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Operator: Welcome to Balder Q4 Report 2025. [Operator Instructions]. Now I will hand the conference over to IR Jonas Erikson. Please go ahead. Jonas Erikson: Good morning, everyone, and welcome to this call for Balder's Q4 and Full Year Results 2025. With me in the room, I have Erik Selin, CEO; and Ewa Wassberg, CFO. And we will run through some slides as usual, and then open up for questions. Erik Selin: Erik here. If we look at Balder at a glance by year-end, we have a portfolio value of SEK 229 billion, and the composition is 54% resi and 46% commercial. Occupancy rate at 95%. We have good liquidity, SEK 24 billion, debt to assets, 48.1% and NAV is SEK 94 in this quarter. Looking at the Q4 numbers specifically, we have rental income and NOI up 4%, and it's important to bear in mind that this is in Swedish krona that has been pretty strong lately. Profit from property management in earnings capacity goes down 7%, and that is connected or explained by our proposed distribution of Norion share as a dividend to the shareholders. And also important to just bear in mind that if we look at year-end figures, the dividend is roughly SEK 5.25 per Balder share, but NAV will decrease SEK 4 per share. And like-for-like rental growth is in the positive territory of 2.7%. And here, we have the earnings capacity then updated in more detail. And there you can see Norion effect is on profit from associated companies that goes down, but that is totally explained by the Norion distribution that we will most likely do after the AGM. So now it's the balance sheet booked as another asset that will be distributed, and that's why it will not be included in earnings from this year. So with that, we end up with SEK 6 billion and SEK 5.06 per share ex-Norion. The portfolio is 80% in larger city and capital, as always, and we have the usual one, Helsinki, Stockholm, Gothenburg, Copenhagen. And you can see the split also residential, 54%, as I mentioned, and then you have office 15%, retail, 12% and logistics, 7%. The longer-term trend is that we have been having quite a good increase over the long time period in profit from property management. This curve is only 10 years. But if we look back another 11 years, we have a long good trend. The latest year has been sort of flattish, and that is, of course, interest rates moving from 0 and upwards. And in our case, we more or less compensated with higher income. And we also had a lot of fixed interest rates. So the effect came gradually. But then having said that, if interest rates are flat, then the long-term trend will be that this curve will start to go upwards again. And here, we can also see development for property value and LTV and occupancy. So LTV, 48.1% and occupancy now is 95% is rough -- it's almost always 96%, but every now and then it happens with 95%, and this is whole percentage points. So behind that is actually sometimes that move up or down, and then we round it up to 2%. So we think this is an okay result, and thanks to our organization for achieving this stable development year after year after year after year. Ewa Wassberg: Looking at the financing, the current mix of funding is largely where we want to be, which is 50-50 split between bank and bond financing. The level of available liquidity is in line with last quarter, which is a little bit higher than usual. And we will also continue to have slightly higher liquidity during '26 due to higher concentration of maturities in the beginning of '27. The interest rate fixing and hedging ratio is stable and the average interest rate is unchanged since last quarter at 2.9%. Yes. So here, you can see the long-term trend of the portfolio value in relation to the net debt to total assets. As you can see here, net debt to total assets continue to go down a little bit. And the current encumbrance level is at 23.4%, which also is a reasonable expectation for the future given our funding mix that is somewhere between 20% and 25%. So over to the maturity structure. If we start with the bank loans, the maturity structure is a result of the Swedish bank financing. It's typically quite short, even though we have bank financing in other countries as well. So on the bank side, it has been business as usual, rolling maturities. If you look at the bond side, we have more maturities in '27, which is the reason for the higher liquidity position. The funding market is very strong. And in such a situation, we might maintain a slightly higher level of liquidity as the cost of additional liquidity is small relative to the security it provides. And here is more sort of a structural overview of the funding and capital side. As we have said before, we will continue to have a balanced capital allocation until reaching our target of 11x net debt to EBITDA, even if the distribution of the Norion shares as a dividend will temporarily work in the opposite direction. Here's also an updated calculation on the convertible bond, which when that is converting, assuming that we are above strike price, obviously, will have a very positive effect on the indebtedness number as well. And in terms of funding strategy, there is really no change compared to previous quarters. And that was actually all from us. And on that note, I will leave the floor and open up for questions. Operator: [Operator Instructions] The next question comes from Stefan Andersson from Danske Bank A/S, Danmark, Sverige Filial. Stefan Erik Andersson: A couple of questions -- sorry, a couple of questions from me. Starting on Norion there. Just a little bit curious on the technique on that one. Earlier distributions we've seen, there's an -- just before the distribution, there is an adjustment of the value to market value. So like it was a write-up made when Anaheim was distributed. Now I guess 2 questions in one here. I guess the valuation right now after the drop here is similar to what you have in the books on group level. But will you have such an adjustment of value before distributing? Or are you going to net it out somehow? That's the first question. And the second question is when you say distributing SEK 5.50 and the NAV drop is 4%, is that based on the year-end valuations? Or is that based on today's valuation? Jonas Erikson: Yes. So there won't be any sort of value change before the distribution. So the distribution is sort of separated as of year-end. And now it's booked as an asset that will be available for distribution and the NAV will be adjusted sort of accordingly. It's not going to be any value increase or realization gain booked through the P&L. And the numbers are per year-end. Stefan Erik Andersson: Perfect. Then secondly, B shares. I'm a little bit curious if you could maybe mention a little bit about why are you thinking about issuing B shares? Is it -- is this something you need for the Norion distribution? Or is it has anything to do with the hybrid? Or is there anything else? Erik Selin: No, we don't need it for Norion or hybrid. It's just to have optionality going forward. So it's a practical way to be able to do it. And then we add that when we have the AGM instead of potentially if we need it later, have an EGM. Stefan Erik Andersson: Okay. Then I'm a little bit curious about your thinking about repurchasing your shares. I mean the -- with the NAV growth and the stock flat, the discount is increasing even further. I've seen that you made some acquisitions, and I guess you have to evaluate the capital allocation on that. So right now, do you see actually any good options or alternatives to the Balder share actually? Erik Selin: Difficult to tell beforehand. But I think we can do both, as we said last quarter. So it's possible that we buy some shares and do some investments at the same time. But the split between those is a bit depending on share price and what possibilities comes around. Stefan Erik Andersson: Yes. On the co-ops, the apartments business there, with the loss that came through and has come through the year, what is your thinking there? Have you started to discount stuff? Or is it more a volume issue that makes those unprofitable? Erik Selin: No, we have running cost, and we took over some apartments in Karlatornet that was slightly negative when we sold them. So it's highly likely that, that figure turned positive this year. Stefan Erik Andersson: Okay. Good. And then I guess I won't get an answer, but I answer anyhow. I mean, I hear what you're saying with the liquidity that you've had now for a while on a relatively high level versus history and even though you say it's cheap, but it's still costing you a little bit. Is that something that you use to have some maneuvering room to do some bigger transactions? Or is it purely just to wait to pay out in '27? Jonas Erikson: The majority of it is because we have a lot of maturities in Q1 '27. We have 2 euro benchmark bonds maturing in the same quarter. So that in itself will lead to a liquidity position that is sort of SEK 5 billion, SEK 6 billion higher than usual up until we've had those maturities. Then I think you also have to look at how the pricing in the funding market is from time to time. If you see attractive pricing, if you have a lot of incoming interest from investors, you might issue a little bit more or you do it a quarter or 2 before you have planned. If you issue a bond 1 or 2 quarters, ahead of schedule, and you can do that at attractive pricing that might still make sense even if you actually carry a little bit higher liquidity cost. We're trying to optimize and think sort of 24 months ahead in terms of maturities, liquidity needs and how the market is currently and what we see on the horizon. And we try to optimize it from there. Operator: The next question comes from Jan Ihrfelt from Kepler Cheuvreux. Jan Ihrfelt: A couple of questions from my side. I start off with rental agreements on your resi here in Sweden. How have that developed? And are you able to give any guidance on maybe a possible range where it could land? Jonas Erikson: So most of them are finalized. So we landed at slightly below 3.5%, 3.2%, 3.3%, I think. Jan Ihrfelt: Okay. Okay. And my second question relates to Finland. There has been a quite heavy oversupply in the market there for some years. We see some early signs on maybe lower vacancies, but could you give a short -- I mean, put a little bit more flavor on that market just in terms of vacancies and rents? Jonas Erikson: I think there's no change to our sort of outlook for the medium term. There's been quite a drop-off in new supply coming -- de facto coming to the market. And with that, we know that occupancy should go up steadily. And at some point, there will be an increased sort of pricing tension in the market as well. It's very difficult to find this, I think, on a quarterly basis. What we can see in the later part of 2025 is that it actually has slightly less impact on the occupancy compared to what we had expected. But that might also be temporary issues in terms of how migration flows move. So the official statistics in terms of people moving into the urban areas is still very strong actually. So we feel that the picture is very similar to what we've said all along, and it's difficult to time it from a quarterly perspective. But if you think about the big picture, I mean, we've had in the last 7 or 8 years, hardly any rent increases. At the same time, disposable incomes are up by 25-plus percent. There's no issue with affordability. We know that new supply is falling off a cliff. And we see that in some of the cities where that has already happened, you see pretty quick recoveries in occupancy actually. And at the same time, you have a sort of unabated movement of people to the urban areas. So from a pure mathematical standpoint, something new needs to happen for this not too many recovery in the coming couple of years is our view. And let's see when and how and in which order things happen. Jan Ihrfelt: Okay. If I interpret, you're right that the lower vacancies hasn't impacted the rent levels to any extent or. Jonas Erikson: No. I mean there's always some seasonality in the Finnish market. So we can't see any sort of trend shift yet. That's a little bit too early, I think. Jan Ihrfelt: Okay. And my last question regards your key ratio net debt to EBITDA, which is currently at 12x. You have a target of 11x. And my question is really how eager are you to bring it down to 11x for 2026? Jonas Erikson: We've said that's a long-term target. And obviously, the Norion distribution will deteriorate that number slightly. So we set us back a little bit. So I think you need to look at it. I think we've said for a few quarters now that we care more about the direction and the pace of change in the current market conditions. We also know that we have in 2028, the convertible presumably converting into shares, which will obviously support that number slightly as well. So I think you should see it as a directional statement and in terms of where we want to end up, but it's not the 2026 target. Operator: The next question comes from John Vuong from Van Lanschot Kempen. John Vuong: On the Class B shares, so hypothetically, if you were to issue those today, what would you do with the proceeds? Jonas Erikson: I mean there are no such plans. I think it becomes very speculative. We haven't sort of made this disclosure because we have any plans of doing a new issue of the shares. We want to get it into the docks so that we have the opportunity and possibility to do so. So there are no plans currently at all. So you shouldn't see this as a preparation for raising more capital. John Vuong: Okay. That's clear. And then if you -- given that you're looking into this flexibility, how do you think about dividend distributions on Class A and B shares? Jonas Erikson: I think we -- I mean, we have had a capital allocation that has been very flexible for a very long time. And I think that we will be eager to remain flexible on that. If we, hypothetically speaking, should have the shares outstanding, we obviously need to change the dividend policy to accommodate that. But I wouldn't expect that you shouldn't draw the conclusion that, that also means that we will become a regular dividend distributor on the B shares. And we will pretty much, in that case, do what is required to cover the coupon or the dividend for the B shares. And then the rest will be a capital allocation decision as per usual where we really will always prioritize investing in the business and/or doing share buybacks as a means of employing capital, then if we sort of really find no attractive ways of employing capital in an accretive way, then obviously, at some point, the distribution of a dividend becomes the remaining choice. But that principle will still stand in regards to the B shares. And there might always be a little very small dividend because from a rounding error perspective because you can't pay exactly the amount to cover the B shares only, but it's not going to be any material numbers as a default. Operator: The next question comes from Lars Norrby from SEB. Lars Norrby: A couple of questions on the earnings capacity. Now focusing on the profit from property management line, SEK 6 billion. It was SEK 6.6 billion in the Q3 report. And obviously, you're now excluding Norion. What would the number have been in the Q3 report, excluding Norion? Is it -- we see the change in the associated company line some SEK 700 million lower. So would it have been SEK 5.9 billion? Is that the way to interpret it? Jonas Erikson: Honestly, I don't actually have the exact numbers we have in the model. I mean they're always -- given that we give rounded numbers to equal or sort of rounded SEK 100 million, I don't want to say which side of that we would end up if we hadn't had Norion in Q3. But mind you also, there's quite a lot of FX movement that has taken place in the last couple of quarters, and that's obviously impacted the total profit from property management side as well. So I think that's worth keeping in mind, you've had some weakening, especially year-over-year, you've had some pretty noticeable weakening of the NOK, which impact the associate line in terms of you also have obviously the strength vis-a-vis the euro, which will impact everything we have in Denmark and Finland. So that's part of the development that you need to factor in as well. But I think if you just look at the way things are accounted for, Norion is accounted for as a proportion of their -- it's pretty easy to the precise contribution for last year. Lars Norrby: Okay. Second question on the earnings capacity. What type of impact and to what extent have CPI indexation on the commercial side from the 1st of January and for that matter, new rents in particular are in the Swedish resi portfolio, how much has that affected rental income in the earnings capacity since it's unchanged compared to Q3? Jonas Erikson: We always factor in all negotiations discounting and all the indexations that we know of when we cross the year-end. That is being factored in. I would say the unchanged part is more of an FX movement. It's currency who lowered down the number actually. So in constant currency, it would be higher, of course. Operator: The next question comes from Fredrik Stensved from ABG Sundal Collier. Fredrik Stensved: I just have one follow-up. On the occupancy rate, specifically for the industrial and logistics segment, it looks to be down 3 percentage points Q-on-Q. In the same time, rental income is up. So I'm trying to sort of understand the sequential move. Is it Balder acquiring vacant properties in this segment? Or is there something else happening here in between Q3 and Q4? Jonas Erikson: I actually need to dig into that number a little bit further. I don't quite recognize it. But I know we've done some acquisitions that has impacted the number, as you say. But I can't say whether that is the full explanation. Can I get back to you, Fredrik, on that? Fredrik Stensved: Yes, absolutely. Operator: The next question comes from Pranava Boyidapu from Barclays. Pranava Boyidapu: You mentioned that Norion Bank is no longer included in the profit. So it's not in the P&L numbers. Does it mean that it's also not in EBITDA and hence, the net debt-to-EBITDA 12x leverage is already excluding Norion. So upon distribution, it shouldn't change on that basis? Jonas Erikson: No. So sorry for being unclear there. So it is included in the reported numbers for Q4 and the full year 2025. But in our report, we have something called the earnings capacity, which is more of a snapshot as of the 31st of December as a proxy for annualized earnings given the portfolio we have at the 31st of December. And in there, we have excluded Norion. So if you want to look at that as some kind of forward-looking earnings capacity, there, Norion is already excluded. But the 12x net debt to EBITDA still includes Norion shares. So that will be impacted by 0.89%, something like that negatively. Pranava Boyidapu: And you also -- you're doing your share buyback presumably, but also you talk about the convertible in 2028. Would you say