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Operator: Good morning. My name is Joanna, and I will be your conference operator today. At this time, I would like to welcome everyone to the Southland Fourth Quarter and Full-Year 2025 Conference Call. [Operator Instructions] Thank you. Alex, you may begin your conference. Alex Murray: Good morning, everyone, and welcome to the Southland Fourth Quarter and Full-Year 2025 Conference Call. This is Alex Murray, Vice President of Corporate Development and Investor Relations. Joining me today are Frank Renda, President and Chief Executive Officer; and Keith Bassano, Chief Financial Officer. Before we begin, I'd like to remind everyone that this conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical facts nor assurances of future performance. Forward-looking statements are uncertain and outside of Southland's control. Southland's actual results and financial condition may differ materially from those projected in forward-looking statements. Therefore, you should not rely on any of these forward-looking statements, and we do not undertake any duty to update these statements. For a discussion of some of the risks that could affect results, please see the Risk Factors section of our Form 10-K for the year ended December 31, 2025, that was filed with the SEC last night. We will also refer to non-GAAP financial measures, and you will find reconciliations in the press release relating to this conference call, which can be found on the Investor Relations page of our website. With that, I'll now turn the call over to Frank. Frankie S. Renda: Thank you, Alex. Good morning, and thank you for joining Southland's Fourth Quarter and Full-Year 2025 Conference Call. The fourth quarter and full year 2025 results we are reporting today were significantly impacted by a number of discrete items, the most substantial of which we will address directly before turning to our capital structure and the performance of our underlying business. Before we review the details of the quarter, let me start by saying that I am extremely disappointed in our financial results for 2025, and I'm committed to providing you with a complete explanation of the challenges we faced and the strategic plan we have implemented to move the Company forward, which I believe tells a more complete and encouraging story than the numbers we reported last night. Revenue for the fourth quarter was $104 million, inclusive of the revenue reversal of $92 million from adjustments related to legacy-dispute negotiation. Gross loss for the quarter was $193 million, and significant drivers include $136 million related to an adverse legal ruling, $44 million related to other legacy-dispute negotiations, and a $22 million impact from our legacy Civil project. The unfavorable adjustment of $136 million is related to the Washington State Convention Center project within our American Bridge subsidiary. This was the result of an adverse trial-court ruling on a construction-contract dispute, combined with the reversal of an expected recovery and related items, this outcome had a material impact on our fourth quarter and full-year reported results. This was a legacy project that Southland took over when we acquired American Bridge from certain sureties in 2020. We believe we were contractually entitled to significant recoveries through an affirmative claim. This January, we received an adverse legal ruling, which ruled in favor of the counterparty, denying our claim and granting their counterclaim. While we intended to appeal this ruling, certain sureties entered into negotiations with the counterparty on behalf of Southland after year-end. Through the rights the sureties have included in their respective general indemnity agreements -- based on these negotiations and due to the events occurring prior to year-end that led to the adverse ruling, we recorded a long-term accrued liability, which significantly impacted results. Any settlement that is agreed will be paid by the sureties under the general indemnity agreements. The sureties agreed to forbear on seeking repayment of any settlement related to Washington State Convention Center until March 27, 2027. Over the past several months, we have also been working closely with our surety partners to bring additional capital into the business and to restructure our Senior Credit Facility. Our objective is to optimize the capital structure for long-term performance and the successful closeout of legacy projects. To date, we have successfully brought in $116 million to support bonded construction projects under our general indemnity agreements with the sureties. This included approximately $14 million before December 31, 2025, and $102 million so far in the first quarter. Repayment terms are expected to be included in a long-term financing agreement and the sureties have agreed not to require repayment prior to March 27, 2027. Separately, we announced in an 8-K this week that the sureties have also replaced our senior lender. As part of this transaction, we paid down and reduced our principal by approximately $14 million and the sureties assumed the remaining $110 million of debt under this facility. The sureties have agreed to waive all scheduled quarterly principal and monthly interest payments through maturity. Based on the current interest rate, this will reduce debt service by approximately $27 million over the next 12 months. Taken together, our sureties have committed to fund any Washington State Convention Center settlement with no repayment required until at least March of 2027 and have provided $226 million in total support. We are now working toward a long-term financing agreement and a Credit Agreement that will formalize these arrangements and expect to provide the flexibility we need to execute going forward. We are grateful for our surety partners' support. Their commitment to this comprehensive capital solution is a significant vote of confidence in Southland, the quality of our project teams, and our strategic path forward. Now I'll discuss our long-term plan. The first step in our strategic plan involved bringing necessary capital into the business. We have the funding and support of our surety partners to successfully closeout our legacy contracts and execute on the strong backlog of new core work. Their decision to provide support reflects their assessment of our work and the quality of the projects in our portfolio. We also took action to restructure our Senior Debt Facility to create greater flexibility and improved cash flow. Next, we have committed to the sureties to monetize idle equipment and non-core assets, including certain real estate. This is a strategic effort to optimize our asset base and ensure our fleet is aligned with our core-project footprint. We are also pursuing the settlement of outstanding disputes. We expect to use the proceeds from these asset sales and certain claim settlements to pay down our Senior Credit Facility prior to maturity, further strengthening our balance sheet as we execute on our project backlog. Moving forward, we will continue to focus our bidding on water-resource, bridge, marine, and tunnel projects in the geographies where our teams deliver the strongest performance and the highest margins. That is where we are most competitive. And by concentrating our resources there, we expect to produce more consistent and predictable results. During the fourth quarter, we added approximately $118 million in new awards in our core end markets. This was led by a $48 million data-center contract in our Civil segment for a private client in the Southwest. This project marks an important milestone for us as it involves installing water pipelines for a major data-center project. We recently broke ground, and the project is progressing well. We expect to complete the work in 2026. We were also awarded a $40 million Construction Manager at Risk or CMAR water resource project in our Civil segment in Texas, and a $30 million pump-station and transmission-main project in the city of Cape Coral, Florida. During the quarter, the Bull Run Filtration Facility project was terminated for convenience. This reduced backlog by approximately $160 million, which brings our total backlog to slightly over $2 billion. Turning toward the broader market, we see a period of robust multi-year demand for the specialized infrastructure services we provide. In the public sector, the Infrastructure Investment and Jobs Act continues to move from authorization to active construction. And in the private sector, the rapid expansion of data-centers has created a unique tailwind for our industry. This is creating a steady pipeline of water-resource, bridge, marine and tunnel projects across our key regions. Our pipeline remains active across both segments. Upcoming opportunities include the Pojoaque Basin Regional Water System Phase 2 design-build in New Mexico, Phase 3 of the Winnipeg North End Sewage Treatment Plant where we are already executing Phases 1 and 2, significant pipeline and treatment plant opportunities across Texas and the Southwest the Claiborne Pell Bridge rehabilitation in Rhode Island and the Liberty Bend Bridge design-build in Missouri. We continue to be selective in our pursuit strategy focused on high-quality work in our core markets. With our recent capital restructuring and strategic plan in place, we are confident that we have the right team to capitalize on these opportunities. In short, the market demand is here. We have the surety-support, and our fleet is being optimized. As we put the legacy impacts behind us and build on the performance of our core backlog, we expect to deliver the strong and consistent results our business is capable of producing. We have the technical capability and the discipline to be highly selective, bidding on the high-margin, high-quality work that we expect to drive Southland's value for years to come. With that, I'll now turn the call over to Keith for a financial update. Keith Bassano: Thank you, Frank, and good morning, everyone. I will discuss an overview of our financial performance during the fourth quarter and the full year ended December 31, 2025. You can find additional details and information in the financial statements, footnotes, and Management's Discussion and Analysis that were filed on Form 10-K last night. Revenue in the fourth quarter was $104 million compared to $267 million in the prior year period. The decline was driven by the revenue reversal on the Washington State Convention Center project of approximately $48 million and other adjustments related to legacy-dispute negotiations, which negatively impacted revenue by $44 million in the quarter. Gross loss in the fourth quarter was $193 million compared to gross profit of $8 million in the fourth quarter of 2024. The delta was driven primarily by the Washington State Convention Center judgment and related items, which represented a $136 million impact to gross profit in the quarter. This includes $85 million for the judgment, inclusive of fees and interest, $40 million for the reversal of a previously expected recovery, $6.4 million in retention and $4.8 million related to a sanctions order. Beyond the Washington State Convention Center impact to gross loss, we recognized additional unfavorable adjustments totaling approximately $44 million related to legacy-dispute negotiations in the quarter. Additionally, a legacy project in our Civil segment incurred a $22 million cost increase related to extended schedule impacts. Selling, general and administrative expenses for the fourth quarter were $17 million compared to $15.7 million in the same period for the prior-year. This increase was primarily driven by bad-debt expense of $1.4 million and $900,000 of business-transformation expenses offset by a reduction in compensation expense. Interest expense was $9 million in the fourth quarter compared to $9.6 million in the prior-year. Income tax benefit was approximately $300,000 in the fourth quarter compared to $14.1 million in the same period prior-year. The reduction in benefit was largely attributable to non-deductible items and the effect of our valuation allowance on deferred tax assets in the quarter. Net loss attributable to Southland stockholders was $216 million, or a loss of $4 per share, compared to a loss of $4.2 million, or $0.09 per share, in the fourth quarter prior-year. EBITDA was negative $202 million in the fourth quarter compared to negative $2.7 million in the prior-year. Now to touch on segment performance for the quarter. Our Civil segment had revenue of $58.4 million compared to $103.8 million in the same period in 2024. Our Civil segment had a gross loss of $31.3 million compared to a gross profit of $8 million in the same period in the prior-year. The reported loss was driven by legacy-project write-downs that more than offset strong core Civil performance. Our Transportation segment had revenue of $45.6 million, a decrease of $117.9 million from the same period in 2024. Our Transportation segment had a gross loss of $162.1 million compared to a gross loss of $365,000 in the same period in the prior-year. The delta was driven by the Washington State Convention Center adjustment and the other legacy adjustments I detailed earlier. The material-and-paving business-line had a gross loss of $26.9 million in the quarter. At the end of the quarter, we had approximately $74 million of remaining M&P backlog. We expect the remaining M&P projects to be completed this year. Now to touch on the results for the full-year ended December 31, 2025. Revenue was $772 million compared to $980 million in 2024, a decline of 21%. The decline reflects the revenue impact of legacy-project completions and the contract adjustments I described earlier. Gross loss for the full-year was $155 million compared to a gross loss of $63 million in 2024. Selling, general and administrative expenses were $61.6 million for the full-year, down from $63.3 million in the prior-year. The reduction was primarily driven by $2.4 million in compensation expenses, offset by $900,000 in business-transformation expenses. Interest expense for the full-year was $37 million compared to $29.5 million in 2024. The increase was primarily driven by the interest rates on external borrowings, amortization of deferred financing costs and the interest expense related to a real-estate transaction as compared to the same period in 2024. Income-tax expense was $56.5 million in 2025 compared to tax benefit of $46.9 million in 2024. This reflects the establishment of a valuation allowance against our deferred tax assets in 2025 given the cumulative loss position. I would like to reiterate, as I have in prior calls, that this valuation allowance does not limit our ability to use the deferred tax assets in the future. Net loss attributable to Southland stockholders was $306.5 million or $5.67 per share, compared to a loss of $105 million, or $2.19 per share, in 2024. Full-year EBITDA was negative $191 million for 2025 compared to negative $100 million in 2024. For the full-year, our Civil segment had revenue of $342.3 million compared to $323.3 million in 2024. Civil gross profit was $16.3 million, or a 4.8% margin, compared to a gross profit of $16.7 million, or 5.2% in the prior-year. Our Transportation segment had a full-year revenue of $429.8 million compared to $656.9 million in 2024. Transportation had a gross loss of $171.6 million compared to a gross loss of $79.8 million in the prior-year. The increase in the loss was driven primarily by the Washington State Convention Center charge and the legacy-project adjustments I just described earlier. The Materials & Paving business-line contributed $52.1 million in revenue and had a gross loss of $42.8 million for the full-year compared to $100.7 million in revenue and gross loss of $83 million in 2024. As we put the remaining legacy work behind us, we expect the consolidated margin profile to move toward our core performance. Before we open it up for questions, let me address our forward outlook. We ended 2025 with just over $2 billion of backlog, of which we expect to burn approximately 38% in 2026. We are not providing formal financial guidance at this time. Given the magnitude of the restructuring actions underway and the uncertainty around the timing of legacy-project resolutions, we do not believe it would be responsible to provide specific financial targets. We will revisit this decision as the restructuring progresses and our visibility into normalized-earnings improves. Our focus is on 3 things: closing out legacy-work with discipline, which we now have the working capital to appropriately advance these projects, enhancing the balance-sheet through optimizing our asset base; and lastly, continuing to execute in the core-business where our margins are the strongest. I will now return the call to Frank for closing remarks. Frankie S. Renda: Thanks, Keith. Before we open it up for questions, I'd like to thank all of our stakeholders, including our great employees, surety-partners and shareholders for sticking with us through this difficult-period. I acknowledge the results we reported are not acceptable. My 2 partners, Tim Winn and Rudy Renda, and I have been together from the start. We put everything we have into this business and continue to be majority-shareholders. This is all we have ever done. We've been through difficult periods before, and we've always come out stronger. This company has been standing for generations, and I have great confidence in our future, not because the numbers today are where we want them, but because I know the quality of our people, workmanship, and the strength of our core-business. Looking ahead, we have $2 billion of backlog, the majority of which is core-work at strong margins. We have the capital-support of our surety-partners, and we have a deep pipeline of opportunities in the markets where we perform best. Our job now is to execute, and that is exactly what we intend to do. Thank you for your time and interest in Southland. I appreciate everyone joining today. I'll now pass the call back to the Operator for questions. Operator: [Operator Instructions] First question comes from Julio Romero at Sidoti & Company. Justin Mechetti: This is Justin on for Julio. So last quarter, you highlighted data-center opportunities in the $15 million to $20 million range and $50 million to $75 million range, and recently announced a $48 million award in that vertical. Are you continuing to see opportunities of similar size? And how is that pipeline trending today? Frankie S. Renda: Yes. We're continuing to see opportunities in that size. We're pursuing jobs in that market, and this job is going really well for us, and we expect to continue to try to grow that side of the business. Justin Mechetti: And then can you discuss how the margin profile of data-center projects compared to your traditional contracts? Keith Bassano: Yes. So the data-centers are going to fit into our Civil segment, and we would expect margins to align with the core performance that we've had in that segment thus far. Justin Mechetti: And then shifting to your strategic plan. Does the sale of non-core assets, including equipment and real estate, impact your ability to win new projects or execute on your backlog? Keith Bassano: It does not. So that's going to be a key component to us paying down debt and one of the priorities that we have. We want to be able to maximize value when we monetize these assets. Some of that equipment is specialized and some of it relates to the wind-down of the M&P business-line. We do not anticipate this to have a material impact in the go-forward business from a bidding and execution standpoint. Operator: We have no further questions. I will turn the call back over to Frank for closing comments. Frankie S. Renda: Thanks, everyone, for joining. We will talk to you again soon. Appreciate your support of Southland. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.
Operator: Good afternoon. Welcome to the Meitu 2025 Annual Results Presentation. We provide English simultaneous interpretation. If you'd like to listen to the interpretation, please log in through Zoom and click the Interpretation icon, select English channel. If you do not click on this channel, you will not hear the simultaneous interpretation. Today, the leaders participating include Mr. Xinhong Wu, Founder, Chairman and CEO of Meitu. Zeyuan Wu: Greetings. Operator: CFO and Company Secretary of Meitu, Mr. Gary Ngan; CPO and President of the Imaging Products Division, Mr. Chen Jianyi. A warm reminder, we include predictive statements, and many risk factors that we may not control may influence these predictive statements. Online participants, you need to rename and add your real name and affiliation name. Before giving your question during the Q&A session, please first clarify your affiliation and your real name. You may also provide your questions through audio or text in the comments section. Firstly, we provide information about our company. Zeyuan Wu: Investors, analysts and audiences, thank you for your participation. Before we formally start, I would like to extend about the announcement yesterday on behalf of the company. We found that some part of the results were published on social media. We investigated immediately after ensuring we found there may be some misoperations and functions in the process and some information was published on the account, and the responsible person deleted immediately. We took two effective matters. First, we deleted all content on the platform, and we applied for the suspension in the Hong Kong Stock Exchange. What's more? Relative information was just shortly spread on March 25th, and we ensure the smooth function on 26th. We feel sorry for all the inconveniences caused to our investors. Thank you all for joining today's earnings conference. Over the past few months, as generative AI technology has been evolving rapidly, there are various debates around the future of the AI industry. As you may have seen in the opening video through the QR code of -- that made the fastest moving trains, for example, from single model approach to model-agnostic strategy from AI-based apps to AI agents, from subscription to consuming tokens, from the form of our team, from mature teams to AI-driven teams. We reached a strong momentum. The adjusted net profit attributable to owners of the company grew 64.7% year-over-year to RMB 907 million (sic) [ RMB 970 million ] exceeding our latest thoughts on the AI applications. First, Meitu is an AI application company focused on the photo and video industry. Based on AI capabilities and efficiency-driven organization, we focus on high-value verticals and build industry-specific AI agent teams to help address users' end-to-end content creation needs, delivering high-quality output. In each specific use case, our AI agent teams are composed of multiple agents with distinct roles. They are responsible for efficiently executing different standardized repetitive tasks. Users can focus on creative ideation and decision making. The core advantage of the AI agent teams lies in their clear division of responsibilities and targeted training. Break down into multiple stages and assign corresponding roles and responsibilities to each agent, so we can ensure the teams perform better. Besides combining years of user insights, accumulated industry know-how and the ability to flexibly deploy models, we constantly translate AI technology into reliable product capability. Additionally, different models have different strengths. There is not a model that can cover all the areas suited for e-commerce styles. Vertical companies combining different models, it will be more common for companies to deploy models. We will focus on more flexible and global things. Centered around it, we will build AI teams meeting industry needs. Now, let me invite our Chief Product Officer, xiaobai, to elaborate on our AI agent teams. Jianyi Chen: Thank you, Xinhong. I will share our thoughts, mainly on how we plan to build the AI agent teams going forward. Firstly, for e-commerce-related content creation, we've been thinking for a long time. We think that we're not limited to e-commerce providers providing integrated method, but rather helping the suppliers to deliver more tangible results. According to what we observed, many of the e-commerce agents can design well-designed photos and images, but that's it. Many e-commerce companies lack the sufficient judgments of market and business, eventually causing the resulting product sales are often falling short of expectations. For instance, on Amazon, a product such as water bottles experience intense competition. For experienced e-commerce providers, we need to avoid the oversaturated competition of product background, such as home and living. Instead, they would pivot to fitness, to outdoor and other high-growth potential segments. So based on this know-how, DesignKit is building an e-commerce design specific AI agent teams. And this new agent team, aside from the original experts that have a good command in design, we have additional roles, such as for the verticals of e-commerce, we have market and data analysts. We have user research experts, copywriters, prompt designers, et cetera, delivering high-quality visual and also establishing a more refined social media commerce video expert team. For instance, the AI marketing strategist, they can serve as Creative Director, helping users to know what to capture, what to market, or we can have AI commercial directors responsible for the storyboard coordination, helping users to address how to present the visuals. We may also have AI audiovisual model experts acting as photographers, lighting specialists, actors, et cetera, helping users with their contents and their materials. Eventually, we have the AI smart editor compiling all of the editing and the distribution and the post-production methods, helping the users to package and publish their products. So what we aim to do for the e-commerce is to transform the visually appealing images to images that drive sales and to e-commerce videos that boost conversion rates. The DesignKit's new agent teams aim to help e-commerce service providers drive and achieve real business results. In addition, aside from DesignKit for Kaipai, for the talking videos, we also hope to create high conversion rate video contents. Based on this goal, we divided the three AI agent teams to assist with our eventual goal. For instance, we have the AI operations team. It helps with the trending topic research, account diagnostics and also content strategies. We also have the AI filming team, helping with the teleprompter assisted filming, the AI avatars, et cetera. We also have AI team helping with the rough and eventual cuts and editing. The entire workflow is coordinated by the AI director agents. Users only need to submit their industry know-how and their demands, and then the AI agent teams will take care of the rest of their work. For example, when an insurance broker asks for a short AI-generated video about pensions insurance, then once receiving the submission, the AI director agent will automatically break down the information and assign it to the corresponding teams, as mentioned before. And within a short time period, it can provide a ready-to-publish marketing video, and it can even generate social media covers and prompts alongside. So for small and medium-sized merchants, the advantage of this AI operations team is a 24/7 content providing team. And we aim for niche sectors, for instance, insurance, beauty solutions, local services, sectors that are heavily reliant on social content for customer acquisition. This not only lowers production costs, but also provides a reliable AI team that can have a high conversion rate, so we can help the suppliers to focus more on creative judgment and business operations. The production handed over more through directions that we have been doing. We have some progress over the past couple of months. For instance, within DesignKit, we already deployed our 4 agents, the e-commerce trial, poster and video agents. From December 2025, the agent function has become a primary driver of our revenue growth on both web and app portals. Our agent has a stable output quality. For instance, DesignKit, web-based DesignKit, it's e-commerce agent roughly has a 50% save rate, where users save at least 1 output per 2 outputs. Now furthermore, once the agent capabilities are integrated into Kaipai more, user experience continues to improve. According to the latest figures, the penetration rate of Kaipai agents have increased to approximately 11%. At the same time, the RoboNeo, from its official launch to current, it has topped the app stores across 26 countries and regions, demonstrating our globalization potential. Last but not least, as you may have noticed, we recently launched the Meitu CLI capabilities on our AI open platforms. Meanwhile, the first group of Meitu AI skills have been officially integrated into the OpenClaw ecosystem, covering personal and commercial use cases in the global photo and video industry. We focus on the core skills. We hope we could have from mature technologies around 8 core capabilities and we transform them into reusable skills. Based on the CloudHub and ACI, we can use Meitu AI's capabilities for photo and video production. We believe as OpenClaw community continues to grow, in the future, users do not need to switch between products. They simply need to have a single command and complete end-to-end creation. This can substantially increase productivity. Now I hand over to Gary to talk about the 2025 financial condition. King Leung Ngan: Thank you, Xinhong and Xiao Bai. In 2025, centered around the two core strategies of productivity and globalization, our operational performance continued to improve with sustained user growth. As of December 2025, our monthly active users grew 3.8% year-on-year to 276 million. Paying subscribers grew 34.1% year-over-year to 16.91 million. Over the past year, we continue to deepen the productivity strategy. As of December last year, paying subscribers of productivity tools grew 67.4% year-on-year, primarily driven by DesignKit and Kaipai, among them. Paying subscribers from international markets doubled, benefiting from the rapid growth of Vmake. Subscription rate for productivity tools reached 9%, an increase of 3.1 percentage points from December 2024. This further validates that with the continual improvement of our products, the output and the output quality, users' willingness to pay is also increasing. At the same time, the increase in subscription rate for productivity tools will help drive the increased proportion of high ARPU paying subscribers, providing support for our future revenue growth. On the globalization strategy front, 2025 was a year of significant milestones. Our MAU from international markets continue to grow, primarily driven by products for leisure. In the second half of 2025, we launched several global viral features, including 3D figurine, AI group photo, and AI snow. Among them, the AI group photo feature helped Meitu app MAU reach a record high and attracted over 3 million new users from the European markets. It also helped Meitu app top the U.S. iOS category chart for the first time. Driven by these features collectively, Meitu app topped the overall app store charts in 52 countries and regions, and the category charts in over 110 countries and regions. With the rollout globally for products, we observed in the second half of last year, paying subscribers in the international markets experience accelerating growth with the majority of new subscribers coming from high ARPU regions with mature subscription habits such as Europe, Americas and East Asia. Recently, in the top 50 global GenAI mobile apps list published by a16z, we ranked first in the photo, video and design category with 4 apps on the list, further solidifying our position as a globally leading AI photo and video application company. Looking ahead, we will continue to strengthen international markets. At the same time, we'll continue to launch highly effective features and optimize recommendation mechanisms, further enhancing users' stickiness. As a result, the oversubscription rate increased to 6.1% in 2025. Currently, the improvement in subscription rate remains our core growth drivers. Besides, with the deepening of our two core strategies, ARPU growth will also gradually become an important growth engine in the coming years. Before I begin sharing the company's financial results, I would like to note that in November 2025, we have officially discontinued the cosmetic supply chain management services, previously under the solutions for beauty industry. Under the IFRS, this business has been classified as a discontinued operation. Therefore, unless otherwise stated, all financial figures and the year-over-year comparisons for FY 2025 presented hereafter are continuing operation basis. In 2025, overall revenue grew by 28.8% year-on-year to RMB 3.86 billion, first largest revenue. Our core business of photo, video and design products grew by 41.6% year-over-year to RMB 2.95 billion. Looking at performance by market. Revenue from international markets grew by 37.4% year-over-year in 2025, outpacing growth rate in Mainland China. Revenue from international markets accounted for 38% of total in 2025, an increase of 2 percentage points compared with the same period last year. From the product perspective, in 2025, revenue from products for leisure and productivity tools accounted for 81% and 19% of overall photo, video and design products revenue, respectively. Advertising next, in 2025, revenue from this part was RMB 840 million, largely in line with 2024. We continue to remain cautiously optimistic about this business, although it is worth noticing that we have pioneered AI-powered creative advertising formats in brand advertisements. Collaborating with international brands such as McDonald's and Visa, this creative solutions have effectively enhanced the social interaction between users and advertisers. Last, revenue from others, which are mainly legacy and non-core businesses, was approximately RMB 62.11 million in 2025. Moving to the cost side, the total cost in 2025 was RMB 1.02 billion, a year-on-year increase of 42%. Specifically, the largest cost item was revenue-sharing fee to payment channels. The cost increases in line with revenue growth from photo, video and design products, rising 43.5% year-on-year, approximately are RMB 620 million. The second largest cost was computing power and cloud-related costs, growing 16.4% year-on-year to RMB 230 million. The third is third-party API costs accounted only middle single digit of total cost of sales because we were able to use the vertical-specific models and fine-tune open source models to fulfill the vast majority of our user demands, reflecting our in-house AI imaging companies. For gross profit, because we discontinued the low-margin cosmetic supply chain management business in 2025, the financial data in 2024 has been restated accordingly. Gross profit in 2025 was RMB 2.84 billion, a year-on-year increase of 24.6%, corresponding to a gross margin of 73.6%. The restated gross margin for 2024 was 76%. On a like-for-like basis, the gross margin decreased slightly, primarily due to two factors: one, the change in the revenue mix. Because the advertisement with high gross margins have decreased slightly and because to support our core imaging businesses and design businesses have continued to grow, the computing and API-related costs have increased compared to 2024. However, as mentioned earlier, thanks to our model-agnostic strategy and proprietary vertical model capabilities, the gross margin of our core business remains healthy and stable and will remain so in the future. On the expenses, selling and marketing roughly accounted for RMB 600 million, a year-on-year increase of 25.5%. The increase in expense was primarily directed to the growth of productivity tools in China and products for leisure and international markets. If we include the portion of combined revenue from photo, video and design products and advertising business, this ratio remained stable at 16% in 2024 and last year. This is consistent with the statistics -- the range, we previously communicated to the market in our earnings. The R&D expenses were RMB 950 million, a year-on-year increase of 3.8%. The relatively modest increase was primarily because the foundational model training costs decreased in 2025 for two reasons. Firstly, our MiracleVision model foundational training was completed roughly in 2024. Secondly, as we're fully committed to the model-agnostic strategy with fine-tuned open source models, proprietary vertical models, and third-party APIs, we delivered high-quality output for users and did not need to invest significantly into training foundational models. If we exclude the expenses related to foundational model training, the overall R&D expenses will increase 14.5% year-on-year, primarily driven by investment in our R&D talents. Looking ahead, we'll continue to optimize resource allocation between proprietary and external models and increase investment in vertical model training and R&D talents, continuing to enhance our product capabilities and competitiveness and delivering the users' diverse needs with precision. Administrative expenses were RMB 450 million, a year-on-year increase of 14%. On profitability, driven by sustained revenue growth, gross profit grew faster than operating expenses. This increased our operating leverage, further enhancing overall profitability. For ease of comparison with last year, the adjusted net profit includes discontinued operations. The 2025 adjusted net profit attributable to owners was around RMB 970 million, year-over-year increase of 64.7%. Under IFRS, our net profit attributable to owners of the company was around RMB 700 million in 2025, lower than around RMB 800 million in 2024. This change was primarily due to two factors. First, in 2024, we completed the disposal of all cryptocurrencies, generating a onetime gain of RMB 640 million, which elevated the prior year comparison base. Second, as we completed the issuance of convertible bonds to Alibaba at the end of 2025, we recognized a onetime noncash expense of approximately RMB 510 million under IFRS. This expense did not result in any actual cash outflow. Both items are non-operating in nature and are not directly related to our business performance. Lastly, I would like to share with you the latest progress on the Alibaba strategic investment and cooperation. On the business side, we are advancing collaboration across multiple fronts, including large model, e-commerce and cloud computing supplier offerings. In particularly on large models, we have deeply embedded, the capabilities of Alibaba's open source model series across multiple scenarios such as image editing and video generation to deliver better user experience. Meanwhile, our technology team and Alibaba's team have maintained close communication on the model training. Finally, as the AI industry continues to evolve rapidly, starting with this year, in addition to our two regular earnings releases each year, we will provide quarterly updates on key operating metrics for our core business. We believe this will further enhance transparency and help the market better understand our operating progress. In addition, we just announced a share buyback plan of up to HKD 300 million, valid for 1 year. This reflects the company's confidence in its future development, as mentioned by Xinhong. The market would consider large model might replace all AI applications. It's obvious in our industry that this might be a misunderstanding. Our growth is also very rapid. So I believe at this time point, it's proper and good for us to do the buyback, plus the 40% proportion. The overall cash return is around 60%. Thank you. Thank you all for participating today. Operator: [Operator Instructions] Unknown Analyst: I'm from [ Pana Internet ]. Congratulations on our performance. Based on the latest statistics, the paying subscribers are slightly lower than the first half of the year and the MAU is slightly lower than those in June. So if you could give us a brief reflection about the AI fragmentation, what are its impacts on your businesses? That's the first question. The second question is how can we better tackle with this decrease in terms of the statistics? Unknown Executive: Actually, we have another perspective. If we put statistics aside, the increase of model capabilities has the influence as positive. It can help us give out some products that develop faster. In terms of DesignKit's growth in the second half of the year, there are positive outcomes. For instance, the AI agent functions. Once it's been rolled out, it gradually spread to all businesses of DesignKits ad was taken up immediately. For Kaipai, for example, subscription penetration rate is really high. And the ARR [indiscernible] abroad is also increasing rapidly. So for us, we actually think from a longer perspective, from a business perspective, the positive outcome of AI agents is immense. As for you, what you saw in terms of the MAUs slight decrease, we've seen similar trends in past years because we need to bear in mind that the MAU is a snapshot of the past month, statistics of the past month. Last year, we had many blockbuster functions that came out in different months. So in December, we happened to have no blockbuster functions. So that's why there is a discrepancy between the statistics and our overall performance. For the actual numbers, the decrease in growth rates, to me, it's not caused by AI or large models or agents. But rather, if we look at it from a Chinese perspective, the products are maturing. So the growth rate with a large proportion and the large foundation would be slightly slower than before. But this is a positive signal because the productivity products or tools worldwide are growing fast. And these kinds of products are at the early stages of their product cycle. Put it in other words, in the second half of 2025, it seems our growth rate is declining. But we need to bear in mind that the products development are maturing from the early stages to the later stages. And we also need to bear in mind that the ARPU ratio with the subscription rates are better than we expected. Recently, we tested some new tools. The ARPU of new tools are already at $50 per month, translating to great average income. So from this perspective, you may think that the growing capabilities of AI is leading to issues. But from our side, we think that the positives outweigh the negative signals. I'm open to suggestions. Operator: We'll move on to the second question. Unknown Analyst: I'm from Morgan Stanley. Two questions. First, I would say about the expectations for the year 2026. Second, agent is integrated into our products. How do you refer to the subscription contribution and what do we have metrics to measure its contribution? Unknown Executive: I'm not talking about too detailed numbers. Also, what I've said before, the overall rate growing in 2026, the top line is basically the same with the 2025, but the underlying or its composition will include more productivity tools globally. In the coming several years, we'll also see a faster growth acceleration. This is the second curve being mature and the rising of the third curve. This might be a direction. The new adjusted net profits attributable to owners will be different. We'll control our expenses better because most of our operating expenses are about staff and personnel. We are actively tackling this problem by using AI to enhance our output. Meanwhile, with the rapid growth of operations, we will not increase the expenses for staff. I think these are positive directions. More about the agents. The final outcome, we felt happy for it because it solved the long-tail needs of many consumers. For example, the e-commerce, previously, the advertising photo or picture, for example, the barbecue oven, you can only use the outdoor backgrounds in the past, but we actually not only use it, we will also need some meat, smokes, flakes, but it's different. It's hard to achieve in the past. With help of the agents, they can have the chance to express more details. Users can express in verbal language and the AI model can translate it into visuals, representations. For example, the cat. Especially, in the past, we have cat models, they are very hard to cooperate. We can only change the background in the past. I think we should have a very cute cat on the cat equipment. So with the AI agent, we can have a very cute cat of specific species. You would also ask, why would you choose Meitu instead of other models? Whether we will be revolutionized by larger models. For the understanding of many vertical scenarios, I think we do better. For example, the cat tower, some cats are not satisfied with what you've chosen for it. So the sellers can better describe the characteristics of their products. For some nuanced parts, we can cooperate with the traditional conventional agent models or style. The user utilization rate is much higher than the general large models. We can tackle some pain points. Another example, Adobe. Why we think it will be revolutionized by AI, because we know the learning threshold is very high. We need to take -- spend months or years to learn to use it. With the help of AI, it could be very fast. This is also in line with our mission. We want you to feel better using targeted models or the subscription rates or selling. I think this is the biggest meaning integrating agent and also the point which satisfied our team. For paid subscription, agent is the top line function of all paid functions. Unknown Analyst: Thank you for your introduction. I'm from [indiscernible] Capital. I would like to ask some questions related to AI. Firstly, as mentioned earlier, the agent function, it has become the main driving factor of Meitu's businesses. So I would like to ask, the agents businesses in terms of the ARPU enhancements, can you elaborate more on the relationship? The second is, in the future, do you hope for the different vertical sectors to set differentiated pricing for the AI agent or the tiered pricing? Another question is that nearly 19% or 20% of the photo and imaging center cost is taken up by the production tools. So as AI becomes more prevalent in the near future, 3 to 5 years, what do you think will be the proportion of the revenue or production tools in terms of the overall revenue? Thirdly, what are your outlooks on the gross profits in the future? Unknown Executive: Because