which was then related to retail product that we decided to close several years ago, but that has now been running off. If you look at NCI, then -- and remember what I've said before is that we are the biggest when it comes to bank [indiscernible] and payment processing in Sweden. [ Bank Europe ] increased the commission expense for our customers by 30% in the beginning of this year. This is due to the big investments needed to transform the Swedish payment system. That is more visible. It's the same for everyone, but it's more visible for us since we are the biggest. What they also did in the fourth quarter, they added a one-off commission cost, which in our case, was around SEK 35 million that, of course, is weighing on this result. And I think this will be there as long as this is in the investment phase that the cost -- commission costs will be higher on that row and hence, weigh on the net. Card commissions are seasonally a bit lower in the quarter compared to the third quarter where you have the summer months and with people traveling and so forth. But then you also have, over time, a big movement between rows here because we are working more with concepts, both in the Baltics and Sweden, which means that some income has moved from the card line to service concepts. Over time, this is something that we believe is good both for our customers and for us. Asset Management is long-term growing. What you think you need to remember here is that we have around 40% of our fund capital denominated in U.S. dollars. And of course, the strengthening of the Swedish krona is, to some extent, and hence, counterbalancing the strong stock markets in U.S. But this is definitely over time, a good and growing income for us. And if you look at 15/27, this is an important area, and Jens also talked about now celebrating 2 years with the Premium and Private Banking business area, which is also a testament to that this is an area where we see long-term growth, and it is important and it's in our DNA. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Maria Caneman, for any closing remarks. Jens Henriksson: Well, I'll steal the word then I say thank you for calling in. And I think as Jon and I have talked about today is that Swedbank is well positioned for sustainable growth and profitability by strengthening our customer tractions, grow our volumes and continue to increase efficiency and the future of our customers, our focus. Looking forward, meeting you either on the road, on teams or next time in April. Until then, take care, and thank you for calling in.
Operator: Welcome to the Indutrade Q4 presentation for 2025. [Operator Instructions] Now I will hand the conference over to CEO, Bo Annvik; and CFO, Patrik Johnson. Please go ahead. Bo Annvik: Welcome, and good morning on our behalf as well. Let's start with a summary of the year 2025. It was a year with market uncertainty and continued dampened demand, although conditions improved throughout the year. We improved operationally and financially gradually during the year, and we also further strengthened our long-term strategic capability as our new segment structure now is fully established. In terms of financial numbers, 2% total growth in order intake, organically also plus 2%. Net sales decreased by 1% in total, of which minus 2% organically, driven mainly by backlog reductions during 2023 and 2024. The EBITA margin of 13.8%. Excluding extraordinary one-offs in the year, the EBITA margin came in at 14.1%. The cash flow was continued on a high level and the financial position of the group is very strong. In terms of acquisitions, we acquired 13 well-positioned and profitable companies during the year with a total annual turnover of SEK 1.3 billion. The Board proposes a dividend of SEK 3.1 per share. Looking at the Q4 highlights, organic order growth of plus 3% with positive development in many companies and all larger customer segments. Three out of 5 business areas grew organically and the remaining 2 were stable from last year. More than half of the companies had organic order growth. The strongest demand from customer was within Energy, Water & Wastewater and Infrastructure and Construction. Net sales decreased by 1% in total. Organically, it was unchanged. The reported EBITA margin came in at 13.3% compared to 14.6% the same period last year. However, underlying EBITA margin was strong at 14.9%, excluding the extraordinary one-offs in the quarter. And this we will comment more on later in the presentation. Underlying EBITA margin last year was 14.3%. Cash flow from operating activities amounted to SEK 1.6 billion, in line with the high level last year, and there were continued inventory reductions from our companies. The acquisition pace was good in Q4 with 4 announced acquisitions, and the pipeline also remains good, both short and long term. Moving into order intake and sales trends. Demand continued to improve and was stronger than last year with positive development in many companies, customer segments and geographies. Development was generally positive in all larger customer segments, and the strongest performance was seen in the Energy sector, Water & Wastewater and for companies with customers within Infrastructure and Construction. Order intake improved in the majority of the companies and was up 3% organically. Order intake was in line with sales, which is good as book-to-bill is seasonally weaker during the second half of the year. As you can see on the slide, currency has a large impact of minus 4%, which together with a minus 1% from divestments impacts total growth on orders and sales materially. Adjusted for currency and divestments, the underlying situation is clearly better with plus 7% growth in orders and plus 4% in sales. Organic sales development was strongest in the Industrial & Engineering business area and also Infrastructure & Construction grew organically, while it was weakest in Technology & System Solutions. Looking more specifically at the sales per geographical market. Sales to Sweden was flat from last year and down in Denmark due to the high comparables from last year when we still had some deliveries to Novo Nordisk from the large order we received 2 years ago. Finland was stable from last year and Norway stronger. Development in Norway is mainly connected to flow technology products for water and wastewater, aquaculture and marine applications as well as other products for infrastructure customers. For the rest of Europe, sales growth was strong in Benelux, mainly due to good development within valves for power generation and also single-use products for pharma production. U.K., Ireland and Germany was down as a result of the generally weaker business climate in those areas. Sales growth in Switzerland and Austria was strong with good developments for companies with customers within Infrastructure & Construction and MedTech & Pharmaceuticals. Sales development in North America and Asia is normally slightly volatile but was down compared to last year and, among other things, related to companies within business area Technology & System Solutions having a weaker demand on the back of the tariff situation. Total EBITA decreased 10% from the same period last year to SEK 1.1 billion, corresponding to an EBITA margin of 13.3%. However, this quarter was strongly affected by extraordinary one-offs, primarily connected to 2 companies in the U.K. within business area Technology & System Solutions. Patrik will elaborate a bit more on this later in the presentation, but I want to highlight that they are non-recurring and extraordinary and you shouldn't expect these type of items from Indutrade. Adjusted for the one-offs, the underlying EBITA margin was strong at 14.9% compared to the underlying EBITA margin of 14.3% last year. The gross margin was continued at a high level of 35.4% and even stronger than last year if you exclude these 2 U.K. companies I talked about. Organic expenses is under control. As mentioned earlier, organic sales growth was strongest in the business area Industrial & Engineering with positive development in many companies, for instance, infrastructure machinery and railway rolling stock. Infrastructure & Construction also had a slightly positive development, however, from low levels as the demand has been dampened for many quarters. We saw, for instance, strong development in the Water Distribution segment. In Life Science, there was a strong development in several areas, for example, single-use companies and broadly in the MedTech segment, but was offset by references connected to sales to Novo Nordisk last year, as I mentioned earlier. Also, Process, Energy & Water had tough references in many companies. And the main reason for negative development in business area Technology & System Solutions relates to project revenue recognition adjustments linked to the U.K. situation I spoke about earlier. Without those adjustments, the organic development was minus 2%, partly connected to the lower sales to the U.S. Moving into EBITA margin development per business area. As mentioned, the total gross margin was strong, which is driven by multiple factors like mix and currency, but it's also a sign of quality in our product offerings and strong pricing power. Industrial & Engineering improved EBITA margin as a result of the strength in gross margin, but also leverage on the organic sales growth. Infrastructure & Construction was close to last year's level, but was negatively affected by a lower gross margin in a few companies. Life Science also improved EBITA margin despite strong sales references from last year, mainly due to positive product mix with good sales development from some high-margin companies. Process, Energy & Water and Technology & Systems Solutions had a weaker EBITA margin compared to last year as a result of the organic sales development and slightly higher expense levels. The one-offs in Technology & Systems Solutions I mentioned earlier is recognized as group items outside the business area, so no impact on the EBITA margin from that in the BA. In 2025, we welcomed 13 profitable and well-positioned companies to the group with a total annual turnover of SEK 1.3 billion. The acquisition pace was lower during the first half of the year, but increased significantly during the second half with 10 acquisitions completed in the second half. In the fourth quarter, we announced 4 acquisitions where the acquisition of ATM Group marked our first acquisition in Spain. ATM is a technical trading company specialized in single-use components for Life Science applications. We have many similar companies in the single-use area in other geographies in Europe. So this acquisition is a good example of our ability to expand into new markets in a controlled yet opportunistic way. We have gradually strengthened our acquisition resources and our business areas work independently with different projects. This together with business segment leaders being more proactive in the acquisition work and internal pipeline generation is a strong platform to use in gradually increasing our acquisition pace going forward. The pipeline is good, both short and long term, and I look forward to announce the first acquisition in 2026 very soon. Looking at the longer trend, we are stepwise increasing number of acquisitions, although number of acquisitions per year can be a bit volatile. Looking at the bridge effect from acquisitions over the last 12 months, we have added over SEK 190 million to the group's EBITA in 2025. Furthermore, we can also see that the acquisitions are margin accretive with an accumulated EBITA margin of 16% for the quarter and 16.4% rolling 12 months. Good to note that this includes transaction costs, so the underlying margin is even higher. By that, I leave the word over to Patrik to comment more on the financial situation. Patrik Johnson: Thanks, Bo. So let's dive a little bit deeper into the data. Total growth for orders and sales in both the quarter and for the full year was plus 2% and minus 1%, respectively. Positively, book-to-bill is at 1 in quarter 4 and above 1 for the full year. And as mentioned earlier, there is a seasonality in the book-to-bill, where the first half of the year is normally stronger than the second. In quarter 4, the gross margin was at 35.4% versus 35.7% last year, but impacted by the one-offs in the quarter. Excluding the one-offs, it was higher than last year. And for the full year, the gross margin remains ahead of last year, even including the one-offs actually. Expenses, not in the table, but they are, as said, under control and increased organically only marginally with around 0.5 percentage point, excluding one-offs. EBITA decreased with 10% in the quarter and 5% for the full year as a result of the one-offs in the quarter. And talking about the one-offs then. First, we had the non-operational one-offs connected to earnout and goodwill write-downs as we have from time to time, and then the net effect of those was small, minus SEK 3 million. But then in addition, we had an extraordinary one-off items of, in total, SEK 125 million from 2 U.K.-based companies in the business area Technology & System Solutions where we identified the need to reassess projects in terms of cost estimates and also degree of completion, particularly related actually to a few large projects with long lead times that have both new complex technology and customer application areas. Excluding these one-offs in the quarter, the underlying EBITA margin improved to 14.9% versus 14.3% last year. Moving further down into the P&L. Finance net decreased by 5% in the quarter and 14% year-to-date because of both lower interest rates and lower debt level. Tax costs decreased 10% in the quarter and 1% year-to-date. Earnings per share was also impacted by the one-offs in the quarter amounting to SEK 1.72 in the quarter and SEK 7.03 for the full year. Return on capital employed declined slightly to 18%. Also that's mainly due to the one-offs in the quarter. Operational cash flow was unchanged from the very high levels last year, and I will elaborate some more on that on the coming slides. Net debt-to-EBITDA end of the quarter -- end of the year is at 1.4x, a low level, same as last year. So let's move on to the cash flow. And that is, as I said, in line with the record high levels of last year, amounting to SEK 1.6 billion in the quarter. Improvements versus last year relates to the strong underlying results in combination with continued good working capital reductions. I think it's good to note that the one-offs in the quarter had no impact on the cash flow. It's a bit of sort of proof that they are truly one-off costs. The organic inventory levels continued to decline sequentially and in relation to sales, and the ratio is now at a very good level, almost historically low levels. As we mentioned before, our companies are relatively capital light, and there is a continuous strong underlying cash flow reflected in a good cash conversion, as you can see also from the slide. And it continues to trend on a rolling 4-quarter basis on above 130%, which is the ninth -- actually ninth consecutive quarter with a cash conversion on that high level. The working capital efficiency also continued to improve. Moving on to looking at the earnings per share development over time. And for the quarter, it decreased 14% to SEK 1.72 mainly due to the one-offs we have spoken about. For the full year, it amounts to SEK 7.03, which is a decrease of 7% versus last year. And we are obviously not satisfied with the EPS development. Besides the one-offs, it is, of course, related to a weaker demand and result development in the last 2 years. Full focus is now to come back on good growth levels, and momentum, I think, is good, growth levels in line with our targets, and also with that then deliver earnings per share growth. And lastly, commenting on the financial position. The interest-bearing net debt decreased both sequentially and versus last year from SEK 8.2 billion to SEK 7.6 billion, driven by the strong operational cash flow. Our net debt ratios are stable and low from a longer historical perspective. Net debt/equity was 44% versus 49% last year. Net debt/EBITDA was, as I said, then 1.4, in line with last year. And if you exclude earn-outs, they were at 1.2 compared to 1.3 last year. And if you look at the financial net debt, which is the part of the debt that relates to borrowing that needs to be refinanced, that is historically low at 0.9. And in the quarter, we issued a new 5-year bond loan of in total SEK 1.3 billion at a margin of 1.13% against 3 months STIBOR, which I think shows our strong position in the credit markets. So in conclusion, our financial position is very strong, creating a good room and opportunity for value-accretive acquisitions and also organic growth initiatives going forward. So thanks from my side, and I leave over back to you, Bo. Bo Annvik: Good. And we summarize the key takeaways. Continued organic order growth of plus 3% and stable organic sales, growth of plus 7% and plus 4%, respectively, if you adjust for currency movements and divestments. We had a strong gross margin in the quarter and the expenses are under control, which resulted in an improved underlying EBITA margin of 14.9%. I also would like to comment -- I also would like to make one additional comment on the projects with the one-off effect we spoke about earlier. The projects are in the absolute final phases of completion. Based on the current information and analysis of the projects, all costs have now been accounted for in a prudent way. The 2 companies are independent from each other, but they have shared a couple of senior managers. There are also indications that they should have realized these deviations and accounted for them earlier. These persons have left the companies during last year. Again, this is an extraordinary situation, which would not be expected in the Indutrade group. Going forward, the market uncertainty remains. However, a slightly larger order book, higher acquisition pace and lower references provide some comfort about the earnings trend. 13 companies were acquired in 2025, and all business areas operate independently with acquisition projects and with a strong focus on internal pipeline generation. This provides good conditions for a gradually increasing acquisition pace. We are now fully focused on delivering annual growth of at least 10% per year over a business cycle and a stable EBITA margin of at least 14%. We have made deliberate strategic investments in our platform. Now it's time to harvest. By that, we close the presentation and open up for potential questions. Operator: [Operator Instructions] The next question comes from Zino Engdalen Ricciuti from Handelsbanken. Zino Engdalen Ricciuti: Just quickly on the projects. The comments you made now, Bo, it sounds like it was maybe a bit related to these individuals. So my question is how you ensure that anything similar does not happen in the rest of the group, so to say? Bo Annvik: Yes. I feel certain that this is non-reoccurring. I've been in this role now for almost 9 years and we have had nothing at all similar to this and, as far as I know, Indutrade has never reported anything like this before my time either. We obviously have internal control functions. We have Boards in all companies. We have our external auditors. We have business control functions on business area level, on group level. We have an internal bank. We have a lot of professional sort of control both processes and standards, which eventually will catch up with wrongdoings in different ways, which is also did this time. But if you have persons who deliberately hide things and they are in responsible positions and they cooperate, it can take some time, which it did. Zino Engdalen Ricciuti: Very clear. And just lastly, is it then, I would say, the very extraordinary circumstance that you put it in the group items and not the business area? Patrik Johnson: Yes, exactly, they are reported -- the result effect of this is reported then on group items, and that's correct. But it impacts the gross margins since they are -- it's related to these projects. Zino Engdalen Ricciuti: Understood. And a question on the Industrial & Engineering, which saw a strong margin. I think you commented that it was from lower levels as well given the business environment they occurred [indiscernible], that they have the ability to deliver on this level going forward as well. Bo Annvik: Generally, I'm quite optimistic that all business areas have opportunities to improve organically 2026 versus 2025. So even if there is not a dramatic business cycle improvement around the corner, there is slightly -- I would say, slightly better environment and more optimistic perspectives when we talk to our companies. So I expect a gradual improvement during the year. And we have now seen 2 quarters in a row with organic order intake improvements, so I think we are trending step-by-step in the right direction, and hopefully this will continue in 2026. Zino Engdalen Ricciuti: And just a last question for me that's M&A related. You previously made some comments about possibly looking into some larger acquisitions and when you maybe also more prioritize the organic growth possibilities of what you acquire. Relating to the average size of the companies acquired in '25, do you make any particular reflection about it? Bo Annvik: I would say that they were generally smaller on average than we usually acquire, and it would perhaps be surprising if that would also happen in 2026. So I think it was not a common average size for -- in a full year perspective on Indutrade. Our primary focus is to buy companies around, I would say, EUR 15 million in size, and that will be the intention also going forward. But sometimes, we find companies which are a bit larger. And if we feel that they still are managed by good entrepreneurs who are engaged in their business in the same way as in our general size scope of companies, we are also interested in them. If we are finding really much larger companies where the owner is not really too engaged and it's more like an externally recruited management team without large financial ownership in the companies, we are, I would say, less interested because that's not the typical type of individuals we would like to have engaged in the companies we buy. So that's a bit of a divide in terms of our interest. But -- so you will probably see mostly, hopefully, the EUR 15 million type of size, but sometimes a bit larger, and then it should be where management has been very engaged in the company also on the ownership side. Operator: The next question comes from Carl Ragnerstam from Nordea. Carl Ragnerstam: It's Carl from Nordea. A couple of questions from my side. Looking into the organic pace, the sales pace, you grew orders 3% above sales organically. On the other hand, Q4 is a bit of a small order quarter, book-to-bill is still at 1. So could you help me a bit understand the backlog dynamics and how comfortable you are in the organic sales trending up here, I guess, from Q1 and onwards? Bo Annvik: Quite confident that, that will happen. So there is a better order backlog, as you say yourself, and we see an organic momentum which is positive and has been positive for the autumn and fall here now. And I think the -- also governments in a lot of Western European countries are step-by-step increasing their infrastructure investments, defense investments. So it's not going to be a super significant step-up in Q1, but this trend -- I assume this trend will continue and at some point order intake will also be realized in sales. And yes, so I'm having an optimistic outlook for 2026 in that perspective. Carl Ragnerstam: That is very clear. And on the gross margin, looking at the underlying gross margin, I assume that it's around 36.5%. You mentioned divestitures, you mentioned acquisitions, you mentioned mix effect. So could you help me unpack a bit on an adjusted basis these levers? And I would also assume that Life Science was an important gross margin driver. You mentioned single-use coming back strongly. So how do you look at the sustainability of this quite good gross margin as you have on an adjusted basis in the quarter? Bo Annvik: Do you want to start, Patrik, from your side, and then I can finalize with some comments... Patrik Johnson: Yes. Yes. I mean we don't have a sort of a full detailed bridge on that, but sort of the gross margin improvement is sort of driven by multiple factors, and you mentioned a few of them. And we are –- I mean, our companies -- as we've talked about for a long time, our companies are good with pricing in general. So I think that's sort of the starting point. But then you have on top of that, I think you have favorable mix effects. And I think Life Science is a good example with the single-use area growing with good margins, and also many of our MedTech companies have good margins. So that's also increasing the underlying margin. And then actually currency then, because we have a lot of trading companies in Sweden benefiting from the stronger SEK. So those are the drivers. I can't give you sort of a breakup of that. Is it sustainable? I think it is. And also, you mentioned also acquisitions and divestments, those impacting. So I think it is sustainable. But of course, it will be difficult sort of to push it dramatically more up, I would say. Bo Annvik: Yes, I agree with Patrik. And I think that's been one of the key trademarks of Indutrade for a very, very long time that we have had stable gross margins. And I've spoken about this in a lot of other calls also that the DNA of an Indutrade Managing Director is really to protect gross margin, and I think they do that in a really good way. The risk factor at some point is maybe the currency. Otherwise, I think we are handling things really well. But I think we will handle that also well. But if that swings against us in this perspective with several percentage points, that will be maybe demanding in some situations. But no, I think this will continue at a good and stable level. Patrik Johnson: And if I sort of -- only one additional input. I think the currency is, of course, one if you talk about risks in the gross margin. Maybe also there is still a dampened -- we don't have a super strong business cycle and it's a little sort of dampened market still and fewer larger deals projects in the market than you would see in a higher growth environment. And when you have more daily business rather than bigger deals projects, the margins are slightly better. So good business cycle with more projects is maybe slightly dampening gross margins. Carl Ragnerstam: Very clear. Coming back to SG&A, you touched upon it a bit. It seems to have flattened out quite nicely. So if organic growth comes back, as you alluded to before here, how much could you hold back on cost? Is it more low performers you're working with perhaps fully offsetting the needs of hiring in some other growing companies? Bo Annvik: Yes. We have worked with SG&A and expenses quite actively, as you know, over the last 2 years, and we have had our ups and downs. And the culture within the group is the glass is half full and they are opportunity driven. I think we collectively have learned to watch certain parameters, and, not least, headcount I think is even higher on the agenda than it perhaps was before. So I think there's going to be a resistance in the system somehow to add headcount, which is going to be more obvious now than perhaps it was before. So some learnings from what we have experienced and some benefits from that going forward. So there, we will keep track on cost versus sales ratios and things like that in a good way. Carl Ragnerstam: Very good. And the final very quick one, sorry for that. Organic growth -- sales growth minus 1% in Life Science. What is it adjusted for the Novo Nordisk comps roughly? Bo Annvik: In the quarter, I think, roughly 3% almost, I think, or something. Patrik Johnson: Yes, almost. I think you have to correct it with around 3%, and so plus 2%. Operator: The next question comes from Opeyemi Otaniyi from GS. Opeyemi Otaniyi: Do you mind just talking through sort of outlook for margins from here? Performance in Q4 was quite strong. And so do you mind just talking through what's driving that? But also are you done with the cost, are you done here today, as we've talked through for most of last year? Bo Annvik: I must apologize, but I didn't exactly hear your question. Which business area did you refer to? Opeyemi Otaniyi: No, sorry, it was just on margin for group. So Q4 was quite strong. And so should we extrapolate that as we look forward into 2026? And so were there any key things driving margin? Was it sort of just the strong gross margin? Or was it the M&A accretion as well? Bo Annvik: Yes. I think you have picked it up yourself in a good way in that sense. It was a good gross margin and M&A is also accretive and costs are under control. So I would say that all those factors have implications on that, obviously. Patrik Johnson: And if you -- I mean, if you look ahead into quarter 1, I think in general you have a seasonality during the year, which is good to understand that quarter 1 is normally slightly weaker. And then margin normally comes back a bit in quarter 2 and is the strongest in quarter 3. And then quarter 4 is maybe sort of an average in line with quarter 2. So that's the normal seasonality. Then you could, of course, have things affecting that. But you start there, I think, then. So normally slightly lower in quarter 1 than quarter 4. Then, of course, it depends on -- organic development is sort of one key driver. And here, we have a slightly higher backlog supporting us going into the year, but still no sort of super strong cycle yet. So -- but again, slightly higher backlog. Opeyemi Otaniyi: Great. Understood. And maybe just switching gears and talking about M&A. Could you give any updates on the phasing of deal activity through the year? So is it kind of coming down from the pace you saw in Q3 and Q4? And could you also just give an update on divestment activity? I know it's a few minor transactions, maybe largely related to construction, but any updates on divestments would be appreciated. Bo Annvik: Yes. If you look at Q3, Q4, we are basically adding around SEK 0.5 billion or EUR 50 million on sales values in those quarters and approximately 5 acquisitions per quarter there. And I definitely think that pace will continue in Q1 and onwards in 2026, and medium term will even increase versus this. But short term, that this pace will continue into the next coming quarters. Divestments, should not really expect any divestments. It can happen. It probably will happen, but it's not very common. And I think we have done those we wanted to do relating to this business cycle situation and so on. So not a very active divestment sort of agenda going forward. Opeyemi Otaniyi: Great. And maybe just lastly, Technology & Systems Solutions organic growth there minus 6%. Do you mind just talking to the drivers there? Was that related to the situation in those 2 businesses you've talked about? Or were there other trends driving that? Bo Annvik: Yes. So if you exclude that U.K. situation, they were at minus 2%. And they -- that's our most international business area. So they have sales into North America and, not least, the U.S., and also to China, Asia. And there has been some weaker sales short term into the U.S. linked to the tariff situation. There has also been some impact in China. They have had more of a buy local policy since a couple of years, as you probably know. But I think most of our companies have realigned, yes, replaced some of that in -- and found other geographies and opportunities. So I think step-by-step, also TSS will improve in terms of both order intake and sales, and that will happen during 2026. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Bo Annvik: Well, then we thank you for participating and asking good questions and wish you a good continued day.
Operator: Welcome to the Xerox Holdings Corporation's Fourth Quarter 2025 Earnings Conference Release. After the presentation, there will be a question and answer session. To ask a question at that time, please press 11 at any time during this call. You can withdraw your question by pressing 11 again. At this time, I would like to turn the meeting over to Greg Stein, Senior Vice President and Investor Relations. Please go ahead, sir. Good morning, everyone. I'm Greg Stein, Senior Vice President and Head of Investor Relations at Xerox Holdings Corporation. Greg Stein: Welcome to the Xerox Holdings Corporation Fourth Quarter 2025 Earnings Release Conference Call. Hosted by Steven John Bandrowczak, Chief Executive Officer. He is joined by Chuck Butler, Chief Financial Officer. At the request of Xerox Holdings Corporation, today's conference call is being recorded. Other recording and or rebroadcasting of this call are prohibited without the express permission of Xerox. During this call, Xerox executives will refer to slides that are available on the web at www.xerox.com/investor. And we'll make comments that contain forward-looking statements, which by their nature address matters that are in the future and are uncertain. Actual future financial results may be materially different than those expressed herein. At this time, I would like to turn the meeting over to Mr. Bandrowczak. Good morning, and thank you for joining our Q4 2025 earnings conference call. On the Q3 call, I highlighted the macroeconomic challenges we are facing and the continued disruption associated with the tariff and government funding-related uncertainty. Macro headwinds continue to persist, but we are cautiously optimistic that the business trends are starting to improve. Revenue in the quarter of $2.03 billion increased roughly 26% in actual currency and 24% in constant currency. Reflecting the inorganic benefits of the Lexmont and IT Savvy Pro forma for these acquisitions, revenue declined 9%. Adjusted operating income margin of 5% was lower year over year by 140 basis points. Free cash flow was $184 million, a decrease of $150 million versus the prior year. And adjusted loss per share of 10¢ decreased by 46¢ year over year. For the year, revenue of $7.02 billion increased roughly 13% in actual currency, and 12% in constant currency. Excluding the benefits of the acquisitions, revenue declined approximately 8%. Adjusted loss per share of 60¢ was $1.57 lower year over year. We generated $133 million of free cash flow, which was $334 million lower year over year. An adjusted operating income margin of 3.5% was lower year over year by 140 basis points. While macro headwinds continued to weigh on transactional print equipment sales, activity picked up following the end of the government shutdown. In addition, page volume declines moderated and supply usage stabilized. Encouragingly, we enter 2026 with a pipeline higher than this time last year. With cancellations and renewal rates also improved in 2025. This gives us confidence in improving underlying trends in 2026. What does give us pause is the recent spike in DRAM prices, as they began to impact costs across storage, servers, endpoints, and networking equipment. Having the greatest effect on our IT solutions business. Considering this, we are taking steps to mitigate including moving to consumption models such as HPE GreenLake, Dell Apex devices and service models, providing extended maintenance services for clients that decide to retain their old hardware. The impact is expected to be modest in our print business in the first half of the year, but based on current trends, we are expecting a larger impact from the price and availability perspective as we move into the back half of the year. Still, we remain confident in our long-term prospects of our IT solutions business. While revenue was impacted in Q4 due to delays in enterprise deals directly tied to the recent spike in memory prices, the breadth of our business continues to grow. Supported by a very strong quarter in the Velocity channel. Bookings, billings, and backlog all increased and pro forma profits improved meaningfully once again. Aided by the synergies generated throughout the year. IT Solutions is strategically positioned to capture secular growth through differentiated platforms, including our network operating center. Through our NOC, we deliver scalable AI-enabled automation and operational intelligence underpinning our managed infrastructure services through a proprietary AIOps platform. As we look out towards 2026, our conviction for more meaningful margin expansion is high, underpinned by our guidance of more than $200 million improved in adjusted operating income. Many of the headwinds we experienced in 2025, such as tariffs, increased product costs, and the wind-down of the sale of several production lines, begin to moderate as we move through the year. We expect tailwinds in 2026 to steadily grow from the launch of new product offerings, a fully integrated IT solutions organization, and a soon-to-be unified Xerox Lexmark sales organization. We remain focused on the balanced execution of our three strategic priorities. Execute reinvention, realize acquisition benefits, and balance sheet strength. I will provide an update on each. Starting with the execution of reinvention. With each quarter, the progress following the acquisition of Lexmont, I have become increasingly confident in the complementary nature of our businesses. Much of the original nervousness from following the transaction close had dissipated, and most of our clients and partners are excited about what our joint offerings mean for them. We continue to develop our route to market and we'll have more to share next quarter as well as an update on our inside sales strategy. Which we will continue to be meaningfully expanding during the year. Last quarter, we discussed at length our enhanced global business services organization. Which was launched in 2024 to create a more streamlined and comprehensive set of centralized operating processes leading to lower operating costs and improved quality. In addition to the physical changes we noted, such as greater utilization of Lexmont captive offshore and nearshore global capability centers, we are also leveraging our AI capabilities to further drive efficiencies into this organization. To that point, Xerox recently established an AI center of excellence. In 2025, we launched several internal designed to streamline processes, improve customer experience, and strengthen financial performance. These platforms are delivering measurable impact today. We introduced AI-powered service agents across XBS US and Latin America. These agents handle thousands of real customer interactions via chat, and voice leveraging prior service cases, support, engineering content, and large language models to deliver immediate This has resulted in higher success rate reduced waiting times, and improved customer experience all at lower cost per interaction. financial improvements. Beyond service, AI is driving significant Using Microsoft Copilot Studio and advanced data science reduced outstanding accounts receivable, automated over $10 million in credit hold actions, and surfaced actionable insights from 1.4 million collector comments. These capabilities empower faster, data-driven decisions that improve cash flow and operational resilience. Finally, we begin to utilize AI-driven analytics to protect our supplies business. Leveraging problem holistic modeling and machine learning we identified hundreds and thousands of cartridges with potential counterfeit and third-party activity, strengthening supply chain integrity, and customer trust. Moving to acquisition benefits. November 20 marked the one-year point of our acquisition of IT Savvy, and we have been thrilled with the progress to date. Cross-sell performance remains strong, and we are now going to market under a unified brand Xerox IT Solutions. The alignment and scale provide us opportunities to deliver unique value to our 200,000 customers. Such as with the recent launch of Xerox Tri Shield 360 cyber solution. A holistic cybersecurity offering targeted specifically for SMB. The solution is built upon Palo Alto Networks advanced detection technology, continuous monitoring, and response platform. With cyber response provided by Lumify and its security operations center and cyber insurance coverage provided by the Hartford brokered by Aon. This is enterprise-grade security designed for SMBs offering scalable protection without the complexity or the cost of traditional solutions. While operational efficiencies are a main pillar of the rationale for the Lexmark transaction, we are beginning to bear fruit as one company in our go-to-market operations. In the fall, we rolled out Lexmont produced a three devices in Eastern Europe. The channel reaction so far has been very positive as this product has better features and design innovation focused on serviceability, and reliability. We expect these devices to reduce service costs, extend activities in post-sales, and lead to better uptake with partners over time. We are planning a larger global rollout in 2026 as our in-house manufacturing capacity ramps. During the quarter, Xerox and Lexmark secured a global first joint win with Morrisons. One of The UK's leading grocery retailers. The agreement expands a long-standing relationship with Morrison's and positions Xerox as a strategic partner across both operational print infrastructure and customer marketing communications. The solutions have Xerox providing a fully refreshed central print room, leveraging cloud-based print management, web-to-print automation, and Lexmark MPS for their entire state 500 supermarkets 15 logistics sites, the head office, and with added Xerox on-site operations. Morrisons will also adopt our GoInspire platform including direct mail, loyalty communications, store leaflets, and campaign automation through GoInspire's digital marketing platform Go 360, enabling more targeted data-driven customer engagement. Earlier this month, I joined our team at the National Retail Federation show in New York City where, for the first time together, we demonstrated legacy Xerox strength in IT solutions production print, and digital workplace with Lexmark's expertise in in-store operation with devices intentionally engineered for retail. Signage solution, and Vision AI. We were excited by the reception and believe our enhanced value proposition, especially with the retail vertical, will lead to greater participation in RFPs and further wins and expansion into existing accounts. We also just announced the partnership agreement with RJ Young, one of the largest office equipment and technology dealers in The United States. This agreement, which stems from the existing Lexmark partnership, extends Xerox portfolio with RJ Young's proven service capabilities to their customer base. We continue to look for opportunities as one company to commit to and invest in our partners. Finally, balance sheet strength. For those focused on our current credit ratings, we remain extremely confident in our ability to drive increased profitability and delever. Since the Lexmont transaction closed, we have generated meaningful positive free cash flow and took net debt down by $366 million. For the near and medium term, we plan to use all excess free cash flow to repay debt in connection yesterday's announcement of the warrant distribution, which Chuck will speak to in more detail, further supports our goal to enable balance sheet flexibility. Cost rationalization remains a top priority, and we are reaffirming our cumulative run rate gross cost synergy targets of at least $300 million from the Lexmont acquisition and the $1 billion plus of profit improvement as part of our reinvention program. Inclusive of Lexmark cost synergies. Delivery against this target is centrally managed and continuously updated through our enterprise transformation office or ETO a joint team comprised of legacy Xerox and Lexmark leaders. The ETL is responsible for enabling our reinvention priorities overseeing integration execution, and building adorable transformation capabilities across the enterprise through robust analytics and disciplined governance. This includes active oversight of several core integration work streams, dozens of sub work streams, and hundreds of enterprise-wide initiatives. Each initiative is formally documented tracked through defined stage gates, and subject to required milestones and approval before being incorporated into our integration and synergy forecast. This level of rigor and transparency gives us strong confidence in our ability to deliver on and potentially exceed our synergy commitments. Before I hand the call over to our recently appointed chief financial officer, Chuck Butler, I wanted to share why he is the ideal leader for this role. Chuck joined Xerox as part of the Lexmark acquisition where he spent twenty-one years in a variety of senior leadership positions most recently as their chief financial officer. He brings deep experience and proven resilience having led the company through supply chain disruption, a significant manufacturer transition due to US sanctions, on its former Chinese parent company, and a large-scale restructuring that delivered stronger revenue and profitability. At this pivotal moment for our organization, Chuck's thoughtful, pragmatic approach to driving operational excellence and profitability is just what we need. I'm excited to partner with him as we work to restore growth, and strengthen the business. Chuck, take it away. Thanks, Steve. It's an honor to step into the CFO role at this moment in the company's history. I don't take this responsibility lightly. Spent the last couple of months getting up to speed, and while there's work to do, I'm encouraged by the talent across the company and the early signs of progress from My priorities are straightforward. Improve execution, strengthen the balance sheet, and drive predictable profitability and cash generation. Let me start with the quarter. For Q4, while revenue was slightly below guidance, adjusted operating income and free cash flow came in ahead of our expectations. We saw contributions from integration activities, early synergy capture, and disciplined cost actions. On a reported basis, Q4 revenue increased approximately 26% year over year driven by the contributions from Lexmark and 9%. Adjusting for deliberate exits, nonstrategic reductions, and normalizing backlog fluctuations, revenue declined about 5% This is consistent with Q3 and reflects ongoing macro and policy-related uncertainty particularly early in the quarter. Results this quarter were affected by unforeseen impacts, primarily from the sale of finance receivables in Portugal and France. These transactions reduced revenue by $16 million and adjusted operating income by $13 million. But were executed to strengthen the balance sheet, mitigate risk, and improve liquidity. Without this effect, revenue would have been roughly in line with expectations and adjusted operating income would have been well above guidance. Turning to profitability. Adjusted gross margin was 29.3%, down two thirty basis points year over year reflecting 160 basis points of higher tariff cost and 160 basis points of increased product cost partially offset by Lexmark's contribution and reinvention benefits. Adjusted operating margin was 5%, down 140 basis points driven primarily by lower gross margin, partially offset by integration savings, including headcount actions, executed in October and early nonheadcount synergies. Adjusted other expenses net was $85 million up $54 million year over year due mainly to higher net interest expense associated with the Lexmark acquisition financing. The adjusted tax rate was 147.1%, compared to 32.9% last year, reflecting geographic mix of earnings and an inability to benefit from current year losses and expenses in certain jurisdictions. GAAP loss per share was 60¢, down 40¢ year over year and adjusted loss per share was 10¢, 46¢ lower primarily due to higher interest expense. Let me now review segment results. Within print and other, Q4 equipment revenue was $485 million up 23% as reported, or up 21% in constant currency. On a pro forma basis, equipment revenue declined approximately 10% normalizing for reinvention-related actions and other onetime items. Equipment revenue declined around 5%. To provide additional context, legacy Xerox equipment revenue declined 14% in constant currency, or roughly 10% excluding reinvention-related items tied to our decision to discontinue manufacturing high-end production systems. This compares to a normalized 8% decline in Q3. Sequential performance was impacted by continued budget-related delays, in federal and sled orders as well as softer commercial and channel demand. Lexmark equipment declined 8% in constant currency, including an estimated 12 points of year over year backlog fluctuations, underlying demand grew 4% versus a comparable 12% decline in Q3 indicating a firming of demand over the quarter. Elevated backlog weighed on Q4 revenue but represents a future revenue opportunity as it converts. Print post-sale revenue was $1.39 billion up 25% as reported and up 23% in constant currency. Chuck Butler: On a pro forma basis, print post-sale revenue declined 9%. Excluding reinvention effects, pro forma post-sale revenue declined approximately 5% a modest improvement from last quarter, reflecting moderating declines across supplies, services, and outsourcing at Legacy Xerox. Print and other adjusted gross margin was 29.8%, down two eighty basis points year over year due to higher tariff and product cost, lower managed print volumes and lower high-margin finance-related fees, partially offset by reinvention savings. Print segment margin was 5.8%, down two seventy basis points due to lower gross profit partially offset by reinvention savings and Lexmark's contribution. Turning to IT solutions results. Revenue increased 39% year over year, reflecting the inclusion of IT Savvy for the entire quarter versus a partial quarter in the comparative period last year. Pro forma gross billings a reflection of business activity, increased 13% year over year in the fourth quarter. Total bookings, an indication of future billings, increased 8% in the fourth quarter. We continue to see growth in sales activity for IT products and service to existing Xerox print clients with more than $60 million of pipeline creation in 2025. IT solutions gross profit was $36 million, with gross margin of 22.7%, up 610 basis points year over year due primarily to IT savvy. On a pro forma basis, gross profit expanded by nearly $6 million versus prior year or nearly 20%. Segment profit grew $9 million year over year, with profit margin reaching 5.8% helped by the inclusion of IT Savvy. On a pro forma basis, segment profit grew almost $7 million due primarily to increased gross profit and cost structure improvements. Moving to our cash flow and capital structure. For the quarter, operating cash flow was $208 million compared to $351 million last year reflecting lower net income, lower proceeds from finance receivable sales and working capital timing. Investing activity was a $4 million use of cash with CapEx being partially offset by proceeds from real estate disposals. Compared to a use of $172 million in the prior year which had costs associated with the acquisition of IT Savvy. Finance activity resulted in a $173 million use of cash reflecting ABL paydown and payments on secured debt. Free cash flow was $184 million for the quarter. Down $150 million year over year For the full year, free cash flow was $133 million, above our $107 million comparable guide. This incorporates an adjustment to our Q3 earnings release, that reallocated a use of $43 million from investing to operating cash flow. This adjustment was the result of a onetime accounting treatment related to the settlement of intercompany balances between Xerox and Lexmark. This had no effect on cash and did not impact Q4 2025 free cash flow. We ended Q4 with $565 million of cash, cash equivalents and restricted cash and total debt of $4.2 billion was down $160 million sequentially including repayment of $100 million ABL borrowing that was outstanding at the end of Q3. There were no borrowings at the year-end under our ABL, We will be repaying the remaining $110 million of IT savvy notes tomorrow. Approximately $1.5 billion of the outstanding debt supports our finance assets, with remaining core debt of $2.7 billion attributable to the nonfinancing business. On a pro forma basis, gross leverage was 6.7 times trailing twelve months EBITDA, our top capital priority remains debt reduction with a medium-term target of approximately three times trailing twelve months EBITDA. For 2026, we expect greater than $7.5 billion in revenue, which represents approximately 7% growth versus 2025 inclusive of the full year of Lexmark. This outlook incorporates several known headwinds from ongoing reinvention actions. Including lower revenue related to the exit of high-end production print manufacturing and continued declines in XFS finance receivables. As a result of our forward flow execution. These impacts are partially offset by expected growth within IT Solutions. On an organic basis, we expect year over year revenue performance to improve as we move through the year as headwinds dissipate, and we realize the benefits of tailwinds Steve referenced earlier. Specific to XFS, we expect approximately $50 million of revenue headwinds and roughly $40 million of operating income headwinds in 2026, primarily from Ford Flow Dynamics. Despite these impacts, we expect adjusted operating income to be in the range of $450 million to $500 million an increase of more than $200 million versus 2025 driven by $150 to $200 million of integration synergies, and $100 million of reinvention savings. We have clear line of sight to these savings with accountable owners sequencing, and cash timing discipline, which gives us confidence in the delivery path. We expect tariffs to be a profit headwind in the first half and a tailwind in the second half as we shift more A3 production in-house. Recent memory price increases are expected to offset some of that benefit. We expect free cash flow of approximately $250 million driven by higher adjusted operating income, partially offset by higher interest expense and reduced forward flow benefits. Free cash flow assumes roughly $335 million of forward flow benefits, leading to slightly over $1 billion of receivables by year-end, $290 million of net interest expense, $160 million of pension contributions, and moderate working capital headwinds, We expect a use of cash from operations in Q1 with improvement. Throughout the year. Finally, as you may have seen yesterday, we announced a special pro rata distribution of warrants to holders of Xerox common stock preferred stock, and convertible notes. For holders as of the record date, February 9, will issue one warrant for every two shares held, which will be tradable as well as exercisable with cash or certain debt instruments at face value. We believe the issuance of these warrants with expected tangible value is a balance sheet-friendly way to reward shareholders for their continued loyalty and provides bondholders the optionality participate in Xerox equity. Those who participate in exchange with debt enable immediate leverage reduction while preserving liquidity enabling faster balance sheet improvement, and accelerating the timeline to our stated leverage goals. Beyond free cash flow generation alone. With that, I will now turn the call back to the operator to open the line for questions. Operator: Certainly. And our first question for today comes from the line of Ananda Baruah from Loop Capital. Your question please. Yeah. Good morning, guys. Thanks a lot. Lots going on. And so I guess just just a few if I could. Steve, is is you mentioned, you know, you're starting to see orders come back post government shutdown. Are things back to normal there? Ananda Baruah: Sorta, like, order wise? Steven John Bandrowczak: Yeah. A couple of things on the Thanks for the question. We're clearly seeing in certain areas the portfolio that we have has given us a broader TAM that we're going after. And we got the opportunity to bring more products and services into state fed local government. The strategy is working in terms of the acquisition of IT Savvy and Lexmont, bringing more products and services into it. So I would say we're expanding and we're growing. Even in areas where we're seeing a slowdown in spend, there are other opportunities that we can bring solutions into the Fed space. Ananda Baruah: Yeah. That makes sense. Okay. Yeah. No. Thanks for that extra context. And then maybe just sticking with with IT savvy. So it sounded like just and this is more of a clarification. Memory isn't actually, could you just sorta unpack or clarify? The impact of memory in the IT savvy business And then it sounds like you also said there's an impact to the print business. Or the copier business, or maybe it's both. Is that distinct from what you're seeing in IT Savvy? Thanks. Yeah. I think it's a couple of things. So memory Steven John Bandrowczak: across all the industries, whether it's IT IT services, whether it's in print, is gonna be a lot of uncertainty as we think about the year both in terms of pricing availability, and so forth. So one of the things we're doing as we highlighted is we're trying to look at our IT solutions portfolio as we're seeing memory prices go up. Maybe there'll be a stall in some end points, but we can help our clients to extend their life of their products, We can help them with moving to as a service such as what we talked about with HP's HPE's offering, Dell's offering. There's a lot of SaaS platforms and things that we can move to that we're gonna help our clients to navigate through the memory challenge. On the print side, first half of the year, little impact because we've got a lot of the products teed up or already in motion. We'll see what the second half of the year is in terms of availability and pricing, but we'll navigate through both of those. Ananda Baruah: And how let's just on the memory side, you know, for kind of across the portfolio, I guess, But Savvy is distinct from from the copy or print business. What's the useful way for for folks to think about well, first of all, you hit are you hitting elasticity yet? And then or are are you starting to see an elasticity, headwind yet? From rising memory costs? Are you passing are you raising prices? You know? And and sort of to what degree should we think of the margins the margin impact also? Steven John Bandrowczak: Yeah. Look, think the industry is uncertain around what is happening with pricing and what is happening with availability throughout the year. What we're trying do, working with our suppliers, making sure that we get the product availability with our clients to try to put in the right so we can optimize their return on investment, the things that they're trying to drive. And, you know, when we see these things and historically, when you think about supply chain challenges and shortages, we look at how do we help in trying to navigate that. So we're working with all suppliers. We're working with manufacturers, working with our end products in terms of the products that they're giving to us and trying to navigate through that. And, you know, it'll be a mix shift of products. It'll be a combination of extending warranties, extending service. Helping to navigate through this. There's gonna be some uncertainty, and, you know, we'll just see how we play it out. We'll navigate through it. Ananda Baruah: Alright. I appreciate that. I'll leave it there. Thanks so much, guys. Operator: Thank you. And our next question comes from the line of Erik Woodring from Morgan Stanley. Your question please. Erik Woodring: Guys, good morning. Thank you for taking my questions. I have two for you. Steve, maybe just to start, and I think I've asked this before, but would just love an update is you know, obviously, there's a there's a lot going on at Xerox right now between reinvention, absorbing Lexmark, managing leveraging cash flow, kind of trying to protect the core business, and all amidst this kind of very volatile macro obviously memory situation. Just how do you prioritize all of these different kind of moving pieces? Because, you know, you if we go to Chuck's comments, you know, we we wanna talk about improving execution. Obviously, that makes execution risk higher with all these moving pieces. So just how are you prioritizing? How are you managing? And how are you making sure that you can do all of this while pushing this business forward? Then a quick follow-up, please. Thank you. Steven John Bandrowczak: Yeah. A couple of things, Erik. First of all, you know, as we look at Q4 and navigating revenue, operating profit cash came in as we expected, and we navigated through that. I gotta tell you from a strategic standpoint, reinvention strategy, the acquisition of IT Savvy, the acquisition of Lexmont, is working. We're heading in the right direction. And we're seeing that examples of that. The Morrison account where we bring in all of our capabilities. Lexmod their NPS, our production, our GoInspire, all of it coming together and driving value in a large retail account. Expansion in channels. We're seeing channels now picking up on our a three product that we manufacture internally. We drive better serviceability, better profitability as it returns as we look at supplies expansion. We're seeing the launch in IT solutions of our CyberShield, which is a combination of Palo Alto and insurance nobody can bring that to the market, the SMB space like we can bring that. So the strategy is working. The execution is working. When we look at the reinvention and integration, it's one project to us. Right? We have one enterprise transformation office that looks at the entire suite of all the work streams, all the things that we follow. So the management operating system, it's all under one management operating system that we've been executing here. Since the reinvention launch. So I know from an outside, it looks like a lot of moving parts. But I gotta tell you, it's coming together, and it's heading in the right direction. And as you look at our guidance in 2026, the strategic things that we've put in place give us confidence to deliver. Last point. When you bring IT serve savvy together and you bring Lexmark together and you look at integration, culture is important. And I gotta tell you, the culture and the combination of these three assets has been absolutely outstanding. Working together, bringing value to our clients, internal synergies, all the things that we've been working on, have been extremely, extremely important. And then the last piece of it, as we're going through this, we talk about reinvention. Reinvention, our end to end operating reinvention, everything we do. We've now added an AI center of to that. We're now bringing technologies that we've never had before as opposed to two years ago or three years ago when you look at integration. We didn't have some of the capabilities and technology we have today. So I am very optimistic, very, very comfortable, and very excited about where we are in the process, and the team is doing an outstanding job. Erik Woodring: Alright. No. That that's super helpful. Thank you, Steven. You know, I I wanna press you on the the the answer that you provided to Ananda earlier just on kind of the memory stuff. And and really, my high-level question is how are you protecting yourself against kind of pull forward and the risk of a tough second half in IT services? And and and really the point that I'd that I'd love to try to kind of better understand is, I know you speak to double-digit growth in booking and billings in IT services. And just based on some of the what we hear from a pricing standpoint, things look like we're we're we're going through a a mega giga period of inflation, however you wanna, however you wanna characterize it. Just just in the event things get tougher than expected in the second half of the year, Obviously, you're trying to reorient your cost base. How do you protect yourself with all of that going on? Again, just in a world where things do get a little bit more challenging. I'd just love to hear kind of the strategy behind you think about that. Thank you so much. Sure. Three things. Steven John Bandrowczak: Yeah. So three things. You know my background as a CIO, so I'm gonna speak from a CIO perspective. The budget that I have is the budget that I've had. Right? And so I have to drive value for business. I've gotta drive value for internal, whether it's driving more revenue or driving more profitability. And what we're gonna see from our clients is, yes, endpoints may go up, servers may go up, I could sweat those assets. I could extend them. I can move to more towards software as a service and look at some of these other platforms. Right? And we have a full portfolio that we could take advantage of where clients are gonna ship to. We can help them with sweating their assets. We can help them with bringing more productivity. We talked about AI-powered platform around end-to-end support in terms of the service ITIL stack. And so we're shifting, and we're helping our clients navigate the increase in memory prices and ultimately the increase in end devices. So I'm very confident that we have the capabilities, and we've got all the infrastructure to help our clients to navigate through this. Look. You can't predict the pricing. I can't predict the pricing, what's gonna happen with chips, memory over the next you know, eighteen months. What I can do is control the factors that we have, and that is knowing there's always signs of headwinds, shifting our demand, and helping our clients to navigate through this. And I'm confident we've got the products and we've got the line card that allows us to do that. Erik Woodring: Awesome. Thank you very much, Steve. Best of luck to you guys. Operator: Thank you. And our next question comes from the line of Samik Chatterjee from JPMorgan. Your question please. Samik, you might have your phone on mute. Samik Chatterjee: Yes. Sorry about that. Hello. Good morning. This is Mark. This is Tom. Hello. Good morning. So my question is regarding the operating cash flow to free cash flow bridge. You go from $3.60 to $2.50 based on the 2026 guide. So I guess what are some of the assumptions with regards to that, like the working capital assumptions, CapEx, and the split between operations versus finance receivable runoff. Chuck Butler: Yeah. You're talking year to year, and thanks for the question, by the way. If you think about year to year free cash flow from 2025 to 2026, there's a lot of puts and takes that can go on in between, that bridge and the walk down. But the essential gist of it, if you boil it all down, is we'll have a higher EBITDA driven by, you know, operating income increases of $225 to $250 million, and then you'll have less finance receivables. And the net of those two kinda gets you to the year over year improvement. And free cash flow. There are some puts and takes in there. You'll have a little bit higher cash taxes, a little bit higher interest. A little bit less restructuring. But if you netted it all down, it it comes down to a higher operating income income offset by lower finance receivables. Samik Chatterjee: Got it. And I guess piggybacking off that with regards to the finance receivable sales and the prior question regarding prioritization between P and L and balance sheet. How do you think about finance receivables sales over the course of the year in 2026? Chuck Butler: Yeah. We, you know, we had $335 million of finance receivable sales. Our forward flow benefit baked into our forecast for 2026. If you think about where we have stated, we will take our finance receivables to it via balance sheet of about a billion dollars, which is where we'll exit the year. I anticipate the larger piece of that happening in the back half of the year to get to that. And then we'll see if we can be opportunistic beyond 2026. Samik Chatterjee: Got it. Thank you for taking my question. Operator: Thank you. Our next question comes from the line of Asiya Merchant from Citigroup. Your question please. Asiya Merchant: Hi. Good morning. This is Mike Cadiz for Asiya Merchant at Citi. Good to meet you, Chuck, and we look forward to to working with you in the coming quarters. So my one question is can you talk about any cross-selling progresses that you've seen and any milestones or targeting for this year, given the large 200,000 plus client base. And what kind of penetration is targeted for this year? And also, the last thing is, are are the sales motions somewhat different in selling IT services to a Lexmark print client versus a legacy Xerox client? Thanks. Steven John Bandrowczak: Let me start with that. So as you know, we talked about our IT solution strategy in selling into our mid-market clients where typically the same buyer is the buyer about print equipment as well as IT equipment. So we already have the relationship. We've already have a trusted partner and a trusted client We've talked about, you know, our printers are behind the firewall. We're integrated into a security stack. By the way, we're integrated into their overall data security. So it's the same economic buyer. We're now bringing IT solutions into. So for us, the go-to-market motion is leverage the relationship, but bring a broader set of portfolios and products and capabilities such as we just announced with CyberShield. That would never happen without the 200,000 plus clients that we already have that we know struggle with being able to get both cybersecurity insurance and get the scale and get the capabilities of a Palo Alto network. So the go-to-market motion for us is leverage the relationship we already have, bring in the portfolio and the capabilities from IT solution, and continue the expansion and the penetration into those accounts. What we've also seen and recently at the retail show as we start to look at expansion and bringing these together, we now start to see the things that everything that Lexmont had done in the retail space around signage, around IoT, AI capabilities, we now can bring IT solutions in a store the same way, and we now can bundle and package a broader set of portfolios. Including, by the way, adding production capabilities. So what we're seeing is an expansion of route to market and then penetration in existing TAM. We already have relationships, we're already trusted partners, and now we're bringing new products and services that drive meaningful outputs for our clients, which is really exciting as think about the go-to-market motion. Chuck, anything you wanna comment? Chuck Butler: If I would add a little bit to to how does that translate into bottom line performance. You know, someone mentioned all the different projects and areas that we're working right now. But they all have one intended focus, and that's to increase the financial profile this company. And I see all that occurring. I see you know, we performed as expected in Q4 on a bottom line basis. We performed as expected or better than expected from a cash flow generation. So you're seeing some of that working capital discipline. And some of the synergy savings being realized. So where we stand right now is in control of our own destiny. With good momentum going into 2026. Mike Cadiz: Thank you. Operator: Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Steven John Bandrowczak for any further remarks. Steven John Bandrowczak: Thank you. While 2025 brought meaningful challenges, we exit the year with strengthening fundamentals and clear momentum. The integration of LexSmart and IT Savvy is unlocking tangible commercial and operational benefits. Our core print business is showing signs of stabilization, and IT solutions delivered double-digit bookings and billings growth. All of which gives us optimism for an improved in 2026. Looking ahead, we have high convictions in our ability to expand margins, and return to profitable growth. Many of the cost and product-related headwinds began to ease as the year progresses while new product launches and unified IT solutions and sales organizations and disciplined execution of our reinvention program, provide meaningful tailwinds. With a clear deleveraging plan, and a robust synergy pipeline, we are confident in our path we are on. You for your continued support. We look forward to delivering a stronger 2026 for our employees, clients, partners, and shareholders. Have a great day. Operator: Thank you, ladies and gentlemen, for your participation in today's This does conclude the program. You may now disconnect. Good day.