that taken together, the impact on leverage should be broadly neutral? Jonas Erikson: I think the major impacting factors between now and if you take a 2-, 3-year perspective is obviously that we have an underlying growth in our earnings and EBITDA. We have a cash flow annually that improves the balance sheet position as well. So I think those are sort of probably more impacting in that time horizon compared to the buybacks that we've done so far at least and compared to the conversion of the convertible. So the convertible would be corresponding to roughly 1 year's free cash flow for the company. So it more depends on how we sort of steer the balance sheet from here in terms of growth opportunities and potential buybacks depending on where we find the most value really. Pranava Boyidapu: Sure. That makes sense. And then just one final thing for me. There is a small amount left on your hybrid, which -- who have a first call in 2026. So I was wondering, is that included in your bond maturities as 2026? Jonas Erikson: No. So that's recorded at the formal maturity, which is longer. So we think we have sort of a couple of billion SEK to SEK 3 billion outstanding remaining of that, but it's not recorded in the '26 maturities. Operator: The next question comes from Andres Toome from Green Street. Andres Toome: A couple of questions from my side. Firstly, just maybe on Finland residential. I was just wondering what are the sort of implications you're seeing in the market from the housing allowance rolling off and then sort of stricter rules also on permanent residency coming in, in January. Is that sort of impactful for the rental market as you see it? Erik Selin: It's difficult to know exactly what is doing exactly what it should have some effect, but it's -- for us, it's impossible to quantify it. But I mean, it's happened. So from now on, it's already -- I mean, it's there. Andres Toome: Right. And then I guess the housing allowances, they already were coming off. So is there, I guess, some sort of a demand impact you're seeing maybe on smaller apartments because I guess students would have used them a lot as well in the past. Erik Selin: Most likely, but I mean, it's impossible to know exactly right. I mean -- but most likely, that have been the effect, most likely. It must have some effect if you take away subsidies. But for us, it's impossible to quantify it. But could explain some of the weakness, absolutely. Jonas Erikson: There is a tendency in 2025 that the population growth does not fully correspond to the occupancy increase. There's a slight dispersion between the 2. So that suggests that there, on average, should be slightly higher number of people living in each apartment compared to the previous year. That might be one such impact. But I think the important thing from our perspective when we both sat around the business and we think about it strategically is that, as I said before, you've had a number of years with too high supply into the market. There's one of the best affordability situations that we've ever seen. And we all know that the Finnish economy has been pretty weak in the last few years, but it doesn't take away the fact that there is a large need for housing in the urban areas. We have that available. We feel pretty good about the sort of medium-term perspective in that sense. Then you might always have some of these more technical factors impacting the quarterly development from time to time. But I wouldn't say it changes our view on a couple of years horizon. Andres Toome: Understood. And then maybe on Denmark residential as well. I guess there was quite a lot of noise in Copenhagen with municipal elections around rent controls and things of that nature. But I guess what are your views around that in the sense that could this become sort of a national debate? And could it be the case that buildings built after 1992 could become sort of strictly regulated as well? Jonas Erikson: I think there's already a regulation in place in Denmark, which basically stipulates that when you first move into an apartment, then there's a market rent setting from there on, the property owner can only index by CPI. That's sort of fair model that is transparent and easy to sort of understand for all parties, definitely protects the tenant. And in some cases, you obviously have buildings where tenants have been staying for a very long time. So -- but let's see what happens. It's impossible, I think, for us to speculate on potential regulatory changes. But there's even been discussions in -- by some of the political parties in Sweden to adopt the Danish model into the Swedish system because it is balanced between having on one hand, the market economy at the same time protecting tenants. But let's see. I don't have any sort of great insights into what might happen to the Danish regulation. Andres Toome: Got it. And then final question, just on capital allocation. I just wonder where do you see sort of best opportunities right now if you look across sort of your own portfolio, where would you like to add exposure also being cognizant of what's available in the market? And I guess, adjacent to that, for hotels, you have some exposure and there's this large portfolio from Pandox on the market. Is that something of interest perhaps? Erik Selin: I don't think we will be buying from Pandox, if I'm guessing. I don't think so. But otherwise, we're very happy with the hotels, and it's been a good year in -- especially Copenhagen, if you look at RevPAR and occupancy and stuff. Otherwise, we do, as always, we look at the -- basically in the Nordic market and try to see what makes sense to add to the portfolio. to increase the shareholder value over time. We don't decide before what's good or bad. It's all about pricing. Operator: The next question comes from Othman El Iraki from Fidelity International. Othman El Iraki: Just a follow-up on previous question on the hybrid. Just taking your latest thinking, are you still thinking that you don't need the instrument in your capital structure and that you would call this year? That's my first question. Jonas Erikson: We haven't announced that we will make an announcement before we call it and say, but in the past, we always call it first call date. We felt -- and we've said this before as well, we felt that the hybrid instrument is a bit complex as it says. It tends to be very attractive cost of equity in good times and less good times in the credit market, it becomes a bit more cumbersome to roll the outstandings forward. And you also have an optionality in there that is embedded that you pay for, but in practice, you can't really utilize. So far, we've come to the conclusion that we are not looking to issue any new hybrid at this point. And obviously, things might look different, I guess in the last, let's take that in. Othman El Iraki: Okay. And my next question is on the Norion distribution. Have you been in touch with S&P? And are they fully involved in that? Jonas Erikson: Yes. I mean we've been -- this has been announced quite a long time ago, and the growth informed even before it was announced as well. So this is already sort of part of the plan and should be part of their modeling for the future since -- well since 6 months back basically. Othman El Iraki: Okay. So you don't expect a negative reaction from S&P? Jonas Erikson: No, that would be immensely surprising. Othman El Iraki: Okay. Okay. And my last question is, given where the bond markets are at the moment, pretty hard to say the least, how does that compare to your bank funding at the moment? Jonas Erikson: A little bit depends on how you look at it. It's always difficult to compare side by side because one is secured, the other is unsecured. You might have slightly different tenor structures, et cetera. But I would say, currently, we are roughly on par between bond financing and bank financing, a little bit depending on which market and tenors you look at it. Bonds might actually be slightly higher than the bank financing in the short-term. Operator: The next question comes from Pierre-Emmanuel Clouard from Jefferies. Pierre-Emmanuel Clouard: Yes. Just coming back on the Class B share that you may want to issue. Just to fully understand how you are seeing it. So you said that you want to streamline and simplify Balder with the Norion disposal, which is a fair assessment in my view. But you want to add a new class action that would, in my view, further complexify the structure. So just to understand how do you view this item? Is it equity or perpetual debt for you first? And if that's equity, would you keep your current internal metrics unchanged as like net debt to total assets of 65%? Jonas Erikson: Yes. So there's no change in our view on the financials or credit metrics at all. Class B shares -- sorry, we should probably have specified that in the report. So the Class B share is an instrument that is pretty common in the Swedish market, which is a fully -- it's an ordinary common equity class of shares. The differential is between the B shares or the current outstanding shares is only in terms of the dividend distribution. So that's the difference. And in the Swedish market, the custom is that you always pay a dividend, which is enough to cover the dividend coupon on the B shares at least. So it's actually from a credit metric standpoint, capital standpoint, there is literally no change. There's no difference in -- compared to ordinary shares in a liquidation situation. There's no difference from an S&P perspective. There's no difference from an accounting perspective. It's all part of the same common equity. The only thing is that you differentiate between 2 share classes and who gets a dividend first. Pierre-Emmanuel Clouard: Okay. I'm asking the question because as you know -- as you may know, some investors could classify the Class B shares as perpetual debt, but it's open to debate. And my second question. Jonas Erikson: Sorry to interrupt you. I think there are instruments that might be open to debate. I don't think Class B shares is one of those that might be open for debate because there is no -- in the past, there's been quite a lot of companies that used and ourselves included actually a number of years ago, they use pref shares of various kinds. Those had in addition to the dividend preference, they also had a differentiation in a liquidation situation and they also had accumulation of unpaid coupons. So the difference here and the reason why S&P credits this as a fully 100% equity and why it's accounted for as equity is that there is no such thing. So if the company can afford to pay a dividend, these guys would, in theory, then get their dividend first. But there is nothing binding the company to -- in a stressed situation, leaking cash flow. So this is actually not one of the instruments that is difficult to interpret in that sense. Pierre-Emmanuel Clouard: Okay. I understand. And my second question is on your top line growth expectations. So can you guide us through the like-for-like rental growth for 2026? And what is your estimated indexation and occupancy changes for this year? Jonas Erikson: No, we don't give any outlook in that sense. So in 2025, we had a like-for-like of 2.7% for the full group. This year, we will have -- if you just look at the delta, this year, we will have slightly lower indexation for the Swedish resi portfolio. Then I think in Denmark, there shouldn't be a large change. The Danish inflation and CPI indexation has been pretty low for some time now already. So that should be pretty similar to what we saw last year. There's not been any dramatic changes in the Swedish CPI numbers either on the commercial side. It will more be a matter of what pricing tension you will see in the market based on how occupancy moves. And then the Finnish resi market, as I alluded to before, we see that occupancy is going up. And at some point, we should have slightly better pricing tension in that market. It hasn't happened so far. Let's see when that starts happening. It's difficult, I think, to give a precise prediction of that. But the trend, I think, is in our favor there. So I think that's broadly what I can give you. So it should be fairly similar, slightly lower probably due to the Swedish resi on a pure like-for-like basis, then obviously, you will have the reported numbers being impacted by everything from transactions to FX movements, et cetera. Pierre-Emmanuel Clouard: Okay. I see. And maybe a final question, as a follow-up on Swedish resi. Do you see a lot of opportunities currently on the market? And do you have any clue on the pricing? Jonas Erikson: Do you mean sort of final transactions in the property. Pierre-Emmanuel Clouard: Yes, on portfolios that could be on the market currently, actually. Jonas Erikson: If you look at the transactions that we have done in the last 12 to 18 months, and we tend to like do transactions where we can get an accretion in terms of yield compared to what we already own. I mean the first test is obviously that it needs to be in a location where we want to be and where we have our property management organizations in place. But other than that, we want to have an accretive impact on the full portfolio when we do incremental transactions. And we have been extremely tilted to the commercial side in the last 18 months and the transactions we've done on the Swedish side. SATO did an acquisition of 1,000 apartments last summer in Finland. We've done 1 or 2 smaller resi transactions in Sweden as well in particular cases where we already have a decent footprint in some area and then another property comes out for sale. If we can get a decent yield on that, that might be worth doing. But there's no -- I think the pricing is actually fairly both on centrally located commercial and on resi in Sweden, it's not that easy actually to go out and buy things that are accretive compared to our back book yields. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Jonas Erikson: Okay. Thank you very much, everyone, for listening in. You know where to find us if you have any follow-up questions during the day. And just feel free to reach out. Thank you.
Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help you. Standby, your meeting is about to begin. Good morning, and welcome to the Perella Weinberg Partners Full Year and Fourth Quarter 2025 Earnings Conference Call. Currently, all callers have been placed in a listen-only mode. Following management's prepared remarks, the call will be open for your questions. Please be advised that today's call is being recorded. I will now turn the call over to Taylor Reinhardt. You may begin. Taylor Reinhardt: Thank you, operator, and welcome all. Joining me today are Andrew Bednar, Chief Executive Officer, and Alexandra Gottschalk, Chief Financial Officer. Before we begin, I'd like to note that this call may contain forward-looking statements, including Perella Weinberg Partners' expectations of future financial and business performance, conditions, and industry outlook. Forward-looking statements are inherently subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those discussed in the forward-looking statements and are not guarantees of future events or performance. Please refer to Perella Weinberg Partners' most recent SEC filings for a discussion of certain of these risks and uncertainties. The forward-looking statements are based on our current beliefs and expectations, and the firm undertakes no obligation to update any forward-looking statements. During the call, there will also be a discussion of some metrics which are non-GAAP financial measures, which management believes are relevant in assessing the financial performance of the business. Perella Weinberg Partners has reconciled these items to the most comparable GAAP measures in the press release filed with today's Form 8-K, which can be found on the company's website. I will now turn the call over to Andrew Bednar to discuss our results. Andrew Bednar: Thank you, Taylor, and good morning. Today, we reported full-year 2025 revenues of $751 million and fourth-quarter revenues of $219 million. While 2025 revenues were down 14% from 2024's record results, 2025 was the third-highest revenue year in our firm's twenty-year history. A testament to the strength and resilience of our business and the result of our deliberate investment in building a focused and differentiated platform that can perform across M&A. It was a productive year for expanding and deepening our coverage and expertise. Though we fell short of our revenue ambitions as several large transactions we advised on did not complete as we had hoped. That said, we are pleased with our progress and have confidence that our investments and laser focus on clients will deliver in 2026 and beyond. In Europe, we delivered record revenues, further cementing our position as a leading advisor in the most active regions on the continent. Our restructuring practice also hit record revenues, gaining market share in a market that continues to grow. Consistently delivering superior results for our clients is attracting more high-profile and high-value assignments, especially in debtor-side mandates. This positions us extremely well going forward across our financing and capital solutions business. On talent, 2025 was a record year for both recruiting and promoting senior bankers, and new hire momentum continues. We see a flywheel effect. Top talent is attracting more top talent, and our pipeline of future 23 new senior bankers to our platform. And already in 2026, we added two more partners, one reflecting our continued build-out of our Healthcare Services business and the other strengthening our U.S. Software coverage, following a recent partner addition in Europe. Looking ahead, the opportunity to grow our business is exceptional. Our gross pipeline stands at record highs, and our announced and pending backlog is strong and building. Sentiment is positive across our client base from corporates to sponsors. And we see momentum building. As we enter our twentieth year as a firm, we feel great about our position. We're incredibly proud of the firm we've built over two decades, and we're excited to write the next chapter. One that builds on our strengths to deliver both superior outcomes for our clients and attractive returns for our shareholders. In a sense, we're really just getting started. With that, I'll now turn the call over to Alexandra Gottschalk to review our financial results and capital management in more detail. Alexandra Gottschalk: Thank you, Andrew. Our fourth-quarter revenues of $219 million included $18.5 million related to closings that occurred within the first few days of 2026, which in accordance with relevant accounting principles were recorded in the fourth quarter. Our adjusted compensation margin was 68% for the full year 2025 compared to 67% in 2024. We maintained strong discipline in managing our compensation ratio despite, as Andrew mentioned, a year of record talent investment, including the Devon Park acquisition. We remain highly aligned with our shareholders, with partners in