the ARPU rate is mainly provided in the latter half of next year, there will be fluctuations. But if you look at the DesignKit, we already have RMB combo. We did this combo is because we see there is tangible demand among the consumers. We have other combos at 30% to 35% in terms of the pricing. So the total consumption brought by agents is manifested more profoundly across many products. Of course, the increases in ARPU will need time. So in the future, you may see that different products will have more pricier subscription choices. Additionally, in the future, there will be different tiers of basic substitutions. But in different sectors, it will be based on the token consumption. In our prices, we discovered that there are drastic different token consumptions. So we use the appropriate skills choice. For instance, if we do consulting, we know that the consulting prices of different sectors are different. For instance, for high barrier sectors, we need to pay more for consultations. And for the meta prompts for instance, we just mentioned, it's based on sector experience. For the senior practitioners, his or her understanding of the sector have more insights, more personalized insights helping companies to stand out among the homogeneous competition. So that's why we do have the meta prompts and all of the field trial and paid consultations, eventually helping us to gain more insights into how to develop our vertical sectors. So eventually, we base on the different sectors different values and providing more returns for our consumers. In terms of the gross profits, we dropped by 1 to 2 percentage points, but the greatest reason is because of the changes in the revenue mix. Because in the past, advertisement took up a lot. But as advertisements proportion continue to decline, in the short term, the gross profit will decline as well. This year, the advertisement proportion will decrease, but it's already taking up a lower proportion. So its influence on the gross profits will be lower compared to 2025. Additionally, this year, because Apple in China is reducing its fees in China, it's helping with our gross profit. As for your concern, I think you may be concerned about third-party API use and deployments. You may think it influence our gross profits. But at present at least, because we only have a mid-single digit of our third-party API so it won't influence our gross profit that much. Overall, our gross profit will remain stable this year, around higher than 70%. We haven't had the specific statistics for the proportion of production tools in our overall revenue. If we look 5 years into the future, production tools will take up a higher revenue proportion than leisure tools. Put it in this way, production tools as discussed for 2.5 years or 3 years from 2023 until present. Now it takes up around 19% of our overall revenue. But actually, for the vertical sectors, we managed to integrate industry know-how into the products through the AI agents. So there is a scenario that I believe in the future, I think the growth rate will be different from 3 years before. It will be faster. But as for the specific statistics, I have yet to collect them. Operator: Thank you for your question. We will continue with the Q&A. Unknown Analyst: An analyst, Sara. I have two questions. First, as mentioned by the management, the cooperation with Alibaba especially for the products for leisure, what about the user portals who will have more AI-powered phones that would be integrated with many AI-powered functions. So how we see the changes in user portals for products for later? Question two, the productivity tools ARPU is more valuable or promising than of the products for leisure. We are the model-agnostic strategy. We want to build the model to tackle the pain points of users. The models are evolving rapidly. How does the management view the extension of models, this possibility into the photo, video and design vectors? For example, will the foundational large models be extended into the e-commerce area or sector? Unknown Executive: Products for leisure, from the perspective of user, I think we have an advantage because we have an MAU of over 280 million. Many new products of ours published in recent years have performed very good with rapid growth for DesignKit and Kaipai and also Vmake, Wink, we have access advantage. So we can be top-tier players in this sector. Other giants, including the smartphone producers, they, of course, will try new functions related to photo, video and design. It's always a very essential part of them. For example, many smartphone producers focus on the imaging capabilities of the phone. Of course, we feel the challenge. But we will find many corresponding room where they left or they overlooked because there is no one company that could serve the users' all needs. This is a marathon for innovation. We view this trend very objectively. This challenge, in turn, makes us feel the warning and have the spirits to challenge is good. And second question, what about the extension of large models into other sectors, I think the answer is yes, but it's similar to the answer of the first question. No large model companies can solve all factors on use, especially vertical sectors pertaining certain areas. A large amount of energy and expense should be devoted. So at present, we are digging into these perspectives and we saw the things that these models could not do. I believe this is also another marathon of innovation, different ecosystems for models and applications. Models cannot cover all applications. Actually, it's empowering applications. We know we would do something about it. They develop some independent targeted apps or software. For our team, they make us feel pressured and also urge us to increase our competency. Unknown Analyst: I'm from Citibank, Internet analyst, Vicky. I have an AI-related question. I look forward to your thoughts. I don't know what are your thoughts about this. Zeyuan Wu: Indeed, we saw this trend as well. Xiao Bai has elaborated over the AI teams. How we build the teams and how to deliver high-quality results, we also mentioned earlier that the business models have been changing from the subscription to the consumption of tokens. So to deliver high-quality results, so we think there's an opportunity for us. I suppose we roll out some new production tools that have a relatively high barrier, but users are willing to buy because they can deliver high-quality results. As a result, we see our ARPU rates increasing fast, especially production-related. Therefore, in June this year, we will post the Meitu Imaging Festival, and that will be launched, focusing on the AI agent teams' establishment and how to deliver high-quality results for our users. I believe, by then, we will have a better understanding. Jianyi Chen: I would like to add some more thoughts. I think an interesting thing is that there are many store apps through the subscription revenue. So after you subscribe to something, you may not use it for 99% of the time. So that is an issue of overpayment. It can't be like this. So there are many inefficiencies in the previous conventional model. But this cannot be applied to us because, in the past, we've been providing services that needs to be subscribed to be used. We don't have a model where we subscribed and the users do not use it for most of the time. So even though some people regard us as traditional imaging and photo industry, but we actually have some differences in terms of the conversion rate. For the subscription, I think the token consumption, a part of our revenue will be generated by subscription. It's just that in the past, by subscribing, we provide a group of tools. But now by subscribing, we have a bunch of tokens. After you consume all the tokens, you may need to buy higher-tier subscriptions that gives you more tokens. I think for the two models, they are not dichotomous. They are a combination. Operator: Due to the time limit, we will continue with the remaining two questions. Before online questions, we will have another question on site. Unknown Analyst: I'm an analyst, Xixi from [indiscernible]. My first question is that globally, last year, when we're expanding production tools, we mainly focus on vertical sectors,; for instance, the restaurants, et cetera. I wonder, in 2026, do we expand our vertical sectors to more sectors? Secondly, when we look to the production tools of users abroad, their habits may be different from those in China. Thirdly, I would like to ask more about your cooperation with Alibaba. Alibaba's users in terms of production tools, what are the percentage in terms of the contribution to the revenue? In 2026, the driving of production tools mainly come from ARPU or the paying tools. Zeyuan Wu: We're now doing extensions in vertical applications. As you may have seen, you have saw the financial results video and some AI agent studio functions. Besides what's mentioned, we saw very vertical sectors where there are opportunities for us. Under these scenarios, traditional services, they may spend over USD 10,000 to USD 20,000, but we can achieve this with 10% to 20% of that with same or even better quality. There are scenarios like this. Meitu will try to avoid the directions of manage giants, their core paths and strategies, so that we would not be greatly influenced. But we'll try to discover the parts where they may neglect or didn't consider it very important. So actually, we have many opportunities to lead in very vertical sectors. So we may try to avoid some popular or hot choices. For example, we still have a large user base in the off-line market. Traditional expense is high, but now it's just maybe 1% of the previous expense. In detail, I can't expose too much, disclose too much. But you will see our future products. And about the user habits of the productivity tools in international markets, we may observe different vertical scenario preferences and. Last month, our RoboNeo topped in the photo video category in 15 countries, including Brazil. For example, the South American users, they have a strong desire to express on social media. This is different from Asian markets. And we'll do more language and operation support in Southern American market. We cannot express too much about it, but I want to say that we have different orientations and directions. We will segment very carefully and precisely. We will try to serve well. a certain need and extend to more categories and markets. Jianyi Chen: As an additional reminder, as what Xinhong have said, the critical point is that the users demand on visuals because there are different cultures, they're vastly different than us in the past. But now due to the cultural differences, we need to have many different and AI adaptation. For instance, the same e-commerce platform, Chinese users may perform tests. They have less coherence but have more visual stimulation. But for overseas users, they may prefer more simplified accounts that look more high end. So there are great differences. For instance, Brazil, many Brazilian users would like the e-commerce platforms to stand out more. Some countries like light colors, for example. In our main business areas, we have all the compatibilities and adaptations. After the adaptation, we also observe the different subscription habits. For Chinese users, because we would like to subscribe low-cost orders, in China, the per week subscription is more preferred than monthly subscription. But for the U.S. market, the reverse is true because they think weekly subscriptions, it's is hard to experience the value of products in the short run. We need to have a longer time period to understand what values can the product bring. Because they are less sensitive on the price, they hope that they would pay to create value and then decide whether to subscribe. So for us, in the past, many of our products were based on the demand and habits of the Chinese market and then we ready it to the rest of the world. But now we hope we cater to the specific demands of each area in the world. In the past, we may have 100 products in China, but only 50 to 60 overseas. But now we look at the overall demand, and we have products that are 90% available and also 90% available in China and also overseas. That is our biggest change. Operator: And due to the time limit, we will have the last question. If we have investors on site that have questions, please raise your hand. So we'll have a question online from the meeting. Unknown Analyst: First, about the ARPU value. We mentioned we can see increase of the ARPU value. The main drivers are productivity tools in Chinese Mainland and international markets. And also, the third-party CPI are single digits. Which directions we use the third-party API? And why would we consider this of high, low status of proportion? Unknown Executive: Management answers the elevation of ARPU value, the main driver is that the introduction of agent. Many delivery of outputs will consume tokens. After the consumption increases the purchase more expensive packages, due to high-quality, they do not mind that much because this cost is much lower than in the past, nearly 10% or 1%. So the main ARPU growth are contributed by this partner, productivity tools. Products for leisure, I will not consider a dramatic increase in ARPU value. But with the higher proportion of international markets, this part certainly increases, but still not that huge. About the API part, compared with other model companies, you know we pay attention to quality or effector. We have an evaluation team of over 200 people. Many designs are outsourced. They comply to teams, but ultimately it's up to R&D team. But in Meitu, they are competing. If the design team do not consider it good, it's not published or aligned. For example, Xinhong himself also paid great attention to it, one, because the evaluation of the effect of different models. When we come up with a case, we first evaluate all models about their effects and outcomes. For example, 10 models, the winner, does it meet the expectations of the real users? If it's good, we use then the API. But after the competition, if we cannot find a very good winner, we self-develop. So our understanding about the external API, first, we evaluate. And if it meets our standard, we use it or we choose to self-develop. We hope they cooperate and build the industry's top standard. Operator: Thank you for your questions of investors and the detailed response. If you have more demand for our tools for statistics, you may contact the IR teams. Now we'll enter the media Q&A. This session will not have simultaneous interpretation. For the participants on Zoom, you may feel free to log off. Thank you for your participation and attention once again. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Good day, and thank you for standing by. Welcome to the Autolus Fourth Quarter 2025 and Full Year 2025 Financial Results Conference Call. [Operator Instructions] Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Amanda Cray, Executive Director of Investor Relations. Please go ahead. Amanda Cray: Thank you, Kevin. Good morning or good afternoon, everyone, and thank you for joining us on today's call. With me are Chief Executive Officer, Dr. Christian Itin; and Chief Financial Officer, Rob Dolski. On Slide 2, I'd like to remind you that during today's call, we will make statements related to our business that are forward-looking under federal securities laws and the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These may include, but are not limited to, statements regarding status of the ongoing commercial launch of AUCATZYL in the U.S. and U.K., Autolus manufacturing, sales and marketing plans for AUCATZYL, the market potential for AUCATZYL and the status of clinical trials, development and/or regulatory time lines and market opportunities for obe-cel and our other product candidates. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations and reflect our views only as of today. We assume no obligation to update any such forward-looking statements. For a discussion of the material risks and uncertainties that could affect our actual results, please refer to the risks identified in today's press release and in our SEC filings, both available on the Investors section of our website. On Slide 3, you'll see the agenda for today's call. As usual, Christian will provide an overview of our operational highlights. Rob will then discuss the financial results, and Christian will conclude with upcoming milestones and closing remarks. We'll then take questions. With that, I'll turn it over to Christian. Christian Itin: Thank you, Amanda, and welcome, everyone, to our Q4 and full year update. As we have communicated in January, we had a very good first year of launch with AUCATZYL in the U.S. with $74.3 million in revenue recognized in 2025. By the end of 2025, we had 67 centers activated and are building on positive physician feedback and reliable high-quality product delivery for our second year. We are reiterating our guidance for 2026 with net revenue of $120 million to $135 million, a shift to positive gross margins in 2026 and increasing our commercial footprint, targeting more than 80 activated centers by end of 2026. Regarding gross margins, larger volumes will drive down fixed costs and improvements in the operating model will reduce variable cost per batch. By the end of 2025, we had also achieved regulatory approvals in the EU and in the U.K. and achieved market access in the U.K. and have initiated the launch at the very beginning of this year. On Slide 5, alongside the launch in the U.S., the ROCCA Consortium, which stands for real-world outcomes collaborative of CAR T in Adult ALL, collected data from all patients treated with AUCATZYL within participating institutions. Overall, 96 patients were apheresed. Of those, 91 actually achieved the infusions. And 5 patients did not receive an infusion due to medical reasons, either due to progressive disease or a combination of progressive disease and infection or a lineage switch of the disease and loss of CD19. Of the 91 patients that received the dosing, both infusions were received in all of those patients. And by the time of the analysis at the beginning of this year, 84 patients were evaluable for a day 28 assessment for response. The median follow-up is obviously relatively short because this was the first year of launch. So the median follow-up was 137 days from first CAR T cell infusion. Moving to Slide #6. What we're seeing in terms of the outcomes, we're looking here at both the outcome of the ROCCA Consortium in the real-world setting, and we actually juxtapose our prior clinical trial experience in the FELIX study. What is worthwhile realizing that the 96 patients that were actually collected in the database approximate about 60% of the U.S. commercial patients that were treated during the course of the first year of launch. When we look in terms of the patient population, we do see that we see a wide range of age with a median age of about 50 years comparable to what we had in FELIX and a very wide range, including patients that were very much on the elderly side already. Now what was very encouraging was to also see that when moving to the real-world setting that we actually were able to maintain the safety profile that we have seen with AUCATZYL or obe-cel in the FELIX study. So the real-world observation was from a CRS perspective, from a cytokine release syndrome perspective, is that about 59% of the patients had a cytokine release syndrome of Grade 1 or Grade 2, but no patient experienced a Grade 3 or higher cytokine release syndrome. Similarly, when we're looking in the -- on to the ICANS side, we had 17% of the patients that experienced Grade 1 or Grade 2 ICANS and only 3% experienced Grade 3 ICANS in this -- in the real-world setting. When you then look at the -- and compare that to the FELIX experience, you do see that, that actually does translate very well. We had in FELIX on CRS, a slightly higher level overall of cytokine release syndrome observed. And we also had a small proportion of 2% of the patients with high-grade cytokine release syndrome. And similarly, on the neurological toxicity side on the ICANS, we had in the FELIX study, 23% of the patients experiencing ICANS and about 7% experienced high-grade ICANS. So overall, a very nice reproduction of our clinical experience now in the actual real-world setting. Now when we look at the efficacy side, obviously, this is early data. So the -- what was available is the tumor assessment at day 28. Further data may become available at later time points, but that is what so far has been analyzed and what was presented at the ASGCT meeting in an oral presentation this year in Salt Lake City. What you see is, again, on the left-hand side, the data from the real-world setting. And you can see that overall, we have about 92% overall complete remission rate in the real-world setting, which actually is quite similar to what we've seen overall from a picture perspective with the mature FELIX data at 3 months, and it looks somewhat improved over the day 28 assessment in the FELIX study. But this, again, is a very nice, I think, confirmation of the data and the observations we had in our clinical trial now in a real-world setting and in patients that were obviously now treated in the normal standard of care environment that obviously at times can differ from clinical trial environments. So what is important is, obviously, the data is very nicely aligned with what we have prior observed. Very nicely corroborating the data that we have presented in the past. But what we also do see in the patient population that there is also a wider range of patients included from a tumor burden perspective, as you would expect in the real-world setting, where once you have evidence of disease coming back, you wouldn't wait treating the patient until the patient had high disease burden, but you would intervene at an earlier time point. It's reflective of the actual standard of care that we're seeing in the disease setting. So very encouraging observation of the first year. I think for us, quite a remarkable coincidence that indeed it was -- the Consortium was ready to collect the data practically from day 1 that we were able to make product available. And with that, get a real-time view of the performance of the product, both from a manufacturing, from a supply perspective, but also from an outcomes perspective. So with that, I'd like to move to Slide #7. And just a brief word on the overall activities that we have, in particularly around obe-cel oral capsule. Obviously, we have now a very strong foundation in the Adult ALL segment with our first label and the product in the market and performing well in the market. And we're now obviously building on that to actually broaden the utility of the product across a range of additional indications. And obviously, one of the first indications that is natural -- it's very natural to add is actually to aim for an ability to offer the product across the entire age range within acute leukemia. And hence, we started the work on the CATULUS study, and I'll briefly show you the data in the upcoming 2 slides. But what we're doing with the CATULUS data is really looking to actually get a data set that allows us to also get to a label for pediatric patients. We had started with a Phase 1 data set, which was presented at ASH just at the end of last year. And based on that data and discussions with the agency, we agreed on a path to expand the study and with that expanded study should have the data as a pivotal study to support a future label in this particular pediatric population. The second study that obviously we've been very active in, and we also reported data on at the end of last year, first at ACR and then in an oral presentation at ASH is the first experience that we gained in the autoimmune setting, and this is in systemic lupus with very advanced patients. It's the CARLYSLE study. This is a Phase 1 study where we evaluated the activity of the product and the safety of the product in this group of patients. And we have reported initial data based on that data and also interaction with the agency, we designed then the LUMINA study, which is focusing on lupus nephritis patients that are advanced patients, and we're in the process of actually enrolling that study. So that study is off the ground and running. And we expect data in 2028 for the lupus nephritis population. We have alignment with the FDA on the design and also as the design as a pivotal study to get us to enable the approval of the product if the data obviously can be generated. In addition, we're looking at progressive MS as sort of an exploratory study. That's a Phase 1 study called the BOBCAT study, which is currently enrolling. We treated the first patient in October last year. So that's enrolling, and we expect to have full data for this Phase 1 experience during the course of 2027 and hope to have early data by the end of this year to get a first view. Overall, when you look at the flow from the pivotal study perspective, the pediatric ALL study, we expect to have data by the end of 2027. The LUMINA study, again, pivotal data in '28. And in '26, we expect, obviously, a longer-term update and data update from the CARLYSLE study, which is planned for the end of the year. Now in addition, there are additional opportunities that we see with the products that we actually have obviously, on the one hand, a continuation of data collection that we expect to see from the ROCCA Consortium and sort of more of that experience being frankly, collected and analyzed in their hands. And then on the other hand, there is a substantial interest for investigator-sponsored studies with a particular focus on the opportunity in frontline patients to see whether you could actually develop a definitive consolidation and have data in that -- from that -- in that space to see whether indeed there is activity in that early setting as well. So there's quite a lot of interest, obviously, to explore a broader opportunity base here for the product. And also when we look at our internal studies, I think a very nice news flow as we go through '26 and '27 into '28 with very meaningful data updates and hopefully, data sets that will enable a broadening of the opportunity commercially as well for the product. With that, I would like to actually, on the next 2 slides, briefly summarize the data that was presented at the ASH conference for the pediatric experience. These are all relapsed/refractory patients. And I would like to start on Slide #8 with just a brief view on the safety data as it was presented at ASH. And what you can see when you go through the safety data set is you see this is consistent with what we have seen in the adult population in terms of immunological toxicity infection risk as well as neutropenia, which is very well characterized in this population. When we then go to Slide #9, what you can see here is a swim plot. First, I think, to observe is that, in fact, almost all patients managed to actually achieve a complete remission, either a CR or CRi. Overall, we do see that it was a CR/CRi level at the 95% level and the CR level in just around 91% of the patients. So clearly confirming the very high level of activity, consistent, obviously, with what we're seeing in the adult population as well. And we start to see a good duration of responses, as you sort of see the swim plot here in front of you. Obviously, the follow-up is still relatively early in this population. We have a median follow-up of 8.8 months. With that, I'd like to just briefly look on Slide #10 on how we're actually moving forward on the pediatric side. So we have decided to add an additional 30 patients for the Phase 2 portion of the study. It's an international study. So we have centers in the U.S., U.K. and in Spain active. We have developed the approach in collaboration with the Children's Oncology Group, the key group for pediatric oncology in the U.S. And in terms of the age range, we include patients between 0 and 18 years of age. You remember that our label in the U.S. is 18 years and older. And we have stipulated a minimum body weight, to 6 kilogram. Remember, the way we dose in pediatric patients with a single infusion with 1 million cells per kilogram. In terms of the population that we're including, obviously, these are relapsed/refractory patients, and we have a particular focus on the patients that have in the first line, a high-risk relapse and that -- first -- sorry, first line high-risk relapse population, which is actually populations currently excluded from access to CAR T therapy. I want to make sure there's an opportunity also for those patients to benefit from CAR T therapy. And hence, we're including that population in addition to obviously the broader range of relapsed/refractory patients. So this is where we are on the pediatric ALL side. As I mentioned, we expect to have data by the end of 2027. Moving to Slide 11 and the advanced SLE population that we have studied in the CARLYSLE study. We have determined the recommended Phase 2 dose in that study, which is a 50 million single infusion after the dose. When we look at the patient population that we have in the Phase 1, it was patients that had to the large extent, significantly impaired kidney function as well as quite a wide range of additional manifestations of autoimmune disease that you would actually then see represented in the SLEDAI-2K disease scores. And in fact, we're having overall a population with very high levels of disease scores, which obviously represent a very challenging to patient population. We have now 11.4 months of follow-up in the 50 million cell dose cohort. We achieved in 5 out of 6 of those patients, a DORIS response, achieved in 3 of 6 a complete renal remission. The product was overall well tolerated. We saw no ICANS and we had no high-grade CRS in these patients. And we start to get a good feel for some of the key biomarkers. And just to give you just a quick snapshot on the data, if you go to Slide #12. This is actually from the actual ASH presentation and starting on the left-hand upper side, the summary of the safety data. Obviously, the key there is overall very good, very well tolerated product and minimal immunological toxicity that we have picked up in the form of CRS and ICANS. Below that, you see the SLEDAI scores. You see in different colors, the different manifestations of autoimmune disease that are shown on the legend on the right-hand side of that panel. And you can see that these patients do improve over time. The blue color that you see is actually the renal scores in these patients. And obviously, some of these patients already had very advanced, very challenging disease. If we go to the right upper panel, you do see kind of a depiction of the DORIS remissions. And you see that 5 of the 6 patients actually converted into a DORIS response. The DORIS response actually looks at both the manifestation of the disease as you would actually have it depicted in the SLEDI score. So you need to have the SLEDI score improvement. But you also want to see that the patients are getting down to low levels of corticosteroids of no more than 5 milligrams per day or less. And so it is both a measure, obviously, of the improvement overall, but also the fact that, that is now a state that the patients are in where they get what's typically referred to as physiological levels of steroids. Now at the bottom on the right-hand side, we see basically took a look at both the persistence and the recovery of the B cell compartment. When we look at persistence, we do see that the median persistence is 3 months for the product. And when we look at the time to recovery, the median time to recovery for the B cells, we see that is at 6 months. We've seen very deep remission, a reset, a naive state after the B cells start to reappear and then obviously, over time, differentiation of these cells from there on forward. But this is clearly a deep cut and a nice sequence of loss of persistence followed by recurrence of B cells, as you would expect from a mechanism of action perspective. When we then go to Slide 13, this is a quick look at the way that we are developing in lupus nephritis. We've obviously done the CARLYSLE study. We selected the dose. We actually also have included now in the CARLYSLE study and report at the end of the year also teenagers, patients 12 years and older and include that population as well because we believe it's a particular medical need and quite often a very aggressive course of the disease in these teenagers and young adults. Based on this data, we're moving or have moved into the LUMINA study, which is a single-arm, 30-patients study in patients that have gone through B cell depleting antibodies. And Calcineurin inhibitors failed on both and are now basically outside the approved standard of care in this -- for that stage of the disease. The study is enrolling, and we're actually are active in the U.S., in the U.K., in Spain, and we're likely going to add 1 or 2 additional countries on top. When we then think forward, obviously, there is an opportunity once you actually create a foothold in the indication to then think about the ability to broadening the use of the product in a wider set of patients, and that's going to be sort of the second step once we sort of achieved our first approval in the indication. We expect data for the LUMINA study, as indicated in 2028. And then finally, on Slide 14, just as a reminder, the progressive MS study that we're conducting in the BOBCAT study. And obviously here, really what we're looking at is both the safety or obviously, the safety profile on the one hand, the clinical impact from a disease score perspective as well as a range of biomarkers and imaging measures to understand the activity of the product in these patients and obviously, depending on outcome, we'll move from there. So with that, we're getting to the financial results section, and I'm handing over to Rob. Robert Dolski: Thanks, Christian, and good morning or good afternoon to everyone. It's my pleasure to review our financial results for the fourth quarter of 2025, and I'll be referring to the information on Slide 16. Before diving into the specific numbers, I would like to note a refinement to the accounting treatment related to our product revenue and cost of goods sold that are reflected in the results that we'll discuss today. Importantly, this change has no material impact on our existing or anticipated AUCATZYL revenue and has a practical benefit of better aligning the timing of revenue and cost of sales. On a full year 2025 basis and moving forward, we plan to recognize both the full value of product sales and the associated cost of goods sold upon confirmation of the second dose administration for AUCATZYL. From a revenue perspective, this means we will no longer recognize a 50-50 split across the first and second dose confirmations. This also eliminates the previous deferred revenue accounting and earlier cost of goods recognition associated with those deferred revenues. The accounting for personalized cell therapy products is an emerging area. And during our year-end reported review process, we and our auditor concluded on this refined position within the accounting standards and again, with no material impact on the financial statements. Now on to the results. Net product revenue for the fourth quarter of 2025 was $23.3 million, bringing us to a total of $74.3 million for the first full year of AUCATZYL sales. I'll also note that we also recorded a $1 million license revenue component in Q4 2025, related to the achievement of a clinical milestone under our license and option agreement with Moderna. Combined, this gives you the $24.3 million in total revenue for the fourth quarter. Cost of sales in the fourth quarter totaled $25.3 million, and that's compared to $11.4 million for the same period in 2024. This change was primarily driven by having a full quarter of sales in 2025 and having only a partial quarter of commercial manufacturing activity expense recognition upon FDA approval back in November of 2024. Additionally, cost of sales in Q4 2025 includes canceled orders in the period, patient access program product, inventory reserves or write-offs, third-party royalties for certain technology licenses. As discussed on our full year guidance, we expect to shift to positive gross margin this year based on increasing patient volume, improving overall plant utilization, together with executing on operational efficiencies. Moving on, our research and development expense was $35.6 million for the fourth quarter of 2025. That compared to $30.8 million during the same period in 2024. This change was primarily driven by an increase in research and development activities, including some of our new clinical trial start-up and a reduction in the period-over-period U.K. R&D tax credit. This was partially offset by commercial manufacturing-related employee and infrastructure costs that have now shifted to cost of sales and inventory. Our selling, general and administrative expenses increased to $35.8 million for the fourth quarter of 2025 compared to $33.7 million in the same period in 2024. This increase was primarily due to salaries and other employee-related costs, driven by the increased headcount supporting the commercialization activities. Our loss from operations for the 3 months ended December 31, 2025, was $72.5 million as compared to $75.9 million for the same period in '24. And finally, net loss was $90.3 million for the 3 months ending December 31, 2025, compared to $27.6 million for the same period in '24. Our cash, cash equivalents and marketable securities at December 31, 2025, totaled $300.7 million. Operator: Hello, Rob? Rob are you still there? SP1 Pardon me, Amanda, can you hear me? Christian Itin: This is Christian. I can hear you. Operator: Okay. Looks like we might have just lost Rob. . [Technical Difficulty]. Christian Itin: Okay. I think I'm going to take over. Robert Dolski: Sorry about that. Operator: Are you back? Okay. Robert Dolski: Okay. I'm going to pick up on the -- our cash and cash equivalents and marketable securities at the end of '25 totaled $300.7 million as compared to $588 million at the end of December 2024. That decrease was primarily driven by net cash used in operating activities and impacted by a delayed receipt of approximately $18.6 million related to the 2023 R&D tax credit that we are expecting from the U.K. HMRC. As Christian noted, we are reiterating financial guidance issued in January that we expect between $120 million and $135 million in AUCATZYL net product revenue in 2026. This includes contribution from both the U.S. and U.K. markets. Finally, based on our current operating plans, including anticipated AUCATZYL net revenues, we expect that current and projected cash, cash equivalents and marketable securities will be sufficient to fund our operations into Q4 2027. I'll now hand back to Christian to wrap up with a brief outlook on expected milestones. Christian? Christian Itin: Thanks, Rob. All right. So going to Slide 18, upcoming milestones. We're actually just about 2 weeks away from a Virtual KOL Event that will be focused on acute leukemia and the opportunity there. I'll talk a little bit more on the next slide about that. We then actually have -- if you look into '26, we expect towards the end of the year, longer-term follow-up from the CARLYSLE Phase 1 trial. We also expect first data from our AUTO8 program in collaboration with UCL on light chain amyloidosis. Name of the trial is ALARIC and early data from the BOBCAT Phase 1 trial in progressive MS. The full data for BOBCAT is then expecting during the course of 2027. And we also, by the year-end of '27, expect the full Phase 2 data for the CATULUS study, which obviously is designed as a pivotal study. And then the second pivotal study, the LUMINA study in lupus nephritis is expected to read out in 2028. So with that, just a quick look on Slide 19, the event that we're planning for April 8. We got a great group of speakers who will talk through the landscape and the opportunity. It starts with Dr. Jae Park from Memorial Sloan Kettering, who will talk about the Adult ALL treatment landscape and unmet medical need. Dr. Lori Muffly from Stanford will talk through the ROCCA real world experience with AUCATZYL. Dr. Elias Jabbour from MD Anderson will look at the opportunity in the earlier lines of treatment in ALL and particularly through the lens of investigator-sponsored trials. And then we will get to the pediatric population with Dr. Michael Pulsipher from Utah University Huntsman, who will look at the medical need in the pediatric patients and the initial data that we have from the CATULUS study. The event, obviously, is going to be webcast and also will be recorded. And we're looking forward to hopefully many of you being able to join us, a great group of speakers, and I think a very nice direct feedback and sense for where the disease setting is and where the opportunities are and also, obviously, their perception of how AUCATZYL fits into this landscape. With that, just to finish and to wrap up, the focus for 2026, clearly drive market share for a AUCATZYL, improve the gross margins for the product and expand the utility of obe-cel with the clinical trial programs, development programs that we have ongoing that are designed to give us overall a broader range of indications ultimately to be able to serve with obe-cel. With that, I think we're at the end of the prepared remarks, and we're happy to take questions. Operator: [Operator Instructions] Our first question comes from James Shin with Deutsche Bank. James Shin: I have a couple. For the 2026 guide of $120 million to $135 million, Christian, can you -- or Rob, can you guys help us with how much might come from U.K. and other ex-U.S. regions? Secondly, what's the latest on more EU adoption or reimbursement for AUCATZYL? And then Christian, given we're pretty much through 1Q '26, can you shed any light on how AUCATZYL uptake has trended? Christian Itin: Yes. Well, first of all, thanks a lot for joining, James. So with regards to the U.K. guidance, as Rob said, this includes both the U.S. as well as the U.K. We're not planning to break that out. Obviously, we're early on in the launch. The U.K. is a substantially smaller country than the U.S. and much smaller population. So we're going to be actually presenting the data in the aggregate. And we do not expect a major contribution yet from the U.K. given that this is obviously very early in the process. So at this point, I think too early to tell and probably too early and frankly, too early to break out. With regards to other EU countries, we do not expect in 2026 any contributions from other -- from EU countries. As you remember, we have an approval in the EU, and we're actually in conversation with market access authorities in Europe to see whether there's appropriate path here for us to take. I think what is very clear for us is that obviously, we need to be able to enter a market in a way that actually is economically sensible. And different from maybe some of the larger players, we cannot afford actually taking a loss doing that. So we're in the process of evaluating, and we certainly will keep you updated as we learn more and we get a better understanding of the dynamics here. But for 2026, we are not actually guiding to any revenue coming outside of the U.S. and U.K. And with regards to Q1, obviously, we're not going to break out individual quarters. We've given you the full year guidance as we had actually at the beginning of the year and now reiterated. I think in overall, when you look during the course of last year, what we certainly saw were elements of seasonality that we're picking up. And certainly, in the -- as you sort of go through in the summer with vacation periods that is clearly visible as well as kind of the year-end holidays do have an impact on patients, particularly those patients that are -- have an ability to, frankly, buy some time or bridge some time and obviously are interested to sort of spend time with their families, particularly over Christmas, New Year's. So there's elements there that we see over the years. But overall, we're not going to give, I think, any sort of particular guidance per quarter because, frankly, there's too much variability in those numbers, but we're confident on the aggregate for the full year. Operator: Our next question comes from Gil Blum with Needham & Company. Gil Blum: So very nice ROCCA results. Do you think this is going to influence physician behavior? Is this sufficiently socialized? I mean feedback that we've gotten is most physicians already view AUCATZYL as a preferred therapeutic? Christian Itin: Thanks for joining, Gil. Obviously, we're very pleased with the observation, the real-world observation. And I think what's important to understand in this disease setting is that, obviously, this is an incidence-driven disease. It's a onetime therapy. And so what's really at the core of your ability to actually build market share is the continued buildup of confidence, experience and confidence that the treating physicians have. So that's a critical component in that, obviously, the ROCCA data, which is the physician's own data, obviously, is very important. Now we have to understand when we look into kind of the physician groups that actually are treating ALL patients, this is not just the transplanters or CAR T therapists that actually are treating ALL patients, but the wide range of hemato-oncologists who are treating them and particularly in the frontline and early relapse setting. So there's a lot of work that we do to sort of expand, obviously, the adoption of the product across the range of stem cell transplanters and CAR T therapists, but also increase the awareness within the group of those physicians that tend to do the frontline therapy. So those are kind of the key dimensions that we're working on. And obviously, the data is very important because this is their own data, their own experience in many of the centers for many of the centers that are very relevant for the treatment of ALL patients. So we think the data is very important, but there is a substantial amount of work that we have ahead of us to sort of go from a market penetration that is probably somewhere around the 10% range to really start driving that towards the levels of penetration that we're seeing with Blincyto, which is what we believe actually the actual potential would look like. Gil Blum: And are there any insights you can provide on how the LUMINA enrollment is