Line Dovarn: Good morning, and welcome to today's presentation of Munters Q4 and 2025 Full Year Results. My name is Line Dovarn, and I'm Head of Investor Relations, joined by our CEO, Klas Forsstrom; and our CFO, Katharina Fischer. So Klas and Katharina will begin with presenting the results, and then we will have a Q&A session after that. Please go ahead. Klas Forsström: Thank you, Line, and good morning, everyone. Let me start with a few sentences to summarize the quarter and the year and then dig into the details then. The year 2025 ended up with a quarter showing the strength of our leading offer across our prioritized end markets. All in all, then resulting in more than 3x organic growth, I mean, over 200%, a book-to-bill of 1.6, I have to say, an exceptional achievement by our teams. Earnings weakened to 10%, primarily driven by dual site costs and underutilization in AirTech, as well as temporary tariffs and transition cost when it comes to moving different products in and out of the DCT system. I'm not pleased with the result, but very confident that most of this will diminish after quarter 1. All in all, 2025 was a year to be proud of, delivering record order intake, solid profit and strong cash flow. It was also a year building industry-leading capabilities to produce, to show stellar innovation and offer buildup paired with improved efficiencies. All this while balancing in a fast-changing world of trade conflicts and wars. I enter 2026 with a positive view on our end markets, strong or slightly improving market demands across our segments. Even better is the momentum across Munters. Innovation is the core of a company, an innovation drive that is reaching a vitality index of more than 50%. Production capacity built for current and future growth, we are able to handle 50% more growth, a modern and forward-leaning digital FoodTech, operational improvements in AirTech and accelerating this into 2026 and an order backlog that sets us up for a record 2026 and beyond. After Q1, when short-term holdbacks will diminish, we are set to deliver a 2026 with historically high turnover and strong margins in H2. In a nutshell, 2026, a year to look forward to. So let's dig in a little bit into the details then. And as I said, exceptional demand while earnings weakened. Order intake, plus 191%, organically 200%. Very pleasing, AirTech also delivered growth with a book-to-bill over 1. Data Center Technology, significant increase. Of the orders received, about SEK 5.7 billion was announced in orders before the quarter report. FoodTech organically declined, some lower software orders, partly offset by controllers, but we also met a very, very strong quarter here. Order backlog all in all, increased with 53%, currency adjusted with 80%. It's mainly DCT and orders to be delivered in 2026 and 2027. And as I said, a book-to-bill of 1.6. Net sales declined. AirTech declined, lower sales in EMEA. As you know, EMEA had a few working days less, but it was a weaker backlog that we had to eat from. DCT increased successful execution on order backlog, but also here in DCT, I mean, we closed for a couple of days, as always, during Christmas. FoodTech increased driven by strong growth in controllers, and that was partly offset by lower software. All in all, for the full year, net sales increased with 8% organically above that. Adjusted EBITA margin, 10% in the quarter. It's the tariffs that represents about 4% in DCT. When it comes to AirTech, lower volumes and underutilization due to weaker battery market that accounts for about 2% units and an adjusted EBITA margin in the year of close to 13%, 12.7%. When it comes to regions, significant variations in between the regions. Americas stands for 86% of our orders in the quarter. EMEA, about 11%; and APAC, 4%. Of course, it is DCT that stands out with 95% orders in Americas. But also very good to see 5% of the total orders in the quarter came in Europe. So we start to see a European data center market that is starting to grow, and we are taking our share in that. And then when it comes to FoodTech, a more, call it, normal balanced quarter. All in all, we look upon the quarter, AirTech, soft with pockets of growth pretty much in all the different regions, but clear signs of especially the base business, 95% of our business starting to show some growth moving forward. Data Center continue to rapidly expand in Americas. It is a smaller market in Europe, but we start to win here in a good way. And then when it comes to APAC, a good market outlook, especially in Southeast Asia and the Oceanic region. And FoodTech, very much a continued positive market as such. Moving into AirTech, a book-to-bill of 1.1. Order backlog stable. Pleasing to see that the order backlog did increase. And as you can see now, when it comes to the orders, about 90% of the -- in the year is outside battery. So it is a sign that we now are moving into capturing orders in a stronger market that is outside of battery. And here, I think it's very clear. This quarter is order intake-wise, one of the best, I would say, the best quarter in the last 8 quarters with one exception. And if I take a look upon outside battery, it's for sure, the best quarter in the last couple of years. Also important to see here, as you can see, there is an up picking trend the last couple of quarters. And so that is the reason why we are saying it is a market that seems to become stronger and stronger. When it came to net sales, a lower outcome due to -- and that resulted in a lower profitability. All in all then, something that was very good to see that is the share of service, 23%. And when it comes to components, 19%. Here, we have a shift in components then. So we have more evaporative pads than what we have then desiccant wheels. When I look upon our innovation pipeline, and you have heard me say that we have a vitality index of more than 50% now. I think this is an important slide to talk about. When it comes to AirTech, AirTech is exposed to many different end user segments. You drive energy efficiency and customer value to primarily 2 different components here. It is material science and technology leadership when it comes to the media. And then it is how you use and how you control your equipment. And if I take a look upon this, I mean, what I see that is the material science and the new media gives opportunities for customers to increase -- improve their energy efficiency in between 10% to 20% compared to old versions. And if we take the connectivity and using artificial intelligence and better controlling the setup, it is a similar value, 10% to 20% more improvements. And if you combine this, I mean, then you can have up to 40% energy efficiency. What is also clear that is that in some of the underlying segments there as pharma, defense, and service, I mean, we see a continued upgrade and higher demand coming forward. Also important to see that is when it comes to what we call clean technology, air quality and pollution control, we also see a strong underlying market as such. Moving over to Data Center, an exceptional order intake in the quarter. Demands across both colocators, hyperscalers, very much driven by artificial intelligence-related investments, but really across the full type of board. We announced orders of SEK 5.7 billion, and we reached SEK 9.2 billion in total orders. The order backlog increased. And here, we talk about deliveries into 2026 and then carry into 2027. The book-to-bill in the quarter was impressive of 7%. Also, what I think is important if you take a look upon the circles there, I think that exemplify the product transition that is taking place. The 38% where we have the split system that is represented in the past, very much by cycle in the future, very much of split system based on, as an example, on chillers. Now we are building up chiller capability. And when chiller capability are then increasing that we can produce it more in an industrial way, the chiller profitability will increase in the same way as we showed with cycle. The main effect of the margins in this quarter came from tariffs. And here, we deliberately decided that it's better to take market share, establish ourselves in U.S. even before we have full-fledged production of chillers in U.S. If I would bring that back, I mean, we would be in a range of around 18%. And if I then add also the changes in the product mix, et cetera, I mean, we would be in the 19% range. But all in all, I mean, I'm very confident moving forward that we will continue over a period, over a year to be in the high teens range. But this and also next quarter will be affected by tariffs. We are filling up the order backlog, and we are building up capacity. And capacity you build up by building factories, driving efficiencies, driving the way you produce, but also how you interact with the customer, how you preplan, how you actively secure critical components and so on. And if I take all that then on the right side here on the slide, that we have now capacity to be able to take 50% more orders moving forward, and that gives me very good confidence. Of course, it varies in between the different factories. In some factories, we have not much more to gain. In other factories, substantially more to gain. This is also why I say that with this backlog, I mean, I'm extremely confident that we will have a strong invoicing year in Data Center. And what type of products are we then bringing in? I think the best way to describe it, that is across the board. Some cases, it is more dedicated CRAHs, custom-designed CRAHs that have high efficiency. In other cases, it is chillers, and yet other examples, it is more what I would call it hybrids where you combine chillers, custom-designed CDUs and CRAHs. And for me, that is the strong point of Munters today. We can cater all different type of product demands and all different types of cooling demands there is in the market. Also very pleasing that we took a sizable order in EMEA that includes Geoclima chillers and CRAHs. And this puts us in a very good position also for a strong fill rate in our EMEA factories. On and off, I and we get questions about, I mean, what is driving then the success in Data Center and how -- what about the market. You've heard me talk very much about, I mean, we have evolved from being a niche specialist to now having a comprehensive, very wide cooling portfolio that can expand into many different type of data centers. That has been driven by the innovation engine, innovation through own innovation and combining with acquisitions that we then have brought into the system. We accelerated the time to market for next-generation cooling systems. And I think that we have at current and a world-leading time to market when it comes to new systems. We have also in parallel, strengthened the service setup. I mean, with own personnel, but also contractors and partners. So gradually, we are expanding the service coverage also. Capacity. We have built up capacity, and we never take and accept orders that we cannot deliver on promise. We have been building capacity ahead of the plan, i.e., that generates some cost in the beginning, but we have also proven that when we have a scalable footprint, we can also generate the bottom line. And then the discussion about what type of cooling solutions are there and what is then affected cooling. I think you have to come from 2 perspectives. First, you have to have very dedicated type of data center cooling setups, but then you also have hybrid readiness. In the very best liquid cooling data center, there is still need for in between 20% to 25% air cooling. So you need to have the [ width ] on this. So all in all, I think we have an extremely strong platform for continued growth and profitable growth moving forward. If I go back to FoodTech, the first thing I think is important to recognize here that is we have completely shifted what FoodTech is now compared to a year ago. Now it is 100% digital and software-driven. There is when we have increased the number of controllers or the sales of controllers still a seasonal effect that the controllers are sitting in the farms, et cetera, et cetera. So in quarter 4 and quarter 1, there is a weaker controller demand. But all in all, it is a more stable business area compared to the past, a strong market outlook moving forward. Margin remains strong. What affected margins was our continued investments to support growth, a shift in products that we have more controllers this quarter than we had software. And then on the positive side, price increases and efficiency initiatives. But all in all, a strong underlying margin. I predict that we will continue to grow over years in between 20% to 30% when it comes to the ARR this quarter, slightly lower, but that is very much due to the comparables of last year. For me, this is one of the most important pictures of the future in FoodTech. It is about the full value chain, a data-driven connected supply chain. Our products and solutions are very much focused on the growth segment, where chickens, the swines, the animals, the plants are growing. But it is also handling data and help the customer manage the full value chain. And this is something that is extremely sought after. Of course, it takes some time. If you start in the middle, you have a unique offer there, combining controllers with software, it takes some time to sort of expand out in the full value chain. But what I see that is that our customers are very attracted to this. And if we talk about the software side, churn, low churn is important, and we have a very low churn, about 2% and below. And then, as I said, the ARR then expected to be in between 20% to 30% year-by-year. This quarter, a little bit lower due to very strong comparables last year. With that then, I leave it over to Katharina. Katharina Fischer: Thank you, Klas. So starting with the fourth quarter, net sales declined 8% or remained flat currency adjusted, primarily reflecting the lower volumes in AirTech. The adjusted EBITA margin declined, and this was mainly due to the temporary tariff effect in Data Center and the lower volumes and underutilization in AirTech. Net income declined, and this was due to the lower operating earnings, but also due to the increased items affecting comparability in the fourth quarter. They amounted to SEK 174 million. The driver of this was a contingent consideration of SEK 98 million due to recent acquisitions. So this was mainly related to the 20% holdback of the transaction price for the acquisition of the remaining shares in the MTech Systems, and that was closed in March. 2025. And this amount then has been paid in full now in January this year and was fully accrued at year-end then. Looking at cash flow was very strong. I will come back to that later on. Sorry, I should also say on the items affecting comparability, we also have restructuring charges of SEK 77 million. They related to AirTech. And here, we are progressing according to plan on the cost measure activities that we announced in Q3. If you recall, we announced then that we will take a charge of SEK 150 million in total over Q4 and Q1. We also had a very strong operating working capital to net sales ratio in the quarter. It improved further. So that reflects our strong discipline in this area. Looking at the full year, net sales increased 8% or 15% currency adjusted. And this was then driven by the continued strong growth in Data Center and FoodTech and partly offset by a weaker development in AirTech. And the adjusted EBITA margin declined due to lower volumes and the continued dual site cost and underutilization in AirTech as well as the tariffs then in Data Center. And also for the full year, the net income declined then for the full year due to the lower operating earnings and the increased items affecting comparability. And this continued considerations effect was then almost SEK 200 million for the year then. And also, as I said, very strong operating working capital. Then looking at the margin, the margin declined in the quarter. While this was below our ambitions then, it was due to temporary effects such as the tariff impacts and the lower volumes and utilization in AirTech. The volume then had a negative impact, but mainly due to AirTech in EMEA, partly offset then by DCT and FoodTech. I'm very glad to see that we continue to have a positive net price impact, both in DCT and FoodTech. However, the margin was negatively impacted then by the temporary tariff headwinds in DCT and also a negative product mix across all business areas and also an adverse regional mix in AirTech. From the operational excellence perspective, the under-absorption in AirTech weighed on the margin and also the transition to new products in Data Center had a negative effect on the margin. We continue to invest in our business, of course, to scale the business and also to digitalize further and automate and also do more investments in the footprint. If we compare to the Q3 margin of 13.5%, the margin then declined, and this was the -- primarily drivers for that was the increased tariff headwinds, but also lower volumes and changes in the product mix. In addition to this, we also had currency headwinds, which impacted the quarterly results then negatively. Looking at the cash flow. We had a strong cash flow from operating activities in the quarter. So even though the operating earnings were lower, we were able to offset this with positive contributions in -- from operating working capital, and this was mainly driven by advances in DCT. In the investment activities, we had an impact from business acquisitions. So these were then retention payments or holdbacks related to acquisitions of Geoclima and AEI, which were closed during 2024. So there were some remaining payments for those 2. And then we have also bought the remaining shares, 40% in the Brazilian company, InoBram. Looking at year-to-date, we have a stable cash flow from operating activities, a little bit lower, but due to the operating earnings and also a less favorable development in working capital for the full year. Looking at cash flow from investing activities, it was impacted by lower CapEx and also lower cash flow from the business acquisitions during the full year. Looking at investments then, our capital allocation principles remain disciplined and selective. So we continue to focus our investments where they create sustainable growth and also create long-term value creation. And in the quarter, the ratio was 7%. So this reflects a higher level of activity then where we continue to invest in competencies, upgrading operations, doing more digitalization and optimization in our business. For the full year, this number was 5.8%. Looking into 2026, we continue to invest in DCT footprint and the Virginia production facility, including the test lab will be up and running in the second quarter of this year. And efficiency improvements and volume ramp-up will take place gradually, of course, and with the main improvements to be seen in the second half of the year. Looking at CapEx for the full year, we expect it to be -- remain broadly in line with the full year number for 2025. Operating working capital, then as I mentioned before, very strong number if you look at the chart there, so at 7.3%, right now. If we look at leverage, the leverage ratio remained stable at 2.9 compared to Q3, slightly up, reflecting lower operating earnings. However, we had this very strong cash flow, which then enabled us to manage this acquisition-related payments during the quarter. And if you compare to the leverage at the end of Q4 last year, the increase is driven by increased lease liabilities. While we do not have a fixed leverage target, we do have an ambition to be within 1.5 and 2.5 over time. And we are not worried by temporary deviations above this level as they are then related to strategic investments that support our future growth and also increase our competitive position. Diversification of financing and strengthening our funding base is, of course, also important. During the quarter, we have issued a bond of SEK 400 million, and we have also increased our outstanding commercial papers. Also want to highlight then that during the first quarter now this year, we have then paid the remaining -- the holdback 20% for MTech, USD 18.5 million. So that payment was done in January this year. Turning to sustainability then. We continue to have a very focused agenda that we execute diligently on, that spans across climate, social aspects and responsible business practices. And if we start with climate, we -- during 2025 inaugurated our new flagship factory then in Amesbury in the U.S. And if we look at our ambitions for 2030, our Scope 1 and 2 for the year increased 3%. And if we look at Scope 3 emission intensity, it increased with 19%. And this increase in Scope 3 was related then to higher activity in regions where the emission intensity is higher and also a different product mix. But of course, this highlights that we, as many others, need to continue to focus on delivering on our decarbonization road map. And in parallel, we also continue to develop products that are more energy-efficient products and services, and we also work with our customers to find renewable energy solutions. Looking at gender equity, here, our ambition is very clear. We want to achieve the 30% of women leaders and women in workforce, and we drive many different initiatives linked to this, where we have and support inclusive employee networks. We also drive initiatives to promote interest in technology-related fields and so on. And we also aim to broaden the talent base through very focused training programs and defined goals. On the responsible business side, we are aligning with the CSRD, and we are, of course, also preparing for the upcoming CSDDD. This is then underpinned by us continuously upscaling our workforce, where we have many different trainings in human rights, anticorruption and related topics. And of course, this is very important with this training programs because we really want to make sure that we have consistent standards in our day-to-day decision-making across operations and our supply chain. And then finally, you know that we have the service and components ambition to be above 1/3 of net sales. And during the full year, this net sales grew organically, and we achieved a percentage of 25%. And with that, I would like to thank you and hand it back to you, Klas. Klas Forsström: Thank you, Katharina. Here and also take a look into the future before we open up for Q&As. The year, we ended up on a growth of 15% on an EBITA margin of 12.7%, on an operating working capital through net sales of 7.3%. In the quarter then, not much growth adjusted currency and an EBITA margin of 10%. And of course, it is the same number when it comes to operating working capital. The Board is proposing a dividend of SEK 1.6 per share moving into the general meeting then. From this quarter, we have started to give outlooks. If we start then with a status, where are we in the different business areas. First of all, I mean, the efficiency programs that has started and are driven in AirTech delivers plus SEK 100 million in this year. The second program that we announced mid this year is aimed to delivering between SEK 250 million to SEK 300 million run rate by end of this year, and both programs are operated according to the plans. We have also improved the capacity utilization step-by-step by reallocating our sales force to what I prefer to call the base business, i.e., all the business that is less project-driven, less battery driven. And here, you can see that we are gradually then increasing that type of business. When it comes to DCT then, you have heard me talk about our success in broadening our portfolio by own developed and acquired type of portfolio components. We have invested and increased our global footprint, both when it comes to production capacity, but also when it comes to sales capacity. And we have then delivered a record order intake that takes us for sure through 2026, well into 2025 and actually also are touching already now 2028. When it comes to FoodTech, we have completely transformed this. It's now a fully digital offer. It is an offer that no one else in the market has, and it generates a lot of attractions from customers. We have entered new regions, and we have been growing the share of recurring revenue step by step. If I then move to the market then, and this is how we look upon the market for the full year 2026. In AirTech, with all the different segments, it is flat to a positive market. And the positive sign that is, of course, in everything outside battery. And today, everything outside battery represents pretty much close to 90% of what we sell. So flat to positive. In Data Center Technology, we predict a continued positive market demand for the year. But of course, and I highlight this, it is extremely difficult to predict how much order intake will come quarter-by-quarter, but we see still a very, very strong underlying market. No changes there. And when it comes to FoodTech, continued a positive market outlook. Business then outlook for the year. First of all, it is clear that our net sales growth is expected to develop positively. And I said, I expect it to be a record year on invoicing. And how to substantiate that? If we take the backlog in Data Center, at least 30% more invoicing will come. With the right customer demand, it could be as high as 40% increase in invoicing. And then a slightly increase also moving into AirTech supported by a better order intake. When it comes to adjusted EBITDA margin, after Q1, we expect that it will diminish the tariff impact in Data Center and the margin improvements in AirTech will start to pay off. So you can look upon this year, a little bit reverse to last year, i.e., a substantially better H2 than H1 when it comes to adjusted EBITDA margin. All in all, I mean, this sets us up for a very, very exciting 2026. With that, Line, I hand it over to you and everyone on the call for Q&As. Line Dovarn: Thank you, Klas and Katharina, for presenting. [Operator Instructions] So we'll begin with a caller from the telephone conference. Operator: [Operator Instructions] The next question comes from Adela Dashian from Jefferies. Adela Dashian: Two questions from me then. The first one, obviously, you had very, very strong order intake in the DCT segment, and it would be great to try to understand whether or not this is timing-related lumpiness or if you expect this to be a sustainably higher run rate given all the AI deployment. We'll start there. Klas Forsström: Thank you, Adela, for the question. I think it's fair to say, as I said many times, I mean, by nature, Data Center order intake is lumpy. This quarter, I think everyone understands that this was an extraordinary quarter. With that said, what we have done over the last couple of years, that is we have expanded our product portfolio, and we have expanded our capabilities to sell in many different regions. So from that perspective, we have more opportunities to gain customers, to gain attractiveness. But I think you should look upon this as an extraordinary quarter. Don't expect this to be the new baseline, so to speak. But with that said, I see, we see a strong underlying market in data center. Adela Dashian: That's really helpful. And then if I stay on the DCT track, but move to margins, you're outlining here a path to get back to mid-teen DCT margins as the tariff headwinds ease and also volumes ramp up from the second half and onwards. But does that margin trajectory fully reflect the incremental investments that you might need given the elevated backlog? Klas Forsström: Yes, it does. I can very confidently say that we -- when it comes to production capacity, we have constantly been investing ahead of the curve, so to speak. And this we have done also this year. And we could have taken a decision not to take orders and sell and deliver, call it, chillers in North America and thereby avoided the tariff hit. We deliberately decided that it's so important that customers are exposed to our fantastic chillers and thereby then securing the orders that will be delivered after we have the production setup here. So if I take a look upon, I mean, the, call it, the margin development and just ballparking it out, I mean, we have a 4% when it comes to the tariffs. That will diminish after Q1. And then we also have the very logical setup when you start to produce something new, in this case, chillers in North America, I mean, you will gradually then move the margins up on that. So from that perspective, if I take a look on the full year, that is why I say that when it comes to DCT, it is, of course, a very strong delivery of top line and also a restored profitability in DCT for the second half of the year. And when it comes to AirTech, the easiest way to describe it is by adding some volumes that we are at current and by cutting out the costs of the SEK 250 million to SEK 300 million, we will step-by-step restore that margin as well. Adela Dashian: Just to clarify quickly, I guess the question -- I appreciate all the color on the near-term outlook or the 2026 outlook. But I guess my question is also more related to medium term or long term. Do you feel like high teens is still sustainable even as your backlog grows. Okay. Klas Forsström: Yes. And also here, I think I said it loud and clear that we have the operational footprint of handling 50% more order intake. What we need to then, of course, adjust that is man hours that is -- but that is in the larger scheme just adjustments, if I put it like that. Adela Dashian: Great. That's the number I was looking for. I'll get back in the queue. Line Dovarn: We can take another caller. Operator: The next question comes from Karl Bokvist from ABG Sundal Collier. Karl Bokvist: A follow-up here a bit on what you've already talked about. But would just like to understand the time line of events that hold back the margins here. So one thing that we've talked about, of course, were the tariffs in DCT. But the dual side factory situation. You said it was complete by year-end '25, i.e., this is something you have alluded to how much it has impacted margins. But should this be now entirely out of the margins from Q1 '26? Klas Forsström: I mean, as I said, I mean, we have completed that. And then, of course, when you start it up, it will have small impacts also in the startup process. But the majority of that has disappeared, yes. Karl Bokvist: All right. Understood. And then also on the just general industrial improvement here, is there anything in particular that you would highlight here within AirTech, I'm talking about now, whether or not it's just about hesitancy becoming -- with customers seeing a bit more clarity on their investment decisions? Or is there any particular -- any other kind of trigger that you see would really make this area start to improve again? Klas Forsström: But it's a very good question. And if I sort of then take it region by region, you can see a openness, improved, call it, market across all the different segments. In Europe, we see in, call it, the base business and improvements in the outlooks, and I give you a couple of examples there. We can talk about restoration. We can talk about defense, et cetera. There, we see a stronger order intake. Here, we talk about, of course, many smaller projects, not the large projects. And in North America, what we see there, that is still a hesitancy, but the order backlog in all 3 regions are moving up -- or sorry, not order backlog, the pipeline of orders are moving up. So normally, when you see that at a certain given time, then you start to open up. So that's the reason why I'm positive. I don't see, yes, now it is substantially better, but it's a stronger market in the non-battery market across all regions. Line Dovarn: And we will take another caller from the telephone conference. Operator: The next question comes from Carl Deijenberg from DNB Carnegie. Carl Deijenberg: So a couple of questions from my side. I just wanted to maybe start on the phasing on the invoicing. Of course, I heard your comments sort of on the full year for '26 expectation and also the ramp-up towards the latter part of H2. But when we go now into Q1 is just from a sort of revenue standpoint, is that what you're seeing now a similar level to what we saw in Q4? Because, yes, it sounds like you're going to have -- facing the sort of similar issues now very near term. So is that a... Klas Forsström: If I put it like this, I mean, we will have the chiller production fully up and running in U.S. after Q1. So the big increase of deliveries in U.S. will, of course, start to come from Q2 and forward. And then during the year, that will then quarter-by-quarter increase in progression. The first quarter, we had pretty much the same setup as now. So then it's more driven out what type of demands, when would customers like to have certain deliveries, so to speak. But the best, call it, guidance that is we will have a full-fledged production in U.S. from Q2, and then we will definitely increase the deliveries. Carl Deijenberg: Great. Then I wanted to also follow up a little bit on the large orders you have announced here in Q4 '25. I know that some of them have been announced in Swedish krona, whereas a couple of other ones have been announced in U.S. dollars. So just wanted to understand a little bit sort of currency structure you're taking on, let's say, currency risk in between those 2. I know that you have a very local cost base in the U.S. But how does that work with the orders that you've announced in Swedish krona now given the currency movements? Klas Forsström: I can start, and then I can also hand it over to Katharina. But if you take the current currency exposure is on and about depending on the different business areas in between 7% to 11% and the highest then is in Data Center. Then if you take a look upon the order intake situation, we have an extremely high then currency effect, but that is pure mathematics. I mean, you have a low comparison and then you add an humongous large order quantity on top of that, and then it becomes, I mean, 11% on a very high number becomes a large percentage on the lower number, if I put it like that then. But if I then summarize it, you can say, as long as we deliver from Europe to U.S., then we will have a currency effect. But when we start to deliver from U.S. production, I mean, U.S. dollar is the U.S. dollar. So then the exposure in U.S. dollar will disappear because then we balance it off, if that made sense. Katharina, any more favors on this then. Katharina Fischer: No, but the U.S. contracts are in U.S. dollars. And yes, we have most of our cost base in U.S. dollars as well. Carl Deijenberg: Yes. No, the reason for asking was just that I noted that some of the large orders were announced in Swedish krona. Katharina Fischer: Yes. It's just the way that we announced it in the press release, Carl, so the order is taken in U.S. dollars, but it's just the way we have chosen to announce the results. It's taken in U.S. dollars. Carl Deijenberg: Perfect. Then finally, I also wanted to ask on AirTech. I heard your comments what you're talking about sort of the mix change that you've seen this year measured in battery becoming a smaller part. And of course, you've taken quite a few sort of measures now on production and utilization and so forth. And I just wanted to understand, we've seen in the past that this battery contract that you took back in '22, in particular, were quite profitable for the division, whereas now you're sort of entering '26-'27 with a little bit of a different, let's say, end market mix. And on the back of the changes you've done here on the production and utilization side, is it still a material margin difference in battery relative to other segments? Or is that more balanced now, you would say? Klas Forsström: I have to give you a little bit lengthy answer, and then I will sum it up. Generally speaking, the non-battery side has always had a slightly better margin than the large batteries orders. With that said, when you have a very large battery orders and you take another large battery order, then you set up a production system, so you have, call it, volume effects, so you can bring out a higher margin on that side. So if I then go back to service, components and base business, in general, product margins have a higher margin than the larger projects. But then, of course, if you can fill a factory and deliver like we do in Data Center, then you have volume benefits on that then, if it makes sense. So moving forward, I see that if we have a couple of quarters in the range of the SEK 2 billion that we have now, I mean, then we will have a good load of factories and a good way forward. And that will most probably be filled more of what I referred to general base business than battery projects. Line Dovarn: And we will take another caller. Klas Forsström: Yes. Yes. Yes. Operator: The next question comes from Gustav Berneblad from Nordea. Gustav Berneblad: It's Gustav here from Nordea. Just coming back a bit to the tariff situation there of 400 bps. How much -- I mean, how much would you say that you're able to offset with the new production line of chillers in Virginia, meaning sort of looking at H2 2026, if we say sort of ballpark, is it fair to assume closer to 1 percentage point tariff headwind? Or is it less? Or if you can just comment a bit. Klas Forsström: And now I think when it comes to tariffs, let's start with a little bit of a joke and then I will come. Tariffs have a tendency to change depending on the President's mood. But if we take as an assumption, nothing is changing. If we take that as an assumption. I mean, the tariffs are built up by 2 components. One is if we deliver a full-fledged system to U.S., which we are when it comes to chillers, I mean, then what we have, that is, first of all, we have the general, the 15% tariff. Then there are other tariff components that is steel as an example. And then you have to add another tariff ingredients on that then on the steel part in what you have. When we start to produce in U.S., I mean, the first component is gone. Then the second component will be more or less gone due to the fact that if we can then supply with U.S. steel, et cetera, I mean, then we will have no effect. But if we need to supply as all other U.S. companies have to supply then steel outside U.S., I mean, then we have a tariff component. But if I sort of summarize it, everything will not disappear after Q2 because there is a little bit of residual. But if we follow our plans, the very large majority of this will disappear in H2. Am I fair to say that, Katharina? Katharina Fischer: You're exactly right. Gustav Berneblad: Perfect. That's very clear. And then coming back to the cost savings program in AirTech there. I mean, can you just give us a bit more nuance on how we should interpret this in terms of what you're actually doing? Is it mainly personnel and we will see a sort of a front heavy or more front-end loaded cost savings? Or how should we think this progressing in 2026? Klas Forsström: No, I've been talking so much. Maybe I hand this over to Katharina here. Katharina Fischer: For the program that we announced then in Q3, the one that to deliver SEK 250 million to SEK 300 million in savings, that will start to come into play already in the first quarter. So that program is progressing well to plan. Then there is a second part of that program that will come into play more in the second half. Gustav Berneblad: But is it possible to say anything if it's the weight of the cost program is more tilted towards Q1 here or H1 or? Katharina Fischer: Yes. I mean, towards the end of the year, it will be the full run rate, so to say, but it will start to build already from now. Klas Forsström: So you can put it a little bit like this. I mean, everything that has been executed by end of this year, I mean, that will month by month add up. And then you will have a second go, put it like that, that will start to add up from mid end of Q2. And then those 2 streams will then accumulate up to the total of SEK 250 million to SEK 300 million. Line Dovarn: We can take another caller. Operator: The next question comes from Anders Roslund from Pareto Securities. Anders Roslund: Yes. I have just one question regarding the margin in DCT in the fourth quarter. If adding back the 4% for tariff, is this relatively well reflecting the new product assortment? Or is it parts coming from the high-margin cycle and less? Or what sort of... Klas Forsström: I mean it's a very good question. And so the easy thing to deduct, if I call it like that, I mean, that is the 4%. That is just the way it is. Then we have other minor components, and that is, as you referred Anders, we have the shift in the product portfolio, the mix. That then brings down its slightly, let's say, 1 bp, 1% more or just to take a number there. Moving forward, if you keep the 4% then at the end of next year, that is gone basically then. Then what -- the way you should look upon this, that is when we then are ramping up the chillers, then that will gradually then improve a positive product mix by the end the second half or starting, I mean, mid-quarter 2. So you will have a little bit of cycle effect, but then let's call it the chiller effect then when that is gradually then moving up in margins. So in the beginning, now we have a negative product mix. And at the end of next year, you can sell relatively said, you have a positive product mix. Line Dovarn: But there's no cycle left in Q4 in the deliveries. Those have been completed. Anders Roslund: Okay. Excellent. And how do you see in general, you only talk about chiller production, how is the production ramping up for the other product categories? And how will that affect margins? Klas Forsström: That is -- if we take a CRAH as an example, there are some variations in between the CRAHs in margins. I mean, when you have a high density, high capacity CRAH, you have slightly higher margin. But CRAHs, as you know, look upon them as, call it, slightly lower margins, but a stable margin. A CRAH is CRAH, and we are good in producing that. So that is just adding up. And then, of course, if you produce 100 and then 200, you are a little bit better. But call it, not that much efficiency, more in between an efficient or, call it more a me-too type of CRAH. But there, I mean, there, as I referred to earlier, there you can say that has been the negative product mix at current that we are selling more CRAHs than versus cycles. Moving forward, I mean the CRAHs will be at a stable level, and then it will be a larger mix of chillers then. I hope that was -- well enough described. Anders Roslund: Excellent. No, that's okay for me. Line Dovarn: And I think we have another caller. Operator: The next question comes from Mats Liss from Kepler. Mats Liss: Well, looking at chiller production there in Italy, and I guess you will sort of move part of that sourcing to the U.S. gradually during the year. But what will happen in Italy? Will that capacity come down until you get sufficient amount of demand in the European market? Or could you sort of -- say something about... Klas Forsström: But It's a very good question, Mats. We are also gaining traction in Europe of chillers. We are actually also at current and there, we have no tariff effects. We are, to some extent, supplying Asia, from Europe. So without being -- because I cannot be too specific, but I don't see any, call it, overcapacity or worries that we will have not good enough coverage in our factories in Europe. When we have production up and running in U.S., I mean, not from day 1, but in a quarter, everything after a quarter that is sold in U.S. will be produced in U.S. if there is not a specific, call it, emergency that we need to supply it in between. So we will have a strong base capacity in Europe for Europe, but also towards Middle East and towards Asia. Mats Liss: Great. And I guess it sounds like you experience this very good demand in Data Center segment going into 2026 as well. And I just want to -- well, get a feel for, do you see customers maybe placing dual orders here to secure supply? Or is it sort of not possible for them to do that? Or could you say something in... Klas Forsström: I mean when you take a look upon the extraordinary order size we had in Q4 then and then take that into when will that be delivered, so to speak, will be delivered during 2026. I've said like this, I expect a turnover of plus 30% and maybe a turnover increase of plus 40% depending on customer preferences of deliveries in Data Center during the year. But then a large part of this SEK 9 billion order is also moved into 2027. And actually a few of those are moved into 2028. So I have never been this comfortable when it comes to the load situation in data center. '26 done. We can take some more. We have availability. But as you know, I mean, after Q1, it's not very much you can fill there. And then we have a good situation already now for '27. And there, we have at least 5, 6 quarters more to go when it comes to fill that up. And we have already started to fill 2028. We had a book-to-bill of 7x in the quarter. Is that prebooking? Or is it, call it, just customers that would like to have a relaxed situation when it comes to will they have it or not? I cannot say that. But that is how it is. We are well covered into 2027 and actually also into '28 to some extent. Line Dovarn: Thank you. I think we have Karl back on the line. We can take one question for you and then we have to finish off. Operator: The next question comes from Karl Bokvist from ABG Sundal Collier. Karl Bokvist: All right. So just a comment there on what you see ahead on the growth there. I assume this is talking about current prevailing currency rates, i.e., organic or assuming existing currencies, on the sales growth from the backlog to 30% to 40%? Klas Forsström: Yes. I mean what we reported, that is in, call it, year-end currency rate. And then currency move up and down, but you can say that the majority of what is currency neutral in a way that it is sold in U.S. and the majority after -- or pretty much all that will be produced after Q1 sort of everything that will be delivered after Q1 will also be produced in. So you may have a top line effect there, but you will not have a bottom line effect. Line Dovarn: Thank you very much. I think, we will finish off there. Thank you, Klas and Katharina for presenting today. Klas Forsström: Thank you. Thank you very much. Line Dovarn: Thank you, everyone, for listening in. And please feel free to reach out to us at Investor Relations if you have further questions or if you would like to meet up with us during the quarter. So thank you for listening and see you next time. Katharina Fischer: Thank you. Klas Forsström: Thank you.