our broader team owning over 30% of the firm, and we are committed to thoughtfully managing our compensation ratio as we drive profitability while strategically investing in top talent. Adjusted non-compensation expense was $159 million for the full year 2025, down 2% from a year ago and well below the single-digit growth range we originally projected earlier in the year. Looking ahead to 2026, with certain nonrecurring items now behind us, we expect a further single-digit percent decrease. Turning to capital management, we returned over $163 million to equity in 2025 through dividends, RSU settlements, share repurchases, and unit exchanges. As a part of these efforts, we retired 6.5 million shares during the year, reflecting our continued focus on managing our share count. At year-end, we had 67 million shares of Class A common stock and 22 million partnership units outstanding. Finally, we closed the year with $256 million in cash and no debt. This morning, we declared a quarterly dividend of $0.07 per share. With that, operator, please open the line for questions. Operator: Thank you. Our first question will come from Devin Ryan with Citizens Bank. Your line is open. Devin Ryan: Great. Good morning, Andrew and Alexandra. How are you? Andrew Bednar: Yes. Hi, Devin. How are you? Devin Ryan: Doing great. Question just first on kind of the advisory environment and kind of the outlook. Obviously, don't want to dwell too much on what happened in 2025, but you did mention there were some kind of large deals that didn't come together. Any sense of like order of magnitude how much that impacted results on the year? And then as we think about 2026 and assuming your kind of batting average is more normal versus maybe it's a little below normal on those large deals, how much of an impact does that have as you look at your kind of record backlog as you noted? And how much is kind of large deals versus kind of a broadening out in the M&A market? Andrew Bednar: Yes. Thanks, Devin. Look, we live for large-scale M&A transactions, but we don't die when they don't play out. I mean last year, there were 70 transactions over $10 billion. The year before that, there were 35. And in the year, where we had record results, there were four transactions over $10 billion last year. We were not in any. This year, out of the gate, we're in one already. So I think generally, the trending is better. Because of our scale, we're just going to have a lower incident rate than really all segments in the market, but in particular, we all feel it a little bit more when we're not in the larger scale, larger fee transactions. There are several where the ball just didn't bounce our way for us and for our client. That's unfortunate. So that usually leads to some other type of strategic activities. So that doesn't usually lead to just a dead environment for deal flow generally once you have that client you're thinking about the next thing. So that's encouraging. And generally, a few of them, the bulge didn't bounce our way. We're more optimistic heading into '26 again given the starting point that we have here in January. Where we announced a $15 billion transaction a couple of weeks ago. Devin Ryan: Okay. That's great. Thanks, Andrew. And follow-up here on the private capital, the Devon Park kind of addition. Now that that's been part of the business, obviously not too long, but any anecdotes on how that's going, how it's making you more relevant in client conversations? And just how we can think about maybe the order of magnitude of what that business could mean for Perella Weinberg Partners over the intermediate term, just like how is it going and the anecdotes you're seeing there? Thanks. Andrew Bednar: Yes, thanks. So far, feel great about the combination. As you know, we look for situations where they're culturally and financially and strategically highly attractive to us and to our new partners. I think the Devon Park transaction has gone very well in all those regards. The take-up rate and the conversations with our private equity clients and our credit clients and real estate clients have gone very well. And we have already jointly won new mandates. So we're very encouraged by that. And the pipeline looks very good. We're only month four, obviously, so it's early days, but we couldn't be happier with the early days. Devin Ryan: Okay, great. I'm going to try to squeeze one more in here, if I can, just on compensation. Obviously, in the year where revenues go down, not surprising to see the comp ratio tick up a little bit. Indirectly because that made sense. As we look ahead and the environment is improving, hopefully, a better hit rate 2026 on some of these larger deals. How do we think about the algorithm from this jumping-off point to get back into that mid-60s or below on the comp ratio? And not twenties. Andrew Bednar: Yes. Thanks for that. Look, didn't hit our revenue targets for '25 and combined with our heavy investment. I always look at the balance of trade between our productive partners and our shareholders, and I've always committed to finding the right balance point between having partners invest in future growth and having shareholders invest in future growth. I think we've historically struck the right balance. We're all large shareholders, as you know, so we care about the equity of this company, but we're looking at ways to drive this forward. We do have comp leverage. We have flexed that in the past. As you know, we flexed in '21. We flexed it in '24 where we took it down 300 basis points from 2023. We need more scale, so we need the revenue progression to continue and get back on what we think we can earn here. I think last year, we under-earned based on our capabilities and our capacity. So we're more optimistic going into 2026. But I don't have a specific algorithm because it really depends on a multivariable equation where we have to look at only the revenue outcome, but also what our investing is like. And you know, Devin, I have a different view than the accountants, but the accountants control the outcome on how it's reported. But some of our comp margin is CapEx. And I think that when we're wisely investing, we're going to see the results of that in the go-forward periods. There's a bit of a mismatch where we have to invest before we get the revenue. But we feel really good about the 23 senior hires we had, the 23 senior additions we had in 2025, 14 of whom are new to the platform, which is great. We see the pipeline looking pretty good for 2026 as well. But that's a constant balancing that we have to do to make sure that we're sharing appropriately how we think about CapEx here and this impact on comp margin. But as you get scale, we have that comp leverage flex and we've done that in the past. We just weren't able to do it in 2025, and I think a one-point increase from where we were accruing reflects the level of investments that we're doing. Devin Ryan: Yes. Very helpful. Thank you very much. I'll hop back in the queue. Andrew Bednar: Thanks, Devin. Operator: Thank you. Our next question will come from Alexander Bond with KBW. Your line is open. Alexander Bond: Good morning, everyone. Just a question on restructuring outlook. This has obviously been an increasingly important part of your business recently. But wondering if you can just speak to your outlook for 2026 here, maybe relative to 2025. Are you expecting revenues to be up here maybe year over year or maybe closer to flat or even down slightly? And then any color you could add just on the broader backdrop for restructuring from here would be helpful as well. Thank you. Andrew Bednar: Yes. Thanks, Alex. We feel very, very good about the environment for our restructuring business and we feel very good about across sectors in that market as well. We saw a record year for our business last year. We're not seeing any slowdown, particularly in liability management engagement. So not necessarily nine eleven going bankrupt tomorrow, but just generally really prudent and very proactive finance managers with our clients that are looking ahead at maturities, they're looking ahead at covenants, they're looking ahead at ways to enhance their balance sheet and we guide them through that and receive a fee in those circumstances. So, I think the environment is very strong. I think with some of the disruption we've seen in software in recent sessions has created some level of concern with the credits in those particular sectors that I think will again lead to some more activity for us. So that business is quite strong and we're feeling very good about heading into the rest of 2026. Alexander Bond: Got it. That's helpful. And then maybe just another one on recruiting backdrop. I think you've noted previously that this past year was an above-average year for you all in terms of hiring. But maybe if you could just help us think about how you're thinking about the recruiting backdrop for the coming year, maybe what we should expect to see in terms of maybe not necessarily a number, but just in terms of your activity there on the hiring side and also just, any high-level thoughts around, recruiting backdrop as a whole be helpful as well. Thank you. Andrew Bednar: Sure. That's a continuous exercise for us. It's a core part of our strategy to add talent. We have a lot of open space in our platform still with only now 77 partners, and we have you know, covering about 1,500 to 2,000 clients. So we have a lot of open space for high-quality bankers to join our platform. And pipeline looks very good. We have always every year more candidates that are interested in joining us than we will accept. And just reality of how we think about additions to our platform. I think it will be likely a more normal year. It'll go back to trend in the coming twelve months. I think, again, the pipeline looks good, but I don't see it as active as we were last year. In terms of the sort of brick by brick strategy that we've been on. But we can get some surprises and that'll be great if we can add some more talent. But I think we're back on trend and the pipeline looks very good, so I'm happy about it. Alexander Bond: Okay, great. That all makes sense. Thank you, Andrew. Operator: Thank you. Our next question will come from Brendan O'Brien with Wolfe Research. Your line is open. Brendan O'Brien: Good morning and thank you for taking my questions. To start, I was just a bit surprised that you guys had the record year in Europe given from what we can see in the geologic data trends have continued to lag those in the U.S. I was just hoping you could unpack some of the drivers, what seems like pretty meaningful share gains in the region and just what the tenor discussions are like in Europe today and how you feel that people will track relative to the U.S. over the near to intermediate term? Andrew Bednar: Yes. I think for the better part of the decade, European volumes have been trending below normal. And certainly trending disproportionate to the growth in the U.S. So I think it's a matter of just a matter of time before those activity levels get back to where they should be. Again, I think we're seeing the benefits of some of our investments and not only in new talent, but also our investments in clients that you have to make that are going to take time to actually convert to revenue and we were fortunate to have some large-scale transactions not only announced in the period, but also get done in the period because we're in a business where typically large-scale transactions don't announce and close in the same quarter. Or sometimes even in the same year. So I think we had some very good dynamics in our European business. We've got a terrific team there. We've got leading share in markets like in Germany and in France, and those were very active markets as we look back at 2025's results. I think Europe is very, very focused on what their future is looking like. There's active investments around industries, defense and energy things around infrastructure. So the dialogue has picked up quite dramatically in the wake of all the geopolitical changes that we're all witnessing every day. We wake up and read the news, and I think that's leading to more and more discussions on the continent about what the industries will look like in a go-forward Europe, which is good for our business when people have complex situations, they tend to have experts around them and so we're fortunate to get those calls and be around the table with industry leaders as they think about and contemplate the future of what Europe is going to look like. But we're right in the middle of those dialogues and feel good about our team and very happy with results coming out in 2025. Brendan O'Brien: That's helpful color. And I guess building on your comments on the geopolitical tensions ramping, that's obviously seen a pretty notable uptick as and then you've also seen an increase in policy uncertainty in the U.S. which is only likely to intensify into the midterm elections. Just wanted to get a sense as to whether you've seen any impact on dialogues at this point with your U.S.-focused clients? And do you anticipate the midterms to have any negative impact? Andrew Bednar: On the last point on midterms, we're not seeing anything yet, it's a little too early. For that to start. Bleeding into some of the decisions our clients have to make. So I think it's a little early on Geopolitical generally, as I mentioned a few seconds ago, it's just part of our environment now, much part of the every day we wake up and assess what's going on in the world. I think it creates a level of anxiety, but not panic. And I think once we and our clients get through some of the fog, most of our clients, I would say the overwhelming majority of clients see opportunities more than they see obstacles coming out of the geopolitical landscape. And that's true for the energy complex, for global manufacturing and even for services companies that operate globally. So I think once you get through the initial shock of some of the headlines and news flow, I think the cooler heads prevailed, long-term thinking sets in and people are seeing more opportunities than they are seeing problems. Brendan O'Brien: Great. Thank you for taking my questions. Andrew Bednar: Thanks. Operator: Our next question will come from James Yaro with Goldman. Your line is open. James Yaro: Good morning. Would you be able to help us think through a high level the mix of your advisory revenue across M&A versus the non-M&A businesses, perhaps 2025 in aggregate or however you'd be willing to break this down? Andrew Bednar: Yes. Good morning, James. As you know, said on prior calls and at various conferences that we don't segment our business that way because we don't operate our business based on our products. We don't sell products. We solve problems for clients. We are organized by sector and therefore organized by the coverage we have of our clients, not the products that we're trying to sell. So I know I get this question often. Respectfully declining to give that detail because it isn't how we operate the business. I do want to give some color on the different markets we operate in, which hopefully I've given in terms of M&A context as well as our financing and capital solutions business, which I mentioned was at a record. And we feel very good about particular our liability management engagements going forward and the activity we see there. James Yaro: Understood. Could you just perhaps update us a little bit on your capital return priorities beyond the organic investment, which is clearly top of the list of priorities and that makes sense. But just beyond that, anything that we should be thinking about for capital deployment? Andrew Bednar: Our priority stack remains exactly the same. As we can invest our capital in future revenue and future clients and building out businesses, that by far the best use of our capital. We saw really good uses in '25, so we were weighted a bit more to that deployment in the prior period. '26, we don't it's early days, so we don't know. We may have some good investment opportunities, and we'll take advantage of those they present themselves. But we're still laser-focused on our share count. We have our dividend, which we announced this morning. And we will take advantage of buyback opportunities either through exchanges and our typical RSU vesting, where we buy in the shares to pay taxes and from time to time, we're in the open market. But I don't see any departure from our priority stack there. And from time to time, may emphasize one over the other, but priorities remain in place, James. So no change there. James Yaro: Thank you. And maybe if I may, just one more. What is the right starting point for the comp ratio as we head into 2026? I'm just trying to make sure that we understand I think, firms do it differently. Should we be looking at full-year '25 ratios, the jumping-off point, the 4Q number? And then does the mid-sixties comp ratio target still hold? Andrew Bednar: Yeah. The Q4 number to me at least, is irrelevant. That's just what the math shows to get to our annual comp ratio, is 68%, which is I explained I thought was 100 basis points above where we were accruing in the first March, which a fair balance of trade for who will pay for future growth. And I think we're going to get that, and it's a good investment. Our jumping-off point, we're going to have the same as last year. So start at 67% for Q1. And I've just always asked all of our stakeholders, people on this phone and my partners, employees that own shares that we just need some flexibility in Q4 to assess what the final manage our business and reflect our investments. So that's our typical cadence stick with that, but the jumping-off point, as you call it. For Q1 will be at 67% accrual. James Yaro: That's very clear. Thanks a lot. Andrew Bednar: Thank you. Operator: This concludes the Q&A portion of today's call. I would now like to turn the call back over to Andrew Bednar for any additional or closing remarks. Andrew Bednar: Okay. Thank you, Katie, and thank you, everyone, for joining us today. As we mark our 20th anniversary as a firm, I want to express our gratitude to first all of our clients who have trusted us with their most consequential transactions over the last two decades. Relationships are the foundation of everything we do. And we thank you for placing your trust and confidence in us over the years. To our investors, many of you have been with us since we went public five years ago. And others have joined along the way or more recently. Thank you for your confidence and for all your support. We're committed to delivering for you, as you know, as I've mentioned many times, we're also large shareholders. And finally, to my teammates around the world, you make this firm what it is. Your exceptional talent and tireless dedication to our clients drives their success every day and in turn our success. Thank you. We look forward to updating all of you on our next quarter. And thanks again for joining us today. Operator: This concludes the Perella Weinberg Partners full year and fourth quarter 2025 earnings call and webcast. You may disconnect your lines at this time and have a wonderful day. Goodbye.