going? Christian Itin: So the LUMINA study, as I indicated, is taking place in several countries. We started out in the U.K. and obviously building on the initial experience from the CARLYSLE study. So that is starting to get -- I think, to start to gain good momentum. We're in the process of adding U.S. centers, and we expect U.S. centers to come online in the upcoming quarter. And with that, I think we're going to start to see, I think, a very nice sort of development in the disease setting and in the enrollment characteristics. So far, we're seeing kind of what we had expected to see in the indication and then seeing the type of flow of patients consistent with what our expectations were. Gil Blum: All right. And one last one for Rob. So now that we're recognizing revenues and costs on the second dose, how should we view patients only receive one dose? Robert Dolski: Yes. Thanks for the question, Gil. So maybe just as a reminder on that, I mean, if you go back to the experience in the clinical study or even commercial experience last year, we're talking about a relatively small number of situations in patients. So they don't get the second dose. So the cutoff will be certainly, if there's a first dose towards the end of a quarter, that patient may still get the second dose, that revenue won't be recognized. But if they get the second dose in the second -- in the next period would be recognized then. If the patient only ever gets the first dose, that's going to be a situation where there's a number of factors that will feed in, depending on the type of patient in terms of the split CMS reimbursement or credits according to the trade policy that may apply. But eventually, what will happen there is we will wait until cash receipt to recognize that revenue on that individual patient. Whether it's a full reimbursement or a 50% reimbursement, it really depends on the patient characteristics. Operator: Our next question comes from Salim Syed with Mizuho. Salim Syed: Congrats on the progress. Just one for us on cadence of catalysts for this year. So I know we're getting a lot of data here at the year-end of '26. But a lot of these trials like BOBCAT, LUMINA, et cetera, I think even ALARIC are all open-label studies with -- I presume you're going to be looking at data through the course of the year. Is there any potential here on these studies for potential early disclosure? And can you just remind us specifically on BOBCAT, the intervals that you'll be measuring disability progression? Christian Itin: Yes. Really good question. Thanks for joining us. With regards to CATULUS the -- on the CARLYSLE study, obviously, we have presented sort of the baseline data at the end of last year. So what the next real question for that study is really kind of the longer-term outcome in these patients and obviously also the additional experience in the adolescent patients. We don't think we're going to make sense to actually to piecemeal that data. I think you want to give a proper update with a comprehensive review of the data, which is what we're planning to do. With regards to the ALARIC study, so that's the first data cut we're going to do in that study. Obviously, you want to have enough patients and also from a dose level perspective, have enough experience to actually look at the data and understand kind of what the impact of the treatment is. With regards to BOBCAT, one of the key things that obviously you'd like to understand is, on the one hand, the pharmacodynamic markers that you can look at and some of the imaging markers. But you also want to obviously see whether there is actually any sign of clinical activity eventually, and that will actually take time to build. So in a way, it's tempting to look very early, but the thing is you will not actually have any understanding whether or not there is a clinical -- anything you could link to a clinical outcome. And I think ultimately, that's ultimately what we would like to do is to be able to sort of make these connections. But even if you look at the pharmacodynamic markers, you need a certain number of data points that you collect, so you understand what trends are to actually get a good sense of what it is you're looking at. The individual data points, I think, are tricky, particularly early on and can be misleading. So we're not planning to actually come early with data from BOBCAT that doesn't make sense because I think the data probably would be not interpretable as much as we can get excited about individual patients and individual observations. So we're planning to come towards the year-end, but we're not expecting to come earlier than that because I don't think it's helpful. Salim Syed: Okay. And same on LUMINA, I presume there'd be no potential early disclosure here that's open label. Christian Itin: Well, it's open label, but it's also a pivotal study. So the thing you don't want to do is you don't want to actually start to put information out that may actually impact the trial itself. And that's particularly tricky in single-arm studies and open-label studies. So that's something you absolutely would not do. And remember, we didn't do -- we didn't do that with the FELIX study either. Because you start to risk actually the integrity of the study. Operator: Our next question comes from Matt Phipps with William Blair. Matthew Phipps: On the progressive MS study, you were kind of hitting on this, but just, I guess, a follow-up. Stanford recently presented data on 6 patients at ACTRIMS. And a couple of patients maybe saw some improvements by 6 months in ES scores and CSF oligoclonal bands. I guess any thoughts on this data and then how that makes you think about what you could present at BOBCAT later this year? And then for AUTO8 and AL amyloidosis, similarly, I mean, cilta-cel has shown very high response rates in that setting. What do you think the CD19 aspect of AUTO8 gets you as far as differentiation from cilta-cel? Christian Itin: Yes. Very good questions. Thanks, Matt. So with regards to the data that was presented at ACTRIMS from the Stanford team, I think overall, encouraging data. They're showing certain correlations between pharmacodynamic markers, and there's early observations on the disease score in these patients. The challenge, and this is goes back to the answer I gave to Salim before, the challenge is that obviously part of those disease scores also include patient assessment and physician assessment, which obviously can be more subjective. And that actually creates some of the challenges in the interpretability of that data, particularly if you look at it early on. Overall, what you look -- what you'd like to see is probably some congruence between pharmacodynamic activity and some early indication of activity. And we think that stage, we're probably going to reach sometime next year in '27 with a longer-term follow-up and more stability in the data. I think early on, you'd be looking more at some of the pharmacodynamic markers and general presence and product properties, persistence, presence of the product in CSS, those types of assessments that you'd be looking at and then obviously, B-cell depletion data and so on. But I think in terms of going from there forward and sort of concluding whether or not you might actually have the type of clinical outcome, I think, would be premature in the early time point I think we get a better sense for that during the course of next year, but it takes a longer observation time to start to be able to have put some weight on that. What was encouraging with the Stanford data was it suggested that the patients did improve. But again, it's early data and it's early days, but definitely worthwhile, obviously, pursuing and frankly, figuring it out. And then with regards to the ALARIC data, so that's obviously light chain amyloidosis, predominantly a plasma cell disorder. And what we're looking at there is we're actually looking predominantly at the action of the BCMA component of the product. And then we're going to see whether or not the CD19 component adds to that or not. But the fundamental activity, we expect, obviously, very clearly to be driven by the BCMA either predominantly or maybe even exclusively. Operator: Our next question comes from Roger Song with Jefferies. Unknown Analyst: This is [ Fiona ] up for Roger. Congrats on the quarter. So I understand that you will shift to a positive gross margin this year. And how should we think about the near-term on involvement of gross margin once it turns positive? And with your partnership with Soliris platform early this year, how quickly can this automated platform be integrated into your commercial supply chain? And what's the magnitude of cost reduction do you expect from this approach? Christian Itin: Yes. Very good questions. Thank you. So let me start out with just -- what we're doing in order to actually drive down overall production costs and also with that improve gross margins for the product. The 2 key areas. One is quite obvious, which is you run more products through the infrastructure. And with that, the fixed cost obviously can be broken down to a large number, a larger number of products. And with that, the contribution of fixed costs becomes reduced on a product per product basis. That's very straightforward. The second aspect, which is really critical, though, is that we're also doing a lot of work in optimizing the operating model that we have in our facility and really are optimizing every step along the way. And between those 2 elements, the optimization on the one hand and the higher level of volume through the facility, we actually can drive the cost down substantially over time. Overall, that is going to be the key trajectory we're going to be on and will be the key driver to get us to an economically attractive place. The Soliris opportunity is obviously one where we do a feasibility study to see what the comparability of the data between the 2 different manufacturing setups, which is from an operating setup slightly different. But obviously, the biology that you're running is the same biology in the 2 systems. For us, the particular interest is actually in -- for situations where we might actually have to scale substantially because of a new indication that we might be able to unlock that may require us to actually set up a substantially larger manufacturing capacity. And so the -- when we look at Solaris, this is much more an ability to scale to a substantially higher level of volume rather than actually to drive down costs. the primary focus is actually on the ability to scale. And the reason why we're looking into it is that we obviously do not know where the out where we're going to come out on some of the new indications, particularly also on MS, but assume a positive outcome in MS, that could actually drive substantial demand and substantial need to be able to stand up capacity. And that is sort of the context under which we're actually looking at this, and we're looking doing the feasibility work because we believe that could be an attractive way to actually scale and scale in an economical way. It doesn't actually take anything away from what we're doing at our own facility at the Nucleus facility, which is obviously really focused on delivering for the ALL patients and the smaller subsets of the autoimmune patients, which is what the facility is designed to support. Operator: Our next question comes from Yanan Zhu with Wells Fargo. Yanan Zhu: Just maybe a follow-up to the primary MS study questions earlier. The study has 3 dose cohorts at the year-end readout, can you talk about how many dose cohorts could we expect and whether a signal of efficacy can be discerned from kind of dose response on some of the metrics? And if you could be a little more specific on powerful success, that would be very helpful. And I have a follow-up as well. Christian Itin: Okay. Thanks for joining Yanan and all really good questions. Obviously, this is an exploratory study, which means that we expect this is a study where we will actually learn quite a bit along the way. We've designed it as a dose escalation study. What we do know is that the product obviously does give us an ability to penetrate the blood-brain barrier and be active in the brain. We've seen that with acute leukemia patients with CNS involvement. We've seen it also in primary CNS lymphoma patients. So we know the product has the right properties. It has an ability to do that. What the sort of the appropriate dose level is, is something we're evaluating in this study. We started at 100 million cell dose. We have an ability to either step up or step down, both is possible. And obviously, one of the key things we're going to be looking at is the presence of CAR T cells in CSF as sort of a measure of the ability to actually cross the blood-brain barrier and going to the compartment that we know that systemically applied therapeutics typically cannot actually get to and typically cannot be active in. So that's where the mechanism helps a lot and gives us sort of a differentiation here. Now in terms of where -- what we're sort of working through is obviously working through the dose levels. We need to have with each one, I think, a reasonable level of follow-up. So by the end of the year, I think it would be really very early data from our initial dose cohort to get a feel for what that data might look like. And it will be, as I indicated, predominantly around the product properties in terms of expansion, the safety profile, obviously, the ability to sort of actually access the CSF -- and then I think, additional sort of typical pharmacodynamic markers, including B-cell depletion and so on. And then we're going to obviously record all the typical other parameters that you can record both biochemicals, imaging parameters. And we'll see whether there's any correlation between any of these parameters. I think it will be very -- it will be too early to actually understand where there are true connections and where there's a link to outcome. I think that is just not enough observation time. But we believe as we go through the course of next year that, that we start to get to a place where we actually have a longer observation time with that have an opportunity to start looking more at clinical impact and hopefully can put more emphasis, but also more trust in the data that we're collecting on the clinical side, just given the inherent variability that, that data can actually represent. So that's where we are. So it will be very -- an early peak, but then the much more relevant data during the course of 2027. Yanan Zhu: Great. That's super helpful. Then on the B-ALL launch for AUCATZYL, can you comment on whether there's any use in earlier line setting such as MRD-positive consolidation? And also, we see there is a Sloan Kettering ITT that just opened for MRD-negative consolidation. Can you share your thoughts on how that could be leveraged in expanding the opportunity? Christian Itin: Right. So in terms of the actual use, current use, what we're seeing is that -- and this was what was presented at the ASTCT meeting, and Laurie will talk more specifically to it. But what we're seeing is similar to what we've seen with other products in the relapsed/refractory setting that patients can be included that actually have mineral residual disease or low disease burden at the time of inclusion. They're still relapsed/refractory. So it's the same setting, but it's basically inclusion at a time when the disease hasn't actually grown quite to the level of morphological disease. So that we do see in the data, we see maybe about 1/3 of the patients, give or take, in that bucket, which is frankly what you would expect to see. This is the standard of care. This is the way these patients are being assessed and the intervention is done when you see when you have evidence of relapse. And as I mentioned, none of the physicians will wait for things to get worse for a patient when they already have evidence of the disease coming back. So we do see that, which is very expected in terms of the real-world setting. I don't think we have patients that actually are in a frontline MRD setting at this point. I don't think we do. But that's something that we'll need to sort of look at and sort of see more kind of data coming back from the Consortium to see whether indeed that might happen over time. It's not something that we expect to see for the time being. Now what you've picked up with the memorial entry in clinicaltrial.gov is a trial that's done in connection with other centers across the U.S. and there's a second study as well in the U.S. that are currently looking for as an investigator-sponsored studies where those investigators are interested in exploring the use of obe-cel in frontline patients that have gone through the initial frontline treatment and then actually have either evidence or no evidence of disease in the studies where it differ in terms of their designs in that regard to then do a consolidation, but do, in essence, have an ability and look at a population or patients that were treated not for the full extent of frontline treatment, which is like an 18-months treatment with quite a range of therapeutics and then at the end, put the CAR T, but rather actually look at an abbreviated initial therapy and aim for a definitive consolidation. That's the thought process that these investigators have sort of brought forward and what they're interested in looking at. And also it's an area we're very interested in. And from a fundamental perspective, certainly if you think about it from a patient perspective, would be desirable to find therapies that actually can actually reduce the overall treatment time and reduce the overall amount of toxicity that the patients do get exposed, particularly in the frontline treatment. So we understand that there could be real benefit in those settings. And I think we'll learn from those investigators experience, and we'll get a sense for the profile of the product in those patients. Operator: Our next question comes from Emily Bodnar with H.C. Wainwright. Emily Bodnar: I guess how much additional follow-up and durability data should we expect from the CARSLYLE trial later this year for the 50 million and 100 million cell doses? And what are you kind of looking to see to gain additional confidence in the LUMINA trial? Christian Itin: Yes. Thanks a lot for joining, Emily. So the CARSLYLE study, I did mention we had 8.8 months of follow-up for the data cut at ASH. I would assume for that -- and that's the initial cohort of the 50 million cohort. I would assume we have 12 more months between 6 and 12 more months, depending when the exact data count happens. So we're looking at somewhere in the range of 1.5 years to close to -- well, probably around 1.5 years of follow-up for the 50 million cohort. And the 100 million cohort will probably be just under probably a year of follow-up at that point in time and probably half a year follow-up for the adolescent patients. So that's kind of the ballpark in terms of follow-up that we expect. And in terms of the LUMINA study, the difference with the LUMINA study is that the population is slightly different. In the CARSLYLE study, it was SLE patients with organ involvement. Happens to be that the vast majority of these SLE patients had pretty significant kidney damage and kidney involvement. So they had a lupus nephritis component to their disease. What we're having here in the LUMINA study is more precisely defined the population and it's defined by the prior lines of treatment that the patients went through. In this -- in the LUMINA case, it's a CD20 or other B-cell depleting antibodies and calcineurin inhibitors being after those [ 2 lines ]. And at that point in time, you actually get sort of outside the approved therapeutics from a label perspective. And so it's more defined, it's more defined population. And then there's obviously a range of kidney -- level of kidney damage and a requirement for the inflammatory process to be ongoing. So indeed, this type of an approach has an ability to improve the outcome. So it's a different definition of the patients. Obviously, very similar overall properties, but it's a different way of defining the patient population as the basis to then actually have a definable primary endpoint that would be interpretable from a pivotal perspective. Operator: Ladies and gentlemen, we've reached the conclusion of the Q&A portion of today's conference. I'd like to turn the call back to Christian for any further remarks. Christian Itin: Well, first of all, thanks, everybody, for joining. We're looking forward to hopefully seeing or hearing from most of you on April 8 when we have the KOLs talk to us about the ALL disease setting of the opportunities. And obviously, after that, it's not far out, and we're going to be meeting again for the Q1. So thank you very much for joining today, and I wish you all a good time. Operator: Thank you, ladies and gentlemen. This does conclude today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.
Operator: Good afternoon. Welcome to the Meitu 2025 Annual Results Presentation. We provide English simultaneous interpretation. If you'd like to listen to the interpretation, please log in through Zoom and click the Interpretation icon, select English channel. If you do not click on this channel, you will not hear the simultaneous interpretation. Today, the leaders participating include Mr. Xinhong Wu, Founder, Chairman and CEO of Meitu. Zeyuan Wu: Greetings. Operator: CFO and Company Secretary of Meitu, Mr. Gary Ngan; CPO and President of the Imaging Products Division, Mr. Chen Jianyi. A warm reminder, we include predictive statements, and many risk factors that we may not control may influence these predictive statements. Online participants, you need to rename and add your real name and affiliation name. Before giving your question during the Q&A session, please first clarify your affiliation and your real name. You may also provide your questions through audio or text in the comments section. Firstly, we provide information about our company. Zeyuan Wu: Investors, analysts and audiences, thank you for your participation. Before we formally start, I would like to extend about the announcement yesterday on behalf of the company. We found that some part of the results were published on social media. We investigated immediately after ensuring we found there may be some misoperations and functions in the process and some information was published on the account, and the responsible person deleted immediately. We took two effective matters. First, we deleted all content on the platform, and we applied for the suspension in the Hong Kong Stock Exchange. What's more? Relative information was just shortly spread on March 25th, and we ensure the smooth function on 26th. We feel sorry for all the inconveniences caused to our investors. Thank you all for joining today's earnings conference. Over the past few months, as generative AI technology has been evolving rapidly, there are various debates around the future of the AI industry. As you may have seen in the opening video through the QR code of -- that made the fastest moving trains, for example, from single model approach to model-agnostic strategy from AI-based apps to AI agents, from subscription to consuming tokens, from the form of our team, from mature teams to AI-driven teams. We reached a strong momentum. The adjusted net profit attributable to owners of the company grew 64.7% year-over-year to RMB 907 million (sic) [ RMB 970 million ] exceeding our latest thoughts on the AI applications. First, Meitu is an AI application company focused on the photo and video industry. Based on AI capabilities and efficiency-driven organization, we focus on high-value verticals and build industry-specific AI agent teams to help address users' end-to-end content creation needs, delivering high-quality output. In each specific use case, our AI agent teams are composed of multiple agents with distinct roles. They are responsible for efficiently executing different standardized repetitive tasks. Users can focus on creative ideation and decision making. The core advantage of the AI agent teams lies in their clear division of responsibilities and targeted training. Break down into multiple stages and assign corresponding roles and responsibilities to each agent, so we can ensure the teams perform better. Besides combining years of user insights, accumulated industry know-how and the ability to flexibly deploy models, we constantly translate AI technology into reliable product capability. Additionally, different models have different strengths. There is not a model that can cover all the areas suited for e-commerce styles. Vertical companies combining different models, it will be more common for companies to deploy models. We will focus on more flexible and global things. Centered around it, we will build AI teams meeting industry needs. Now, let me invite our Chief Product Officer, xiaobai, to elaborate on our AI agent teams. Jianyi Chen: Thank you, Xinhong. I will share our thoughts, mainly on how we plan to build the AI agent teams going forward. Firstly, for e-commerce-related content creation, we've been thinking for a long time. We think that we're not limited to e-commerce providers providing integrated method, but rather helping the suppliers to deliver more tangible results. According to what we observed, many of the e-commerce agents can design well-designed photos and images, but that's it. Many e-commerce companies lack the sufficient judgments of market and business, eventually causing the resulting product sales are often falling short of expectations. For instance, on Amazon, a product such as water bottles experience intense competition. For experienced e-commerce providers, we need to avoid the oversaturated competition of product background, such as home and living. Instead, they would pivot to fitness, to outdoor and other high-growth potential segments. So based on this know-how, DesignKit is building an e-commerce design specific AI agent teams. And this new agent team, aside from the original experts that have a good command in design, we have additional roles, such as for the verticals of e-commerce, we have market and data analysts. We have user research experts, copywriters, prompt designers, et cetera, delivering high-quality visual and also establishing a more refined social media commerce video expert team. For instance, the AI marketing strategist, they can serve as Creative Director, helping users to know what to capture, what to market, or we can have AI commercial directors responsible for the storyboard coordination, helping users to address how to present the visuals. We may also have AI audiovisual model experts acting as photographers, lighting specialists, actors, et cetera, helping users with their contents and their materials. Eventually, we have the AI smart editor compiling all of the editing and the distribution and the post-production methods, helping the users to package and publish their products. So what we aim to do for the e-commerce is to transform the visually appealing images to images that drive sales and to e-commerce videos that boost conversion rates. The DesignKit's new agent teams aim to help e-commerce service providers drive and achieve real business results. In addition, aside from DesignKit for Kaipai, for the talking videos, we also hope to create high conversion rate video contents. Based on this goal, we divided the three AI agent teams to assist with our eventual goal. For instance, we have the AI operations team. It helps with the trending topic research, account diagnostics and also content strategies. We also have the AI filming team, helping with the teleprompter assisted filming, the AI avatars, et cetera. We also have AI team helping with the rough and eventual cuts and editing. The entire workflow is coordinated by the AI director agents. Users only need to submit their industry know-how and their demands, and then the AI agent teams will take care of the rest of their work. For example, when an insurance broker asks for a short AI-generated video about pensions insurance, then once receiving the submission, the AI director agent will automatically break down the information and assign it to the corresponding teams, as mentioned before. And within a short time period, it can provide a ready-to-publish marketing video, and it can even generate social media covers and prompts alongside. So for small and medium-sized merchants, the advantage of this AI operations team is a 24/7 content providing team. And we aim for niche sectors, for instance, insurance, beauty solutions, local services, sectors that are heavily reliant on social content for customer acquisition. This not only lowers production costs, but also provides a reliable AI team that can have a high conversion rate, so we can help the suppliers to focus more on creative judgment and business operations. The production handed over more through directions that we have been doing. We have some progress over the past couple of months. For instance, within DesignKit, we already deployed our 4 agents, the e-commerce trial, poster and video agents. From December 2025, the agent function has become a primary driver of our revenue growth on both web and app portals. Our agent has a stable output quality. For instance, DesignKit, web-based DesignKit, it's e-commerce agent roughly has a 50% save rate, where users save at least 1 output per 2 outputs. Now furthermore, once the agent capabilities are integrated into Kaipai more, user experience continues to improve. According to the latest figures, the penetration rate of Kaipai agents have increased to approximately 11%. At the same time, the RoboNeo, from its official launch to current, it has topped the app stores across 26 countries and regions, demonstrating our globalization potential. Last but not least, as you may have noticed, we recently launched the Meitu CLI capabilities on our AI open platforms. Meanwhile, the first group of Meitu AI skills have been officially integrated into the OpenClaw ecosystem, covering personal and commercial use cases in the global photo and video industry. We focus on the core skills. We hope we could have from mature technologies around 8 core capabilities and we transform them into reusable skills. Based on the CloudHub and ACI, we can use Meitu AI's capabilities for photo and video production. We believe as OpenClaw community continues to grow, in the future, users do not need to switch between products. They simply need to have a single command and complete end-to-end creation. This can substantially increase productivity. Now I hand over to Gary to talk about the 2025 financial condition. King Leung Ngan: Thank you, Xinhong and Xiao Bai. In 2025, centered around the two core strategies of productivity and globalization, our operational performance continued to improve with sustained user growth. As of December 2025, our monthly active users grew 3.8% year-on-year to 276 million. Paying subscribers grew 34.1% year-over-year to 16.91 million. Over the past year, we continue to deepen the productivity strategy. As of December last year, paying subscribers of productivity tools grew 67.4% year-on-year, primarily driven by DesignKit and Kaipai, among them. Paying subscribers from international markets doubled, benefiting from the rapid growth of Vmake. Subscription rate for productivity tools reached 9%, an increase of 3.1 percentage points from December 2024. This further validates that with the continual improvement of our products, the output and the output quality, users' willingness to pay is also increasing. At the same time, the increase in subscription rate for productivity tools will help drive the increased proportion of high ARPU paying subscribers, providing support for our future revenue growth. On the globalization strategy front, 2025 was a year of significant milestones. Our MAU from international markets continue to grow, primarily driven by products for leisure. In the second half of 2025, we launched several global viral features, including 3D figurine, AI group photo, and AI snow. Among them, the AI group photo feature helped Meitu app MAU reach a record high and attracted over 3 million new users from the European markets. It also helped Meitu app top the U.S. iOS category chart for the first time. Driven by these features collectively, Meitu app topped the overall app store charts in 52 countries and regions, and the category charts in over 110 countries and regions. With the rollout globally for products, we observed in the second half of last year, paying subscribers in the international markets experience accelerating growth with the majority of new subscribers coming from high ARPU regions with mature subscription habits such as Europe, Americas and East Asia. Recently, in the top 50 global GenAI mobile apps list published by a16z, we ranked first in the photo, video and design category with 4 apps on the list, further solidifying our position as a globally leading AI photo and video application company. Looking ahead, we will continue to strengthen international markets. At the same time, we'll continue to launch highly effective features and optimize recommendation mechanisms, further enhancing users' stickiness. As a result, the oversubscription rate increased to 6.1% in 2025. Currently, the improvement in subscription rate remains our core growth drivers. Besides, with the deepening of our two core strategies, ARPU growth will also gradually become an important growth engine in the coming years. Before I begin sharing the company's financial results, I would like to note that in November 2025, we have officially discontinued the cosmetic supply chain management services, previously under the solutions for beauty industry. Under the IFRS, this business has been classified as a discontinued operation. Therefore, unless otherwise stated, all financial figures and the year-over-year comparisons for FY 2025 presented hereafter are continuing operation basis. In 2025, overall revenue grew by 28.8% year-on-year to RMB 3.86 billion, first largest revenue. Our core business of photo, video and design products grew by 41.6% year-over-year to RMB 2.95 billion. Looking at performance by market. Revenue from international markets grew by 37.4% year-over-year in 2025, outpacing growth rate in Mainland China. Revenue from international markets accounted for 38% of total in 2025, an increase of 2 percentage points compared with the same period last year. From the product perspective, in 2025, revenue from products for leisure and productivity tools accounted for 81% and 19% of overall photo, video and design products revenue, respectively. Advertising next, in 2025, revenue from this part was RMB 840 million, largely in line with 2024. We continue to remain cautiously optimistic about this business, although it is worth noticing that we have pioneered AI-powered creative advertising formats in brand advertisements. Collaborating with international brands such as McDonald's and Visa, this creative solutions have effectively enhanced the social interaction between users and advertisers. Last, revenue from others, which are mainly legacy and non-core businesses, was approximately RMB 62.11 million in 2025. Moving to the cost side, the total cost in 2025 was RMB 1.02 billion, a year-on-year increase of 42%. Specifically, the largest cost item was revenue-sharing fee to payment channels. The cost increases in line with revenue growth from photo, video and design products, rising 43.5% year-on-year, approximately are RMB 620 million. The second largest cost was computing power and cloud-related costs, growing 16.4% year-on-year to RMB 230 million. The third is third-party API costs accounted only middle single digit of total cost of sales because we were able to use the vertical-specific models and fine-tune open source models to fulfill the vast majority of our user demands, reflecting our in-house AI imaging companies. For gross profit, because we discontinued the low-margin cosmetic supply chain management business in 2025, the financial data in 2024 has been restated accordingly. Gross profit in 2025 was RMB 2.84 billion, a year-on-year increase of 24.6%, corresponding to a gross margin of 73.6%. The restated gross margin for 2024 was 76%. On a like-for-like basis, the gross margin decreased slightly, primarily due to two factors: one, the change in the revenue mix. Because the advertisement with high gross margins have decreased slightly and because to support our core imaging businesses and design businesses have continued to grow, the computing and API-related costs have increased compared to 2024. However, as mentioned earlier, thanks to our model-agnostic strategy and proprietary vertical model capabilities, the gross margin of our core business remains healthy and stable and will remain so in the future. On the expenses, selling and marketing roughly accounted for RMB 600 million, a year-on-year increase of 25.5%. The increase in expense was primarily directed to the growth of productivity tools in China and products for leisure and international markets. If we include the portion of combined revenue from photo, video and design products and advertising business, this ratio remained stable at 16% in 2024 and last year. This is consistent with the statistics -- the range, we previously communicated to the market in our earnings. The R&D expenses were RMB 950 million, a year-on-year increase of 3.8%. The relatively modest increase was primarily because the foundational model training costs decreased in 2025 for two reasons. Firstly, our MiracleVision model foundational training was completed roughly in 2024. Secondly, as we're fully committed to the model-agnostic strategy with fine-tuned open source models, proprietary vertical models, and third-party APIs, we delivered high-quality output for users and did not need to invest significantly into training foundational models. If we exclude the expenses related to foundational model training, the overall R&D expenses will increase 14.5% year-on-year, primarily driven by investment in our R&D talents. Looking ahead, we'll continue to optimize resource allocation between proprietary and external models and increase investment in vertical model training and R&D talents, continuing to enhance our product capabilities and competitiveness and delivering the users' diverse needs with precision. Administrative expenses were RMB 450 million, a year-on-year increase of 14%. On profitability, driven by sustained revenue growth, gross profit grew faster than operating expenses. This increased our operating leverage, further enhancing overall profitability. For ease of comparison with last year, the adjusted net profit includes discontinued operations. The 2025 adjusted net profit attributable to owners was around RMB 970 million, year-over-year increase of 64.7%. Under IFRS, our net profit attributable to owners of the company was around RMB 700 million in 2025, lower than around RMB 800 million in 2024. This change was primarily due to two factors. First, in 2024, we completed the disposal of all cryptocurrencies, generating a onetime gain of RMB 640 million, which elevated the prior year comparison base. Second, as we completed the issuance of convertible bonds to Alibaba at the end of 2025, we recognized a onetime noncash expense of approximately RMB 510 million under IFRS. This expense did not result in any actual cash outflow. Both items are non-operating in nature and are not directly related to our business performance. Lastly, I would like to share with you the latest progress on the Alibaba strategic investment and cooperation. On the business side, we are advancing collaboration across multiple fronts, including large model, e-commerce and cloud computing supplier offerings. In particularly on large models, we have deeply embedded, the capabilities of Alibaba's open source model series across multiple scenarios such as image editing and video generation to deliver better user experience. Meanwhile, our technology team and Alibaba's team have maintained close communication on the model training. Finally, as the AI industry continues to evolve rapidly, starting with this year, in addition to our two regular earnings releases each year, we will provide quarterly updates on key operating metrics for our core business. We believe this will further enhance transparency and help the market better understand our operating progress. In addition, we just announced a share buyback plan of up to HKD 300 million, valid for 1 year. This reflects the company's confidence in its future development, as mentioned by Xinhong. The market would consider large model might replace all AI applications. It's obvious in our industry that this might be a misunderstanding. Our growth is also very rapid. So I believe at this time point, it's proper and good for us to do the buyback, plus the 40% proportion. The overall cash return is around 60%. Thank you. Thank you all for participating today. Operator: [Operator Instructions] Unknown Analyst: I'm from [ Pana Internet ]. Congratulations on our performance. Based on the latest statistics, the paying subscribers are slightly lower than the first half of the year and the MAU is slightly lower than those in June. So if you could give us a brief reflection about the AI fragmentation, what are its impacts on your businesses? That's the first question. The second question is how can we better tackle with this decrease in terms of the statistics? Unknown Executive: Actually, we have another perspective. If we put statistics aside, the increase of model capabilities has the influence as positive. It can help us give out some products that develop faster. In terms of DesignKit's growth in the second half of the year, there are positive outcomes. For instance, the AI agent functions. Once it's been rolled out, it gradually spread to all businesses of DesignKits ad was taken up immediately. For Kaipai, for example, subscription penetration rate is really high. And the ARR [indiscernible] abroad is also increasing rapidly. So for us, we actually think from a longer perspective, from a business perspective, the positive outcome of AI agents is immense. As for you, what you saw in terms of the MAUs slight decrease, we've seen similar trends in past years because we need to bear in mind that the MAU is a snapshot of the past month, statistics of the past month. Last year, we had many blockbuster functions that came out in different months. So in December, we happened to have no blockbuster functions. So that's why there is a discrepancy between the statistics and our overall performance. For the actual numbers, the decrease in growth rates, to me, it's not caused by AI or large models or agents. But rather, if we look at it from a Chinese perspective, the products are maturing. So the growth rate with a large proportion and the large foundation would be slightly slower than before. But this is a positive signal because the productivity products or tools worldwide are growing fast. And these kinds of products are at the early stages of their product cycle. Put it in other words, in the second half of 2025, it seems our growth rate is declining. But we need to bear in mind that the products development are maturing from the early stages to the later stages. And we also need to bear in mind that the ARPU ratio with the subscription rates are better than we expected. Recently, we tested some new tools. The ARPU of new tools are already at $50 per month, translating to great average income. So from this perspective, you may think that the growing capabilities of AI is leading to issues. But from our side, we think that the positives outweigh the negative signals. I'm open to suggestions. Operator: We'll move on to the second question. Unknown Analyst: I'm from Morgan Stanley. Two questions. First, I would say about the expectations for the year 2026. Second, agent is integrated into our products. How do you refer to the subscription contribution and what do we have metrics to measure its contribution? Unknown Executive: I'm not talking about too detailed numbers. Also, what I've said before, the overall rate growing in 2026, the top line is basically the same with the 2025, but the underlying or its composition will include more productivity tools globally. In the coming several years, we'll also see a faster growth acceleration. This is the second curve being mature and the rising of the third curve. This might be a direction. The new adjusted net profits attributable to owners will be different. We'll control our expenses better because most of our operating expenses are about staff and personnel. We are actively tackling this problem by using AI to enhance our output. Meanwhile, with the rapid growth of operations, we will not increase the expenses for staff. I think these are positive directions. More about the agents. The final outcome, we felt happy for it because it solved the long-tail needs of many consumers. For example, the e-commerce, previously, the advertising photo or picture, for example, the barbecue oven, you can only use the outdoor backgrounds in the past, but we actually not only use it, we will also need some meat, smokes, flakes, but it's different. It's hard to achieve in the past. With help of the agents, they can have the chance to express more details. Users can express in verbal language and the AI model can translate it into visuals, representations. For example, the cat. Especially, in the past, we have cat models, they are very hard to cooperate. We can only change the background in the past. I think we should have a very cute cat on the cat equipment. So with the AI agent, we can have a very cute cat of specific species. You would also ask, why would you choose Meitu instead of other models? Whether we will be revolutionized by larger models. For the understanding of many vertical scenarios, I think we do better. For example, the cat tower, some cats are not satisfied with what you've chosen for it. So the sellers can better describe the characteristics of their products. For some nuanced parts, we can cooperate with the traditional conventional agent models or style. The user utilization rate is much higher than the general large models. We can tackle some pain points. Another example, Adobe. Why we think it will be revolutionized by AI, because we know the learning threshold is very high. We need to take -- spend months or years to learn to use it. With the help of AI, it could be very fast. This is also in line with our mission. We want you to feel better using targeted models or the subscription rates or