Operator: Good morning, ladies and gentlemen, and welcome to Comcast Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please note this conference call is being recorded. I will now turn the call over to Executive Vice President, Investor Relations, Miss Marci Ryvicker. Please go ahead, Miss Ryvicker. Marci Ryvicker: Thank you, Operator, and welcome, everyone. Joining us on today's call are Brian Roberts, Michael J. Cavanagh, Jason S. Armstrong, and Steve Crony. I will now refer you to slide two of the presentation accompanying this call, which can also be found on our Investor Relations website, and which contains our Safe Harbor disclaimer. This conference call may include forward-looking statements subject to certain risks and uncertainties. In addition, during this call, we will refer to certain non-GAAP financial measures. Please see our 8-K and trending schedule issued earlier this morning for the reconciliations of these non-GAAP financial measures to GAAP. With that, I turn the call over to Brian Roberts. Brian L. Roberts: Good morning, everyone, and thanks for joining us. Before I turn the call over to Michael J. Cavanagh and Jason S. Armstrong to walk you through our results, I wanted to take a moment to say a few words about the team and the year ahead. We are at an inflection point, both in our industry and at Comcast Corporation. The business is changing rapidly, and competition has never been more intense. The choices we are making right now matter. I feel very good about how we are positioned, and it really starts with our leadership. Steve Crony joins us for the first time on this call today. From day one running this business, he challenged long-held assumptions and moved quickly to reset priorities around actions that will drive growth. We spent time last week at Steve's leadership meeting where he brought together the entire team following a major reorganization. And coming out of that, my confidence has only increased. There is a clear sense of focus and urgency. Everyone understands the priorities and is moving with speed and purpose. I think you will enjoy meeting Steve today for those that do not know him. And as Michael J. Cavanagh starts this year as co-CEO, I could not be more excited about him stepping into his role. We have worked side by side for a long time, and he brings an exceptional combination of strategic clarity and operating discipline. As we continue to pivot the company towards our six growth drivers, Michael J. Cavanagh is leading the strategy and execution of that shift. As we look ahead to the upcoming Winter Olympics, we are excited about the prospects for Team USA but more importantly, are reminded of the power of shared moments to bring people together across the globe. Like so many, I am heartbroken by the tragic events of recent weeks. And our thoughts are with the families and communities that have been deeply impacted. In a time of profound division, we hope the Olympic Games can offer a moment of connection for our country, and for people everywhere. Now I would like to turn it over to you, Michael J. Cavanagh. Thanks, Brian. Michael J. Cavanagh: 2025 was a year of meaningful progress for us. We moved with urgency to make decisive management, operational, and structural changes, resetting how we run our businesses and how we compete, all with a clear focus on positioning the company for sustained growth. A key step in that effort was appointing Steve Crony as CEO of Connectivity and Platforms, and I could not be more pleased to have him leading that business. Under Steve's leadership, we have made the most significant go-to-market shift in our company's history. We have simplified our broadband offering by moving away from short-term promotions toward a clear, transparent value proposition. Customers now choose from four nationwide speed tiers with straightforward, all-in pricing that includes our best-in-class gateway and unlimited data, along with a five-year price guarantee that brings predictability and removes long-standing complexity from the category. We also strengthened our wireless approach with new offers tailored to different customer segments, from premium unlimited plans for higher-value households to a twelve-month free line promotion designed to increase mobile awareness and attachment. At the same time, we began to simplify the overall customer experience with faster access to live agents, easier digital buy flows and activation, and same-day delivery. Those changes are beginning to show up in customer behavior. Voluntary churn continues to trend lower, NPS is moving in the right direction, adoption of the five-year price guarantee remains strong, and gig speed sell-in has improved meaningfully with approximately 40% of the base on gig plus tiers. We have also expanded the use of simplified market-based pricing and retention, including broader deployment of new everyday pricing. Refreshed packaging is driving higher Xfinity gateway attachment, enabling a more differentiated in-home experience, better streaming performance, and lower latency. Turning to wireless, I am pleased to share that we have modernized our MVNO partnership with Verizon, supporting continued profitable growth for Comcast Corporation, Charter, and Verizon. With these enhancements, we have an even stronger relationship with Verizon to enable our customers to have a world-class experience. With the addition of T-Mobile as a network partner for our business customers later in the year, we continue to have a capital-efficient mobile platform with a cost structure that supports a durable and growing convergence value proposition for our customers. Wireless continues to be a powerful driver of that convergence strategy, and 2025 was our strongest year yet. We added approximately 1,500,000 net lines, ending the year with over 9,000,000 total lines and roughly 15% penetration of our residential broadband base. That performance reinforces wireless as a key growth engine for the company while also strengthening customer relationships and lifetime value across our connectivity portfolio. Even as wireless competition intensifies, our broadband scale, industry-leading Wi-Fi, and improving offers position us well to grow wireless profitably while maintaining a disciplined long-term approach. And finally, we continue to make substantial progress on our network upgrade with roughly 60% of the footprint now transitioned to mid-split spectrum and a virtualized architecture. We are already seeing benefits from greater automation and the deployment of AI across the network to optimize the end-to-end customer experience. Our investments are delivering tangible operating benefits, including a 20% reduction in trouble calls and a 35% reduction in repair minutes where we have deployed FDX technology. 2025 also marks great progress across content and experiences. At parks, the opening of Epic Universe is already acting as a catalyst across Orlando, driving longer stays, higher per cap spending, and increased demand across our parks and hotels, reinforcing the attractive returns we see from continued investment in this business. In media, we have made meaningful progress at Peacock, improving EBITDA losses by approximately $700,000,000 for the year, and we are pleased with the successful launch of the NBA on NBC and Peacock late in the year, which is delivering strong viewership while expanding reach and engagement across our platforms. We strengthened our content pipeline with a long-term creative partnership with Taylor Sheridan, adding premium franchise-scale film and television IP. And finally, we have completed the spin of Versant Media, creating a focused, well-capitalized public company while enabling NBCUniversal to concentrate on driving profitability in our media business powered by best-in-class live sports, entertainment, and news across NBC, Peacock, and Bravo. Looking ahead, 2026 is about building on the changes we made in 2025 and advancing the next phase of our plan centered on levers that matter most. Our priorities in connectivity and platforms are clear: position the business for a return to growth, deepen convergence through wireless, and fully leverage our network leadership across residential and business services. This will be the largest broadband investment year in our history, focused squarely on customer experience and simplification, with the goal of migrating the majority of residential broadband customers to our new simplified pricing and packaging by year-end. In wireless, we expect a meaningful portion of customers currently taking a free line to transition to paid relationships in the second half of the year as engagement deepens and customers experience the value of the product, consistent with the progression we have seen over time. We will further simplify activation and service interaction with a focus on reducing call-ins, improving first contact resolution, and shortening speed to service. We will also lean into our network leadership as we complete upgrades across most of the footprint and start marketing multi-gigabit symmetric speeds and their differentiated capabilities, creating opportunities to move customers into higher value tiers over time. And in Comcast Business, we will remain focused on stabilizing small business while accelerating growth in mid-market and enterprise where demand for advanced, secure, and scalable connectivity continues to increase. 2026 will also be a defining year for content and experiences. It marks NBC's one hundredth anniversary, a century of leadership in broadcast and live storytelling, and a year in which NBCUniversal will deliver roughly 40% of the industry's major live events, bringing the biggest moments in media to audiences at scale. Sports remains one of our most durable strengths, with the full breadth of that portfolio on display. Beginning with legendary February featuring the Super Bowl on NBC and Peacock, followed by the Winter Olympics in Milan, and the NBA All-Star Game. All sold out. Later in the year, Major League Baseball returns to NBC and Peacock under a new agreement followed by the World Cup on Telemundo. And at Peacock, we expect another year of meaningful EBITDA improvement as we continue progressing toward breakeven even as we absorb the NBA rights. Our studio slate remains exceptional, led by the Odyssey from Christopher Nolan, the Super Mario Galaxy movie, and Minions three from Chris Melandandre, and Disclosure Day from Steven Spielberg. At Parks, 2026 marks the first full year of Epic Universe alongside the opening of Universal Kids Resort in Frisco, Texas, the debut of our first outdoor roller coaster at Universal Studios Hollywood, and groundbreaking on our new Universal Resort in The UK. So to wrap up, my focus remains squarely on growth. We have been consistent in investing behind the six growth engines that define our future while protecting one of the strongest balance sheets in the industry and returning substantial capital to shareholders. We like the position of both of our major businesses. Our broadband network and products are best in class, our customer experience keeps improving, and as the market shifts to multi-gigabit symmetrical speeds, we are well positioned to grow. We have the best hand in convergence, combining broadband leadership with a differentiated capital-light mobile business, and we are the market leader with small businesses and the fastest-growing provider in mid-market and enterprise. On the media side, we operate world-class theme parks and studios, and we are scaling a streaming platform that runs in concert with our television business delivering unmatched sport, news, and entertainment. Taken together, we feel very good about where we are positioned with the right assets, the right strategy, and the financial strength to perform through cycles and create long-term value. With that, I will turn it over to Jason S. Armstrong. Jason S. Armstrong: Thanks, Michael J. Cavanagh, and good morning, everyone. I will start with a high-level overview of our consolidated results, and then get into more detail on our businesses. Total company revenue grew 1% in the fourth quarter, benefiting from strength across our six growth businesses which collectively represent 60% of our revenue and grew at a mid-single-digit rate. Notably, theme parks, Peacock, and domestic wireless, three of our six key growth drivers, each grew revenue right around 20%. As we previewed, we are in an investment period. We are pivoting in the broadband business through changes to packaging and pricing and significant investments in the customer experience, all designed to stabilize our base and subsequently grow revenue in the category again. We are also absorbing the full cost of the first year of the new NBA contract in our content and experiences segment and expect that to scale over time. As a result, adjusted EBITDA in the quarter declined 10% and adjusted earnings per share declined 12%. We generated $4.4 billion of free cash flow in the quarter, which includes about $2 billion of a cash tax benefit related to an internal corporate reorganization. Recall, we received the P&L benefit associated with this in last year's fourth quarter, and at the time mentioned that the cash benefit from this would occur in 2025. So this quarter's free cash flow includes the benefit of that. Finally, during the quarter, we returned $2.7 billion to shareholders, including $1.5 billion in share repurchases. Now turning to our businesses, starting with Connectivity and Platforms. The competitive environment for broadband remains intense, similar to prior quarters, while we saw wireless competition step up towards the end of the fourth quarter. Against that backdrop, we continued to advance our new go-to-market strategy we launched earlier this year. While it is still early, we remain encouraged by what we are seeing, including lower voluntary churn, strong adoption of our five-year price guarantee, a significant improvement in take rates of gig plus speeds, and continued uptake of free wireless lines. We remain focused on transitioning the majority of our customer base to simplified, market-based pricing plans, and importantly, prioritizing getting to the other side of this transition as quickly as possible. As we have highlighted, this pivot comes with an investment. That includes rate reinvestment through simplified broadband pricing and offering free wireless lines, which impact near-term revenue, as well as higher operating costs tied to customer experience initiatives. These dynamics were reflected in the quarter through dilution to broadband ARPU growth and elevated marketing, product, and customer service expenses, contributing to the 4.5% decline in connectivity and platforms EBITDA. As we have said before, as we continue to invest through this transition, we expect incremental EBITDA pressure over the next couple of quarters until we begin to lap these initial investments in 2026. As we move past this investment period, we will have the vast majority of our base on new pricing and packaging for broadband, we will have a much higher percentage of our customers on gig plus speed plans which are substantially differentiated from fixed wireless and satellite offerings, and we will have a large base of free wireless customers moving into paying relationships with us. All tailwinds to our business at that point, which will better position us for long-term growth. Now let me get into some more details of the quarter, starting with broadband. Subscriber losses were 181,000, as the early traction we are seeing from our new initiatives was more than offset by continued competitive intensity. Broadband ARPU grew 1.1%, slight growth, but consistent with the deceleration that we had previewed reflecting our new go-to-market pricing, including lower everyday pricing and strong adoption of free wireless lines. Looking ahead, we expect further ARPU pressure for the next couple of quarters, driven by the absence of a rate increase, the impact from free wireless lines, and the ongoing migration of our base to simplified pricing. At the same time, convergence revenue grew 2% in the quarter, driven by 18% growth in wireless. We added 364,000 wireless lines, and similar to last quarter, nearly half of our residential postpaid connects came from customers taking a free line. Our free line strategy is a logical and, importantly, a rational competitive approach for us. It adds value to our core broadband product, builds familiarity in a tough-to-penetrate wireless market, and will convert to a paying relationship after one year. In a product category where we are firmly profitable and one which delivers strong bundling benefits to our core broadband business. We also continue to see a strong uptake of our premium unlimited plans, further strengthening our position in the higher-value postpaid market. In total, we now have over 9,000,000 wireless lines, with penetration of our residential broadband base above 15%. While the wireless environment has become more competitive, we remain confident in our strategy. Our converged offerings continue to deliver meaningful savings versus comparable plans from our competitors, reinforcing the value proposition we deliver to our customers. Looking ahead to 2026, we expect to convert the vast majority of free lines into paying relationships, which in turn should provide a meaningful tailwind to convergence revenue growth. Turning to business services, revenue increased 6%, and EBITDA grew 3% in the quarter. Results continue to reflect the dynamic we have been seeing for several quarters, with modest revenue growth in our small and medium business segment and strong momentum at our enterprise solutions business. In SMB, competitive intensity remains elevated, particularly from fixed wireless, but we are driving higher ARPU through increased adoption of advanced services, including cybersecurity and Comcast Business Mobile. Enterprise solutions continue to gain traction as we expand our customer base and deepen our relationships. This remains an area of investment and an important growth driver going forward. In addition, in 2026, we look forward to expanding our business mobile relationships through our T-Mobile MVNO. In content and experiences, there are a few items I would like to highlight. At theme parks, we delivered another strong set of results, with growth accelerating in the fourth quarter. Revenue increased 22% and EBITDA grew 24%, with EBITDA crossing the $1 billion level for the first time. This performance was driven by strong results at Universal Orlando. We are really pleased with what we are seeing from Epic, which continues to drive higher per cap spending and attendance across the entirety of the resort. While we are not yet operating at full run rate capacity, we have made meaningful progress expanding ride throughput, and we remain focused on scaling further over the next several quarters, with higher attendance, stronger per caps, and additional operating leverage over time. At studios, we have had great success with the Wicked franchise, which has now grossed well over a billion dollars worldwide. Our overall results reflect tough comparisons to last year's film slate, the timing of content licensing deals, and higher marketing spend associated with the higher volume of films this year. Turning to media, we successfully completed our spin of Versant on January 2, after the quarter closed, so our fourth quarter results still reflect a full quarter of ownership. We will provide pro forma trending schedules excluding Versant ahead of our first quarter earnings to help with comparability in forecasting as we go forward. Media revenue increased 6% in the fourth quarter, primarily driven by Peacock. Peacock revenue grew more than 20% to a record $1.6 billion, supported by strong distribution revenue growth of over 30% as paid subscribers increased 8,000,000 year over year and 3,000,000 sequentially, reaching 44,000,000 as of December 31. Advertising revenue at Peacock grew nearly 20%, benefiting from our strong sports lineup, including the premiere of the NBA, and the timing of the exclusive NFL game this quarter. Total advertising increased 1.5%, with strong underlying demand driven by our record upfront, continued strength from Sunday Night Football, which delivered the most-watched season in its history, and the launch of the NBA this quarter, partially offset by lower political advertising compared to last year. Media EBITDA declined in the quarter, primarily reflecting the addition of NBA rights. As we have discussed, we are straight-lining the amortization of these sports rights, which creates upfront EBITDA dilution, particularly in the first season, with game counts driving the quarterly realization of this expense. While the fourth quarter represented about 25% of our total games for the season, the first quarter will be the peak volume period with roughly 50% of our games played, which will also result in peak EBITDA dilution. Over time, we expect to offset this impact through advertising growth and subscriber acquisition and monetization across both linear and Peacock. At Peacock, while losses came in at $552,000,000 for the quarter, reflecting the addition of NBA rights and our exclusive NFL game, full-year Peacock losses improved over $700,000,000 year over year. Peacock has reached meaningful scale and continues to demonstrate improvement, giving us confidence in our ability to absorb near-term investments, including the first full year of the NBA. And in 2026, we expect Peacock losses to meaningfully improve again. I will wrap up with free cash flow and capital allocation. For the full year, we generated $19.2 billion of free cash flow, up significantly year over year and the highest year on record. We benefited in 2025 from lower cash taxes, favorable working capital comparisons, particularly related to studio production spend, and lower capital spending. As we look towards 2026, it is important to note that one-time cash tax benefits in 2025, including the $2 billion mentioned upfront, will not recur. In addition, recall, we said the benefits from new tax would average about a billion dollars per year for the next five years. The timing of those benefits is lumpy. We saw an outsized benefit in 2025 and expect the benefit to be significantly lower in 2026. Finally, as you can see from their filings, the Versant spin-off removes a significant pool of cash flow from our operations. Total capital spending in 2025, inclusive of CapEx and capitalized software and intangibles, declined 5% to $14.4 billion. This includes a 17% decline to $3.6 billion at content experiences, driven by lower investment at theme parks following the completion of Epic Universe earlier this year, alongside relatively consistent capital spending of $10.5 billion at connectivity and platforms. Looking ahead to 2026, we expect total capital spending to be relatively similar to 2025, with spending at both CMP and C&E remaining relatively consistent year over year. Turning to leverage, our balance sheet remains incredibly strong, ending the year with net leverage at 2.3 times. As you know, the Versant spin was capitalized in a way that positioned them for success, with low leverage and ample liquidity. As a result, our leverage ratios will increase slightly on the back of the spin-off. Our intention will be to migrate back to the 2025 ending leverage of 2.3 times. On capital returns in 2025, we returned nearly $12 billion to shareholders, including nearly $7 billion in share repurchases, resulting in a mid-single-digit year-over-year reduction in our share count. Consistent with what we articulated at a conference last month, we are maintaining our annual dividend at its current level of $1.32 per share. In addition, our shareholders received a dividend in kind through the distribution of Versant shares and now will be able to participate directly in Versant's capital allocation priorities, including dividends. As a result, our investors should see higher total dividends in 2026, marking our eighteenth consecutive year of dividend growth. As we look ahead to next year, our capital allocation strategy remains unchanged. Our priorities are to invest organically in our growth businesses, maintain a strong balance sheet, and return capital to shareholders. This formula has served us well and will continue to guide our approach. With that, before turning back to Marci Ryvicker for Q&A, let me welcome Steve Crony as this is his first earnings call, and turn it over to him for a few opening remarks. Steve? Steve Crony: Thanks, Jason S. Armstrong. I appreciate it, and it is great to be on the call. I look forward to getting to know those of you I have yet to meet. As Brian Roberts and Michael J. Cavanagh have outlined, we have been moving with urgency on a number of important changes across the business, and the team is focused and aligned on executing against the plan. When I think about what success looks like, it starts with being honest with ourselves and clearly defining our reality. The market is going to remain intensely competitive. Success is not about waiting for the environment to change; it is about how we perform inside of that environment. We are executing against a clear, actionable plan to change the trajectory of the business. We are focused on simplifying how we operate, eliminating redundancy, and aligning the entire team around a single set of growth objectives, all of which are centered around improving our competitiveness in the marketplace. A lot of the progress Michael J. Cavanagh outlined on pricing, mobile penetration, network modernization, and the customer experience is exactly what this plan is designed to deliver. Fewer distractions, clear ownership, and accountability, and much better execution. From there, we stay focused on our core pillars. First is the network, which remains our foundation. We offer gig Internet and wireless to 65,000,000 homes, the largest converged network in the country. Our job is to stay well ahead of demand on speed, performance, and capacity. Usage continues to grow at double-digit rates, and as competition intensifies, a scalable, reliable, and increasingly intelligent network will become an even more important competitive advantage. Second is the product. This is where we have our clearest differentiation. Customers make decisions based on the quality and reliability of their Wi-Fi, and our Wi-Fi reliability ranks number one in our footprint based on independent open signal testing. We have a Wi-Fi-centered strategy designed to reliably support hundreds of connected devices and deliver a seamless experience in and out of the home. Mobile then builds naturally on this foundation. When customers take mobile with broadband, lifetime value increases substantially, and those customers are more meaningfully loyal. Third is the customer experience, which is our biggest opportunity by far. We must make it easier to do business with us and build a more loyal customer base through greater price transparency, more simplicity, fewer friction points, and consistently getting it right the first interaction. And importantly, the same operating model applies to Comcast Business, where we are accelerating growth in enterprise while continuing to lead in SMB, with a clear shift towards advanced, multiproduct solutions. When we get these three critical pieces right, I am determined to improve our broadband performance year over year in the near term, return to revenue and EBITDA growth, drive higher mobile penetration, and create much better customer outcomes, which include higher relationship and transactional Net Promoter Scores, lower effort, and stronger loyalty. All of this is within our control. It does not assume relief in the competitive environment, and it does not rely on any one lever. It is about executing better with the industry's best products, a differentiated Wi-Fi-first experience, and a unified team focused on growth. With that, back to you, Marci Ryvicker, for Q&A. Marci Ryvicker: Thanks, Steve Crony. Operator, let's open the call for Q&A, please. Operator: Thank you. We will now begin the question and answer session. Please press star then the number one on your touch-tone phone. If you wish to be removed from the queue, please press star then number two. If you are using a speakerphone, you may need to pick up a handset first before pressing the numbers. Once again, if there are any questions, please press star, then the number one on your touch-tone phone. The first question is coming from Michael Ian Rollins from Citi. Your line is now live. Michael Ian Rollins: Thanks. Good morning. If I could dig into the broadband side of the business for a moment. First, in terms of moving from more localized rate plan management to national, can you give us an update in terms of what you are seeing on both the intake and retention of customers? And then secondly, can you discuss more of the wireless opportunity? And in terms of the converged bundle, with the free line promotion, if there is an opportunity to further accelerate quarterly wireless net adds. Michael J. Cavanagh: Thanks, Michael Ian Rollins, for the question. I appreciate that. So let me start with broadband. As was highlighted in the opening, it is our largest go-to-market shift in the company's history. And on top of the go-to-market shift, we are investing across marketing, product differentiation, and the customer experience. And we are encouraged by what we are seeing early. We have seen year-over-year improvement in voluntary churn, we have seen an active migration of the base to more simplified transparent pricing which has long-term benefits, we have a strong adoption of the five-year price guarantee further stabilizing the base, and we are seeing continued mix shift toward our gig plus tiers, which is a clear differentiator from fixed wireless and satellite. And on top of that, even though we have the national price points, we still maintain flexibility market by market. We have a data-led approach, and we look at competitive intensity and will adapt our pricing accordingly as we approach that. In reference to mobile, there is just a huge opportunity in mobile. 65,000,000 passings as I highlighted earlier. We are really excited about the opportunity there. It is one of the largest and fastest-growing markets, $200 billion TAM, and we strongly believe we have the right to compete and win in that marketplace. Customers are responding to the value. We did see competition intensify a bit in the fourth quarter, but we still had our best year ever in 2025 with wireless net additions. Another positive is in the back half of the year, about 50% of our residential postpaid phone connects were free lines, creating a meaningful monetization opportunity as we move forward. Additionally, we have strong early results in our premium unlimited tier that we launched this year, expanding our reach into the higher end of the market, enabling gig download speeds, 4K streaming, and guaranteed device upgrades, all at a price that is well below the market. Additionally, we have a structural advantage when it comes to mobile. 90% of Xfinity mobile traffic is offloaded on our own network, and we have lower acquisition costs by selling into our existing broadband base. If you take all that together, we are 15% penetrated today, and we have a long runway ahead of us. Marci Ryvicker: Thanks, Michael Ian Rollins. Operator, next question, please. Operator: Thank you. Next question is coming from Craig Moffett from MoffettNathanson. Your line is now live. Craig Moffett: Hi. Two questions, if I could. First, Brian Roberts, I wonder if you could just reflect a bit on the process that we have seen play out with Paramount, Netflix, and Warner Brothers Discovery and how you think that sort of shapes your thinking about Peacock with respect to scale or partnerships and what have you? And then second, Michael J. Cavanagh, if you could just quickly return to what you said in your prepared remarks about the modernization of the contract with Verizon. I wonder if you could just put some meat on the bones for us with respect to the MVNO agreement as to what might have changed. Brian L. Roberts: Okay. Thanks, Craig Moffett. Let me start and kick it over to Michael J. Cavanagh and feel free to talk on either subject. I do not think we have too much data on the Verizon piece that we just covered. But in terms of Warner Brothers, I mean, what can you say? It is still underway, obviously. But I think we saw an opportunity to see if we could build value for the Comcast Corporation shareholders looking at their international reach, which would have been additive. But once it looked like all cash, we were just not interested in, at these values, stretching our balance sheet to do something like that. So I do not know how much more we can say except that it forced us in the journey to really take a good look at what we have and what we are building. And I will let Michael J. Cavanagh expand a little bit on this, but I think we have done a super job. The businesses that we would have contributed in a very creative structure, putting the two companies together is post-verse and spin. And they are trying to do the same thing with their cable nets that we have already done. We have a wonderful studios business, as you just heard in the opening, creating franchises. 2026 should be a great year for the film business. We are excited with the number of the films coming out. Off of that business, we have two studios in the television business, which is feeding Peacock. Your question on Peacock, I think we made a lot of progress in 2025, and we are getting there. And there is an integrated media business that is profitable, that has got a lot of sports, it has got someday Taylor Sheridan, today it has got great pay-one movies and wonderful shows. All Her Fault, Love Island, really some breakthrough content in 2025 with more coming with now the Olympics, and the Super Bowl, and the World Cup, and on and on, and the NBA. So I just think we came to this late because of our Hulu one-third ownership, which we have been able to monetize. And so finally, this is the theme park business. And so all three of those businesses put us in a very different kind of business than perhaps what you are witnessing with Paramount, Netflix, and Warner Brothers, what their ambitions may be. So I think we are very, when we sat and looked at our businesses, we are very confident and comfortable that we are in the right part of the industry. We have separated the businesses that have more strategic issues that have to get resolved with the cable nets, and Mark Lazarus is off to a great start trying to do that with Versant. And so I think we take a wait and see. It has stirred the pot. I would end with this one thought. A lot of companies are, what does this mean to me? And there are a lot of conversations on whether, you know, there are opportunities to build value, and we are always open to that. So we are looking at ways to creatively compete, succeed, and go into a part of the business that perhaps is not the same as, quote, everybody else. And I think we are doing a great job of that. Michael J. Cavanagh, do you want to expand on that at all? Michael J. Cavanagh: I think you said it well, Brian L. Roberts, but I will just add that the Versant spin did, you know, leave us by design with the three growth businesses that Brian L. Roberts described within NBC. And I think it is a microcosm of really across the whole company. My focus over the last eighteen months has really been to make sure the management teams and leaders in all of our businesses are properly focused on dealing with the challenges that some of the legacy businesses within our mix have. And not let that take away from the focus of putting resources and energy and ambition behind those parts of the business that have growth opportunities, and that has been the focus. And I think you see with Versant set off on their course, I think the remaining businesses of NBC were focused on driving top-line growth and then converting that into the bottom line as time passes, and you see that happening. I think one other thing I would add on that score is it is competitive. As Steve Crony said, we are operating in very competitive markets across all the businesses. And one other area of focus for me, Steve Crony, and others across the business is to make sure that in these competitive times, we make sure to take advantage of all the opportunities we have across the businesses. Not that we were not on that previously, but I would say the energy of making sure that we are using all parts of the company to help the business. We have been very strong at this broader notion called symphony over time, but I think we have gotten a lot more tactical in the last six, nine months on a week in, week out basis with a real cadence around what can NBC be doing to help the connectivity business and, likewise, what the connectivity business, for example, can be doing to help Peacock. So I think there are opportunities ahead of us to make sure we execute that at a high level. So I think that is what I would add on the NBC side of it all. Going to Verizon, great. Not much to add there. I think we are, you know, we amended the long-standing agreement, the partnership we have. It is a good arrangement for all parties involved. It is modernized, and it is a foundation for mutual profitable growth as we continue to build the business together. So as you zoom out, I think what was important to us, what is important to us, going back to my comments just now, is that we take advantage of the opportunity that you and others have pointed out that we have in connectivity. I think we have a right to win. We are across 65,000,000 homes with gig plus speeds, broadband on a path to multi-gig symmetrical. And we can today sell gig speed plus mobile plans with the best devices across a leading network, and that is a real opportunity for us to execute against. And so our agreements allow us to feel confident that we are well positioned with the extension of the agreements to continue to do that. Marci Ryvicker: Thanks, Craig Moffett. Operator, next question, please. Operator: Thank you. Next question is coming from Jessica Reif Cohen from BofA Securities. Your line is now live. Jessica Reif Cohen: Thank you. Maybe continuing with the theme of potential consolidation. Can you step back and talk about how you are thinking about your asset portfolio over the next twelve to twenty-four months or longer? And what would need to change for you to consider a different structural approach to the media assets to recognize the value and potentially strategic flexibility? Because for the first time in a really long time, there are clear values for different parts of the media business versus the current conglomerate multiple that you are unfortunately getting. And other areas of the business that are scaling up. So how do you think about the next couple of years? And then just drilling down to Peacock for a second, your 44,000,000 subs now, and I am just wondering what the levers are to narrow the losses. Is it pricing? Is it ad loads? CPMs? Do you manage turnarounds? Sports, you know, seasonality? What are the milestones that we can look for to, you know, for Peacock to actually get to breakeven and sustain profitability? Michael J. Cavanagh: Sure. So it is Michael J. Cavanagh. I will jump in there. So I think, piling on to what Brian L. Roberts and I had just said, I think I would add to it that we do not really see that there is a strategic advantage or making NBCUniversal stronger by separating it from the cable side of the house or putting it outside of Comcast Corporation. So start there. So the advantages we have sitting inside the company do not get stronger by being smaller as a standalone entity is our view. What our view is, as I just said, is to create value by executing against the plans we have. And the second part of your question, I think one of the big ones, I do not think there is any doubt about the strength and value creation opportunity that we have in parks. Leaning in heavily to that. I do not think we need anything more than just the team we have and the resources that we can put behind it. Very much the same in the studio business. And so the real work to do is on the media side, execute now post-Versant on the integrated domestic strategy to have a broadcast business aligned with a streaming business in Peacock, that adds to it the pay-one movie windows from our studios, as well as the strong sports news and entertainment that goes along with it. To drive Peacock towards profitability, as Jason S. Armstrong said earlier, we made great strides in 2025, and we will do the same in 2026. When it comes to the path to doing that and particularly the NBA side of it all, I think what you are seeing is the strength of the content, especially new content, is price increases. So we successfully took a $3 price increase last summer, late summer, and held the full-year growth that we have seen in subscribers. You see it in advertising, with growth there and, you know, for the note on the NBA, we have seen really nice success in the NBA thus far with adding, you know, something like 170 advertisers in the NBA. Great demand. 20% of those advertisers are new and basically sold out on our NBA season, so we feel very good on that score. Then as time passes over several years, 2025 to 2028, as our affiliate deals renew as opposed to they do not accelerate simply because we took on new content. So we will see that revenue stream build as those multiple levers are the levers that over the period of time ahead bring Peacock to profitability in the overall media segment. To sustainable profitability alongside parks and studios. Marci Ryvicker: Thanks, Jessica Reif Cohen. Operator, next question, please. Operator: Certainly. Next question is coming from John Hodulik from UBS. Your line is now live. John Hodulik: Great. Thanks. Maybe a quick one for Steve Crony. Talk about the competitive environment in high-speed data and just sort of how that has evolved over the last several months? Michael J. Cavanagh mentioned at our conference that they were seeing you guys are seeing more competition on the fiber side. Just want to get a sense for whether or not that has continued into January. And then maybe for Jason S. Armstrong, you referred to the biggest year investment in the broadband business. And it sounds like your point is sort of incrementally accelerating declines in the first half with C&P EBITDA. Are you suggesting or do you guys model out that those declines will improve in the second half of this year or that we can actually get to EBITDA growth? And when do you guys expect that to happen? Steve Crony: John Hodulik, great to hear from you. So in reference to the competitive environment, in the fourth quarter, we did see a more competitive environment from fiber. And that remains. It is just, you know, I think we assume that is going to happen continually as we go forward as I already mentioned. You know, from a fixed wireless perspective, it stayed pretty consistent, and we are seeing stability there. I think as we are all aware, the mobile environment got significantly more competitive within the quarter. So as, you know, as discussed, we built the plan assuming the environment stays the same, we will continue to operate accordingly. Jason S. Armstrong: Yes. John Hodulik, I will take your question on EBITDA and just sort of pacing through the year. I think you are right. In upfront remarks, we talked about sort of the fourth quarter and into the first half of next year. That is going to be a period characterized by incremental investment, which obviously we have talked about to feed several of the initiatives Steve Crony has walked you through. We did not take a rate hike, at least in the first part of this year, in broadband. So that is going to impact ARPU, as we said, over the first couple of quarters. As we look to the back half of the year and really sort of zooming out, you know, we will have a far greater percentage of our base and, you know, well over 50% and creeping into sort of the vast majority on new pricing and packaging, which is really sort of the intention here, really stabilize the base, create durable pricing and packaging, and really sort of lock it down from a churn perspective, and create monetization mechanisms on top of that. So wireless being the biggest one. We sort of came into this year saying, much like we did end of last year, you know, Steve Crony and team focused on how do you go accelerate wireless. And part of this was the low to mid-tiers of the market. We had a little bit of an awareness issue. We went after that with free lines. Come try us for a year, and we can monetize it after that and move you into a paying relationship. I think we have great confidence that the vast majority of our lines will move into a paying relationship. And then we took on the high end with the premium unlimited plans that Steve Crony has mentioned. We are off to a great start with those and having a lot of success. So as you look at the back half of the year, I think one of the things that gives us confidence is, a, we start to lap some of the incremental investments we made starting in 2025. And b, we will get into monetization of what is probably the biggest vehicle we have out there, is free wireless lines moving into paying relationships. So I will stop short of giving a full EBITDA guide. I would tell you in the back half of the year, we would expect improvement. Marci Ryvicker: Thanks, John Hodulik. Operator, we are ready for the next question. Operator: Our next question today is coming from Kutgun Maral from Evercore ISI. Your line is now live. Kutgun Maral: Great. Thanks for taking the question. Was hoping to dig in on the theme parks. Can you expand on the trends that you are seeing there and outlook for the business? Epic seems to be delivering on what you had hoped for in terms of driving higher per caps and attendance across Orlando. You touched on this a bit earlier, but perhaps you can discuss the operational or financial priorities for its second year. And whether you are seeing any shifts in competitive posture in that market. And any more color on your broader parks portfolio would be appreciated as well. Thank you. Michael J. Cavanagh: Okay. Good. It is Michael J. Cavanagh. So I think we could not be more pleased with Epic. You know, it was a big swing, as everybody knows. The biggest park opened in the country and maybe beyond the world in twenty-five years. Lots of excellent technology. The theming is incredible. So to sit here and look back on the achievement that the team made of getting it, you know, successfully opened and ramping it with more ramp still to go as we head into 2026. And by the end, we will, I think, of this coming year, I think we will be, you know, fully ramped up in that park. But I think you said it well, and it was in my earlier remarks. The point of it was to lift all of Orlando, and that is in fact, you know, what it has done. So when you level the whole thing up, you know, having taken this fourth quarter that we just ended and the first time that the parks business has crossed $1 billion of EBITDA in a quarter is a great achievement. We have had a phenomenal year with Epic, and I think the plans continue to invest behind that park in the fullness of time, but I think this year is a year where we continue to drive the original agenda, which is to fill up our hotels, which is the case. We have, you know, we added 2,000 rooms. Our average daily rate in the hotels in Orlando is up 20% and occupancy up 3%. So we, again, feel great. It is a continuation in the near term. More broadly in parks, as you know, last year, we secured and have recently got the national level approvals for our park in The UK. We will be off opening the kids' park in Frisco, Texas, later this year. Japan delivered its second-best EBITDA year in the history of our business. So there is a lot I feel good about. Great team under Mark Woodbury. Plenty of enthusiasm to keep building behind the successes that we have seen. But going back to the top, I think when you have a moment like the ambition of opening Epic and succeed, I think it makes us all feel good about the future of the business ahead of us. Kutgun Maral: Thanks, Kutgun Maral. And Marci Ryvicker: Operator, we will take our last question, please. Operator: Thank you. Our final question today is coming from Michael Ng from Goldman Sachs. Your line is now live. Michael Ng: Hi. Good morning. Thank you for squeezing me in. First, just on the comments around the broadband investments this year, I was just wondering if you could just expand on that a little bit more. Is that more in kind of customer relationships and pricing? Is that more on the CapEx side? And then relatedly, I wanted to ask if there was a shift in posture in terms of pursuing some of these premium unlimited plans. It just feels like, you know, a good opportunity to lean into some of the potential jump walls over the next, you know, year or two just given the Apple iPhone cycle. Just would love your thoughts there. Thank you. Steve Crony: So, yeah, in reference to broadband, I would say it leans much heavier into our go-to-market pricing strategy. As we look at it, we did a few things. We simplified it considerably as we discussed. Down to four tiers. We are all-inclusive now with those tiers. One positive in being all-inclusive is we have more customers taking our gateways, which we believe are best in class, and they will get the feature benefits of that over time. But a big part of the investment is around migrating our base into the new pricing and package in a simplified way. So we are managing through that now. And as Jason S. Armstrong highlighted a little bit earlier, we will see the heavy majority of our customers in the new pricing and packaging. Additionally, we did lower our everyday prices, which makes us much more competitive in the marketplace. And for those customers who may have a promo role, it is much more manageable now. And then the biggest driver is the free wireless line. And importantly, lean into that space, you know, big market ahead of us, as I mentioned. Substantial improvement in CLV there. And greater loyalty from those customers that have both products that have or converge households. So we will continue to lean into that and push forward. So that is the bulk of the investment that we are making around the broadband. Michael J. Cavanagh: And I do think that is the case. You know, investment, it is less the capital side where our network has been steadily doing what we need to do. The investment, you know, language is about putting more value to the customer, getting them on new pricing and packaging in a variety of ways that is just seen in, you know, seen through EBITDA. And I think on the premium side, I do think that is, and as Jason S. Armstrong said in his remarks earlier, getting more exposure to our broader base through exposure to the free line for one year is a strategy to get breadth of exposure, but our ambition is to be a leading provider competing against all segments. And so the launch of Premium Unlimited has been directly targeted at being relevant in that space versus our earliest offers of by the gig, which targeted or succeeded in a different segment. So we are pleased with what we are seeing, and it gives us the opportunity, as you suggest, to think about where and when to lean in, you know, further. I just would end by saying that I hope you feel like I do that there is a bounce and an energy with the new team. And I think, Steve Crony, good luck. We are all counting on you, and I think you are off to a great start. Marci Ryvicker: That concludes our fourth quarter earnings call. Thank you all for joining us. Operator: Thank you. That does conclude today's conference call. A replay of the call will be available starting today at 11:30 AM Eastern Time on Comcast Corporation's Investor Relations website. Thank you for participating. You may all disconnect.
Operator: Good morning, and welcome to the Allegro MicroSystems third Quarter Fiscal Year 2026 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jalene Hoover, Vice President of Investor Relations and Corporate Communications. Please go ahead, ma'am. Jalene Hoover: Thank you, Michelle. Good morning, and thank you for joining us today to discuss Allegro MicroSystems' Fiscal Third Quarter 2026 Results. I'm joined today by Allegro's President and Chief Executive Officer, Michael Doogue, and Allegro's Chief Financial Officer, Derek D'Antilio. They will provide highlights of our business, review our quarterly financial performance, and share our fourth quarter outlook. We will follow our prepared remarks with a Q&A session. Today's call includes remarks about future expectations and plans, which are forward-looking statements. Such statements are based on current expectations and assumptions as of today's date and are subject to risks and uncertainties that could cause actual results and events to differ materially from those anticipated or projected on today's call. The company assumes no obligation to update these statements, except as required by law. For a discussion of these risks and uncertainties, please refer to today's press release and the Risk factors contained in our periodic filings with the SEC. Additionally, we will refer to non-GAAP financial measures during today's call. Today's earnings press release, which is available on the Investor Relations page of our website at www.allegromicro.com, contains important information about our non-GAAP financial presentation and also includes reconciliations of our non-GAAP financial measures to the most directly comparable GAAP measures. This call is also being webcast, and a replay will be available in the Events and Presentations section of our IR page shortly. It is now my pleasure to turn the call over to Allegro's President and CEO, Michael Doogue. Michael? Michael Doogue: Thank you very much, Jalene, and good morning, and thank you all for joining our third quarter earnings conference call. We continue to see positive momentum across the business, once again achieving growth in bookings and backlog to multi-quarter highs, and securing significant design wins in our strategic focus areas led by ADAS, XEV, and data center. This momentum has enabled us to deliver strong third quarter results with sales above the high end of our guidance range at $229 million and EPS above the midpoint of our guidance range at $0.15. E-mobility led continued growth in third quarter automotive sales. Our automotive sales growth was once again fueled by Allegro content gains and the increased adoption of XEV and ADAS systems in cars. This momentum is reflected in our third quarter automotive design wins where e-mobility led the quarter. In ADAS, we secured key wins for position sensors and motor drivers in electronic power steering systems. We also had several design wins for higher dollar content steer-by-wire systems with OEMs in North America, China, and Europe. In XEV, we won several designs with our current sensor ICs and onboard charging systems, and high voltage traction inverters. In our industrial and other end markets, sales growth was again led by data center, establishing a new quarterly record at 10% of sales, up 31% sequentially. The rapid expansion of higher power AI servers continues to drive increased demand for our fan driver ICs. Additionally, our market-leading high-speed current sensors are ramping in data center power supply applications, where we enable crucial improvements in efficiency and power density. We are pleased to report that current sensors were a growing contributor to data center sales growth. Looking ahead, we are also building another growth vector in the data center with our isolated gate driver ICs. We recently released our first isolated gate driver IC for silicon carbide transistors, and we are broadly sampling this new IC to market leaders in the data center power supply market. Our growing product portfolio and strong market pull were also evident in our industrial design wins where data center continued to lead third quarter wins. Our motor drivers for cooling fans represent the majority of data center wins in the quarter, with current sensors also securing meaningful wins and driving future content gains. Sales for many of these new wins will ramp within calendar year 2026. To further capitalize on our industrial opportunities, we conducted a Robotics Roadshow in the US, Japan, and China. This focused customer activity confirmed new wins and pilot production ramps with market leaders in quadruped and humanoid robots. Our customer engagements validated our high content opportunity in robots, including up to 150 Allegro sensor ICs, and 50 of our power ICs in advanced humanoid robots. Let me now pivot to our focus on relentless innovation. During the quarter, we introduced an innovative current sensor that cuts power-related losses by up to 90%, enabling new levels of power density in XEV and data center applications. This IC can measure up to 200 amperes of current in a very tiny form factor and is gaining broad customer interest while deepening our competitive advantage. For some perspective, the maximum current consumed by the average American household is 200 amperes, and our new sensor can measure 200 amps of current in a package form factor that is less than half the size of a postage stamp. As I mentioned earlier, we also expanded our power through isolated gate driver portfolio by releasing our first IC that drives a broad array of silicon carbide transistors. Our isolated gate driver ICs present a significant content uplift in automotive and industrial markets. We have sampled our new silicon carbide driver to a broad group of industrial customers, and we are also sampling market leaders in the XEV charger and inverter markets. We also attended CES this quarter. Robotics was the highlight of the show and a hot topic of conversation with our customers. We had dozens of customer meetings at the show, and it is clear that customers view our highly differentiated market-leading TMR sensors as a key enabler for their next-generation platforms. Additionally, existing and new customers confirmed our belief that Allegro's unique motor driver ICs allow them to make smaller, quieter, and more efficient electric motors in both automotive and industrial applications. In summary, we are seeing positive momentum across the business and continue to execute on our strategic priorities. We are excited to share more regarding our strategy, growth drivers, and target financial model at our upcoming analyst day in a couple of weeks. I'll now turn the call over to Derek to review the Q3 2026 financial results and provide our outlook for the quarter. Derek D'Antilio: Thank you, Michael, and good morning, everyone. Starting with our third quarter results, net sales were $229 million and non-GAAP earnings per share were $0.15. As a percentage of sales, gross margin was 49.9%, operating margin was 15.4%, and adjusted EBITDA was 20.1% of sales. Total Q3 sales increased by 7% sequentially and 29% year over year. Sales to our automotive customers increased by 6% sequentially and 28% year over year, and within auto, eMobility sales increased by 46% year over year. Industrial and other sales increased by 11% sequentially, and 31% year over year led by continued strength in data center to record levels. Distribution sales increased by 11% sequentially and 39% year over year. End market demand remained robust and both sell-in and POS increased in the quarter. From a product perspective, magnetic sensor sales increased by 5% sequentially, and 21% year over year, and sales of our power products increased by 9% sequentially and 43% year over year. Sales by geography on a ship-to basis were as follows: 30% of sales in China, 27% in the rest of Asia, 17% in Japan, 15% in The Americas, and 11% of sales in Europe. Now turning to Q3 profitability. Gross margin was 49.9%, an increase of another 30 basis points sequentially. Operating expenses were $79 million, an increase of approximately $3 million compared to Q2 largely due to variable compensation. Operating margin was 15.4% of sales, an increase of 150 basis points compared to 13.9% in Q2 and 10.8% a year ago. The effective tax rate for the quarter was 7%. Third quarter interest expense was $4.7 million. Third quarter diluted share count was 186 million shares. And net income was $29 million or $0.15 per diluted share. EPS increased by 15% sequentially and 114% year over year on sales increases of 729%, demonstrating the significant operating leverage in our business model. Moving to the balance sheet and cash flow. We ended Q3 with cash of $163 million and our term loan balance was $285 million. Cash flow from operations was $45 million, CapEx was $4 million, and free cash flow was $41 million or 18% of Q3 sales. From a working capital perspective, DSO was forty days compared to forty-five in Q2. And inventory days were one hundred and thirty-three days compared to one hundred and thirty-five in Q2. Finally, I'll turn to our Q4 2026. We expect fourth quarter sales to be in the range of $230 to $240 million. The midpoint of this range equates to a 22% year over year increase. Additionally, we expect the following on a non-GAAP basis: Gross margin to be between 49-51%. The midpoint of this range equates to an increase of 440 basis points compared to 2025, again showing the operating leverage in our business. Operating expenses are expected to increase by approximately 3% sequentially largely due to annual payroll tax resets. And earlier this month, we repriced our term loan down another 25 basis points to SOFR plus 175 basis points. This repricing reflects our lenders' confidence in our business model and our financial discipline. Interest expense is projected to be $5 million in Q4, which includes approximately $700,000 of expenses related to this repricing. We expect our tax rate for the quarter and the full year to be 8%. We estimate that our weighted average diluted share count will be 186 million shares. And as a result, we expect non-GAAP EPS to be between $0.14 and $0.18 per share. Now I'll turn the call back over to Jalene for Q&A. Jalene Hoover: Thank you, Derek. This concludes management's prepared remarks. Before we open the call for your questions, I'd like to share our fourth fiscal quarter conference lineup with you. We will attend Morgan Stanley's Technology, Media and Telecom Conference on March 2 in San Francisco, and Loop Capital Markets Seventh Annual Investor Conference virtually on March 9. And finally, we are excited to host our upcoming Analyst Day event on February 18 in Boston and look forward to seeing many of you there. We will now open the call for your questions. Michelle, please review Q&A instructions. Operator: Thank you. Star one one again. To provide the opportunity for everyone to ask a roster. Our first question comes from the line of Timothy Arcuri with UBS. Your line is open. Please go ahead. Timothy Arcuri: Thanks a lot. Derek, if I look at gross margin, revenue came in above the high end, but gross margin was barely at the midpoint. And then in the guidance, it's a little the, you know, the sort of incrementals are a bit below the 60 to 65 you've been talking about. Can you talk about that? Derek D'Antilio: Yes. Sure, Tim. So in the quarter, I would say that the gross margin was largely geographic and product mix. What I mean by that is China was 30% of our sales in the third quarter. And so that drives the gross margins down a bit, about 10 basis points below the midpoint of our guidance, still 30 basis points above last quarter. And on a positive note, as I've talked about in the past, we're expecting gross margins to be between forty-nine percent fifty-one for the March, which is actually better than we expected originally because coming into that March, we always expect to have some pricing friction. But two things are happening in this March. One is with Chinese New Year, China is a smaller piece of the overall mix. And number two, as we've talked about in the past, we expect pricing this year to be far less pronounced than it was last year. Timothy Arcuri: Thanks. And then, can you just talk about sell-in versus sell-through, and whether that's, you know, that's kind of been a tailwind, but it seems like that tailwind, you know, sounds like they were about equal. So that, you know, tailwind's kind of you know, gone away. So you're gonna get back to shipping to, you know, to sell through? Derek D'Antilio: That's exactly right. For the past about four quarters leading up to this, we had a significant POS far exceeded sell-in, right, as they were burning down inventories. Our distributor inventories are down nearly 50% over the last almost five quarters right now. This quarter, POS and sell-in were close to each other. Sell-in was slightly higher than POS. Going forward, I'd expect those two to be about equal. Regions will vary. Timothy Arcuri: Thanks a lot, Derek. Derek D'Antilio: And I should just say, Tim, too, on distribution, maybe a little bit less indicative of actually what's happening in markets. Because all of our sales in Japan are serviced through distribution. And about a little bit more than half of our sales in China are serviced through distributions. That also includes auto, of course, and 90% of our industrial sales, including data center, are serviced to distribution. Operator: Excellent. Thank you. And one moment for our next question. Our next question comes from the line of Joseph Moore with Wells Fargo. Your line is open. Please go ahead. Joseph Moore: I know you don't give, like, segment guide, but just trying to think about how to think about automotive growth into the March relative to the continued strength you're seeing in industrial and data center? Derek D'Antilio: Yeah. So for the March, it will absolutely be led by industrial. So industrial will be up in the March. The midpoint of the guidance is up about 2.5% in total for the company led by industrial. I expect auto to be about flat to marginally down, again led by Chinese New Year. Really, the Chinese New Year drives that. And I should say we're also right now still shipping 20% below our peak in automotive at this point, even in this Q3. Michael Doogue: Yeah. Maybe not sure, Joe. This is Mike. Not if there's a deeper question just about automotive in general, but I do wanna point out we feel good about what we're seeing in automotive strong bookings and backlog, great design win XEV and ADAS. And actually great design wins in China as well. So we are feeling good overall. About automotive. That that's helpful. Yeah. As a follow-up, just kind of maybe double clicking on the automotive. I mean, are you seeing any propensity from your customers maybe build a little bit of inventory just given there's been some disruptions across like kind of the auto supply chain from a component standpoint? Yeah. The instructions are out there. We have yet to see any meaningful increases in inventory at the tier ones in automotive. I've stated in prior calls we see fairly lean inventory out there in automotive, and that's what we continue to see. Operator: Thank you. Thank you. And one moment for our next question. Our next question will come from the line of Blayne Curtis with Jefferies. Your line is open. Please go ahead. Blayne Curtis: Hey, good morning guys. A