Operator: Good day, and welcome to the nVent Electric plc Fourth Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, to ask a question, you may press star then 1 on a touch-tone phone. To withdraw your question, please press star then 2. Please note that this event is being recorded. I would now like to turn the conference over to Tony Riter, Vice President of Investor Relations. Please go ahead. Tony Riter: Thank you, and welcome to nVent Electric plc's fourth quarter 2025 earnings call. On the call with me are Beth Wozniak, our Chair and Chief Executive Officer, and Gary Corona, our Chief Financial Officer. Today, we will provide details on our fourth quarter and full-year performance, and 2026 outlook. All results referenced throughout this presentation are on a continuing operation basis unless otherwise noted. Before we begin, let me remind you that any statements made about the company's anticipated financial results are forward-looking statements subject to future risks and uncertainties, such as the risks outlined in today's press release and nVent Electric plc's filings with the Securities and Exchange Commission. Forward-looking statements are made as of today, and the company undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances. Actual results could differ materially from anticipated results. Today's webcast is accompanied by a presentation, which you can find in the Investors section of nVent Electric plc's website. References to non-GAAP financials are reconciled in the appendix of the presentation. We will have time for questions after prepared remarks. With that, please turn to slide three. I will now turn the call over to Beth. Beth Wozniak: Thank you, Tony, and good morning, everyone. It's great to be with you today to share our outstanding fourth quarter and full-year results. 2025 was a record year for sales, EPS, and free cash flow, each growing at or above 30%. Through 2025, organic sales accelerated, resulting in consecutive record sales quarters. It was an important year as we transformed our portfolio with the divestiture of the thermal management business and the acquisition of EPG. These strategic moves increased our exposure to the high-growth infrastructure vertical. Infrastructure now makes up 45% of our annual sales, with data center sales representing approximately $1 billion in 2025. The fourth quarter was our second consecutive quarter with sales of more than $1 billion. Both sales and EPS exceeded our guidance. We also had strong orders and backlog growth. Organic orders were up approximately 30%, primarily driven by large orders for the AI data center build-out. Excluding data centers, organic orders grew low double digits. With the strong orders, we ended the year with $2.3 billion in backlog, triple what it was a year ago. Our free cash flow was very strong in the quarter, and our balance sheet is healthy. In 2026, we expect another year of record performance. Our full-year guidance includes reported sales growth of 15% to 18%, and adjusted EPS growth of 20% to 24%. Now on to slide four for a more detailed summary of our Q4 and full-year performance. Fourth quarter sales were up 42% and 24% organically, led by the infrastructure vertical. Adjusted operating income grew 33% year over year with return on sales of 19.7%. Adjusted EPS grew 53%, and we generated $189 million in free cash flow, up 26%. Looking at our key verticals, infrastructure led the way, with organic sales up over 50% driven by outstanding growth in data centers. Industrial grew high single digits, and commercial resi sales were up low single digits. Turning to organic sales by geography, both Americas and Europe are strong. Americas grew approximately 30% while Europe was up high single digits. Asia Pacific was down. For the full year, we had sales of $3.9 billion, an increase of 13% organically. Adjusted operating income grew 21% with margins up 20.2%. Adjusted EPS was up 35%. For the full year, we had record free cash flow of $561 million, growing 31%. Let me share a few strategic and operational highlights. First, we launched 86 new products in 2025, contributing approximately 10 points to our sales growth, and our new product vitality was 27%. Our innovation is delivering growth and solutions for our customers. Second, as I mentioned, the infrastructure vertical now makes up 45% of our sales, led by data centers, which grew over 50% for the year. Third, our organic growth and recent acquisitions more than offset the EPS impact from the thermal management business we divested in the first quarter. Importantly, we cannot accomplish these results without the dedication of our nVent Electric plc team. Transforming our portfolio and accelerating to become a higher growth company takes a lot of effort and teamwork. I'm very proud and appreciative of all the hard work by our nVent Electric plc team to support our customers and deliver the outstanding performance in 2025. Looking ahead, we expect 2026 to be another record year of strong growth and value creation. Moving to Slide five. Our portfolio transformation to become a more focused, higher growth electrical connection and protection company is showing up in our results. We have increased our exposure to the high-growth infrastructure vertical from 12% of sales at spin to 45% last year, and infrastructure is expected to be well over half of our sales in 2026. In addition, we have been aggressively investing in our data center business, which is rapidly growing and accelerating with the AI build-out. In January, we opened a new facility in Blaine, Minnesota, to expand our liquid cooling capacity. Production is online, and we are ramping quickly. Turning to Slide six and our outlook for the verticals. In 2026, we believe the infrastructure vertical has the highest growth with the trends of electrification, sustainability, and digitalization. Infrastructure is expected to grow at approximately 20% this year, driven by AI data center CapEx acceleration. In addition, power utilities, renewables, and energy storage are expected to grow with the increasing demand for power. For industrial, we expect mid-single-digit growth with increasing CapEx investment, automation, and reshoring. The commercial resi vertical is expected to grow low single digits. This wraps up my remarks. I will now turn the call over to Gary for further details on our results as well as our 2026 outlook. Gary, please go ahead. Gary Corona: Thank you, Beth. We had another excellent quarter exceeding our guidance with record sales, strong adjusted EPS, and very strong free cash flow. Let's turn to slide seven to review our results. Sales of $1.067 billion were up 42% relative to last year. Organically, sales grew 24%, well ahead of our guidance driven by stronger than forecasted data center sales. Acquisitions added $126 million to sales, or 17 points to growth, ahead of our guidance. Foreign exchange was roughly a one-point tailwind. Adjusted operating income was $210 million, up 33%. Return on sales came in at 19.7%, a bit lower than expected due to higher investments, incentive compensation, and mix. Inflation was nearly $55 million, including more than $40 million in tariff impact. Price plus productivity offset inflation, and we also continued to make investments for growth, particularly for data centers and our recent acquisitions. Q4 adjusted EPS was $0.90, up 53% and above the high end of our guidance range. We generated robust free cash flow of $189 million, up 26% year over year. Now please turn to slide eight for a discussion on the fourth quarter segment performance. Starting with systems protection. Sales of $737 million increased 58%. Acquisitions contributed 23 points to sales and have performed ahead of expectations. Organically, sales grew 34% with all verticals growing. Infrastructure grew approximately 70% largely due to continued strength in data centers. Industrial was up high single digits, and commercial resi grew low single digits. Geographically, Americas and Europe were both strong. Americas grew over 45% while Europe was up high single digits. Asia Pacific was down in the quarter. Fourth quarter segment income was $149 million, up 49%. Return on sales of 20.3% decreased 120 basis points year over year impacted by inflation, growth investments, and recent acquisitions. Moving to electrical connections. Sales of $330 million increased 15%. Organic sales were up 8%, and the EPG acquisition contributed six points to sales. From a vertical perspective, infrastructure led, growing approximately 25%. Industrial grew mid-single digits, and commercial resi was up low single digits. Geographically, all three regions grew. Sales were up high single digits in The Americas, Europe was up low single digits, and Asia Pacific grew double digits. Segment income was $91 million, up 8% versus last year. Return on sales of 27.6% decreased 180 basis points year over year impacted primarily by inflation. That wraps up the quarter. Now turn to slide nine for a recap of our full-year 2025 results. 2025 was an outstanding year with 30% or more growth in reported sales, adjusted EPS, and free cash flow. We ended the year with sales of $3.9 billion, up 30% or 13% organically. Acquisitions contributed 16 points to growth for the year. Adjusted operating income grew 21% to $786 million. Overall, return on sales came in at 20.2%. Inflation was more than $160 million, including approximately $90 million in tariff impact. Price plus productivity offset inflation, and we also continued to make investments for growth. Free cash flow was $561 million, up 30% with a 102% conversion of adjusted net income. This included higher CapEx investments for growth and capacity. In summary, 2025 was a year of record performance and strong execution with nVent Electric plc now a higher growth company. Turning to the balance sheet and cash flow on slide 10. We ended the year with $237 million of cash on hand and $600 million available on our revolver, putting us in a strong liquidity position. Our debt stands at $1.6 billion, down approximately $600 million from a year ago. Our healthy balance sheet and strong liquidity position give us financial flexibility to support our disciplined capital allocation strategy. Turning to slide 11, where we outline our capital allocation priorities. Our capital allocation strategy is all about investing in and capitalizing on opportunities that generate the highest returns for our shareholders. Our first priority is growth. We are investing in new products, capacity, and supply chain resiliency. In 2025, we invested $93 million in CapEx, up 26%. These increased investments are for recent acquisitions and new capacity to support growth in data centers and power utilities. We returned $383 million to shareholders in 2025, including share repurchases of $253 million. And we increased our quarterly dividend 5%. We exited the year with a net debt to adjusted EBITDA ratio of 1.6 times, below our targeted range of two to two and a half times. We believe we are well-positioned and have additional capacity for future capital deployment, with our first priority being to invest in growth. Moving to slide 12 and our 2026 outlook. We are forecasting another year of strong sales and earnings growth. Reported sales are expected to grow 15% to 18% with organic growth in the range of 10% to 13%. This assumes strong volume growth and positive price. Acquisitions are expected to contribute approximately four points to growth, and foreign exchange to be a one-point tailwind. Our outlook for full-year adjusted EPS is $4 to $4.15, which represents growth of 20% to 24%. And we expect free cash flow conversion to be between 90% to 95% of adjusted net income. We expect net interest of approximately $70 million, our adjusted tax rate of approximately 22%, and shares outstanding of approximately 164 million. Price and productivity are expected to offset inflation, including tariffs. We forecast incremental tariffs of approximately $80 million, largely in the first half of the year. Corporate costs are expected to be approximately $130 million, CapEx of approximately $130 million, and depreciation and amortization of approximately $230 million. Moving to slide 13, and our first quarter outlook. We forecast reported sales growth of 34% to 36%, with acquisitions contributing approximately 15 points to sales and foreign exchange approximately a two-point tailwind. Organic sales growth is expected to be up 17% to 19%. Price coupled with productivity are expected to offset inflation, including the tariff impacts in Q1. We expect adjusted EPS to be between $0.90 and $0.93, which at the midpoint reflects more than a 35% increase relative to last year. Wrapping up, our team delivered a strong year with record sales, adjusted EPS, and free cash flow. We are well-positioned for another record year in 2026. With that, I will now turn the call back over to Beth. Beth Wozniak: Thank you, Gary. Please turn to slide 14. Key to our success and performance has been our people and our culture and making nVent Electric plc a great place to work. We are focused on improving our employee experience and having a positive impact on our communities. On this slide, you can see numerous awards and recognitions we have received as we focus on our people and building a more sustainable and electrified world. For the second consecutive year, we were recognized as one of the world's most ethical companies by Ethisphere. We also earned a gold sustainability rating from EcoVadis, placing us in the top 5% of companies assessed. And we were certified as a great place to work for the fourth consecutive year. These are just a few of the many awards and recognitions we have received. I'm extremely proud of our nVent Electric plc team and everything we have accomplished together. And there's always more we can do. We want people to grow their careers at nVent Electric plc as we grow as a company. Turning to slide 15. On February 24, we will be hosting our Investor Day, and I look forward to sharing more details about our growth strategy, new medium-term financial targets, and how nVent Electric plc is inventing the electrified future. Wrapping up, on slide 16. 2025 was a year of outstanding performance for nVent Electric plc, delivering differentiated value for our customers and shareholders. Our portfolio transformation and data center organic investments are accelerating our growth, and we expect 2026 to be another record year of financial performance. Our future is bright. With that, I will now turn the call over to the operator to start Q&A. Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Deane Dray with RBC Capital Markets. Please go ahead. Deane Dray: Thank you. Good morning, everyone. Beth Wozniak: Good morning. Deane Dray: And maybe we can start with getting a bit more color, and maybe you can size the impact of inflation and these growth investments in your '26 guide. And then also, if you can just give us some context as new capacity comes online, what is that doing to your typical margin progression? Gary Corona: Thank you. Thanks, Deane. This is Gary. I'll give a bit of color on inflation. And we expect higher inflation in 2026 due to labor, metals, and as I mentioned in my script, approximately $80 million in carryover or tariff impacts. We plan to address that through strong productivity as well as pricing, and those two actions will offset the inflation in the year. As you mentioned, we'll continue to invest to support growth. And we have been doing that in '25 as well as into '26. And you're seeing that support the tremendous top-line growth that we've delivered in the quarter, and we'll continue to deliver in 2026. Beth Wozniak: And with respect to your point on as we're investing in the margin impact, I would just say that we're ramping so quickly and having to train a lot of new people. There are some inefficiencies. And as we start to scale, we'll get better in terms of improving those inefficiencies and that productivity. Deane Dray: That's real helpful. Thank you. And then just as a follow-up, really impressive new product introductions, new product vitality index. And maybe if we could, you made a lot of impact at Supercompute this year, launching a new line of standardized modular liquid cooling platforms. Just, you know, how what's been the customer receptivity to the launch? And where does that stand today? Beth Wozniak: Yeah. Thank you, Deane. Yes, we did showcase a lot of those new products at Supercompute, and some of those products start to launch here through Q1 and Q2. Customer reception to that has been very strong because, as you know, we've driven some very high-performance and very capable products that are very scalable and modular. And so, as we see, you know, this year, a lot of those products launch, and we think that'll be part of our growth story as that reps through 2026. Operator: Thank you. The next question comes from Julian Mitchell with Barclays. Please go ahead. Julian Mitchell: Hi, good morning. Beth Wozniak: Good morning. Julian Mitchell: So maybe just good morning. Just wanted to start perhaps with, you know, a color you could give us on that backlog kind of recognition profile? I think it was $2.3 billion at the December. So it's about 50% of your revenue guide for the next twelve months. Maybe help us understand, I suppose, you know, how the maybe the book to bill trended recently so we can get some sense of that orders to sales cadence. And how much of that backlog do you think will be recognized in the next twelve months? I think we get your RPO in the 10-K. Beth Wozniak: Hi, Julian. Maybe I'll start, and I'll let Gary fill in. So, you know, as we transformed our portfolio, and we talked about how we have more of a mix between short cycle and long cycle. You're seeing that we're more of a, you know, we have more backlog than we would have had traditionally. And so some of that is in data centers. Some of that is in power utilities. And so you're just seeing the strength there. And, you know, I would say that most of that backlog, you know, is through 2026, although there's some beyond that. But a lot of that is what gives us confidence in our guide for the year given the strength of it. Gary Corona: Yeah. I just would add we mentioned in the script, the backlog is now three times what it was last year. Primarily data center and our new track team and EPG business supporting the vertical, but there also is healthy orders and backlog in our electrical connections business and our core systems protection business, Julian. So healthy backlog. Orders were up nicely in the quarter, and we feel good about the momentum that we're carrying into 2026. Julian Mitchell: Thanks very much. My second question would be on the operating margins. So I think the guidance embeds about a 70 basis point decline year on year in the first quarter. And then operating margins are up maybe 20 bps or so for 2026 in aggregate. Just wanted to check those numbers are roughly okay. And I