selling. I think this is the biggest meaning integrating agent and also the point which satisfied our team. For paid subscription, agent is the top line function of all paid functions. Unknown Analyst: Thank you for your introduction. I'm from [indiscernible] Capital. I would like to ask some questions related to AI. Firstly, as mentioned earlier, the agent function, it has become the main driving factor of Meitu's businesses. So I would like to ask, the agents businesses in terms of the ARPU enhancements, can you elaborate more on the relationship? The second is, in the future, do you hope for the different vertical sectors to set differentiated pricing for the AI agent or the tiered pricing? Another question is that nearly 19% or 20% of the photo and imaging center cost is taken up by the production tools. So as AI becomes more prevalent in the near future, 3 to 5 years, what do you think will be the proportion of the revenue or production tools in terms of the overall revenue? Thirdly, what are your outlooks on the gross profits in the future? Unknown Executive: Because the ARPU rate is mainly provided in the latter half of next year, there will be fluctuations. But if you look at the DesignKit, we already have RMB combo. We did this combo is because we see there is tangible demand among the consumers. We have other combos at 30% to 35% in terms of the pricing. So the total consumption brought by agents is manifested more profoundly across many products. Of course, the increases in ARPU will need time. So in the future, you may see that different products will have more pricier subscription choices. Additionally, in the future, there will be different tiers of basic substitutions. But in different sectors, it will be based on the token consumption. In our prices, we discovered that there are drastic different token consumptions. So we use the appropriate skills choice. For instance, if we do consulting, we know that the consulting prices of different sectors are different. For instance, for high barrier sectors, we need to pay more for consultations. And for the meta prompts for instance, we just mentioned, it's based on sector experience. For the senior practitioners, his or her understanding of the sector have more insights, more personalized insights helping companies to stand out among the homogeneous competition. So that's why we do have the meta prompts and all of the field trial and paid consultations, eventually helping us to gain more insights into how to develop our vertical sectors. So eventually, we base on the different sectors different values and providing more returns for our consumers. In terms of the gross profits, we dropped by 1 to 2 percentage points, but the greatest reason is because of the changes in the revenue mix. Because in the past, advertisement took up a lot. But as advertisements proportion continue to decline, in the short term, the gross profit will decline as well. This year, the advertisement proportion will decrease, but it's already taking up a lower proportion. So its influence on the gross profits will be lower compared to 2025. Additionally, this year, because Apple in China is reducing its fees in China, it's helping with our gross profit. As for your concern, I think you may be concerned about third-party API use and deployments. You may think it influence our gross profits. But at present at least, because we only have a mid-single digit of our third-party API so it won't influence our gross profit that much. Overall, our gross profit will remain stable this year, around higher than 70%. We haven't had the specific statistics for the proportion of production tools in our overall revenue. If we look 5 years into the future, production tools will take up a higher revenue proportion than leisure tools. Put it in this way, production tools as discussed for 2.5 years or 3 years from 2023 until present. Now it takes up around 19% of our overall revenue. But actually, for the vertical sectors, we managed to integrate industry know-how into the products through the AI agents. So there is a scenario that I believe in the future, I think the growth rate will be different from 3 years before. It will be faster. But as for the specific statistics, I have yet to collect them. Operator: Thank you for your question. We will continue with the Q&A. Unknown Analyst: An analyst, Sara. I have two questions. First, as mentioned by the management, the cooperation with Alibaba especially for the products for leisure, what about the user portals who will have more AI-powered phones that would be integrated with many AI-powered functions. So how we see the changes in user portals for products for later? Question two, the productivity tools ARPU is more valuable or promising than of the products for leisure. We are the model-agnostic strategy. We want to build the model to tackle the pain points of users. The models are evolving rapidly. How does the management view the extension of models, this possibility into the photo, video and design vectors? For example, will the foundational large models be extended into the e-commerce area or sector? Unknown Executive: Products for leisure, from the perspective of user, I think we have an advantage because we have an MAU of over 280 million. Many new products of ours published in recent years have performed very good with rapid growth for DesignKit and Kaipai and also Vmake, Wink, we have access advantage. So we can be top-tier players in this sector. Other giants, including the smartphone producers, they, of course, will try new functions related to photo, video and design. It's always a very essential part of them. For example, many smartphone producers focus on the imaging capabilities of the phone. Of course, we feel the challenge. But we will find many corresponding room where they left or they overlooked because there is no one company that could serve the users' all needs. This is a marathon for innovation. We view this trend very objectively. This challenge, in turn, makes us feel the warning and have the spirits to challenge is good. And second question, what about the extension of large models into other sectors, I think the answer is yes, but it's similar to the answer of the first question. No large model companies can solve all factors on use, especially vertical sectors pertaining certain areas. A large amount of energy and expense should be devoted. So at present, we are digging into these perspectives and we saw the things that these models could not do. I believe this is also another marathon of innovation, different ecosystems for models and applications. Models cannot cover all applications. Actually, it's empowering applications. We know we would do something about it. They develop some independent targeted apps or software. For our team, they make us feel pressured and also urge us to increase our competency. Unknown Analyst: I'm from Citibank, Internet analyst, Vicky. I have an AI-related question. I look forward to your thoughts. I don't know what are your thoughts about this. Zeyuan Wu: Indeed, we saw this trend as well. Xiao Bai has elaborated over the AI teams. How we build the teams and how to deliver high-quality results, we also mentioned earlier that the business models have been changing from the subscription to the consumption of tokens. So to deliver high-quality results, so we think there's an opportunity for us. I suppose we roll out some new production tools that have a relatively high barrier, but users are willing to buy because they can deliver high-quality results. As a result, we see our ARPU rates increasing fast, especially production-related. Therefore, in June this year, we will post the Meitu Imaging Festival, and that will be launched, focusing on the AI agent teams' establishment and how to deliver high-quality results for our users. I believe, by then, we will have a better understanding. Jianyi Chen: I would like to add some more thoughts. I think an interesting thing is that there are many store apps through the subscription revenue. So after you subscribe to something, you may not use it for 99% of the time. So that is an issue of overpayment. It can't be like this. So there are many inefficiencies in the previous conventional model. But this cannot be applied to us because, in the past, we've been providing services that needs to be subscribed to be used. We don't have a model where we subscribed and the users do not use it for most of the time. So even though some people regard us as traditional imaging and photo industry, but we actually have some differences in terms of the conversion rate. For the subscription, I think the token consumption, a part of our revenue will be generated by subscription. It's just that in the past, by subscribing, we provide a group of tools. But now by subscribing, we have a bunch of tokens. After you consume all the tokens, you may need to buy higher-tier subscriptions that gives you more tokens. I think for the two models, they are not dichotomous. They are a combination. Operator: Due to the time limit, we will continue with the remaining two questions. Before online questions, we will have another question on site. Unknown Analyst: I'm an analyst, Xixi from [indiscernible]. My first question is that globally, last year, when we're expanding production tools, we mainly focus on vertical sectors,; for instance, the restaurants, et cetera. I wonder, in 2026, do we expand our vertical sectors to more sectors? Secondly, when we look to the production tools of users abroad, their habits may be different from those in China. Thirdly, I would like to ask more about your cooperation with Alibaba. Alibaba's users in terms of production tools, what are the percentage in terms of the contribution to the revenue? In 2026, the driving of production tools mainly come from ARPU or the paying tools. Zeyuan Wu: We're now doing extensions in vertical applications. As you may have seen, you have saw the financial results video and some AI agent studio functions. Besides what's mentioned, we saw very vertical sectors where there are opportunities for us. Under these scenarios, traditional services, they may spend over USD 10,000 to USD 20,000, but we can achieve this with 10% to 20% of that with same or even better quality. There are scenarios like this. Meitu will try to avoid the directions of manage giants, their core paths and strategies, so that we would not be greatly influenced. But we'll try to discover the parts where they may neglect or didn't consider it very important. So actually, we have many opportunities to lead in very vertical sectors. So we may try to avoid some popular or hot choices. For example, we still have a large user base in the off-line market. Traditional expense is high, but now it's just maybe 1% of the previous expense. In detail, I can't expose too much, disclose too much. But you will see our future products. And about the user habits of the productivity tools in international markets, we may observe different vertical scenario preferences and. Last month, our RoboNeo topped in the photo video category in 15 countries, including Brazil. For example, the South American users, they have a strong desire to express on social media. This is different from Asian markets. And we'll do more language and operation support in Southern American market. We cannot express too much about it, but I want to say that we have different orientations and directions. We will segment very carefully and precisely. We will try to serve well. a certain need and extend to more categories and markets. Jianyi Chen: As an additional reminder, as what Xinhong have said, the critical point is that the users demand on visuals because there are different cultures, they're vastly different than us in the past. But now due to the cultural differences, we need to have many different and AI adaptation. For instance, the same e-commerce platform, Chinese users may perform tests. They have less coherence but have more visual stimulation. But for overseas users, they may prefer more simplified accounts that look more high end. So there are great differences. For instance, Brazil, many Brazilian users would like the e-commerce platforms to stand out more. Some countries like light colors, for example. In our main business areas, we have all the compatibilities and adaptations. After the adaptation, we also observe the different subscription habits. For Chinese users, because we would like to subscribe low-cost orders, in China, the per week subscription is more preferred than monthly subscription. But for the U.S. market, the reverse is true because they think weekly subscriptions, it's is hard to experience the value of products in the short run. We need to have a longer time period to understand what values can the product bring. Because they are less sensitive on the price, they hope that they would pay to create value and then decide whether to subscribe. So for us, in the past, many of our products were based on the demand and habits of the Chinese market and then we ready it to the rest of the world. But now we hope we cater to the specific demands of each area in the world. In the past, we may have 100 products in China, but only 50 to 60 overseas. But now we look at the overall demand, and we have products that are 90% available and also 90% available in China and also overseas. That is our biggest change. Operator: And due to the time limit, we will have the last question. If we have investors on site that have questions, please raise your hand. So we'll have a question online from the meeting. Unknown Analyst: First, about the ARPU value. We mentioned we can see increase of the ARPU value. The main drivers are productivity tools in Chinese Mainland and international markets. And also, the third-party CPI are single digits. Which directions we use the third-party API? And why would we consider this of high, low status of proportion? Unknown Executive: Management answers the elevation of ARPU value, the main driver is that the introduction of agent. Many delivery of outputs will consume tokens. After the consumption increases the purchase more expensive packages, due to high-quality, they do not mind that much because this cost is much lower than in the past, nearly 10% or 1%. So the main ARPU growth are contributed by this partner, productivity tools. Products for leisure, I will not consider a dramatic increase in ARPU value. But with the higher proportion of international markets, this part certainly increases, but still not that huge. About the API part, compared with other model companies, you know we pay attention to quality or effector. We have an evaluation team of over 200 people. Many designs are outsourced. They comply to teams, but ultimately it's up to R&D team. But in Meitu, they are competing. If the design team do not consider it good, it's not published or aligned. For example, Xinhong himself also paid great attention to it, one, because the evaluation of the effect of different models. When we come up with a case, we first evaluate all models about their effects and outcomes. For example, 10 models, the winner, does it meet the expectations of the real users? If it's good, we use then the API. But after the competition, if we cannot find a very good winner, we self-develop. So our understanding about the external API, first, we evaluate. And if it meets our standard, we use it or we choose to self-develop. We hope they cooperate and build the industry's top standard. Operator: Thank you for your questions of investors and the detailed response. If you have more demand for our tools for statistics, you may contact the IR teams. Now we'll enter the media Q&A. This session will not have simultaneous interpretation. For the participants on Zoom, you may feel free to log off. Thank you for your participation and attention once again. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Good morning, and thank you for waiting. Welcome to Braskem's video conference to discuss our results for Q4 2025 and the year 2025. Today, we have with us Mr. Roberto Ramos, CEO; Felipe Jens, CFO; and Rosana Avolio, Investor Relations, Strategic Planning and Market Intelligence. Please note that this event is being recorded. The presentation will be delivered in Portuguese with live translation and simultaneous interpreting into English. [Operator Instructions] Before we proceed, we'd like to clarify that any statements that may be made during this conference call regarding Braskem's business prospects, projections, operational and financial goals constitute beliefs and assumptions of the company's management as well as information currently available to Braskem. Future considerations are not a guarantee of performance and involve risks, uncertainties and assumptions as they refer to future events and therefore, depend on circumstances that may or may not occur. Investors and analysts should understand that general conditions, industry conditions and other operational factors may affect Braskem's future results and may lead to results that differ materially from those expressed in such future conditions. Now I'll turn the conference over to Rosana Avolio, Investor Relations, Strategic Planning and Corporate Market Intelligence Director. Ms. Avolio, you may begin your presentation. Rosana Avolio: Good morning, everyone. Thank you for participating in Braskem's conference call for the fourth quarter and the full year 2025. As indicated in the agenda shown on Slide 3, I will begin the presentation with the company's main highlights for the period, starting on Slide 4. During 2025, the petrochemical industry remained impacted by the prolonged downcycle with international petrochemical spreads below the historical industry average due to the continued imbalance between global supply and demand. These dynamics significantly affected the profitability and liquidity indicators of the global industry and therefore, the company in 2025. As a result, the utilization rate of the petrochemical complexes in Brazil in 2025 was 4 percentage points lower compared to the previous year. This reduction is mainly explained by the adjustments to production levels in line with demand, ensuring the Brazilian market demand remains supplied and prioritizing higher value sales. In relation to international businesses in the United States and Europe, utilization rates remained in line with those recorded in 2024. In Mexico, production levels were lower than in 2024 due to the first general maintenance shutdown of the petrochemical complex in the country since the beginning of its operations completed at the end of July 2025. Regarding safety, the global accident frequency rate was 0.80 events per million hours worked. This was the second lowest rate since 2002, reinforcing that safety is and will always be a nonnegotiable value to the company. In relation to the financial results, the company recorded recurring consolidated EBITDA of $109 million in the quarter. And for the full year, recurring consolidated EBITDA was $557 million. Regarding operating cash flow, the company posted operating cash generation of approximately $13 million in the quarter, and operating cash consumption was $246 million for the year, reflecting the lower EBITDA. Finally, the corporate cash at the end of the fourth quarter of 2025 totaled approximately $2.1 billion, including $1 billion standby facility maturing in December 2026, and corporate leverage was approximately 14.74x. Moving to the next slide. In 2025, the global macroeconomic environment was marked by volatile trade conditions driven by commercial tensions, geopolitical fragmentation and the economic slowdown of major economies, including China. These uncertainties impacted production decisions and inventory replenishment throughout the transformation. Thus considering the weakened demand and the global oversupply that has been occurring in recent years, international resin spreads, which are references for the products sold in the regions where we operate were lower when compared to 2024. In Brazil, after a 6% growth in resin demand in 2024, downstream converters sought to optimize inventory levels in light of global macroeconomic uncertainties. This resulted in a decline of approximately 2% in domestic resin demand in 2025. The same movement was observed in the United States, considering the growth in industrial activity. Now moving to the next slide. The performance of each business segment will be presented next, beginning with Brazil on Slide 7. In the fourth quarter, utilization rates at the petrochemical complexes in Brazil were 6 percentage points lower when compared to the third quarter of 2025, mainly due to the scheduled maintenance shutdown at the Bahia complex completed in January 2026 and the continued adjustments in production levels to reflect lower seasonal demand while ensuring supply to the Brazilian market. These effects also impacted the 2025 utilization rate versus the prior year. Domestic values -- sales volumes were 6% lower, mainly due to weaker seasonal demand in the period. Chemical sales were also lower due to reduced product availability resulting from lower utilization rates, as mentioned previously, especially at the Bahia complex. In this context, recurring EBITDA for the Brazil segment in 2025 was $698 million, 22% lower than in 2024, mainly due to the lower resin and chemical sales volumes and the lower average spreads, partially offset by the depreciation of the Brazilian real and cost reduction initiatives. Moving to the next slide. In the quarter, United States and Europe segment posted utilization rates 8 percentage points lower when compared to the third quarter of 2025, mainly to the scheduled shutdowns at European plants completed in the fourth quarter of 2025 and also the inventory optimization in both regions. Lower quarterly volumes also reflect seasonality. For the year, utilization rates and sales volumes remained broadly stable. Recurring EBITDA for the year was negative $52 million, impacted by lower polypropylene, polyethylene spreads in Europe, inventory effects on the cost of goods sold in the United States and the reclassification of the expenses from the corporate into this segment following an organization change. Moving to the next slide. In Mexico, polyethylene utilization in the fourth quarter of 2025 reached 85%, an increase of 38 percentage points versus the third quarter of 2025, driven by the ramp-up after the general maintenance shutdown completed in July of this year and higher imported ethane supply through the import terminal. For the year, utilization was 64%, a reduction of 14 percentage points compared to 2024 due to the same shutdown as previously mentioned. In the quarter, higher imported ethane volumes supported the gradual recovery after the shutdown, partially offset by continued lower deliveries from PEMEX. Recurring EBITDA for the segment totaled $2 million. The decline in comparison to the previous year reflects lower product availability due to the shutdown associated with the lower international polyethylene, ethane spreads. Now moving on to the next slide. The next chapter covers consolidated performance of the company. Recurring consolidated EBITDA for the fourth quarter 2025 was $109 million. For the full year 2025, recurring consolidated EBITDA was $557 million, a 49% decrease versus 2024. The decline was mainly due to the lower contribution margins resulting from continued pressure on petrochemical spreads. Lower sales volumes reflected weaker resins and chemical volumes in Brazil and lower polyethylene sales in Mexico. These effects were partially offset by higher revenues from tax credit recoveries and by the depreciation of the Brazilian real, which averaged approximately $0.20. Now let's move on to the next slide. By the end of December 2025, all work fronts in Maceio continue to advance as planned. The relocation and compensation program ended the quarter with 99.9% of relocation execution completed. The same percentage applies to proposals submitted, of which 99.6% were accepted and 99.5% were already paid. Together with that, the sealing and the monitoring of salt cavities continued as planned. All necessary actions to ensure the 35 cavities reach a long-term maintenance-free condition have already been provisioned for the long term. By the end of 2025, 6 cavities were naturally filled, 6 were completed and 4 of those cavities reached their technical filling limit and 6 cavities remained in the filling process. Thus, the total provision for Alagoas event was approximately BRL 18 billion, of which around BRL 13.9 billion had already been disbursed and approximately BRL 1.4 billion have been classified to other payables. With this, the remaining provision at the end of the fourth quarter of 2025 was BRL 3.5 billion. Now let's move on to the next slide. For the year, the company posted operating cash consumption of BRL 1.4 billion, mainly due to lower EBITDA in 2025 as a result of the prolonged downcycle as seen in the petrochemical industry. The working capital consumption increase was due to lower availability of certain payment arrangements with financial institutions and suppliers. Recurring cash consumption was impacted by higher interest payments resulting from higher gross debt. Including Alagoas' disbursement, total cash consumption reached approximately BRL 7.3 billion in the period. Next slide. At the end of 2025, Braskem's adjusted net debt was $7.5 billion, excluding Braskem Idesa. The weighted average cost was currency variation plus 6.2% per year, and the corporate leverage ended the year at 14.74x. Available cash of $2.1 billion includes the drawdown made in October from the $1 billion standby facility maturing in December 2026. Following our agenda, let's move on to Slide 15. Global macroeconomic volatility, combined with the prolonged petrochemical downcycle has resulted in lowest industry operating rates in decades. Demand declined by approximately 3 million tons of polyethylene and polypropylene globally. So it reflects a lower consumption in the main regions. Operating rates reached historically low levels of 79% for polyethylene and 74% for polypropylene, pressurizing the profitability of the global industry. So the company tried to use the global program of resilience with the purpose of minimize the downturn cycle, preserving cash levels and maintain the sustainability of the business. Throughout 2025, we implemented more than 70 action plans of over 700 initiatives across 6 major fronts: institutional agenda, supplier negotiations, commercial initiatives, asset monetization, optimization of employed capital and operational [indiscernible]. These were fundamental to minimize the effect of adverse scenario, preserve liquidity and reinforce the competitiveness of the company and of the Brazilian industry. At the same time, it continues moving forward with this restructuring agenda and also with transformation initiatives. Now let's move on to Slide 16. The next slides cover the global petrochemical scenario. On Slide 17, we bring an update on the global petrochemical scenario, focusing on the risks associated with the geopolitical environment. In recent weeks, we have observed an escalation of tensions in the Middle East involving the United States Israel and Iran. This movement has reflected in greater volatility in commodity prices, especially Brent crude oil and naphtha in addition to additional pressures on international freights. Since the beginning of the conflict, Brent prices have shown significant increase, reflecting the strategic importance of the Middle East region for oil production and export. Naphtha has followed this volatility given its direct link to oil, which can impact the costs of the petrochemical chain, especially for marginal producers with greater exposure to this feedstock. The prices of chemicals and petrochemicals have increased in the international market due to the direct impact of the increase in the price of naphtha. It's important to emphasize that impacts presented on the slide represent hypothesis. And this has to do with the additional increases of freight that can impact the parity of the export and the prices in the Brazilian market. As I said, it's important to point out that all those impacts are hypothesis that can or not materialize. And that would depend the geopolitical scenario and possible logical restrictions such as the Strait of Hormuz. On this slide, we hypothetically explore the potential global productive impact resulting from a possible logistical restriction of the Strait of Hormuz should the geopolitical conflict intensify further. Strait of Hormuz is a critical point for the flow of feedstock and resins produced in the Middle East. In a scenario restriction, estimates indicate that global supply of polyethylene could be reduced between 6 million and 19 million tons, which represents about 4% to 11% of the global operating rate. In the case of polypropylene, the potential supply reduction could range between 7 and 10 million tons, equivalent to 4% to 5% of the global operating rates. From the regional perspective, the effect would be very different. In North America, the combination of feedstock availability and structural competitive advantage could allow for the maximization of operation rates and eventual value capture through prices, both in polyethylene and polypropylene. In Europe, the expectation would be a reduction in import pressure in the short term. However, in the medium and long term, the process of capacity rationalization tends to continue reinforcing a more cautious stance regarding operational levels and working capital. In Asia, lower availability of feedstock imported from the Middle East such as naphtha and propane could lead to shutdowns and production reductions, accelerating the rationalization processes. In this context, the priority tends to be meeting domestic demand to the detriment of exports. In the Middle East, in addition to logistics constraints, there would be additional pressures on ports, increased costs and operational risks related to security and safety, which could significantly impact the region's export capacity in the long term. In South America, a scenario of lower global supply could lead to an increase in operating rates to meet the shortage of resins. At the same time, the region would remain exposed to the volatility of the availability and price of feedstocks impacting costs. For Braskem, these effects, the effects mentioned on the previous slide tend to be potentially positive in the short term compared to the scenario expected at the beginning of the year. However, we emphasize that all the impacts presented on this slide are potential scenarios, which may or may not materialize depending on the evolution of the geopolitical conflict and the international logistics conditions. The company continues to monitor these developments and their potential effects, maintaining discipline in the company's commercial, operational and financial management in face of this more volatile environment. Next, I will comment on the company's strategic direction for the coming years. Moving on to the next slide, please. For the 2026 and 2028 cycle, we will reinforce the pillar of actions of the strategy as defined in the previous cycle, including the reorganization of the capital structure with the aim of balancing the company's capital structure, enabling business continuity. Our strategy maintains safety as a nonnegotiable value in addition to people and culture and governance as its foundation. On this basis, we will advance initiatives of resilience and financial soundness as well as transformation initiatives aimed at the perpetuity of the business. In the area of resilience and financial soundness, we will focus on tactical initiatives to mitigate the impact of the downturn cycle and preserve liquidity, highlighting operational optimizations, strategic and commercial initiatives and feedstock initiatives in addition to initiatives for the defense of the Brazilian chemical industry. In transformation, we will seek to ensure competitiveness and continuity of the business through the implementation of an asset strategy and the expansion of the gas and renewable base in the company's feedstock profile. This strategy aims to enable the recovery of the company's value through an integrated set of actions, which will strengthen its capacity for value creation, maintenance of competitiveness and therefore, business sustainability. Now let's move on to the next slide. Finally, I would like to highlight the main priorities for the company for the year 2026, aligned with the strategic direction, which take into consideration the challenging scenario of the global petrochemical industry and the preservation of the business sustainability. The first priority is the reorganization of the company's capital structure, creating the necessary conditions to ensure the continuity of operations throughout petrochemical cycles. In parallel, we will continue with the implementation of the resilience plan, focusing on the preservation of the company's financial liquidity through strict cost control, discipline in capital allocation and initiatives that reinforce operational cash generation to mitigate the impact of the adverse scenario. The third priority concerns the transformation plan initiatives, focusing on seeking financing alternatives to ensure the necessary resources and make the strategic projects feasible, thus strengthening the company's competitiveness. We will also look for ways to continue growing the green portfolio -- green product portfolio, reinforcing its positioning in sustainable solutions and commercial differentiation in the long term. Additionally, we maintain our commitment to full compliance with the agreements related to the geological events in Alagoas. And finally, safety remains as a perpetual and nonnegotiable value for the company with safe and reliable operations aligned with the best practices of the global industry. These priorities will guide the company's decision throughout 2026. Thus, we conclude the presentation of Braskem's fourth quarter and 2025 earnings results. Thank you very much for everyone's attention. We will now begin the Q&A session. Operator: Ladies and gentlemen, I will now pass the floor to the company for their remarks. Unknown Executive: Good morning. Before we begin the Q&A session, I'd like to highlight a few points. First, it's important to remember that the year 2025, and I know you all follow the scenario very closely, was a very challenging year, especially because of the external perspective considering the geopolitical conflicts and tariff wars. In this context, we see the continuous imbalance between global supply and demand, which had an even bigger impact on petrochemical spreads around the world, compressed industry margins and as a result, affected Braskem. To tackle these challenges, we adopted some initiatives over the year 2025, focusing on generating value for various different company stakeholders, focusing on maximizing EBITDA and improving and maximizing Braskem's cash generation. Among these initiatives, I will highlight 3. First, defending the competitiveness of Brazilian petrochemical industry, where we maintained the 20% import rate for PE, PP and PVC resins. We approved the antidumping law affecting the United States and Canada and the PVC antidumping from PVC coming from the U.S. And lastly, approving PRESIQ and increasing and maximizing REIQ for the coming year, which are essential programs for the Brazilian chemical and petrochemical industries. Secondly, the transformation program. We hibernated the chlor-soda plant in 2025 with the goal of making Alagoas PVC more competitive and above all, more sustainable. And we approved the Transforma Rio program, which will transform Braskem's products through ethane and polyethylene. And thirdly, but no less important, operational improvements. We established 79 action plans with over 700 internal initiatives, of which I will highlight the following: optimizing feedstocks and gases with CapEx, prioritizing resins with greater added value and the demand in the internal market and reducing downtime in transitions between grades, reducing logistics costs, improving the acquisition of feedstocks and raw materials and adopting tax grids. I should highlight that these initiatives adopted by Braskem gave us $500 million in EBITDA and $600 million in cash generation for 2025, which allowed Braskem to remain healthy financially to date. Now with regard to the Alagoas' geological event, we signed an agreement with the state valued at BRL 1.2 billion in payment, of which the vast majority has already been paid. And so considering the total provisioned amount of BRL 18 billion and the payments that company has already disbursed by the end of 2025, we have a remaining provisioned amount of BRL 3.5 billion to be paid over the coming years, which demonstrates the company's strong commitment and healthy advances in improving the situation after the Alagoas event. I should also highlight the advances of our negotiations with our other parties with Braskem and Braskem Idesa, along with legal advisers and financial advisers the company hired for this purpose. This was announced to the market in various different events over the previous months. These events are essential for the financial health of both companies. Now with regard to the change in the company's shareholder situation and controlling structure, the Brazilian CADE has approved. And now in the U.S., the -- their organization still needs to investigate and approve. Now with Novonor and the Shining (sic) [ Shine I ] credit funds, including with any related topics will all be announced to the market if and when they arise. Now with our perspectives for 2026, in spite of a lot of instability around the world, the war in the Middle East and the remaining closure in the Strait of Hormuz as well as the limited amount of feedstocks coming from the Middle East, we may see captures in certain regions, value captures, including the Americas as well as spreads for the international market. This means we must continue to assess risks and opportunities and preserve the company's liquidity. Once again, we'd like to thank you all for joining our earnings call, and we'll now begin the Q&A session. Rosana Avolio: Good morning, everyone. As we did in the previous call, we received the questions. Of course, there are many questions related to the conflict in the Middle East. So I'm making a summary so that we can provide the answers. So these are the questions. Considering the current context, could you provide a view of how the global industry has behaved? Have you seen reduction of relevant capacity or events of force majeure impacting the business? And then there was also a question about how the petrochemical spreads are responding as a result of the conflict. I know that the company does not provide formal guidance, but what would be the effect of the war on the EBITDA of the company? Could we expect an EBITDA about $1 billion? And there's also a question about sourcing of feedstock. In previous year, have you managed to -- you have been able to diversify the purchase of naphtha, reducing the exposure of naphtha for Petrobras. The lower availability of naphtha has been affecting your feedstock considering the global price at the global level. So I'll turn the floor to Roberto for him to answer the questions. Roberto Ramos: I'll begin on the topic of sourcing with some relevant information first. First, the Asian petrochemical powers in Japan, South Korea and China, they have lower naphtha inventories than we do, roughly 15 days because the rate of replenishment of naphtha there is made much easier because of the fact that they purchased from the Middle East. So it's a shorter distance than what we have here in the Americas. So we started the war with a larger supply of feedstock than our competitors did. Naturally, we purchase -- we import naphtha, especially from the U.S. We also imported condensate from Algeria. We also have some shipments of naphtha coming from the Middle East. We do not purchase naphtha from Russia because of sanctions. Actually, our main supplier of naphtha is the U.S. because the U.S. is long in naphtha and in gasoline. Shale oil has a density that is very similar to diesel oil. So when you refine that type of oil, we have what we call medium and light shale products, and that includes naphtha. So the U.S. has a surplus of naphtha supply. And so they are a net exporter of naphtha, and we are a significant purchaser of U.S. naphtha. As you know, Braskem is the biggest buyer of naphtha in the world. So with regard to our naphtha supply, since it comes from the U.S., it is not impacted by any of these conflicts. Of course, there is an impact in higher prices because U.S. naphtha now is also being fought over by the Asian petrochemical companies. But our price minus the price of transportation, purchase minus transport is still better than these prices for Japan, Korea and China. But the question is very relevant because it is at the linchpin of our strategy, which is we want to reduce our dependency on naphtha. Today, we are 80% naphtha-based. The rest is gas and ethanol. And our plan is, by 2030, to reach 60% naphtha and 40% ethanol and gas, roughly 20% each. So we already had a very well-defined strategy to reduce our dependency on naphtha and look for others, not just ethanol, but also propane. Our plant 2 in Rio Grande do Sul, we are processing propane coming from Argentina. Argentina is potentially an important supplier. It already is for propane, but in the future, it could be for ethane as well, which we aim to use in plant 2 in Rio Grande do Sul. We're also importing ethane from the U.S. to use this ethane in some of the machines we have in Bahia as a way of sidestepping the increasing cost of feedstocks because ethane prices went up practically almost nothing, whereas naphtha practically doubled in price. So looking into the future and naphtha sourcing for Braskem not being -- it's not at risk at the source, but it is impacted due to price. So what's happening in the Japanese and Korean petrochemical companies is they are reducing production and scale because essentially, they were supplied almost exclusively by naphtha coming from the Middle East. So our sourcing is not at risk. We have access to naphtha. Of course, we must pay the price. Our initial supply of naphtha was already bigger than our competitors. And in the future, we want to be less reliant or less dependent on naphtha. Now the question is, how much time will this price increase that impacted naphtha resulting from the higher cost of oil? How long would this last? Well, that will depend considerably on how long the Iran conflict will last. And today, this is much more than a war between the U.S., Israel and Iran. It also involves other countries around the globe. I should also mention that the Gulf of Persia (sic) [ Persian Gulf ] and the Middle East has 50% of the energy inventory, energy stocks in the world, more than 50% of gas and oil. So the energy that can be stored because wind and solar cannot really be stocked. But storable energy overall, more than 50% of it is stored in the Middle East. So this conflict is not a conflict that involves just 3 countries. It involves a whole region, Iran, beyond Dubai, Bahrain, Qatar. So this conflict has a much bigger impact than just the incursions that the U.S. and Israel made in Iran last year. So this year's conflict is going to take much longer to be resolved and the impact on petrochemical supply and production chains and logistics chains is going to take a number of years before it is fully resolved. Rosana Avolio: Allow me to add, I'm going to read a question about the EBITDA impact. For sure, the company does not provide the formal guidance. So I'm going to use the history track from external consultancy services between 2014 and 2025. If we consider the historical consolidated EBITDA between 2014 and 2025, this is about [ $2.54 billion ]. And in this period, 2014 and 2025, we have a PE and ethane, which were very similar, which are the spread expected by the external consultancy. So this is a spread of the main chemicals and even higher than the average considering the increase in oil prices and the PE naphtha is a bit lower, about 10% below. So considering this market reference, the expectation for the future in terms of average petrochemical spreads according to the external consultancy, we would reach the historical levels. And the external consultancy services have been using an average of timing. And this is what's going to define the impact and the upsides and downsides, an average of 1 month for the war with a later impact considering the structural impact that we have seen in the region. But it's too early to try to imagine a future scenario. So we are considering different scenarios. We are getting ready for the best, for the worst. As Roberto mentioned, we see the price of the feedstock going up in a significant manner following the oil price, especially naphtha. And we can see that the rising prices have a lag so that it can be reflected in the results. And as Felipe mentioned, we are preserving cash and the liquidity, but we also have to be cautious because it's a dynamic scenario that changes at all times in real time, and this is the reason why we are considering different scenarios. Well, moving on to the next question. I'm going to ask Felipe. This was related to Braskem Idesa as follows. With the default of the bond interest rates and the lower ratings to D and possible reorganization via Chapter 11, what's the real likelihood of this scenario to materialize? What are the next steps? And what would the consequences of Chapter 11 in the consolidated balance sheet and the control of its assets? Felipe Montoro Jens: Thank you, Rosana. Thanks for the question. As you saw in the notes we published explaining our financial results recently, we are always very transparent and very objective. And we've been practicing this over the past years, explaining each and every step that occurred last year when we hired the Braskem Idesa legal and financial advisers to reorganize that company's capital structure. Now as the process progresses, we need to keep up our engagement in order to see what the final situation will be. It is not up to me to speculate about what any of the routes forward may be. But what I can tell everyone here in this room is that this is an absolute priority as we have announced here at the beginning of this call and focusing on liquidity. As soon as we have material information about what this reorganization restructuring will look like, we will certainly share it with you so that you all stay apprised in real time about the company's coming steps. Rosana Avolio: Thank you, Felipe. Moving on, there's a question related to the antidumping process of polyethylene in Brazil. So this is the question. What was the result of the meeting that was held yesterday? And will the new protections be implemented? And the current logistics restrictions, freight increases and production restrictions, can they reduce the possibility of using antidumping actions in Brazil? Roberto Ramos: Well, we had an information on the MDIC site that Gecex opted not to consider the in-depth detailed study that was prepared by the technicians at the Ministry of Industry and Commerce that recommended a $700 per ton antidumping norm for ethylene coming from the U.S. and it opted to maintain the protection that had been granted by the provisional antidumping law from 6 months ago. Apparently, the information that we received was that apparently, this decision was taken due to the public interest. We will appeal this decision because it is our opinion that the antidumping case is very strong and very well demonstrated. And there's actually access to information provided by the U.S.