couple of questions. I just want to ask on the data center business. I think you mentioned fan drivers still driving the majority of the growth, but obviously, big opportunity with the gate drivers as well as current sensors. Can you just talk about that pipeline a little bit more, when that revenue kinda layers in and how big that opportunity is for you? Michael Doogue: Sure. So thanks, Blayne. Yeah. As you know and as we stated, the biggest piece of the business today in our data center area continues to be the fan drivers. There's just really continued to be a larger number of fans going into these data center racks as power levels increase. What started about a year ago, that's when we started ramping our current sensor business in the power supplies for these higher power data center installations. That business is growing nicely. I mentioned in the prepared remarks, the record-setting levels of data center that we achieved this quarter current sensors played a role in that. So it's nice to see that ramping significantly. On the gate drivers, big opportunity there. We're excited about it. We have truly unique products. We are in the design-in phase with some of the biggest customers in the marketplace. We would expect to see revenue in that space start to ramp somewhere in the eighteen months to twenty-four months time frame. Blayne Curtis: Thanks. And then maybe just a follow-up for Derek on the gross margin. So as we think about data center increasing as a percent of the overall mix, how do you think about that impacting gross margins? Derek D'Antilio: Yeah. As I've talked about in the past, the majority of what we're shipping to data center today, as Mike talked about, is more to drivers or fans, which are slightly below fleet average from a gross margin standpoint. But what's actually impacting the March slightly is to a positive basis is more of the current sense as we saw when they have slightly better gross margins. As we continue to move in that direction with current census and, of course, isolated gate drivers, the margin will continue to improve within data center for us. Operator: Thanks, guys. Thank you. And one moment. For our next question. Our next question will come from the line of Thomas O'Malley with Barclays. Your line is open. Please go ahead. Thomas O'Malley: When I look at the eMobility business and the general broad trucking business, it looks like both are seeing a bit of growth here in the quarter. Can you talk about in the guidance, what's assumed between those two and where you're seeing some of the additional growth? Derek D'Antilio: I actually didn't catch your question, Tom. I'm sorry. There was a little I'll start, Tom. We're not gonna really guide, you know, parse out the guidance between e-mobility within auto. You know? And ICE business. That can vary depending on what's scheduled to ship within the quarter. As I said, in total, I expect the March to be up 2.5% at the midpoint of guidance. Within that, industrial will certainly lead the way led by data center. I expect auto to be flat to down marginally, really, just because of Chinese New Year. The biggest portion of our e-mobility business continues to be ADAS applications, both from a revenue standpoint and from a design win standpoint. Thomas O'Malley: Gotcha. I guess, yeah, inherent in the question is, you've heard others this earnings period already talk about health of auto maybe a little bit slower off the bottom than on the industrial side, it sounds like. You've got some really good trends in your specific industrial verticals. But just anything on the health of the broader auto market. Are you seeing customers behave any differently? Are you starting to see any inventory built? And then customers, just anything on the broader health of auto would be helpful as, I guess, where I'm getting that. Michael Doogue: Yeah. Sure. I could take that one. So when we look at our automotive, Sam, it's about $8 billion. $5 billion of which is the e-mobility portion of the business. So that would be our XEV and our ADAS business. And we see strong momentum not only for Allegro there, but strong activity from our customers. No signs of slowing down. Generally, when you look on a global perspective across ADAS and EV. When we look at the stats for EV growth, going forward and taking them from S&P, the growth rates for electrified vehicles continue to be around 20%. Some people say high teens. We're seeing that activity both in hybrid where we do very well battery electric vehicles where we also do very well. And ADAS adoption is starting to enter a broader swap of cars, which is a good tailwind for us. We see the design work continuing to be very robust. It's a good sign for the future. We have a lot more dollar content as a company in these future design ins, so we're pleased there. Like I said earlier, from an inventory perspective, we still see people holding very thin inventory and automotive as well. Operator: Thank you. And one moment for our question. Our next question comes from the line of Gary Mobley with Loop Capital. Your line is open. Please go ahead. Gary Mobley: First of all, let me extend my congratulations on the good top line execution. If we nitpick on anything in particular, which is, I guess, what we're paid to do, you know, might be the OpEx discipline. I understand that you guys need to reward yourselves for execution and hence the variable compensation recognition in the quarter in the guide. But as we look into fiscal year 2027, how should we think about the OpEx growth relative to sales growth? Derek D'Antilio: Yes, Gary, this is Derek. If you look at our OpEx, have absolutely right. The increase in the quarter was almost entirely variable compensation. And without that, we're kind of on our plan for OpEx. The increase in the March is simply the payroll tax resets. As we roll into the June, which I'm not really giving guidance for, but as I said before, we've built our OpEx to service well over a billion dollars as we reset our variable compensation in that June, we also have merit increases. You should expect inflationary only inflationary increases within OpEx. In some other things, we've been able to really keep our G&A flat for about five years. And those dollars have been reallocated into where you'd want them to be reallocated into research and development, into some of these high growth areas like isolated gate drivers. TMR. And over those last three years, we've bought those two acquisitions into largely into R&D. So it's really all about reallocation. I expect going forward after we get through Q4 that OpEx will increase at about the rate of inflation. Gary Mobley: Thank you. As my follow-up, would ask about the lifetime value of design wins. I have no doubt that you track the lifetime value of all these design wins on a quarter by quarter basis. Maybe you're not willing to share what value is and whatnot, but can you at least give us an idea of what type of revenue growth supported by the trends that you're seeing in lifetime value design wins say, over the last twelve months? Michael Doogue: Yeah. So good question, Gary. This is Mike. So we do track that, of course. A couple of quick points. We're not giving numbers. But when we look at this year, we're seeing much higher intensity, meaning higher dollar values for design wins, is a positive sign for an accelerating business. The funnel that we see, the results of all these design wins, it does support our double-digit sales growth number. What I can say, this is a good plug. You're a good setup person for this one. We're gonna have a deep discussion at our analyst day in a few weeks that will actually show you some data and walk you through how our funnel and how the design win support a robust growth number. So we're gonna make you wait a few weeks for the numbers but we appreciate the question, and you'll see a better answer at Analyst Day. Gary Mobley: Look forward to it. Thank you, guys. Michael Doogue: Welcome. And one moment for our next question. Operator: Our next question comes from the line of Nathaniel Quinn Bolton with Needham and Company LLC. Your line is open. Please go ahead. Nathaniel Quinn Bolton: Hey, guys. Let me offer my congratulations as well. I guess, Mike, question I've gotten from investors is, as you look at sort of across the auto analog landscape, some of your peers are sort of back, if not at record auto levels. You're kind of still 20% below peak. Why do you think you're slower to get back to peak? And I guess the real concern is, do you think there's any evidence of share loss to the broader analog peer group? Michael Doogue: Yeah. Thanks for the question, Quinn. So, no, we don't think there's any evidence of share loss. In fact, we feel like we're driving the So share loss is not even a part of the conversation for us. You know, I think every company has different situations. There were relationships with customers where you have some customers that were just happy to build much larger than expected levels of inventory. That's what we were impacted by. And now we're working closely with those customers, and we feel good about the growth future of automotive. In our e-mobility, Sam, 16% CAGR driven largely on the backs of automotive dollar content gains. So we are at this measured pace that you've been seeing roll out quarter over quarter. We continue to increase. We have the bookings in backlog to keep that happening in automotive. But I wanna reiterate, we don't think share loss is any part of the story when we tell Allegro's automotive story. In fact, again, ours is one of share gain. Nathaniel Quinn Bolton: No. Thank you for that. And then, Derek, I guess just looking at the variable comp, usually as you go into the next fiscal year that resets, you talked about March ticking higher. Because of FICA and payroll taxes. I guess, is there any opportunity for a step down in OpEx once you get into the June quarter? Or is 81 sort of the right base to be thinking about as we head into June and as you said, to grow that base at a sort of inflationary rate. Sort of on a sequential basis through the year? Derek D'Antilio: Yeah, Quinn. Absolutely. So what I talked to earlier, but to Gary about is I expect year over year inflationary increases in OpEx. So mathematically, as we get past this March quarter, there'll be a couple of million dollar step down in OpEx. One, as we reset variable compensation, offsetting that is meriting increases that happened in that June quarter. But net net, I expect OpEx to be marginally down in that June quarter. And then growing from an inflationary after that. Nathaniel Quinn Bolton: Okay. Thank you for the clarification, Derek. Derek D'Antilio: You're welcome. Operator: And one moment for our next question. Our next question comes from the line of Christopher Caso with Wolfe Research. Your line is open. Please go ahead. Christopher Caso: Yes. Thank you. Good morning. I wanna talk a little bit more about the data center business and how you're thinking about growth in that going forward. And I guess there's two aspects to that business. One is the fan business, which is existing and then some of the other things you're layering on top of that. You know, for that existing business, should we expect that that's growing sort of at or a little above a rate of what we're expecting for that data center business, and then we're growing on top of that. Just maybe just some clarification on how you're thinking about that growth going forward? Michael Doogue: Absolutely, Chris. This is Mike. So, good question. So, as we all know, data center is a growth market. It is for us as well. When we look at profiling our business, we expect the business to grow at sort of a typical market rate with a CAGR north of 20%. At least on a short-term basis. And as you've suggested, we have a growing dollar content story as well. So we have the capability to grow higher than that. So we think it will be a robust growth business for Allegro for many quarters to come. One thing I wanna point out, we've been getting a lot of that there have been comments and releases about increased prevalence of liquid cooling. We believe that the dollar content expansion story we have data center, which I'll share in a minute, holds true even with all these new levels of liquid cooling architectures out there. So if you look in our investor presentation today, you'll see our dollar content opportunity per rack for Allegro around $150 today. Growing to $425 in the future. And we maintain those numbers even in the face of increased liquid cooling. There's just a lot of potential for Allegro products in the data center, so it will remain a growth story. Christopher Caso: Thank you. As a follow-up, and this is something I'm sure you're gonna touch on at the Analyst Day, but maybe I'll ask a preview question. With regard to the operating leverage that you folks would have in recovery, and know, not just for a quarter or two, but as we look out, like, 10 over the next two, three years or so, what should we expect with regard to operating leverage? And I mean, one is the ability to absorb some of the fixed costs on the gross margin side and OpEx growth as a in comparison to the revenue growth? Derek D'Antilio: Yeah, Chris. So this is Derek. So you can already see it in FY '20 right? If you use the midpoint of our Q4 guidance, the sales growth is expected to be just over 20%. And on that, we'll more than double our non-GAAP EPS. That's all operating leverage from two things. One, that's that 60% drop through on gross margin where gross margins at the midpoint of Q4 improving 440 basis points above the trough. Four quarters ago. And then two, as I mentioned, we'll be pretty disciplined, continue to be very disciplined on OpEx and reallocation. And remember, we did $1.48 billion in revenue in FY 2024 with the fixed cost that we have in the COGS and also the OpEx that we have. So there's significant operating leverage in the model. Thank you. Operator: You're welcome. Thank you. One moment for our next question. Our next question comes from the line of Vivek Arya with Bank of America Securities. Your line is open. Please go ahead. Vivek Arya: Thanks for taking my question. For the first one, I just wanted to dig into the industrial segment. So first on the data center, if you could quantify how much it was as a percentage of sales in December, I think in the past, you said it was about 8%. For the September, I believe. So how much how large was it in December? And then outside of the data center, what trends, Mike, are you seeing in the rest of your industrial business? You know, recently, we have seen very positive commentary from the likes of, you know, TI and Microchip and others. So I'm curious. What are you seeing outside of the data center in your industrial segment? Michael Doogue: Sure. Thanks, Vivek. On the first one, that's easy. I did say in my prepared remarks that the data center business was 10% of total sales for Allegro in the quarter. So you see a nice increase from 8% last quarter. Any further questions on that, Vivek? Vivek Arya: And what are you expecting for March, if you could give us that? Michael Doogue: Yeah. We're not guiding forward other than I sorta gave the just a few questions ago that if you look at the growth rate of data center, you know, we expect and we believe we have the potential to grow at about that growth rate going forward. Moving on to the trends that we're seeing. You know, there's an interesting storyline here. So Allegro developed a large array of unique technologies, whether it's precision sensing, 48 volt, 800 volt, isolated gate drivers, and as we were developing that tech, we had automotive at the front of our mind, but we knew that all of that tech technology was going over into the industrial market. So 48 volt technologies went to the data center. It's actually roughly 48 volts is the preferred voltage rail for humanoid robots, for example. Isolated gate drivers are all throughout the EV with the 800 volt battery. They're all throughout the data center. So from a general trend perspective, we see very positive signals from the industrial market. It really matches the unique technologies that we have very, very well. So we see very good customer activity, design and activity in the industrial market. Perhaps your question was more in the short term in terms of the health of customers. Certainly, we see a robust growth in our data center customers. Beyond that, it's certainly we see growth from the broader swap of industrial customers. But not at the same level of data center. The rest of the market is at a more muted growth level, but it is growing. Vivek Arya: Got it. So my follow-up, maybe one for Derek on gross margins. So the last time you were at these revenue levels, you know, gross margins were in the mid-fifties. I realize, yeah, that was an extraordinary time. But I was just hoping that you would contrast you know, where you are now versus the situation then. And more importantly, what is, what are the next levers you have to take gross margins towards your target model? Is it volume? Is it mix? Is it utilization? Like, just what does the road map look like from here in the near to medium term? Thank you. Derek D'Antilio: Sure. When gross margins were at their peak, right, obviously, volumes were at their peak, and we were at peak in terms of pricing in the industry and those sort of things. Both of those things have come down over the last few years. While costs have gone up. Right? So our costs have gone up. We continue now to start to get cost mitigations or cost reductions from our vendors, which is really, really helpful. Going forward, what I'd expect really is the large majority of it is gonna be led by leverage as we talked about improving 440 basis points just over the last twelve months. That's all leverage. The second piece is factory efficiencies. We continue to do a lot of things in our own factory to be far more efficient. And then the third piece is maintain that very healthy variable contribution margin between 60-65% that we've talked about in sort of held in that range, generally speaking, year over year, since we've been public. That requires, you know, continued more mix of industrial, these higher margin parts that we keep releasing TMR and some of these other things. It requires geographic mix. It requires cost reductions, product cost reductions that Mike's been talking about with some things like copper to gold, the gold to copper, and those sort of things. And then managing ASPs, which I think we're doing quite well this year. Thank you. Operator: You're welcome. One moment for our next question. Our next question is from the line of Joshua Buchalter with TD Cowen. Your line is open. Please go ahead. Joshua Buchalter: Hey, guys. Thanks for taking my question, and congrats on the results and guide. Maybe following up a bit on that last one. It seems like there's a lot of optimism in particular on current sensing in both auto and, you know, in data center and industrial. Any way to sort of help us better understand how much of this is sort of the legacy hall effect portfolio versus some of the TMR stuff layering in, in particular, the IP you got from Crocus? Thank you. Michael Doogue: Thanks, Josh. This is Mike, and I'm always happy to talk about current sensors for lots of reasons. So when we look at the growth of magnetic current sensing, we believe that's the highest area of growth both for the market and for us. There's a number of reasons for that. When you think about power management in general, whether it's cars electrifying power levels of the data center, robotics. You have these even energy infrastructure. There's so many areas of power conversion, and people wanna measure current to have active information for the control of this power conversion step. We offer products whether they're Hall or TMR. They can increase the efficiency of a power conversion system. We were the first company to come to market with these innovative magnetic current sensors, and we have continued to just layer innovation upon innovation into the current sensor space. In terms of the predominance of revenues today, it's mostly hall today. And we've actually been pushing the boundaries of efficiency gains through optimized packaging, through higher bandwidth or speed of operation. So we were leading the market with those in terms of those attributes with hall sensors and getting increased levels of design wins. We talked recently about our 10 megahertz TMR current sensor, a newer product for Allegro. This now starts to take the current sensor capability beyond what can be achieved with Hall ICs. And it is actually very important to have a fast current sensor to make power more efficient. We're starting to accelerate activity with customers, accelerate share gains, through the use of TMR and current sensing, and that's actually a strategy or a playbook that we plan to step and repeat in other areas of our sensor business as well. Joshua Buchalter: Thank you for all the there, and glad you could talk about your favorite topic. Maybe one for Derek. You guys have done a nice job delevering both by paying down debt and by having EBITDA move higher. Saw that you didn't pay down any in the December quarter for the first time in a while. Are you guys comfortable with the amount of debt on the balance sheet here? And how should we think about capital allocation going forward? Derek D'Antilio: Yeah. Thanks, Josh. Yeah. So we built a little bit of cash this quarter. We built about $40 million of cash, ended the quarter with $163 million, which interestingly kind of equates to about six months' worth of sort of OpEx plus CapEx, which is just one benchmark for liquidity. We have an untapped line of credit for $256 million, which we plan to tap. So I feel like we have a good amount of liquidity, which is obviously one of our priorities. We have $285 million in term loan exiting the quarter. And we refinanced that here to a fairly tight, so for plus $1.75. You know, exiting Q4 at the mid of our guidance, the net leverage ratio is just slightly below one to one. There's no metric for where we're trying to get to. I think that's a pretty healthy number. We will continue to balance liquidity on the balance sheet with paying down debt because I think that's just accretive to EPS, and it moves some of the enterprise value, of course, to the shareholders. So we'll continue to look at that each quarter. Joshua Buchalter: Thank you. Derek D'Antilio: You're welcome. Operator: Thank you. One moment for our next question. Our next question comes from the line of Vijay Rakesh with Mizuho. Your line is open. Please go ahead. Vijay Rakesh: Hi, thanks. Good call, Mike and Derek. Just on the eMobility side, obviously, nice step up in the December quarter. Was there a pull in there, or do you see that growing at kind of similar rates as you go through 2026? I know you mentioned big driver was ADAS and the current sensing, but just wondering how you look at that through 2026. Thanks. And I have a follow-up. Michael Doogue: Thanks, Vijay. This is Mike. Yeah. So, you know, sometimes new programs pop. That's why I don't talk too much about order to quarter dynamics. But in general, in e-mobility, yes, we've had a lot of strength in ADAS, recently. We see a lot of wins as well in the XEV space. You know, we see going forward a 16% growth rate for our SAM, the e-mobility space. So we continue to believe this will be a long-term growth driver, and we have the design wins to back it up, both across ADAS and EV. Vijay Rakesh: Got it. And I saw you mentioned robotics slide deck. Just wondering and also you mentioned in the remarks that you have been doing the customer engagements in US, Japan, etcetera. Just wondering how you see the revenues there as you look out 06/2728 in terms of mix? Or dollars? Thanks. Michael Doogue: Yeah. Absolutely. This is Mike again. So, you know, I mentioned sort of the potential unit count in humanoids, and the robotics market is about a lot more than humanoids, but certainly humanoids are where the real dollar content's at. So as we work with customers, the trend I would say we're seeing is you have customers talking about tens of thousands of robots per year in the near term. Over the next few years, maybe that ramps up to hundreds of thousands of humanoids, and you have some companies which are talking about numbers much bigger than that as well. So we see revenue ramp starting to happen probably two or three years out. It really comes down to how the market develops. But internally, this is how we're looking at it. We are out there talking to the lead robotics manufacturers. I mentioned in the prepared remarks, we've confirmed numerous times a 150 sensor sockets for both our physician and current sensors in a humanoid robot up to 50 of our motor drivers, the dollar content is high, but as I said, you'll start to see tens of thousands of robots in the next year, then that ramps to hundreds of thousands. And, hopefully, we get to millions over the three-year period, but that's really up to the market. We just plan to be prepared for the ramp. And we have ideal technologies and products to support that ramp. Derek D'Antilio: And, Vijay, this is Derek. Maybe this touches on some of the OpEx investments. Right? What's really nice about this is much of the robotic space, particularly the humanoids, a lot of that is automotive type of customers and automotive customers. So in many cases, it's existing products to existing customers. We really get to continue to leverage that OpEx and their existing customers, which is probably the best tangential sale you can have. Vijay Rakesh: Got it. Great. Thanks a lot, Derek and Mike. Thanks. Derek D'Antilio: You're welcome. Operator: Thank you. And one moment for our next question. Our next question comes from the line of Joseph Moore with Morgan Stanley. Your line is open. Please go ahead. Joseph Moore: Great. Thank you. First, wanted to follow-up. You sort of mentioned average selling prices moving in a good direction. Can you talk about any changes in like for like pricing? Any difference in how those negotiations are going, customer behavior, anything like that? Michael Doogue: Sure, Joe. This is Mike. So in the prior call, we even talked about price dynamics. They stay the same, but I'll repeat them that as we enter calendar year 2026 with our customers, we would normally be looking at a low single-digit reduction in ASPs and I've characterized this year's pricing environment as one where the reductions are very low single-digit reductions. That's for a number of different reasons. I think we're all aware of some of the pricing dynamics from competitors in the marketplace. There have been other signals in terms of tight supply, etcetera, that allow us to have a more favorable than normal pricing environment as we enter 2026. I will say we do have longer-term contracts with customers that do have some price declines built in. So that is why there's still a very low single-digit decline in pricing, but more favorable in 2026 than historical. Joseph Moore: Great. Thank you for that. And then the robotics piece, I wanted to ask about that as well. You know, who should we think of as the major customers there? You talked about automotive customers, which there are some clear examples of that. But are you seeing the sort of traditional industrial robotics companies make investments in humanoid and just know, is this an evolution from existing robots or an entirely new space? Just how do you think about all that? Michael Doogue: Yeah. Thanks, Joe. It's Mike. You know, I can't mention names, of course, but, unfortunately, the answer to your question is a little bit all of the above. Right? I think so many of these companies that have motor manufacturing and motor control expertise are looking to get into the humanoid space. And that's fantastic for us because as Derek mentioned, not only do we sell motor drivers to many of the leading motor companies out there, many of them need position sensor feedback, current sensor feedback. So we see a broad swath of customers which would include many of the automotive players, but also just major motor manufacturers, some of the bigger industrial companies in general, all trying to dip their toe into the water. And I think there is such an array of robots and so many components in those robots that there's room for various players. But our strategy is just to make sure that we're participating and securing design ins with the winners, which will probably include some of the new innovative players that we're working with as well. So a dynamic space, a very interesting one as well. And we're happy to have such high dollar content and be participating in the market. Joseph Moore: Great. Thank you. Michael Doogue: You're welcome. Operator: Thank you. At this time, I'm showing no further questions in the queue. I would now like to hand the conference back to Jalene for closing remarks. Jalene Hoover: Thank you, Michelle. This concludes today's call. To all of you for taking the time to join us this morning. We look forward to seeing you at various investor events in the coming weeks. This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.
Operator: Hello, and welcome, everyone, to the SkyWest, Inc. Fourth Quarter and Full Year 2025 Results Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. At this time, I would like to turn the conference over to Rob Simmons, Chief Financial Officer. Please go ahead. Rob Simmons: Thanks, Audra, and thanks, everyone, for joining us on the call today. As the operator indicated, this is Rob Simmons, SkyWest's Chief Financial Officer. On the call with me today are Chip Childs, President and Chief Executive Officer, Wade Steele, Chief Commercial Officer, and Eric Woodward, Chief Accounting Officer. I'd like to start today by asking Eric to read the safe harbor. Then I will turn the time over to Chip for some comments. Following Chip, I will take us through the financial results, then Wade will discuss the fleet and related flying arrangements. Following Wade, we'll have the customary Q&A session with our sell-side analysts. Eric? Eric Woodward: Today's discussion contains forward-looking statements that represent our current beliefs, expectations, and assumptions regarding future events and are subject to risks and uncertainties. We assume no obligation to update any forward-looking statement whether as a result of new information, future events, or otherwise. Actual results will likely vary and may vary materially from those anticipated, estimated, or projected for a number of reasons. Of the factors that may cause such differences are included in our most recent Form 10-K and other reports and filings with the Securities and Exchange Commission. And now I'll turn the call over to Chip. Chip Childs: Thank you, Rob and Eric. Good afternoon, everyone, and thank you for joining us on the call today. Today, SkyWest reported net income of $91 million or $2.21 per diluted share for the 2025 fourth quarter and full year net income of $428 million or $10.35 per diluted share. These results reflect the challenges of the fourth quarter as well as the overall improved production in 2025 compared to the previous year. For the 2025 year, our model converted a growth of 15% in production to a 31% increase in pretax income, reflecting the strong operating leverage within our model. We're also pleased to announce extensions on key flying agreements, 40 E175s with United and 13 E175s with Delta. These agreements continue to strengthen our partnerships and demonstrate the ongoing long-term demand for our product. Our fleet flexibility has never been more important. And while our E175 flying agreements are further solidified, we continue to leverage our extensive CRJ assets. Our ongoing investments in and the diversity of our fleet ensure we're well-positioned to adapt to future market demands. I'm humbled and honored that SkyWest was named a Fortune World's Most Admired Companies for 2026. A distinction our people helped us earn for the third time now. SkyWest was named in the top 10, the only regional airline on the list. This is an outstanding accomplishment, and I'm so proud of our exceptional team. Throughout 2025, SkyWest Airlines achieved more than 250 days of 100% controllable completion, a solid team accomplishment during the year, we regularly reached over 2,500 daily scheduled departures. The fourth quarter was unusually challenging starting out with the government shutdown, and mandatory flight reductions and leading right into the peak holiday season travel. I want to thank our team of over 15,000 aviation professionals for their continued teamwork and dedication to excellence. As expected, we were disproportionately affected with more canceled flights than our major partners during the mandatory flight reductions, and we experienced a modest impact from the shutdown. Rob will talk more about that in a minute. We continue executing to derisk our model. The contract extensions we announced today with United and Delta deliver ongoing revenue stability. With all of our dual-class fleet, both CRJ and ERJ now under contract, we have no major E175 contract expirations until late 2028. Additionally, over the past three years, we've reduced our debt by $1 billion. All this work continues to place us in a solid position of long-term strength. The investments we're making today set us up well for 2027 and beyond. SkyWest continues to lead our segment of the industry in service and in value of our diverse assets. Remain disciplined and steady. As we execute on our growth opportunities by delivering on significant pro rate demand investing and fully utilize our existing fleet and preparing to receive our deliveries in the coming years for a total of nearly 300 E175s by 2028. We spent years strengthening our balance sheet and fleet flexibility. As well as reinvesting in our future growth. Continue to play the long game and invest in our fleet and our future to ensure we're in the best possible position to respond to market demands in a way that no one else can. Rob will now take us through the financial data. Rob Simmons: Today, we reported a fourth quarter GAAP net income of $91 million or $2.21 earnings per share. Q4 pretax income was $125 million. Our weighted average share count for Q4 was 41.3 million, and our effective tax rate was 27%. Let's start today with revenue. Total Q4 revenue of $1 billion is down seasonally from $1.1 billion in Q3 2025, and up 8% from $944 million in Q4 2024. Q4 revenue includes contract of $803 million, down from $844 million in Q3 2025 and up from $786 million in Q4 2024. Pro rate and charter revenue was $167 million in Q4, flat with Q3 2025 and up from $126 million in Q4 2024. Leasing and other revenue was $54 million in Q4, up from $39 million in Q3 and up from $32 million in Q3 2024, driven by discrete maintenance services provided to third parties. For comparability purposes, the mandated flight cancellations from the government shutdown in November negatively impacted our Q4 2025 results by $7 million or $0.13 in earnings per share. Additionally, these Q4 GAAP results include the effect of recognizing $5 million of previously deferred revenue this quarter, down from the $17 million recognized in Q3 2025. And $20 million recognized in Q4 2024. As of the end of Q4, we have $265 million of cumulative deferred revenue, that will be recognized in future periods. As we close out 2025, here are a few financial highlights to recap our 2025 year. Our pretax income in 2025 of $506 million was up 31% from 2024 on a 15% increase in block hours reflecting the strong operating leverage in our model. Our EBITDA for 2025 was $982 million, up over $100 million from 2024. Our free cash flow for 2025 was over $400 million, providing the liquidity to invest in our long-term CRJ fleet initiatives and other accretive capital deployment opportunities. We've repaid $492 million of debt in 2025 part of a 10% reduction to our debt balance since 2024, including the effect from seven new E175s we financed in 2025. We ended Q4 with debt of $2.4 billion down from $2.7 billion as of 12/31/2024. We used $85 million in 2025 for share repurchase doubling our investment from 2024. We bought nearly 850,000 shares in 2025, up 50% from the shares bought in 2024. Now let's discuss the balance sheet. We ended the quarter with cash of $707 million down from $753 million last quarter and down from $802 million at Q4 2024. The ending cash balance for the quarter included the effects from repaying $155 million in debt investing $214 million in CapEx, including the purchase of five E175s and buying back 268,000 shares of SkyWest stock in Q4 for $27 million. As of December 31, we had $213 million remaining under our current share repurchase authorization. Cash flow is obviously an important driver of our capital deployment strategy. Over the last two years, we generated nearly $1 billion in free cash flow and deployed it primarily to delever and derisk the balance sheet to the benefit of our partners, our employees, and our shareholders. Our balance sheet and liquidity are powerful tools as we pursue a variety of growth and capital opportunities for 2026 and beyond, including acquiring and financing 29 additional E175s, by 2028 and continuing to pay down our debt. As we remain focused on improving our return on invested capital, we'd like to highlight the following. Both our debt net of cash and leverage ratios continue at favorable levels and are at their lowest point in over a decade. Our total debt level is $1 billion lower today than it was at the end of 2022 in spite of acquiring and debt financing 14 E175s. During that time. The total 2025 capital funding our growth initiatives was approximately $580 million, including the purchase of seven new E175s. CRJ 900 airframes, and aircraft and engines supporting our CRJ 550 opportunity. We expect to take nine new E175s during 2026. And we anticipate approximately $600 to $625 million in total CapEx in 2026 approximately flat with 2025, except for two incremental 175 deliveries. Consistent with our practice, we're not giving any specific EPS guidance today. Let me update you on some commentary on 2026. We gave last quarter. For 2026, we now expect to see mid single digit percentage growth in block hours over 2025, moderately up from the color we provided last quarter. We also now anticipate our earnings per share for 2026 will be in the mid $11 area up modestly from our expectation last quarter. In addition to this full year EPS color, we would expect sharper quarterly seasonality a bit more like pre-COVID patterns with our Q1 2026 EPS being flat to down from Q4 2025 GAAP EPS and with Q2 and Q3 being the strongest quarters of the year. For modeling purposes, we anticipate our maintenance activity in 2026 will continue approximately at current rates as we invest in bringing more aircraft back into service. We also anticipate our effective tax rate will be approximately 24% for 2026, similar to 2025, including a lower expected rate in Q1 than the remaining quarters. We are optimistic about our growth possibilities going into 2026, including the following three focus areas. First, growth in our ability to increase service to underserved communities driven partially by the redeployment of approximately 20 parked dual-class CRJ aircraft and strong utilization of the existing fleet. Second, good demand for our pro rate product. And third, placing nine new E175s into service for United and Alaska by the end of 2026 and six new E175s for Delta in 2027 and 2028. We believe that we are positioned to drive long-term total shareholder returns by deploying our strong balance sheet and free cash flow generation against a variety of accretive opportunities. Wade? Wade Steele: Thank you, Rob. Today, we announced a multiyear extension of 40 E175s with United and 13 with Delta. These extensions continue to solidify our flying agreements with United and Delta through the end of this decade. We now have no contract expirations on E175 until 2028. During the quarter, we took delivery of five new E175s for United. We currently have 69 E175s on firm order with Embraer, including 16 for Delta, eight for United, and one for Alaska. We expect delivery of nine new E175s this year. Let me talk a little more about our firm order of 69 aircraft. Of the 69, 25 aircraft are allocated to our major partners. And 44 are not yet assigned. Our long-term fleet plan has positioned us well and continues to be an important part of that strategy. This order locks in delivery slots starting in 2027 through 2032. However, the order is structured with good flexibility to defer or terminate the aircraft in the event we don't arrange for a partner to take them. After we finish the Delta deliveries expected in 2028, our E175 fleet will be nearly 300. Continuing to enhance SkyWest's position as the biggest E175 operator in the world. Last quarter, we announced an agreement with United to extend up to 40 CRJ200s into the 2030s. These aircraft were set to expire at the end of 2025, and we're pleased with the continued strength of our United agreement. As we previously announced, we have a multiyear flying agreement for a total of 50 CRJ 550s with United. As of December 31, we had 27 CRJ 550s in service and expect the last 23 entering service later this year. We have begun a prorate agreement with American. We are currently operating four aircraft under this agreement. With up to nine aircraft expected by the end of 2026. We are excited to expand our relationship with American. Let me review our production. For the full year 2025, we increased block hours by 15% compared to 2024. We anticipate that our 2026 block hours will be up mid single digit percentage compared to 2025. For 2026, we delivery of nine new E175s, placing 23 CRJ 550s into service capitalizing on strong prorate demand, and anticipating an increase in fleet utilization. These increases are offset by the return of 19 Delta owned CRJ900s over the next couple of years to Delta. We anticipate the return of these aircraft will be at a slower cadence than we originally anticipated. Our revenue seasonality has returned to the model as utilization improves during the strong summer months. We still have approximately 20 parked dual-class CRJ aircraft that will be returned to service. Many of these aircraft are currently under flying agreements and will begin operating in 2026. We also have over 40 parked CRJ200s further enhancing our overall fleet flexibility. Also during the quarter, we canceled approximately 2,000 flights and 3,000 block hours due to the government shutdown. These cancellations decreased our results by approximately $7 million. This is net of any reimbursements from our major partners. As we shared during the year, we continue experiencing challenges in our third-party MRO network. Including labor and parts challenges. We expect our 2026 maintenance expense to be consistent with our 2025 levels. As we continue to bring aircraft out of long-term storage and service the current fleet as production continues to increase. As you would expect, the maintenance expense will before the aircraft goes back into service. As far as our prorate business, demand remains extremely strong. With great community support, we are seeing opportunities to return SkyWest service to several communities. And we will continue to work with airports we serve on the best way to expand our service. As we discussed last quarter, the increase in our prorate business results in an increasingly seasonal model consistent with the typical industry seasonality, we expect Q1 production will be flat to down from Q4. We feel good about our ongoing efforts to reduce risk and enhance fleet flexibility and remain committed to continuing our work with each of our major partners to provide strong, innovative solutions to the continued demand for our products. Rob Simmons: Okay, operator. We're ready for our Q and A now. Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. We'll take our first question from Savi Syth at Raymond James. Savanthi Syth: Hey. Good morning. Hey. Good afternoon, everyone. Just on the FAA cuts in the last quarter, I was kinda curious on how that was handled in. I know usually when there are weather events, that know, there's a lot more coverage of of the coffee incurred. So I was wondering if you can expand a little bit more on on, you know, why there was that level of impact. Chip Childs: Savi, this is Chip. I think I think you're thinking about weather is kind of consistent with the government shutdown. Obviously, as we said on our script. You know, we had a fairly strong cancellation relative to what happened in the industry. And honestly, we're okay with that. We have, you know, various provisions in our contract to help mitigate that. But in the partnership spirit that we have with these partners, know, we're gonna do things together to get through some of these challenges. And extensive as the last one was, certainly, it had an impact on us. But, you know, again, this is something that you work with your partners with and make sure that you do what you need to to take care customers and crews and partners and everything. And so it worked out well. And we don't wanna do it again, obviously, but but from that perspective, the way you're thinking about it being like a a a weather and IROP event was extensively longer, but consistent within the contract. Savanthi Syth: Understood. I wonder if I can on the extensions that that are happening this year, I'm guessing a lot of those are aircraft that are coming you know, fully paid in the next year or two. Wondering if you could provide kind of a update on your on unencumbered assets and kinda where they are today and and, you know, where you see them kinda going by maybe the end of this year and and next year? Rob Simmons: Yes. Savi, this is Rob. In terms of unencumbered assets, we have a very strong portfolio of those. That can be converted into debt, obviously, very easily. But we have know, somewhere in the neighborhood of $1.5 billion of unencumbered, equipment at this point. Savanthi Syth: And does that step up quite a bit? This year, next year, or is it just a kind of a maybe a steady increase? How should we think about as those E175s start coming off contract. Chip Childs: Yeah. I think, Savi, that you're you're exactly right. It's certainly increases as more of them become paid off. We're in a great position today with our unencumbered assets. And as we discussed and as Rob discussed about the debt repayments and stuff that those obviously, the or number of assets unencumbered continues to increase relatively aggressively. Over the next several years as E175s become paid for. Savanthi Syth: Awesome. Thank you. Operator: We'll move next to Duane Pfennigwerth at Evercore ISI. Duane Pfennigwerth: Hey. Thank you. With respect to your order book, and I think you have capacity out to 2028, maybe some availability 2027. Can you speak to how discussions are evolving around placement of the next kind of slug of new aircraft you can take delivery of? Wade Steele: Yeah, Duane. This is Wade. So, yeah, we have an order of 69 aircraft currently on order with Embraer. 24 of those are under contract with our major partners, 16 for Delta, eight for United, and one for for Alaska. So we we're always talking to them about, the order book. So our orders the the deliveries that are coming in '27 are all spoken for. The majority of them in '28 are spoken for. So after that, it's really twenty nine, thirty, 31. And beyond that we're still working with our major partners. But those conversations are ongoing, and we're very optimistic about continuing to to work with them and place them. Duane Pfennigwerth: Thanks. And then, I'm sure there was noise around shutdown and maybe some weather, but can you speak to the underlying trend in utilization and kind of what your target is? And where you're at relative to that target in terms of utilization recovery? Thanks for taking the questions. Wade Steele: Duane. That's a that's a great question. So, yeah, we've seen positive trends in in aircraft utilization for sure. And as we are looking at our schedules going into the '26, those trends are continuing to, be be extremely positive for us, honestly. And so we will get better utilization out of our assets. We are seeing that. It's it's slightly higher than what we had anticipated last quarter. That's why the guidance on block hours did go up. That's one of the reasons. And so yeah, we're we're optimistic about the increased utilization on our fleet and where and where it's going. Duane Pfennigwerth: Thank you. Operator: We'll move next to Catherine O'Brien at Goldman Sachs. Catherine O'Brien: Hey. Good afternoon, everyone. Thanks for the time. Just one more on the E175 renewals. It's really helpful to know your next renewal isn't until the 2028. Could you provide any color on on how the terms of these renewals compared to the prior purchase CPAs that they were on. You know? Was there any impact in the rate discussions to the fact that, you know, you guys don't there's no already debt associated or or or that didn't factor in and and the terms look pretty similar. Thanks. Chip Childs: Yeah. Katie, this is Chip. I I would I would basically say that the contracts, as you continue to go through the maturity of the life of the aircraft, certainly evolve. Certainly, certain things, contracts, because this is such a dynamic industry change. Various things that we thought were important five years ago have changed to other things are more important today. So I won't I will I will certainly underline that there's a lot of evolution that takes place mostly due to market conditions. In large, I think you're mostly asking about, you know, economics and that type of stuff with the renewals. I would only say that everything is roughly economically very similar to what we've you know, experienced in the past. Although there's some things embedded within the contract that evolve for, you know, just changing market conditions that help both of us as partners. The dynamics of the conversation is good because of the outstanding demand that's in the marketplace right now. So in all honesty, we try to be very transparent very present with our partners all the time, and the conversations you know, are very, very good. Particularly, as you know, this is a tough industry to be in, and you have to be in that mode with your partners all the time to be dynamic and and being able to evolve. And I don't know of anybody in the industry that can evolve as as well as we can. So that's kind of the kinda how the contract conversations go, and we're gonna continue to prepare for future ones to to make it even easier. So Catherine O'Brien: That's great. Maybe just one quick follow-up if you allow just to make sure. I don't wanna put words in your mouth. But on the economics, under the terms of the agreement, that looks pretty similar to, okay, this is now you know, thirteen year old aircraft versus a brand new aircraft. Like, the if there were I don't and I actually don't know if there's a step down usually when you move from the first contract to a contract under a CPA agreement. But, like, whatever that normal step between contract one and contract two, that's what it looks like here for these. Is that right? The the the rate economics are very Wade Steele: consistent with where they were before. So we we will see a a very consistent level of revenue continuing on with these airplanes in the future. Catherine O'Brien: Oh, that's great. Then just for my second question, you know, maintenance elevated here you know, around the industry, we're seeing that. Not not surprised. Rates, slots are tight. Can you walk us through how much of the maintenance is on aircraft under contract? And what is for aircraft that are, you know, currently parked not on contract? And on that second group of air of aircraft, like, how like, you know, you're you're putting in the work now. You talked about being flexible. That's a competitive advantage. Are you pretty advanced in conversations around some of these aircraft you're working on now that you might have an MRO slot for, or or this is really just, like, if a partner calls, you could answer. Just trying to understand, you know, much you're investing and and what you think the prospects are for return on that investment. Thanks. Wade Steele: No. That that's a great question. So as as I talked about a little bit in my script, we have 20 aircraft that are currently parked or have been parked that are in heavy maintenance. That are going to be done very shortly that are going into contracts that are the contracts are signed. They're ready to go. They're just waiting for the airplane to be done with its maintenance cycles. And so, obviously, the maintenance come comes in advance of the airplane being returned to service. And so there are 20 airplanes that will be going through that that return of maintenance right now. That's the 20 dual class airplanes. We also have some CRJ200s. That I said we have 40 of those parked, and we are returning some of those to service. And we do believe you know, we we know very good opportunities in the marketplace for those. And, we're very optimistic that we will find a very good revenue model for those. Catherine O'Brien: Thanks so much. Operator: We'll go next to Mike Linenberg at Deutsche. Mike Linenberg: Yeah. Hey. Yeah. Talking about a very good revenue model. I mean, I we're sort of watching the build out of Chicago and it does seem like a lot of the growth at least at that hub over the next several months is going to be driven by regional flying. Are you able to capitalize on both of your relationships with those carriers to to grow into that market or is it one-sided? Wade Steele: Yeah. Mike, that's a that's a great question. We work with each of our major partners. As as you know, under these capacity purchase agreements, they dictate the schedule. They dictate where these aircraft fly. They tell us where to go. And so we are working with each of our major partners on the deployment of where they would like these airplanes, and we will operate these at the extreme highest levels of reliability. That that that are out there. And so we will work with each of our major partners where they wish to deploy those, and we will and that's how the CPAs work. Mike Linenberg: Okay. And then just, my second question, Rob, on the the revenue piece, you know, the revenue recognized in excess of fixed cash payments. Obviously, that came down quarter over quarter. How is that trending? Are we back to sort of $5 million a quarter as we march through 2026? Or is there, like, how should we think about that with respect to modeling? Thanks for taking my question. Rob Simmons: Yeah. Sure, Mike. No. I I think, you know, Q4 was a little down as we extended some of the contracts and pushed out some of the recognition of deferred revenue. But in 2026, for modeling purposes, you know, I would suggest, you know, you're probably in the 20 to $25 million quarter, area for you know, recognizing the you know, deferred revenue that remains. And, again, there's $265 million of deferred revenue that remains to be recognized. Mike Linenberg: So Rob, to clarify, the the extension was you know, the and what was announced today, right, I guess, maybe that drove part of it, right, to extend the E175 flying with both Delta and United? That's right. Yeah. Those those contract extensions, you know, all Rob Simmons: push out the timing of the recognition of the deferred revenue. Mike Linenberg: Alright. That's what I thought. And then just lastly, one other piece. I when and it may have been Chip or you know, or you who talked about this seasonality where earnings will be down March over Q4, obviously, because, you know, now we're getting back more normal seasonality with respect to your pro rate business. When we think about down, are we thinking down on the reported Q4 number? Or should we think down from a Q4 number that would not be impacted by government shutdown? I'm just again, this is modeling. Rob Simmons: Just to make it easy, I mean, it's just the gap number that we reported You know, we do expect that it'll be flat to down. In Q1, again, because of the sharper seasonality in the model. Mike Linenberg: Okay. Makes sense. Alright. Thanks for taking my question. Wade Steele: Mike. Operator: We'll move next to John Godden at Citi. John Godden: Hey, guys. Thank you for taking my question. I wanted to to sensitize and and brainstorm a bit about the eleven fifty. You guys mentioned operating leverage a few times in the prepared remarks. We're seeing that in the numbers. If in a couple quarters, eleven fifty is becoming 12, you know, What happened? Just help us kinda sensitize that a bit and and and I'd love to just kind of you know, hear your thoughts. Rob Simmons: Yeah, John. And, again, welcome. The, you know, the the guidance for the for next year, the mid 11 guidance, I think, is something that we always look at there being a possibility of of, you know, coming in either ahead of that or or behind it. But as as Wade mentioned, you know, in his in his script, you know, we see strong demand in various areas of our of our model right now, in know, including prorate and contract. And so, you know, as things play out, we'll continue to you know, update the street on on how we're seeing the year evolving. But, you know, right now, we were you know, bringing up both our expectation around production and our expectation around earnings for the year compared to what we were seeing a quarter ago. John Godden: Mhmm. Do you think that prorate would be the biggest swing factor? Wade Steele: So the there's three or four things, you know, that will affect our block hours. Pro rate being one of them. I would say the the more meaningful one is probably the increase in utilization that we are anticipating and and seeing from from each of our major partners. Then also just the return to service of some of our airplane of the that have been parked over the for a while. So those those are really the three drivers that that will help us increase production, which in in turn increases the profitability. John Godden: Got it. And and if I could ask about the balance sheet. Certainly moving in the right direction. For for some time. I think you guys mentioned no contract extensions for for a bit. It it seems like we may be know, in a window here where we can potentially deploy the balance sheet more more offensively, more strategically. I'm curious if that's how you think about it. Could there be a change to the attitude toward buybacks? Or maybe there's other calls for cash that you think are even more exciting. Rob Simmons: Yeah, John. I I think, you know, when it comes to the sort of topic of capital allocation or the balance sheet, You know, I think we're comfortable enough and confident in our free cash flow generation going forward that feel like we're in sort of an all of the above position where know, we can continue to invest in the fleet like we have been, which we love doing. We can continue to delever and derisk you know, the model and the balance sheet as, you know, as we talked about you know, we've been paying down our debt you you know, with a good cadence over time. And finally, you know, as we've proven, you know, we've you know, we're strong believers in the value creation possibilities of share repurchase. And so I think we're in a position with the balance sheet that's got the liquidity and the strength and the leverage that will allow us to do all of the above. John Godden: Got it. Thanks, guys. Appreciate it. Operator: We'll go next to Tom Fitzgerald at TD Cowen. Tom Fitzgerald: Hi, everyone. Thanks so much for the time. Was a pretty big jump in lease airport services and other revenue this quarter, and I was just kind of curious what drove that. Was that maybe third party engine overhaul work or or something else? Rob Simmons: That's right. I mean, and it you know, there's a piece of it on the revenue side and another piece in maintenance. So yeah, it was it was a engine deal with the third party. Tom Fitzgerald: Okay. Great. That's that's really helpful. And then just as any any updates on the charter business as as you look out into 2020 And I don't know if that could be a driver of incremental positivity for the year, maybe around the World Cup or this summer or maybe not, just given that else is going be utilized in the core business? Thanks again for the time. Chip Childs: Yeah. Tom, this is Chip. Yeah. It's real quick. It's a great question about SkyWest Charter. You know, we've got a lot of leeway and permission to do a lot of very cool things with that. Certainly, we're seeing as of right now significant demand with sports teams and everything. In fact, it's demand that we can meet honestly, because of aircraft availability. We're we're seeing certainly a very strong demand for SkyWest Airlines aircraft at this time that we're we're trying to fulfill with our major partners. As you know, that's that's the core of what our business is is try to take care of these four customers of ours. So it does put, some of our initial objectives with SkyWest Charter on the back burner. We're not saying that it's never gonna happen. We mentioned on the call several times, we have a lot of CRJ 200 aircraft available. And there's a lot of and we've also talked about MRO. Availability and getting these aircraft available to us. So I would not say that 2026 is going to be a, you know, historically huge year for Charter because of the backlog of supply chain issues we have with certain MROs and the fleet that we have. But we still have the same long-term objectives that we've always had with that the demand and the things that we can do with that enterprise are still extraordinarily promising. But I think you can get a tone on the call. There's just a lot of demand, and we're trying to get as much you know, aircraft resources in place to meet that demand for 2026. So hopefully, we can do some other things, in '27 or '28 with that with that enterprise. Operator: Next, we'll take a follow-up from Savi Syth at Raymond James. Savanthi Syth: Hey. Thanks for the follow-up. Just wondering you know, operationally, you've been kinda executing really well and and know, as your partners need extra lift, I think you've been able to step in from time to time. Was curious, and I think the industry as a whole, the operational execution has kinda taken a leg up maybe versus kinda ten, fifteen years ago. Curious how you stack up compared to some of these kinda internal partners at at your, you know, mainline like the internal regional airlines, how how do you stack up in terms of performance and execution? Wade Steele: Hey, Savi. This is Wade. That's that's a great question. Question. You know, SkyWest, you you can look at some of the DOT data. SkyWest is always a very high performer on on our a 14, our completion percentages. So you know, that is one thing that we emphasize around highly is just our execution to our mainline partners and then also ultimately their customers. And so know, we we put a lot of emphasis around that, and we are typically the one of the top tier performers. So yes. Chip Childs: I I I would add just one thing also, Savi. I think I think you have to have the utmost respect to our people and certainly our management team because we're one of the only airlines in the world that has four customers that strategically, at times, operate for completely different ways, yet we have to consolidate that operation into exceptional overall performance in our own way. So we're we're we're used to this challenge. We've been doing it for decades. And to that end, our our people are fantastic at making sure that they meet our objectives and what we wanna do and also meet the needs of our partners. But I can tell you, the level of effort and talent that it takes to go as many days as we indicated with, you know, zero with a 100% controllable completion over 250 days this last year is exceptional. And to that end, you know, we're doing it in a in a way which we're trying to to make four partners happy along way, which we do a pretty good job of, which is why they keep giving us contract extensions and more flying. So, from that perspective, on a micro level and a macro level, we're pretty proud of the efforts that our people put forth in those endeavors. Savanthi Syth: That's helpful. And if I might just follow-up on John's question about use of you know, the how you're thinking about the use of cash. Any are there any kind of liquidity targets or leverage targets that you want to stay within? Rob Simmons: So, Savi, you know, as we've said in the past, we really have a a bright line number But, again, you know, we wanna be careful that we have the liquidity in the balance sheet. Capacity to make sure we can monetize all the opportunities that are in front of us. And, again, those opportunities are numerous right now in terms of you know, investing in this in the the the fleet and and other other ways that we can deploy the balance sheet. So I think as you see the progress that we've made over the past few years, we're in a great place from a balance sheet leverage standpoint. We haven't been in a lower leverage position in a decade. We're in a great position in terms of liquidity. We've got plenty of you know, unpledged collateral if we were to need it. And so, you know, again, I think that that that provides the for us to to look at all of our accretive opportunities and and monetize them. Savanthi Syth: Got it. Thank you. Operator: And we'll take a follow-up from Catherine O'Brien at Goldman Sachs. Catherine O'Brien: Hey again. I just I was thinking about your answer to that question on the CRJ opportunities. And so a follow-up there. You know, on those 40 CRJs you're investing in, you noted that you know of good opportunities for those. Are any of those slated to come out of the shop this year? And and if they did and you execute on one of the opportunities you noted, would that be incremental to your current mid single digit block hour growth rate? Thanks. Wade Steele: That's a great question. A lot of that is baked into our our operating plans already. Obviously, if we do have ups upside especially for the summertime, a lot of that, we know what's front of us. We know the opportunities right there. And so if we do get the air out quicker, then there could be sooner opportunities for us. We are looking at opportunities in the fall, and we are looking at, those opportunities right now. And so potentially, you know, eight, nine months from now, for sure, there could be some additional opportunities that that we're looking at. But things that are know, for the summer, six months in advance of us, that's all pretty much in our operating plans right now. Catherine O'Brien: Great. Thanks for the extra time. Operator: And that concludes our Q&A session. I will now turn the conference back over to Chip Childs for closing remarks. Chip Childs: Thank you, Audra. Again, thank you all so much for your interest in SkyWest. We are very proud of what's happened in 2025, but mostly we're very focused and, grateful for the opportunities which we have and put ourselves in a good position with our people in '26 and beyond. And we look forward to giving the first quarter update in three months from now. So thanks for your interest. Operator: And this concludes today's conference call. Thank you for your participation. You may now disconnect.