suppose more specifically, it seems like the organic operating margins maybe are not getting the lift yet that you had expected. So just wondered what you thought the main culprit there was. Is it if it's price cost, that's okay on the cost side, but has anything got worse on the price side because of all the capacity everyone's adding? Gary Corona: Thanks, Julian. I'll take that one. And I'll talk about 26 margin. And we expect margin expansion in 26, including better incrementals in '26 than we had in '25. You know, as you mentioned, the inflation will persist, including the tariffs, but we expect price and productivity to offset it. We expect more price, and we've announced pricing that's in the market. You know, the Q1 is we expect margins to be flattish sequentially in the quarter but up factoring in for the accelerated share-based compensation that we'll recognize in Q1, which is really phasing across the year. Operator: Great. Thank you. The next question comes from Nigel Coe with Wolfe Research. Please go ahead. Will Branco: This is Will Branco on for Nigel. Hey, Will. Good morning. Gary Corona: Morning. Will Branco: If I could kinda go back to the margin point, for twenty-six first, I think the implied incremental margins in the guide are around 25% next year or this year, which is obviously a step up from twenty-five. But just in terms of the first half versus the second half, you increasingly easy comps through the year. So just how should we think about the first half or second half waiting on incrementals? And then maybe if I could just extend that out beyond 26, I think longer term, you've talked about think, incrementals in the 30 to 35% zone. Obviously, the portfolio, very different now from two years ago. So any color on how we should think about incremental margins in the business beyond 26 as well? Thank you. Gary Corona: Yes. Thanks for the question. And as you mentioned, incrementals will be better in '26 than they were in 25. And we expect that to progress nicely throughout the year. The first half has the impact of the carryover tariffs, the EPG acquisition, and some of these investments for growth that Beth mentioned as we get some new capacity online. You know, second half will be better as those headwinds abate. You know, we're very confident in the direction that our margins are headed. And I'm not gonna comment on anything beyond '26. We will have the opportunity to speak to that as we're together in about a month at our Investor Day. Will Branco: Great. Thanks, Gary. And then maybe my follow-up, I could focus on orders. Obviously, 30% growth in the quarter. Any color on maybe how orders trended q over q in four q? And then, obviously, through January, maybe any color on year-to-date order trends, specifically any orders that may have pushed out of the fourth quarter into the first quarter? If any color there would also be very helpful. Thank you. Beth Wozniak: Yes. As we commented in our last earnings call, our orders ex data centers were up high single digits. And as I just remarked, orders for Q4 were up low double digits. So in the non-data center business, we've seen orders improve, and I would say orders continue to look good through January. Will Branco: Thanks, guys. Operator: Thank you. The next question comes from Joe Ritchie with Goldman Sachs. Please go ahead. Andy: Hi, this is Andy on for Joe. Good morning. Beth Wozniak: Good morning. Andy: Yeah. Thanks. I had a broader level question around your 2026 guide. So in 2025, your order growth has averaged close to 30% through the year, and you exited 4Q with a 24% organic clip as well. So can you just help us understand the puts and takes on the growth guide of 10% to 13% for 2026? And then the implied step down after 1Q. Gary Corona: Yeah. I appreciate you recognizing the strong growth that we had in Q2 or Q4. And we expect really a strong Q1 on revenue and EPS both growth over 30%, mid-thirties at the midpoint. You know, annually, I would just say, look. It's early in the year. We've entered a period of unprecedented growth for nVent Electric plc. And we'll continue to update our outlook as we deliver the results quarter after quarter. Keep in mind, we are overlapping 20% organic and 50% EPS growth in 2025. And we want to ensure that our guidance gives us the flexibility to invest to support growth in the long run. So we feel good about the momentum. And we'll continue to update you as we move throughout the year. Andy: Got it. That makes sense. Just as a follow-up, maybe a broader question around liquid cooling, and a lot of the growth today is driven by data centers, whether it's the orders or the top line. But liquid cooling still remains, you know, underpenetrated and ultimately, like, data centers are going to need it forward. Can you give, like, a higher level on how you're thinking about the TAM, you know, over the next three to five years and when's right to win on this opportunity? Beth Wozniak: Sure. Well, you know, one of the things that we just said is our data centers are now over a billion dollars. And it's been growing significantly with liquid cooling. At Supercompute, we showcased a lot of new products that we're launching. So we see that liquid cooling is, you know, currently less than 30% of data centers have liquid cooling, and that is going to grow significantly because of the heat loads and power densities, etcetera. So, as we go forward, we have a lot of new products that are modular, that are scalable, that we've been investing in our capacity. So we just see a lot of opportunity with data centers and with the AI build-out and the need for liquid cooling. Andy: Okay. That's awesome. I'll get back in queue. Operator: Thank you. The next question comes from Jeff Hammond with KeyBanc. Please go ahead. David Tarantino: This is David Tarantino on for Jeff. Maybe going back to orders, maybe just on the profile of the orders in data center versus the growth we saw in March. Are you seeing any change in the order patterns in terms of size scale and or lumpiness of the orders quarter to quarter? As these kind of larger data center projects are contributing to it? Beth Wozniak: Look. I would say, you know, data center orders can be very lumpy. And so, you know, we had tremendous orders in Q3 and good orders in Q4, but I think we're gonna continue to see large orders and, you know, and those are not gonna be necessarily smooth as they go through the year. David Tarantino: Okay. Great. That's helpful. And then there's been a lot of talk about the effects of operating data centers at higher temperatures as of late. Could you walk us through your view on what the implications this has around your portfolio? And maybe could you speak to your visibility around technology evolutions as you work with your customers on them? Beth Wozniak: Sure. So one of our new CDU products that is launching this year, and we showcased it at Supercompute. What we shared is that we've been working with NVIDIA, and we understand those technology road maps and those heat loads out to 2030. And we have designed those products with a lot of flexibility built into them. So in some cases, what we can do with this new CDU we're launching would have taken two CDUs in the past. So those higher heat loads we're well aware of. We're working with all the chip manufacturers, and we're designing that into our product portfolio. David Tarantino: Great. Thank you. Operator: The next question comes from Vladimir Bystricky with Citi. Please go ahead. Vladimir Bystricky: Hey. Good morning, everyone. Thanks for taking my call this morning. Beth Wozniak: Morning, Vlad. Vladimir Bystricky: So I just wanted to ask you. Obviously, a lot of focus on data centers and infrastructure vertical, but I wanted to touch it for a second here on the third of your portfolio that's industrial. So can you just talk about how you're seeing underlying trends evolve in that market and your level of visibility and confidence to the mid-single-digit growth in Industrial in 2026 and whether you're seeing orders currently sort of consistent with that demand? Beth Wozniak: Well, as we discussed at ex data center, our orders in Q3 were high single digits. Then they're in Q4, low double digits. And we're seeing that we're seeing industrial orders, you know, at a nice rate given investments in CapEx, investments in automation, and reshoring. So some breadth to the orders coming across some different industries. And it's really those order trends and what we're hearing from our channel partners and customers that gives us the perspective that we're gonna see industrial grow mid-single digits for this year. Vladimir Bystricky: Got it. That's really helpful, Beth. Appreciate that. And then just shifting back to data centers, can you just talk about as we're seeing the data center technology and architecture continue to evolve, and as we're seeing new entrants trying to come into the space, can you just talk about how you see your position in thermal management evolving going forward and maybe more specifically, what you're seeing in terms of competition in liquid cooling? Beth Wozniak: Sure. So as you know, we've been doing liquid cooling for well over a decade, and have been working with some large hyperscalers for a long time. And on, you know, we're several generations in here. So when we think about our capability, we have a lot of application expertise. We've developed a lot of manufacturing and supply chain capability to be able to scale. And in our case in point is from when we announced that we were going to expand to a new facility and sign the lease to where we started actually producing that was just over a hundred days when I mentioned that we're up and running in January. And I think that speaks a lot to our capability from a manufacturing supply chain perspective. So, you know, as we go forward, look, I think there's a lot of new entrants that want to get in because they see the growth opportunity here. And what I would just share is we continue to invest. We continue to launch a broader scale of products because we see that there's going to be demand for liquid cooling from hyperscalers to colos to enterprise, it's even non-data center applications in the future. And so our investment here, our investment in our labs, you know, we've got good partnerships that I think we're going to continue to differentiate with our performance and our ability to scale. Vladimir Bystricky: Thanks, Beth. Appreciate that. I'll hop back in the queue. Operator: Thank you. The next question comes from Brian Drab with William Blair. Please go ahead. Brian Drab: On the $1 billion figure in data center, I just wanna be clear. Is that a run rate that we're exiting the year at? And sorry if you said this, but I might have missed it. But is that a run rate, or is that the total for '25? And that's my first question. Beth Wozniak: Well, the first is that was our 2025 revenue in data centers reached over a billion. Brian Drab: Okay. And then can you talk about what the comparable number was for '24? And I know there's acquisitions in there. And then, you know, just any color that you... Beth Wozniak: In 2024, it was $600 million. Brian Drab: Okay. And then can you talk at all about in '25 what the, you know, the different categories within data center? Like, what type of growth you saw? At least maybe, like, rank order, you know, cooling versus powering versus the, you know, enclosures and other business? Like, where are you seeing the fastest growth? I assume it's in liquid cooling, but I just want to if you could add some color to that. Beth Wozniak: Yeah. I mean, we're really seeing the fast growth in liquid cooling and power. But, you know, behind that, I would say our cable management is also growing very nicely as well. Brian Drab: Okay. Alright. Thanks. I'll save my other questions for later. Thank you. Operator: Thank you. The next question comes from Nicole DeBlase with Deutsche Bank. Please go ahead. Nicole DeBlase: Yes, thanks. Good morning. Beth Wozniak: Good morning, Nicole. Nicole DeBlase: I don't think we've spent much time on power and utility yet in Q&A. So just wanted to kind of dig in there, Beth, you know, trends that you guys saw during the quarter with respect to orders. And then last quarter, you commented about tracking were trending ahead of your deal plan. Is that still the case? Beth Wozniak: Yes. It is. You know, we're very pleased with those acquisitions, and the growth that we're seeing in the performance. Look. Power utilities. This is an area where we're seeing just solid growth and opportunity, and I think there's some very synergistic plays for us as we're able to pull through more of our portfolio, especially in some of these integrated engineering building solutions. And we just see some nice long-term growth in this area, very synergistic to what's in the rest of the nVent Electric plc portfolio. Nicole DeBlase: Thanks, Beth. And just orders, were they up double digits in power and utility? I would assume so, but wanted to clarify that. Beth Wozniak: I don't think we've been that I don't think they've been as strong as data centers, but they're part of that overall everything ex data centers is up. Low double digits. Nicole DeBlase: Okay. Understood. And then, maybe on the M&A pipeline, if you could talk a little bit about the level of activity that you're seeing today and the level of excitement about potential M&A into 2026? Beth Wozniak: Yes. I mean, our, you know, first of all, you know, our balance sheet and our net debt to EBITDA ratio are in really good shape, and when we think about our pipeline, it's very strong. It's very robust. We remain very disciplined. And I think, you know, there's always opportunity for us to find some new acquisitions like we did with Trackdee and Avail that are really helping us build out, you know, infrastructure in particular. So you never quite control the timing of deals, but we've got a good pipeline that we're currently working through. Nicole DeBlase: Thank you. See you in a few weeks. Operator: Thank you. The next question comes from Scott Graham with Seaport Research Partners. Please go ahead. Scott Graham: Hey. Good morning. I have a question about hey. Hey, Gary. Hi, Beth. I have a question about productivity. Let's call it, let's say, away from the acquisition integration. So, you know, sort of in the first half of the year, we're gonna have some, you know, dilution margin-wise with the ramp in the LC capacity. Suggesting that the offset is on productivity elsewhere has to be maybe a little bit higher. What are you doing in productivity elsewhere to kinda make some of that up? Gary Corona: Yeah. I appreciate the appreciate the question, Scott. And as I mentioned in my remarks, we plan to have our productivity as well as our pricing offset the mid-single-digit inflation that we're expecting in the year. And what we've talked about is we're advancing our lean capabilities, you know, while we invest in our capability. We're working on driving capability in transportation, automation, and our funnels and our sourcing productivity side are quite good. So we're very focused on driving additional productivity, especially as we've increased our investment. And we're confident that price plus productivity will offset the inflation in twenty-six. Scott Graham: Okay. Got it. Hey. I too wanted to ask a couple questions about power. So I know you're mostly, you know, grade T and D. But now for the, I think, for the first time in a while, you've started to mention renewables as being, you know, 5%. I was just kind of wondering what the dynamics of renewables growth look like as well as generation? Do you have opportunities in generation? Beth Wozniak: It's more for us through T and D, in particular, sub. And as you think about substations, whether that's for utilities or it's supporting data centers, that's where we see the most opportunity currently. Scott Graham: Okay. Close enough. And then last one was on the penetration of liquid cooling. Is that a number you guys are able to update? Beth Wozniak: Well, we will give an update at our Investor Day on February 24. You know? But we've said that, you know, liquid cooling, less than 30% of data centers have liquid cooling today. And we see it growing significantly. Operator: Thank you. The next question comes from Neil Burke with UBS. Please go ahead. Neil Burke: Question on data center. I mean, we see CapEx continuing to accelerate. But the guide for organic growth for this year like, a pretty meaningful deceleration in the back half. Is this just comps getting harder, or is there some sort of kind of timing difference between what we see on the hyperscaler CapEx side and in nVent Electric plc's orders or sales? Gary Corona: Yeah, Neil. I appreciate the appreciate the question, and we're pleased with the backlog and our momentum that we have on data center. I'll just go back to the comment I made earlier, which is, look, it's early in the year. You know, we're managing unprecedented growth here for nVent Electric plc. And we'll continue to update you on the outlook as we deliver results here in the first half of the year. But we're confident in the momentum, and then we'll talk about the multiyear opportunity in data center here in a month or so at our investor day. Neil Burke: Thanks. And just like on the multiyear opportunity, so I'd look forward to hearing more on that. But do you just sort of, like, high level feel like you have a better level of visibility now as you scale this business. Obviously, backlog's a lot higher. But, like, in terms of the data center project pipeline, do you feel like you are getting closer to customers as you grow this business and you have more visibility on future demand. Thank you. Beth Wozniak: Well, I would say, in general, with this portfolio transformation, it's given us more of a balance between short cycle and long cycle. And whether it's data centers or even power utilities, just because of the nature of those types of builds and projects, we certainly have more visibility into, you know, multiyear projects or even just understanding technology road maps and where they're going. Both of those are very important and are helping us to think about our capacity as well as our new product technology road map. Operator: Thank you. This concludes our question and answer session. I would like to turn the conference back over to Beth Wozniak, Chair and CEO, for any closing remarks. Beth Wozniak: Thank you for joining us today. I'm extremely proud of our performance in 2025. We will continue to focus on delivering for our customers, employees, and shareholders by executing on our growth strategy. We believe nVent Electric plc is a top-tier high-performance electrical company well-positioned for the electrification, sustainability, and digitalization trends. Thanks again for joining us. This concludes the call. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day. And welcome to the Under Armour Third Quarter 2026 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the appropriate key. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on a touch-tone phone. To withdraw the question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Lance Allega, Senior Vice President of Finance and Capital Markets. Please go ahead. Lance Allega: Good morning. Welcome to Under Armour's fiscal 2026 third quarter earnings call. Today's call is being recorded and a replay will be available at our Investor website shortly after it ends. Joining us this morning are Kevin Plank, Under Armour's President and CEO, and Dave Bergman, our CFO. Before we begin, please note that certain statements made on today's call are forward-looking as defined under federal securities laws. These statements reflect management's current expectations as of February 6, 2026, and are subject to risks and uncertainties that could cause actual results to differ materially. For a detailed discussion of these factors, please refer to this morning's press release, filings with the SEC, including our most recently filed Form 10-Ks and Form 10-Q, and other public disclosures. In today's call, we may reference non-GAAP financial measures. We believe these metrics offer additional insights into the underlying trends of our business when considered along with our GAAP results. Reconciliations of these measures to their most comparable GAAP metrics are included in the press release and can be found on our investor website at about.underarmour.com. With that, thank you for being here and your interest in Under Armour, and I'll now turn the call over to Kevin. Kevin Plank: Thanks, Lance, and good morning to everyone taking the time to join us today. Under Armour is a global performance brand with opportunity and relevance that is both present today and capable of significantly scaling as we find our operating rhythm. Entering the next phase of our turnaround, the focus is on execution. We're not declaring all the work finished yet, but we are making real progress. With a disciplined strategy, structure, and team now in place, that progress is becoming more consistent. For too long, the organization carried unnecessary complexity. Too many handoffs, too many approvals, too much focus on one's individual job versus the broader brand objective we're trying to solve for: having athletes fall in love and know why they need Under Armour. Since coming back to the CEO chair nearly two years ago, we have narrowed our focus, moved decisions earlier, and reduced friction across the system. That work has simplified the operating system. Inventory is down year over year. Assortments are tighter. Planning is more precise, and we have additional opportunity to continue to improve. The structure of the company has been addressed and is enhancing our speed to market, SKU productivity, athlete insight, and especially accountability for all the above. In the third quarter, although we had a few nonrecurring impacts in our GAAP results that are frustrating, our adjusted results came in ahead of expectations across most line items. We modestly raised our full-year adjusted operating income outlook. This is a good proof point that our underlying business is becoming steadier, and we're seeing fewer surprises and greater predictability, which is where we believe we should be at this stage of our turnaround. Looking at our journey, fiscal 2025 is about assessing our greatest needs to address our operating infrastructure and stand up the expertise necessary for our reset, with a few additions from outside, but primarily from within the organization. For Under Armour by Under Armour. Years of consulting and rented in... David Bergman: ...took us on a path that was not the unique brand position and engine that allowed UA to cut through in the first place. Fiscal 2026 was about implementing that structure, including the foundation category-managed operating model, a renewed go-to-market, and a clearly articulated strategic business plan. We're now building on that infrastructure by changing nothing, running that same play again in fiscal 2027 and beyond, becoming sharper as the kinks work through, which we are still feeling some of, but moving forward. What is new has been layering in the how we are running the business. The operating principles that will manifest the thematic of selling so much more, of so much less at a much higher full retail price. I spent the month of January presenting these holistic principles called unleashing intentionality, in dozens of individual and group settings to teammates and partners. Taking this message directly to key stakeholders, ensuring our entire offense and defense know exactly who we are, what we are building, and how we plan to execute to achieve our mid and long-term ambitious goals. To support this next phase, we recently made targeted leadership changes to accelerate speed. Kara Trent is now Chief Merchandising Officer, with end-to-end responsibility for product mix, pricing, and margin performance. Adam Peak has been named President of The Americas. Eric Glitke is now Chief Marketing Officer and EVP of Strategy. And Yaseen Sade has transitioned to an external senior advisor role to ensure design continuity. These changes reflect exactly where we are in the transformation, moving with tighter alignment and a more decisive operating cadence. This work is not done on a spreadsheet but by bringing our teams together, removing slow process barriers, and facilitating conversations to create a much more intentional line of products across apparel, footwear, and accessories. Products that we can be famous for while highlighting the areas we already are, like UA heat and cold gear. The recent org changes now have all product teams in one conversation, including physically in one room sharing information to remove redundancy and increase speed. In addition to the 25% of SKUs we began eliminating in fiscal 2025 that is now complete, we have additional opportunity to be even more efficient. Not only with SKUs and styles, but the raw materials that support the products we make. More to come on this in future calls. But the new structure is actively digging into this work, and the early reads are incredibly positive. Kevin Plank: Looking ahead, key indicators are moving in the right direction. Brand health in the US continues to improve; awareness, consideration, and engagement are trending higher, particularly among younger athletes. Digital engagement remains strong, and when products, storytelling, and distribution align, we see a positive consumer response. So let's talk about product, because product is everything. And at Under Armour, we say that product is our currency. It always has been the engine that will ultimately drive this turnaround. This is also the hardest part of the transformation. There was no switch to flip. We are rebuilding capability, discipline, and credibility inside the organization and in the market. That work takes time. And importantly, we're now seeing real evidence that it is working. Across apparel and accessories, the proof points are starting to stack up. Base layer remains a steady engine for the business with heat and cold gear standing out. New styles, refreshed design language, and modern colorways are driving higher ASPs and strong double-digit growth in these products. That matters because it's an early signal that intentional product thought leadership can help us rebuild pricing power. We're seeing similar momentum elsewhere. ICON fleece is performing well, and our women's Meridian franchise continues to gain traction as new silhouettes and colors attract a broader, more engaged consumer base. These products reflect a stronger point of view and improved execution across categories. Spring/Summer 2026 is another meaningful step forward. You'll see more elevated products entering the market with a more consistent cohesive design language. We're introducing improved women's Vanish Elite collection, alongside continued evolutions across icon, sportswear, and footwear. In accessories, our Stealthform hat and no way backpack continue to push the price ceiling, supported by premium performance attributes in a clean, focused product story. When design intent is strong and segmentation is disciplined, consumers respond. Sell-through for newer franchises is improving year over year. Full price realization is trending higher even from a lower base. Wholesale partners are engaging more positively with upcoming assortments and buying. The shift in the footwear, which has been on a long challenging recovery path. I want to be very direct about it. Year-to-date sales are down about 14% reflecting structural issues we are actively unwinding. For multiple seasons, we tried to grow by expanding the assortment. More styles, more price points, more incremental updates. Without consistent demand over the scale to support it. That diluted volume pressured margins and increased inventory risk. We are addressing each of these. We're exiting low productivity styles, reducing redundant SKUs, and eliminating launches that lack a defined role, strong margin profile, or scalable growth opportunity, with the primary criteria being every product must have a reason to be built by Under Armour. It must have a story. In parallel, we're tightening our price tier architecture and concentrating investment behind fewer higher impact franchises that can win consistently. This disciplined approach sharpens our focus areas across training, running, and sportswear, while building momentum in team sports where we are increasingly confident in both our product and our growth trajectory, all of which should drive improved returns over time. We're already seeing proof points. In run, the Velocity Elite 3 delivered strong sell-through at launch and run specialty. And sharper segmentation across the franchise is driving healthier performance at more accessible price points. With velocity distance and Pro 2. The Acerta 11, launched in November, we talked about on the last call, continues to perform really well and is delivering a meaningfully higher ASP versus the assert 10 as we predicted. And as we outlined last quarter, we positioned this velocity run-inspired redesign in a Charge plus midsole as an outstanding $75 accessible price point offering. Rowan Los Angeles Dodgers back-to-back World Series champion Freddie Freeman as a product ambassador. Starting to drive increased demand in a millions of annual units program. This reflects our strategy in action. Simplifying the line, strengthening franchises, and reinforcing Under Armour's running credibility. In sportswear, just this week, we launched the HP Low, a $100 basketball-inspired silhouette built for all-day comfort. Pairing a premium leather upper with a cushioned court-to-street ride and a bold expression of the UA logo. The price-to-value of this shoe is off the charts and believe that it can be a gateway product for Under Armour to take share in court shoes and sportswear. Coming off our fall launch, the $120 solo model continues to build momentum. Additionally, we introduced the ARC 96 at $125 a modernized run-inspired silhouette that blends premium materials with elevated cushioning the distinctive design language. With social response and sell-through as key indicators, we're very encouraged by the evolution of these sportswear styles, all excellent examples of what's to come. While the reset of our footwear business is still underway, the actions we're taking combined with strong early signals for our innovation and design-led product give us growing confidence that we can stabilize the footwear category next year rebuild momentum with consumers and wholesale partners. Overall, our products are becoming stronger assets, not just something we sell, but primary driver of demand and value creation. We're building more intentional product segmentation across innovation levels, price points, and usage models. Every product is gaining a defined consumer role and will have a distinct identity. Over time, this approach will deepen consumer understanding of the brand support more consistent pricing discipline. Pathway to improve demand and margin contribution. Our storytelling is also getting sharper. We're moving up with greater purpose, connecting the right products to real sports moments meeting athletes where they are and driving higher engagement per dollar. Social is leading that effort particularly on TikTok. Our influencer strategy continues to expand reach and reinforce credibility. While activations like We Are Football and Run Club events with recording artist, Gunna, are evolving into community-led platforms that generate authentic energy and momentum for the brand. Team sports remain a core driver of momentum and brand authority. In American football, we continue to deepen our presence through authentic on-field storytelling and partnerships, including the launch of the first overtime national high school championship at our UA Stadium here in Baltimore, and expanded collegiate relationships with Georgia Tech, the first Under Armour school to wear Under Armour in 1996. And the University of Wisconsin, a long-standing partner. This week, we launched our spring 2026 activation spotlighting women's flag football, the next era of the game. Debuting just this past Wednesday on National Girls and Women in Sports Day. Click clack, the next era, reimagines our iconic original 2006 ad in a fresh Gen Z forward way. With the sport exploding in the 2028 Summer Olympics, on the not-so-distant horizon, UA athletes, Ashley Klam, Diana Flores, Lynne O'Brien, and Isabella Garrasi helped set the pace for the sport. The message is clear. Flag football is here to stay. At the highest level of the sport, our on-field credibility in the NFL continues to build spanning established athletes like Philadelphia Eagles, Davonta Smith, and rising stars such as Seattle Seahawks rookie, Nick Amonowari. In his first year in the league, Nick will take the Super Bowl stage this Sunday, a powerful and energizing milestone that underscores the momentum of our athlete roster and the growing relevance of our brand at the very top of the game. We're also investing in the next generation of athletes. Our UA Next All America Game Week showcased top high school talent across football and volleyball. Broadcast on ESPN and where we sold out the product capsule. We signed our first click clack NIL class and continue to build our presence in track and field as we prepare to host the inaugural UA Track and Field Nationals this spring at IMG Academy in Florida. This month, UA is on the world stage. In Italy, Lindsey Vonn, our longest-serving athlete. Will compete for Team USA and Kayle McCar will take the ice for team Canada at the Winter Olympics. Then next month, that momentum carries as the World Pass Baseball Classic. Many of our iconic UA Major League Baseball players will compete at the highest level on yet another global stage. In EMEA, momentum continues to build across global football. Activations including the UA Mansory collab, delivered strong engagement and sell-through. In our full funnel, be the problem football, and unapologetic women's campaigns are outperforming benchmarks and strengthening our brand's cultural relevance. We don't see these as isolated moments. We see them as repeatable proof points that our brand is regaining momentum at scale. This authenticity enables UA to meet approximately $5 billion in annual consumer demand while rebuilding trust, and deepening durable connections with athletes around the world. This is a foundation for sustained relevance, demand stability, and long-term value creation. Switching next to the regions. North America is beginning to turn the corner. We believe December marks the bottom of the reset. Traffic, yes, remained soft, but underlying indicators are improving. We continue efforts to strengthen our premium online position even amid a promotional environment. E-commerce conversion is up and factory house performance is improving. Digital engagement tools such as SMS and TikTok shop are delivering strong growth. In wholesale, our focus remains on rebuilding the right partner relationships. And we're making real progress. A Q3 product campaign led by Cold Gear compression with DICK'S Sporting Goods delivered solid results, and its partners gained confidence in our product and storytelling collaboration is growing. And we are encouraged by how our fall order book is shaping up. In EMEA, the business remains solid and continues to be the clearest expression of our premium strategy in action. Performance is being driven by disciplined execution, across the region with a more intentional approach to promotions that protects brand equity and pricing integrity. At the same time, solid wholesale performance is reinforcing the quality of our partnerships and the strength of demand in key markets. Together, these factors are delivering consistent reliable results and underscoring the resilience of the business in the region. In APAC, where I spent seven days in January visiting five key cities with our teams and partners, we continue to make progress on our reset. And the region remains a critical long-term growth opportunity. There, we're taking decisive actions to manage inventory, sharpen assortments, and elevate the retail experience. Together, these efforts are positioning APAC for stabilization over the next twelve months and more sustainable growth beyond. So to close, there are no shortcuts in a turnaround like this. Progress is earned through discipline and consistent execution. The business is simpler. Revenue volatility is stabilizing. The margin trajectory is improving. Inventory is cleaner. And Under Armour remains a brand athletes actively choose with authenticity and a competitive edge that would be difficult, if not impossible, to replicate. Under Armour is unique. It just is. Now if there's one thing to take away from today's call, we believe that the most disruptive phase of our reset is now behind us. We're past the period of structural change and operating noise and the organization is now focused squarely on execution and stabilization. When we look at the fundamentals, they are where we expected them to be at this point in the reset. Our operating model is in a much better place. Our business plan is well defined and increasingly repeatable. And our go-to-market approach is more focused and disciplined. Each is making progress, and each is reinforcing the other. The strategies we're executing are strengthening our foundation and positioning Under Armour to deliver more consistent performance and long-term value creation going forward. With that, I'll turn it over to Dave to review the quarter and our outlook. Thank you. David Bergman: Thanks, Kevin. Turning to our third quarter performance, we met or exceeded our outlook across all major line items. This performance reflects the discipline, focus, and growing consistency in execution as the turnaround continues to progress. While there was some non-recurring noise in the reported numbers for the period, the underlying performance of the business remains solid and consistent. With that context, I'll start at the top of the P&L and walk through the