-based producers that effectively demonstrates that they were implementing a predatory pricing policy. So in effect, we have a concession of theirs about their infraction. And I think it's deplorable to consider that this information was not taken into account by the Brazilian Council and the technicians at the Ministry of Industry and Commerce were not informed by the Gecex. It's -- and there's more in particular, the sample of prices that were collected over the past year, including the provisional protection. This actually has been maintained as a result of the war because naphtha does follow the price fluctuation and our main feedstock is naphtha. So the unfair pricing that we suffer has been exacerbated by the war. So the situation not only failed to improve, but it also became worse. So the Gecex actually should have detected that we are in -- we are literally in a war. So it's really difficult for me to understand what sort of public interest could possibly have impacted this decision, but I can only base my opinions on the short clip that was published by the Ministry of Commerce and Trade. So I -- again, I reiterate, it is deplorable that a research -- a project with enormous technical information and quality was not taken into account. Rosana Avolio: Thank you, Roberto. And moving on, Roberto, we have a question. Why there are questions in the capacity to continue operating as we saw in the financial report of Braskem? Felipe Montoro Jens: Thank you [indiscernible] for the question. This question is very important. I need to make it very clear to start that the balance that has actually been confirmed by our auditors. It's one of the baseline assumptions of our statements, touches on the continued health, good health of the company and its operations. However, there is a plan that has been defined and approved by the company's Board. We've actually mentioned some of these topics recently. They involve a restructuring of Braskem's capital structure. And just as every company and every entity, the auditors, the independent auditors must raise any issues about significant or less significant uncertainties about any plan they assess. Now given the company that we're talking about, Braskem, it was mentioned that there are uncertainties about this plan, but we've already been working since September of last year with full engagement from everyone, financial and legal advisers to implement this plan. So that is the reason. That's why there have been mentions about uncertainties and the assumptions were maintained about the company's operational continuity. Rosana Avolio: Thank you, Felipe. Talking about our transformation plan, this is a question. The company announced investment in the Transforma Rio project and continues with strategic investments. Considering the high leverage and cash burn, how is the company going to finance this CapEx without affecting its capital structure? Was there any reevaluation in the scope of those investments? Roberto Ramos: Thank you once again for this question. Yes, we already mentioned this in the last time we published the Q3 '25 results, and we maintain the same answer. Yes. This restructuring, this reorganization of the company's capital structure does include the necessary resources for this essential project to transform Braskem. So the resources for this purpose have been earmarked and are included for this purpose. It needs to be materialized and implemented, but there is no discussion about the need for this to occur whatsoever. This really helps us to corroborate our entire business plan that was approved by the company's Board and the project itself was also approved and announced to the market as soon as the Board approved it. This will allow Braskem to survive, to stay afloat and survive healthily and go back to the not so ancient past. I'd like to highlight something about our strategy. We have a process underway where we are changing our feedstock. The Rio plant that is roughly 300,000 tons a year, it's gas-based. This allows us to pull Bahia's plant 1, which will be converted from a naphtha unit, and it will start processing ethanol. So the 300,000 tons that we are going to start producing in addition in Rio, plus the green ethane -- ethylene, sorry, that we produce in Bahia will replace the 600,000 naphtha-based ethylene. And in so doing, we are adding more competitivity and increasing our sustainability because whether it's because the prices are more interesting for us or because these feedstocks are more sustainable. So don't look at the Rio expansion as an isolated event, oh, Braskem is ramping up production in Rio because it's cheaper. Well, that is true, but we're doing more than that. We are replacing naphtha with other feedstocks. We are switching from gas and we are switching to green, which is our fly up to green. These factors are all integrated. This is not a simple operation. And so financing this project takes all of that into consideration. Rosana Avolio: Thank you, Roberto. Moving on. The question is related to petrochemical spreads. Since the closure of the Strait of Hormuz, what we have seen has increase and what are the potential impacts? I'm going to answer these questions, and then Roberto and Felipe can add to what I said. As I said, we are considering different scenarios. This is a very dynamic topic. Every day, there is something new and update. We learn about escalation of the conflict. So I'm going to talk about what we have seen in terms of consensus. In a more technical view, when we look at the feedstocks, if oil prices go up, naturally, as a co-product of the refinery will also have its price higher. So all those higher prices of naphtha that you have been observing in March will be the national reference that you will use as consumption of feedstock for next month. So we see that there's a working capital being consumed from the payables. When we consider the resins or the main products, we see a quicker response in relation to the chemicals. So base naphtha producer also make other chemicals that also have an impact on the margin of the company that would account to 15% to 20% of the historic EBITDA of the company. We already see this consequence in the result of March. But in terms of spot price, we have seen some increases. But in our cash flow, we can expect a positive result a little bit in the future. In terms of expectations, what are of the spreads of the first or the second quarter, based on the consultancies, there's an expectation from the external consultancies of an increase of about 50% of the spreads as we have observed in the first quarter of 2026. Roberto Ramos: I'd like to add with a reflection about the length of the rise in prices. How long do we expect that to last? Now if there even is a negotiating table between the U.S. and Iran, Iran has 2 demands that I personally think are very difficult to meet. First, Iran demands reparations for the losses that it is suffering as a result of the war. This reminds me of the war reparations that were imposed on Germany by the Treaty of Versailles. If you like history and economics, this was often cited as a cause for the German hyperinflation and the rise of Hitler. Now that's not exactly true, but I'm not here to talk about history. The fact of the matter is that the U.S. attacks destroyed Iran's fleet and Iran demands the U.S. and Israel to pay to rebuild that fleet. And Iran also demands that its sovereignty over the Strait of Hormuz be recognized internationally. This, if it occurred, would allow Iran to charge a toll on all goods that transit through the Strait. Now this will never be accepted by any party. So if these demands are real demands, if they are, in fact, stumbling blocks on the negotiation, then this negotiation will drag on for a very long time. Rosana Avolio: Thank you, Roberto. I'm going to move on to our last question. In relation to the potential change of control, could the company provide an update on the latest facts, please? Felipe Montoro Jens: Thanks for the question. We do also -- we have mentioned this often. I'd just like to highlight that Braskem is not party to these discussions or to these negotiations. And when -- and if Braskem is notified, then we will, in turn, notify the market immediately. As we've mentioned at the beginning of the call, there was public information that was published by the CADE and was materialized by the U.S. in the beginning of March with regard to the antitrust and final negotiations with the shareholders. So this is a topic that for us, there is our due diligence, the analysis that's done by potential investors. This remains ongoing here at the company, and we continue to respond to these requests in a timely manner. So -- and to send them to the market so that the market remains apprised in a timely manner as well. Rosana Avolio: Thank you, Felipe. Our last question, Felipe. Could you provide more information on Petrobras? Could there be any type of support from Petrobras to Braskem considering that the transaction with IG4 has been approved and the new shareholders' agreement is likely to be signed briefly. Felipe Montoro Jens: This question actually depends significantly on Petrobras, and it actually should be asked of Petrobras, not really Braskem. And with regard to the relevance between Petrobras and Braskem, we continue to work to develop future improvements and commercial conditions. Of course, respecting both parties so that both parties can reach an agreement that is fruitful for both companies. I believe that these discussions remain ongoing in parallel. They've always remained ongoing regardless of the -- any potential shareholder situation. Roberto Ramos: Just to add, Petrobras does hold a relevant stock in the company. They have 4 Board members in our Board. We have monthly meetings of the Board. So Petrobras is notified in a very timely manner of everything happening at Braskem. In addition, the Petrobras Board has direct access to the Braskem Board. And we talk every week, multiple times a week. So Petrobras is fully aware of the Braskem situation and the extremely negative petrochemical cycle. They are also enormously interested in the stake that they hold here at the company and the interest they have at the company. So what Felipe said is true, but I think the answer is a little obvious. Petrobras is enormously interested in Braskem and will remain interested. Operator: Ladies and gentlemen, we now conclude the question-and-answer session and the Braskem video conference. Our conference is now complete. Thank you all for joining us, and have a great day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Good day, and thank you for standing by. Welcome to the metals company Fourth Quarter 2025 Corporate Update Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please be advised that today's conference is being recorded. I would like to hand the conference over to your speaker today, Craig Shesky, Please go ahead, sir. Craig Shesky: Thank you very much. Please note that during this call, certain statements made by the company will be forward-looking and based on management's beliefs and assumptions from information available at this time. These statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. Additionally, please note that the company's actual results may differ materially from those anticipated, and except as required by law, we undertake no obligation to update any forward-looking statement. Our remarks today may also include non-GAAP financial measures, including with respect to free cash flows and additional details regarding these non-GAAP financial measures, including reconciliations to the most directly comparable GAAP financial measures can be found in our slide deck being used with this call. You're welcome to follow along with our slide deck or if joining us by phone, you can access it at any time at investors.metals.co. I'd now like to turn the call over to our Chairman and CEO, Gerard Barron. Gerard, please go ahead. Gerard Barron: Thank you, Craig, and apologies to those on the line who -- we are a few minutes late. We're waiting for a wide across the line. But welcome to you all. And before we get to the path forward, I'd like to take a moment to reflect on our journey over the last year. One year ago to the day in our fourth quarter earnings call, we announced a regulatory pivot that fundamentally changed our company's destiny. Instead of the uncertainty and gridlock of the ISA, we chose the certainty and clarity of the U.S. regulatory regime built upon a long-established legal framework under DSHMRA and catalyzed by the political will of this administration. In April, this political will was made evident by the executive -- President Trump's executive order, unleashing America's offshore critical minerals and resources, which marked America's return to leadership in deep seabed minerals. Some of the directives in this EO have already been delivered, including the modernization of NOAA [Technical Difficulty] Craig Shesky: Gerard, sorry to interrupt. Your line is cutting in and out. Gerard Barron: Road map for [Technical Difficulty] in 2026, we focused on accelerated execution, starting with permitting. Our consolidated application submitted to NOAA in January of this year has been deemed substantially compliant, and we expect our permit to be granted in less than 1 year from today. This permitting clarity also provides confidence to us and our partners to get building in anticipation of commercial production. Offshore, we have reached commercial agreement on key terms with our long-term strategic partner, Allseas, and continue to progress the engineering work for the long lead items for our forthcoming production system, and we expect this agreement to be finalized in the coming days. Onshore, it's also clear that the U.S. wants to dominate the onshore processing and refining polymetallic nodules, establishing a counter to China's stranglehold on the production of critical minerals. To do that will require support from the government itself requisite [Technical Difficulty] at the Port of Brownsville, Texas and have also reached agreement with our partner, Mariana Minerals to progress this feasibility work as part of the TMC owners team, but more on this shortly. Since day 1, we knew success would depend on building a bench of exceptional partners and with the expertise to tackle complex challenges and the conviction to back a new industry. And as this chart shows, we've brought together a strong group of experienced partners across the value chain, each bringing a unique skill set to our vision of reimagining the metals and mining sector. What's changed and what matters is momentum. Many of our existing partners have deepened their commitments, reinforcing their belief in the long-term opportunity. We're also welcoming new partners who share our belief that this industry will be built in the United States. That growing alignment is a clear validation of where this industry is heading. And as I mentioned earlier, we've agreed key commercial terms with Allseas to complete the development and operate the Hidden Gem offshore system, the first ever commercial nodule collection system. The continued strategic alliance, which will be memorized in the coming days, brings together Allseas decades of offshore execution expertise with our proven resource, environmental and processing platform into a single integrated system, designed for a nominal capacity of 3 million wet tonnes per annum using the Hidden Gem, two collector vehicles and a vessel to transfer nodules to bulk carriers for shipment to shore. And Allseas are currently working on key long lead items like the Riser, our launch and recovery systems and the umbilical. We look forward to signing this definitive agreement in the coming days and continue to progress towards system commissioning still targeted for Q4 2027. So one of the key actions outlined in last year's executive order was the directive for various government agencies to identify potential sources of financial support for this industry. And in order to unlock government support for onshore processing, there are a few boxes we must tick, including a site-specific plan and feasibility studies. And to that end, back in December last year, we secured an exclusive right over a potential lease option in the Port of Brownsville, Texas, where near where plans have been recently announced by this administration for the first new U.S. oil refinery in decades underscoring the broader momentum behind strengthening American industrial capacity. We've developed a preliminary master plan and a pre-feasibility study is already underway for a 12 million tonne per annum nodule industrial park. Of course, existing capital-light tolling options are still available to us, and we will not be committing any capital at this time. But I'm certainly excited about what a domestic nodule processing hub can mean for both new partnerships and for our project economics. Processed domestically, our nodule resource could single-handedly solve the American supply chain dependency across 4 key metals. And as I mentioned, one of the requirements to unlocking funding on is the preparation of a feasibility study for a processing plant at a specific site. To that end, we're adding a new strategic partner to our bench in Mariana Minerals. Mariana's CEO, Turner Caldwell speaking at last year's Strategy Day is someone we know well from his time at Tesla, where he headed up global battery metal supply. The Mariana team are pioneers of AI and software approaches to project development and metallurgical processing and have demonstrated their ability to fast-track project execution, which enabled Tesla to build its lithium plant in Texas in less than 2 years. The Mariana team will be joining as part of the TMC owners team, and we already enjoy a good working relationship with their team. Mariana's approach is core to how cutting-edge businesses like SpaceX and others operate. With AI, we think they can move even faster and believe their innovative model offers a faster, more modern approach to reindustrialization. And subject to further definitive agreements, we look forward to exploring how their systems could reduce permitting and construction time lines for a domestic plant while reducing OpEx and increasing recovery of payable metals. In fact, right after this call, our team -- executive team will convene in Texas with the Mariana team for the next week to progress this mission-critical work, which is also a prerequisite for a certain U.S. involvement. I'm also pleased to share that in April, just days away, The Metals Royalty Co. will begin trading on the NASDAQ under the ticker TMCR. A quick refresher formed with the goal of onshoring critical minerals production in the U.S., TMCR has a 2% gross royalty on our NORI area, resulting from an agreement we signed with Low Carbon Royalties in 2023, and we retain the right to repurchase up to 75% of that royalty over time at a capped return, which could potentially reduce the royalty to just 0.5% of 1%. The TMC also maintains a 25% equity stake in TMCR. Many TMCR faces will be familiar to our followers, including the current and former Board members, Michael Hess and Brian Paes-Braga, and with their backing and a strong team behind them, we see TMCR as a strategic vehicle, which can potentially provide future options for capital and sizable project finance. I'd now like to turn the call over to Craig to discuss some industry updates, our regulatory path ahead and our financials. Craig Shesky: Thanks, Gerard. One quick note that we shared actually in recent weeks in our social accounts. We recently joined the Defense Industrial based Consortium, DIBC, partnership within the Department of [indiscernible] and investment prioritization direct [Technical Difficulty] of our capabilities. This initiative gives the government the tools that need to provide with commercial solutions that can help close supply chain vulnerabilities and strengthen the defense industrial base. And of course, critical minerals and seabed are focused for the U.S. and allies. And over the past year, we've seen investors and operators effectively vote with their feet, gravitating toward regulatory frameworks that offer clarity and a credible path to commercialization. While the ISA remains in gridlock, the U.S. has emerged as a leading jurisdiction and certain allies are relying upon the U.S. and certain areas of expertise to develop seabed resources. This shift is being echoed at the government level, while in March, the U.S. and Japan announced a new critical minerals action plan with an explicit focus on accelerating cooperation on commercially viable deep sea mining. And against this backdrop, we remain the only seabed mineral developer with SEC compliant mineral reserves, which is the clearest definition of commercial viability, positioning us at the forefront of this emerging industry. In January, NOAA finalized revisions to accelerate permitting under the Deep Seabed Hard Minerals Resources Act, introducing a consolidated application process that meaningfully streamlines the path to commercial recovery. And TMC moved quickly to take advantage of that clarity, submitting the first consolidated application under this new framework. This application expands our expected commercial recovery area from 25,000 square kilometers to approximately 65,000 square kilometers and is designed to significantly reduce permitting time lines. Importantly, it reflects the strength of our technical readiness and our ability to meet NOAA requirements for commercial scale operations. We see this as a clear signal that the U.S. regulatory path is active, predictable and capable of supporting responsible development. And now with more than 10 applications in the system, it is evident that the broader industry is aligning around the U.S. framework. And last time we updated you, we are progressing systematically through the NOAA permitting pathway, and that remains the case today even under this new consolidated path. With the consolidated application now active under NOAA's new rule, we have greater clarity on the process ahead and a clear line of sight on the key milestones required for final approval. Our experience over the last year, particularly through NOAA's review of our exploration licenses, has provided valuable insight into the process and expectations for both TMC USA and NOAA. We announced on March 9th that we passed the first of these milestones with NOAA determining our application to be substantially compliant and the next potential milestone being full compliance. Based on this progress and what we've learned, we now expect the grant of our commercial recovery permit within the next 12 months. Now to get to this point, it's taken over $700 million and hundreds of research days at sea, and we are now nearing the completion of our environmental impact statement, and our EIA is complete. Informed by the largest environmental data set in history, over a petabyte in size, this comprehensive document reflects 15 years of scientific research conducted alongside leading institutions and demonstrates our ability to responsibly collect nodules using modern systems designed to maximize efficiency while minimizing environmental impact. Put simply, better science leads to better design and better design leads to better environmental impacts. For those with a keen eye on our social media, you may have noticed that we've begun sharing key findings from our EIA publicly during a new video series, highlighting how our data addresses environmental concerns and how innovation has reduced our environmental footprint. I encourage you all to check this out, and you can click on the PDF of this posted on our website to get to those videos directly or we encourage you to follow TMC on our social accounts, including Twitter and LinkedIn. We look forward to our EIS being made available for public comments soon as per NOAA's transparent and accountable process. And as many of you know, and there may be some on the call who are with us in the room, we published a pre-feasibility study and initial assessment alongside our Strategy Day in New York last August. Covering our first production area, the PFS documented world-first reserves for a nodule project, demonstrating clear commercial viability. Our initial assessments covered everything else that you see in royal blue amongst our contract areas on this page. Keep in mind that neither of these comprehensive studies, which were signed off by multiple independent qualified persons, cover additional ground over which we now have priority right through the U.S. process. This is represented in the lighter gray on this page. Given the proximity of these areas to those covered in our published technical studies, we do believe that these areas support significant exploration upside. So at current metal prices, shifting to project economics, it's clear that these projects are incredibly valuable. And if you combine the $5.5 billion net present value of our pre-feasibility study and the $18.1 billion NPV for the initial assessment, you arrive at a total estimated resource of $23.6 billion. Over the life of both projects on an undiscounted basis, the study's outlined revenue of approximately $369 billion, EBITDA in excess of $200 billion and a position in the first quartile of the cost curve as laid out in our PFS. However, despite the clear value of this high-quality and abundant resource and our expected low-cost positioning, our valuation does remain below of comparable peer developers and explorers. On the left side of this page, you'll see the TMC valuation example where we're trading at about 8% of our underlying net present value, well below peer averages for explorers and developers and certainly below the average of nearly 1x NAV for nickel and copper producers. So as we march toward a permitting and -- clear permitting path and commercial production, we are looking forward to a significant re-rating in this valuation story. On to liquidity, TMC reported year-end 2025 cash balance of $117.6 million, and we expect at month end for March 31, 2026, to report approximately $110 million in cash. TMC liquidity, defined as cash plus borrowing capacity on our unsecured credit facility stood at $162 million at year-end 2025 and is approximately $150 million more, and is expected to be approximately $154 million around month end March 31, 2026. And this means we have no imminent need to raise funds in the public markets. As discussed in our last several quarterly conference calls, however, we are filing a new Form S-3 shelf registration statement in conjunction with our upcoming 10-K as a matter of good corporate housekeeping, and we do intend at some point in the future to refresh our ATM. However, there has been no ATM use by the company since April of 2025. On to our financial results. In the fourth quarter of 2025, TMC reported a net loss of $40.4 million or $0.08 per share compared to a net loss of $16.1 million or $0.04 per share for the same period 2024. The net loss for the fourth quarter of 2025 included exploration and evaluation expenses of $10.6 million versus $8.3 million in the fourth quarter of 2024. General and administrative expenses, or G&A, of $34.1 million versus $8.1 million G&A in the comparable quarter last year and a credit of $4.3 million from other nonoperating items versus a credit of $0.3 million from other nonoperating items in Q4 2024. Exploration and evaluation expenses increased by $2.3 million in the fourth quarter of 2025 compared to the same period in 2024, primarily resulting from an increase in share-based compensation due to accelerated amortization of awards granted in the third quarter of 2025, partially offset by lower mining, technological and process development costs resulting from decreased engineering work. G&A expenses increased by $26 million in the fourth quarter of 2025 compared to the same period in 2024, reflecting an increase in share-based compensation due to the accelerated amortization of awards granted to directors and officers in the third quarter of 2025 and an increase in legal, consulting and personnel costs. Other nonoperating items that reduced the net loss in Q4 2025 included higher interest income generated from our increased cash balances and a gain resulting from the dilution of our ownership interest in The Metals Royalty Co. as it completed a private placement to third parties at a price well in excess of book value. On free cash flow, the free cash outflow for the fourth quarter of 2025, was $11.5 million compared to $13.8 million for the fourth quarter of 2024. Net cash used in operating activities was $11.4 million compared to $13.8 million for the fourth quarter of 2024, primarily due to lower personnel and environmental payments, coupled with the interest earned on the higher cash balance in 2025 and partially offset by higher legal payments. Focusing on the full year basis for the cash flow. On a full year basis, free cash outflow for 2025 was $43.1 million compared to $44 million in 2024. Net cash used in operating activities was $42.9 million compared to $43.5 million in 2024, reflecting lower environmental and mining technological payments and interest earned on the higher cash balance in 2025, partially offset by higher underutilization fees paid on the unsecured credit facilities, timing of payment on regulatory fees and higher legal payments. Free cash flow is a non-GAAP measure, and I would point you to the non-GAAP reconciliation included in the slide deck. We believe that our cash on hand will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months from today. Looking at the balance sheet over the course of 2025, there was a significant increase in the cash balance as the following funds were received: $85.2 million from the Korea Zinc investment, $41.2 million from other registered direct offerings, including the Hess family investment, $14.8 million from ATM use and $27 million from the exercise of various stock options and warrants. A portion of these proceeds was used to repay the $7.5 million Allseas working capital loan, along with other outstanding interest thereon as well as a $4.3 million draw on the ERAS/Barron unsecured credit facility. Our accounts payable and accrued liabilities as at December 31, 2025, was $46 million and includes $34 million owed to Allseas for various services provided, the majority of which can be settled in equity. The $131 million increase in royalty liability was the result of the change in fair value following the company's release of two economic studies in August 2025, which increased the value of the NORI project. The significant increase in the warrant liability over 2025 was due to the increase in the fair value of private warrants, which reflected the increase -- significant increase in our share price. With that, operator, we'd now like to open the call up for some Q&A. Operator: [Operator Instructions] Our first question will come from the line of Heiko Ihle with H.C. Wainwright. Heiko Ihle: Can you guys hear me? Craig Shesky: Good morning, Heiko. Yes, we can. Gerard Barron: Good morning, Heiko, yes. Heiko Ihle: I'm very intrigued by those negotiations for the module processing and refining hub in Brownsville, obviously, given recent geopolitical risk factors that have just been going up quite a bit and just in general uncertainties that are going on, I think this might be quite interesting. A couple of things on that. Can you walk us through what you see an impact with the shipping expenses if this Brownsville hub goes ahead and maybe quantify it? Gerard Barron: Sure. I think the -- look, there are many exciting options about bringing material straight to the U.S. and shipping is one of them. Energy costs, of course, is another because the biggest input into our cost base when we process nodules is energy. And we applaud this administration for realizing that abundant energy leads to prosperity. And that's -- there's no better example of that than the U.S. compared to some other markets. And it's our estimate that you can actually process nodules cheaper in the site where we've located, Brownsville, Texas compared to China or Indonesia or Japan because of energy costs. And so -- but shipping is also better as well. And it does mean having to bring them through the Panama Canal. And it will also -- the site we've chosen does have some deepwater berths available to it. They won't take the biggest ships that are available and that we'd like to use, but in time, we think they can. And -- but no firm numbers, but improvements to be made. Heiko Ihle: And then I know it's early, but can you walk me through -- and you may not even have all these answers yet. But can you walk me through key permits and time lines you think we need to build all this infrastructure, please? Craig Shesky: Yes. It's important to note, Heiko, too. I mean, what we're beginning here is site-specific feasibility work. At the same time, what I can say is that the particular site we're looking at does have many permits. We continue to have continued discussions, very positive discussions with Governor Abbott's office in Texas and other agencies there. But it's important to note, a lot of this is going to be for a prerequisite of us making plans and moving forward, going to be dependent on some of the support we get at the federal level. So really, the key permit here is the grant of a commercial recovery permit by NOAA. And certainly, when we're talking to various agencies and cabinet departments, it is that permit that would unlock, we think, a lot of the support and potential investment for a facility like this. And one of the reasons I think that you're seeing TMC engage in some of this work on feasibility as well as us alongside our partner, Allseas, progress engineering work and beginning to think about ordering these long lead time items is due to our confidence in the grant of that commercial recovery permit in a timely manner. Operator: Our next question will come from the line of Matthew O'Keefe with Cantor Fitzgerald. Matthew O'Keefe: Yes, just a question. I want to follow up on Heiko's Texas question there. You are working on a feasibility study there. It sounds like Mariana is going to be a part of that. What's the timing on getting that done? And will we get to see sort of the results of that? Gerard Barron: Yes, sure. Well, certainly, Mariana will be playing an important role as part of our owners team. We already have Hatch working on the refresh of that -- of the PFS, which is based on bringing all those numbers to a Brownsville site. But we anticipate -- and that will be ready very soon. But we also anticipate well before the end of the year, having a, I guess, in the old language, a BFS on what we're planning to put on the ground in Texas. And so the date that has been talked about is end of October, and so not far away. And we certainly expect Hatch and others to be involved in that as well. Matthew O'Keefe: And that's a good group. And then is that going to be a hydromet facility? Or are you going to look at an option of doing sort of the RCEF front end like you're going to be doing in Japan? Gerard Barron: Yes, that's the exciting part. For the last -- since -- in fact, since Dr. Jeffrey Donald joined our group and pivoted us back to more of a pyro front end, that's where we've been building lots of expertise on how we get raw nodules into those intermediate products. And the plan is to build the pyro in Brownsville, if we were to go down that pathway. We're very fortunate that we have an amazing technical partner in Japan that we continue to have a great working relationship with. And -- but boy, a nickel refinery, a nickel processing plant hasn't been built in 80 years yet here in America, yet the demand for nickel is going at an increasing clip. We know it's needed to make every ton of stainless steel. We know it's used in super alloys. We know it's used across AI and data centers and military uses and electrification. And so the uses and the demand for it is going up, yet we import 100% of our nickel. So something is not kind of a fit there, Matt. So there's an opportunity, I guess. And we just see that this might be that moment where the administration says, yes, we want to fix that problem. Matthew O'Keefe: Yes. No, for sure. That's why I was kind of asking, it seems like a pretty exciting turn and would love to see the numbers on that. More on that, just switching off the processing back to the recovery. You said you're sort of getting long lead time items, I'm assuming for Hidden Gem and the whole -- that whole process. So what would you anticipate -- assuming you get your permit within 12 months, what would you anticipate the timing to get Hidden Gem back on the water? And do you foresee it being as is or with additional collector capacity? Gerard Barron: Yes. We are still standing by our guidance of commissioning Q4 next year. And it will -- we've elected to run with a 2-collector model. And so that is -- basically gives us the opportunity to get out on the water. I guess that will be early '28. And we'll kick off with one collector in production, but we'll soon move to a second collector being in production as well. And so as you well know, we have a production boat that is production ready now just on a production number that's not high enough. And so we want to see a higher production number because the more tonnes you amortize over the cost of the floating steel above, the better the economics. And I think we proved in 2022 that we can do this reliably at commercial scale. So now it's about making money. Craig Shesky: It's important to note, Matt, too, the connective tissue for the ramp-up offshore, but then also what the potential processing and refining plans might be onshore. Certainly, this administration wants to be able to say, if we can bring this back domestically, it's helpful to be able to do it during this administration. And the way you do that is ramp up in relatively bite-sized amounts, starting, let's say, with production capacity that could handle nodules coming from a vessel like the Hidden Gem, which has 3 million tons per annum nominal capacity. So kind of matching as best we can ramp up for both the offshore production and then having a home for the processing and refining of those nodules is certainly part of the work that we and our team of engineers are doing in the coming months. Matthew O'Keefe: All right. And if I may just ask one more question. On the permitting process, not so much the process, you've made that pretty clear. One of the -- under the NOAA process, there is an additional piece of ground that wasn't covered by the PFS. It wasn't covered by the initial assessment that you've added. I'm just curious sort of why and what your plans are for that? I mean, can you really do any work on that in the near term? And is it infringing on anyone else's claims that might be under the previous permit regime? Gerard Barron: Yes. Look, it was just a natural fit. It was fitting between 2 blocks that we had hold over. And at the end of the day, we will -- while we're out there, continue to take observations of that. And I guess what we'll aim to prove it's a continuous piece of ground, and it doesn't require any particular environmental work done on it. And so -- and we imagine that once production starts out there that there'll be more collaboration between some of the license holders as well. And I think no doubt, there will be some people that end up being granted licenses who don't have production vessels and/or who want help getting their applications through the permitting process. And as you know, we probably know more about that than anyone on this planet. And we're certainly getting a lot of inbound into how we might be willing to collaborate with some players. And I -- and, you know, we see this as preproduction. I think it's -- we want to see more people in production out there. But what I'm pretty certain no one is planning to do is to put plans for a processing plant on the ground anywhere. I see a lot of applicants starting to talk about them being successful at moving to the first phase. We know from that journey, there's a lot of road left in front of them, and we'll be here to help them and maybe supply services to them along the way. And -- but in the meantime, to fully explore just how committed this administration is to bringing a processing plant so we can bring nodes straight to the U.S.A. Craig Shesky: I think we're going to, Michelle, take a few questions potentially from our chat. So there's a question from Jakob Stanski. We mentioned government support is needed for the U.S.-based processing plant. And can we clarify what type of support this means, financial permitting or otherwise? It's a good question, and I think the answer is all of the above. Certainly, as we noted earlier, progressing the commercial recovery permit is the most important prerequisite. We also, of course, would rely upon both at the federal state and local levels, what we think are very supportive administrations to help really make some of these plans a reality. But again, the prerequisite for a lot of this work is site-specific feasibility work. So ensuring that we get that right and are doing it at a place like the Port of Brownsville, where we have truly everything that we need to stand up a potential nodule ecosystem that's going to be critical in our decision to push forward on this. And we do have really the unique ability with this resource of maintaining capital-light options for the processing. So it's not like most ore bodies where you have no choice but to build processing and refining close to where the ore body is. We have flexibility here in the nature of this nodule resource and that you can collect them and ship them really North, South, East or West, but it's the desire of this administration to change the game and kind of release themselves from the stranglehold that China has had on the critical metals. And to do that, as Gerard noted, it's not just a TMC story. So we have the resource and we have the capability to help do this. But we're making all of the decisions, obviously, with the benefit of our shareholders in mind and making sure that we are not pushing forward on anything without a very nondilutive financing plan that we expect would be supported by the government, assuming that we would want to take the next step. There is another question here from Jameson Irwin, to what extent are your systems being designed or evaluated for dual-use capabilities with U.S. Defense or autonomous underwater operations? Gerard, maybe if you want to weigh in a bit on that, too, but it is a good point to raise it. We saw a piece from CNN in Montego Bay over the last few weeks that traveled pretty far, noting the fact that Chinese ambitions in this space are focused offshore very much on the dual-use capability between some of the military uses for the stuff that they're working on, along with deep sea mining. One of the interesting things that we're looking at on the onshore side is the fact that the flow sheets that we and Hatch and Mariana are developing and working through certainly are the types of things that could lead to processing and refining capabilities that aren't just limited to nodules over the long term. But Gerard, I'm not sure if you have any other color on that point. Gerard Barron: Look, I think there are some exciting areas for collaboration, and I wouldn't rule them out. Craig Shesky: I see one more question on the Hidden Gem. Looking at sort of the investment or acquisition of a second vessel like the Hidden Gem, what would be planned before that? Who might manufacture it? Who would the partners be on that front? Gerard Barron: Well, taking a converted drillship and making it fit for picking up nodules proved to be a pretty efficient move. And there's an abundance of those vessels. I saw Transocean recently scrapped 4 of them for quite cheap money. And so that's an option. And we are -- we do have inbound inquiry from people who have vessels who would like to use them. Of course, the vessel is the first step. The operator is the important one. And just to be clear, Allseas want to operate more vessels in the CCZ, and we want them to operate more vessels for us in this area. And so -- and obviously, there are efficiencies in having similar type vessels from a parts, from administration perspective. And so stand by. Craig Shesky: Operator, any other questions on the phone line? Operator: I'm showing no further questions on the phone lines. Craig Shesky: Okay. Gerard, perhaps over to you. Gerard Barron: Well, yes, yes. Well, thank you, everyone. We've got a lot of very long-term shareholders who have been supporting us since our go public in 2021 and of course, before that, when we were deep green. And it's exciting to see the direction the business is heading. It was exciting to report some of those updates today. It's frustrating not being able to give more regular updates, but we have to be very sensitive in how we message that. To the team and our partners, thank you for an enormous heavy lift from everyone who works at TMC. It's a very dedicated, hard-working team, and it's an honor to work alongside you all. And to our shareholders, thank you for being there and coming with us on this journey and look forward to keeping you updated as updates become available. Over and out. Operator: Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.