Ilkka Ottoila: Good morning, and welcome to Nordea's Fourth Quarter and Full Year 2025 Results. I'm Ilkka Ottoila, Head of Investor Relations. As usual, we'll start with the presentation by Group CEO, Frank Vang-Jensen, followed by a Q&A session with Frank and Group CFO, Ian Smith. Please remember to dial in to the teleconference to ask questions. With that, Frank, please go ahead. Frank Vang-Jensen: Good morning. Today, we have published our results for the fourth quarter of 2025. We finished the year well with high fourth quarter profitability, higher business volumes and lower costs. It was a strong result, despite the uncertain environment and despite consumer confidence in our Nordic home markets remained muted. For the full year, we delivered a return on equity of 15.5%, in line with the commitment we made 3 years ago. Our performance reflects the momentum we have built since we set out to reshape Nordea in the autumn of 2019. We have grown our business with existing and new customers and improved our customer experience. We are much more efficient today. Back in 2019, we spent EUR 0.57 to generate EUR 1 of income. Now it takes EUR 0.45. We are much more profitable. In 2019, we ranked near the bottom of the world's 100 largest banks based on return on equity. Now we are firmly in the top 20 and among the best in Europe. And we are creating sustainable value for shareholders. Total shareholder return over this period amount to 322% or 26% per annum. I was especially pleased to see us end 2025 on a high note on one other very important metric, customer satisfaction. Our scores are now 4 to 10 index points higher in all 4 business areas and performance has improved relatively to peers. Our results show that Nordea is performing well. By most measures, Nordea is stronger than it has ever been. We carry that strength into our new strategy period for which we have high ambitions as reflected in our new priorities and financial targets. I'll briefly return to those later. Being a strong and resilient financial services group, we also have the capacity to support our customers effectively in the current unsettled global environment. While the geopolitical backdrop remains uncertain, our focus is on ensuring we are consistently there for our customers with advice, with our capital and with a broad range of financial service and a very strong balance sheet. We're well equipped if conditions shift, no matter which direction they will go in. Our diversification is a key advantage among. Our Nordic peers, we are the most diversified financial services group. Income, lending and profits are well balanced across sectors and across our 4 home markets. We also benefit from operating in our home region with strong economies and fiscal positions and stable political systems. These features help us to navigate through volatility and adjust to external shocks. The largest Nordic businesses are export-driven and will feel some impacts. Still, they distinguish themselves by their quality, innovation and deep tech and engineering know-how and very importantly, by the agility and ability to adapt. That formula has enabled them to establish competitive positions in global market positions that are durable over time. For all these reasons, even while risks to the global outlook remain and impacts are difficult to assess, I'm confident that our region is well positioned to continue performing strongly. With that, let's return to the fourth quarter and look at some of the highlights. Our return on equity was strong at 14.4% compared with 14.3% a year earlier. Earnings per share were EUR 0.34, up from EUR 0.32. Corporate lending grew by 8% year-on-year and deposits were up 1%. Mortgage lending increased by 1% and retail deposits were up 6%. Assets under management increased by 13% to a record high of EUR 478 billion partly driven by higher asset values. Net inflows were strong at EUR 6.5 billion. Total income was flat against the previous year. Our net interest income continues to hold up well, supported by higher volumes and our deposit hedge. As expected, in the declining rate environment, it decreased by 5% year-on-year and by 1% quarter-on-quarter. Some of that due to the policy rate reductions in Sweden and Norway in Q3, which has a full quarter effect in Q4. Net fee and commission income was up 3% with solid growth in savings fee income. Net fair value result was up 28% for the quarter. This was driven by higher customer activity and a stronger result in treasury and our markets operations. Costs decreased by 3% year-on-year, reflecting continued active cost management and stable strategic investment levels. Full year operating expenses were EUR 5.4 billion, fully consistent with our guidance. The Q4 cost-to-income ratio was 46.2%, excluding regulatory fees. Operating profit increased by 3% year-on-year to EUR 1.5 billion. Our credit and asset quality remain very strong. Net loan losses and similar net result amounted to EUR 49 million or 5 basis points, once again, well below Nordea's long-term expectation. Due to continued strong credit quality, we were able to reduce our management judgment buffer by a further EUR 17 million in the quarter. Our strong capital generation continued and our CET1 ratio was 15.7% at the end of the quarter. That puts us 1.9 percentage points above the current regulatory requirements. Given our strong 2025 performance, our Board of Directors has proposed a dividend of EUR 0.96 per share for 2025, up from EUR 0.94 per share for 2024. Today, we have published our outlook for 2026, which is the first year of our new strategy period running to 2030. For the full year 2026, we expect a return on equity of greater than 15% and a cost-to-income ratio, excluding regulatory fees of around 45%. Following our strong Q4, we were able to close our strategy period having met or exceeded all of our targets. Our initial return on equity target was greater than 13%. As the environment shifted, we lifted it to greater than 15% and ultimately achieved 15.5% in 2025. We delivered on our guided cost-to-income ratio, even with a significant step-up in strategic investments and maintained strong credit quality and capital generation. All of this enabled strong shareholder distributions, distributions over the 4 years exceeds EUR 17 billion. This clearly surpassed our initial expectation and was right in the middle of the updated target level. Let's now return to Q4, starting with a look at our main income lines. During the quarter, net interest income continued to hold up well in the lower interest rate environment. Our NII was supported by both higher business volumes and our deposit hedge. The deposit has contributed positively to our income year-on-year, increasing NII by EUR 99 million. As expected, the policy rate reductions affected deposit and equity margins. Our net interest margin for the quarter was 1.57%, quite stable following 1.59% last quarter. We saw an encouraging trend in business activity on the corporate side with lending up 8% year-on-year. Mortgage lending also increased but at a slower rate. The 1% year-on-year increase was driven by Sweden and Norway as housing market activity continued to slowly pick up. Retail deposits were up 6%, while corporate deposits were up 1%. Net fee and commission income was up 3% year-on-year, driven by savings and higher customer activity levels. The higher savings fee income was driven by higher assets under management with positive net flows in all channels and higher asset values. The good momentum continued in our Nordic channels with net inflows at EUR 4.8 billion, roughly equally split between retail funds, private banking and Life & Pension. Net flows from international channels were EUR 1.7 billion with positive net flows in both wholesale distribution and international institutions. Brokerage and advisory income was lower, resulting from lower debt capital market income. The clear positive in the quarter was a very strong income growth from our secondary equities business. Net fair value result was strong in the quarter, increasing by 28% year-on-year. That increase was driven by higher customer activity in foreign exchange and interest rate hedging. We also benefited from good performance in treasury and market making. Costs decreased by 3% year-on-year as planned and in line with our guidance. This reflected stable strategic investment levels and continued active cost management including a reduction in the number of employees. During the quarter, we continued with our strategic investments in several areas, including technology, data and AI. At the same time, we are driving operational efficiency and increased productivity. This is our continued focus, and it is leading to more efficient ways of working and a leaner organization. For the full year, costs were EUR 5.4 billion, representing a modest 1% increase despite the inflationary pressures. The fourth quarter cost-to-income ratio was 46.2%, excluding regulatory fees compared to 47.9% a year earlier. For the full year, it was 45%, and we are targeting to take this down to 40% to 42% by 2030. Our credit quality continues to be very strong. Net loan losses and similar net result for Q4 was EUR 49 million or 5 basis points, well below our long-term expectation of approximately 10 basis points. The provisions in the quarter, were driven by corporates with no industry concentration or specific trends. Due to continued strong credit quality, we reduced our management adjustment buffer by 1/3 of EUR 17 million and it now stands at EUR 276 million. We continue to deliver strong capital generation and maintain our robust capital position. At the end of the quarter, our CET1 ratio was 15.7%, 1.9 percentage points above the current regulatory requirements. We continued to deploy capital to support business growth and we also continue to use share buybacks as a way to return excess capital to our shareholders, where we do not find profitable uses for it. During the quarter, we launched and completed a EUR 250 million share buyback program, our fourth of the year. After that, in December, we launched a new EUR 500 million program which is expected to be completed by no later than the 8th of May. Given our strong 2025 performance, our Board of Directors will propose to shareholders at the AGM a dividend of EUR 0.96 per share for 2025 compared with EUR 0.94 per share for 2024. Additionally, the Board has proposed a distribution of the midyear dividend in 2026, corresponding to approximately 50% of the net profit for the first half of 2026. Let's now turn to our business areas. In Personal Banking, we continued to deliver business volume growth with customer activity, again, highest in savings and investments. Households continue to prioritize strengthening their financial positions, increasing their deposits by 5% year-on-year during the quarter. Many customers are also increased their recurring savings amount and they put more money into investment funds. Q4 net flows in our Nordic retail funds were strong at EUR 1.7 billion, up from EUR 0.7 billion we had in Q3. With lower interest rates supporting confidence, housing markets continue to improve gradually, but the pace remained muted. We increased our mortgage lending by 1% year-on-year. In Sweden, we continued to grow, our mortgage market share capturing 27% of the market growth in the period from October to November compared to a back book market share of 14%. Digital activity continued to grow with app users and log-ins up 3% and 5%, respectively. In our previous strategy period, we set a target to ensure all every day banking needs could be met digitally by the end of 2025. We have now achieved this goal, and it has contributed to a stronger overall experience and that record high customer satisfaction level for personal banking. Total income decreased by 3%, driven by lower policy rates. The lower interest income was partly offset by continued net fee and commission momentum, especially in savings, payments and cards. Return on allocated equity with amortized resolution fees was 15%. The cost-to-income ratio was 51%, improving from 53%. In Business Banking, we performed well, driving strong volume growth with the support of our strong digital offering. Nordic SMEs continued to adapt well to the operating environment with stable interest rates supporting higher demand for lending. I'm quite pleased with the increased business activity. Lending volumes increased by 6% year-on-year, led by Sweden, but with growth across all Nordic countries. Deposits were up 5%. During the quarter, we improved customer experience by simplifying onboarding and introducing a new digital tool to enable customers to get started faster. We want to be the leading digital bank for SMEs and a big part of that effort has involved making sure our customers' everyday banking needs are met by our digital offering. In 2022, around 40% of our customers' daily banking needs were covered by self-service functionalities. By the end of the 2025, we stood at 80% in line with our target. Total income for Q3 was down 3% year-on-year with higher volumes and higher net fee and commission income partly offsetting lower deposit income. Return on allocated equity with amortized resolution fees was 15%. The cost-to-income ratio was 45%. In large corporates and institutions, we had a strong quarter, driving double-digit lending growth and higher overall income. Lending volumes were up 10% year-on-year, with particularly strong growth, 20% in Sweden. Deposit volumes decreased by 3% year-on-year. We interpret lower deposit volumes as a sign of increased risk appetite and greater willingness to invest. Debt capital markets activity remained high, if a little lower than in previous quarters, helping us maintain our leading positions for Nordic bonds and Nordic loans overall in '25. During the quarter, we arranged close to 140 transactions for a broad range of issuers that brought the total for the full year to over 600. Our secondary equities business performed strongly and income grew by 26% year-on-year. Nordea markets delivered strong results driven by solid trading performance and increased client activity compared with a year ago. Total income was up 4% year-on-year, mainly driven by higher ancillary income. Net fee and commission income increased by 10%, driven by equities, asset management, products and lending fee income. Return on adequate equity was 15% the cost-to-income ratio improved from 42% to 40%. In Asset & Wealth Management, we drove further strong momentum with growth in all our Nordic channels and strong investment performance. Net inflows in our Nordic channels were EUR 4.8 billion, with private banking contributing EUR 1.6 billion of that. In private banking, we finished the year as we began, with solid momentum and customer acquisition and high levels of customer activity. Overall, customer satisfaction remained at a record high level. In our International channels, we had net flows of EUR 1.7 billion, which was an improvement quarter-on-quarter. About half of that was from international institutions and half from the wholesale distribution channel. Net flows in Life & Pension were EUR 1.3 billion. The performance was again strong across our 4 markets, and we further reinforced our position as Nordics second largest player. Gross written premiums in the quarter amounted to EUR 3.3 billion, up from EUR 3.1 billion a year ago. That took premiums for the full year to an all-time high of EUR 12.9 billion. Assets under management increased by 13% year-on-year to EUR 478 billion, driven by market performance and the positive flows in all channels. Our Empower Europe fund launched in June continued to attract interest during the quarter. It has now secured a net flow of more than EUR 500 million. The fund invests in Europe's energy independence, industrial revitalization and defense. We also saw renewed strong interest in our sustainable investment approach. One of our new BetaPlus funds launched in the summer is already the largest actively managed sustainable ETF in Europe. Total income was down 2% year-on-year driven by lower net interest income. Net fee and commission income was down 1%, driven by customer preferences from lower risk and lower margin products. Return on allocated equity was 30%, that cost-to-income ratio was 48%. All in all, this was a good quarter and a year of success for Nordea. We now have two very successful strategy periods behind us, and we are aiming high for our third. Looking across to 2030, our priorities are clear: To grow strongly in several attractive areas and drive faster than market income growth. To further strengthen our customer offering and to unlock the full potential of our unique Nordic scale. Our Nordic scale is a key source of competitive advantage for Nordea. We have already realized a lot of scale benefits. However, most of the gains still lie ahead. In this next phase, we will take a decisive step to unlock these benefits across Nordea. The priorities and targets we have set are ambitious, and we are fully committed to achieving them. We are targeting a return on equity of greater than 15% each year through to 2030 and significantly higher in 2030 itself. We are also targeting a cost-to-income ratio, excluding regulatory fees, of 40% to 42% in 2030. We are at 45% today and coming down to our target level will be a gradual process. Accordingly, we expect to deliver a return on equity of greater than 15% for the full year 2026 and expect a cost-to-income ratio, excluding regulatory fees, of around 45%. Rest assured that our plan will be executed with the same rigor and focus we have applied over the past 2 strategy periods. We do what we say. We look forward to building on our progress and realizing our ambition to become the undisputed best performing financial services group in the Nordics. Thank you. Ilkka Ottoila: Operator, we are now ready to take the questions. And as usual, please as a courtesy to others, could you please limit yourself to 2 questions max. Thank you. Operator: [Operator Instructions] The next question comes from Martin Ekstedt from Handelsbanken. Martin Ekstedt: So I wanted to first ask about the management judgment allowance. It decreased by only EUR 70 million this quarter against roughly EUR 50 million each over the previous 2 quarters, right? And additionally, only EUR 10 million of that decrease was an actual release. So given I believe you've said at the CMD that you will either use or release the around EUR 300 million buffer that you had when entering '26, over the course of this year. I just wanted to check, should we now see this smaller release in this quarter meaning it's going to be more back-end loaded, the full release in the year 2026 or are you simply seeing a different credit risk environment currently causing you to take a more conservative stance overall? Ian Smith: Martin, thanks for the question. You shouldn't read anything different in terms of our intention on the release of the management judgment buffer. We did, as you pointed out, release more earlier in the year. Actually, Q3 saw quite a big release simply because of a different change in credit conditions, sort of macro related, but no, the portfolio continues to perform well. And as you see with the -- again, a net release of collective over the period, generally, conditions are improving. So there's nothing to read into that. It's simply that we tweaked it in Q4. Our intent remains the same that over time, we will either utilize or release. And as we've said so often, in calls like this, but also in other [indiscernible] that the strength of the portfolio and also the strength of conditions in our home markets means that it's harder and harder to hold on to it. So what we set out at Capital Markets Day remains the case. Martin Ekstedt: Okay. But just to clarify, I think you said that over time, you will either utilize the release, right? But I think at the CMD, you said over '26. Is that correct? Ian Smith: Yes. So that's what we said at CMD, no change. Martin Ekstedt: Okay. Okay. And then just secondly, if I could focus on M&A for a bit. I just wanted to see when we should expect to see some new acquisitions from you. And it is still the base case that you'll be turning your M&A machinery towards Sweden now, as you've said in the past, after your couple of deals in Norway, right? So the Danske piece in Norway deal, I think it was announced in July '23, i.e., it was more than 2 years ago now. In the past, you said that you're aiming for roughly 1 deal per year, considering, was it 25, 30 bps of capital deal, does this also mean that we should see something larger perhaps from you on the M&A front given some time has passed now since the Danske [indiscernible] the Norway deal? Frank Vang-Jensen: Thank you for the question, Martin, it's Frank speaking. We would like to do M&A as long as it's accretive to our business and helpful for our shareholders, but then we need a target -- available target. And it's -- you mentioned Sweden and it's right that we have -- in the new strategy of ours, we have a special strategic focus on Sweden and Norway but we want to grow in all 4 countries. So actually, we are, of course, interested in opportunities across the board as long as it fits well to our strategy. That's what we can say. And then these comes when they come, and you need two to do a tango. And right now, we have really not much to say more than unchanged ambition and we would like to use inorganic as a lever to grow Nordea as well. Martin Ekstedt: Okay. So it's availability on target more than anything else. But does this mean also that you've now saved up some dry powder perhaps? Frank Vang-Jensen: Yes, it's nothing to do with appetite. It's nothing to do with capital. It's nothing to do with us not having a clear view on where that we want to grow and who would we really like to team up with. It's basically about availability. Operator: The next question comes from Gulnara Saitkulova from Morgan Stanley. Gulnara Saitkulova: So the first question is on asset margins. At your CMD, you mentioned that you're not assuming any meaningful margin expansion. Is it reasonable to expect that asset margins will remain broadly stable in 2026? And how does your outlook on margins differ across your key geographies? And across the Nordic margins -- Nordic markets, where do you see the most margin pressure? And where do you believe margins can hold up or even improve? Ian Smith: Thanks, Gulnara. So yes, our base case assumption was that we're not relying on margin expansion. Obviously, very happy to see that come back. But I guess, conditions at the moment are as we've seen throughout 2025, still very thin volumes in the mortgage market and in those circumstances, we do see some of our competitors reducing pricing to try and chase business and things like that. So inevitably, that puts a bit of pressure on mortgage margins. Another feature we've seen, particularly in the second half of 2025 is we grew really, really strongly in corporate lending and particularly in our LC&I business, where our lending is at very much the sort of blue chip and it's been pretty competitive there. So those 2 dynamics have made margin expansion pretty difficult to deliver. So we continue to assume that we won't see margin expansion. History has shown us that when conditions ease and when demand increases as consumer confidence returns, we've seen an improvement in lending margins. And no reason not to expect that, but we do need to see that consumer sentiment improve and the market start moving again on the household side. I mean in terms of just different markets, there really isn't anything to choose between the markets in terms of what we're seeing on margins, particularly. Our competitors are active in most of those markets and where we're seeing them acting aggressively on margins, that's right across the board. But we do, I suppose, have good sort of -- if we split between where things are growing a little bit better, Sweden and Norway versus things being a little bit more flat in -- from a market perspective in Finland and Denmark. So I think that watching Sweden and Norway from a margin perspective is important. But I don't know, Frank, whether you want to add anything to that sort of perspective? Frank Vang-Jensen: No, I think you expressed it very well. So no further comments to that one. Gulnara Saitkulova: And another question on Sweden market share. In Sweden, you have been gaining front book market share. Can you remind us what is driving your ability to stay competitive and grow the front book ahead of the back book? And what do you see as the key levers and competitive advantages that Nordea has in Sweden? And looking ahead, how do you plan to sustain that momentum? And what are the targets that you are setting for the Swedish market? Frank Vang-Jensen: So we are gaining market share, and that's across the board, I would say, in Sweden. And as you know, we have had a special focus on Sweden and Norway for quite long as we have relatively smaller market share than in Finland and Denmark. And back -- I think it's 7 years ago, we decided that there -- now we want to grow our Sweden on mortgages, and we want to grow slightly above our back book market share. And I think we have done that probably each quarter for the last 6.5 years, something like that. So it's nothing new. What is probably a little bit new is that we are growing quite much faster than the back book this year. So 22-ish percentage points of the front book on the mortgage market is where at least the last days that I have and that should compare that with the back book of 14.03% something. So the momentum is strong and -- but it's nothing new. And yes, mortgage is not rocket science. It's about getting many -- retail is about detail. So getting many things right, the customer interface, digital tools, the self-service, getting the entire organization teamed up around what is it that we aim for, how do we do it, ensure that the value chain is effective that we respond well, fast and so on. And then you need to get the pricing right. So we are -- I would say we are slightly above average. So we are not using the tools to buy. We try to position us price-wise where we should in the corridor, but a bit above the average. And that works very effectively. So I'm very happy with the progress the team has made, but that's not really anything new. And when it comes to the auto businesses, they had actually a very nice growth, so SMEs. And within SMEs, we have grown above market for long and continue to do so. In LC&I. In Q4, we had a growth within lending of 20% quarter-over-quarter or quarter -- Q4-over-Q4 last year or '24. So it's -- it's just -- and then corporate banking, by the way, is on fire as well. So it's -- we are just in good shape, and the momentum is great. I don't know if that answered your question, but that's probably the most I can say. Operator: The next question comes from Magnus Andersson from Nordea. Magnus Andersson: It's Magnus Andersson from ABG. You haven't bought us yet as far as I know. Just beginning with a specific one, NII in Norway in Personal Banking was down 11% quarter-on-quarter in local currencies. If you could please shed some light on that? And also related to that comment on the competitive situation in Norway. I think we're getting quite negative signals. Secondly, just on your cost income ratio target, if you could say something about what kind of headcount outlook you have for 2026? And related to costs, anything on the restructuring charge you're supposed to book this year? Frank Vang-Jensen: All right. Thank you, Magnus. Ian, should I start with the competitive situation and then you take all the difficult stuff on the details. Yes, so Magnus, I think Norway is a very competitive country. And it's -- that has almost always been the case. And it's just sometimes it goes even further. Right now, there is a very intense competition and that goes across the board. I think we're doing very well, honestly. But there is a consolidation going on now in the Norwegian market, where the savings banks are becoming fewer and bigger. And then we have the 2 large players, DNB and us basically taking the rest, and then you have a lot of boutiques especially within wealth and investment banking. So it is a very competitive market, but it's also a very interesting market as it's growing. And it's -- as we know, the economy in the country is super strong due to the stronger oil foundation. We're well positioned. We grow across the board. Wealth looks really good. SME, really good. Personal banking looks good on lending and really good on doing more business with the current customers, ours, which has been a strategic initiative, basically race up the customers and cover much more than of the needs than just lending. And that goes very well. They're doing a great job over there. And then we have large corporates and institutions are doing a great job, but it's a tough competition for sure. And that also explains a little bit why the lending is down. But it is -- remember, in Norway, we have our shipping portfolio for the group and shipping has been consolidating itself heavily, which have impacted and then it's a very dollar-based business, which, of course, also impact us. It's -- the dollar has weakened. But I would say, in general, we are very well positioned, I would say. But Ian, do you have anything to add to this more like the strategic assessment or the market assessment before you go into the details? Ian Smith: No. I think you've captured it, Frank. Magnus, so in terms of the detail, yes, we did see a step down in net interest income in PEB Norway in the quarter. I guess a few things are going on in there. I mean, the rate cut in September further reduced deposit margins and where we saw a full quarter impact of that in Q4. Then we've also seen, I guess, in response to the rate cuts, which have been a little longer coming in Norway, a lot of customers have been actively renegotiating mortgage rates, and that really started with the first rate cut and we saw the full effect come through together with a little bit of impact of the September cut in Q4 because we have the usual sort of 2-month lag. And then we only got a partial offset from Nibor because 3-month Nibor didn't move to the same extent. So just a bit of margin pressure in Norway that I think will be felt across the market. I'd be surprised if we didn't see the same things in our competitors there. But look, as Frank says, firing on full cylinders in Norway and really, really pleased with both what we're doing, being able to provide customers with other products and also working with our new customer base that came across from Danske. So I guess those are the moving parts in Norway. In terms of cost, that kind of thing, so yes, we did I guess, through good sort of active management, see the headcount come down during 2025. And as we see us continue to implement our Nordic scale initiative with process improvements, consistency, and indeed, as we start to see some of the early impacts of AI, we would expect to see FTE continue to come down. So I think that trend is set to continue. And then in terms of restructuring, no news to report there. We're still going through our necessary processes, consultation and other things like that. So I guess, to repeat what we said at Capital Markets Day, we don't expect it to be material on a full year basis, certainly lower than the provision we took back in 2019. And we would expect to book that in full in '26. But I guess my advice for now is, because I know some people have made a bit of a guess of what it could be, is I'd say leave it out of estimates for now. We intend to treat it separately from our regular performance KPIs. And when we give our detail, we can talk through it fully then. Operator: The next question comes from Andreas Hakansson from SEB. Andreas Hakansson: So let's start with a quick one, I think. It's following up basically on Magnus' questions on costs. The 45% cost-to-income ratio is all good. Could you just help us a bit? You talked about the 2% cost CAGR over time, but it might be a little bit forward loaded -- or front loaded, so should we think about a 3% cost growth to reach that 45% cost-to-income? Ian Smith: So Andreas, I mean I think the sort of broad consensus is in not a bad place. So somewhere between 2% and 3%, I guess. The things people should bear in mind when thinking about cost-to-income, first of all, do exclude restructuring from that. And then the other is that regulatory fees makes a bit of an impact on cost growth. I mean we've seen really good growth in deposits over the year. Our expectations is that might feed through into slightly higher resolution fee for this year, but we don't have any information on that yet. But otherwise, broadly speaking, I think estimates for cost growth for next year are broadly in the right place. Andreas Hakansson: That's helpful. And then a bit country by country from me as well. And we covered the NII in Norway. But can we just talk a little bit about asset quality in Finland? I mean retail, I think, was at 20 bps, which is some level we haven't seen a retail banking for some time in the region and a business banking 35, so that's on that side. And then on the large corporate side, we saw quite an increase in impaired loans in large corporate in Sweden and Denmark, which was also, I thought, surprising. So could you tell us a bit about what's happening in those markets and in those areas, please? Ian Smith: Yes. So I mean, in terms of the large corporates first, these things are all relative, right? There is a fairly sort of low level of impaired assets across the book. And so where you see a particular situation arise that can have a sort of magnified short-term impact on the metrics. So there's nothing untoward or systemic going on with those movements that you've seen in Sweden and Denmark. In Finland, on both our SME book and on the retail side, we've got a slightly broader base book, a bit more consumer finance in there as a proportion than you see elsewhere in our business. And that tends to mean we have a slightly heavier burden in Finland from credit charges. And then we always have a bit of, I guess, a catch-up on write-off of impairs and other things towards the end of the year. So again, I wouldn't want you to take anything by a concern from that. But we do have a slightly different shape of the book in Finland compared to other countries. Andreas Hakansson: Okay. Fair enough. And then on -- just on the countries as well. If we think about net interest income outlook for 2026, I mean, ECB/Denmark, hasn't cut since June and Sweden cut in September and Norway, we at least believe it will continue to cut a bit further. And with the competitive pressure you talk about, should we see that the NII in Sweden, Finland and Denmark is stabilizing relatively soon, and it will continue to go down in Norway, is that the best way of looking at things? Ian Smith: I think that's a good summary, Andreas. Our expectation, as you say, is for rate stability or sort of rate flat in all countries apart from Norway and then 1 or possibly 2 cuts in Norway. So exactly, as you set out. And what that does is provide a little bit of stability. Into Q1, we've got a lower day count. So arithmetically, that means that we'd see slightly lower net interest income for the group in Q1 this year than the quarter just passed. And then from there, provided that rate picture plays out as both you and I have described then it's about volumes and some impact from margins. And so we're confident that we'll be able to grow as the market grows. And so Q1, probably the trough for NII on a quarterly basis. And then with rate stability, volume should help drive from there. Operator: The next question comes from Namita Samtani from Barclays. Namita Samtani: I just had one. The margin on the asset management business. If I just simply take the asset management revenues divided by the average AUM in '25, it was around 42 bps versus 47 to 48 bps in '22 to '24. So I was just wondering why you think that's the case as flows have been in the higher-margin businesses like private banking and how do you think your asset management franchise stacks up versus peers? Ian Smith: Thanks for the question. So yes, we've talked throughout the year of some of those margin dynamics in asset management and also what we've been able to achieve in terms of flows. So I think to start with, really pleased with the flows, EUR 4.8 billion in our Nordic channels in Q4 and then 1.7% in international. So I think that continued sort of good performance in flows that we saw in Q4 is really encouraging. There's 2 things playing into the -- your arithmetic there on what's happening with margins. The first is, yes, we have seen a bit of a sort of move in preference in the market towards lower-margin product that continues to be plenty of pressure and competition from passive versus active. Our own response to that has been to I guess, plan for it and understand that that's what's happening. And to respond with new product launches and others. And as we said in our report today, some of our sort of BetaPlus products that has a bit of active within them, but also designed to compete with that passive threat, they've performed really well in terms of attracting new money. So a bit of overall margin per share that we see right across the industry. And then something that we saw quite specifically in 2025 is a bit of a preference amongst our customers for lower risk, but then also lower margin products. So if we look at our Life & Pensions business, for example, a strong customer preference for our fixed income products, which we're really good at. So there's a margin and a mix impact going on in there that has driven the effect that you've seen. We're really proud of our asset management business. It's performance, it's a range of products. It's customer preference, all of those kinds of things. So in terms of your question of how we think it stacks up, I think we're in good shape. We recognize that it's a very competitive world out there. And the best response to that is to have the best products and the best performance, and we think we stack up pretty well there. Ilkka Ottoila: And operator, I think we have time for one more question. Thanks. Operator: The next question comes from Nicolas McBeath from DNB Carnegie. Nicolas McBeath: So I had a question on the cost to income outlook for 2026. So you're expecting 45%, which is flat from 2025. While at the CMD, you talked about fall in cost to income every year until 2030. So has anything made you a bit more cautious about the near-term cost to income trend? Yes, so that's my question. Frank Vang-Jensen: Should I take it in. Nicolas, it's Frank speaking. Our ambition has not changed. And what we are saying is around 45%. And of course, we are just recognizing that there is a lot of uncertainty and exactly how the year would play out, we need to be a little bit humble about but there's nothing negative that has happened, and our aspirations are not different to what they have been previously. So we just tried to reflect the start to the year and what is happening in the world, of course, can impact the momentum, but let's see. So don't put too much in that. Ian, I don't know, have you anything that you want to add to this specific question? Ian Smith: No, I think you covered it, Frank. Nicolas McBeath: Do I have room for another question or do you have to wrap up? Frank Vang-Jensen: Yes, you have -- so an extra one is fine. You did only one, so that's fine, so please go ahead. Nicolas McBeath: Okay. So then if may I ask also what explains the strong growth and increase in market share that we see in the large corporate segment in Sweden and Finland? Are you competing with lower margins, taking up the risk appetite or what is the recipe here? Any particular segments that account for much of the growth we're seeing here? Frank Vang-Jensen: So the risk appetite, no. So we are not changing our risk appetite. We are -- we have been there for so many years. So we do know that these things you shouldn't do, that's dangerous. Some will do. Some are doing it, but we are not. But of course, it's a very competitive market for sure. So you would like higher margins, but the market is as it is right now. So then it's about getting more of the customer's business, which we are. Sweden is simply -- we have changed a bit in the organization, leadership and also gotten agreed on the ambition level. And they are -- it's very visible, honestly. They are super ambitious. They're active. They are passionate. They're leaning in and that's what you see in the quarter. Then I -- we cannot deliver a 20% increase year-over-year for all years, but at least we can take a fair share of the market. So that's one. And the other one was about Finland. Now I think it's just about -- Finland has been a bit quiet. And we want Finland to be less quiet in LC&I. And I think that what we see now is a response to that. So no magic, it's just hard work, staying close to our customers and being on the beat. Nicolas McBeath: Any particular segments? Frank Vang-Jensen: In -- within LC&I? Nicolas McBeath: Yes. Frank Vang-Jensen: No. I think no, we are broad. So -- but of course, you cannot -- that will -- yes, we are broad. I would say, we are broadly focused. So there will always be -- in each country, there is always an industry composition that you have to understand, and you will be exposed to these industries then. But nothing really here that sticks out, I would say, not to my information at least. Ian, before we close, is there anything that you would like to highlight before we close the call? Anything we have talked -- not talked about or anything that you want to say? Ian Smith: I think we covered most of the key things, Frank. Maybe just a quick recap of the dynamics that we see going into 2026. So I talked about, we expect NII to come down quarter-on-quarter into Q1, mainly because of lower day count. And if we get that sort of fairly stable rate picture that we've been talking about, then I think Q1 '26 should be the quarterly trough. And after that, NII should grow in line with volumes and margin development. So -- and I think, again, with stable rates, a fairly stable contribution from the deposit hedge. I think as we look at the full year for 2026 on NII kind of expectations at the moment because of what we're seeing with margins and other things is maybe flat to slightly down for the full year. And I guess consensus is maybe a little bit on the high side there. But -- so that's NII. Fees and commissions, we ended the year quite strongly. We'd like to see those activity levels sustained and confidence is going to be key there with everything that's going on in the world. So I think '26, all being well in terms of activity levels, I guess, we expect NCI to increase. But estimating the pace of growth is probably a bit difficult at the moment. And then just a watch out for Q1. Q4, we had annual and semiannual fees of around EUR 26 million that won't be repeated in Q1. And so that was sort of lower day count, probably says that quarter-on-quarter, we might see NCI a little bit down. But look, I think a positive outlook for the year. And lastly, on costs, as I said on one of the questions, I think, broadly speaking, expectations for the full year in a decent place. For Q1, we might see a slightly higher resolution fee than the EUR 35 million we took last year, and we booked all of that in Q1, obviously, so makes it a slightly higher cost quarter than the average. And then we covered restructuring. As I said, I suggest people leave it out of estimates for now, and we'll get back to you when we have something to report, we'll exclude it from our KPIs for the year and as a guidance on size, just repeating what we said at the Capital Markets Day, lower than the provision that we took in 2019. So I think we've covered the key topics, Frank, and I'll hand back to you. Frank Vang-Jensen: Great. Thank you so much. And all, thank you so much for participating. We are here for you. If you have any questions, please revert, but else, thank you for today.
Operator: Greetings and welcome to the Dow Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If you would like to ask a question during that time, please press star followed by one on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Dow Investor Relations' Vice President, Andrew Riker. Mr. Riker, you may begin. Andrew Riker: Good morning. Thank you for joining today. The accompanying slides are provided through this webcast and posted on our website. I'm Andrew Riker, Dow's Investor Relations Vice President. Leading today's call are James R. Fitterling, Chair and Chief Executive Officer, Karen S. Carter, Chief Operating Officer, and Jeffrey L. Tate, Chief Financial Officer. Please note our comments contain forward-looking statements and are subject to the related cautionary statement contained in the earnings news release and slides. Please refer to our public filings for further information about principal risks and uncertainties. Unless otherwise specified, all financials where applicable exclude significant items. We will also refer to non-GAAP measures. A reconciliation of the most directly comparable GAAP financial measure and other associated disclosures are contained in the earnings news release that is posted on our website. On Slide two is our agenda for today's call. Jim will review our fourth quarter and full-year results, Karen will provide an overview of our operating segment performance, and Jeff will share some details on the macroeconomic environment and our modeling guidance for the first quarter. We will also provide updates on several of our strategic priorities, including the transformational work that we announced earlier today, an update on our Alberta project, and several of our in-flight actions that aim to provide near-term cash support and ensure we maintain our financial flexibility. Following that, we will take your questions. Now let me turn the call over to Jim. James R. Fitterling: Thank you, Andrew. Beginning on slide three, Team Dow continued to execute with discipline during a year marked by persistent macroeconomic challenges, trade and policy volatility, as well as anticompetitive behaviors by certain industry players. In the face of external pressures, we managed what was within our control. Our fourth quarter operating EBITDA was $741 million, reflecting an expected sequential decline from lower seasonal demand and typical margin compression across many end markets. Looking across 2025, we accomplished several impactful near and longer-term milestones all while the market wasn't providing many tailwinds. We identified more than $6.5 billion in near-term cash support items and delivered well over half in 2025, including the accelerated delivery of our in-year cost savings from our $1 billion cost-out program. We further strengthened our global manufacturing footprint, including our announced plans to shut down upstream high-cost assets as well as the completion of our remaining incremental growth investments which serve downstream higher-value markets that are growing above GDP. We were also once again recognized as one of the world's best workplaces, reflecting direct feedback from our employees about the culture and talent that continues to drive Dow forward. As we move into 2026, we recognize that many markets are fundamentally shifting. Geopolitical dynamics, rapid advances in AI and automation, and economic volatility require new, breakthrough approaches, greater agility, and continued technological adoption. That's why we announced our Transform to Outperform program earlier today. This work builds on our track record of taking proactive measures to help Dow and it represents a fundamental change in how we will operate and serve our customers. We believe this will strengthen our long-term competitive position through every part of the economic cycle. Lastly, we have finalized the value-maximizing path forward for our Path to Zero project in Fort Saskatchewan. We'll share more details on all of this later in the call, but before that, Karen will cover our fourth quarter operating segment performance. Karen S. Carter: Thank you, Jim. Good morning to everyone joining today. Dow's cost savings measures gained significant traction across every business in 2025, which is reflected in our fourth quarter performance. Despite continued industry pressures, we are delivering on our commitments and self-help actions. Beginning with our Packaging and Specialty Plastics segment on Slide four, fourth quarter net sales were $4.7 billion with year-over-year and sequential decreases that were largely driven by lower downstream polymer prices. Volume decreased 2% year-over-year, primarily due to lower merchant olefin sales in Europe, the Middle East, Africa, and India, following our previously announced decision to idle one of our crackers in the Netherlands. Polyethylene sales volume increased year-over-year and grew sequentially driven by continued global demand growth. Operating EBIT was $215 million, down from the year-ago period driven by lower integrated margins. Sequentially, operating EBIT increased by $16 million, driven by the company's cost savings efforts throughout the quarter, which more than offset margin compression. In addition to lower fixed costs, Packaging and Specialty Plastics benefited from higher licensing revenue, increased energy sales, and higher sequential volumes in polyethylene. Through a challenging environment, Team Dow set an annual ethylene production record for the third consecutive year. This highlights the strength of our cost-advantaged asset footprint, our focus on operational excellence, and the early impact from the startup of our new Poly 7 polyethylene train in the US Gulf Coast, which serves high-value downstream markets. Next, turning to our Industrial Intermediates and Infrastructure segment on Slide five. Overall demand for industrial applications remains challenged, which continues to pressure the industry and our businesses. Net sales for the segment were $2.7 billion, down 9% versus the same period last year. Sequentially, net sales decreased 5%, mainly due to lower local prices and seasonally lower building and construction volume. Volume decreased 1% year-over-year, primarily driven by lower volumes in polyurethanes and construction chemicals. This was partly offset by higher than typical seasonal demand for deicing fluids, which have continued into 2026. Operating EBIT decreased $285 million versus the same quarter last year, and $154 million sequentially driven by lower integrated margins. Our cost savings in both businesses helped offset some of the decline. We also completed the shutdown of our higher-cost upstream propylene oxide unit in Freeport, Texas, rationalizing approximately 20% of North American PO industry capacity. Moving to the Performance Materials and Coatings segment on Slide six, net sales were $1.9 billion, representing a 6% decrease compared to the same period last year. This decline was primarily driven by a 4% decrease in local prices across both businesses. Sequentially, net sales declined, reflecting typical seasonal slowdowns, particularly in building and construction end markets. Volumes decreased 2% year-over-year, driven by lower supply availability from planned maintenance in coatings and performance monomers, while volumes in consumer solutions were flat. Even with the impacts from tariff uncertainties, we delivered increased volumes in 2025, marking the second consecutive year of growth for our downstream silicones franchise. The business remains focused on shifting our mix towards higher-value products while reducing upstream capacity. The strategy advances our previously announced European asset actions, including plans to shut down our basic siloxanes plant in Barry, UK, by mid-2026. Operating EBIT for the segment increased by $34 million compared to the year-ago period, driven by strong demand for our electronics and mobility applications as well as our ongoing efforts to reduce costs. On a sequential basis, operating EBIT was down $55 million, largely driven by lower monomer supply availability from our planned turnaround in Deer Park, Texas, as well as typical low seasonal demand. To summarize our fourth quarter performance, even with continued industry challenges and normal seasonality throughout our portfolio, our self-help actions enabled us to deliver results ahead of expectations. In 2026, we will continue to operate with discipline while taking decisive measures to adapt to market realities and transform our business for long-term resilience. I will touch on all of that shortly, but first, I'll turn the call over to Jeff, who will share some macroeconomic insights and our outlook for the first quarter. Jeffrey L. Tate: Thank you, Karen. Good morning to everyone participating on today's call. Slide seven shows that across the broader macroeconomic landscape, there are mixed signals in some of our end market verticals and key geographies. Recent developments are showing some encouraging signals in response to structural industry challenges as well as trade and tariff uncertainties. This includes several announcements of further ethylene capacity rationalization, as well as the elimination of VAT export rebates on select products in China. Across our packaging market vertical, global polyethylene fundamentals are expected to remain stable heading into 2026. From a price standpoint, ACC inventory shows a net draw in 2025, which should provide support for the price increases we've announced for January and February. Across the infrastructure sector, building and construction conditions are likely to gradually improve as interest rate cuts over the past twelve months gain traction. Housing starts and existing home sales remain well below historical averages, but there are some signs of positive momentum with existing home sales increasing for four months in a row. Consumer confidence has improved slightly but remains near historic lows, continuing to weigh on overall demand. At the same time, US retail spending is holding steady in several categories, with resilient sales of electronics as a bright spot. Mobility remains mixed. In China, EV sales are anticipated to moderate as subsidies expire and government support narrows, but growth rates are still expected to remain strong. And in the US, auto manufacturers anticipate a softer market in 2026 due to increasing costs. Overall, our teams are continuing to navigate a variety of dynamics across the key markets that Dow serves, reinforcing the importance of our disciplined cost actions, diversified market exposure, and strategically advantaged manufacturing footprint. As we've demonstrated in the past, we will continue to maximize value while making appropriate trade-offs. Throughout 2026 and beyond, we will build on this momentum to enable even further improvements in our top and bottom-line performance. Next, I'll cover our outlook on slide eight. Our expectations for first quarter EBITDA is approximately $750 million. This sequential improvement accounts for anticipated margin expansion, as well as the normal seasonal uplift following typically low fourth-quarter market demand conditions. We also expect continued tailwinds from our efforts to reduce costs across every business, function, and region. With that, some of these gains should be offset by higher planned spending on turnaround activities as well as lower equity earnings. Turning to our operating segments, in Packaging and Specialty Plastics, we anticipate that price increases and lower feedstock costs will provide higher sequential integrated margins. Lower equity earnings from a cracker turnaround at our Kuwait joint ventures as well as lower licensing activity will represent a collective headwind of approximately $75 million in the quarter. Finally, planned maintenance at one of our crackers in Louisiana represents another headwind of approximately $125 million. Moving to Industrial Intermediates and Infrastructure, we expect normal seasonal improvements in building and construction end markets. Additionally, positive demand momentum for deicing fluids should continue into the first quarter, providing a tailwind for the segment. Our cost savings efforts will provide an additional $10 million tailwind, while approximately $15 million for planned maintenance activity throughout the quarter is expected to offset these gains. And in the Performance Materials and Coatings segment, we anticipate typical seasonal improvements for architectural coatings, as well as higher siloxane pricing following the increased market prices that happened in China late last year. Collectively, this will provide roughly $80 million of sequential tailwinds this quarter. We'll also see a small uplift from lower maintenance activity following the completion of a planned turnaround at our Deer Park, Texas site, as well as continued contributions from our cost reduction actions. Across the portfolio, this combination of factors results in improved operational results for the quarter. Our continued efforts to structurally reduce costs in every area of the company, paired with seasonal demand improvements and expectations for margin-related tailwinds, are meaningful. However, higher planned turnaround spending will weigh on first-quarter results. Looking ahead, as our transformational work and continued cost reduction actions progress, our teams will remain focused on managing what's within our control to preserve our financial flexibility. Now I'll hand the call back to Jim. James R. Fitterling: Slide nine outlines the key areas where we're focused on strengthening Dow's earnings power to ensure that we remain resilient through every cycle. First, we expect to deliver the remaining more than $500 million in cost savings by the end of this year from our previously announced $1 billion program. We're also executing a series of strategic moves that will uniquely position Dow to win. This includes the startup of our remaining incremental growth investments in cost-advantaged regions, as well as our announced shutdowns of upstream higher-cost assets. Additionally, Transform to Outperform is expected to deliver at least $2 billion in near-term EBITDA improvement. About two-thirds of that will come from productivity gains, and the remaining one-third from growth. This work will radically simplify how we operate, streamline our end-to-end processes, reset our cost structure, and modernize how we serve our customers. We anticipate the outcomes to deliver step-change improvements in productivity, more growth with our customers, and greater shareholder returns. Lastly, a refined timeline for our cost-advantage Path to Zero project in Alberta will enable us to align capital deployment with market conditions and maximize project returns when demand improves. The underlying enabler to all of this work is our focus on maintaining financial flexibility while preserving our investment-grade credit rating. Together, these actions form a cohesive roadmap that aims to strengthen our near and long-term competitiveness. Next, Karen has more details about several of these key strategic priorities. Karen S. Carter: Thank you. Turning to slide 10, as Jim mentioned, we are well on our way to delivering more than $500 million in cost savings, representing the remainder of our 2025 $1 billion cost savings program. This builds on our demonstrated ability to deliver higher than expected savings last year when we realized more than $400 million versus our original target of $300 million. In addition to that, we are executing several strategic moves that will uniquely position Dow to win, many of which will begin to materialize in 2026. For example, in Packaging and Specialty Plastics, we completed the startup of our Poly 7 world-scale polyethylene train last year. Using Dow's proprietary solution technology, Poly 7 is designed for lower cost and increased production capacity as well as improved efficiency and flexibility. The new asset is supporting customer-driven demand in specialty packaging, health and hygiene, and industrial and consumer packaging applications. Additionally, the completion of our new alkoxylation will support growth in industrial solutions, which serves attractive end markets such as home care, pharma, and energy. We're also progressing our plans to shut down higher-cost upstream assets, including three in Europe, largely due to the ongoing structural challenges in the region. Each of these assets represents a meaningful portion of our regional capacity and are high on our cost curve. These shutdowns are cash accretive and expected to result in an annual EBITDA uplift of $200 million by 2029, with benefits beginning in 2026 with the shutdown of our basic siloxanes capacity in Barry, UK, by mid this year. Next on slide 11, I'll walk through additional details about some of the work that is already underway as well as what's next. Transform to Outperform builds upon the self-help actions that we have implemented over the past few years. But importantly, it goes a lot further, representing a structural reengineering of our operating model and cost base. The goal of this transformation is to achieve significant growth and productivity gains that elevate Dow's competitive position. And while this transformation aims to simplify the way we work, it will not impact our long-standing commitment to our core values of faith, reliable operations. In addition to simplification, we will focus on streamlining all of our end-to-end work processes and resetting our cost structure. And we'll continue to utilize the power of leading-edge practices and technology to modernize how our teams serve customers in key fast-growing markets. We are bringing a full 360-degree view to this work, inclusive of external viewpoints, lessons from other industries, and robust benchmarking in addition to our own expertise. And we have established a dedicated Dow team to drive our transformation efforts across every part of the company. We anticipate at least $2 billion of near-term uplift from this work, and we've outlined a clear timeline and understanding of the cost to achieve it, which we will hold ourselves accountable to. A third of this will come from new growth, and the remaining two-thirds of the benefit will be in the form of productivity improvement. This year, we expect to deliver approximately $500 million in value. And as a reminder, this is on top of the more than $500 million we will deliver in 2026 to round out our 2025 cost savings program. We anticipate one-time costs of approximately $1.1 billion to $1.5 billion, including $600 to $800 million of severance, and $500 million to $700 million of other one-time costs. Next, I'll share a few examples of the early opportunities that we have already identified and are taking action on. First, as part of our commitment to operational excellence, we will simplify Dow's operating model. We do anticipate this will include a global Dow workforce reduction of 4,500 roles. It will also result in a reduction of third-party roles and resources. As the way we work evolves, so will our expectations for where and how work gets done. This will allow us to speed up decision-making and put the right role in the right areas of the company to better align with the changing market landscape and with where our customers are investing. We will also adopt new ways of working. This includes streamlining all of our end-to-end work processes by leveraging the power of automation and AI, which we expect will result in lower cost and improved efficiency across the entire organization. We will modernize the way in which we grow with our customers through our industry-leading innovation capabilities and deeper insights into customer and end-market needs. Finally, we will fundamentally reset our cost structure. This work will result in a renewed focus on improved raw material sourcing and logistics to drive further efficiency. These are just a few examples of how Transform to Outperform will deliver step-change improvement in both growth and productivity. We're committed to providing you with updates every quarter as the work and value delivery progresses. And we are confident that these efforts will create a Dow that raises the competitive benchmark, is more resilient across the cycle, and consistently delivers growth, customer success, and shareholder value. Next, Jim will provide an update on our Path to Zero project. James R. Fitterling: Turning to slide 12, in April, we announced that we would be delaying construction of our Path to Zero project in Fort Saskatchewan. This decision supported our near-term cash flow while also assuring the project timing would better align with a market recovery. After careful analysis and collaboration with all of our project partners, we have determined that completing the project with a two-year delay is the most value-creating option. This moves phase one startup to late 2029 and remains the best option in support of our long-term value creation goals. We remain committed to the strategic rationale of the project and the upside that it will enable in targeted applications like pressure pipe, wiring cable, and food packaging. And we're confident that Dow can capture outsized growth in these markets for years to come, which will create value for shareholders. We are taking deliberate steps to ensure the new asset will be first quartile globally, further enhancing our low-cost footprint. Importantly, we do not expect any material impact on the cash and tax incentives associated with this timeline. On the execution front, several milestones have been achieved. This includes heavy equipment procurement and detailed engineering design. As we begin to ramp up workforce labor for the project, our robust risk mitigation strategies will help us ensure that it remains on track with current cost projections. With the project delay and resulting incremental CapEx increase associated with it, we now expect returns of at least 8% to 10%. We anticipate that our efforts to reduce and mitigate costs will provide further upside, and we continue to advance several additional levers within our control that could further improve our returns. For example, the value for low-carbon product premiums is not included in our base model, representing potential further upside of 100 to 200 basis points. The low-carbon supply agreement that we signed last year is a testament to the value brand owners and consumers place on decarbonized products, and we have more in the queue. Approximately 30% of the total project CapEx spend is complete, and we anticipate that Dow's CapEx spending will remain at or below D&A until we see mid-cycle earnings. While our intention is to continue this project on a stand-alone basis, we remain open to all options that could enhance value, provided they benefit Dow's strategy and support shareholder returns. Market conditions remain challenging, but the industry has made significant progress in 2025, including accelerating capacity rationalizations. We anticipate that the startup of the Alberta project will align well with these industry operating rate improvements ahead of the next cycle peak. With that, I'll hand it off to Jeff to share more about how we're preserving near-term financial flexibility. Jeffrey L. Tate: Thank you, Jim. On slide 13, looking ahead, the strong financial actions we initiated in 2025 will help us continue to navigate a still challenging macro environment while executing with discipline and consistency. Taken together, these actions give us line of sight to more than $3 billion in near-term earnings uplift potential before the phase one startup of our Path to Zero project. In addition to this, our cash and cash equivalent balance was above $3.8 billion at the end of 2025, and Dow has approximately $14 billion of available liquidity, including a revolving credit facility that was recently renewed through 2030. In 2025, we completed multiple actions to strengthen Dow's near-term cash flow, further reinforce our balance sheet, and achieve lasting operational improvements. For example, we received approximately $3 billion in total cash proceeds for our strategic partnership with Macquarie for the sale of a 49% equity stake at select US Gulf Coast infrastructure assets. We lowered our cost by more than $400 million in the year, and we lowered our CapEx plans by $1 billion. In addition to that, we completed two bond issuances at attractive spreads for a total of $2.4 billion, pushing our next material maturity to 2029. We made the prudent decision to implement a 50% dividend reduction. Collectively, the actions we took provide near-term financial flexibility and support while maintaining our commitment to an investment-grade credit profile. Our teams will continue this momentum into 2026. This starts with delivering approximately $1 billion of benefits this year. As a reminder, this includes the more than $500 million of cost savings that remain in our 2025 program as well as an additional $500 million in operating EBITDA benefits from Transform to Outperform. We remain focused on completing the remainder of our more than $6.5 billion in near-term cash support actions. Our disciplined operating model, commitment to capital efficiency, and the decisive actions we've taken over the last few years ensure Dow is well-positioned to continue navigating near-term volatility. At the same time, Transform to Outperform will enable us to build towards sustained earnings power and a recovery. Next, Jim will provide closing remarks on slide 14. James R. Fitterling: Thank you, Jeff. In summary, 2026 represents an inflection point where our long-term vision and the steps we've taken to navigate a challenging down cycle come together to position Dow for stronger, more resilient growth. First, and foundational to everything we do is our commitment to safe and reliable operations and financial flexibility. Transform to Outperform will become a central driver of new value creation. It builds on our core strengths and positions us to operate with greater speed and efficiency while also enhancing our focus on innovation and value creation with our customers. With the revised timeline, our Path to Zero project will enable growth in high-value packaging, infrastructure, and wiring cable applications. The project represents a growth opportunity that is unique to Dow. It adds a first quartile cost asset in a globally competitive NGL basin and gives us the best portfolio of low-carbon product offerings. We also expect to fully realize the benefits of our near-term incremental growth projects, which expand our ability to serve high-value markets from cost-advantaged positions. Lastly, as Jeff just outlined, we're progressing several cash and cost support actions to give us even further financial flexibility in the near term. In summary, we're revamping our operating model, resetting our cost structure, and enabling new growth. Our strategic priorities are clear. We are delivering on near-term cash and cost savings levers. We're investing where we have lasting structural advantages. We're simplifying, streamlining, and modernizing to enable greater agility, and we are building a more competitive Dow that is positioned to innovate faster and grow more effectively with customers. These are not new priorities. They are part of Dow's DNA, but it is a step change in how we operate that is especially critical in today's environment. 