details. Revenue declined 5% to $1.3 billion, slightly better than the outlook we shared in November. The outperformance relative to our plan was partially due to approximately one percentage point of growth from a timing shift of some wholesale deliveries from Q4 into Q3. Digging into the results by region, North America revenue declined 10% primarily due to a decrease in wholesale, with a slightly smaller decline in our direct-to-consumer business. In EMEA, revenue increased 6% on a reported basis and 2% on a currency-neutral basis, with growth in both wholesale and direct-to-consumer during the quarter. APAC revenue decreased 5% on both reported and currency-neutral basis, marking a sequential improvement from the year-over-year declines we saw in the first half of the fiscal year. The Q3 decline was driven primarily by our full-price wholesale business while DTC revenue was down only slightly, partially offset by positive licensing growth. And in Latin America, revenue increased 20% or 13% on a currency-neutral basis, driven by balanced growth throughout the business. From a channel perspective, wholesale revenue decreased 6% due to lower full-price and third-party off-price sales, partially offset by growth in our distributor business. Direct-to-consumer revenue decreased 4% primarily due to a 7% decline in e-commerce revenue. Sales in our owned and operated stores were down 2% in the quarter. And licensing revenue increased 14% driven by the strength of our international licensees and modest growth in North America. Finally, by product type, apparel revenue decreased 3% due largely to softness in train, golf, and run, while sportswear was flat for the quarter. Footwear revenue decreased 12% reflecting declines across most categories partially offset by growth in outdoor. And accessories revenue decreased 3%, driven largely by declines in golf, outdoor, and team sports, with a partial offset from growth in sportswear. Third-quarter gross margin declined 310 basis points year over year to 44.4%, in line with our outlook. This decline was primarily driven by 180 basis points of supply chain headwinds, including 200 basis points of pressure from higher U.S. tariffs, 140 basis points from pricing amid a more promotional environment in North America, and a combined 40 basis points from unfavorable channel and regional mix. These headwinds were partially offset by 30 basis points of foreign currency impacts and 20 basis points from a more favorable product mix. Turning to SG&A, third-quarter expenses increased 4% to $665 million driven primarily by a $99 million litigation reserve expense related to a previously disclosed insurance carrier dispute. Within SG&A, we also recorded approximately $3 million in transformation costs related to our fiscal 2025 restructuring plan. Excluding these items, adjusted SG&A was down 7% to $563 million mainly due to lower marketing spend driven by timing with a greater share of our fiscal 2025 marketing investment recognized in the second half, along with continued benefits from restructuring actions and disciplined management of discretionary costs. In the third quarter, we recorded $75 million of restructuring charges and $3 million in transformation-related SG&A expenses, totaling $78 million under our fiscal 2025 restructuring plan. Since the plan's inception, we have incurred $224 million in charges and transformation expenses, of which $89 million are cash-related and $135 million are non-cash. We continue to expect total charges and expenses under the plan to be up to $255 million with any remaining amounts expected to be incurred by the end of 2026. Thus far, the actions we've taken under the plan to streamline our business have resulted in $35 million in savings in fiscal 2025, and are on track to deliver an additional $55 million in fiscal 2026. Moving down the P&L, we reported a third-quarter operating loss of $150 million. Excluding the litigation reserve expense, transformation expenses, and restructuring charges, our adjusted operating income was $26 million, again exceeding our outlook. The bottom line, our reported diluted loss per share was $1.01. This result includes the impact of the insurance appeal decision, transformation expenses, restructuring charges, and a $247 million non-cash valuation allowance against certain U.S. federal deferred tax assets. Regarding this valuation allowance, accounting rules required us to reduce the value of our U.S. federal deferred tax assets and record a non-cash tax expense due to cumulative GAAP U.S. losses over the past three years. These losses have been driven largely by restructuring and impairment charges, litigation reserve expenses, and other non-operating items. Importantly, this valuation allowance has no impact on current cash flow, does not signal deterioration in the underlying business, and should reverse over the next few years as U.S. profitability improves. Excluding the items discussed earlier and the U.S. federal deferred tax asset valuation allowance, our adjusted diluted earnings per share for the quarter was $0.09. Separately, part of our Q3 adjusted EPS overdrive relative to our outlook was due to a favorable tax development on the IRS's approval of a tax method change that mitigated the use of our U.S. losses to offset foreign earnings under the U.S. GILTI provisions. As a result, our full-year fiscal 2026 non-GAAP estimated effective tax rate is lower than originally anticipated and more reasonable. So with that, we recorded a cumulative three-quarter catch-up tax benefit in the third quarter. This tax update accounted for approximately $0.06 of our EPS in the quarter. Now, turning to the balance sheet. Third-quarter inventory was down 2% year over year to just over $1 billion. We ended the quarter with $465 million in cash and cash equivalents and $600 million in restricted investments. As a reminder, that $600 million is fully set aside and dedicated to covering all remaining principal and interest on our senior notes due in June. These restricted investments are not available for general use and should not be viewed as part of our operating liquidity or discretionary debt profile. Furthermore, we continued to prioritize balance sheet strength during the quarter, including repaying approximately $200 million of revolver borrowings and ending the period with no amounts outstanding under our $1.1 billion revolving credit facility. As a result, we entered the final quarter of this fiscal year with a strong liquidity position and meaningful financial flexibility with more than sufficient resources to meet all expected obligations. Now moving to our fiscal 2026 outlook. With one quarter left in the fiscal year, we've updated our expectations largely toward the high end of our previous ranges. Breaking that down further, we now expect full-year revenue to decline approximately 4% compared with our prior expectation of a 4% to 5% decline. This reflects our expectation that North America revenue will decline approximately 8% and APAC revenue will decline approximately 6%, partially offset by growth of approximately 9% in EMEA. This implies a meaningful improvement in fourth-quarter revenue trends as we continue executing our strategies and move toward the stabilization we expect in fiscal 2027. Turning to gross margin, we now expect the full-year rate to decline by approximately 190 basis points compared with our prior outlook of a 190 basis to 210 basis point decline. Drilling down further, U.S. tariffs will drive most of the decline, along with unfavorable channel and regional mix and pricing headwinds. These pressures are partially offset by foreign currency tailwinds and a more favorable product mix. We remain highly focused on controlling costs and expect adjusted SG&A expenses to decline at a mid-single-digit rate, unchanged from our prior outlook. With even greater confidence in our ability to leverage given the slight improvement in the revenue outlook. This implies a considerable decline in fourth-quarter SG&A expenses driven primarily by year-over-year marketing timing and lower compensation-related costs. This translates to an expected adjusted operating income of approximately $110 million at the high end of the $95 million to $110 million outlook we provided in mid-November. The bottom line, we now expect adjusted diluted earnings per share of $0.10 to $0.11 driven in part by the favorable tax planning developments I noted earlier. These updates are expected to yield a full-year fiscal 2026 effective tax rate roughly in line with the fiscal 2025 rate. In closing, we are operating with focus, discipline, and growing confidence as we complete a pivotal year in Under Armour's transformation. Our third-quarter performance reflects meaningful progress in simplifying the business and driving more disciplined execution, supported by a leaner, more agile operating model. The foundation continues to give us flexibility to manage near-term challenges while positioning the company for improved financial performance over time. While work remains, we believe the most disruptive phase of this reset is behind us. And with a clear strategy, disciplined capital deployment, and continued focus on cost optimization and margin expansion, we are confident these actions will better position us to drive sustainable profitable growth and shareholder value over the long term. Finally, before we close out today's prepared remarks, this being my last call in this role, I want to pause and say thank you. With a special thanks to Kevin, our entire Board, and to all my teammates around the world. After twenty-one years at Under Armour, including nine as CFO, I've had the privilege of working alongside extraordinary teammates who bring passion, resilience, and an unwavering commitment to this brand every day. Together, we have navigated periods of growth, transformation, and real challenges. We have done so with locked arms in the humble and hungry mentality that makes this place so special. As we work through the coming CFO transition, with Reza joining the brand, I do so with complete confidence in our teams. And in the strength of the foundation we have now established together. We are reaching that crucial turning point. And thus I believe Under Armour's best days are still ahead. With that, we'll open the call to questions. Operator? Operator: We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw the question, please press star then 2. Our first question comes from Simeon Siegel with Guggenheim. Please go ahead. Simeon Siegel: Thanks. Hey, guys. Morning. Dave, just want to say it's been great working with you. Best of luck on your next chapter. David Bergman: Thank you. Simeon Siegel: Kevin, your December comment is interesting and encouraging. Can you speak to what makes you confident about that the quarter was the lowest revenue decline for North America and just that the region and Under Armour overall will see stabilization in FY '27? And then along those lines, just as you think about this path forward, I think you mentioned stabilization in footwear in '27. Can you elaborate a little bit on that more? Thank you. Kevin Plank: Yeah. Thank you, Simeon. And, let me just start with leadership. First of all, I'm becoming more and more proud, I think, of the ecosystem that we built here at UA to be able to have internal talent like Kara Trent be able to move from a merchandising role into America to a similar one in Europe, to heading up Europe and then having the ability to bring her back here a little more than two years ago. And I think stabilization was something that was her number one goal, and we did a, care delivered and along with an amazing team of people, that just made that happen. And then I also just want to make note that the credit of a fourteen or fifteen-year Under Armour vet in Adam Peak who we brought back to the brand about eleven months ago and have the ability to create that kind of clarity and role and succession. So I think it starts with, the confidence we have in giving stability to our partners. Within that, you know, structurally, believe that we now have the right model in place. I think that we're attacking the right issues. And that, of course, begins with product. We clearly have done a really solid job in laying out our design ethos and a language that consumers can look to, expect, and begin to make more and more repeatable. As I said, we started with our concept of winning with the winners, and that's getting behind heat and cold gear. And then meanwhile, we're introducing new styles and silhouettes that, again, just becoming more consistent with. From a storytelling standpoint, I think it's you're just starting to feel the brand more. And that goes to the launch we did with the women's flag football campaign on Wednesday, and please take a chance to look at our investor relations page and see the recent spot that we just put out, which is pretty impressive. Probably the most telling thing, though, is going to be no matter what I say, Kara walked into a pretty tough situation, and we were just looking at declines especially at the wholesale level, which is always a great indicator of how a year is going to turn out. And I can say, definitively for the first time in quite some time, we're no longer looking at significant declines. And, obviously, I'm hedging my statements there. But we're at a place that we like the way the order book is shaping up right now. That also just goes back to just pure relationships with partners because, hopefully, you can hear it in our voice. And if you were watching, you could see it in our eyes. But there's just a different level of confidence, swagger, whatever you want to call it, which I think leads to the most important indicator, which is just culturally. This business is feeling it. That's exuding out. It's exuding through the desire of the number of phone calls we get of people that want to be here. And it's just a trend. It's hard to put it into words. And after twenty years public and celebrating thirty years this year as a business, I've just seen a lot. So feel very good about what the North American position looks like. Moving on to footwear. As I said, we're not trying to hide anything here. Footwear is a billion-plus dollar business for us. We believe has the opportunity to be much larger. As we compare ourselves to others in our space, we're seeing other partners or other brands do a lot more with a lot fewer items. That's pretty narrative to the way that I'm driving across the organization right now. Is how can we just skinny up. I think I did a pretty good job covering it in my prepared remarks. Of let's just stop trying to chase volume through additional units. Let's get behind. Let's get clarity with the way that works from the product to the story to the distribution. And I think that our new operating model, what we spent the majority of calendar year 2025 doing implementing, and then running now for a year. I think we're going to start seeing those benefits. So I can talk about the authenticity on field, and I think we made a good job making the statement that Under Armour's authentic athletic credibility is something which is nearly impossible to recreate. So we're going to lean there. We're going to leverage and you're going to see, you know, really clear ideas, like, when we talk about things like running we have a really clear point of view of who we are and run. Know, we build running shoes for athletes that are running to train for their sport. In addition to that, we also have the ability to make Formula One race cars like the Velocity 3 at $250 per share in Lokate. But a part of it is some of the work that our team has been digging into we just took up the Velocity family that had six shoes in its franchise ranging from a 110 to $250. We just went from six shoes in that franchise to four. Being more targeted. Being more deliberate with the storytelling that we're going to do and put behind it, which makes it easier for, a, our teams to be able to build b, our sales team be able to sell, see the wholesale partners, be able to write orders for, and most importantly, the consumer to be able to make an easy purchase decision with a really clear point of view from the brand. So, in some instances, and maybe just the last point here, when I think about it, I mentioned sportswear and talked about three price points from a 100 a hundred and twenty, and a $125 with the Solo, the HP Low, and the footwear that we now have in place there. We're just we're getting very intentional. That word is no accident on this call. You'll hear it over and over. And it's basically it's tattooed into anyone who walks through this building. So, we're doing a good job doing that. So thank you for that question, Simeon. Simeon Siegel: That's great. Your excitement is really clear. Best of luck for the rest of the year. Kevin Plank: Thank you. Operator: Our next question comes from Jay Sole with UBS. Please go ahead. Jay Sole: Thank you so much. Kevin, you mentioned that North America is beginning to turn the corner and the wholesale partners are engaging. You're seeing the fall order book shaping up nicely. I'm wondering if all that progress, that operational progress in North America is also transferable to Europe and the APAC regions. Are you seeing progress in those regions as well? Do you expect sequential improvement as we go through, you know, calendar 2026? Kevin Plank: Yeah. Thank you, Jay. EMEA has been a strong suit for the company for quite some time, and delivering no less this year with about 9% growth there. So we really like the team. Again, it's the consistency that we have, a, in the team on the ground, the leadership of, again, being able to move in, another Under Armour legacy athlete like Kevin Ross into the leadership position following Kara has been a real asset. Relationships there have really never been stronger. And calling out specifically JD Sports and Sports Direct, the buy-in, the partnership is something that, you know, they're really getting behind the brand because we've been delivering, and we've been consistent. And in places like France where we're probably the number one underground brand in the country, we're seeing that begin to translate out. At the same time, EMEA is becoming more and more promotional particularly in The UK, which is our largest market. So it's something we have our eye on. And what you're seeing, frankly, from the other brands is there's a lot of people that are out there buying business. So we know that that does not work. And so we're really holding the line, I think, for being opportunistic where we can or more importantly, maybe we have to in some instances. But, you know, we like what EMEA is doing. We believe it will continue to grow for us. We're not sure at what levels right now as we think and look out into the new year. But it's certainly an area of strength for us. And, you know, I guess I get to sit here like a bit of an old hat now, thirty years doing this, where I just look at things of progress. But, you know, that feeling from the team, I'm going to be over in Europe next week