Operator: Greetings, and welcome to the Carnival Corporation First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Beth Roberts, SVP, Investor Relations. Thank you, Beth. You may begin. Beth Roberts: Thank you. Good morning, and welcome to our first quarter 2026 earnings conference call. I'm joined today by our CEO, Josh Weinstein; our CFO, David Bernstein; and our Chair, Micky Arison. Before we begin, please note that some of our remarks on this call will be forward-looking. Therefore, I will refer you to today's press release and our filings with the SEC for additional information on factors and risks that could cause actual results to differ from our expectations. We will be referencing certain non-GAAP financial measures, including yields, cruise costs without fuel, EBITDA, net income, ROIC and related statistics, all of which are on a net basis or adjusted as defined, unless otherwise stated. A reconciliation to U.S. GAAP is included in our earnings press release and our investor presentation. References to ticket prices, yields and cruise costs without fuel are in constant currency, unless we note otherwise. Please visit our corporate website where our earnings press release and investor presentation can be found. With that, I'd like to turn the call over to Josh. Josh Weinstein: Thanks, Beth. Good morning, everyone, and thank you for joining us today. Before we begin, I do want to acknowledge the ongoing conflict in the Middle East and the profound human impact it's having on so many people. Our thoughts are with the brave men and women of our armed forces, with all those affected, and with the countless families and communities facing hardship during this time. Like so many around the world, we remain hopeful for a resolution that brings relief to those impacted and a lasting peace to the region. Turning to our business. We are off to an excellent start to the year. First quarter results came in ahead of guidance, thanks to higher yields and better cost performance, reflecting healthy fundamentals and solid execution across the business. Close-in demand remained robust, guests continued to spend more onboard and pricing strengthened, enabling us to outperform our December guidance and deliver record first quarter revenues, net yields, operating income, EBITDA and customer deposits. We're seeing this momentum continue in onboard and pre-cruise sales. Guests are engaging earlier in the vacation journey, purchasing more inclusive packages, excursions and other experiences before they even step on board. That trend is contributing to higher onboard revenue and reflects the value guests place on the experiences our cruise lines deliver. We're also seeing it in our bookings. Bookings for current year sailings increased 10% year-over-year, adding to our record book position for the remainder of the year at historically high prices. With nearly 85% of 2026 already on the books and less inventory available than this time last year, we remain well positioned to keep improving yields as the year unfolds. Cumulative future year bookings also reached a first quarter record, adding to our continued confidence in the trajectory of the business. And as a result, we are seeing it in our customer deposits, which reached a new first quarter record of almost $8 billion, surpassing last year's high watermark by nearly 10%. Now what stands out most is that we're achieving all of this against such an unpredictable macroeconomic and geopolitical backdrop. It says a great deal about the demand we continue to see across our portfolio of world-class cruise lines, about the team's ability to execute on our long-term strategy and about the progress we've made in positioning the business to perform through a wide range of environments. This start to the year also supports increasing our full year outlook operationally by approximately $150 million compared to our December view. That improvement helps absorb a $500 million fuel headwind albeit that is against a substantial EBITDA forecast of $7 billion, which David will walk you through in more detail. This quarter and our outlook are further evidence of how far this business has come over the last several years. Over that time, we have restructured the organization, reconstituted the global leadership of the corporation and our cruise lines, actively managed the portfolio and its assets and sharpened our commercial operations. We have also just begun to better harness the power of our unmatched Caribbean and Alaskan destination footprints, improve pricing, fortify the balance sheet and embed greater rigor across the organization. As you know, thanks to those efforts, last year, we surpassed our SEA Change objectives in roughly half the originally outlined time frame. We more than doubled our ROIC, delivered our highest unit EBITDA in nearly 2 decades and meaningfully reduced our greenhouse gas intensity rate, all of which built momentum and, more importantly, reinforced that our approach is working. With this robust foundation in place, we are focused on the next chapter of value creation for Carnival. So today, we are introducing PROPEL: Powering Growth & Returns, Responsibly. By 2029, we are targeting return on invested capital above 16%, earnings per share growth of more than 50% versus 2025 and the distribution of more than 40% of our cash from operations to shareholders, or approximately $14 billion. At its core, PROPEL is about converting strong and growing demand into higher returns, earnings and cash flow while maintaining disciplined capacity growth and a strong balance sheet. That we see 4 primary drivers underpinning these targets. First, yield expansion. A continued focus on high-quality execution across our commercial operations will drive even more growth in same-ship demand, strong pricing, increased onboard spend and earlier guest engagement throughout the booking journey. These trends are already evident in our current performance and give us confidence in our ability to drive sustained yield improvement. Second, disciplined capacity growth and high-returning capital allocation. Our capacity growth remains intentionally measured with only 3 ships scheduled to enter service during the PROPEL period. At the same time, we'll be investing in return-generating modernization programs across many of our cruise lines, building on the success we are already seeing from AIDA Evolution. And the second cruise line announcing its program will be just next month, so stay tuned. Third, further monetizing our destination portfolio. We're expanding and enhancing our unique destination assets, including Celebration Key, Grand Bahama, RelaxAway, Half Moon Cay and Isla Tropicale, Roatan, along with our unrivaled Alaska land footprint to deliver differentiated guest experiences while generating attractive incremental returns. Fourth, continued cost discipline. We remain hyper-focused on maintaining our industry-leading cost structure and driving operational efficiencies across the P&L. And all of this is supported by a phenomenal team and advancing technologies to enhance revenue and improve efficiency. Importantly, these PROPEL targets will not come at the expense of financial strength, corporate responsibility or investing in our future. We are targeting net debt-to-EBITDA of 2.75x and a reduction in greenhouse gas intensity of more than 25% versus 2019 levels. For us, returns, resilience and environmental stewardship go hand in hand. And further, our growing cash flow will enable us to meet these targets while reinvesting over $15 billion back into the business over this time frame. With greater financial flexibility, we have the capacity to invest in our growth, to achieve our leverage target to grow our recently reinstated dividend and to return excess capital through an opportunistic buyback program, beginning with a $2.5 billion authorization announced today. This is a balanced approach, investing for growth, increasing shareholder returns and doing so in a way that supports the long-term earnings power of our business. Accelerating returns is a natural result of that strategy and a reflection of the attractive fundamentals of our business. Our capacity growth remains measured while demand continues to expand as cruising becomes even more mainstream, as consumers are choosing to spend more of their hard-earned money on well-deserved and much-needed vacations, and as we remain underpenetrated relative to the broader vacation market. We are well positioned with a strategy that is grounded, focused, diversified across our portfolio and built for consistent execution over the long term. As we continue to monitor developments in the Middle East, we remain focused on executing on that strategy and delivering for our guests, for our shareholders and our other stakeholders. While external conditions will continue to evolve, what gives us confidence is our ability to deliver exceptional vacation experiences, operate efficiently, allocate capital with discipline and grow in a measured way. Now none of this progress happens without the dedication of our global team, the best in all of travel and leisure. I want to thank our more than 160,000 team members, both ship and shore, for their hard work in delivering these first quarter results. They go above and beyond every day to deliver unforgettable happiness to our guests by providing them with extraordinary cruise vacations while honoring the integrity of every place we visit, life we touch and ocean we sail. I also want to thank our travel agent partners, our loyal guests, our investors, our destination partners and all of our stakeholders for their continued support. With that, I'll turn the call over to David to walk you through the quarter and our guidance in more detail. David Bernstein: Thank you, Josh. I'll start today with a summary of our first quarter 2026 results, then I'll provide color on our full year March guidance and finish up with some additional insights into PROPEL. Once again, we delivered record first quarter operating results with strong execution, resulting in us beating guidance on revenue, costs and net income. Net income of $275 million was more than 55% higher than the prior year and exceeded our December guidance by $40 million or $0.03 per share. The outperformance versus December guidance was driven by 3 factors. First, revenue favorability contributed $0.04 per share as yields were up 2.7% versus the prior year on top of the more than 7% increase in the first quarter last year. This was over 100 basis points better than our December guidance, driven by continued strong close-in demand which drove higher ticket prices and stronger onboard spending. Yield improvement was driven by increases on both sides of the Atlantic. Second, cruise costs without fuel per available lower berth day, or ALBD, were up 5.3% versus the prior year. This is more than 0.5 point better than our December guidance and contributed $0.01 per share. This benefit was driven by cost-saving initiatives that we firmed up during the quarter. Third, the remaining $0.02 per share of operational favorability came from improvements in depreciation expense, net interest expense and fuel consumption, where we delivered a 4.7% year-over-year reduction. Total first quarter operational improvements of $0.07 per share are fully reflected in our full year guidance. However, those first quarter operational improvements were partially offset by the unfavorable impact of fuel price and currency costing $0.04 per share. Turning now to our full year March guidance. Our full year guidance calls for earnings per share of $2.21. This includes the first quarter operational improvement of $0.07 per share as well as an additional $0.04 per share of improvement in depreciation expense, fuel consumption, net interest expense and income tax expense over the remaining 3 quarters of 2026. However, that $0.11 per share operational improvement for 2026 will be more than offset by a $0.38 per share headwind from higher fuel prices driven by recent geopolitical events and reflected in our March guidance. Given the recent spike in volatility in fuel prices, we believe it is reasonable to assume some moderation over the balance of the year rather than base our guidance on current elevated spot prices. As a result, our guidance assumes the purchase price of fuel for the month of March and early April, Brent averaging $90 per barrel for the remainder of April and May, Brent averaging $85 per barrel for the third quarter and Brent averaging $80 per barrel for the fourth quarter. A 10% change in our fuel cost per metric ton, excluding emission allowances, for the remainder of the year impacts our bottom line by $160 million or $0.11 per share. Turning now to yield growth. Our March guidance assumes yield growth of approximately 2.75%, which is 25 basis points better than our December guidance and fully reflects the first quarter yield improvement. Importantly, our yield assumptions for the balance of 2026 remain unchanged from our December guidance. Yield growth versus 2025 reflects both higher ticket prices and continued strength in onboard spending. It is also worth noting that full year 2026 yield growth is approximately 3.25% on a normalized basis, excluding the previously disclosed impact of the summer 2025 close-in decision to redeploy away from the planned first quarter 2026 Arabian Gulf voyages and the impacts of loyalty program accounting for Carnival Cruise Line. Cruise costs without fuel per ALBD are now expected to be up approximately 3.1%, which is 15 basis points better than our December guidance and reflects the first quarter improvement. Like yields, our cruise costs assumptions for the balance of 2026 remain unchanged from our December guidance. On a normalized basis, cruise costs without fuel per ALBD are up just 2.3% after factoring in the partial year of operating expenses associated with Celebration Key, Grand Bahama and RelaxAway, Half Moon Cay as well as the timing of certain expenses between the years. In addition, you will see that our cost growth decelerates from the first half of 2026 to the second half. The main drivers of the deceleration are the sliding of some costs from the fourth quarter of 2025 to the first half of 2026, which will impact our first half, second half comparison, as we indicated on the December earnings call. The full year operation of Celebration Key, Grand Bahama, which opened in July 2025, will also impact our first half, second half comparison. This comparison is also affected by the seasonalization of advertising and repair and maintenance spending. I will close with a few additional thoughts on PROPEL. As Josh said, at its core, PROPEL is about converting strong and growing demand into higher returns and stronger operating cash flow while maintaining disciplined capacity growth and a strong balance sheet. Our confidence in achieving our PROPEL targets is grounded in the same strategies, priorities and disciplined execution that have delivered strong results and momentum in recent years. It is also supported by realistic assumptions and performance metrics that give us confidence in the path ahead. From 2026 through 2029, we expect moderate yield growth on a CAGR basis and low single-digit CAGR growth in cruise costs, excluding fuel per available lower berth day. Because we expect yield growth to grow faster than costs, we believe this will drive significant margin expansion. Achieving these targets will require heightened cost discipline and a focus on further strengthening our industry-leading cost structure. We will drive operational efficiencies and realize scale benefits within ship operating expenses and G&A through technology and sourcing, resulting in decelerating cost growth throughout the period. While it is true we are announcing PROPEL at a time of heightened volatility, these targets are about the long-term trajectory of our business, for which I have great optimism. And I say that based on very relevant experience. During my time at Carnival, we have managed through so many challenges, 9/11, the global financial crisis, the Arab Spring uprisings, COVID and the Ukraine war, just to name a few. And we have always come away demonstrating our ability to execute and achieve new record results while building resilience and growing stronger. I expect no less as we look ahead to our future. Operator, we're now ready to open the call for questions. Operator: [Operator Instructions] Our first question today is coming from Robin Farley of UBS. Robin Farley: I wonder if you could just give us a little insight into when you were thinking about your long-term targets. Did anything change from 4 weeks ago aside from obviously the changes in fuel? Just wondering how anything in the last month would have impacted your longer term, the other indicators. And then just as a follow-up on the share repurchase, if you could just spell out a little clearly what dividend and share repurchase over the next 3 years. I mean I think I can back into the math from what your dividends are and your total capital return. It's just a significant step-up from what you had done pre-COVID. So I just want to make sure that we're thinking about that right. Josh Weinstein: So first, sorry for the technical delays. We got hung up on, which is not good when you're the speakers. So with respect to the long-term targets, I mean, at the end of the day, they're long-term targets and we have a lot of confidence in our ability to deliver over that period. With respect to the current situation and what its impact could be, I'm not going to speculate on how it's going to play out, but we do have very minimal exposure to that region. We didn't have any this year because of the decisions we took and we've already made that decision for next year. And we have the ability to move our assets as everybody knows. So we feel very good about the long-term trajectory. We certainly didn't just do it based on fuel prices from 2025. We thought about this and stress-tested it in various scenarios and it's something that we do believe strongly that we can deliver. With respect to the capital allocation, remember if you think about what the world looked like 10 years ago versus where we are today, our profile is very, very different. We've got no ships this year. We've got one ship a year thereafter. We are generating a lot more cash than we used to. And even with the spending that we're investing, as we noted, in our materials, in ourselves, which is quite important, including the destination strategy and revitalization plans for our brands, it still leaves us with a tremendous amount of free cash flow that we can give back. And we will do just that. And you should expect both the dividend and the initial authorization of $2.5 billion. Those are starting points, and we'll progress from there. Operator: Our next question is coming from Steve Wieczynski of Stifel. Steven Wieczynski: Congrats, Josh, on the strong results here. So I guess, first of all, it seems like the booking environment remains very healthy at this point. But Josh, wondering if you could maybe walk us through what you've seen from a booking perspective for both your North American and your EAA brands. I guess what I'm trying to understand here is if there's been any material differences in the bookings across your brands. And then also maybe you've seen any changes in your cancellation rates as we head into the summer, specifically around I assume it would probably be European cruises this summer. Josh Weinstein: Yes. So let me start with the cancellation question. We're really not seeing anything significant to talk about with respect to cancellation trends. Our onboard spend have been consistently strong as we got out of Q1 and headed into Q2. So with respect to the last 3 weeks, I'd say as -- feels like d j vu, like last year. People see what's going on. There is a lack of understanding about what it means for the world, what it means for me personally, and then life normalizes. And we're in the process of life normalizing over this period. We've seen -- it's not surprising that if you think about potential impact and how people are thinking about things, to the extent that we're talking about sailings that are Eastern Mediterranean, that's got a different profile than Western Mediterranean. That's got a different profile from Northern Europe and then obviously Caribbean, Alaska, Australia. So overall, we're actually pretty pleased with how things have been progressing. Certainly volumes have been stronger for places like Alaska and the Caribbean. But it's not like there's just this line around Europe. I mean Northern Europe is going quite well. We've made progress even with our Eastern European sailings when it comes to the book percentage that we're at today versus where we are a few weeks ago. Would it have been higher and more activity had all of this not happened? Absolutely. But one of the strategies that we had going into wave was pull forward the occupancy, pull forward our bookings. And we did just that. So we entered into this period with a nice amount of headroom, which we've maintained overall. So there's going to be ins and outs as we move through this. And I'm sure there's going to be reverberations that we don't know about yet, but the teams are managing to the curve and being reactive because the world is pretty reactive right now. Steven Wieczynski: Okay. Got you. And then second question, Josh, if I could ask one about PROPEL. If we think about the target of greater than 50% EPS growth from '25 through '29, so simple math is going to say, okay, 2025 adjusted EPS, I think, was whatever it was, $2.25, I think. That would say 2029 EPS should be at a worst-case greater than $3.38, $3.40, somewhere in that range. I guess with 2026 EPS now taking a pretty significant step backwards just because of fuel, is it fair to kind of assume that you guys feel pretty comfortable that you'll be able to absorb pretty much higher fuel prices over a longer period of time? Am I kind of thinking about that the right way? Josh Weinstein: Yes, I think that's right. Over a longer period of time, we'll take what the world has and we'll perform in any environment at the end of the day. So clearly, we'd be performing better if fuel was back at $60, $70, but we don't plan our lives around a world where fuel stays at $60 to $70. That's why our focus forever, and will continue to be forever, is use less because whatever the price is, if we use less, we do better. And if you think about our trajectory on our consumption, if you look at the per unit consumption decreases that we've had across the fleet, if you go back to where we were in 2019 versus where we are in 2026, we're saving this year alone about $650 million. If you go back just to 2023 and you look at where we are today, that alone is $250 million, thanks to the consumption savings that we are hyper-focused on and we'll continue to do that. Operator: Our next question is coming from Matthew Boss of JPMorgan. Matthew Boss: Great. So Josh, maybe could you elaborate on the curve and your comments on bookings well into 2028? Maybe if you could just speak to pricing power or areas of opportunity that you see across the portfolio today. Josh Weinstein: I want to make sure I understand your question. So can you say it a different way? Matthew Boss: Yes. Maybe if you could just elaborate on the strength on further out bookings. I think you cited well into 2028 and just where you see the greatest areas of pricing power across the portfolio. And I know we've talked about your portfolio approach and how that separates you from some of your peers in the industry. Josh Weinstein: Yes, I mean, I think the answer is yes. We've seen the trajectory of our brands in a pretty holistic way, leaning forward across the board when it comes to lengthening the booking curve. So it's almost uniform that people are at the far end of their booking curve. So everybody's been taking opportunities to really put things out for sale with more lead time, driving further sales and managing the curves. I don't know if I'd say differently than they used to. It's really just evolving. We've got tools that we've invested in to help us be better at our jobs in that respect. We've got -- we've brought in a lot of folks over the last few years that have great capability that are leading teams of revenue managers that are really pushing the envelope. And I think overall, we are becoming more mainstream, right? We're becoming more mainstream as a product. Our loyal guests really enjoy what they get with us and know to book in advance as far as they can so they get the best of whatever they want for their particular vacation. So I think it's all the blocking and tackling that we have been working with our teams around the world around those brands to push things forward. And it is -- when we talk about bookings, we're not just -- internally, we're not just looking at this quarter. We're not just looking at full year. What are our targets for '27, which I'm not going to tell you, what are our targets for '28? How far are we going? And are we getting the right balance, right? I mean we don't want to be 100% booked on day 1 that we put things on for sale. So there is art and science behind it, but everybody's been working hard to maximize the revenue. Matthew Boss: And then maybe, David, could you outline the drivers of ROIC above 16% in the PROPEL plan, meaning opportunities you see remaining across the portfolio, just how you're thinking about net yields relative to low- to mid-single digits historically? David Bernstein: As I said in the prepared remarks, our PROPEL model and the 16% was built off moderate yield growth and low-single-digit cost growth. And there's clearly, as Josh talked about, further out bookings and the revenue management, and I won't repeat all the things he said. There's clearly upside opportunity on both the revenue and the onboard areas to drive the ROIC even higher than 16%. That's not a cap. It's just a target for 2019 (sic) [ 2029 ] and beyond. Operator: The next question is coming from Xian Siew of BNP Paribas. Xian Siew Hew Sam: Maybe just on the 2Q guidance, you did 2.7% net yield growth in 1Q and 2Q is guided at 2%. Maybe just can you talk about any reasons 2Q should maybe take a little bit of a step back? Because it sounds like underlying, there's -- demand is quite strong. Josh Weinstein: I mean honestly, our first quarter yield guidance was less than 2%. We were pretty clear that when we were kind of coming around the table again to think about the rest of the year, we kept things fairly consistent given all the noise and all the background. So there's -- every period's got differences based on dry docks, based on what day of the week the bookings, the sailings end, et cetera. But we feel that 2% is where we were and where we are, and we always try to exceed. Xian Siew Hew Sam: Okay. Great. And then maybe just on the follow-up for longer-term outlook for net yield, you kind of mentioned moderate yield growth. Could you maybe talk about what do you think is the biggest kind of drivers within that? How do we think about the building blocks, if it's the ship kind of revamps, the islands? Like, what do you think is kind of the biggest kind of drivers within that? Josh Weinstein: Well, I don't think if we're going to quantify, the biggest drivers are not going to be the revamps. I don't think the biggest drivers are going to be the destinations. I think they're going to absolutely be accretive, but those are fairly isolated ship-by-ship things that are going to be nicely supportive of the yield growth. What's really going to drive us forward is incremental improvement in the commercial space, right, in the marketing, in the revenue management, in utilization of technology that we're already utilizing to be better at lead generation, better at conversion, better at personalization, better at driving earlier engagement with booked guests so that they are booking not just the ticket, but the packages and bundles and all the experiences that we have to offer on board. So the good thing is, if you think about where we are now versus where we were when I was kind of talking about this stuff 3 years ago, I think we've got a track record of leaning into those things and getting better every day. And not only do we have, I think, just an amazing team and amazing leaders, many of whom are new versus where we were 3 years ago, but the technology advancements to supercharge this only are going in one direction. So I think that's really where the broad-based improvements are going to be, which then get [ bolstered ] by the investments we've been making in the destinations and will continue to do so. And as you said, the refurbishments. Operator: Our next question is coming from Brandt Montour of Barclays. Brandt Montour: Congratulations on getting the buyback announcement today. I have a question on technology to kind of stay with that thread, Josh. How do you think about the opportunity to do more direct integrations with AI and LLM companies out there that do travel? And just given sort of the inherent complexity of the cruise product for most first-time cruisers, does that have the potential to fundamentally change the way consumers find their way to cruises? Josh Weinstein: I think it already is, right, because of the number of folks that utilize, whether it's ChatGPT or Gemini, Claude, I mean, you name it. I mean the whole nature of our interaction with the guests and how to get to our -- either our websites or our trade partners to come sail with us are in flight. I do think -- and so the teams have been working for a while now and will continue to do that on optimizing how we show up in those AI engines as opposed to the old days where we were just talking about Google search. I think the thing that's probably going to be a little slower for the cruise industry because of what you said versus what you see in places like Walmart and things that are a little bit more easy to navigate and easy to know what you're looking for and find it at the price that it's listed for is we are more complicated. There is no doubt. We're not a commodity. We are an experience. And so I'm sure it will come at some point, but we'll be on the tail end of that versus what we're already starting to see in select types of retail experiences. And I think with respect to our travel agents, we've been saying this forever, they are an incredibly important piece of our business. I don't expect that to change anytime soon. They are great at providing newcomers access to us. And they too, just like we are and just like every other company is, are working on, what does it mean to be a travel agent in a world of AI and optimizing their operations around that too? So I think it's going to lift -- a tide that's going to lift all boats. Brandt Montour: That's really helpful thoughts there. A different question would be on the longer-term targets. You just gave a great rundown, Josh, of how you think you're going to be able to drive yield growth. But just sort of honing in on your ship orders, 3 years ago, I think we all kind of thought that you'd see this -- lower, less ship orders, 1 to 2 per year. You're doing 1 per year. It looks like you guys are doubling down on that for the next sort of period of time. When you take this model out, obviously your fleet age will start to stand out against peers. And I want to know if you think that the industry has changed or your business has changed and that doesn't matter as much anymore? Josh Weinstein: I mean for those on the call that got to experience us going on the AIDA ship that came out of the AIDA Evolution program, an 18-year-old ship can look and feel like a 1-year-old ship and be maintained in that condition. So I don't think getting older in and of itself is going to be a driver of our ability to execute on our revenue strategy. I was, I am and I continue -- will be for looking forward to be of the belief that by having very measured capacity growth, we really get to focus on improving the underlying business and keep focused on that. And there is a tremendous amount of opportunity to do that. And yes, newbuilds are great, but we've got 96 ships, right? Newbuilds are not in the grand scheme of things. The thing in any couple of years or a few year period is going to lift us up. What's going to lift us up is the 96 ships. And we have every intention of keeping this fleet going for a nice time while we do introduce new capacity over time in a measured way. So I don't know if that answers your question, but I feel that the approach has been working and will continue to work. These are very long-term assets that people enjoy. And some of the best yields and some of the best NPS we get are on some of our older ships. Operator: Our next question is coming from Trey Bowers of Wells Fargo. Raymond Bowers: Thanks for the color earlier in the call about what you guys are kind of seeing in the Med and Europe given the conflict, but it seems like we could take out of that, that maybe some of the non-European trends, are they coming in even better than you might have expected? And maybe in that, could you just break down kind of what you're seeing in the Caribbean and maybe Alaska? Josh Weinstein: First thing I'd say is it is early days, right? We're literally a few weeks into something that has been completely unexpected, and it's working its way through the global backdrop. So yes, Caribbean's been a bit stronger. Alaska has been strong and it continues to be strong. We've been very pleased for a very long time about how Alaska for 2026 was shaping up. I'd be saying the same thing if we were having a call at the end of February. And with respect to Europe, I mean, we are very well booked in Europe to begin with. And so like I said, we had been pushing to really produce a good occupancy advantage and we did that. There is absolutely not the pace that we would have expected over the last few weeks versus a world where this wasn't happening in the backdrop, but not to an extent that there's much to talk about, just an extent that, yes, things have shifted a little bit here and there. And I have no idea how it's going to play out. Now cards on the table. I don't know. So we'll have to see how this develops, and we'll respond accordingly. Raymond Bowers: Yes, fair. And I have to ask, David, when we go through these periods of fuel spikes like this, and when and if things settle down, does this kind of maybe reintroduce the idea of just trying to smooth fuel prices a little bit through reintroducing a hedging program at some point? David Bernstein: Yes. No, thank you. So listen, we think about that question all the time, regardless of the situation and circumstance when we talk about it. But at the moment, you know what we've done over the past decade, and we'll continue to evaluate and rethink it. Josh Weinstein: I lost a bet. It took us until 10:46 for someone to ask about fuel hedging. Operator: Our next question is coming from Ben Chaiken of Mizuho. Benjamin Chaiken: Maybe on free cash flow, the $14 billion is very compelling. I think you framed it as 40% of operating cash flow. Does that -- if I'm not mistaken, does that kind of signal that you think about capital return and free cash flow independently? In other words, capital return in any year is agnostic of the CapEx in that year. And maybe along the same lines, for the implied buyback portion of that $14 billion, do you expect that to be smooth or will you be opportunistic? And then one follow-up. David Bernstein: Yes. So from an -- we do expect to be opportunistic in terms of the stock buybacks. We've said that repeatedly. As Josh said, we're starting with $2.5 billion. And clearly, over this period with $14 billion of expected shareholder returns, there'll be additional stock buybacks. In terms of the allocation, you got to remember that our CapEx is reasonably predictable over time because we have laid out one ship per year. And remember, we're only talking about '26 through '29 here. So it's one ship a year. Our non-newbuild CapEx also has some level of predictability, although we don't know the exact number every single year. This year it's $2.4 billion. And so as a result of that, we were able to triangulate into 40% of cash from operations, or more than 40% of cash from operations being returned to shareholders. And it's a combination of the reinvestment in the business, as Josh said, the $15 billion, and $14 billion -- more than $14 billion probably going to shareholders. That's the way we think about it as opposed to because of the predictability. Benjamin Chaiken: Okay. Got it. And then, David, in the past you've talked about there being more costs within NCC this year versus CapEx. You didn't necessarily talk about it on this call, but I think over the last 6, 12 months you've brought it up. Have you kind of contemplated this anymore, meaning is '26 an anomaly? Or is the level of cost attribution between OpEx and CapEx the right way to think -- for this year, the right way to think about it moving forward? David Bernstein: Yes. So you're referring to the dry dock expense where I had indicated in December that the total dry dock -- total spending on dry dock was flat, but there was a different allocation between the costs. That's something that we're going to have to look at every single year based off of the accounting rules and what can get capitalized. So stay tuned until -- for our December guidance. But we haven't, of course, we're just beginning to work through the 2027 capital expenditure plan and dry dock schedule. So there's a lot more for us to evaluate before we can give that answer. Benjamin Chaiken: Was there something unique that you're doing this year on the dry docks? I appreciate it moves year-to-year, but just to maybe double-click there. David Bernstein: Yes. There wasn't anything in particular that was unique. Remember, in total, the dry dock expense, and I mean, we're talking about well over $1 billion between all the ships in the year. And so a very small movement of even 1% or 2% between CapEx and expense can have an impact on the percentage increase of net cruise costs without fuel. And that's what it was. It was just a couple of percent movement which had a -- I think it was a 0.6% impact on the net cruise costs without fuel. Operator: Our next question is coming from Conor Cunningham of Melius Research. Conor Cunningham: Just on the -- so I understand that you're 85% booked for 2026, but just around fuel recapture a little bit, on the remaining 15%, does your pricing algorithms immediately kick in? And then in the same context as that, do you worry about demand destruction at all just because some of your competitors obviously do hedge and you guys don't? And like, does that put you at a disadvantage as a result on the pricing side? Josh Weinstein: Yes. So the answer is with respect to how we manage our revenue, the price of fuel is somewhat irrelevant. And certainly immediate swings are irrelevant. We price as much as the market can bear. We price as much as we -- as our guest base and potential guest base is willing to pay. And if they were willing to pay $10 more because of fuel, they should just be willing to pay $10 more. And so it is a little bit separated. Now clearly, when we do our itinerary planning and long-term planning, the price of fuel is a very big factor in how we set the itineraries and getting the balance right between the revenue that we'll generate and the cost that we incur. But with respect to how we manage the business day-to-day, now, I mean, we're really trying to maximize. And we're talking about $7 billion of EBITDA. So I don't see a disadvantage one way or another with respect to the price of fuel at any one given time. People don't tell us we got a great advantage when we're not hedged and the price is low. So this kind of conversation, we only talk about this when fuel goes in one way and not the other. I do think, I'll go back to what I was saying before, the focus on consumption is really, when you think about the long-term trajectory of our business and the long-term trajectory of our earnings power, using less is the only solution to the price of fuel. And that $650 million that I said, between 2019 and this year, the savings that we'll get in this year alone because of the consumption savings, that's nicely higher than the over $500 million impact we're seeing because of the spike in fuel. So that will remain our focus. Now I don't take away from what David said. We'll always look at it, right? And the world can change and we could take a different view in the future, but that's not the focus. The focus for the health of the long-term business is to use less. Conor Cunningham: Totally appreciate that. And I hate to ask another fuel-related question. Just given the -- like, I mean, if you look at your current pricing for fuel right now, it is obviously below current spot, and it's below the forward curve. And I totally appreciate it's impossible to factor like where that's all going. But like, why use those numbers? Why not assume something higher and then kind of if it comes in better, great. Just the idea around where you're marking oil at today in general? Josh Weinstein: We literally set our guidance on Monday and that was the curve on Monday. We rounded, but that was the curve on Monday. Since then it's gone up, it's gone down. It will continue to change. We tried to give you information so people can model whatever you believe or whatever is happening, but we just had to draw a line in the sand sometime and just move forward. David Bernstein: Yes, we gave you the sensitivity. Conor Cunningham: Well, if you know where it is next week, let me know. Josh Weinstein: Yes. If I know where it is next week, I'm retiring because I know the future and I can make a lot of money doing a lot of things. And I'm not the person that was betting on the prediction market in advance of all the stuff that's going on. Operator: Our next question is coming from Chris Stathoulopoulos of SIG. Christopher Stathoulopoulos: Josh, you've been in this seat now for a few years. You've navigated some difficult landscapes. I've always said with a lot of confidence and transparency. But one of your peers in the travel space is, I guess, giving some straight talk around what an extended period of elevated energy prices might mean. So you've gotten around Russia, Ukraine, tariffs, Liberation Day, other things. Walk us through, I guess, your plan. So in the short term, you're talking about lower consumption. Longer term though, if we're in a period of 16, 24 months of $100-plus oil, just how should we understand, I guess, internally? What are the areas of focus? How should we think about your ability to respond via pricing and perhaps changing itineraries and the like? Just want to understand, like, I guess the mid- to longer-term playbook in an extended or elevated energy cycle. Josh Weinstein: Sure. Yes. So I'd say, from a consumption standpoint, you've got, as you said, shorter term and longer term. Shorter term, there's still things that we can do on balance that will improve our consumption savings and really being even more maniacal about simple things that can save a lot of money with respect to how we're managing the sailing times and making sure we get in just to the port right in time and leave on time that cuts your fuel usage and how we manage the HVAC. I mean all those things, there's still opportunity to, like I said, be more focused. On the longer term, yes, we absolutely have the ability to change itineraries, to make decisions about number of ports that will stop off at particular -- in particular future scenarios. I would say we have been really strategic in thinking about the fuel side of our investments in our destinations in the Caribbean. And we are looking to -- and we have been looking to create a bit of a strategic fence for ourselves where we have great opportunities to go to great places that are very, very close to the home ports that we sail from. And things like Celebration Key and the pier that's going up now at RelaxAway are incredibly useful. We also have things in the pipeline on the investment side which we call -- we've already cycled through our Service Power Package 1, which cuts a lot of consumption on the hotel side. We already have our plans for Service Power Package 2, and we are incredibly bullish on that. And if it's warranted, we can always speed that up and get even more consumption savings. I don't -- I will be honest with you, though. I don't know how to respond to your question in total because I don't know what the world looks like in a year if fuel is at $110 and what that means. I just don't know. I would remind everybody that we have a lot of things going for us when it comes to what it is that we have to offer. Number one, we are still a huge value gap to land. We provide experiences at a much lower price point than people can find on land. And if people are looking to stretch their dollar further, it goes further with us. Second, we do make it convenient for people to get on our ships. About 50% of the folks that travel with us drive to get there. And that is incredibly powerful if people are looking to avoid cost, cost of air. So we will continue to, as you said, navigate challenges as they come. And I think over the last, call it, 5, 6 years, we have shown how much agility and nimbleness we've got and ingenuity to overcome some pretty significant things and come out stronger. Oh, you have one more? This might be the last question though. Go ahead. Christopher Stathoulopoulos: All right. Well, wanted to give you 2 things. So we can do our math on what it means for implied EPS growth through '29 off of the new guide. But if you could talk a little bit more about how, I guess, things like YODA and AI. I know there was an earlier question in AI, but I have been getting some questions on how AI might perhaps unbundle and take away some potential pricing power that you've been able to extract, if you will, because of this frictionless approach or bundling around purchasing. And then also, there was a chart back in your SEA Change deck from a few years ago that had future state capacity by brand, and I wonder if we're at a point where -- I think it was 30% plus for Carnival Corp where that is contemplated similar-ish level for PROPEL by '29. Realize there's a lot there. Maybe if you just want to talk about, I guess AI or... Josh Weinstein: I got to be honest with you, and I apologize. I didn't understand either question. So... Christopher Stathoulopoulos: Okay. Well, maybe if you could talk about -- you've talked about the moderate yield growth. And in the past, you've done a lot of -- you've spoken about YODA and how that differentiates what you do at the core. And there's been some questions around AI, which perhaps is maybe at conflict with that. And then on the actual capacity by brand, back in the SEA Change slide, you had future state, which was '26. I'm assuming that FY '29 contemplates a similar sort of distribution of capacity by brand type. Josh Weinstein: Okay. So as far as the AI goes, I think I understand where you're going. I mean AI has the opportunity to certainly be a disruptor in society in a lot of different ways. AI also has an opportunity to be harnessed for the benefit of supercharging what we do, including how we manage YODA. I mean we're already starting to utilize some pretty advanced technology in how we operate our business on the revenue side. And I think it's still early days. So I think the whole world is going to move at pace, taking advantage of what technology is going to do for businesses and for consumers. With respect to the capacity, are you asking basically whether our brand mix is going to be relatively consistent for 2029 versus where we are now? Christopher Stathoulopoulos: Yes. Josh Weinstein: Got it. So I mean, yes, I mean, more or less. I mean you've got the road map, right, which is really there's just effectively 2.5 ships in that period that are going to Carnival. So Carnival will be a bit heavier weighted in '29 versus where we are today because they're the only ones that have ships on order over this PROPEL period, and then we start introducing some for AIDA. And then obviously, we will order more ships for the 2030s. It will come at some point and we'll share that with you when there's something to share. But it's all going to be in the vein of intentionally measured capacity growth. So I apologize again for the delay in getting to the Q&A session, but I do appreciate the questions. And thanks to everybody for joining. Be safe, and we'll talk to you next quarter. Operator: Ladies and gentlemen, this concludes today's event. You may disconnect your lines at this time or log off the webcast and enjoy the rest of your day.