2026 will be about execution, discipline, and accelerating the work we've already begun. With that, I'll turn it back to Andrew to get us started with the Q&A. Andrew Riker: Thank you, Jim. Now let's move on to your questions. I would like to remind you that our forward-looking statements apply to both our prepared remarks and the following Q&A. Operator, please provide the Q&A instructions. Operator: Thank you. Ladies and gentlemen, we will now begin our Q&A session. Telephone keypad. We kindly ask that everyone limit themselves to one question. Your first question comes from Hassan Ahmed with Alembic Global. Hassan Ahmed: Good morning, Jim. Jim, a question around, well, a two-part question around capacity curtailments. In the last call, you guys obviously talked at length about seeing roughly 20 million tons of capacity rationalization. So I would love to sort of get an update with regards to where we stand on that figure. And then part and parcel with that, about your decision to carry forward with the Alberta project, I mean, how do you, I mean, obviously, the returns seem favorable to Dow. But in the broader landscape, what compelled you to sort of go through with that decision? The fear, obviously, being that any sort of future upcycle, you know, if there's sort of, quote, unquote, phantom capacity that lingers on, that may impede the sustainability of any sort of future upcycle? So I would love to hear your thoughts about that as well. James R. Fitterling: Good morning, Hassan. Thanks for the question. I don't think there's dramatically new data on the number of ethylene capacity rationalizations that have come out. We've seen more firm announcements out there. I think the total amount now is in the 15 to 20% of the European capacity that's coming out. We haven't seen anything substantive on anti-involution in China. So nothing has changed there. On Path to Zero, I think several things in our view, the changes that are happening are going to lead to the next upcycle. We're at a point right now, and you've made this comment in some of your writing, that demand has been relatively lackluster, and we know what the supply situation is and where supply is going. Demand in some of the higher volume markets has been where things are soft. So as we see housing, construction, infrastructure, and other things pick up, that's typically where you see things start to take off on operating rates. As we mentioned, the low-cost assets, we ran them hard. We set an ethylene production record even with a good cracker idled in Europe. So I think it speaks to running the low-cost assets hard. Path to Zero will put another cracker in the first quartile for us while we exit positions that are in the fourth quartile. I think that's something that we have to do in every cycle. We gave guidance on the return on Path to Zero, which is at the low end, and there are some upsides in there. Those will be driven by things that we can do to mitigate costs and, obviously, continued success in bringing in the premiums for the low-carbon product that's coming out of there. We're able so far to see a good outlook on the cost picture. We've got the detailed engineering design essentially done. We've got the long lead time items procured. So we've got a pretty good handle on how the costs are coming in. The remainder is going to be the labor when we start to ramp that up. Operator: Your next question comes from Vincent Andrews with Morgan Stanley. Vincent Andrews: Thank you, and good morning, everyone. Jim, on Alberta, just a few clarifications. Is this it? One more year delay and then 100% moving forward? Or is there any potential off-ramp or other opportunity there? And then secondarily on that, it sounds like you were maybe saying you'd be interested in bringing a partner in. Maybe I'm putting words in your mouth or looking at project finance or something else. But maybe you could just expand on other sort of things you might look at there and whether you're getting incoming interest around that. James R. Fitterling: Good morning, Vincent. Yeah. The two-year delay, I think, as we look at it, most of the change in the cost picture and the reduction in the returns is the capitalized interest on what happens with that delay. And so, you know, we had some of that, and our partners had some of that as well. So, yes, I think that is it. I mean, you'd have to have a very Armageddon scenario to look at something different. We don't anticipate that happening. When I mentioned about flexible arrangements, we haven't had any serious inquiry from a partner standpoint. Mentioned on the last call, we're always open to value-creating opportunities, and we still remain that way. I think there may be some creative finance opportunities there. As long as those are good returns for shareholders, we'd be open to talk about those. Operator: Your next question comes from Michael Sison with Wells Fargo. Michael Sison: Hey, good morning. So the export markets have continued to have really low margins, zero margins in most cases for polyethylene. Can you help me understand how much of your ASP capacity goes to the export market? And, you know, some companies have opted to reduce their capacity in the States because, you know, those markets remain low for quite some time. Any thoughts on how much of your capacity you want to be in the export market? And any thoughts about reducing that over time? James R. Fitterling: Yeah. Good morning, Michael. About 30 to 40% of our PASP volumes currently from our North American assets go to the export market. I think as we look forward, two things that we have to take into consideration are the cost position of ethane cracking and the rate cost advantage we get from that. It's especially important. The second is the product mix. When you look at the product mix that we put on the assets, are all of those products available globally? And in many cases, they are not. That has a big difference on the returns that we get on some of the exports. There's going to be a shift. Obviously, there's a lot of shifts coming with all the trade talks, with all the geopolitical tensions that are going on. But from our viewpoint, long term, the Americas are going to be advantaged from a gas cost position. The supply is there. They will be low cost. The Middle East will continue to be advantaged. And our position in Argentina looks to continue to be advantaged. So that's where we want to maximize, and that's where our investments, if you look at our investments, not just plastics, but across the board, they've been in our home bases that are in those low-cost positions. Operator: Your next question comes from Jeffrey Zekauskas with JPMorgan. Jeffrey Zekauskas: Thanks very much. Your cash flow from operations was $1 billion. In reading your slides, I guess slide 13, it looks like you got $450 million from long-term supply agreements and $250 million from divestitures. So excluding that, cash flow from operations is $300 million. What are your expectations for 2026, and is that a correct assessment of what happened this year? James R. Fitterling: Jeff, maybe I'll ask you to make some comments on the cash flow outlook. But Jeff Z., one of the things I would say is clearly, we're working hard on restoring margins. So that's one of the first priorities. And then, obviously, the cost-out actions that we mentioned, which are worth about a billion dollars for this year on self-help actions. Jeffrey L. Tate: Yeah. Good morning, Jeff. A couple of comments I would make. As you recognize, we're closing out 2025 with a really solid cash balance of almost $4 billion. If you add in those year-over-year earnings improvement opportunities that Jim just mentioned, the one is the $500 million closeout of the billion dollars of cost reductions. Secondly would be the Transform to Outperform EBITDA uplift of $500 million. We've also got our growth investments and our asset actions that will deliver at least a $100 million of earnings uplift year-over-year. In addition to that, Jeff, we'll have the $1.2 billion from the Nova proceeds as well as we're expecting a net working capital efficiency gain with the release of cash of $500 million during the course of 2026. So with each one of those actions from an EBITDA uplift perspective as well as direct cash flow infusion, we're in a good position to be able to support our cash flow needs going through 2026 and beyond. Operator: Your next question comes from Christopher Parkinson with Wolfe Research. Christopher Parkinson: Great. Thank you so much. Jim, if you could just take a step back, just given the $6 billion quoted in the PowerPoint and what you're seeing from polyethylene integrated margins. How do you see that evolving over, let's say, the first half of '26 through '27, '28, just given where we are in the cycle? What underpins those assumptions? And what do you think perhaps the street is missing if you believe people are, let's say, particularly too low? Just your updated thoughts on that would be greatly appreciated. Thank you so much. James R. Fitterling: Yeah. Thank you, Chris. Good question. I think we do expect integrated margins to improve. Even with the weather situations that we've had here, I think the input costs, especially in the Americas, have been very stable. The drawdown in inventories at the end of the year in North America has really helped as we lean into the first quarter. We're getting some pricing power and moving things up. So I think one of the things we have to be careful of is that we're not extrapolating from a fourth-quarter first-quarter data point, which typically are not the strong parts of the quarter. So we're talking about bottom-of-the-cycle integrated margins. And, you know, you don't want to extrapolate those forward. And we will see demand improvement as we continue to move through this and see the rationalizations come. Karen, any specific comments on what you're seeing in the marketplace right now on integrated margins? Karen S. Carter: Yeah. I think the other thing I'd add, Jim, is that from a polyethylene demand perspective, it remains resilient. It's still growing above GDP. You mentioned towards the end of the year that through November, we saw industry inventories come down by 400 million pounds. I think the other important data point is that November was the highest monthly volume of 2025 and actually set a total sales record, both from a domestic perspective as well as exports. So exports out of the low-cost regions in North America continued to be strong. And so absolutely expect coming into the first quarter that integrated margins will improve. Prices will go up in January. And even before the recent spike in the feedstock that you referenced, Jim, the situation was already there. The conditions were there for prices to go up. And the other thing, last thing I'd mention is we have to keep in mind that industry integrated margins have been at this low level for a while. And so there's a lot of motivation and reason to move them up. Operator: Your next question comes from Kevin McCarthy with Vertical Research Partners. Kevin McCarthy: Yes. Thank you, and good morning. Your II&I segment trended a little bit weaker than I think you and I both expected two or three months ago. So maybe a two-part question. Can you talk about the variances that manifested in that segment versus your prior expectations? And then the second part would be on polyurethanes. I think in the past, you had discussed a strategic review of that business. Is there any update on the efforts there? Is it active or dormant? Appreciate any color there. Karen S. Carter: Sure. In the fourth quarter, we did see normal seasonal demand declines, particularly in the building and construction market. And the reality is that that market just continues to be under pressure, not just domestically, but around the world. And, of course, that is putting downward pressure on pricing. But also, if you think about housing, if you think about automotive, those markets are just weak around the world. And so as we went into the fourth quarter, we saw that we had some lower fixed costs as well as lower planned maintenance. But the building and construction end markets and durables just really offset that. As we think about the first quarter, we do expect to see some modest seasonal demand improvements and also tailwinds from cost actions. But we have a bit of planned maintenance that's going to offset that and, again, just continued downward pressure, particularly in the building and construction market. James R. Fitterling: On polyurethanes, we continue to look for the best options, Kevin, on a go-forward basis for the polyurethanes franchise. Obviously making a lot of changes. We noted that we took out 20% of North American PO capacity at the end of the first quarter. So we're having some rationalization in the industry, higher-cost assets, to kind of address the oversupply situation there. I would say, additionally, the team has been very busy on the trade front. I mentioned anticompetitive practices before, but Europe especially has been hit very, very hard from dumping of material into the European continent. And this comes from regions that don't have any particular cost advantage to bring it in. And so we've seen some actions I think are going to have a positive impact. In China, for example, the announcement that the 13% duty drawback for exports out of China is going away at the end of the first quarter in April, I believe, is when it goes away. So there were companies that don't have the cost position to be able to export under free trade, fair trade rules. We're getting 13% duty drawbacks for all their exports. That's going to go away. And you've got a whole host of cases on antidumping that are starting to take hold. There's been more traction in the Americas than there has been in Europe. Europe is a bit slower to respond, but it is on the radar screen. It is getting attention in Europe. Operator: Your next question comes from Matthew Blair with TPH. Matthew Blair: Thank you, and good morning. Could you talk a little bit more about your outlook for feedstock costs for your US cracking business? I think you mentioned that Q1 should benefit from lower ethane costs, which makes sense based on just the quarter-to-date numbers. But are you concerned that ethane might rise later in 2026 with the startup of three new natural gas pipelines from the Permian? And then long term, how do you feel about the overall availability and pricing for natural gas and ethane given all this competing demand from AI and LNG? Thank you. James R. Fitterling: Hey, Matthew. Good question. I mean, the energy sector is one we watch pretty closely. In general, I would say the electricity demand that drives, you know, that power demand for AI and tech is a good thing. America has the production capability, and it will drive the natural gas production. And as the natural gas needs rise, obviously, people want to take the natural gas liquids out to get the maximum return they can. And we see about 8% growth in the fractionation capacity coming at the end of 2026 and into 2027. So I think there's going to be plenty of ability to take that ethane out, and we'll have pretty good NGL prices through there. We've got 20 to 23 cents right now in the price outlook, which is a frac spread of about 25 cents a million BTU. You know, 0 to 25 cents is pretty normal. And then I think the other thing that we have to watch is just what happens with LNG exports. And so LNG has been moving because of the so we have to watch LNG export capacity and approvals and timeline when those come on. The short-term spike that we just witnessed was because of freeze-offs in the Haynesville and some of the other basins that were pretty cold. And so that creates a kind of a short-term supply disruption and a very cold weather environment where we're drawing down natural gas. So we've seen some pretty wild movements in that market. For that market, it clears pretty quickly, and I think as this weather moderates, you'll see things come back to normal. Operator: Your next question comes from Matthew DeYoe with Bank of America. Matthew DeYoe: Good morning. $2 billion. It's a really big number. I think one of the issues that we kind of see with productivity initiatives sometimes in commodity companies is, like, it just kind of gets lost to the cycle. And we often hear, you know, you should have seen how bad things would have been if we didn't, you know, cut costs. So as we try to grade the curve, where will we begin to see the tangible evidence? Like, there's $400 million savings in 2025. Where was that registering across the line items? I know you had mentioned II&I saw some benefits, but it's candidly hard to tell. And then there were comments about lower cost quarter over quarter in TNSP. Is that where we're seeing some of the $400 million in the fixed cost? And as we look ahead with the $2 billion, does SG&A move lower on an absolute basis? You know, what segments will we see the most tangible uplift? James R. Fitterling: It's a good question, Matt. And, you know, the $2 billion Transform to Outperform target is two-thirds from productivity and a third from growth. And so I think it's important to split those out. If I look back at last year and the cost out, we had significant margin pressure, and we saw that on price. A lot of the savings that we saw came through cost to manufacture. And so when you look at our cost of goods sold, it would have come out in there. But obviously, in the face of the declining margin environment. And I think we've also been in a low oil environment. And in general, for us, higher oil is a more constructive environment. And I think that's going to take some demand snapback in some of these bigger volume markets to see that. Karen, maybe you want to unpack a little bit about what's different about the approach on Transform to Outperform than what we've done in the past. Karen S. Carter: Yeah. Thanks, Jim. You know, I think it's important to just highlight what Jim mentioned. This is not just about cost out. This is not just about productivity. But it's also about growth. Just a couple of other things that are going to be different about this versus even the $1 billion cost restructuring that we announced in 2025. First, it's really the scale and the speed at which we intend to deliver. So at least $2 billion between now and 2028. This is about our entire operation. And so this is going to touch every aspect of the company. And we expect to see the benefits in all of the businesses. You know, we're also being proactive about ensuring that when we achieve the gains, we sustain the gains. We have a dedicated team at Dow that's driving these efforts. We are fundamentally looking at how we change the way we work but also being careful about preserving the best parts of our culture and shifting where we need to. And then we're also putting governance in place to ensure that there's complete alignment and accountability across the entire organization, and that we are focusing on things that are going to drive shareholder value. So this is really a reset of our cost structure. It's also about streamlining our end-to-end processes and simplifying how we operate, including looking at the management structure, the management layers to reduce bureaucracy and complexity. Operator: Your next question comes from Duffy Fischer with Goldman Sachs. Duffy Fischer: Maybe I can sneak into the first one. I believe Sadara is up for its debt midyear this year. So can you just give us some details about operationally how Sadara is looking and what does that debt refi mean for Dow? And then just the second one is you gave us a billion dollars on the Canada project at mid-cycle. What would that project be making in today's environment? James R. Fitterling: Morning, Duffy. Yeah. On Sadara, we continue to keep a close eye on Sadara. It's running safely and reliably. I'd say we had one small incident at the cracker this year, but the assets are in a good position on the global cash cost curve. Most of it has been around the financial structure. And Dow and Aramco are conducting an ongoing strategic review of Sadara, which is targeted to be completed during 2026. The JV obviously operates very safely and very reliably, and we'll look at the evaluate the opportunities to enhance the long-term resilience of the joint venture. I don't anticipate any cash payments to Sadara lenders in 2026. Sadara's got ample liquidity through their facilities, including some that they utilized in the fourth quarter. And, of course, Dow and Aramco have support behind that, pairing guarantees behind that. On the second part, I don't have a number for you on what that would be instantaneously, but I can ask the team to talk with you and see if they can get you an estimate of what that would look like. I do have the forward look, which we put in the slides, which is we still see the ability to generate a billion dollars of uplift out of that project. Operator: Your next question comes from Frank Mitsch with Fermium Research. Frank Mitsch: Just touching base again on this Transform to Outperform. Obviously, it's been a very difficult past couple of years, and now you're unveiling this big project, and I understand that it's going to touch everything that you do. And you mentioned earlier, you know, how much AI is playing a role in this. Is the fact that, you know, are you getting confident in the ability of AI to help achieve these productivity savings? And in terms of how much you're spending on AI, you know, have you seen a return as of yet? I mean, how is AI being integrated into this whole Transform to Outperform? And, obviously, when demand comes back, I would imagine that you anticipate seeing all of this drop to the bottom line. Is that the current thinking? James R. Fitterling: Yeah. Good morning, Frank. It's a good question. And I just want to make sure that we're clear that it's not all AI. So, you know, there are also going to be some fundamental changes. We're going to look at all of our integrated work processes from end to end and simplify those. So, for example, in previous changes, we've looked at trimming third-party costs. We've looked at obviously, always look at procurement and what we can do to do better in procurement and bring costs down for what we pay out to third parties. But in this case, we're looking at how things are built into our system and how we do our work end to end and how can we take steps out, how can we automate things that are done either manually or hand off within the system today? And AI is going to give us a lot of possibilities there. Over the last couple of years and in the first, I mean, we had a not in 2025, but we had a billion-dollar cost-out program before that. And some of the money from that program actually went into digital capabilities and IT. So one of the things that we have is we have a lot of high-quality data. We've got an intelligent data hub that we've built inside the company that AI on top of that will allow us to take a look at these work processes and really take steps out and streamline the whole thing. So we call it a reengineering or a rewiring of the way we do business globally. And then that can be, you know, baked into the system and automated. And that's one of the ways we'll keep cost out as we go forward. We're seeing progress in many functions right now. Many different functions are using AI in ways that are speeding things up or reducing the cost to do things. We see it in legal, for example, patent research work, you know, doing discovery on cases, on legal, as a big cost savings there. We're seeing it in a lot of other applications. So I think it's going to be there. And we haven't really started to get into yet robots and AI and robotics together. I think at some point, we will. On traditional AI, we've seen great progress, obviously, from using technology to make things safer and eliminate certain costs from turnarounds and things like cost of scaffolding is a big cost in a turnaround. By using drones and crawlers with cameras and other kinds of technologies, we can eliminate big costs out of having to scaffold parts of plants to go in and do those turnarounds. So they're real numbers, and we're pretty confident that we can bring all of it to the bottom line. On the growth side, there will also be some refocus on where we have our people positioned. I would say the focus will be on still boots on the ground on the sales side, sales, tech service, application development. Our model is you have to be at the design table with your customers, and you have to be on the ground to do that. We'll look at how those are deployed. Are they in the right geographies and the geographies that are growing? And then how we support that from behind the scenes inside the shop, see what we can do to automate to help them and bring better data to their fingertips. Operator: Your next question comes from David Begleiter with Deutsche Bank. David Begleiter: Thank you. Jim, just on CapEx, can you discuss how you will be able to keep CapEx below D&A as you ramp up the spending on the Path to Zero project? And just on the and is that due to any timing from the Canadian cash and tax incentives? Thank you. James R. Fitterling: Yeah. Good morning, David. Well, obviously, we're finishing up in-flight growth projects. So we've got a few of them rolling off. Our outlook for CapEx for this year is still $2.5 billion like we spent last year. So there will be some most of what was spent on Path to Zero this year is receiving long lead time items that will be delivered into the site. Mostly engineering work will get finished by the middle of the year. And so detailed engineering will be done. We'll have the roll-off, obviously, of some of the growth projects that are already up and operating. And we have some small incremental growth projects that come along, like in silicones that we need to support. And so that will get us through 2026. And then as we look at '27, '28, '29, and that's where Path to Zero will ramp up. We'll keep a pretty tight control on the rest of the CapEx spending and maintenance spending. And as you can see from maintenance spending, we're right in line with our traditional levels. Wanted to make sure, obviously, that we keep our asset footprint on the low-cost assets and keep them reliable. That's what's carried us through. So it helped us as well deliver in the fourth quarter. And so we want to continue to do that, make sure that they're in good shape. No change on the Canadian receipt of the goods. Canada's been very positive and continues to be very supportive. So as we near that time frame, obviously, we'll have discussions about timing, etc., on that. Operator: This concludes our Q&A session. I will now turn the conference back over to Andrew Riker for closing remarks. Andrew Riker: Thank you, everyone, for joining our call today, and we appreciate your interest in Dow. For your reference, a copy of our transcript will be posted on Dow's website within forty-eight hours. This concludes our call. Operator: This concludes today's conference call. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Nasdaq Fourth Quarter 2025 Results Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you would need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. In the interest of time, please limit yourselves to one question. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Ato Garrett, Senior Vice President and Investor Relations Officer. Please go ahead. Ato Garrett: Good morning, everyone, and thank you for joining us today to discuss Nasdaq's Fourth Quarter and Full Year 2025 Financial Results. On the line are Adena Friedman, our Chair and Chief Executive Officer, Sarah Youngwood, our Chief Financial Officer, and other members of the management team. After prepared remarks, we'll open the line for Q&A. The press release and earnings presentation accompanying this call can be found on our Investor Relations website. I would like to remind you that we'll be making forward-looking statements on this call that involve risks. A summary of these risks is contained in our press release and a more complete description of our annual report on Form 10-K. We will discuss our financial performance on a non-GAAP basis excluding the impact of divestitures and the impact of changes of FX. Full year comparisons also exclude a previously announced one-time revenue benefit in index during 2024. Definitions and reconciliations of US GAAP to non-GAAP plus adjustments can be found in our earnings presentation, as well as in a file located in the financial section of our Investor Relations website at ir.nasdaq.com. And with that, I will now turn the call over to Adena. Adena Friedman: Thank you, Ato, and good morning, everyone. Today, I will start with an overview of our fourth quarter and full year 2025 financial and operational performance. I will then discuss our strategic priorities and outlook for 2026 before handing the call to Sarah to walk through the financial results in more detail. 2025 was an excellent year for Nasdaq as we delivered strong organic growth and accelerated innovation across our business. Our team executed exceptionally well, demonstrating the resilience of our platform in a complex operating environment defined by volatile trading dynamics, sustained geopolitical tension, and an ever-changing regulatory landscape. It was also a year of significant milestones for the company. For the first time in our history, we surpassed $5 billion in annual net revenue and $4 billion in solutions revenue. Our index franchise reached new heights, delivering record average AUM, a second consecutive year of record inflows, and the highest number of new index products introduced in our history. Market services delivered record revenues for US equities and US options. We delivered industry-leading new listings performance and a record $1.2 trillion in listing transfers, the strongest year ever for our switch program. In financial technology, we strongly delivered against our cross-sell commitments, deepening our clients' relationships. And we are now proud to call every GSIB a Nasdaq client. Our financial crime management technology business pioneered innovative approaches to fight crime and introduced our new Agentic AI workforce, a suite of Agentic workers that automate key client workflows. We also formed a new partnership with Biocatch to bring additional intelligence and effectiveness to our solutions. These accomplishments reflect not only the breadth of our platform but the momentum behind it as we enter 2026 with more opportunity than ever. For the full year, we delivered net revenues of $5.2 billion, an increase of 12%. Our solutions revenue grew 11% to $4 billion at the top end of the range of our medium-term outlook. ARR ended the year at $3.1 billion, an increase of 10% year over year. Our operating income was $2.9 billion, up 16%, and we delivered 24% diluted EPS growth. Our fourth quarter net revenue was $1.4 billion, up 13% year over year, with solutions revenue of $1.1 billion, up 12% year over year. Expenses in the fourth quarter were $609 million, up 8% year over year. Operating income was $783 million in the quarter, up 16%, and we delivered 27% diluted EPS growth. Our performance was anchored in the strategic pillars of integrate, innovate, and accelerate, which enabled our teams to execute with clarity and focus. Within our integrate priority, we overachieved our expanded efficiency program net expense target with over $160 million in cost reduction actions as of year-end. We ended the year with gross leverage of 2.9 times, outperforming our previous expectation of reaching three times leverage by the end of the year. In recognition of our strengthening balance sheet, both Moody's and S&P upgraded Nasdaq senior unsecured debt ratings in 2025 to Baa1 and BBB+ respectively. Within our innovate priority, we executed across several key initiatives. We embedded AI across our business and have begun rolling out new AI-enabled products with strong client reception. For example, we've seen enthusiastic engagement from Nasdaq Verafin clients for our Agentic AI workforce that we launched at the '3. The first Agentic worker we introduced, our Agentic sanctions analyst, has strong early use among our clients. Continuing the momentum this month, we launched our second worker, the Agentic enhanced due diligence analyst. We look forward to expanding this offering with additional Agentic workers planned for 2026. In market services earlier in 2025, we announced plans to bring 23 by five trading to the Nasdaq stock market. And we will be ready to launch this capability in the '6 subject to regulatory approval. Further, we're driving industry efforts to realize the potential of digital assets across multiple initiatives, including our proposed approach to trade tokenized securities, which prioritizes issuer choice, investor protection, and capital efficiency. Lastly, within our accelerate priority, our one Nasdaq strategy continued to deliver strong results, driving 25 cross-sell wins across financial technology in the year for a total of 42 cross-sells since the Denza acquisition closed. At the end of the fourth quarter, cross-sells accounted for over 15% of Financial Technologies sales pipeline, and we remain on track to surpass $100 million in run rate revenue from cross-sells by 2027. This program culminated in net revenue growth of 12% and solutions growth of 11% at the top of the range of our medium-term outlook. Turning to our strategic and operational highlights for 2025. I'll begin with Capital Access Platforms, where we delivered 10% revenue growth for the year, driven by record index inflows, new IPOs, and strong bookings growth, particularly in data and analytics. Our listings business had the strongest IPO year since 2021. We secured three of the five top IPOs of 2025, including Medline, the largest IPO of the year. It was our seventh straight year as the leading US exchange by proceeds raised, with eligible operating companies raising over $24 billion, including over $10 billion in the fourth quarter alone. In our Nordic markets, we also welcomed the largest IPO in Europe, Verisure. In Europe, we continue to benefit from increased international focus on the Nordics where the equity markets have consistently outperformed the rest of the region. The strength of these markets attracted five new ETP issuers who listed 84 new exchange-traded products across the Nordics in 2025. We also made strong progress on our switch program in 2025, reinforced by Walmart's historic transfer to Nasdaq, the largest exchange switch ever completed. This milestone capped a record year for transfers, including Shopify, Kimberly Clark, and Thomson Reuters. In total, operating company switches in 2025 represented more than $1.2 trillion of market cap, bringing the ten-year total to $3.1 trillion. This quarter, we're introducing an updated listings win rate methodology that better reflects the pathways through which operating companies can list on Nasdaq, including a traditional IPO, a direct listing, and a SPAC combination. Under this new methodology, our win rate was 72% for the full year 2025. This metric also accounts for our newly approved listing qualifications that raise our minimum standards. We've included details on page 21 of our earnings presentation. Looking ahead to 2026, we see signs of accelerating capital markets activity further supported by recent Fed cuts and a very healthy pipeline of late-stage private companies. Based on the current market dynamics, we look forward to an active new issuance year. Our data business delivered robust growth in 2025, as clients across the ecosystem utilized our data more than ever to navigate the financial markets. Our growth was driven by new enterprise license agreements, which increased 24% year over year, and our international expansion efforts, including signing an agreement with one of the largest banks in Saudi Arabia. Our growth was also driven by higher use of our data products across our client base. Our index franchise remains an exceptional growth engine delivering tremendous performance and innovation. We achieved a record $99 billion in net inflows over the last twelve months, including a record $35 billion in the fourth quarter, and exited the year with ETP AUM of $882 billion, an all-time high. In Index, we delivered on our new product strategy, launching 122 new products in 2025, including 60 international products and 32 in the institutional insurance annuity space. Within workflow and insights, our analytics and corporate solutions businesses continue to advance through product innovation and strategic partnerships. In analytics, the investment business delivered robust performance, supported by our strong network effects with platform usage up 10% year over year, driven by increased use of research workflows. We continue to build powerful partnerships, including with Juniper Square and LSEG, reinforcing our strategy to embed Nasdaq's investment data in investment workflows across both public and private markets. In Corporate Solutions, investments in AI-powered features and tools as well as deep client engagement supported new sales efforts in our governance and Nasdaq Lens solutions. These tools also support a retention improvement across the portfolio. Turning next to our financial technology division. In 2025, FinTech delivered strong financial results with 11% revenue growth. Financial Crime Management Technology grew 22% over the year, including 24% growth in the fourth quarter. Regulatory Technology delivered 10% growth for the year, including 12% growth in the fourth quarter. And Capital Markets Technology grew 9% over the year and in the fourth quarter. With more than 3,800 clients, now including all of the GSIBs, the division has established itself as a leading modern technology partner helping institutions address complex risks, critical regulatory reporting, and the modernization of trading infrastructure. In financial crime management technology, we continued strong sales execution during the year, adding 255 new SMB clients and six new enterprise clients, a combined 23% total client growth over the prior year. In enterprise, five of the six new client signings were cross-sells, and we completed three expansion deals with existing enterprise clients for a total of nine enterprise deals. This underscores our ability to deepen client relationships through our one Nasdaq approach. In regulatory technology, our Acxiom SL team broadened our product portfolio to meet evolving regulatory demands, supporting geographic expansion into Saudi Arabia, India, and France. Additionally, we deepened our partnership with Revolut after they consolidated their UK and European regulatory reporting onto our cloud-managed platform this quarter. We also signed a significant cross-sell to a global tier-one bank, an enterprise cloud deployment demonstrating the scale of our solutions and the trust we've established across our platform. In our surveillance business, we drove strong client growth, including an agreement with CFTC, which selected Nasdaq to replace its legacy surveillance system. Overall, in 2025, our surveillance team signed 26 new clients across securities exchanges, crypto trading venues, market participants, and regulators to strengthen their protections across rapidly evolving markets. In capital markets tech, we delivered a strong year driven by durable demand for market modernization solutions. We continue to strengthen our relationships with central banks, ending the year with 24 total central bank clients, including three new central bank clients signed this quarter. Calypso experienced increased adoption from global banks and managers transitioning from legacy on-prem environments to cloud-hosted trading risk and treasury solutions. We're seeing early momentum in Calypso's fully managed service offering on AWS, which drove additional upsells and a major cross-sell into a leading market infrastructure operator during the quarter. In Market Technology, our managed service offering demonstrated strong momentum with growth across multiple solutions. And in the fourth quarter, we signed a major financial market infrastructure client for a multi-product cloud-based deployment based on the Eclipse platform, highlighting our ability to provide integrated end-to-end solutions. Turning to market services. We achieved record annual net revenue of $1.2 billion, up 17% year over year, fueled by elevated volumes in US equities and US equity options as well as robust performance in European cash equities and equity derivatives. Our teams continue to execute well, capturing opportunities in value-added products, and extending our competitive positioning in both US and European markets. Specifically, in the fourth quarter, our index options revenue more than doubled year over year for the second consecutive quarter. We grew market share in European equities, and we delivered strong US Paid Plan revenue. Nasdaq's closing cross also set a new notional value record during the triple witch event in December with $233 billion traded. Success in 2025 reflects our ability to execute with discipline, innovate with purpose, and meet our clients' evolving needs. I've used the start of this year to meet with clients across the globe, including on the ground at Davos, listening closely to their priorities and pressure points. Those conversations have reinforced our view of the industry's priorities to manage risk, advance market structure, and innovate with AI, strengthening our conviction and the durability of our diversified business offerings. Looking ahead to 2026, Nasdaq is well-positioned to build on our strong foundation and deliver durable growth. Our platform is built on three core strengths. First, an embedded client community that connects us to real-world needs and builds trust that accelerates adoption. Second, gold source data that delivers unique client value powering intelligence, and advanced workflows. And third, engineering excellence that delivers speed, resilience, and interoperability at scale, enabling innovation, global deployment. Along with our deep industry expertise, these foundational layers work together to create a differentiated platform that delivers outcomes that matter to our clients. Our platform strongly positions us to take advantage of key growth areas in the age of AI. Sustained investment from leading technology firms and AI firms is continuing to reshape the economic landscape, making digital infrastructure and data-driven innovation the key drivers of business investment and real growth. By architecting the world's most modern markets, by powering the innovation economy, and by building trust in the financial system, we're not just responding to the change, we're shaping it. We look forward to updating you on our progress on these priorities at Investor Day next month. And with that, I'll turn the call over to Sarah. Sarah Youngwood: Thank you, Adena, and good morning, everyone. We closed 2025 with strong momentum following an excellent year for Nasdaq. We delivered over $5 billion in annual revenue for the first time, projecting strength across the business, and performance that met or exceeded our outlook expectations in every division. We had 10% ARR growth in the year, Solutions now represent 76% of total net revenue at over $4 billion, underscoring the deliberate shift of our business mix. We coupled that growth with disciplined execution, expanding operating and EBITDA margins by two points, reducing gross leverage to 2.9 times, and delivering free cash flow conversion of 109%, while continuing to invest to support long-term growth. Let's start with annual results on Slide 11. Net revenue of $5.2 billion was up 12%, with Solutions revenue of $4 billion up 11%. Operating expense was $2.3 billion, up 7%, in part driven by our strong top-line growth, yielding a 56% operating margin and 58% EBITDA margin. Full-year net income was $2 billion with diluted EPS of $3.48, up 24%. Turning to quarterly results on Slide 12. We reported net revenue of $1.4 billion, up 13%, with solutions revenue up 12%. Operating expense was $609 million, up 8%, leading to an operating margin of 56% and EBITDA margin of 59%, both up two points compared to the prior year quarter. Net income was $554 million with diluted EPS of $0.96, up 27%. Slide 13 shows the drivers of our 12% net revenue growth for the year and 13% net revenue growth for the quarter. We generated over eight percentage points of alpha for the quarter and for the year, a 170 basis point improvement in our five growth versus 2024. The drivers were consistent for both alpha and beta. Alpha was driven by new and existing clients, low churn, and product innovation, beta was driven by elevated volumes in market services, and higher valuations in Nasdaq indices. As shown on slide 14, we achieved 10% ARR growth for the year. This represents a two percentage point improvement versus the prior year period and includes 12% in FinTech. Total SaaS revenue grew 13% in the quarter, including 19% SaaS growth in FinTech. SaaS continued to represent a consistent share of ARR at 38%, in line with the prior year quarter. Let's review division results starting on Slide 15. In Capital Asset Platforms, we delivered quarterly revenue of $572 million, up 12%, with annual revenue of $2.1 billion, up 10%, both were driven by 9% of our ARR growth ended the year up 7%. Data and Listings revenue was up 7% in the quarter with ARR up 8%. Data revenue growth was driven by upsells, usage, and new sales. Listings benefited from the improving IPO environment. Growth from new listings and pricing was partially offset by the revenue headwind from prior year delisting and lower amortization of prior year period initial listing fees, both of which were in line with our previous expectations. Looking ahead to 2026, expect an approximately $9 million year-over-year headwind in each quarter from delistings in the previous year, the impact from new proposed changes to listing standards, and the amortization wall off of prior period initial listing fees. Index revenue was up 23% in the quarter. We had net inflows of $99 billion over the last twelve months, a second consecutive quarterly record, including a record $35 billion in the fourth quarter. Beta drivers were fit, with approximately 70% coming from ETP AUM appreciation for market performance, and the remaining portion coming from strong year-over-year growth in derivatives contract volumes. Overall, Index delivered a 36% increase in average ETP AUM, which reached a record $860 billion in the fourth quarter. As a reminder, at the start of 2026, our contracted rate associated with trading of derivatives contracts resets. Holding volumes and capture constant, we expect a sequential revenue impact in 1Q 2026 similar to what we saw in 1Q 2025. The rate will increase once we cross a specific revenue threshold, which will likely occur sometime early in the second quarter. In workflow and insights, revenue was up 4% in the quarter, with ARR growth also at 4%. The revenue increase was primarily driven by analytics, mainly investment in DataLink, with both seeing strong booking growth as well as benefiting from the expansion into new products in DataLink. Corporate solutions delivered modest revenue growth. Quarterly operating margin for the division was 59%, up 100 basis points versus the prior year quarter. The annual operating margin for the division was 60%, up 150 basis points versus the prior year. Moving to Financial Technology on Slide 16. Revenue in the quarter was $498 million, up 12%, with annual revenue of $1.85 billion, up 11%. ARR ended the year up 12%. The quarterly results reflect strong performance across all three FinTech subdivisions. We signed 129 new clients, 143 upsells, and 12 cross-sells in the quarter, bringing the annual totals to 291 new clients, 462 upsells, and 25 cross-sells. Cross-sells continue to represent over 15% of the financial technology division's pipeline. Financial Crime Management technology revenue grew 24% in the quarter with ARR growth of 18%. We signed 119 new SMB clients in the fourth quarter, bringing the annual portfolio in the client segment to 255. Net revenue retention was 112%, reflecting strong client engagement. We also had continuous momentum with enterprise clients with three new signings in the quarter, bringing our totals to nine enterprise deals for the year. In 2025, we signed four times the number of enterprise deals at four times the ACV compared to 2024, with ACV concentrated in the second half of the year. The sequential revenue improvement in the fourth quarter was primarily driven by professional services fees related to SMB and enterprise client implementation. Do not expect to maintain these levels over 2026 based on the implementation timing for deals signed in 2025. As a reminder, as we grow our enterprise business, expect to see increased quarterly variability in revenue growth impact from enterprise client signings. Regulatory technology has quarterly revenue growth and ARR of 12%. Revenue growth in the quarter reflects strong performance across both Active Metal and Turbulence, driven by our successful sell execution, as well as sequentially improved professional services revenue, consistent with our previous comments. Capital Markets Technology had quarterly revenue growth of 9% and ARR growth of 11%, with a difference driven by professional services fees. Financial technology quarterly operating margin was 48%, down 100 basis points versus the prior year quarter, and annual operating margin was 47% in line with the previous year. We are well-positioned in 2026 for continued growth and expansion of the Financial Technology business. Before I wrap up on FinTech, let me provide an update on the 2025 performance of the combination of Axiom SL and Calypso. ARR growth was 13%, including the ramp-up to deals. Adenza also had healthy subscription revenue growth of 12%, partially offset by lower professional services, including the implementation delays related to client readiness, which we referenced earlier this year. Going forward, we will continue to report Calypso and Axiom SL within their respective service divisions and will no longer disclose Adenza-specific revenue or ARR performance. Turning to market services on slide 17. We had net revenue of $311 million in the quarter, a quarterly record, reflecting growth of 14%. For the year, we had net revenue of $1.2 billion, an annual record reflecting growth of 17%. Growth in the quarter was driven by record industry volumes in US equities and options, as well as our ability to consistently deliver alpha as reflected in index options revenue, more than doubling for the second straight quarter driven by improving volumes and capture. Elevated market share in European equities, and higher US Paid Plan revenue versus the prior year quarter, which had abnormally low per share. The growth was partially offset by lower capture in US Options with two drivers. The options regulatory fee or ARF allows us to recoup a portion of, or at most all our regulatory expense throughout the year. The fee that we collect is reflected as a component of our options capture rate. Given the strong volume and share performance of our options market in 2025, our regulatory expenses were mostly recovered during the first March of the year, resulting in lower ARF and thus a lower net options capture rate in the fourth quarter. Separately, the strong volumes we mentioned in the quarter came with a mix shift towards lower revenue quarter. Other revenue within Market Services also reflected record revenue in our Canadian equities business as well as higher capture in European equity derivatives. Market services quality and annual operating margins were both at 64% and both up over five percentage points due to higher revenue. Moving to expenses on slide 18. We had operating expenses of $2.331 billion for 2025, an increase of 7% driven by strong revenue performance, growth in employee compensation, and strong investments in people and technology to support revenue and drive innovation and growth. For the fourth quarter, we had operating expenses of $609 million, up 8%, driven by similar factors. Fourth quarter operating margin was 56%, EBITDA margin was 59%, both up two percentage points versus the prior year period. We are introducing our 2026 non-GAAP operating expense guidance of $2.455 billion to $2.535 billion. This reflects a non-GAAP organic growth rate of 7% at the midpoint, which includes the in-year benefit of net synergies action under our expanded cost program, a $25 million net decline due to divestiture and a small acquisition, and a nearly $20 million increase from FX, as well as a strong level of investments in growth and innovation, including AI, both in our products and on our business, which we'll discuss in more details at Investor Day. Our effective tax rate in 4Q 2025 of 21.2% reflects the impact of a few discrete items. This resulted in a 2025 full-year tax rate of 22.4%, slightly below the 2025 tax rate guidance. For 2026, we expect a non-GAAP tax rate going back to a range of 22.5% to 24.5%, due to the absence of one-time items and the expiration of certain benefits. Turning to capital allocation on Slide 19. Nasdaq generated free cash flow of approximately $2.2 billion in 2025, including $537 million in the fourth quarter. The year reflected a conversion ratio of 109%. In 2025, we paid dividends of $1.05 per share, totaling $601 million. Fourth quarter dividend payments of $153 million represented $0.27 per share, and a 31% annualized payout ratio. We paid down $826 million of debt in the year, including $100 million in the fourth quarter, through a successful tender offer to end the year with a gross leverage ratio of 2.9 times, beating our expectation of 3.0x. In the fourth quarter, we repurchased 3.2 million shares for $286 million, bringing full-year repurchases to 7.2 million shares or $616 million in 2025. As I wrap up, I want to thank the full Nasdaq team for an outstanding year of execution. And I am proud of our accomplishments. I am more confident than ever in our growth story, and our ability to deliver even more value to our clients and shareholders in 2026 and beyond. With that, open the call for Q&A. Operator: Thank you. Star one one on your telephone. To withdraw your question, please press 11 again. We ask that you please limit your questions to no more than one but feel free to go back into the queue. And if time permits, we'll be happy to take your follow-up questions at that time. Please stand by while we compile the Q&A roster. And I show our first question in the queue comes from the line of Patrick Moley from Piper Sandler. Please go ahead. Patrick Moley: Yes, good morning. Thanks for taking the question. So you recently received SEC approval for expanded options expirations in some of the MAG seven names your Monday, Wednesday, Friday now. So could you talk about just your expectation for what this now means for the options market overall, how Nasdaq stands to benefit and, you know, any expectation you have about what this could mean for just market volumes in general? And then as a second part to that, if we do see this lead to a proliferation of zero DTE trading in single stock options, I'm curious whether you think this will be a tailwind for your index option franchise given that the weighting of some of these MAG seven names is greater in your indices relative to a competitor like the S&P 500 and could be viewed as a more accurate hedging tool for this type of you know, new market activity that we could see. Adena Friedman: Thanks. Great. Thanks. Thanks, Patrick. Yeah. So first, we're really pleased that we were able to launch this and our clients are also very happy that they have more choice in terms of being able to manage risk more precisely and more accurately as they are managing their capital and markets. And we are definitely seeing, you know, early uptick that's really exciting. So we see this. You know, the world is changing very quickly. I think that giving our clients more opportunity to manage risk in a shorter-dated way allows them to be able to address changes in the marketplace, change in the environment, in a much more precise way. And we think that this is a trend that will continue to drive both volumes in the markets, but also participation in the markets. From institutional players, and it has an opportunity to expand that. So we're very pleased with this. We are focused on the stocks we've already launched, and we want to continue to be very mindful of the characteristics of the companies that we're introducing into this framework because I think that's really important in terms of being able to manage risk successfully. But we are very excited to continue to expand it over time, and we'll certainly provide you updates as we see the volumes into the market. It's only been live for a week. So we have some room to go in terms of being able to understand the effects on our market. Patrick Moley: Thank you. Operator: And I show our next question comes from the line of Jeff Schmidt from William Blair. Jeffrey Schmitt: Hi, good morning. You've seen really strong growth in equity options volumes in the second half year and in the quarter, even though comparisons have been tough, volatility has come down from the first half. Is that just being driven by retail strength? Do you see a structural shift there? And is that carried over into '26? Adena Friedman: Yeah. So you're right that we have seen very nice continued growth in the volumes within the equities and equity options markets. And I think that in both cases, it's actually really a broadening out of the investor base both in retail for the equities markets and in retail and in institutional and the options markets. And it is, I think, reflective of a structural shift in terms of the interest that investors have in public equities, which is terrific. I also think that the other thing that we have also seen is a really increase in equity options on the ETF options overlay. So there's a lot more AUM coming into ETFs with an options overlay, which then, of course, brings more institutional engagement into the options market. And so that's also been a driver of, I would say, a structural shift and a structural change in the drivers of the options market in particular. But just that level of engagement also just continues to drive our interest in expanding the market. So as we go later into 2026, we're really excited to be able to hopefully, pending SEC approval, launch 23.5 trading for in the Nasdaq stock market and start to really broaden the base even further around the world. So it's an exciting time to be in the markets business. No doubt about it. Operator: Thank you. And I show our next question comes from the line of Michael Cho from JPMorgan. Michael Cho: I just wanted to touch on the data and listing segment, Adena, you know, you called out some large wins in the quarter and in the year, and certainly pointed to maybe accelerating new listings activity ahead. Maybe I was just wondering if you could just unpack your comments around the pipeline and then pace expectations a little bit. And guess, is there anything to consider for this segment, you know, into guess, into 2026, you know, relative to the low single-digit medium-term guide that's out there now? Thanks. Adena Friedman: Great. Well, thanks, Michael. Yeah. We definitely had momentum in general for new issuances really started to build up as we went through 2025. We did, unfortunately, have an interruption to that with the government shutdown. So we actually saw some issuance, you know, some issuers who really wanted to tap public markets in the fourth quarter now, really focusing on the 2026. But that also and then we have a lot of active dialogue with companies, late-stage or private companies looking to tap the public markets. We also see that there's a lot of investor interest in the public market. One, I was actually, I was at a meeting in Davos with a lot of managers and pensions, and one of the things that we heard was that there really is a premium value to right now because the environment around us is so dynamic. That the ability to have liquid assets that they can invest in and have the opportunity to be able to invest in these growth assets in liquid state is something that's really more and more interesting to both the pensions and to asset managers. So we're excited about the fact that there's risk capital available, their company is ready to go. And now we just need to make sure that we can execute on them and I think that, you know, that's pretty exciting. It's also obviously accrues the benefit of our index business. And then with switches, companies that are coming from New York to Nasdaq, we continue to be able to demonstrate a differentiated value proposition that we're very excited to have more companies join us here at Nasdaq. Sarah Youngwood: Thank you. Operator: And I show our next question comes from the line of Dan Fannon from Jefferies. Please go ahead. Daniel Fannon: Thanks. Good morning. Wanted to follow-up on the Financial Crime Management outlook. 24% in the fourth quarter, I think you talked about some professional fees. Wanted to understand a bit better momentum into next year and tracking more towards the medium-term guide of mid-twenties growth. Adena Friedman: Yeah. So I think that Sarah gave you some good information around how we see the development of the sales, the fact that in the enterprise deals, a lot of the ACV was back-weighted in the year. It does take longer to implement those clients. So that also and we don't bring that into our ARR until they're fully implemented in live. So that, I think, kind of gives you a sense of how we're thinking about the year progressing for enterprise deals. Then on professional services fees, as we are engaging both with a lot of SMB clients, we had a really great sales year for SMB clients. In addition to the enterprise deals where there is a, you know, I would say, more effort involved with implementing those clients. We will see a little bit more variability quarter to quarter in the revenues as we manage our professional services revenues with those and that's some of what you saw in the fourth quarter. So with that, I think that kind of the building momentum we're just so happy. We have nine new clients and then or nine new deals. Including actually three upsells. Like, that's a new muscle also for the fintech I mean, for the financial crime management team to be a modular provider of capabilities to these enterprise clients. So I have to tell you, we're really, really excited about both what we've been able to do in '25, but also the pipeline of opportunity in '26. Sarah Youngwood: Thank you. Operator: And I show our next question comes from the line of Elias Abboud from Bank of America. Please go ahead. Elias Abboud: Adena, you made some comments at the SEC, CFTC joint roundtable a few months back. Kind of lamenting how difficult it is for Nasdaq to own an ATS? I was wondering if you could expand more on those comments. If the rules do indeed change at the SEC, is there an opportunity for Nasdaq to do M&A in the off-exchange space? Or do you think Nasdaq can compete organically with these off-exchange venues? Adena Friedman: Well, first, we are very encouraged by the fact that the SEC is focused on providing more innovation opportunities in the securities markets. And we really like to be a holistic provider to our clients. But we have been really limited in the way that we've been able to offer our solutions clients. You know, the exchange rules are very codified, and it makes it very difficult to be an innovator within the confines of the exchange rules. So allowing us to have the flexibility to have an ATS as part of our solution set to our clients and being able to tap into more of the off-exchange trading is a real interest of ours. We do see that the SEC we believe that they're gonna provide a more flexible framework for that. We continue to engage with them, we will be excited to see ways for us to get involved in that space going forward. Operator: Thank you. And I show our next question comes from the line of Simon Clinch from Rothschild and Co Redburn. Please go ahead. Simon Clinch: Hi. Thanks for taking my question. Wondering if I could just change tack a bit. In terms of you've already achieved beaten the leverage target you set. As we look ahead in terms of capital allocation then, you've made comments before that you know, sort of transformational deals, you know, are kind of I guess, maybe off the table is not the right word, but, yeah, they're not really on the agenda at the moment. So was wondering if you could talk about the pipeline of sort of opportunistic deals you have, how you balance that the potential for buyback because you're gonna have a lot of capital coming your way. And against that, the sort of the general range of leverage that you're willing to operate in. Thanks. Sarah Youngwood: Thanks, Simon. So in the $2.2 billion of free cash flow and 109% of free cash flow conversion. We're very proud of those numbers, and that gives us a lot of ability to have multiple things we can do. We are focused on organic growth. And are supporting on our organic growth. We are also continuing to have a progressive dividend, and you've seen us do some share repurchases, some debt repurchases, and is something which we are very interested in continuing to do. And, of course, we will continue to evaluate bolt-ons, especially with the build versus buy approach. Thank you. Operator: And I show our next question comes from the line of Brian Bedell from Deutsche Bank. Please go ahead. Brian Bedell: Maybe just to ring back on FinTech and the medium-term growth targets. You've had great acceleration in the upsells in new clients. Just in 4Q relative to even the '25 pace. And I know you talked about some like implementation lags and headwinds coming into 2026, but should you think about the full year, given that momentum and the secular trends that you're talking about, should we think of potentially an acceleration of RegTech and cap markets revenue growth higher towards the higher end of those ranges or at least acceleration on a full-year basis in '26 versus '25 just based on that comment. I know it's early, of course, but wanted to get some color around that. Yeah. Adena Friedman: Sure. Well, I think first to just to remember, our fourth quarter is always our largest sales quarter for fintech. And so it is you know, it's wonderful to see, but it is also a pretty cyclical element of business in terms of having a large portion of sales occur in the fourth quarter. I think that as we you are right, we do have good momentum in the business. We have you know, we feel very good about the client engagements. We've been had a particularly I mean, if I look at it, like, every part of the fintech business had a strong sales year in different ways. You know? The upsells and certain areas were just really remarkable, and the new sales in other areas were great. So I and we and when we look at the pipeline, we continue to have really strong engagement across the world with our clients and potential clients. So I'm not gonna give you a specific outlook for '26. But I just want to say that we're really pleased with the ongoing performance of the business. The way that we're engaging client customers, and the opportunity set in front of us you know, it's critical for us to continue to innovate, and we are doing that at scale. We're doing that with our clients. It's a really exciting time in that business as well. Brian Bedell: Thank you. Operator: And I show our next question comes from the line of Alex Kramm from UBS. Please go ahead. Alex Kramm: Yes. Hey, good morning, everyone. This may be a little bit of a random topic, but Adena, would be curious if you can talk a little bit about what's going on in proxy these days you've talked about it on some of the prior calls already, and there's clearly a lot of things happening on the advisory side. But you guys had an op-ed in November as well talking even complaining about the rising cost of even the processing side of that. And maybe even suggesting, like, there should be better solutions, maybe involving blockchain. So just wondering, given that this is a pretty sizable market today with one large player, do you think there is a role for Nasdaq? Do you have any ambitions and anything you can share that, you may be doing to help you and your listed clients? Adena Friedman: Yeah. Great. Thanks, Alex. You know, the focus we've been having on is definitely on policy reform or regulatory reform. And as well as modernization of the proxy infrastructure. And so I'm gonna say, you know, when we engage on that topic, we are engaging on behalf of our listed clients. And really reflecting their experience and what they feel is one of the bigger pain points to being a public company. If we want more companies to be public, we have to find ways to make the path to being public less onerous and less of a big leap. And so our engagement on proxy has primarily been both with the regulators and with the established providers to make it so that we can streamline the technology. I think there's actually, I know, if you've done a proxy vote lately, but I have to say the new app that they've delivered that Broadridge has delivered for a proxy voting is actually quite good and easy to use. So, you know, making sure we're modernizing that, making sure we're also focusing on the plumbing, the proxy plumbing, because we have so much more retail investment in the markets. We need to engage those retail investors. There's also pass-through voting that's been developed now among the institutions. And that also needs to have a process and technology that underpins it. In addition to having changes in the proxy process at the regulatory level so that companies can operate, spend their time operating their businesses and not dealing with proxy. So that's the focus we have, Alex. It's not so much as a business opportunity. Alex Kramm: Thank you. Operator: And I show our next question comes from the line of Michael Cyprys from Morgan Stanley. Please go ahead. Michael Cyprys: Hey, good morning. Thanks for taking the question. Just wanted to ask around the proposal you have out there to tokenize equity securities. Just curious how you envision that integrating with existing infrastructure. How your proposal, how you guys think about it being different from others that you're seeing out there in the marketplace or other proposals out there. And just more broadly, how you see the potential to ultimately migrate toward a fully on-chain environment? What hurdles would need to be overcome? What the time frame and path might look like? Adena Friedman: Okay. Great. Well, that's a big question. So I would say I would start by saying the purpose of our regulatory filing to introduce tokenized equities is to actually make sure it is in fact integrated into infrastructure that exists. We have the deepest, most liquid markets in the world. They operate at enormous scale. We manage three to 5 million messages a second depending on equities and options markets. We manage honestly, we have over, you know, in any given day, somewhere in the range of 80 to 100 billion messages that flow through our systems. And we provide latency of less than twenty microseconds on an average basis. So it is a remarkable business. And the resiliency of what we've created is so important to maintain. So as we've been thinking about and driving tokenization, it is a good technology. It is something that can over time, transform the ability to move money around the world, can transform the ability to manage collateral in a much more flexible way, can allow retail investors more access to more markets. So it's an exciting technology, but our approach to this has always been make sure we focus on investor protection, focus on issuer choice, focus on having the integrity of the markets be retained, while bringing this technology in. So our tokenization filing is meant to be working with the infrastructure providers like DTCC, like other transfer agencies, other providers, all of our market participants to allow for an equity to be tokenized at the CUSIP. To allow the investor to have a choice as to whether they want the stock to settle in a tokenized form or a traditional form. To allow for fungibility and interoperability. And we are engaging with DTCC and with other key players to make this a reality. And we will also look for other innovations. And there's a lot of innovation in space where we wanna make sure we're addressing investor needs and issuer needs, but also recognizing the role we play in the industry. And how we bring the proper protections through as we bring this technology into the market. Michael Cyprys: Thank you. Operator: And I show our next question comes from the line of Alexander Blostein from Goldman Sachs. Please go ahead. Alexander Blostein: Great. Hey, Adena. Sarah. Good morning, everybody. I was hoping you could expand on the sort of M&A discussion that Sarah hit on a little bit earlier. When you kind of zoom out, it feels like there's a lot of development in new markets, whether it's sort of digital assets and new technologies, obviously, with AI, etcetera. As you sort of progress and you're obviously very far in integrating Axiom and Calypso now and over the last call it, twelve to eighteen months, it was very clear, you preferred organic growth. But now that, perhaps balance sheet is in a better capacity space and you're further along and integrating, how are you thinking about M&A broadly? Is organic growth still the primary focus for the firm for the next call at couple of years? Adena Friedman: We are really focused on organic growth. Yeah. So thanks, Alex. As Sarah mentioned, and innovation and engaging with our clients. And, you know, but as she also mentioned, we have a lot of great ways to use this great capital that we make every year. So and we'll continue to evaluate, you know, potential bolt-on acquisitions in a kind of a build versus buy orientation. But if you were to ask our team, on that. Organic growth path and the opportunities we have in front of us are just are really tremendous, so we're keeping the team focused. Sarah Youngwood: Thank you. Operator: And I show our next question comes from the line of Ashish Sabadra from RBC Capital Markets. Ashish Sabadra: Thanks for taking my question. Adena, can you share your views on the prediction markets? Your peers have announced partnership investment or organic investments in prediction market. Does Nasdaq have aspirations to get into the prediction market as well? Thanks. Adena Friedman: Sure. Thank you. Well, one thing I've said pretty consistent is we really like to operate in regulated markets. And we operate best when the markets provide, like, clear rules of the road. And I think that the prediction market space is very dynamic. And the regulatory environment is still not really settled. And so, we are we're certainly focused on what kind of benefits they can offer to investors, the risks that they introduced, and things like that to say, does this fit within our risk tolerance? Does it fit within the regulatory mandate that we have? Do we feel confident in our ability to be successful? In making sure that we can deliver for investors and deliver a great experience, but also have the proper investor protections that we really look for when we do make decisions to operate markets. One of the things that we have been evaluating is within the options business, the potential for us to have event options within the options business so that we can have it within a regulated market. And the other thing is that we do provide technology to the prediction markets. We also can provide data distribution and other things to support prediction markets through other parts of our business. Sarah Youngwood: Thank you. Operator: And I show our next question comes from the line of Owen Lau from Claire Street. Owen Lau: Hey. Good morning. Thank you for taking my question. I wanna go back to the tokenization topic. And how do you think about the risk of splitting liquidity between on-chain and traditional well and also the competition between tokenized equities and issuance of block native token. A little bit technical, but thanks. Adena Friedman: Thank you. So we definitely have a real I think, I would say a mandate to be the provider that focuses on bringing liquidity together. I mean, that's really our you know, a big core function of ours is to drive transparency, liquidity, and integrity across the markets that we operate. So we do actually care a lot about making sure that investors have a complete view of the trading of any sort of equity, whether it's in tokenized form or not, that they have a complete understanding of the risks and benefits of whatever they're trading. So if it's a fully a full equity versus a synthetic equity, making sure they understand those differences and the risk that they bring. And then also allowing for issuers to have a complete view of the trading of their stock. That is one of the core tenants, frankly, of the national market system. And it's something that I think we feel it's important to preserve. We have been you know, we have obviously been engaging very closely with the SEC and with legislators to understand kind of the changes that they're trying to seek to open up the aperture to innovation with tokenized equities. And we did see some guidance come from the SEC last night around that topic of tokenized equities, which we're pleased to have an understanding of the framework that we should be operating within so that we can make sure that we're bringing the right experience to investors and maintaining that issuer choice as to how their stock trades and the transparency that they have. So it's a very dynamic time, Owen, and it's something where we have a lot of engagement with our clients and in Washington to make sure we're creating a sustainable path forward for bringing tokenization to the equities market. In terms of blockchain native, that's a harder thing to do in the equity space. I just have to say, like, to have blockchain native trading of equities at the scale we have with the message traffic we have with the determinism, the speed, the latency, is it I would have to say that's a the technology is not there to be able to support the level of the kind of the level of trading that occurs in the equities markets. The other thing we have to think about is capital efficiency too. In making sure that there's a lot of netting that happens in the equities market. To make it so it's an affordable trading environment for the market participants. And so we have to think about how do you persist that efficiency as you're bringing tokenization to the market as well. Owen Lau: Thank you. Operator: And I show our last question in the queue comes from the line of Benjamin Budish from Barclays. Benjamin Budish: Hi, good morning and thank you for taking the question. Maybe just to round out the discussion on tokenization. If you've talked about some of the benefits, capital efficiencies, creating access to new products, round-the-clock trading. If you kinda look forward, say, like, five years, and assume a lot of the market sort of migrates to tokenized trading, how do you think about the benefits to Nasdaq? Do you think there could be, you know, a material uplift in trading activity because of the capital efficiencies or around-the-clock trading? Do you see, you know, internal cost saves? Or does it, you know, come down to the same you know, if everybody is trading on blockchain, it's does it come down to the same competitive factors, you know, liquidity, depth of market, that kind of thing? Would be great to get your thoughts there. Thank you. Adena Friedman: Yeah. I mean, I think that if we think about the evolution of markets and bringing new technologies to market, anything you can do to drive more capital efficiency opens up the ability for more people to participate. Now how you bring capital efficiency into tokenized equities is a really, really important question that I don't think we have a perfect answer to at this point. But I do think that that's important. The one area that we're focused on is with capital efficiency is collateral movement. There's a lot of collateral that's kind of trapped inside of clearing houses and clearing brokers because of the fact that there's friction to converting that into something that can move and move across. And in fact, one of the conversations I've been having we've been having with the critical infrastructure providers is how do they manage the, you know, the netting and the capital obligations, the margining in these new you know, across newer market hours because the traditional payment rails are not designed for twenty-four five. So leveraging that tokenization and digital assets digital capital to allow for collateral to move more efficiently, we see as a real opportunity. And in five years, if that's something where money is just moving consistently across the world in a tokenized form that allows for more capital efficiency, we see that as opening the aperture. The other thing about twenty-four five trading is just you know, does it increase the addressable market? It's hard to know. Right? We've seen, you know, a small amount of trading occurring when our systems are not open today. But we are making a long-term bet that we can open the aperture and increase the addressable market in terms of investors who have access to our markets during their waking hours. And then, of course, it also means that we have an opportunity to provide more services, fintech services, to our clients. Whether that's surveillance, trade operation or trade infrastructure, regulatory reporting, things whereas institutional engagement grows and expands around the world, we hope to be a partner to them across our fintech solutions as well. Operator: Thank you. This concludes our Q&A session. At this time, I would like to turn the conference back to Adena Friedman, President and CEO for closing remarks. Adena Friedman: All right. Well, before we close, I want to remind everyone that we have scheduled our 2026 Investor Day for Wednesday, February 25. We hope to see you all there, either in person or virtually, we look forward to sharing our vision with you. Thank you all for joining, and have a great day. Thank you. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Goodbye.
Operator: Good morning, and welcome to the Bread Financial Fourth Quarter 2025 Earnings Conference Call. My name is Kevin, and I will be coordinating your call today. At this time, all parties have been placed on listen-only mode. Following today's presentation, the floor will be open for your questions. To register a question, please press 11. It is now my pleasure to introduce Mr. Brian Vereb, Head of Investor Relations at Bread Financial. The floor is yours. Thank you. Brian Vereb: Copies of the slides we will be reviewing and the earnings release can be found on the Investor Relations section of our website at breadfinancial.com. On the call today, we have Ralph Andretta, President and Chief Executive Officer, and Perry Beberman, Executive Vice President and Chief Financial Officer. Before we begin, I would like to remind you that some of the comments made on today's call and some of the responses to your questions may contain forward-looking statements. These statements are based on management's current expectations and assumptions and are subject to the risks and uncertainties described in the company's earnings release and other filings with the SEC. Also on today's call, our speakers will reference certain non-GAAP financial measures which we believe will provide useful information for investors. Reconciliation of those measures to GAAP are included in our quarterly earnings materials posted on our Investor Relations website. With that, I would like to turn the call over to Ralph Andretta. Ralph Andretta: Thank you, Brian, and good morning to everyone joining the call. Today, Bread Financial reported strong fourth quarter and full year 2025 results in line with our expectations. Starting with our 2025 financial achievements on Slide 2, we are proud of the progress we have made executing on our focus areas during the year. Leveraging our experienced team of associates and full product suite, we delivered against our responsible growth objective with seven major new brand signings in 2025 and renewing multiple existing partners in a number of verticals. Our vertical expanded significantly in 2025 with the signings of Bed Bath & Beyond, an e-commerce retailer with ownership interest in various retail brands; Furniture First, a national cooperative buying group that serves hundreds of independent home furnishings and bedding retailers across the US; and Raymour & Flanigan, the largest furniture and mattress retailer in the Northeast and seventh largest nationwide. Additionally, we signed and launched crypto.com, as well as BreadPay installment lending relationships with Cricket Wireless and Vivint, reflecting our flexible payment options and seamless integrations and solutions. These relationships demonstrate how our product solutions span all generational segments and are supported by our digital-first approach, creating value for our brand partners through increased sales, revenue, and lifetime customer value. Shifting to our renewals, we renewed multiple brand partners this year, including a multiyear extension with our long-term partner, Caesars Entertainment. All of our top 10 programs are now renewed until at least 2028. Additionally, in June, we launched a new enhanced fee-based Caesars Rewards credit card that gives members more ways to earn accelerated rewards and enjoy unique experiences. This is a clear example of how we continue to innovate and evolve our product set to fit our brand partner and customer needs and enhance value propositions to drive sales and loyalty. Our vertical and product expansion efforts continue to have a positive impact on both risk management and income diversification across our portfolio. With co-brand comprising 52% of our credit sales in the fourth quarter, up from 48% in 2024, Bread Financial continues to leverage our partner-first culture and experienced program management team to deliver full capabilities to brand partners and their customers. This includes providing a full suite of flexible payment options to unlock incremental sales and build loyalty through omnichannel delivery, seamless integrations, and exceptional customer experience. We are routinely chosen by industry-leading brands across a wide array of industry verticals to take their credit and loyalty programs to new heights. We continue to see success in our direct-to-consumer deposit program as it remains an important source of stable and lower-cost funding for the company. Our direct-to-consumer deposit balances increased 11% year over year and have grown 20 consecutive quarters, now representing 48% of our fourth quarter average total funding, up from 43% a year ago. Regarding capital allocation in 2025, we returned $350 million in capital to shareholders. This includes $310 million in common share repurchases resulting in the repurchase of 12% of our year-end 2024 outstanding shares. We also increased our quarterly common stock dividend by 10% during 2025. At the same time, we meaningfully strengthened and optimized our balance sheet by reducing and refinancing our senior debt and issuing subordinated debt and preferred equity. Lastly, we received a credit rating upgrade from Moody's and Fitch and positive outlooks from Moody's and S&P during the fourth quarter, acknowledging the actions we have taken to strengthen and improve our financial resilience and enhance our enterprise risk management. Our focus on operational excellence and technology advancements was evident this year as we achieved our goal of delivering positive operating leverage with over year-over-year adjusted expenses while continuing to invest in our business. During the year, we progressed our multiyear technology transformation, which included delivering new customer capabilities, continued cloud migration, and increased automation, including accelerating AI adoption. From a credit management perspective, we underwrite for profitability and returns, creating value for our partners and providing purchasing power for consumers. The effective execution of disciplined credit strategies and continued product diversification, coupled with a resilient consumer, led to improving credit metrics throughout 2025. Our full-year net loss rate of 7.7% was better than our outlook and meaningfully better than our initial expectations for 2025. We anticipate that a gradual improvement in our credit metrics will continue in 2026. Overall, we are pleased with our 2025 financial and operational results and remain confident in our ability to generate returns. Moving to the fourth quarter key highlights on Slide 3, during the quarter, we generated net income available to common stockholders of $53 million, excluding the $42 million post-tax impact from expenses related to debt repurchases in the quarter. Adjusted net income and earnings per diluted share were $95 million and $2.07, respectively. Our tangible book value per common share grew 23% year over year to $57.57, and our return on average tangible common equity was 8% for the quarter and 20% for the full year. In the quarter, we repurchased $120 million or 1.9 million common shares with $240 million remaining on our current share repurchase authorization. We also issued $75 million in preferred shares. Consumer finance health remained resilient during the quarter, driving a 2% year-over-year increase in credit sales as a result of higher transaction sizes and increased transaction frequency. We are seeing consumers continue to allocate a larger portion of their budget towards non-discretionary spend. Within discretionary spend, we saw an increase in travel and entertainment spending compared to 2024. Additionally, our credit performance trends continue to improve. The fourth quarter net loss rate was 7.4%. The positive trajectory of our credit sales and credit metrics, along with our new business additions and stable partner base, give us confidence that we are nearing an inflection point of loan growth as we enter 2026. Our solid, sustainable results underscore our disciplined approach to growing responsibly, building financial resilience, and advancing operational excellence. Supported by strong capital levels and cash flow generation, we entered 2026 with strong momentum, which positions us well to execute on our capital and growth priorities while delivering sustainable, long-term value for our shareholders. Now I will pass it over to Perry to review the financials in more detail. Perry Beberman: Thanks, Ralph. Starting on Slide 4, I will highlight our full-year 2025 financial performance. During the year, credit sales of $27.8 billion increased 3% year over year. The increase was driven by new partner growth and higher general-purpose spending. Average loans of $17.9 billion were down 1%, and end-of-period credit card and other loans of $18.8 billion were nearly flat. Both were pressured by an increasing payment rate. Revenue increased $7 million, primarily due to the benefit of pricing changes and paper statement fees, partially offset by lower billed late fees resulting from lower delinquencies. Total noninterest expenses were $72 million or 3% driven by a $43 million lower year-over-year net impact from debt repurchases. Excluding the impacts from our debt repurchases, adjusted total noninterest expenses decreased $29 million or 1%, driven by benefits from our continued focus on operational excellence initiatives. Income from continuing operations increased $142 million or 87% in 2025, benefiting from lower provision for credit losses and lower debt repurchase impacts. Excluding the impacts from our debt repurchases, adjusted income from continuing operations increased $188 million or 48%. Adjusted pretax pre-provision earnings or adjusted PPNR, which excludes any gain on portfolio sales and impacts from debt repurchases, increased $44 million or 2%. Moving to Slide 5, I will briefly highlight our fourth-quarter performance. During the quarter, credit sales of $8.1 billion increased 2% year over year, while average loans of $18 billion decreased 1%, and end-of-period loans of $18.8 billion were nearly flat year over year. The various drivers of fourth-quarter credit sales and loans were consistent with the full-year drivers I previously mentioned. Revenue increased $49 million or 5%, primarily reflecting the implementation of pricing changes, partially offset by lower billed late fees and higher retailer share arrangements. Total noninterest expenses increased $19 million or 4%, primarily driven by a $44 million higher year-over-year net impact from debt repurchases. Excluding these impacts, adjusted total noninterest expense decreased $25 million or 5%, driven by benefits from our continued focus on operational excellence initiatives. Income from continuing operations increased $45 million, primarily driven by higher net interest income and lower provision for credit losses, partially offset by the impacts from our debt repurchases. Excluding the impact from our debt repurchases, adjusted income from continuing operations increased $74 million. Looking at the financials in more detail, on Slide 6, fourth-quarter total net interest income increased 6% year over year, driven by the gradual build of our pricing changes and lower interest expense. Noninterest income was $10 million lower year over year in the fourth quarter, driven by higher retailer share arrangements, partially offset by paper statement fees. Moving to total noninterest expense variances, which can be seen on Slide 13 in the appendix, employee compensation and benefits costs decreased $10 million, primarily due to strategic staffing adjustments in the prior year. Card and processing expenses decreased $7 million, due primarily to lower operating volumes, including letter and statement costs. Other expenses increased $46 million, primarily due to the impacts of debt repurchases that I previously mentioned. Adjusted PPNR for the quarter increased 19% year over year. Turning to Slide 7, net interest margin of 18.9% increased compared to the fourth quarter of last year due to the continued gradual build of pricing changes as well as lower funding costs resulting from our opportunistic debt actions and growth in direct-to-consumer deposits. We expect these tailwinds to continue into 2026, offset by pressure from an anticipated lower prime rate, the ongoing gradual improvement in our payment and rate trends, which will result in fewer billed late fees, and a continued shift in product and risk mix, which helps lower credit losses but often comes with lower revenue yield. On the funding side, we are seeing interest expense decrease as our cost of funds benefits from growing our direct-to-consumer deposits and reducing and refinancing our debt. With our rating upgrades in 2025, we opportunistically issued a $500 million senior note at 6.75% and fully paid down our $900 million 9.75% senior note. With this refinancing, we reduced our rate by 300 basis points and reduced the size of the note by $400 million, resulting in continued overall improvement in our cost of funds. Moving to Slide 8, our liquidity position remains strong. The total liquid assets and undrawn credit facilities were $66 billion at the end of the quarter, representing 26.4% of total assets. At quarter-end, deposits comprised 78% of our total funding, with the majority being FDIC-insured direct-to-consumer deposits. Shifting to capital, we ended the quarter with a CET1 ratio of 13%, up 60 basis points compared to last year. As you can see in the upper right table, our CET1 ratio benefited by 300 basis points from core earnings. The repurchase of $310 million in common shares and common stock dividends of $40 million over the past year reduced our capital ratios by 180 basis points. The last CECL phase-in adjustment occurred in 2025, resulting in a 60 basis point reduction to our ratio. Additionally, the impact from debt repurchases accounted for approximately 40 basis points of impact on CET1 since 2024. Finally, our total loss absorption capacity, comprising total company tangible common equity plus credit reserves, ended the quarter at 24.7% of total loans, demonstrating a strong margin of safety should more adverse economic conditions arise. We have a proven track record of accreting capital and generating strong cash flow through challenging economic environments. We have demonstrated our commitment to optimizing our capital structure through the issuance of preferred equity with subordinated debt and appropriately returning capital to shareholders. During the fourth quarter, we issued $75 million of preferred shares, adding to our tier one capital, providing additional capital flexibility. We will continue to opportunistically optimize our capital structure, which may include issuing additional preferred shares in the future. Our commitment to prudently return excess capital to shareholders is evidenced by our share repurchase activity and the 10% increase in our common share dividend in the fourth quarter. In 2025, we repurchased 5.7 million common shares at an average price of $54, which was below our year-end tangible book value per share. We remain well-positioned from a capital, liquidity, and reserve perspective, providing stability and flexibility to successfully navigate an ever-changing economic environment while delivering value to our shareholders. Moving to credit on Slide 9, our delinquency rate for the fourth quarter was 5.8%, down 10 basis points from last year and down 20 basis points sequentially. Our net loss rate was 7.4%, down 60 basis points from last year and flat sequentially. Credit metrics continue to benefit from our multiyear credit actions, ongoing product mix shift, and overall consumer resilience. The fourth-quarter reserve rate improved 70 basis points year over year to 11.2% as a result of our improving credit metrics and higher quality new vintages. Compared to the prior quarter, the reserve rate declined 50 basis points, impacted by higher seasonal transaction balances related to seasonal holiday spend and gradual credit quality improvements. We continue to maintain prudent weightings on the economic scenarios in our credit reserve modeling, given the wide range of potential macroeconomic outcomes. Our weightings remained unchanged again this quarter. As a reminder, the reserve rate typically increases sequentially in the first quarter as holiday transactor balances pay down. We are pleased with our year-over-year improvement in credit metrics, driven by our disciplined credit risk management and product diversification. As you can see on the bottom right chart, the percentage of cardholders with a greater than 660 prime credit score of 59% remained fairly steady both year over year and sequentially. Turning to Slide 10 and our full-year 2026 financial outlook, our 2026 outlook is based on continued consumer resilience, inflation remaining above the Federal Reserve target rate of 2%, and a generally stable labor market. Our outlook also anticipates interest rate decreases by the Federal Reserve, which will modestly pressure total net interest income. Note that as we remain slightly asset-sensitive, a lower recent and future Fed and prime rate will pressure NIM as our variable rate assets reprice faster than our liabilities. As Ralph mentioned, we believe we are nearing an inflection point for loan growth. We expect full-year 2026 average credit card and other loans growth to be up low single digits compared to 2025. Growth will be supported by our stable partner base and new business launches, building credit sales growth, and continued credit loss rate improvement, partially offset by strong cardholder payment rates. Total revenue growth is anticipated to be up low single digits, largely in line with average loan growth. Net interest margin has a wide range of potential outcomes given that it is impacted by many variables. Our baseline estimates have full-year net interest margin near to slightly above the full-year 2025 rate as a result of continued benefits from implemented pricing changes and improving cost of funds, offset by interest rate reductions by the Federal Reserve, lower billed fees from improving delinquencies, and a continued shift in risk and product mix. For noninterest income, we would expect higher retail share arrangements or RSAs as a result of higher sales, implemented pricing changes, and lower credit losses. We manage expense growth based on revenue generation and investment opportunities and expect to deliver positive operating leverage in 2026, excluding the pretax impacts from debt repurchases. We will continue to invest in technology modernization and product innovation, including AI, to drive growth and efficiencies. The degree of positive operating leverage will be macro-dependent and related to credit improvement, loan growth, and the pace and timing of further Fed interest cuts. For 2026, we expect total expenses, less costs associated with debt repurchases, to be down slightly sequentially from the fourth quarter adjusted expense figure of $500 million. We anticipate a year-over-year net loss rate in the 7.2% to 7.4% range for 2026. This range contemplates stable to improving macroeconomic conditions, continued risk and product mix shifts, and a resilient consumer. We are seeing good momentum going into '26, which is a positive sign for continued improvement in the early part of the year. Given the less predictable nature of how consumers will respond to changing macroeconomic conditions, sustaining this momentum and the degree of improvement through the entirety of the year is less certain at this time. We expect our full-year normalized effective tax rate to be in the range of 25% to 27%, with quarter-to-quarter variability due to the timing of certain discrete items. The progress we made in 2025, along with our 2026 financial outlooks, puts us on a path to achieve our longer-term mid-20% ROTC target in the coming years. The key drivers of improvement include first, generating responsible sustainable growth while delivering on our efficiency initiatives, which will lead to higher PPNR. Second, gradual improvements in our credit metrics closer to our historical loss rate level, leading to a lower provision for credit losses. And third, executing on our opportunities for additional capital optimization, including potentially issuing additional preferred shares. We are proud of the results we achieved in 2025 and expect to build upon our momentum as we enter 2026. Now I will turn it back over to Ralph to review our 2026 focus areas. Ralph Andretta: Thanks, Perry. Before we open it up for questions, I am going to discuss a refreshed view of our focus areas as seen on Slide 11. Our focus areas for 2026 are designed to capitalize on our strengths while fortifying our business to help offset any potential external pressures. While our focus areas have remained fairly consistent over the last few years, they continue to evolve with our transformation and the ever-changing business environment. First, our commitment to responsible growth will not change. The work we have done to expand our product suite while enhancing our product capabilities, along with improving consumer health, gives us confidence we can accelerate sustainable, profitable growth. Second, the proactive strategic execution of a disciplined credit management framework has been key to the gradual improvement of our credit performance metrics. We proactively adopt our sophisticated models to effectively balance risk and reward and manage changes in the macroeconomic environment. In addition, we will continue to maintain strong risk and control effectiveness while reinforcing regulatory vigilance. Third, our operational excellence efforts have become part of our culture and are embedded across our business. This year, our initiatives will deliver AI capabilities, technology advancements, improved customer satisfaction, reduced risk exposure, and enterprise-wide efficiency. Finally, supported by strong capital levels and cash flow generation, we are well-positioned to execute on our capital and growth priorities while delivering sustainable long-term value for our shareholders. Our ongoing commitment to effectively manage capital will ensure appropriate returns on investments and help us achieve our long-term financial targets. In summary, our experienced leadership team remains focused on generating strong returns through prudent capital and risk management. This reflects our unwavering commitment to drive sustainable, profitable growth and build long-term value for our shareholders and other stakeholders throughout dynamic economic and regulatory environments. Operator, we are now ready to open up the lines for questions. Operator: Thank you. When preparing to ask your question, please ensure that your phone line is unmuted locally. One moment for our first question. Our first question comes from Sanjay Sakhrani with KBW. Your line is open. Sanjay Sakhrani: Thank you. Good morning, and congratulations on navigating through a challenging year for you guys. Maybe just first, a two-part question on loan growth. One, obviously, very encouraging we are starting to see a pickup in loan growth into 2026. I am just curious as we think about what is driving that growth. I know you guys mentioned sort of the stability of the partnership base and continuing to grow with them. Is there any sort of loosening of underwriting standards? I am just curious what kind of appetite you are seeing from consumers out there. And then secondly, I was just looking at Slide 14 in your deck, and I see BreadPay still kind of small of the total. I am just curious with buy now pay later growing, do you anticipate growing that a little bit more in 2026? Ralph Andretta: Hey, Sanjay. How are you? It is Ralph. You know, I think you answered part of my question. If you look at the tenets of loan growth, it is really the resilient consumer sales momentum we are seeing as we go into the year. You mentioned a new partner stability and new partners that we are adding and improving credit. And, you know, we are not doing anything out of the ordinary. We are underwriting the way we have always underwritten. We underwrite for profit. We make sure that it is thoughtful underwriting. So there is not a general loosening. It is a gradual look as credit improves. And that is how we have underwritten in the past. That is how we will underwrite in the future. So nothing unusual there. In terms of BreadPay, I expect BreadPay buying to pick up. We have added some really good partners. I mentioned Cricket and Vivint, which is, you know, home security. Those are really good popular partners. We have partners to the BreadPay platform on a pretty regular basis. We have got a good handle around underwriting on that platform as well. So we expect that to also improve in 2026. Sanjay Sakhrani: Great. And then just a follow-up on credit quality. Understood, you know, you guys are seeing the improvement and sort of the fruits of tightening on underwriting. You know, I know that labor market seems pretty stable, but underneath it all, every day you are hearing about layoffs and such. I mean, are you guys seeing anything in your data that sort of leads you to believe that there might be stuff happening underneath the surface that might be choppier? Or do you feel like your customer, your ability to underwrite are generally in a good place? Thanks. Perry Beberman: Thanks, Sanjay. This is Perry. You know, so I think when we look at it overall, we are encouraged by what we are seeing in our underlying data. When we look at our roll rates, while they are still elevated, you know, versus where they where we would like to have them, we are pleased with the improvements that we continue to see across all our vantage risk bands. And now they are starting to follow more normal seasonal trends. And the key here, though, you know, our early entry rate that we see is now below the pre-pandemic levels. And to your point, that is a lot due to the strategic actions we have taken, the product remix shifts, and things of that nature. But we are also observing improvement in our late-stage roll rates. And that is what we called out early on in order for our losses to continue to improve. We needed to see that improve. So we are seeing that improvement. So, you know, for lots of the reasons you mentioned, we feel pretty encouraged that the consumer has been resilient and, you know, while there could be pressures out there in the economy, overall, I think we are net constructive on it. Sanjay Sakhrani: Okay. Great. Thank you. Operator: One moment for our next question. Our next question comes from Moshe Orenbuch with TD Cowen. Your line is open. Moshe Orenbuch: Great. Thanks. One of the things in terms of Ralph, you talked a little bit about, you know, kind of a new T&E product. And if you look actually in the, you know, in your Slide 14, you have got that is one of the categories that, you know, that has been a big contributor both to volume and balance growth. Can you just talk a little bit about kind of where you sit in there both in terms of partners and proprietary products? Thanks. Ralph Andretta: Yeah. So, you know, we have an array of products. Obviously, Caesars has been a longtime partner, and we have been able to introduce new products over time with Caesars. And the one we have just introduced is a fee-based product. Give their customers, you know, both our customers access to, you know, better rewards and experiences. And, you know, that is really consistent in the marketplace with high-end co-brand cards. You know, AAA is a partner of ours, and that is a really that is a T&E card, and we are seeing good spend in AAA. Particularly, we saw that in the in the 2020 of 2025. And, you know, one of our proprietary cards is really focused around rewards and redemption around rewards for travel. So, you know, we are able to offer our customers and our partners' customers, you know, that array of travel rewards. And it has become a really, you know, a good vertical for us in terms of volume. And like I said, it is, you know, in the fourth quarter, it was up substantially from 2024. And, you know, we continue to focus on, you know, good partners that give us good returns in that category. Moshe Orenbuch: Got it. Thanks. Maybe for the issue, you mentioned that net interest income should grow, you know, kind of around the same rate as you see in loan growth. Perry, could you just drill into that a little more and maybe talk about the puts and takes of things? Because obviously, you are expecting better credits, so that will have an impact on, you know, on late fees. You have got, you know, your pricing still rolling in. And, obviously, you know, at the same time, you have also got, you know, gradually lower interest rates. Can you just talk about all of that and how it kind of fits into this dynamic? Perry Beberman: You are happy to do so. Right? So as you think about NIM, you have laid out a number of the elements. So as we look into next year, we said right now, we expect it to be pretty stable to slightly up versus 2025 on a full-year basis. Some of it is going to be dependent upon the timing and the number of prime rate reductions. You know, as we are currently asset-sensitive, we will get a little bit of a compression on that. We do expect to see continued lower billed late fees as delinquency improves and the product mix improves. And then as you, you know, kind of hit on this a little bit, around whether it is co-brand and more proprietary or installment lending, the shift in new account production and that results in overall product mix shift. While it lowers risk, it also means often having a lower APR because we need risk-based price, and that also means lower late fees associated with those accounts. As well, we will have a little bit higher average cash mix in the year, and some of it is resulting, you know, the timing of when loan growth happens, and some other things that we are caring for. And then, you know, the tailwinds, you also know that the continued, I will say, working through the pricing changes that have been made from in '24 and 2025. And then, you know, as gross losses do improve, we do have then some slower or better reversal of interest and fees, but it is also a catch-up period where the lower billed fees then you actually do end up with less of that benefit out there in the later quarter. So, you know, a lot of this is going to be variable by quarter, you know, the time of gross losses, the building of those pricing changes, then as I mentioned, the primary. And then I would note, though, as well on the revenue side, as originations start to pick up, and profitability improves, the RSA meaning the retail share arrangements that we have with the brand partners or customer awards. Those will also become elevated as, you know, there is more profit to share and then the originations drive more the compensations then as well. Moshe Orenbuch: Great. Thanks, Perry. Operator: One moment for our next question. Our next question comes from John Hecht with Jefferies. Your line is open. John Hecht: Morning, guys. Thanks very much, and congratulations on a productive year. The direct-to-consumer deposits, you guys mentioned it is almost percent of funding at this point. Do you guys have objectives? Where can that go? And then what is the pricing on that versus, you know, the non-term DTC deposits? Perry Beberman: Yeah. So we are very pleased with what we have achieved on our deposits. When you think about this, Ralph put out there a goal of being at 50%, and that was under current contract. Our longer-term goal is to be more in line with larger peers, which would say that our direct-to-consumer deposits would be probably 70% plus of our portfolio. However, our total funding and that will just happen gradually over time, and you should expect our pricing to remain competitive. Again, not having brick-and-mortar branches where it will be very competitive and, you know, have some online, you know, with the online presence. And it is still a, you know, better funding rate than we have in other things like our brokered CDs of Tenor. John Hecht: Okay. And then second question, yeah, is yeah. On the reserve rate, I yeah. There has been I would say it is down from the peak. Then you know, it and it is and it is coming down a little bit because your credit is improving. What do you where what you know, does it go back to day one levels? Or is there any way to think about the direction of travel of the ALL given that credit is stable and improving? Perry Beberman: Yeah. So the reserve rates are always one of my favorite questions every quarter. But to your point, with the fourth-quarter reserve rate at 11.2%, that is down 70 basis points versus the prior year and down 50 basis points linked quarter. And the reserve rate so far has improved solely as a function of improving credit metrics. So as I noted, we have maintained a we will call prudent credit risk overlay. We did not change any of our risk weightings. And, it is still a lot of uncertainty about how the tariffs will unfold and even the Fed yesterday mentioned that they expect those impacts to peak kind of midway through this year. So we are watching that. And what that means to our consumers. So, you know, we are going to continue to watch that. But, candidly, pretty optimistic that as these play out in the coming months, that we will be able to gradually move our weightings of the adverse and severely adverse scenarios in ways more to, I will call, neutral position over time. You know, we will continue to see the first-quarter reserve rate increase seasonally as holiday transactors roll off. But the way I think about the reserve rate, you think about how it is going to traverse to the rest of this year and into next year, it will follow the trajectory largely of the credit quality. So as credit quality delinquency improves, the reserve rate should come down accordingly. And then as we are able to move those risk weights back to neutral, we will get somewhere, around what we have said around that 10% area, time, I am not sure we get all the way back to day one because, it is a different portfolio and we have a different philosophy on how to, look at some of the risk weight. So different scenarios. John Hecht: Great. Thanks so much for the color. Operator: One moment for our next question. Our next question comes from Mihir Bhatia with Bank of America. Your line is open. Mihir Bhatia: Hi. Good morning. Thank you for taking my question. First, I just want to talk about credit. You are clearly making progress. You have tightened credit, and you are making progress getting back to your 6%, I think, target. Guess the question is, is this really a priority for you in the near term, or are you just comfortable being here in the 7% range and you are back to growth? Just trying to understand the balance between how much you would lean in on growth versus get back to your longer-term target, if you will, on credit. Perry Beberman: Yeah. Yeah. Mihir, the question. I would say it is a priority to get back to 6% over time, but not force it there. And we have talked about this previously that we could choke off credit and really, do things that would be detrimental to our brand partners and our customers. And we have been very disciplined that, again, our underwriting philosophy, first talk about this. We underwrite for profit. You know, we have industry-leading ROTCs on this, and, you know, we are trying to get down towards that 6% win rate each new vintage with that in mind, but we have an existing core portfolio that, you know, is in the condition it is in because of the macro environment. We are paid for the risk we take. You know, again, we did not swing the pendulum overly hard on credit tightening to the existing portfolio by dramatically reducing the lines. I think you have seen, you know, others in the industry have swung way now they are doing is loosening things. Like, you heard Ralph talk about we are gradually dynamically underwriting every day. And so when the credit quality is better, you underwrite deeper, you need stock of line increases, and when it does not, they are little risk. You tighten. It is a dynamic thing. So we are not forcing our way down. It will happen naturally, with the newer vintages coming in and the existing portfolio is back book healing. And so it is going to take time. Mihir Bhatia: Got it. So that makes sense. And then maybe just going to the 2026 outlook, you grew revenues 5% this quarter. Is obviously helped probably by, like, just an easier comp here. Is that, like, the main driver of the slowdown from 5% to low singles in your guidance, or is there something else also going on that we should keep in mind? Maybe just walk through some of the puts and takes on that on that line, on the revenue line, Adam. Perry Beberman: Yeah. I think when you look at the comparable period to 2024, we had done some accommodations through fee waivers, interest waivers, as it related to the hurricanes in that season. So those modifications were in that comp. So that is a piece of why the quarter comp being is a little higher than what ordinarily it should be. So I look more at, you know, the rate of NIM that we have this quarter and then how does that then extrapolate forward into the coming year? And as we said, with all the puts and takes, we think that, you know, we should be able to deliver a stable to, you know, slightly up net interest margin. Mihir Bhatia: Got it. Thank you. Operator: One moment for our next question. Our next question comes from Jeffrey Adelson with Morgan Stanley. Your line is open. Jeffrey Adelson: Hey, good morning, Ralph and Perry. Perry, maybe just dig a little bit on the NIM further. Appreciate all the color and the puts and the take. NIM expected to be slightly higher this year. If I look at where you exited 25% and if we put aside some of the benefit got non-funding costs. Your loan yield was really strong in the fourth quarter in light of what is typically a weaker seasonal quarter as you see more of those transactors come into the mix. So could you maybe just unpack a little further what drove some of that underlying strength? Was there maybe a little bit more of a step up in the pricing changes? Or was it more just that underlying reversal rate improving? And as we think about those pricing changes continuing to build their way in, how much of the book or, like, is now reflecting that? And how long can that tail last for you? Do you expect that might slow as we exit 2026? Or should we be thinking about that benefit from here? Perry Beberman: Yeah. So, again, I am not going to reiterate all the puts and takes because I think that you got those. But you are right on the way to think about this is that we do have some tailwinds that are building through slowly and gradually as it relates to the pricing changes. Largely, the pricing changes are complete for, you know, what was what has been pulled through the portfolio. Now it is just a matter of the, you know, the payment allocation working its way through. But largely, you will continue to see a little bit of that gradual benefit from that, but that could be offset by product mix and how the new vintage looks when it is, you know, the final construction of the year comes through. So at the 2026, will look different than right now just in terms of portfolio mix. But, you know, on a static basis, I would say, yes. You have got some of the tailwind from those pricing changes. That will continue to, you know, ease into the book. But, again, a lot some of that will be offset in the RSA line as more of that is shared with the brand partners through the profit share. Jeffrey Adelson: Got it. Thanks. That is helpful. And just, you know, going back to credit, maybe just focusing on the delinquencies a bit. You know, I appreciate the commentary on NCOs the roll rates improving. I think we have started to see your delinquency rate come a little bit more in line with seasonality still improving obviously year over year, but maybe at a bit of a slower pace. Just what is the path from here on delinquencies as you look at the end of 26 from here? Is that something you think will continue to improve, or will it start to flatten out a little bit? And how are you factoring in the benefit for larger tax refunds this year in your outlook for credit? Perry Beberman: Yep. So that is a good one. Let us start with the last piece of that is the tax refund. Is a little bit of the unknown in terms of how will customers use it. Like, I would tell you, you know, we are optimistic that the 2026 tax, you know, refund season is going to be a positive. You know, we are not exactly sure how that is going to play out. In any year, it is always a guess in terms of how consumers are going to use it, whether they are going to use to pay down debt, which obviously improve our delinquency a little bit. Are they going to spend it? Are they going to save it? But net, we believe it to be a positive. And, you know, with the tax refund plus, the fact that, you know, they probably did not everybody adjust their tax withholding. So overall, you know, we have even the I would say, lower consumer confidence out there, we think that we are going to see some improvement on that front. I would say our guide cares for a modest bit of improvement. But, you know, let us hope for something better. Now the government shutdown could put a little bit of a twist into that, so we will have to monitor that. You know, when we look at it, I think overall, we are thinking that we are going to get back to where that what I will BAU delinquency rate where it is going to flatten out some. Again, slow gradual improvement. Some of it will be product mix dependent. Again, the thing that we are most watchful of is continued improvement in those late-stage roll rates. Because that is going to manifest itself really into the better loss outcomes. Jeffrey Adelson: Okay. Great. Thank you. Operator: One moment for our next question. Our next question comes from John Pancari with Evercore. Your line is open. John Pancari: Good morning. On the operating leverage standpoint, you are guiding the positive operating leverage in '26. On top of what was a solid expense beat for the fourth quarter. Can you maybe help us think about the magnitude that you think is likely in terms of the operating leverage? You achieved 100 basis points or so in 2025. Fair to assume can remain at that pace as we look at '26? Perry Beberman: Thank you for the question. Yes, we are really pleased with the progress we made in 2025. You know, as Ralph has talked about and I have as well that, you know, our organization is really focused on operational excellence. And you think about that means for us is driving continuous improvement savings. We are executing across a whole spectrum of transformation. This is around technology, servicing, collections, marketing, looking for new revenue opportunities. So all of this enabled us to accelerate and, you know, figure out how to do things better. And you think about the use and deployment of AI, that is going to unlock even greater value. Again, there is some investment that goes along with that. But we are very use case focused. So that is going to evolve. So I think overall, the degree of operating leverage is going to end up being largely dependent on macro conditions impacting the revenue side of it. So loan growth, higher or lower in the range. You know, what does it mean? The Fed cuts, the delinquency improvement resulting in lower late fees. So, you know, the op leverage, I think, is more on the, as I said, the revenue side and on the expense side, we have got that well in hand. John Pancari: Okay. Great. And then we will deliver positive operating leverage. Got it. Okay. Thanks. And then separately on the buyback front, you bought back $120 million in the fourth quarter. You see Q1 solid at around 13%. Could you maybe help us think about the reasonable pace of buybacks as you look at this year in terms of factoring in the loan growth expectations? But also the capital generation outlook? Thanks. Perry Beberman: Yeah, I think as you look at the year as Ralph said, you know, we generate we could generate a lot of capital, and we are very proud of where we have landed. With our capital ratios and targets. You heard me talk about the last phase-in of CECL. This last first quarter, that was 60 basis points. RWA will come down in the first quarter seasonally. So, again, we are focused on the capital targets that we set. And as we work through this coming year, we do have $240 million of remaining share repurchases available. The pace will be dependent on loan growth, and capital in excess of those stated capital targets. John Pancari: Okay. Great. Thanks, Perry. Operator: One moment for our next question. Our next question comes from Reginald Smith with JPMorgan. Your line is open. Reginald Smith: Hey, good morning, and thanks for taking the question. I see you guys are advertising or offering personal loans on your website. I was curious I guess, your appetite for that channel and that business. And how large that business is today and maybe talk a little bit about the economics of that versus your core by the label or brand business, and then I have a follow-up. Ralph Andretta: Yeah. You know, we have many products in the marketplace. And, you know, private label is just one of them. I think if you look at us over the last five years, we have evolved to all these products, co-brand and buy now pay later, and obviously personal loans. And the macroeconomic environment is going to dictate, you know, how we, you know, weighted into installment and personal loans. So we are going to support growth first. And personal loans are just a part of our growth equation. Reginald Smith: Got it. Okay. And then Ralph Andretta: But, frankly, it is a good way for us to acquire new customers. Reginald Smith: Yeah. Is there any way to kind of size, and frame that? And do you hold those loans on balance sheet? Like, does that where does that show up in your volume? Ralph Andretta: Yeah. It is part of our loans. And personal loans have different tenors, obviously. It is a small portion of what we are doing. It is currently small, and, you know, it will grow gradually over time, and we will, like every other product we enter into, we will enter into it responsibly and manage it and be thoughtful about how we grow with personal loans. But it is on our balance sheet. Reginald Smith: Okay. Cool. And then I guess one, you know, kind of bigger picture question about AI and thinking about, you know, like, how it may transform the business operationally or underwriting. You know, if I look out five years or so, like, how do you think AI impacts the card issuing business? Like, where should we look for the most progress? And I would imagine it probably impacts, like, your variable headcount need. But I do not know. Maybe talk a little bit about that and how those tools can help you get more out of what you the employee base today. Perry Beberman: Reggie, thank you for the question on AI. It is certainly one that we think a lot about. We have a team of leaders and their people figuring how to deploy it. But, you know, I tell you, for our company, you know, we continue to deploy AI, respond across the enterprise to accelerate operational excellence. Which includes increasing productivity, efficiency, driving innovation, strengthening our risk management. And so recall, for our company, we have leaned in on emerging technology, including AI for years. And in doing so, we have established a solid governance model early on to ensure responsible use and oversight of AI. We have over 200 machine learning models embedded in our business. We have deployed thousands of bots to save over one million hours of manual work efforts. That goes to your point around what does it mean for, you know, people. Deployed call center agent-assisted tools. And that is just to stay with you. So when we look at, you know, at our enterprise, AI road map, you know, we now have more than 60 initiatives in motion with early wins contributing to improve fraud protection, better underwriting performance, enhanced call center effectiveness, increased automation in our workflow. So that is a we are continuing to build on that solid foundation of risk management automated controls and leveraging our tools for what we call always-on monitoring. If you think about that, that is already permeating throughout the release, how we could be more effective. So our go-forward areas of focus are on three basic things. You think about it as first, AI tools to improve call personal productivity and efficiency. And that means, like, content summarization, like, for contract and document reviews. Content generation for, you know, personalized marketing collateral, customer communications, intelligent search capabilities, where it helps the associate or folks or customers streamline how they can get an information and knowledge retrieval. Turn it on, controlled use of AI in our SaaS applications that we have, which further enhances platform function on output. So that is the first part. And the second, we are going to accelerate development and advancement of our core technology and data platforms, specifically leveraging AI tools to modernize code and accelerate our movement to the cloud. And then third one is think maybe where your goal is, where is commerce going? If making sure that we are developing intelligent and agentic applications and that will expand the reach of our products automate full processes, and unlock new and improved customer experiences. That will ensure that we have a foundation of strategic select application for agentic-driven commerce and personalized service among others. So, you know, overall, would hope what I want you to take away though is that there is a lot of investments being made, but they are backed by disciplined value tracking, and we have a strong ROI that we are going to make sure we can deliver more table stake capability. So we are moving with pace, rigor, governance, and confidence that you would expect for us as a regulatory regulated institution. But we feel real good about how we are being positioned for this. Reginald Smith: Now that sounds very exciting. I hope we can continue to get little updates and nuggets as you guys progress through. Even if they are small, like, just to hear how you are using AI and the impact that is happening. That stat about the man hours was fantastic. So good luck, and congrats on Perry Beberman: Thanks, guys. Reginald Smith: Thanks, Chris. Already given. So just two follow-ups. So first, on credit sales. And actually wanted to specifically focus on the better 2026 tax benefits that you were talking about earlier. It does seem like this earnings season so far that there has been some enthusiasm from many of the merchants reporting earnings so far on the sales potential from the tax refund season and the lower tax withholdings. So I am wondering if you are seeing more merchant engagement on driving sales this tax refund season. And then how you are expecting credit sales to do in 2026? Ralph Andretta: Yes. I mean, I think we talked about we see we will see credit sales in a low up low single digits and it remains to be seen about how people will use that tax refund. Some people use that tax refund probably savings and investments. You will see some of that. You will see some people pay down their debt, and you will see some people increase their spend. So I think it is going to be across the board. But, you know, the guides we put out in terms of, you know, single-digit growth is and we feel very comfortable with that, particularly since credit is trending in the right direction. We have a stable partner base. And the consumer has some resiliency. So we feel good about what we put out there in the marketplace. Reginald Smith: Okay. Great. And then the second follow-up on NIM and specifically wanted to get your thoughts on deposit beta. So those seem like industry-wide expectations for lower deposit betas this time, I think around 60%. So I want to get your take, your thoughts on your deposit beta, and I guess, for the industry, are we seeing just higher competition for deposits? Or are consumers more sensitive than historically to deposit rates? Just want to get your view. Thank you. Perry Beberman: No, I think that is a you kind of hit it right on the head there, right? I think previously, we were thinking that deposit beta is probably close to high 70s, right around 80. Now I would probably widen that range a bit to 60 to 80 per 80%, 80 betas, but that will be market dependent as you said. So that is what I think we are going to watch for. But over time, I would expect to probably get back. Reginald Smith: Okay. Great. Thank you. Operator: And I would now like to pass the call back over to Ralph Andretta for any closing remarks. Ralph Andretta: Sure. Well, thank you. Thank you all for joining our call today and for your continued interest in Bread Financial. And we look forward to speaking with you in the next quarter. Everyone have a terrific day, and thanks again. Operator: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.