Thomas Pevenage: Hello, everyone, and welcome to the presentation of IBA's 2025 Full Year Results. I'm Thomas Pevenage from Investor Relations. As usual, you will find this presentation on the Investor Relations page of our website. A Q&A session will follow the formal presentation. Moving to next page. Let me draw your attention to the company's disclaimer for forward-looking statements, which, as you know, are based on our current assumptions and beliefs and subject to risks and uncertainties. Today's speakers are Olivier Legrain, our Chief Executive Officer and IBA Clinical Lead; Henri de Romree, our Deputy Chief Executive Officer and IBA Technologies Lead; and Catherine Vandenborre, our Chief Financial Officer and IBA Corporate Lead. Here is the agenda for today's presentation. We will start with our highlights for the period, followed by a business review, where we will discuss the strategic progress and the financials of each business unit. Finally, we will cover our financial performance in more detail and give you an update on our guidance and outlook before opening the Q&A session. Olivier Legrain: Thank you, Thomas. I'm Olivier. Good afternoon, everybody. Let me start by sharing our key messages for today. Full year '25 was a strong year for IBA. We delivered on our commitments. Our guidance has been met and we progressed as planned on the execution of our strategy while the group continues its transformation. This dynamic is reflected in our full year '25 performance, record revenue exceeding EUR 620 million; adjusted EBIT, formerly known as REBIT of EUR 27.4 million and a return to profitability in Proton Therapy. Our growth engine has also strengthened with a record backlog of EUR 1.6 billion, supported in particular by the scaling of service in Nuclear Medicine and a strong Proton Therapy order intake. Beyond this annual performance, 2025 marks the inflection point from a historically cyclical project-driven model towards a more consistently profitable platform. The '24-'28 financial outlook is confirmed, and we are providing a full year '26 guidance being an adjusted EBIT of at least EUR 32 million. Let me now have a closer look at our commercial momentum. In full year '25, IBA recorded a very strong growth in order intake, bringing our backlog at an all-time high of EUR 1.6 billion and providing increased visibility for the future. Service backlog grew particularly strong, up 16% year-on-year, reflecting the continued expansion of our Proton Therapy installed base, but also a strong contribution of Technologies. On the equipment side, we posted an historic equipment order intake of EUR 452 million, representing an increase of around 40%. Looking at our business unit, in Proton Therapy, we sold 12 rooms during the year, our second best year ever, reflecting strong commercial traction, particularly in the U.S. and in Asia. In IBA Technologies, 37 systems were sold compared with 33 driven by strong demand in RadioPharma, while Industrial Solutions normalized following record high years. As a result, the 2-year rolling book-to-bill ratio reached 1.0 as Equipment order intake grew broadly in line with revenue recognized over the period at group level. I will now move to our key financial metrics. In full year '25, group revenue reached a record level of EUR 620 million, an increase of EUR 122 million compared with full year '24, thanks to well-executed backlog conversion and the growth in service activities. Adjusted EBIT amounted to EUR 27.4 million, exceeding our guidance, a profitability improvement of EUR 10 million year-on-year. The adjusted EBIT margin increased to 4.4% compared with 3.5% in '24 despite a decrease in gross margin driven by a temporarily less favorable equipment profitability mix. Net debt stood at EUR 58 million as of December 31 as working capital continued to be impacted by the delivery of large Proton Therapy projects. On a like-for-like basis, excluding the ORA acquisition, net debt would have been EUR 41 million. Our net leverage ratio at 0.83x adjusted EBITDA remains healthy. Building on strong execution delivered in '25 and the momentum across our businesses, we are setting full year '26 guidance at a group adjusted EBIT of at least EUR 32 million. Let's now move on to the review of our business performance. I will start with the progress of IBA Clinical. In '25, our clinical entity benefited from a strong commercial momentum, continued technological innovation and a very significant improvement in Proton Therapy profitability. The year marks a clear turnaround for the business supported by disciplined execution and a more favorable project mix. The year was marked by several important milestones in Proton Therapy. MD Anderson published the first ever Level 1 clinical evidence from a Phase III randomized trial confirming proton therapy as a standard of care. We also launched a minimum viable product of DynamicARC and obtained the Medical Device Regulation certificate for Proteus 235 reinforcing the robustness and the regulatory maturity of our Proteus platform. In Dosimetry, we continue to innovate with the launch of the QUASAR Phantom for MR Simulation in the radiotherapy market and the release of myQA Blue Phantom. We further strengthened our product portfolio positioning through the acquisition of PhantomX, enabling AI-based quality assurance. Turning now to our global footprint in proton therapy. At the end of the year, IBA had 45 operational sites, well distributed across regions with strong visibility on future expansion as 43 systems are in production and installation. At year-end, we had 8 sites under installation and reached a peak of 10 installations running simultaneously in '25, a new high that demonstrates our execution capability. This include the ongoing installation of the first Proteus ONE in Spain as part of the 10 system order. The installation of 3 additional projects is expected to start in '26, subject to building construction time lines. In China, we made strong progress on major Proteus PLUS installations with the first live treatment rooms in Chengdu and Shenzhen and final acceptance expected by year-end '26. '25 also allowed us to further consolidate our market leadership in proton therapy. Thanks to the 12 rooms sold, we accounted for 63% of the total sold globally during the year. IBA continues to have the largest installed base in the market, which provides significant operational leverage and represents a robust platform to further promote proton therapy in close collaboration with our clinical partners. Increasing clinical evidence continues to be a key driver of Proton Therapy sustained momentum. In December '25, the Lancet published the first ever Level 1 clinical evidence, the most robust level of clinical data for a Phase III randomized trial led by MD Anderson. This study establishes Proton therapy as a new standard of care in head and neck cancer, demonstrating superior overall survival rates and significantly reduced side effect compared with conventional radiation therapy. In addition, early results from the RadCom Phase III Breast Cancer Trial presented at ASCO showed significantly improved patient reported quality of life with proton therapy in breast cancer, one of the most prevalent cancer types. Lastly, new studies have been recently added to pipeline of upcoming clinical evidence. We will continue to report on results. Despite an accelerated conversion into revenue, IBA Clinical continued to build backlog solidly in '25. Equipment backlog reached EUR 564 million, while the 2-year equipment book-to-bill ratio stood at 1.1, providing a sound platform for the future. Service backlog grew even faster now exceeding EUR 800 million. Zooming in on Proton Therapy Services, the increase in service backlog was supported by new orders and 7 renewed contracts while with existing customers. These contracts more than offset the amount of service revenue converted into P&L during '25. As a result, Proton Therapy Services continue to strengthen visibility, recurrence and long-term value creation within IBA Clinical. Let me now focus on Proton Therapy's performance and profitability turnaround. In '25, Proton Therapy returned to profitability, delivering a positive adjusted EBIT contribution of EUR 10.2 million compared with a negative contribution of EUR 12 million in '24. This improvement was driven by, firstly, top line growth as equipment sales more than doubled and service expanded. Secondly, profitability improvement with the scaling of our installed base. At adjusted EBIT level, this improvement was partially offset by continued investment in critical product innovations, including DynamicARC and FLASH and by the prudent application of our internal credit risk management policy with a recognition of EUR 8.7 million in bad debt within G&A. These are isolated problematic situations that we were willing to reflect while the overall quality of our credit exposure remains sound. Turning to Dosimetry in '25. Dosimetry delivered a stable top line in a challenging environment as already communicated throughout our trading updates. However, profitability continued to be negatively impacted by this competitive and regional dynamics in the U.S. and China. This effect was further amplified by the absence of last year's one-off subsidy grant of EUR 800,000, which overall contributed to a decrease in adjusted EBIT. These market dynamics also impacted commercial activity with order intake decreasing by 9%. As a result, cost optimization measures have been defined and will be rolled out in '26, ensuring a sharper focus on core activities and a realignment of the cost base with current market condition. I will now hand over to Henri to comment on the performance of IBA Technologies. Henri Romree: Thank you, Olivier, and hello, everyone. Let me walk you through the strategic progress achieved in IBA Technologies, starting with Industrial and then going to RadioPharma solutions. Industrial Solutions continued to progress along its road map, advancing accelerator-based sterilization and advanced irradiation solution. Ongoing market dynamics continue to support the long-term shift towards, X-Ray and E-Beam technologies as regulatory and environmental pressure on ethylene oxide increases. At the same time, the sterilization market is somewhat digesting temporary overcapacity after a peak in order intake in early 2020, partly linked to the COVID-driven investments. We remain very confident in the underlying market that is growing steadily and expect industrial order intake to normalize as utilization catches up with the installed capacity. In China, despite slower pipeline conversion with some project shifting in the coming years, we made substantial headway last year signing 2 additional high-power [ x-ray ] contracts, tripling the current local capacity. In terms of new application, we advanced our PFAS project progressing through technical trials and studies. And in polymers, another area with promising long-term potential, research continues to show potential with pilot progress remaining on track. Turning to RadioPharma solutions. We saw solid commercial traction with the highest order intake to date, supported by deeper penetration in our core markets and an expansion into high potential geographies. This was illustrated by the sale of a high-energy Cyclone IKON contract to PET Pharm Bio to install a PET and SPECT isotope production center in Taiwan. More recently, post period close, we also signed 2 strategic multisite contracts in the U.S., one with SpectronRX and another one with RLS/Telix. Finally, we continued significant efforts to expand our position in the radiopharmaceutical value chain, which I will detail on the next slide. As you know, IBA strategy in nuclear medicine is leveraging on our accelerator technology leadership to expand along the value chain and build a next-generation oncology platform. A key building block of this platform is ORA, a recognized trailblazer in radiochemistry, which we acquired in December. Another element in Theranostics, where we are making good progress. I will now cover these strategic initiatives in more detail. Let me first come back to the ORA acquisition, which represents an important strategic step for IBA in nuclear medicine. Completed at the end of 2025, the acquisition of ORA brings into IBA, a Belgium-based radiochemistry company with a highly skilled team of around 15 employees, including senior radiochemists, a strong record in automated PET radiopharmaceutical synthetizers and established relationship with leading pharmaceutical partners. By combining IBA's leadership in cytotron technologies with our cutting-edge expertise in radiopharmaceutical synthetizers, we are creating one of the most competitive integrated solution available for hospital and global radiopharmacy networks. This new integrated offering addresses the full radiopharmacy workflow from isotope production to purification, labeling and delivery and is designed to support customers seeking higher productivity and access to advanced radio isotopes. Importantly, the ORA acquisition is immediately accepted to IBA Technologies revenues and profits. And now moving to Theranostics, which is, as you know, a strategic pillar for RadioPharma solutions. It is indeed a fast-growing segment with a nuclear medicine [ serving ] with a projected market size of USD 20 billion by 2030 based on a 35% growth rate on a yearly basis as presented in our last Capital Markets Day. As you can read on the slide, several isotopes are emerging in this field out of which we are highlighting the most mature ones. Within this landscape, IBA decided to focus on actinium-225 and astatine-211 as strategic place based on clinical development as well as our technological and industrial edge. You already know our subsidiary, PanTera, paving the way to making actinium-225 treatment widely accessible. Catherine will update you on their progress in the corporate section of this presentation. Besides, we are increasing momentum for astatine-211. We are positioning ourselves on this emerging market. Firstly, on the technology front, we are developing a dedicated high-throughput cyclotron. Secondly, on the clinical side, we are one of the co-leader of the accelerate.eu program funded by the European Union. This ambitious platform combines industrial clinical and pharma players around a bench-to-bedside ecosystem to accelerate astatine-211 translation into a clinical setting. Lastly, with respect to production infrastructure, we continue to make good progress with a partner, Framatome, on our joint ambition to enable the astatine-211 market through the deployment of a full-fledged production network across Europe and the U.S. Turning now to the technologies backlog, you will notice a decrease over the period, reflecting stronger conversion into revenues. Industrial Solutions order intake has not yet picked up as market absorbs the temporary overcapacity as this was not fully compensated by the strong market momentum in RadioPharma. It led to a 2-year equipment book-to-bill ratio of 0.8 below reconstitution level. As far as service are concerned, backlog now includes upgrades. Nevertheless, IBA Technologies' contribution remains limited as our scope mostly relates to short-term 1-year maintenance contract with no permanent presence of an IBA [indiscernible]. Finally, looking at the financial results, net sales remained stable at EUR 225 million, representing more than 35% of total group sales. This is a solid achievement following 2024 strong growth. Adjusted EBIT contribution eased compared to prior record year. This is driven by 2 elements: first, a less favorable project mix, most notably a higher share of RadioPharma integrated projects where we collect lower margin on our third-party equipment; and two, intensified R&D investment in the radiochemistry and radioligand therapies within RadioPharma as well as in PFAS and polymers within Industrial. Nevertheless, EBIT margin landed at 8.9%. Let's move onto IBA gross profit. I will now give the floor to Catherine who will walk us through the corporate activities besides our group CFO. Catherine Vandenborre: Thank you, Henri. And let's start with an update of our new ventures beginning with PanTera, our joint venture launched with the Belgium Nuclear Research Center. In June, PanTera started the production and the supply of actinium-225 for clinical trials and compassionate use reaching full-scale weekly production in October. The year 2025 also saw the start of the construction of a large production plant located in Northern Belgium. Of course, all required permits were obtained ahead of the start of the construction. Operations are expected to start in '28 with first commercial scale supply targeted for '29. Finally, it is worth noting that PanTera continues to build strong commercial traction with more than 20 active customers across the value chain, including pharma and biotech players as well as key reference hospitals and research institutes. Multiple clinical trials are ongoing spread across different phases with first results expected from 2028. We will keep you posted on further developments. From a financial standpoint, PanTera generated EUR 13 million of revenues in '25 and became EBIT positive in Q4. In terms of funding, PanTera called the third tranche of its Series A for IBA. This resulted in a EUR 7.2 million revaluation gain and dilution to around 35%. A fourth and final capital increase tranche is expected in the first semester 2026, which will further dilute IBA shareholding to 31% while generating an expected revaluation gain of EUR 5.5 million. We remind you that PanTera was valued at about EUR 290 million post money in September '24. Let's now have a look at our other new ventures. First mi2-factory in the field of semiconductors achieved a very important milestone with the finalization of the demo system specifications for its first machine based on updated market requirements. Post period, an equipment development and purchase contract was executed with IBA for a value of EUR 15 million covering the accelerator component of mi-2's end-to-end solution. Second, NHa, our HadronTherapy project launched in collaboration with Normandy region, reached an important derisking milestone with the installation of the [ superconducting coil ] on site. Cooling activities are in progress and generation of the first magnetic field is expected over the summer. In parallel, efforts are ongoing to secure short-term and long-term financing. Post closing, NHa secured the first tranches of the anticipated bridge funding from its funders and other reference shareholders. Turning to our sustainability agenda, '25 delivered concrete progress that reinforces our ability to deliver sustainable growth and long-term value creation. We maintained strong momentum on decarbonization, remaining on track towards our Scope 1 and 2 reduction targets. More than 90% of our electricity now comes from renewable sources, supported by the continued rollout of our low-impact mobility policy. We also advanced the sustainability of our installed base. In the U.S., the full system restoration at MGH is underway, upgrading the proton therapy system to modern standards while avoiding a carbon-intensive decommissioning and rebuild. Beyond environmental actions, we expanded our contribution to patient support. Through the Oncia community, patients across Belgium, Spain and France benefited from human-centered supportive care. Governance and value chain initiatives also progress. We are proud to see our B Corp score increasing to 118 from 114 in 2024 and we published our first CSRD report. Let's now close the business review section and move to the financials in more detail, and let's start with the commercial traction behind our performance in '25. As mentioned earlier, we saw strong growth in equipment order intake, mainly driven by Proton Therapy with order intake up 137%, achieving the second best year ever in terms of rooms sold. From a regional perspective, overall commercial traction in '25 was mainly driven by the APAC region, including 7 out of the 12 PT rooms sold over the year. This contrasts with '22, where growth was mainly driven by EMEA, boosted by the Spanish PT project. The Americas have remained a solid core market for IBA across the years. Turning now to profitability. '25 is driven by a record high top line, up 44% year-on-year, partially offset by a reduction in gross margin down to 32.2%, mainly due product and project mix. This resulted in a combined effect of additional EUR 31.5 million in gross margin. Operating expenses increased in nominal terms, but progressed less than proportionately to revenue at 28% of sales compared with 30% in '24. Within OpEx, the increase in G&A reflects selected investments to support business growth, including digital and organizational initiatives, but also the one-off impact of higher bad debt in IBA Clinical at around EUR 9 million, following a prudent application of our risk policy. Finally, R&D increased as we progress on key projects, strengthening IBA's growth platform, including Proton Therapy imaging, DynamicARC, radiochemistry and [indiscernible] PFAS destruction. Let me now comment on the main items below adjusted EBIT. They were mainly impacted by a project to migrate to [ S/4HANA ], which is expected to be completed in the first semester of '26 and by a foreign exchange loss due to unfavorable currency fluctuations, in particular, the U.S. dollar, which is largely noncash. In addition, hyperinflation in Argentina continued to negatively impact our Proton Therapy project in Buenos Aires for EUR 1.9 million in '25. Impact was, however, reduced versus '24 and will wane in '26 as the project nears completion. Turning to PanTera. You will note a negative contribution under the equity method linked to negative result and a EUR 7.2 million revaluation gain, as already mentioned. If we turn to cash evolution, you can see that operating cash flows were negative over '25 due to cyclical working capital movements. While inventories decreased compared to '24, contract in progress increased substantially, reflecting the high volume of project activity in '25 with cost and revenue recognition progressing ahead of invoicing and cash collection. This trend is expected to start improving over the second semester of '26, partly thanks to the delivery of proton therapy projects in Spain and China as outlines by Olivier before accelerating in '27. Investing cash flows include the ORA acquisition. As already announced in our Q3 '25 trading update, we closed EUR 135 million refinancing package in November to strengthen our balance sheet structure and capture strategic opportunities. We have indeed, in December, partially financed the [indiscernible] ORA acquisition by drawing entirely of EUR 50 million acquisition term loan. Building on the strong execution in '25, we provide 1-year guidance for '26 of at least EUR 32 million of group adjusted EBIT. With backlog at an all-time high and services contributing to growing recurring income, we reiterate our confidence in IBS profitability trajectory while being mindful of the current macro and geopolitical environment. As a result, we reiterate the '24-'28 outlook announced at last year's Capital Market Day. I will now hand over to Olivier for his concluding remarks. Olivier Legrain: Thank you very much, Catherine. To conclude, I would say that '25 represents a key milestone for IBA. We delivered record high revenue and strong order intake, clearly reflecting the robustness of our commercial momentum across our businesses. Profitability improved meaningfully, supported in particular by the scale-up of Proton Therapy, driving the turnaround of our largest business unit back to profitability. At the same time, we continue to make disciplined and targeted strategic investments to support IBA's long-term growth. Throughout the year, we also actively managed our financial position and funding, strengthening the group resilience in a volatile environment. Finally, full year '25 guidance has been delivered, confirming the execution capabilities of our teams and the solid foundation of our transformation. With a strong backlog, clear growth drivers and improved visibility, we enter '26 with confidence and a clear trajectory ahead. Thomas Pevenage: Thank you very much to the audience for listening to our results presentation. For information, you will find on this presentation the key dates from our financial calendar. We will now move on to the Q&A session. [Operator Instructions]. We will start with Frank Claassen. So you should be able to speak, Frank. Frank, we cannot hear you, or maybe we can start with David. He was the second in line. Frank Claassen: Hello, this is Frank Claassen speaking. Can you hear me? Thomas Pevenage: Yes, we can. Frank Claassen: Okay. I had a bit of trouble here. This is Frank Claassen of Degroof Petercam. I have 2 questions. First of all, on your gross margin, it declined in '25 because of the low-margin legacy contracts. What can we expect in '26? Is that -- the legacy contracts, will that roll off? And hence, can we expect some gross margin improvement in '26? That's my first question. And then secondly, on the symmetry, you're taking cost measures here. Can you elaborate what kind of cost measures? And will we already see the benefits in '26? Hence, can we see margin improvement in '26 already? Catherine Vandenborre: So I will take your first question and leave for Olivier, the second question that you raised. So maybe to give a little bit more of color on the '25 gross margin. I would start by saying that indeed, it was impacted, like we said in the past by project in Proton Therapy where margins were lower than the typically targeted margin. But it was also impacted by an unfavorable project mix in RadioPharma. And so compared to, let's say, other years, we had those 2 effects. Dosimetry declined a little bit as well, but Industrial Solution improved. And Proton Therapy, and that's quite interesting, even if it's still impacted by those contracts that we signed with low margin, Proton Therapy improved compared to 2024. And that's also a way to signal the trends over 2026. We expect indeed an improvement of gross margin in '26 compared to 2025. And this is led by 3 major trends. The first one is a kind of more healthy competitive dynamics in the proton therapy market. And of course, it will take time before those contracts signed, especially in '22 will be fully realized, but the more we progress, the less important is the relative share of those contracts. Second element that we already mentioned is the scaling effect in Proton Therapy services where we really improve general margin, thanks to different efficiency measures that we implement. And the last one is a more favorable mix in RadioPharma with high-end applications. Olivier Legrain: When it comes to Dosimetry, we took -- we have implemented actually a number of cost reduction measures, productivity measure to adjust to the vision we had on the market development while preserving the sustainability through continued R&D investment. And the short answer to your question is yes, we can expect to see profitability improvement in Dosimetry already in 2026. Thomas Pevenage: We can move to David. David Vagman: First, a little bit on the question of Frank. So -- but on the 2026 guidance, so I heard you comment on the gross margin. Can you also comment on the top line and the OpEx growth or additional OpEx investments that you're planning for 2026? And then also related to 2026, could you explain us what could be the impact of FX moves on the top line and also the gross margin, if that plays a role? Then my third question on the bad debt. So you've mentioned in the press release that risk management played a role. So could you explain how you've changed your credit risk analysis? Catherine Vandenborre: Okay. So I will take your question on the evolution of the top line, OpEx and I think guidance overall in 2026. So first, in terms of top line, you might remember that we realized a growth of the top line of 7% in '24. We have now 24% in '25. And we mentioned in the Capital Market Day last year that we expected front-loaded growth. In total on '24-'28 trajectory that was announced with the range, 5% to 7% growth per annum overall. And what we can say is that we confirm the range, but we expect also to land at the high end of this range. We need to have in mind that '25 was particularly strong in terms of revenue. So each year over the period may not be as solid top line-wise. But of course, what we will focus on is to improve the profitability overall versus a very aggressive top line growth. And so it brings me to your question more generally on the guidance, gross margin and OpEx. So like already stated, we can expect an improvement of the gross margin in '26 versus '25. OpEx are expected to grow a little bit as well, but quite reasonably. You might remember that in terms of OpEx, we took the commitment to maintain them at maximum 30% of the sales. And that's the reason why if you have in mind the 28% of this year, it will remain relatively moderate as a growth. In terms of overall guidance, I think that we can say that we have been at this stage relatively cautious for 2026. The guidance that we gave is like in 2025, when to beat and not necessarily to meet. I think we need to have in mind that the macroeconomic environment is uncertain. And in this context, we remain cautious at this stage and give a guidance that underwrites those uncertainties. But as we continue to progress in execution over the year, we might update the guidance. And all in all, '26 guidance is on track to achieve an EBIT margin of around 10% in 2028. Regarding the bad debt, which was your other question. So in terms of management of the bad debt, the first element I would like to stress is that we -- of course, we have a policy based on which we try to secure payment through a number of elements like letters of credit, credit risk insurance, bank payments, guarantees and other instruments. But in 2025, we booked close to EUR 9 million, EUR 8.7 million, a little bit in an exceptional way. It's primarily linked to 2 PT customers in China or in the U.S. We are still in discussion with those customers. So we don't exclude to recover part of the amount later. But we believe at this stage, it was more cautious to book those bad debts. David Vagman: And a follow-up on my question on FX or it could be [indiscernible] in gross margin? Catherine Vandenborre: Yes. FX is, of course, quite difficult to predict the evolution. So we have -- you know that we have a hedging policy, which tends to hedge the cash exposure and not the P&L exposure. So we might remain exposed to fluctuation, especially versus the dollar, which are, of course, quite difficult to predict. David Vagman: Is it more of a negative with your cost in euro and your revenues in dollar? Or is it? Catherine Vandenborre: So it depends on the type of activities we have. If you look at the services taking into account that the vast majority of the activities are local, there we have a kind of natural hedge between the cost and the revenues. For equipment there, we still have a base of supplier, which is in Europe and in Belgium. So we tend to do our acquisition or purchase in euro. And then we sell in different currencies. In our negotiation with the customers, we always try to sell in euros, but you can imagine that sometimes it's not accepted by the customer and there, we hedge the position from a cash perspective. Thomas Pevenage: There are currently no more questions. No one else raising his hands. David Vagman: Otherwise, I have another question. On the net debt evolution, so if you could comment and also -- okay, on 2026, but also maybe give us some perspective on 2028? Catherine Vandenborre: Yes. So on the net debt evolution, so first, you saw the figures on '25. I will repeat them for the sake of clarity. So we ended at financial net debt position of EUR 58 million, but like-for-like, it would have been EUR 41 million if we don't take into account the acquisition of ORA, which was, of course, executed at the end of '25 and fully funded with debt. Now going forward, that was your question. '26 will still be impacted by the low-margin contract that we have signed mainly in '22. What we expect is that as from the second semester of '26, mainly the second semester with more devices shipped and expected payments linked to the shipment of those device, the cash situation is expected to improve over the second semester compared to the situation at the end of 2025, but still remaining negative in the sense of net financial debt position at the end of 2026. We will need to wait '27 to see an improvement with, let's say, reversal in our working capital cycle and end the year on a positive situation rather than a net financial debt. And the trend -- this positive trend is expected to continue in 2028. Of course, all this is based on the assumption that we have payment from the customers like we had in the past, so based on historical type of payments. Thomas Pevenage: Time to raise your hands if you want to ask the last questions. So [indiscernible], you should have the floor open. I think you have to click on unmute to make sure we can hear you. Okay, I think he was having a technical issue. [indiscernible]. Unknown Analyst: Just on Dosimetry, I thought -- I don't know if I heard from someone that you would be thinking about exiting this business again? Or was that the false rumor profitability there is really, really disappointing. What's the future of this division? Olivier Legrain: So for Dosimetry, we confirm that we continue to see it as a valuable activities, well anchored into IBA's portfolio of activities and notably with a very strong connection to the proton therapy market. So yes, it was a fake news that you've heard. Unknown Analyst: Maybe an additional question from my side. I saw that there were 3 PT contracts for which the services contract were discontinued. So 3 PT rooms for which the contracts were discontinued on the services side, do you see more of your portfolio of existing PT system at risk of where the maintenance could not be -- could be discontinued? Olivier Legrain: So I think one of them is one in Russia. So we don't have any additional site in Russia. So we had to indeed discontinue service in Russia, even though the site is still operating. The other one was one of the first sites that we have installed. It was in China, and we proposed the customer to either upgrade the site like MGH did or we could not ensure regulatory compliance anymore, and we had to discontinue. So back to your question, no, I don't expect more of this kind of situation. Catherine Vandenborre: And the third one to be very precise, is MGH. So we temporarily stopped because we are doing the refurbishment of the site there. But of course, we expect to renew the contract once the refurbishment is done. Olivier Legrain: Exactly. Thomas Pevenage: [indiscernible], I think you have another question? Unknown Analyst: Yes. On proton therapy, since you have around 65% of new market share, can you comment on your pricing power? Do you use your strength to have, yes, better pricing and margins, et cetera, because there's still a long way to go, I guess. Olivier Legrain: Well, I think on new contracts, we are where we want to be in terms of pricing. All of them remain competitive. So there is not one single deal where we are alone or so we need to remain within the industry benchmark. But in all new contracts, we are on industry benchmark. So we are back to where we want to be in terms of gross margin. Unknown Analyst: Yes. Well, for us, it's a bit hard to understand if you have such a high market share, why you say that you have to remain within industry benchmark. That seems -- or that's hard to understand for me as an outsider, one would think that you would have stronger pricing power than -- if you have -- if the market is so competitive, then it means that you're not so unique or maybe I understand wrongly? Olivier Legrain: I think it says it all. We have a dominant market share, but market is competitive. So I think we have a genuine competitive advantage that makes us win and not win on price, but there's a limit to that. And once again, it's not that we don't have competitors. We have competitors and they are credible enough, let's say, but we are more credible to win more deals with some kind of -- not on price, but on genuine value of our portfolio. Unknown Analyst: Okay. Now I understand. Just one other -- another rumor I heard was that the PFAS project wasn't going that well, but Catherine explained it. It seems to be progressing. Perhaps could you say a little bit more on the prospects of the PFAS project? Olivier Legrain: Maybe you should tell us where all these rumors are coming from. Catherine Vandenborre: Well, it comes from a discussion I had. So in terms of PFAS, there are different applications or solutions that we were looking for in water, but also in, let's say, solid elements on solid elements. On solid elements, I think from a scientific point, we didn't see a solution that would lead to a satisfactory business case. On water, the tests are positive from a scientific point of view, and we are now working on the positive business case together with partner. Unknown Analyst: That's why rumors are good. Now I understand this is precisely the right context. Thomas Pevenage: Anyone else or follow-on questions? Okay. It seems we have answered all questions that were raised. So many thanks again for attending the call and supporting IBA throughout our journey. We wish you a good end of day or start of day depending on where you are, and happy to maintain the dialogue going forward. Many thanks. Olivier Legrain: Thank you very much. Thank you. Bye-bye. Catherine Vandenborre: Thank you.