Operator: Two outsides on hold. Like to thank you for your patience. Please continue to stand by. Your formal program will begin here shortly. Your meeting is about to begin. Good morning and welcome to Lazard's Fourth Quarter and Full Year 2025 Earnings Conference Call. This call is being recorded. Currently, all participants are in a listen-only mode. Following the remarks, instructions will be provided at that time. At this time, I will turn the call over to Alexandra Deignan, Lazard's Head of Investor Relations and Treasury. Please go ahead. Thank you, Nikki. Alexandra Deignan: Good morning, and welcome to Lazard's earnings call for the fourth quarter and full year 2025. I am Alexandra Deignan, Head of Investor Relations and Treasury. In addition to today's audio comments, we have posted our earnings release on our website. A replay of this call will also be available on our website later today. Before we begin, let me remind you that we may make forward-looking statements about our business and performance. Important factors could cause our actual results, level of activity, performance achievements, or other events to differ materially from those expressed or implied by the forward-looking statements, including, but not limited to, those factors discussed in the company's SEC filings you can access on our website. Lazard assumes no responsibility for the accuracy or completeness of these forward-looking statements and assumes no duty to update them. Please also note that unless we state otherwise, all financial measures we discuss today are non-GAAP adjusted financial measures. We believe these non-GAAP financial measures are meaningful when evaluating the company's performance. A reconciliation of these non-GAAP financial measures to the comparable GAAP measures is provided in our earnings release and investor presentation. Hosting our call today are Peter Orszag, our Chief Executive Officer and Chairman, and Mary Ann Betsch, Lazard's Chief Financial Officer. After our prepared remarks, Chris Hogben, Chief Executive Officer of Asset Management, and Tracy Farr, our incoming CFO, will join as we open the call for questions. I'll now turn the call over to Peter. Peter Orszag: Thank you, Ali, and thank you to everyone for joining us this morning. Our fourth quarter and full year results demonstrate our ongoing focus on executing our Lazard 2030 long-term growth strategy. For 2025, we reported firm-wide revenue of $3 billion with record revenue in financial advisory and assets under management up 12% in Asset Management. Before we turn to our outlook and financial results, I would like to take a moment to thank Mary Ann and welcome Tracy as our new CFO. Mary Ann has played a significant role in elevating our finance team and building a foundation to support our long-term goals. I'd like to share my appreciation for her contributions and for her ongoing support as a senior adviser to Tracy through this transition. Tracy brings strategic insight, financial rigor, and deep familiarity with our business. He has worked closely with me and others on our corporate strategy for the firm's future. As CFO, he will lead efforts to improve operational efficiency, helping drive profitable growth and progress towards Lazard 2030 while playing a central role in engaging with the investment community. You can read more about Tracy in the press release we issued this morning alongside our earnings release. Now turning to our outlook and financial results. As we look ahead, we see substantial growth in both of our businesses. In Financial Advisory, the M&A cycle continues to deepen while client demand remains strong for our other advisory solutions such as private capital advisory, and restructuring and liability management. In Asset Management, the repositioning of our business is well underway and is being reinforced by investors looking to diversify their holdings across regions and strategies. Our current level of won but not yet funded mandates is $13 billion, even higher than a year ago, which is one of the factors leading us to expect positive net flows for the year. In both businesses, we expect our investments in exceptional talent to pay off increasingly as we execute against our long-term plans. Looking back on 2025 in Financial Advisory, we reported record revenue of $1.8 billion. This included record revenue for EMEA and for our private capital advisory group, and a strong year in restructuring and liability management, highlighting the breadth of our global brand and the ongoing diversification of our advisory business. We continue to invest in talent, with a goal of on net 10 to 15 financial advisory managing director additions each year as measured from Q1 to Q1. We met our goal for 2024 with 11 net adds. As exceptional bankers are increasingly drawn to our platform, we will exceed our goal for 2025 with more than double 2024's net additions. We continue to anticipate hiring within or above our stated range going forward. And we will prioritize acquiring top talent to deliver long-term profitable growth over time. Notwithstanding the pace of our talent expansion, which puts temporary downward pressure on productivity as these bankers acclimate to being managing directors on Lazard's platform, we outperformed our MD productivity goal in 2025, delivering average revenue per MD of $8.9 million. This is an increase of $2.5 million per MD since 2023, and we expect continued significant improvement in this important metric in the years ahead, which I will discuss later. Overall, and although timing within the year can always be subject to fluctuations, we expect financial advisory activity to accelerate in 2026. Turning now to Asset Management. As we have signaled throughout the past year, 2025 was a clear inflection point for the business. Revenue was $1.2 billion, and AUM was up 12% year over year. We achieved record gross inflows that exceeded our target of $50 billion through increased focus and accountability in sales and distribution, along with enhancements in our research and investment platform. While at an early stage, our global ETF platform helped to support strong gross inflows in 2025. We have successfully launched seven active ETFs in the U.S. this past year and have already surpassed $800 million in AUM. This growth demonstrates the opportunity to meet client demand for selling strategies from our specialized investment teams. We've continued to build more client interest and win new mandates across our asset management business. As I mentioned earlier, even with the record gross inflows in 2025, won but not yet funded mandates are above last year's already elevated level, underscoring this increasing demand for our active strategies and the successful collaboration across our team. Under our new executive leadership with Chris Hogben, we are well-positioned to deliver net positive flows in 2026. In summary, firm-wide performance in 2025 tracked our 2030 objectives. It was underpinned by our commercial and collegial culture and our commitment to delivering with excellence for our clients. I'll share more about our progress and outlook shortly, but let me first turn the call over to Mary Ann to provide more detail on our earnings and financial performance. Mary Ann Betsch: Thank you, Peter. Firm-wide revenue was $892 million for the fourth quarter, up 10% from the prior year, and $3 billion for the year, up 5% from 2024. Financial Advisory revenue was $542 million for the fourth quarter, up 7% from one year ago. Financial Advisory revenue was diversified across teams and geographies, with Lazard participating in several marquee transactions in the fourth quarter and into January. Completed transactions include Kellanova's $35.9 billion acquisition by Mars, Constellation Energy's $26.6 billion acquisition of Calpine, and Three Clouds' acquisition by Cognizant. Recently announced transactions include AgsoNovel's $25 billion combination with Axcelta, Invest Industrial's $2.9 billion acquisition of TreeHouse Foods, and Atlas Holdings' $1 billion acquisition of ODP Corporation. In addition, liability management and restructuring assignments include debtor roles with First Brands Group, Pine Gate Renewables, and Superior Industries, and creditor roles involving MotiveCare, SACS Global, and SI Group. We also engaged in several private equity assignments, including advising CVC Capital Partners on multiple engagements, advising Odyssey Investment Partners on a continuation fund, and advising on the closing of EIR Partners Fund III. Capital structure and debt raising assignments include Lighthouse, Next Wind, and Orsted. Turning to Asset Management. Revenue was $339 million for the fourth quarter, up 18% compared to one year ago, and up 15% on a sequential basis. Our revenues reflected management fees of $301 million for the fourth quarter, up 17% from the prior year quarter, and $1.1 billion in 2025, up 5% compared to the prior year. Incentive fees were higher year over year in both the fourth quarter and full year, totaling $37 million and $59 million, respectively. Average AUM for the fourth quarter was $261 billion, 12% higher than in 2024. As of December 31, we reported AUM of $24 billion, also 12% higher than December 2024, and 4% lower than September 2025. During the quarter, we had market appreciation of $10 billion, foreign exchange depreciation of $800 million, and net outflows of $19.7 billion, largely driven by the closure of one U.S. sub-advised relationship. Excluding this relationship, net inflows were $8.4 billion for the full year 2025. We see ongoing client engagement and demand across our investment platform, particularly with our quantitative emerging markets and Japanese equity strategies. Samples from this past quarter include over $1 billion from a Korean client in Global Equity Advantage, over $1 billion across our emerging markets equity funds from various clients, nearly $700 million from a UK institutional client for Japanese strategic equity, $350 million into emerging markets equity advantage from an Australian client, and over $250 million from a U.S. insurance company into International Equity Advantage. In addition, we have received over $600 million from a U.S. client for U.S. Equity Select in the fourth quarter. Now turning to expenses, our compensation expense was $585 million for the fourth quarter and $2 billion for the full year 2025. Investments in talent to support our long-term growth strategy have accelerated, while at the same time, our compensation ratio is trending in the right direction. For the full year 2025, our compensation ratio was 65.5% compared to 65.9% for the prior year. Our non-compensation expense was $159 million for the fourth quarter, and $613 million for the full year 2025. This resulted in a full-year non-compensation ratio of about 20%. We continue to take a disciplined approach to expenses as business activity and opportunities increase. Shifting to taxes, our adjusted effective tax rate for the fourth quarter was 29.5%, and for the full year 2025 was 22.7%. Turning to capital allocation. In 2025, we returned $98 million to shareholders, including a quarterly dividend of $47 million and $50 million in share repurchases. For the full year 2025, we returned $393 million to shareholders, including $187 million in dividends, $91 million in share repurchases, and $115 million in satisfaction of employee tax obligations. Additionally, yesterday, we declared a quarterly dividend of $0.50 per share. Now I'll turn the call back to Peter. Peter Orszag: Thank you, Mary Ann. 2025 marked the second full year since I became CEO in late 2023, and I've been encouraged by our progress in transforming our culture and our business since then. Even while undertaking this transformation and making the investments that set the firm up for sustained growth in the coming years, we have delivered solid revenue and shareholder returns. In Financial Advisory, we've been actively reshaping our managing director group to strengthen our commercial and collegial culture and to upgrade our connectivity with clients. These investments in top talent and our culture will yield increasing benefits over time in both revenue and productivity. As noted earlier, we have raised productivity by $2.5 million per Managing Director since 2023. And that is despite expanding the number of MDs above our target range in 2025, which means that the share of managing directors new to our platform has remained elevated. As that share normalizes to roughly 30% over time under our expansion plans, the result will be an estimated further increase of approximately $1 million in revenue per MD above the $8.9 million achieved in 2025 from this effect alone. Looking ahead, we see further productivity uplift for several other reasons as well. Increasing traction with clients, our ongoing focus on mandate selection, a disciplined approach to fee structures, and the benefits of integrating AI across our practice. In December, we therefore expanded our goal to include achieving $12.5 million per Managing Director in 2030 as part of our focus on continuing to meet or exceed our productivity objectives. As part of upgrading our financial advisory business, we have enhanced the solutions we provide to our clients by strengthening connectivity, private capital. Advisory revenue associated with private capital has increased from roughly 25% in 2019 to approximately 40% today, and we are confident we can move toward 50% over time even while also expanding our revenue from large-cap public companies. We see significant opportunity to further enhance our advisory business in North America. Last month, we announced Ray Maguire and Tim Donahue as co-heads of financial advisory in North America, with Mark McMaster leading a newly formed senior banker function dedicated to increasing our large-cap public company coverage, which is a top priority for 2026. We are continuing to raise expectations for our bankers to deepen client relationships and increase our market share. Alongside our focus on North America, we will continue to invest in Europe and The Middle East regions where our brand is strong and where we see significant additional long-term opportunities. In 2025, we opened new offices in Denmark and The United Arab Emirates, and we are actively exploring other countries for further expansion. Looking ahead, we expect M&A to accelerate in 2026, despite ongoing policy and geopolitical uncertainty as companies look to achieve both scale and focus. Unlike past cycles, we anticipate that M&A will increase alongside elevated restructuring and liability management activity, as the result of an ongoing dispersion in corporate performance. We also anticipate an increase in private equity activity as sponsors look to return capital to their LPs along with continued strength in fundraising. Together, these dynamics position financial advisory with multiple levers to expand revenue in 2026. Turning to Asset Management, we have established a cohesive and focused executive leadership team with Chris Hogben joining as CEO in December, and the appointment of Rosalie Berman as COO and Eric Van Naustrand as CIO, as part of Chris's broader management team. Strategic alignment across investment distribution and operational priorities further supports long-term success. Chris's leadership also allows me to refocus my time on CEO engagement, new client development, and firm-wide strategy. As we have discussed throughout the past year, we have been transforming our asset management business by sharpening our focus on areas of the market where we can add the most value to clients. Active management plays a particularly valuable role where information is imperfect and technology can be applied to generate excess returns, including quantitatively driven strategies, emerging markets, and customized solutions. These strategies and solutions are also where client demand is strongest. They account for a disproportionate share of our high level of won but not yet funded mandates, and they are disproportionately where Lazard delivered significant outperformance in 2025. Looking ahead, we expect to deliver positive net flows in 2026. This is supported by a more diversified platform, best-in-class research and investment processes, and an enhanced global distribution strategy. Furthermore, we believe 2026 will be a year in which investors continue to reallocate toward international markets, which is where our presence and performance are particularly strong. We entered 2026 with momentum, and we believe the ongoing transformation of our asset management business positions us to deepen client engagement and capture additional opportunities ahead. Along with the significant transformations of our businesses, we see two additional factors underpinning our growth over time: AI and contextual alpha. We remain committed to being the leader among independent financial firms in the adoption of AI, to unlock the collective intelligence of our firm and enhance outcomes for clients and shareholders. We have the scale to invest and experiment, but at the same time, an entrepreneurial culture and size that allows us to be nimble. We saw AI adoption accelerate in 2025 as we onboarded new tools and delivered customized AI solutions to our teams. At Lazard, we are defined by our ability to deliver independent, differentiated advice and investment solutions grounded in what I have taken to calling contextual alpha. In today's world, just looking at a narrow set of financial information, the alpha part of contextual alpha, to make investment or business decisions is not sufficient. Contextual alpha incorporates the judgment and insight across macroeconomic, geopolitical, regulatory, and other factors that help leaders see beyond what the world sees today. This notion of contextual alpha has always been part of Lazard's DNA. It is more important than ever in a world in which business and government are increasingly interdependent. To help clients navigate complexity, evaluate strategic options, and advance long-term objectives with clarity and confidence. In summary, we continue to execute our long-term strategy, and we have performed even while undertaking a substantial amount of investments in cultural transformation for the future. While we have more work to do, results so far validate our strategy and reinforce our conviction in substantial growth opportunities ahead. Now we'll open the call for questions. Operator: Thank you. We ask that you pick up your handset for best sound quality. We'll take our first question from Brennan Hawken with BMO Capital Markets. Please go ahead. Your line is open. Brennan Hawken: Good morning. Thanks for taking the question. Peter, nice to see hinted at the 12.5 productivity improvement on the last call, but good to see you guys made it official. I'd love to talk about advisory trends. Clearly, things are looking good. You spoke to some I'd love to drill into the non-M&A because M&A can all see excitement. You spoke to a good outlook on restructuring. You maybe speak to the revenue mix as it stands today among the non-M&A businesses? And then what your outlook is for those businesses in the coming year and how we should be thinking about forecasting that? Thanks. Peter Orszag: Sure. So for the year, the revenue mix was just a touch under 60% M&A and the residual non-M&A. So let's just call it sixty-forty roughly, but it's a touch under that on the M&A side and a touch over that on the non-M&A side. We do believe that in addition to raising the share of advisory private capital to 50% over time, the non-M&A component of the business can also rise from that roughly maybe just a little north of 40% to something like 50% over time. And that is backed by continued expansions in our fundraising business in particular, where we had a record year as I mentioned. Disproportionately activity in secondaries as you can imagine in that part of the business, but a lot of activity and additional talent and momentum there. Restructuring liability management also had a very strong year. Obviously, we're on a variety of very high-profile assignments in that part of the business, and we continue to see additional opportunities there. I want to again highlight I know I said it in the script, but that one of the underappreciated phenomena over the past decade or so is that the spread in return on invested capital and performance writ large across companies has gotten increasingly wide. That means that you can have a lot of restructuring and liability management happening towards the bottom of that distribution even while the firms at the top of the distribution look to buy other firms in each sector to expand their own activity. So in other words, the coexistence of M&A and restructuring and liability management with a different pattern than they have been the case historically. So we obviously also have other components. We've got Lazard Capital Solutions. We've got a whole variety of other parts of the business that are in the non-M&A category. But we see significant momentum frankly on both sides. You were skirting past them in M&A because I think as you put it, it's well appreciated. But obviously important momentum there also. So we see an increasingly diversified and also growing advisory business. So diversified public company, private company, North America, rest of the world, M&A, non-M&A. Brennan Hawken: Peter, thank you for that thorough answer. Really appreciate it. And I suppose I should have done this first. Mary Ann, best of luck. Tracy, welcome to the circus here. So we'd love to touch on the CFO transition. Sure. So I know we have a six-month transition period, but the timeline for Tracy's stepping in is rather abrupt. So maybe could you speak a little to what has led up to this, if it was normal? If it's normal course, you know, why not maybe telegraph it a little earlier, you know, to allow for a more extended transition? And it sounds like it's normal course, but, you know, CFO transitions do tend to make investors nervous. So any additional color around this would be helpful. Thank you. Peter Orszag: This is very much normal course. I wouldn't characterize it as abrupt in any way. I think you're focusing on the effective date, but in a situation in which you have an internal candidate or an internal person who knows all the issues and knows Lazard well, it facilitates a more rapid effective date. But more importantly, as you noted, Mary Ann will be serving as a senior advisor to make this transition entirely smooth. So, I don't view it as abrupt and I don't think it is. And again, it's a very natural transition. And I just want to, as I said in the script, extend my appreciation to Mary Ann and also the excitement for Tracy joining us. Don't know if they're both here. Don't know if you all want to say anything. Mary Ann Betsch: I think that's well said. Brennan Hawken: Thank you, both. Okay. Perfect. All right, thanks for taking my questions. Operator: Thank you. Our next question comes from Mike Brown with UBS. Please go ahead. Your line is open. Mike Brown: Great. Good morning, everyone. Thanks for taking my questions. Peter, you talked about the sponsor side of the M&A market here and the need for them to return capital to LPs as a strong driver of deal flow in 2026. And we did see the announcements really spike in April from this cohort, but just wanted to hear a little bit more about what are your observations here in terms of broadening out of activity? And, you know, when do you think this can really ramp more meaningfully? And then as we look at the spike of continuation vehicle activity, is there any risk that some of these M&A exits may be some of the high market expectations from either a volume or timing standpoint? Peter Orszag: So, let me try to take both questions. I'd say with regard to PE activity, we've all been waiting for a heightened level of that activity. I do think based on discussions with the tops of the house at a lot of private equity shops also, alternative asset managers and more pure play, that 2026 is likely to be the year in which this occurs. I know this has been a little bit of waiting for Godot. And the reason for that is the one I mentioned, which is LPs that are getting increasingly desirous of some cash return even outside of the continuation and secondary type approach. Along with the, I'd say, narrowing of the kind of bid-ask spread on expectations around valuations. There still is some gap there that might get to the second part of your question. But again, this is not just what our bankers are saying, but also what the heads of the large alternative asset managers are saying in terms of what is anticipated for activity in 2026. Look, with regard to continuation funds and also secondaries writ large, I think there has been this question about whether the pickup in activity will continue even as more traditional M&A exits occur. And our belief is the answer is yes. And the reason is that the secondary vehicles are still a relatively small share of penetration rate is still relatively low, it's growing. And we think this is going to just be a new permanent feature of the private equity landscape. The diminution of M&A activity as an exit may have helped to jumpstart additional secondaries business. But we think that that's a jump start, not an aberrational increase that will go away. It's going to be a new permanent part of the landscape. And this is one of the reasons why we're really excited about the growth that we're experiencing in our PCA business and our investments for the future in this business. Expect a lot more from us in this area in the years ahead. Mike Brown: Okay, great. Thanks for that, Peter. And just a quick follow-up here on the asset management side of the business. So certainly, positive movement in the fee rate here in the fourth quarter. Is the exit rate from the quarter relatively in line with where it was for the full quarter? Peter Orszag: As you think about that $13 billion of won and not yet funded, that's a great number. What is the asset mix in that $13 billion? And how should we think about the fee rates versus your blended fee rate? Thank you. Chris Hogben: Sure. I'll let Chris take that. Yes. Thanks, Mike. This is Chris. So the exit rate was modestly higher than the quarter run rate. The large sub-advised relationship that closed that we reported in the November AUM release obviously happened in November. So that wasn't and that was a lower fee, significantly lower than our average fee rate. So it didn't hit the full quarter. So the exit rate would be modestly higher than the quarter average. As I look at the book of business in that encouraging $13 billion of won but not yet funded, there's clearly a mix in there. It's predominantly emerging market equities, listed infrastructure that tend to be quite healthy fees. There's also some more of our systematic services that tend to be slightly lower fees. So as I look at that mix, I think it's broadly in line with the fee rate that we experienced in the fourth quarter. But the timing of when those hit and the mechanics will there's a little bit of uncertainty around. Mike Brown: Okay, sure. Thank you for all that color, Chris. Operator: Thank you. We will move next with Brendan O'Brien with Wolfe Research. Please go ahead. Your line is open. Brendan O'Brien: Good morning and thanks for taking my questions. I guess to start, while there's clearly a lot of optimism on the M&A outlook, we've seen a notable uptick in geopolitical tensions and political uncertainty within the U.S., a lot of which is likely to only intensify into the US midterms. Just want to get a sense of whether you've seen any impact on dialogue from this increased rhetoric and contention and if you anticipate the U.S. midterms will have any negative impact on activity? Peter Orszag: So the short answer is no impact on the corporate discussions that we've been having. But I think the fact of the matter is I'm going to come back to this concept of contextual alpha. Boards and C-suites recognize that they need to take into account a broader array of variables today. And this is one of the things that's fueling Lazard's rise. We've always been good at this, but we've now professionalized it more. It's deeply integrated into our banking teams and our investment processes. And it's a competitive advantage for us. So anyway, that's the direct answer on that. On the midterms, I do not anticipate any material change in the environment from the midterms. I think people mostly misinterpret what the impact would be if there were a shift in, the more likely outcome is that the house shifts. The back half of an administration typically does not involve any big legislation. So I don't think even if the House and Senate were to remain under their current configurations that you should anticipate any large pieces of legislation. What may happen if the House does flip is that there will be a lot of hearings, there will be a lot of subpoenas, a lot of tension between the legislative branch and the executive branch over executive privilege. And so on. That will all be, you know, a lot of noise, but I don't think has any direct corporate impact. The thing that could have some corporate impact is some of those hearings and subpoenas may then extend out to increase into what companies have been doing, how they've been interacting with various different players. We're now getting into a very speculative zip code. Final thing I'd say is I do think a lot of companies are realizing that the regulatory environment under the current administration is more accommodating to deals. It is also more political, but it is more accommodating. And so I think the more important thing than the midterms is this sense that with regard to the next presidential election that may or may not shift. And so there's an incentive to try to get deals in and done now. While the regulators are willing to consider things that, for example, under the prior administration, I don't think would have even been a debate. Brendan O'Brien: That's helpful color. I guess for my follow-up, I just wanted to touch on the comp ratio. I understand that it will be an of a revenue environment, but just given the robust hiring you've done in 2025, and plan to do in 2026, just wanna get a sense as to how we should be thinking about incremental comp leverage from here if we begin to see better revenue growth and how we should be thinking about that path back down to that 60% level? Peter Orszag: Yes. We do anticipate additional operating leverage in 2026 despite the robust hiring. Obviously, as you noted, it's dependent on revenue growth. I'd say it's also very, I mean, it's also on the advisory side very sensitive to those ongoing increases in productivity, which is why we're very focused on that variable. Because that gives you operating leverage against the non-managing director compensation ratio. In addition, one of Tracy's top priorities is going to be to look for additional operating efficiencies in our corporate functions and across the board. And so there are other levers that we're able to deploy. Continue to reduce the comp ratio over time. Brendan O'Brien: Great. Thank you for taking my questions. Operator: Thank you. We will move next with Daniel Coquiara with Bank of America. Please go ahead. Your line is open. Daniel Coquiara: Hello, good morning, and thank you for taking my question. I know it's early, but we've gotten some questions around a slower than start to the year for M&A. And just given Lazard's global footprint, I was hoping you guys can help unpack some of the trends that you're seeing across geographies in the business and how your expectations for domestic M&A compares to deal activity outside of the U.S. in 2026? Thank you. Peter Orszag: Look. It is super early, so I, you know, I would I would treat what I'm about to say with low conviction. At least, you know, with regard to our business, we're seeing a nice build in January. So that may be idiosyncratic to us. We'll have to see how it plays out. Very early days. With regard to the geographic mix, I would say U.S. CEOs seem a bit more confident than non-U.S. CEOs right now. But we're seeing significant interest in transactions both in North America and Europe and frankly across the globe. The thing that you need to remember about most European companies is their, at least the ones that we're interacting with, tend to be global in their business operations. So while they may be headquartered in Paris or in London or in Frankfurt or wherever, their operations are global. And so they are affected by what's happening across the globe and not just in their own countries. Final thing I'd say is this fracturing of the global economy into a pole around China and a pole around the U.S. with some about where the rest of the world kind of goes. That is leading to a lot of discussions with clients about how that affects their own operations. The move towards industrial independence is affecting supply chains and also both selling businesses and buying other businesses. So what I would say is to the extent that Prime Minister Carney is correct that we are in a period of what he referred to as rupture in the global economy. That is a time when our clients ask for a lot of assistance and look to a place like Lazard for help in reading between the lines of what's happening. So I you know we're engaged in a lot of client dialogue right now. I just want to go back to the first part and that kind of low conviction because it's very early days and uncertainty bands around how the year plays out at this time of the year is always very wide. Daniel Coquiara: Thank you. That's very helpful. And as a follow-up, this one may be more for Chris. You've come in and made some personnel changes. I was wondering if maybe you could spend some time on just discussing what areas you think you see need to see some significant change in maybe some areas where you actually see some healthy momentum. Thank you. Chris Hogben: Yes. Thanks, Daniel. So look, I think we've already laid out, you know, it's our 2030 strategy, the direction and goals for the asset management business. So I think my focus really has to be around execution. That execution really comes down to sort of three areas. The first of which is around delivering for our clients through strong investment performance. I'm encouraged that through last year, our investment performance actually improved sequentially through the year if you look at the percentage of AUM that's outperforming. But by appointing Eric Van Naustrand as CIO, it puts somebody a lot of bandwidth there to work with the investors to help them deliver good performance, evolve their processes, and ensure that we're really bringing the breadth of Lazard's asset management platform to bear. Because, you know, fixed income investors should be able to help an equity investor, and having Eric as CIO really helps us bring out that breadth of insights across the platform. So we need first priority is delivering investment performance for clients. The second is really around growing. The most important thing we can do there is to scale our existing products. So we'll be focusing a lot on that. But then there's secondly a lot of white space around us, whether that's in traditional markets, private, or our wealth channel, that over time, we'll explore and evaluate the best way to execute on those growth options. Then the third is just ensuring that we drive efficiency in the business so that the growth that comes through is profit for growth. And that's why we appointed Rosalie Berman as our COO. To really focus on a lot of the efficiency and cost control, but secondly to really ensure that we're integrating AI as wholesomely as we can across our business. Investments and client experience, and in our operations. So it really is, Daniel, a focus on execution, to deliver those Lazard 2030 goals. Daniel Coquiara: Thank you. That's very helpful. And Mary Ann, wishing you all the best in your future. And, Tracy, look forward to working with you. Thank you all. Peter Orszag: Thanks. Thank you. Operator: Thank you. Our next question comes from James Yaro with Goldman Sachs. Please go ahead. Your line is open. James Yaro: Good morning. Thanks for taking the question. I want to dig in a bit further on Asset Management. I think it'd be helpful if maybe you could identify for us some of the moving parts. So we can gain a little more comfort on the guidance for positive net flows in 2026. Specifically, is there any way that you could give us a little more granularity on the verticals by asset class, geography, however you wish to define it within asset management that are growing? Versus those that are shrinking, and specifically which you view as most material going forward for growth. And where the outflows may be slowing. Chris Hogben: Sure. So thanks, James. Look, if you think about net flows, it's the difference between two big numbers. So if you look at last year, we had record growth inflows. We also had an elevated level of outflows because of the closure of that large sub-advised mandate that we previously disclosed. As I look forward into 2026, we're budgeting for strong gross inflows again. Our goal, internal goal, is above the goal that we set for last year. And we don't expect there's not another large sub-advisory client that could close. We wouldn't expect that large level of outflow to repeat, we'd expect a more normalized level of outflows. And then the net of that should give us confidence around the positive net flows for this year. Secondly, we start the year with a healthy level of won, but not yet funded business at $13 billion. Within the areas where we're seeing a lot of client interest, it's areas like our emerging markets platform, our systematic platform, our listed infrastructure and real asset platforms, as well as some of our alternatives businesses. So and that's where, as I look at the sales goals, that we would expect to see more growth through the year. As Peter said in his remarks, what we are hearing, I hear this as I meet with asset owners around the world, we are starting to see asset owners looking to diversify the margin away from the U.S. into international markets, and we feel well-positioned given the services that we have and the investment performance we're delivering in those services. It's benefit from that diversification as it comes through. Peter Orszag: James, just really quickly, the reason that about this time last year we were flagging this sub-advised account was because that was something that we knew had performance issues and challenges. And was at some risk. Now, there may be normal puts and takes and you have to see there is no flashing red concentration like that. The business is much more diversified as a result. And so just to underscore what Chris was saying, we not only see significant investor interest in the quantitative, in the emerging market, and in customized solution type products and strategies that we offer, but we also don't have, you know, a concentrated risk. There may be outflows that occur, but it's not as we're not highlighting something for you like we did last year. James Yaro: Excellent. Super helpful. There. Maybe just one other one for you, Peter. Can just help us think through the secondaries outlook from here? You expect the strong CAGR in the business we've seen over the past three years to slow at all in 2026? Peter Orszag: The short answer is I think I may have mentioned before is we don't anticipate any slowing. And the reason is I understand the rationale behind asking the question, which is as M&A picks up, does the secondary's business slow? The reason we don't think that a material part of the outlook, while it may be true in some isolated situations, is because the penetration rate of secondaries in this space remains relatively modest, well under 50%. And, you know, probably closer to we can get you the exact number, maybe a third or so. So there's lots of room for that to continue to expand as part of the landscape of private equity. And we think it's just becoming a more normal part of the marketplace, and so it's here to stay. James Yaro: Very helpful color. Thank you so much. Operator: Thank you. We will move next with Ryan Kenny with Morgan Stanley. Please go ahead. Your line is open. Ryan Kenny: Hi, good morning, Chris and Tracy. Welcome to the call. And best of luck to all. I have another one on the asset management side. So we think about the growth drivers that Chris, you just walked through, how do you think about inorganic opportunities to get there, and what would be the framework on any inorganic opportunities that come your way? Chris Hogben: I think firstly, we will always look at inorganic opportunities. But you would want to look at them quite carefully to see, you know, do they is it additive to what we have? Is there an attractive return stream? Is that a result or robust process that we can believe in? Is it a cultural fit? Can we get the economics to work? And that narrows the funnel down pretty quickly. So while there are a lot of opportunities out there, you could expect that we're going to be super selective. As Eric gets settled into his seat, you know, bear in mind, this is my second month too. You know, we will start to, you know, really kind of put together a framework of the highest priority areas, you know, for us to look into. I'm very happy to come back later in the year to sort of share more thoughts on that. But look, inorganic is something that we'll look at, but we'll be highly selective looking at any opportunity. But we do see broadly the three drug drivers around us in public markets, private, and then our wealth channel. Ryan Kenny: Got it. And then separately, a question on restructuring. What's the view on where we are in the restructuring cycle? We've heard from some peers that maybe we're in an ebb period. Do you think restructuring has peaked, or is there more growth ahead? Peter Orszag: Well, as I again said earlier, I think we're in a different environment now than we were than have been the case in past cycles because there has been a very important and I think little noticed change in the landscape of companies. Companies have increasingly grown disparate in terms of their performance. So if you look at any metric you want, return on invested capital, whatever terms of corporate performance, the ninetieth percentile is pulling away from the fiftieth percentile in each sector, and the tenth percentile is falling relative to the fiftieth percentile. This is different than it was ten or twenty or thirty years ago. And it means that there's a very important shift in the correlation between M&A cycles and restructuring and liability management cycles. This is beyond the shift within restructuring and liability management. Towards the latter part, towards the latter term and away from the former term. Because those companies at the tenth or twentieth percentile that are falling increased behind the frontier firms in each sector. Needs liability management and restructuring assistance. So, we are seeing continued activity. I mean that continues in our own business. But I think other point is I think the marketplace is different. Because of this increased spread across companies. And so I'd also note by the way that that increased spread also creates a very strong incentive for mergers and acquisitions. Because the firms that are at the frontier have a big incentive to try to take over the ones that are at the, you know, the median. And then improve performance. And in fact, if you look at research from Nick Bloom at Stanford, you get massive efficiency benefits from mergers and acquisitions because of exactly what I just said. Spread between the top firm and the, which gets accentuated as the, and the, you know, the firm in the middle goes up. Ryan Kenny: Great, thank you. Operator: Thank you. We will move next with Devin Ryan with Citizens Bank. Please go ahead. Your line is open. Devin Ryan: Thanks. Good morning, Peter, Mary Ann, and welcome Chris and Tracy. Question on kind of the productivity discussion and appreciate all the additional detail here and kind of the updated framing. I also appreciate it's an output with a lot of moving parts into it. You have a big recruiting year. It might dip down the productivity of the existing group is improving. So to that point, can you just talk a little bit about when you're underwriting somebody that you're bringing in externally, you know, what should that person be doing once they're ramped relative to the blended average? Meaning, can they increase that because of bringing on kind of a pound per pound higher productivity? And then I know you're operating an integrated strategy, but just talk a little bit about their productivity potential between businesses, whether it's private cap or restructuring? Just trying to understand if there's any mix shifts here could that also change the trajectory one way or another? Thanks. Peter Orszag: Sure. So on the first one, look, we've we we actually, as we, have brought on a large number of new managing directors, we also believe that we have really upped our game on the diligence that we apply and therefore the quality of the people that we're bringing in. And the result is that the so-called ramp may be a bit faster than in the past. We have had actually had an example from it was last week where one of the new managing directors that we brought on in the last of months already has two new mandates, which is don't know if it's a record, but it's a very rapid ramp. But these things do vary and in general and on average, obviously, you become more productive after you settle in and get used to the platform and are able to it takes time for clients to switch over and so on and so forth. So, there's on average there still definitely is a ramp. With regard to and by the way, that's why let me just highlight that. That's why as we move from 40% of our managing directors being within the first three years of being on the platform down to a more normalized level of thirty. There's an additional kind of coiled spring effect that will play through on our productivity. I had been anticipating that that would happen partially in 2025. It did not because we had so many opportunities to grab exceptional talent. So ahead of schedule productivity we accomplished in 2025 was despite not benefiting from that kind of ramp down in the in the share that bankers that are, you know, quote on the ramp. That is still yet to come, which is great. And then with regard to the different parts of the business, there's not I wouldn't say there's any material difference between the non-M&A and M&A parts. One thing that is noteworthy is that on average, this is not individual by individual, but on average productivity tends to be a bit lower outside of the U.S. than in the U.S. I tend to remind our bankers that's not because the U.S. bankers are more talented, more charming, whatever, it's because the fee levels tend to be higher for the same deal size. In the United States, and the result of that is somewhat higher productivity on average and over time in North America relative to other geographies. But no massive difference between non-M&A and M&A bankers. And we often do have very, very, very look at the very top of our productivity, the top 10%, 20%, 30% that is also tends to be a mix of M&A and non-M&A bankers. So it's not just the average, but also the top performers tend to come from both sides. Devin Ryan: That's great. Thanks, Peter. Really appreciate the detail there. And then as a follow-up, love to ask about AI and the investments you're making. You've been talking about this for a couple of years, it's not new thematically. But I recall you mentioned some of the investments. I still think it's a bit abstract from the outside as people think about applications to your business. And so the question is, do you think what you're doing will be table stakes in the market? Or do you think you're leading, meaning this could actually drive an increase impact with clients or increase market share for the firm over the next few years? And anything else you can just share about kind of tangible areas of success or opportunity where you feel like you can really differentiate? Thanks. Peter Orszag: Sure. Let me tackle it in a couple of different ways. I believe that we're at the forefront. I don't think that that's believe that we're at the forefront, but I also believe that other firms will follow. And so this is an advantage, but it's not one that, you know, others won't replicate and try to follow. So I think the goal here is to always remain one step ahead. I would note, for example, I think we are the only firm on Wall Street that has a has on our board someone who is native to AI in the form of Dmitry Shevilenko, the deputy of Complexity. That's one small marker of what we're doing relative to the peer set. With regard to what it can do, I'll give you a few examples. So in my own experience, let's just talk about my day to day. What are some of the applications? First, I'll reveal that the terminology contextual alpha, I think describes Lazard, what Lazard brings to clients in a very apt way. Actually comes from an LLM about three or four or five months ago. I was inquiring how to describe what Lazard does and it and not a human being suggested the terminology contextual alpha. There's one small example. My daily briefing is now increasingly done in the first instance with artificial intelligence and then supplemented by humans that look over it. Opposed to being entirely human drawn. Or human done. I was at two different C-suite board level discussions the day before yesterday. In both cases, the deck that we presented I loaded into an LLM and I was clearing it in terms of how will the board respond to this. What's new here that the CEO hasn't spoken about publicly? Etcetera. It makes it a much more interactive form of preparation for the meetings as another example. And so on and so on. Could I could keep going but the fact of the matter is it is infused in my own daily experience as the CEO of this firm. And I think that's increasingly what's happening across the board with our ability to gain insights from our CRM, our ability to take out some of the mechanical rote parts of the job and then lift people up so that they can do higher value-added work. And so on and so forth. And so I think the question then becomes so what? How is this going to improve our ability to serve our clients? And I think the answer is going to be that at its heart we would love to be able to focus on those parts of the job that we think add the most value. That is the curiosity that leads you to ask good questions because as Dmitry Shevilenko puts it, answers will become commoditized. The ability to ask insightful questions will not. So encouraging that curiosity, which we think has always been part of Lazard, will allow us to continue to serve our clients in an effective way. Putting increased focus on personal relationships and connectivity with clients. So increased convening, increased time directly in person because trust and judgment are going to be difficult for the LLMs to replace because they lack context. They lack the subtle in-person signals that you can get. So we're encouraging our bankers to even more so than in the past. Go out and spend time in person with clients. And so on. So we're really excited about this technology in the form of its ability for us to deliver high-quality advice, trusted advice, and judgment to our clients. And we also think it will be an important part of Tracy's efforts to drive more efficiencies throughout her back office and frankly even some of the ways in which we support our clients. Devin Ryan: Excellent. Thank you so much. Operator: Thank you. We will take our last question from Alexander Bond with KBW. Please go ahead. Your line is open. Alexander Bond: Good morning, everyone. Thanks for fitting me in here. I actually have a question on AI and how it specifically relates to comp leverage. I realize it's still early days here, but can you share how you're thinking about AI-related comp leverage, maybe the timing around when we could see this show up in the comp ratio, and then also maybe the potential magnitude of that impact. Peter Orszag: Yeah. Look, I think there are a couple of different ways of thinking about that question. One is to the extent that the tools and using them in the ways that I just mentioned, you know, additional insight with regard to clients, additional, you know, coming into a meeting even better prepared than may have been the case in the past. That raises productivity per MD, which we believe it will. That's one way of getting operating leverage because the higher the productivity per MD, the lower the non-MD comp ratio tends to be. Secondly, though, over time, we do think that this technology is likely to lead us to be able to have a smaller team associated with each managing director. Each managing director, again, we're going to be expanding our total managing director size over time as previously articulated. So what happens to the number might be unclear, but with each managing director on each client, we think the teams could be smaller. That provides a lot of upward mobility to our analysts, associates, VPs, directors in terms of taking on additional responsibilities. And we think that's a feature, not a bug. Because it allows us to cultivate the skill set, trust, judgment, curiosity that leads to effective managing directors over time. And so the hope is, and we're spending a lot of time designing our HR and other systems to be able to encourage this, that as the opportunity to, I call it practice at the top of your licenses, a smaller team allows more upward trajectory in the responsibilities. We're going to be even better at cultivating and picking out those people that we think are really promising future managing directors. Alexander Bond: Got it. No, that's helpful color. And then just for a quick follow-up, and apologies if I missed this in the script, but did you provide any non-comp expense guide for 2026? And if not, maybe if you could help us size up what the right growth rate is there for the full year ahead? Thanks. Mary Ann Betsch: Yes, take that one, Alex. So the way I think about it is that you should expect us to make continued investments and growth on both sides of the business. Whether that's client development, staying on the cutting edge of technology, etcetera. So I would probably be expecting kind of mid to high single-digit increase in dollars depending on how FX rates evolve throughout the year. And importantly, that we're aiming to get back into our target range in 2026 as the revenues grow in both businesses. Alexander Bond: Okay, great. Thank you. Operator: This concludes Lazard's fourth quarter and full year 2025 earnings conference call. Thank you for your participation. You may now disconnect.