Operator: Good day, and thank you for standing by. Welcome to the fourth quarter and full year 2025 Legence Corp. Class A Common stock earnings conference 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 will 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. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Son Vann, Vice President, Finance and Investor Relations. Please go ahead. Son Vann: Thank you, Daniel, and good morning, everyone. Welcome to Legence Corp. Class A Common stock’s fourth quarter 2025 earnings call. With me today are Jeffrey Sprau, Chief Executive Officer; Stephen Butz, Chief Financial Officer; and Steve Hansen, Chief Operating Officer. This morning, we issued a press release that covers our fourth quarter and full year 2025 results and posted a slide presentation that accompanies the earnings release. All materials can be found on the Investors section of the company’s website, wearelegence.com. Before we begin, I want to remind you that comments made during this call contain certain forward-looking statements and are subject to risks and uncertainties, including those identified in our Risk Factors contained in our SEC filings. Our actual results could differ materially, and we undertake no obligation to update any such forward-looking statements. During this call, we will refer to certain non-GAAP financial measures which should not be considered in isolation from or as substitutes for measures prepared in accordance with generally accepted accounting principles. Please refer to our quarterly earnings presentation for reconciliations of these non-GAAP measures to the most directly comparable GAAP measures. With that, let me turn the call over to Jeff. Jeffrey Sprau: Thank you, Son, and thanks everyone for joining today to discuss our fourth quarter performance and current outlook for the business. I will also briefly cover a few other topics, including our integration efforts of the Bowers Group, the tuck-in acquisition we made earlier this month of Metrix, an engineering firm in the Seattle, Washington area, and provide an update on our growing craft labor force. First off, our fourth quarter results. Now Stephen will go into greater detail, but at a high level, we delivered an incredibly strong fourth quarter which was well ahead of our prior guidance. Total revenues grew by 35% to a quarterly record of $738 million, and most of our revenue growth was organic with contributions from both segments. Adjusted EBITDA grew 53% as EBITDA margins expanded by approximately 140 basis points. For the year, revenues grew by 22% and adjusted EBITDA by 30%. Most impressively, total backlog and awards grew by 49% year over year and 20% from just the end of the third quarter 2025. Backlog growth was essentially all organic and came on top of the aforementioned record revenue quarter. This translated to a book-to-bill ratio for the three months ended December 2025 of 1.9 times, an acceleration from what was already a robust third quarter book-to-bill of 1.5. Both segments saw strong total backlog growth. Year over year, Engineering and Consulting backlog rose by 6% driven by state and local governments, along with contributions from hospitals and data center clients. Our Installation and Maintenance segment grew by 66% driven by data center and technology clients in particular, for fabrication demand of our direct liquid-to-chip technical cooling systems. Outside of what is already in our backlog, we expect strong installation and fabrication demand to continue well beyond 2026. Now to give you a sense of our planning horizon, we are in discussions with certain data center clients for deliveries that extend into 2029. I should mention this fabrication demand is on top of the day-in, day-out installation and retrofit work we do in existing data center facilities built over the past twenty plus years. Okay. Shifting our attention to Bowers and how the integration process is going. As a reminder, Bowers is one of the premier mechanical contractors in the Northern Virginia DC Metro Area, home to the world’s largest installed base of data center capacity. They are one of the key contractors that have contributed to the region’s data center buildout since their first data center project for Amazon way back in 1999. With Bowers, we are now able to expand our mechanical capabilities into this critical region, broaden our customer base, and add roughly 50% to our fabrication footprint. This is in addition to the cross-selling opportunities that are now available with our existing engineering and electrical contracting presence in the region. When we announced the acquisition last November, we thought it would take until mid first quarter to clear regulatory approval. We are actually delighted that the approval came sooner than expected which allowed us to close on January 2. Since closing, we have been focused on critical integration workstreams to establish a secure, standardized operating base that aligns with our safety procedures, processes, controls, communications, and financial rigor. Our leadership team has also put in a lot of effort to build a solid foundation of trust with the roughly 2,000 employees of Bowers. We have been involved in several joint sessions to discuss operational alignment and opportunity reviews. I personally came away from those interactions with even greater conviction of what an incredible addition Bowers is for Legence Corp. Class A Common stock and our shareholders. Our first quarter 2026 results will include a full quarter’s contribution from Bowers as well as partial contribution from a really nice tuck-in acquisition of an engineering firm, Metrix, based near Seattle, Washington that we closed on March 1. Metrix is highly complementary with our existing engineering team in the area and has a solid base of clients that skew towards the education market, and they operate with a really strong margin profile. There is great cultural alignment with a very talented group of engineers, led by a motivated leadership team that is excited to join Legence Corp. Class A Common stock. I want to publicly welcome Metrix to the Legence Corp. Class A Common stock organization and look forward to working together to better serve our clients. One final point before handing the call over to Stephen. It is around our labor force, specifically on the contracting side. At the end of 2025, we employed almost 4,500 unionized craftsmen and women. This is up from 3,800 at September and 3,400 at June. Now with the addition of 1,700 union craftspeople from Bowers at the beginning of the year, and growing our existing workforce throughout this year, we currently have approximately 6,600 skilled craftspeople. Now we recognize there are pockets of tightness in various labor markets from time to time, and highly skilled labor will always be in demand. That said, as a company, we are fortunate in that we have not experienced any significant labor constraints that would impact our ability to execute on our commitments or cause us to pass on attractive new business opportunities. Our ability to add roughly a thousand craftspeople to our workforce, almost a third of our base during the second half of last year, reflects the general availability of union labor in our markets. It also reflects who we are as a preferred and safety-first employer and how we attract and retain people. As a unionized organization on the contracting side, our retention rate is extremely high. Workers are attracted to Legence Corp. Class A Common stock because we invest in our people with training and advanced tools to make them more safe and efficient. They also see our growing backlog with blue-chip customers and feel confident that there is a continuation of work after each project. As a result, we have great relations with the unions that we partner with; Legence Corp. Class A Common stock is typically one of the top union employers in the markets where we operate. Now as someone who has run other companies that employ both nonunion and union workers, there are clear benefits to being unionized and we are in a strong competitive position due to our skilled field workforce. With that, let me turn the call over to Stephen. Stephen Butz: Thank you, Jeff, and good morning, everyone. For the remainder of our call, I will begin with a review of fourth quarter 2025 results in comparison to 2024, as well as a review of our full year 2025 performance. Following my review of our historical results, I will make some brief remarks about our current guidance, discuss our balance sheet and liquidity position at year-end, and pro forma for the acquisition of the Bowers Group. We will close out with a few additional comments on the recent tuck-in acquisition of Metrix before handing the call back to Jeff. Starting with our fourth quarter 2025 results, we generated revenue of $738 million, an increase of $189 million, or 35%, from the year-ago quarter. The overwhelming majority of this increase was organic, with both segments contributing to the strong growth rate. Breaking down quarterly revenue growth at the segment level, starting with Engineering and Consulting, segment revenue increased by 10% to $173 million, most of which was organic growth. Growth was driven by program and project management services, particularly with hospitality and entertainment and education clients. Engineering and design revenues were essentially flat as higher demand from life science and healthcare and hospitality and entertainment clients was offset by lower revenues from data center and technology and education clients. Moving to Installation and Maintenance, segment revenue of $565 million increased by a very robust 44% versus the year-ago quarter, almost all of which was organic. Installation and fabrication services accounted for the majority of the segment growth, increasing by 53% driven largely by demand across high growth industries, including from data centers and technology and life sciences and healthcare clients. As Jeff mentioned, a good portion of the demand growth is for our direct liquid-to-chip technical cooling system we fabricate in our shops and ship to data centers across the United States. When we include the latest backlog additions, we will be shipping our cooling systems to data center locations in Iowa, Ohio, Utah, Georgia, and Texas, as well as Arizona, where we also do the installation. Maintenance and service revenue also increased at a low double-digit pace of 11%, rebounding from the slower growth that we experienced in maintenance and service in 2025. For the full year 2025, consolidated revenue was $2.6 billion, up 22% from 2024 levels. Engineering and Consulting segment revenues grew by 21%, driven in part by the full-year impact of acquisitions completed in 2024 and partial-year impact of acquisitions completed in late 2025. Installation and Maintenance segment revenues grew by 22%, almost all of which was organic, driven by greater demand for installation and fabrication services primarily from data centers and technology, and life science and healthcare clients. Turning to gross profit, consolidated gross profit for the fourth quarter 2025 increased by 31% to approximately $147 million. Our reported gross profit includes noncash stock-based compensation expense related to legacy profit interest units. While this expense burdens the income statement at Legence Corp. Class A Common stock, the payment of this expense is borne by entities outside Legence Corp. Class A Common stock, essentially the legacy pre-IPO shareholders. The settlement of this expense does not impact Legence Corp. Class A Common stock either in the form of cash outlay or the issuance of additional common shares. Additionally, because these profit interest units are marked to market, fluctuations in our stock price can lead to significant volatility in this expense line. As such, we have included in our press release a table reconciling our GAAP gross profit to adjusted gross profit, which excludes this expense related to these legacy profit interests the company does not bear the burden of. We believe this information will provide additional insight into our underlying operational trends. So with all that said, adjusted gross profit totaled approximately $157 million for an adjusted gross margin of 21.2% for the fourth quarter 2025, up from approximately $112 million and 20.5% in the fourth quarter 2024. The improvement in adjusted gross margin was primarily due to higher gross margins in the Installation and Maintenance segment, despite lower Engineering and Consulting margins and a revenue mix shift toward the I&M segment. Delving further into margins at the segment level, fourth quarter 2025 Engineering and Consulting adjusted gross margin was 30.9%, down from 32.6% in the year-ago quarter. The decline was mainly driven by a revenue mix shift towards the program and project management service line, which generates a lower margin profile than engineering and design, as well as slightly lower margins within the program and project management service line on project mix. Installation and Maintenance adjusted gross margin was 18.3%, up from 15.6% in the year-ago quarter. Adjusted gross margin improvement was driven by strong project execution within the installation and fabrication service line, partially offset by a higher revenue mix from the installation and fabrication service line, which carries a lower margin profile than maintenance and service activities. For the full year 2025, consolidated gross profit was $536 million, up 24% from 2024 levels. Excluding stock-based comp expense from the legacy profit interest, adjusted gross profit of $550 million with adjusted gross margin of 21.6% increased from full year 2024 adjusted gross profit of $432 million and adjusted gross margin of 20.6%. Higher adjusted gross margin was primarily due to stronger margins at the Installation and Maintenance segment. Turning to selling, general, and administrative expense, fourth quarter 2025 SG&A totaled approximately $115 million compared to $63 million in the year-ago period. Included in the fourth quarter 2025 SG&A was $36.4 million of stock-based compensation, of which $34.4 million was related to the legacy profit interest. SG&A also includes other adjusted EBITDA add-back items, such as acquisition and strategic initiative expenses. Backing out these items in both quarters, our adjusted SG&A for the fourth quarter 2025 was approximately $75 million, up from $59 million in the year-ago quarter, though lower as a percentage of revenue at 10.1% in the fourth quarter 2025 versus 10.8% in the year-ago quarter. The increase in adjusted SG&A expense was primarily driven by increased headcount, compensation costs, IT software, and professional fees related to both supporting our robust revenue growth and our operations as a public company. For the full year 2025, adjusted SG&A was $267 million, or 10.5% of revenue, essentially the same percentage of revenue as in 2024, despite now in 2025 being publicly traded. All in all, we generated adjusted EBITDA of $87 million in the fourth quarter 2025, an increase of 53% from fourth quarter 2024 levels. Adjusted EBITDA margin for the fourth quarter 2025 improved by approximately 140 basis points to 11.8% compared to the year-ago quarter. For the full year 2025, we generated adjusted EBITDA of approximately $299 million, up 30% from year-ago levels, with adjusted EBITDA margins of 11.7% which improved by approximately 80 basis points compared to 2024 levels. Depreciation and amortization totaled $28.7 million in the fourth quarter 2025, down slightly from $29.9 million from the year-ago quarter. The quarter also included a noncash charge of approximately $27.4 million to impair goodwill and related intangible and long-life assets at one of our smaller business units in the Engineering segment. This particular business unit supports customer energy-related initiatives focused on improving facility efficiency and sustainability. It is largely a success fee-based business that has very long lead times between pipeline to revenue recognition. With the passage of the one big beautiful bill last year, while there may have been some beneficial impacts, the shorter-cycle project led to a period of transition and uncertainty for commercial renewables, including solar, which is the focus of this particular entity. We elected to write off the goodwill of that entity to reflect the uncertainty around our current ability to forecast cash flow for that business unit. Interest expense of $13.6 million for the fourth quarter 2025 decreased by $12.7 million from a year ago, primarily due to lower average debt balance than the year-ago period. We also reported $6.7 million of other expenses in the fourth quarter 2025. Approximately $3.8 million of other expense is related to a tax indemnity receivable asset, which expired toward the end of last year. That was related to a prior acquisition. The expiration of that indemnity requires us to record a noncash pretax expense. There is an offsetting tax liability against that receivable that also expired, which reduced our income tax expense provision by an identical amount. Again, there is no net income statement impact. However, these offsetting amounts are on different financial statement line items. Please note that this could impact our fourth quarter results for the next few years as each portion of this tax indemnity receivable expires. Also included in other expense is $2.9 million related to an adjustment of our tax receivable agreement, or TRA, liability for a change in our pretax earnings mix by state. Turning to income tax, we had income tax expense of $2,022,200,000 for the full year 2025, despite incurring a book loss. There are a large number of expense items that led to a fourth quarter and full year book loss for Legence Corp. Class A Common stock that are not deductible for income tax purposes, such as certain amortization expenses, the goodwill impairment charge, and certain other corporate expenses, as well as some of our interest expense. Cash taxes for 2025 totaled $16.4 million. For 2026, we estimate our effective tax rate, or ETR, to be in the mid 30% to 40% range, and to incur cash taxes in the low $30 million range. Beyond 2026, we expect our ETR to gradually gravitate toward 30%. However, in any given year, our ETR will be impacted by any discrete items that may not be deductible for tax purposes. Lastly, our cash tax payments exclude any payments related to the TRA. We expect to make a payment on the TRA in early 2027 in the mid-single million dollar range, related to 2025 income. Switching gears to backlog, at the end of the year, our consolidated backlog and awards totaled $3.7 billion, up nearly 50% from year-ago levels and 20% sequentially. Almost all of this growth was organic, as the two tuck-in acquisitions completed last quarter only accounted for about $20 million of the $609,000,000 in backlog and awards growth during the fourth quarter 2025. Our consolidated book-to-bill ratio was a very robust 1.9 times for the quarter and 1.6 times for the full year 2025. We experienced backlog and awards growth in both segments. Installation and Maintenance grew by 66% year over year and 24% sequentially. As you might expect, much of this growth was with data center and technology clients. While much of the press on backlog growth will likely go to the installation side of our business, our Engineering and Consulting backlog grew at a healthy 16% clip year over year and 11% sequentially. This growth occurred across several end markets: state and local government, life science and healthcare, and data centers and technology. While our backlog and awards at year-end 2025 does not include Bowers, I want to provide you with some preliminary figures on their backlog and awards. They wrapped up 2025 with $1.5 billion in backlog and awards, up from the $1.3 billion at September 2025. Turning now to our guidance, we are establishing first quarter 2026 guidance for consolidated revenue of between $925 million and $950 million and adjusted EBITDA between $90 million and $100 million. Our first quarter guidance includes a full quarter contribution from Bowers. For full year 2026, we are increasing our revenue guidance to a range of $3.7 billion to $3.9 billion. This represents an increase from the initial 2026 revenue guidance range of $3,475,000,000 to $3,757,250,000 that we presented during our third quarter report in mid-November, which figures included a full year of Bowers. We are also increasing our full year 2026 EBITDA guidance to a range of $400 million to $430 million. This represents an upward revision to our prior guidance of $370 million to $400 million. A key driver of the upward guidance revision for 2026 is to reflect the strong backlog and awards growth that we experienced in the fourth quarter 2025. Now just a few other housekeeping items to help with your modeling efforts. Interest expense, net of interest income, for the first quarter is expected to be in the $15 million range with full year 2026 in the high $50 million range. Depreciation and amortization for the first quarter is expected to be in the $45 million range with full year 2026 D&A in the $170 million to $180 million range. In terms of capital spending, full year 2026 is estimated to total $65 million. Approximately two-thirds of the 2026 CapEx forecast is for growth. A portion of this growth CapEx is for fabrication capacity expansion in Colorado and to finish out our previously announced capacity expansion at our other facilities. Once completed, we will have just under 1.3 million square feet of fabrication capacity, including the 372,000 square feet of capacity that came with the Bowers acquisition. Now to our balance sheet, liquidity, and leverage. We ended the year with a cash balance of $230 million, up from $176 million at September, as we benefited from strong operating performance and continued to emphasize working capital management. Total liquidity increased to $424 million at quarter-end, up $164 million from September, reflecting both our higher cash balance and the revolver upsize that we completed last October. Total debt at year-end was largely unchanged at $825 million from the 09/30/2025 level. Based on our last twelve months adjusted EBITDA, our net leverage ratio declined to 2.0 times, down from 2.4 times at September. Our year-end balance sheet does not, however, include the impacts from the Bowers acquisition, which occurred on January 2. On a pro forma basis for Bowers, our net debt balance would have totaled a little over $1 billion, equating to a pro forma net leverage ratio of approximately 2.4 times, flat with third quarter level, despite the acquisition. As Jeff mentioned, we closed on a nice tuck-in acquisition of an engineering firm in the Seattle, Washington area, which complements our existing engineering business and broadens the client base in the region. Total purchase price was a little over $30 million, of which about 25% was paid in equity. The acquisition multiple was broadly in line with many of our past transactions for engineering firms of this size. This concludes my prepared remarks, and now I will turn the call back to Jeff. Jeffrey Sprau: Hey, thanks, Stephen. In closing and before we get to the Q&A, our fourth quarter results capped a very strong year for Legence Corp. Class A Common stock, marked by robust growth in backlog, revenue, and adjusted EBITDA, with most of this growth organic. We also made significant progress by deleveraging our balance sheet and adding to our liquidity, using 100% of the proceeds from our IPO in September to pay down debt, adding capacity to our existing credit and term loan facilities, focusing on improving our working capital management, and, of course, benefiting from our strong operating results throughout 2025. All of this tremendous performance is a direct result of our amazing 9,000 employees who wake up every single day with the goal of delivering exceptional solutions for our customers, colleagues, and communities. Now heading into 2026, our outlook reflects the strong fundamentals that are driving growth in our core businesses, as well as the addition of Bowers and our other recent tuck-in acquisitions. Now a lot of press coverage goes to the incredible demand in the data center market, and we are certainly participating in that megatrend. But we also really like the balance from our portfolio of life science, hospitals, education, and other end markets that are also growing and continue to provide a large, diverse base of clients to work with. So with that, we will now open the call up to questions. Operator? Operator: We will now open for questions. Please press star 11 to ask a question and wait for your name to be announced. In the interest of time, we ask that you please limit yourselves to one question and one follow-up. Our first question comes from Joseph Osha with Guggenheim Partners. Your line is open. Joseph Osha: Thank you. Good morning, everyone. Congratulations on the strong results. Jeffrey Sprau: Thank you. Thanks, Joe. Joseph Osha: You talked a lot about how your craft labor force availability is allowing you to, you know, take work even at very tight markets like data centers, which is great. I am wondering if you are seeing any other challenges in that market, in particular as it relates to, you know, your customers’ availability of material or other things, or whether you are seeing those projects able to proceed on a timely basis for the most part? Thank you. Steve Hansen: Yes. Great question. To date, we have not seen a supply chain issue that is pushing schedules out. Data center clients and our blue-chip clients, they are looking far into the future at materials they need and working with us upfront to make sure that material chain that we are working within is also available. So to date, no, we have not. Joseph Osha: Okay. Thanks. I have lots of other questions, but I will step back in the queue. Steve Hansen: Thanks, Joe. Operator: Thank you. Our next question comes from Adam Bubes with Goldman Sachs. Your line is open. Adam Bubes: Hi, good morning. Jeffrey Sprau: Good morning. Adam Bubes: Data center technology revenue, I think, was up 80% year over year. Can you just help us parse out that performance? How much was fabrication versus installation growth? And then in 2026, can you just talk about your expectations for the growth trajectory of the data center fabrication business specifically? Stephen Butz: Sure. We are growing both our installation at a nice clip at data centers where we are completing the whole for the mechanical or electrical services, but also the fabrication is growing, probably at an even higher rate as we are participating in buildout in these rural areas where we do not have an installation footprint. Just to give you a sense, even though we do not break out the fabrication-only revenue, it is a proportion of our I&M segment revenue. In 2024, it would have been a mid-single-digit percentage of our revenue with fab-only work, whereas it was a mid-teens percentage in 2025 with fab-only. So it is growing at a higher rate, as you would expect given where many of these data centers are being built. We expect that to probably tick up a bit in 2026, but maybe not quite as much as you would expect because as we bring in Bowers, historically almost all of their fab capacity is going for their installation jobs and not serving other markets. So that is probably an opportunity as we get further into 2027 and beyond. Adam Bubes: Got it. That is helpful. And then backlog, at pretty robust levels, are you seeing any changes in the duration of backlog? And can you just talk about how much is expected to burn over the next twelve months? Stephen Butz: Yes. That is a great question. We are seeing, in a positive way, an elongation of that backlog driven by a couple of factors. Obviously, with the ongoing boom in data centers, there are just longer lead times and also larger projects. Larger projects, obviously, take a little bit longer to burn than smaller projects. So those are some of the factors. We expect to burn a little bit over half of our backlog in 2026. And then, of course, the majority of the remainder would be in 2027, but we also have backlog extending into 2028, and not an insignificant portion. So we have visibility through our backlog and awards of revenue going out much further than we ever would have in the past. Adam Bubes: Great. Thanks so much. Operator: Thank you. Our next question comes from Sharif Elma Grabid with BTIG. Your line is open. Sharif Elma Grabid: Good morning. Thanks for taking my question. Pretty impressive beat this quarter. Can you shed some light on how much of Q4 revenue was driven by the backlog versus book-and-ship type orders that might have come in intra-quarter? And how you see the business mix evolving over the last few months? Thank you. Stephen Butz: Yes. There is certainly a bit of both, probably more from backlog and just really exceptional performance on larger projects, favorable project closeout, increasing proportion of the fab work that we have discussed. But certainly some quick-hitting jobs that provided some upside to the quarter also contributed to the beat versus our expectation in November. Does that answer your question? Sharif Elma Grabid: Yes, it does. Thank you, Stephen. Stephen Butz: Okay. Thank you. Operator: Thank you. Our next question comes from Brian Brophy with Stifel. Your line is open. Brian Brophy: Yes, thanks. Good morning, everybody. Appreciate taking the question. Nice quarter. Just had one on I&M gross margins. Obviously, they are a little bit better than folks were expecting. You mentioned some strong execution benefits in the comments, but any other color on what drove the strength there? Was there any improvement that was more of a onetime benefit? And how should we be thinking about sustainability of gross margins into 2026? Thanks. Stephen Butz: Yes, it is a great question, and we are certainly optimistic about our ability to continue to have this exceptional performance. But, of course, we do not want to get ahead of ourselves on the guidance. We have had two exceptional quarters in a row from a project execution perspective, and so we are not going to forecast that level of beat every quarter. But there again, I think I mentioned the increased proportion of fab-only, which tends to get a little bit higher margin on the fabrication-only business as opposed to the full install jobs, which are much bigger and tend to be much bigger in scope, bigger revenue opportunity. But, also, as we continue to complete more and more of these larger data center jobs, the work is similar, and so we are probably benefiting from that as well—just that additional experience in the area. Brian Brophy: Understood. That is helpful. And then there was a comment made in the opening comments on having some visibility into 2029 on the data center side. Just any more color on that comment and what you are seeing there, and to what extent are you getting some commitments from some of your hyperscaler customers on projects looking out that far? Thanks. Steve Hansen: Yes. As we mentioned earlier, around the supply chain question, hyperscalers and developers are looking further out in getting commitments to build, and we have worked really hard with them. The earlier we are in with them, the better we can help them plan and manage and mitigate risk from supply. And so we are having more and more conversations with them on projects being built all over the place, and, as Stephen said earlier, some of these projects are just getting bigger in scale, and they have to plan further out. So we are well into 2029 in conversation. Brian Brophy: Appreciate it. I will pass it on. Operator: Thank you. Our next question comes from Michael Dudas with Vertical Research Partners. Your line is open. Michael Dudas: Yes. Good Friday morning, gentlemen. Steve Hansen: Morning. Michael Dudas: As you are taking a look at the non-data center technology side of the business, you highlighted a few times in your prepared remarks about diversity and the opportunities there. As you look to 2026 and into 2027, is it a normal growth rate relative to what you have seen? Is it accelerating? Is there any areas—certainly, there is a lot of visibility in life science and healthcare, a lot of press releases on that front. But it also seems like the education and state and local could be very helpful. So how contributory will that be relative to your prior expectations going into 2026 on your outlook? Thank you. Jeffrey Sprau: Yes. It is a great question. I will start, and my colleagues will chime in. We certainly like the long-term macro tailwinds from an onshoring and reshoring perspective on manufacturing. It certainly also applies to the life sciences space. We like—and I think we are seeing some green shoots, if you will, on the biotech lab space as existing square footage gets absorbed, and that turns into ultimately new demand for us from a tenant buildout perspective. And then I think we always have loved education because the installed base is so massive, and there is always a need to improve the performance of existing schools, whether it is primary schools, K-12 schools, or higher education from an R&D and STEM perspective. And that really fits right into our wheelhouse of having this holistic view of design-build in most facilities. And finally, this increase in price or expense related to electricity helps from an energy-efficiency return on investment perspective. Essentially, the math is easier as energy becomes more expensive, which is a demand driver for us. Now, how do we turn that into a hard number in terms of expected growth rates from before versus today? I will sort of pass the mic to Steve and Stephen to try to take those vague comments and boil them down into a more specific number. Stephen Butz: Yes. No, Jeff, you nailed it on those trends that are impacting our results. The reshoring is definitely a longer-term impact and something that we have probably talked about in past meetings with you all—that we really see that having more of an impact as we get further and further into the decade. There are a lot of these big projects like semiconductor fabs with just multiyear planning cycles. And so we are seeing now benefits from reshoring that started at the time of COVID. Of course, there have been a lot of reshoring announcements with some of the administration’s policies that we have seen in 2025 and 2026. And so we are obviously optimistic that that is going to provide some nice uplift as we get into 2027 and beyond. Michael Dudas: Said. Thank you, gentlemen. Operator: Thank you. Our next question comes from Derek Soderberg with Cantor Fitzgerald. Your line is open. Derek Soderberg: Yes. Thanks for taking my question. On your proprietary software, Trove, the real-time data evaluation software, to what degree is software now contributing to revenue? And is it a mandatory pull-through for some of your larger data center installations? Thanks. Jeffrey Sprau: Yes. That is a great question, Derek. Trove is really focused on the commercial real estate market, and it is a tool that we use internally to do analysis of portfolios of buildings for building owners to sort of rack and stack and prioritize capital improvements to improve the performance of their buildings. It also is, at times, used by customers who want to sort of DIY that same analysis. We are happy to do it either way. That said, in either scenario, that really has a de minimis impact on our revenue. It is really part of our bundled solution that we sell to the large global property managers in the world. Derek Soderberg: Got it. Thanks, guys. Operator: Thank you. Our next question comes from Chris Sung with Wolfe Research. Your line is open. Chris Sung: Hey, good morning, guys. Thanks for taking my question. Maybe just asking on the data center deliveries in 2029 a little bit differently. Are the data center opportunities for 2029 onwards, or are there still hyperscalers bookings for 2026, 2027, 2028 from your data centers? Thanks. Steve Hansen: Yes. No, we are still looking at opportunities before that timeline—2026, 2027, 2028 as well. I think the key point is the relationship has allowed us to get further into the planning weeds with our client base and get a much better view of what is coming in the future. Chris Sung: Great. Thanks. And just on a follow-up on the backlog growth, how much reflects new customers versus existing customers? Stephen Butz: Yes. We do not have a breakdown of that handy, but certainly we are continuing to win larger and larger awards with our existing clients, and we are continuing to see new clients, even new blue-chip clients. Often, those initial awards are probably smaller than the awards that we see from our existing clients, but as we execute, we would expect those to grow over time. Chris Sung: Thanks, Stephen. Thanks, Jeff. Operator: Thank you. Our next question comes from Joseph Osha with Guggenheim Partners. Your line is open. Joseph Osha: I made it back. This is a bit of a geeky question. We have heard a lot about the shift to 800-volt DC in data centers. I am wondering if you all have encountered any of those yet. Steve Hansen: Yes. We have not. And really that shift will not affect our work that we do for them. The conveyance of material and everything else that we are doing—that should be a big driver for us. Our electrical installation team will see some of that, but we have not really seen that prevalent in the market yet. Joseph Osha: Okay. Thank you very much. Operator: Thank you. Our next question comes from Oliver Davies with Rothschild and Co, Redburn. Oliver Davies: Yeah. Hi, guys. Just one for me. So I guess, obviously, very strong Q1 guide, you know, even on an organic basis. So can you sort of discuss how you expect the cadence of organic growth to progress through the rest of the year? Stephen Butz: Yes. We do not have huge seasonality in our business, though we do have some. We tend to peak in the second and third quarters, and it is really driven primarily by our program and project management business. If you look at the disaggregation of revenues, a lot of that business is in the education end market, which really tends to peak in the summer months. There may be some pockets of seasonality elsewhere in the business, but that is the pocket that I would highlight as being most significant. Oliver Davies: Okay. Thanks. Operator: I am showing no further questions at this time. I would now like to turn it back to Son Vann for closing remarks. Son Vann: Thanks, Daniel, and thanks, everyone, for attending our fourth quarter 2025 earnings call. A recording of this call will be available on our website in a few hours. We look forward to updating you again on our next earnings call. Thank you everyone again, and have a great weekend. This concludes today’s conference call. Thank you for participating. You may now disconnect.
Operator: Hello, ladies and gentlemen. Thank you for standing by for 51Talk Online Education Group's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded. I will now turn the call over to your host, Mr. David Chung, Investor Relations for the company. Please go ahead, David. David Chung: Hello, everyone, and welcome to the fourth quarter 2025 earnings conference call of 51Talk. The company's results were issued by Newswire services earlier today and are posted online. You can download the earnings press release and sign up for the company's distribution list by visiting ir.51talk.com. Mr. Jack Huang, our CEO; and Ms. Cindy Tang, our CFO, will begin with some prepared remarks. Following the prepared remarks, there will be a Q&A session. Before we continue, please note that the discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may be materially different from the views expressed today. Further information regarding this and other risks and uncertainties is included in the company's Form 20-F and other public filings as filed with the U.S. Securities and Exchange Commission. The company does not assume any obligation to update any forward-looking statements, except as required under the applicable law. Please also note that earnings press release and this conference call include discussion of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. 51Talk's press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures. I will now turn the call over to our CEO, Jack Huang. Jack, please go ahead. Jiajia Huang: Okay. Thank you, David. Hello, everyone. Thank you very much for joining our conference call today. 2025 has been a transformational year for 51Talk as we began to reap the rewards of our strategic investments made over the past several years. Full year gross billings reached USD 127.6 million, representing a year-over-year growth of 83.4%, while net revenues grew 88.6% year-over-year to USD 95.6 million. These results may mark a significant milestone as gross billings surpassed and net revenues approached the USD 100 million threshold for the first time since we embarked on our global expansion strategy, providing compelling validation that our business model can scale effectively on a global basis. Net operating cash inflow also surpassed the USD 10 million mark, reaching USD 11.8 million in 2025, further evidence that we are building a sustainable and scalable business model. Looking ahead to 2026, we are committed to expand our growth trajectory based on the foundation we built over the past years. We are focused on consolidating the transformational gains of the past year and further enhancing our user experience. With that, I will now turn the call over to Cindy, our CFO. Chun Tang: Thank you, Jack. Now let me walk you through our fourth quarter financial details. Net revenue for the fourth quarter was USD 30.6 million, an 88.6% increase from the same quarter last year, largely driven by the increase of active students with attended lesson consumption. Gross margin for the fourth quarter was 72.4%. Gross billings grew by 72.0% from the same quarter last year to USD 36.8 million. Q4 operating expenses were USD 27.4 million, an increase of 103.6% compared to the same quarter last year. Specifically, this has been driven by Q4 sales and marketing expenses of USD 20.4 million, a 101.6% increase from the same quarter last year, primarily attributable to the rise in marketing and branding expenses resulting from intensified marketing and branding activities as well as higher sales personnel costs related to increases in the number of sales and marketing personnel. Q4 product development expenses were USD 1.6 million, a 72.2% increase from the same quarter last year. Finally, Q4 general and administrative expenses were USD 5.4 million, a 123.9% increase from the same quarter last year. Overall, Q4 operating loss was USD 5.2 million, while net loss attributable to the company's ordinary shareholders was USD 6.5 million, a 504.3% and 368.8% increase from the same quarter last year, respectively. Q4 GAAP and non-GAAP earnings per ADS were negative USD 1.08 and USD 1.03, respectively. The company's total cash, cash equivalents and time deposits were USD 39.0 million at the end of the fourth quarter. Advances from students were USD 76.6 million at the end of the fourth quarter. Looking forward to the first quarter of 2026, we currently expect the net gross billings to be between USD 29.0 million and USD 31.0 million. The above outlook is based on our current market conditions and reflect the company's current and preliminary estimate of the market and operating conditions and customer demand, which are all subject to change. This concludes our prepared remarks. We will now open the line for questions. Operator, please go ahead. Operator: [Operator Instructions] The first question today comes from Christo Lee with China Merchants. Christo Lee: So I have 2 questions. The first one is, can you give us an update on how the conflict in the Middle East is affecting your operations? And what's the revenue exposure? And how should we think about the risk to the business? And my second question is, can you share with us any guidance or outlook for this year? Jiajia Huang: Okay. Thank you very much for your questions. So let's start from the first question. This is a fair question in this timing. So our answer is our operations right now in the Middle East are normal and the markets we serve are not the war parties to the conflict and our teams on the ground are safe and operational. Where we have seen some impact is around the travel restrictions in the region. Beyond that, we are mindful that the rising tensions do affect the sentiment of the people, both among local -- our local employees and our customers. On the employee side, we have strong local leadership and will be adaptive. We are managing the customer side proactively, and we are confident to navigate potential fluctuation of customer sentiment. Beyond this, I want to explain more about the Q1 seasonality, which is the Ramadan, with this Ramadan falling from February 18 to March 19 this year, squarely across most of the quarter. And after that, after the Ramadan was about nearly 1 week of the Eid. So we anticipated the natural shift in terms of the lesson activity as we do every year in Q1, and we have planned accordingly. So let's move on to the next question about the guidance or outlook for 2026. First of all, I want to say that we are not usually providing official full year guidance, but we can give investors a sense of direction. So we have confidence that in 2026, our gross billings, net revenues and operating cash flow will all continue to grow healthily. In 2025, we made significant front-loaded investments in new markets, in technology, in our teams. In 2026, we expect to harvest those investments. We will also be focused on improving the unit economies across every market we operate in. So we expect our cash-generating capability to remain robust over the course of the year. Thank you. Operator: [Operator Instructions] There are no further questions at this call. I'd like to turn the call back over to the company for closing remarks. David Chung: Thank you once again for joining us today. If you have further questions, please contact 51Talk's Investor Relations through the contact information provided on our website. Thank you, and goodbye. Operator: This concludes the conference call. You may now disconnect your lines. Thank you.
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