and get to see Lindsey Vonn hopefully ski and win and compete and win some gold. So and I'll be visiting our office in Amsterdam too and delivering the unleashing intentionality directly to our team too. So, we like what's happening in Europe. Again, we're not declaring victory anywhere. What you see is you feel a brand that's it's I think we're right where we're supposed to be at this moment in our turnaround. Jay Sole: Got it. Thank you so much. Operator: Our next question comes from Bob Drbul with BTIG. Please go ahead. Bob Drbul: Hi. Good morning. I guess just Kevin, you think about the go forward especially in footwear, how are you thinking about segmentation in a pretty competitive market? Is increased penetration and success of better and best to stabilize is that the key to stabilization here? Or will it be good level driven? Thanks. Kevin Plank: Yeah. We've used a vernacular of good, better, best of really just thinking about the line that's been critical, as we've been working through this reset. As I said in the past, we've made a lot of good. We've made something better and nowhere near enough best. Now if you ask me for our druthers, we sit at $5 billion-ish in revenue. We'd love to maintain our good. Of course, be opportunistic where we can. But we really like to concentrate our growth at the better and best level. Frankly, those clear lines of segmentation have not been there. And as we said, going through this premiumization, as we're really focusing. And so even with things I gave the example about our velocity franchise earlier. Clear segmentation is there. And what I'll get into maybe a little bit later, is as we're thinking about the way that we're approaching this is becoming more consistent for the consumer. You know, I think one thing that I'm driving very much so is our global continuity. And what's ironic is that in a brand that was founded effectively on two products, if not two fabrics, heat gear and cold gear, if you ask today what our two most important franchises that we have, it's heat gear and cold gear. Then we make a lot of other stuff. So number one, we want to go where the money is. We want to leverage those places where we're already currently winning. And so establishing clear good, better, best that compression category, that base layer category, make sure that we continue to win there. And then we're looking where we can create extensions. What we don't want to be we're not interested in being a fashion company. We'll be fashionable. But we're looking for more continuity where today, we're carrying a global commonality of a number that's somewhere in the twenties. Meaning that each year or if you went to each region between APAC, EMEA, and The States, you'd find about 20% commonality in stores. We're looking to drive that much higher with a much more consistent brand voice and making sure that we're lining up with the distribution that we have because I think it's a unique position of our industry that sports brands especially, you know, we've got the ability to sell at good. And as long as we have the quality and we have product that can compete, we can do better and best very well. So you'll see a much better and broader offering. But not unlike the example I laid out in our footwear with some of our sportswear styles including the Arc 96, the HP Low, and the Solo. We're looking to get into that business, and we're not coming in at a $160. We're being very thoughtful about the way we're approaching it because our footwear ASP, which as you've heard is my number one driver, I'm thinking about how we can grow the business. And we have the organization thinking about it. It's been a number with it that hasn't been carrying three digits. And so we're looking to start building a much stronger platform a $100 plus in footwear, which may be a good, good carryover from the last question too. Bob Drbul: Thank you. Dave, good luck. David Bergman: Thank you. Operator: Our next question comes from Sam Poser with Williams Trading. Please go ahead. Sam Poser: Thank you for taking my questions. I have a handful. But one, Kevin, you talked a lot about the product. You talked a bit about the storytelling. Can you discuss sort of what you're doing to create I just watched the ad very quickly, but what you're doing to create more of an emotional connection both with your performance product and then with your product like the HP and Sola and some of that better those better kinds of introductions both in footwear and apparel. Kevin Plank: Yep. Thank you, Sam. One thing is certain is that the world does not need another capable apparel and footwear manufacturer. The world needs hope and they need a dream, and that means that it's our job to make them feel something when they participate with our brand and it's that little girl or little boy that maybe strap it on their first Under Armour compression shirt and feeling like they just put on a superpower or sliding a shoe on their foot. We've got opportunity. And I don't think that we've maximized that opportunity yet. I was talking about in the sportswear categories, you can see is that the price to value in things like that new HP Lowe shoe at a $100, it is extraordinary. And so that is incredibly intentional from the brand and saying, we need to get them to look. And if you check the site and say, there's nobody better at you than doing that, and find out what people are saying about it. It's what do you think of this UA shoe? And then they're sort of eye-popping and saying, wow. That's a $100. I think people have been critical of us, and we've been critical of ourselves of improving the price to value relationship of the products that we put out there. So a, the product has to be there. Then we have to give them a reason to wear the product. Our authenticity with athletes and teams and leagues all over the planet are something that give us a global presence. But as you know, it's about winning here in The States, so finding that credibility. So we're taking a very deliberate city attack strategy, making sure we get things like sportswear in there. Not to be lost on that, and the reason that people buy our sportswear is because we are authentic. Because we are on field and we have a great positioning. But I think when you look at the levers that will drive that, it's athlete credibility, it's clever and inspirational imaging. And it's confidence, Sam. It's just confidence from us. I think that's the one thing that you see of us being the first ones to really drive and get behind, women's flag show it in such an aspirational way. We think, a, we can invite new young women and inspire them and give them the confidence to participate in the game. That we think will help their overall self, is the thing that helps us show up here and go to work every day, and be so passionate about what it is that we do. So brands need to make you feel something. I certainly feel that that commercial some of the feedback we've had in just a few days from young women that are just sending thank yous and watching the handles of some of the incredible young stars that we have featured in the commercial, like Ashley, they're just these letters that are saying, thank you so much for doing this. You've inspired me. I'm going to go take a chance, and I want to be an athlete now. That you'll see more and more of that where product attributes are important. Having our naming architecture, etcetera, in place matter. Making consumers feel something is where we're focused for the brand. Sam Poser: Thank you. I just want to follow-up. In your flagship store in Baltimore, you have all those high school local high teams who have their helmets up. When I was there, you had the two high schools that I forget what that was called, but the two high schools that are like the rivalry, I think it was. And I'm wondering if you're thinking of applying that both in other full-line stores, but as well as the outlet stores. And then second and then the other question is, if somebody can break down sort of APAC by country and three, the management realignment, with Yassine taking an external role. If you could talk a little bit about that, that would be great. Thanks. Kevin Plank: Well, Sam, with in North America alone, we have 16,000 football-playing high schools in the country, and that just means they have a large enough budget if you sort of want to simplify it. Under Armour has about 3,000 of those high schools right now, so our presence is significant. The opportunity we have to grow in the team sports, which has been a real bright spot for the brand consistently for us, double-digit growth that we continue to see outfitting teams, sidelines, coaches, etcetera. So that's our anchor. The other thing is the other stuff is, frankly, the easy things that we're supposed to be able to sell as a result of being authentic on field. I think we've done a good enough job setting the consumer up for that, giving them products that will get them to and from the field, you know, to and from the court. But we have all the credibility in the world when it happens actually on field or on court. And so opening that up, which is things like buying into the sportswear business by offering such great value with some of those new work shoe offerings we have is something that hopefully will help translate a little more in driving more top and bottom line for us. And I think, Sam, on APAC, you know, we don't normally break down by country, but you know, obviously, it's a super critical region for us. We've got some new leadership there that's really focused on the brand and rebuilding the brand, which is great. We've also got a new country leader in China who's very seasoned, and she's digging in really, really quickly, which is awesome. So we've talked about that APAC is a little bit behind as far as North America on the turnaround efforts, but that we feel like we can turn it around more quickly. It is a challenging environment there. You know, a little bit of softening consumer sentiment. It's a pretty promotional environment. But I think we've got the right leadership there now. The right intention, and the right focus. And we keep rebuilding on the brand voice and driving full-price sales, and that's where the focus is there. I think we could probably say the worst declines for APAC are behind us at this point. And we really start to drive forward again. So we're excited. Dan, what was your last question? Sam Poser: About Yassine and his changed role. Kevin Plank: Yeah. So Yassine has been an incredible partner for us. In just really helping to drive a consistent brand aesthetic. Across the organization. So that red thread is now beginning to pull across. You know, it's when structure follows strategy and you know, the people follow the structure, as you've seen and I've started talking about his role where he could be most helpful to the brand, it was a really easy decision for both of us. And so, you see us going back to his agency world and Under Armour is his first client, and this is all in a very positive way. He begins a new chapter with getting remarried, etcetera. So we're excited for Yassine and what he's going to be doing going forward as it relates to Under Armour. This aesthetic is something that we're driving. The unleashing intentionality presentation that I talked about that we've been rolling out, it's about getting consistent. It's about establishing clear good, better, best, and in categories where we have multiple styles, and you could take something as our woven pants, our unstoppable pants as they're classically called. We've just been editing. We've just been going through and just cleaning the brand up or we're going from, you know, 10 different pants, in multiple styles with, frankly, though, 10 different fabrics and 10 different drawstrings or waistbands or closures or buttons and logo applications and reducing it down to three. Good, better, and best. That simplification that we're going to do on the raw material side of really thinking about how we can be a better supply chain company is a lot of what's driving the thinking that we're doing right now. And when we just made this shift February 2 the new structure and having Kara sit in as our maestro as the chief merchandising officer, getting those five different category managers that are running 10 different categories vertically. We all sat in the same room. And we've had, you know, we've got the planners in there, and we have 15, 20 people that are just really driving cross-functional communication and what that means. And as a part of that, we need the red thread in design. So now that we have a chief merchandising officer, that's setting the tempo, they're setting the music for us, they're writing the sheet music, then you have the category managers that are driving and really implementing what is the consumer insights that we can do. Marketing is driving, ensuring that every product we built has a story. Ensuring that that design comes across in a horizontal way to drive the red thread of what actually makes it Under Armour, what makes it consistent, and what makes this Under Armour good level, Under Armour better level, under our best level. But you should find a much more consistent deliberate, and get ready for it intentional Under Armour going forward. So, we're excited about working with Yassine, Kara, all the other leaders that we have in place now. Sam Poser: Thank you. Operator: Our next question comes from Peter McGoldrick with Stifel. Please go ahead. Peter McGoldrick: Yeah. Thanks for taking my question, Dave. All the best in the future. I want to dig in on the complexity reduction and for greater progress in the future. It seems like much or some of the heavy lifting from SKU rationalization and organization have been made already. I was curious if you can help us think about the improvements that we should expect in the coming quarters and how that would manifest in the cost structure of the business, whether it be raw materials or other items? Kevin Plank: Yeah. Thank you, Peter. Let me give this in two parts. I'll take the first, and Dave will take the back end of it. I've used this analogy as coming back in the CEO chair in April 2024. You know, walking and seeing our innovation head, Kyle Blakely, having a conversation where we were talking about we might need more resources because of the number of fabrics that we're having to go to market with every season. And the number came out as we're making more than 300 fabrics and we just came down and said, why are we making so many? Can we run the eighty-twenty on that? And the eighty-twenty is that there's actually 30 fabrics that are driving 80% of our volume, yet we're spending that time driving nearly another 300 fabrics in development. We're just looking at it holistically, like, how do we get rid of all this stuff? Become more simple, become more narrowed, and more deliberate? Applying a good, better, best structure, which is what Kara's job is doing, setting the margin targets, of where it sits for apparel, where it sits for footwear, setting the profitability targets, SKU targets, etcetera, being really clear at the top. And then making sure that there's products that will fall out of that line. So we've actually spent the last two weeks, since getting into this new cadence with, as I said in the last question, with our GMs and just going through line by line, product by product, finding out where we can maybe have 15 or 16 or 17 training shirts, and with a business like training shirts, where Under Armour has five products that sit in the NPD top top 10, nine products that sit in the NPD top 25, as I've mentioned, our focus here is how do we drive ASP. Because while we may be listed in the top 10 and top 25, we're not certainly not driving anywhere near the highest ASP. We'd see there's opportunity, a, to be able to drive more volume, b, more consistent with our messaging to the consumer, and then as well be able to get more consistent by having less fabrics, having less basically, inventory we have fewer things with clearer stories for the consumer, that hopefully will manifest into a much clearer brand with a much brighter bottom line. David Bergman: Yeah, Peter. And I think as far as, you know, when you think about the go forward, there's some different pieces. What Kevin's getting at absolutely should be able to drive a little bit better margin as far as pricing on raw materials and actual, you know, production based on volumes and less SKUs. That's clear, and that's what we're going to be driving for. And that'll probably benefit more, you know, think about, like, back half fiscal twenty-seven, more into fiscal twenty-eight and beyond. But I think also keep in mind, you know, right now, fiscal twenty-seven would have a full year of tariff cost. Assuming tariff rates don't change. So, you know, the actions that Kevin speaking to will help offset that. In addition to some of the pricing changes that we're driving through that you'll start to see in the market more in back half of fiscal twenty-seven as well. So kind of a balance there is the best way I would put it. Peter McGoldrick: Appreciate that. Thank you. Operator: Our final question comes from Brooke Roach with Goldman Sachs. Please go ahead. Brooke Roach: Good morning, Kevin and Dave. Thank you for taking our question. Can you elaborate on the channel and product category puts and takes you expect in the North America business as you drive stabilization into fiscal year twenty twenty-seven? Are there any businesses that you expect to drive faster or slower stabilization? Are you seeing the same level of wholesale order book improvement across accounts and product lines that might over index to premium versus the value segments of your business? Thank you. David Bergman: Thanks, Brooke. Definitely appreciate the question. But getting into details on fiscal twenty-seven is not something we're really at this point going to do. We're going to do that more when we get to the early May call. But I would say that we've talked a lot about all the deliberate actions that we've been taking over the last year or so, and Kara was definitely driving a lot of that in her new role. And then, obviously, now she's transitioning into product, which is going to be awesome with chief merchandising officer. And we've got Adam Peak stepping in. He's a veteran, and he's going to take the reins to keep driving forward with those relationships in North America. So the wholesale discussions have been positive. I think a lot of the newer product is really resonating. So we should see that come through as we think about, you know, the full-price wholesale business. Next year and beyond. But it does still take some time. We've talked about that. You know, the orders that you're placing now are definitely further out in the future as far as when it comes through on the revenue side. So it is a journey. We've talked a lot about being excited about reaching that stabilization period as we drive into fiscal twenty-seven. And that's exactly what we're going to do. I think there's opportunities in each of the channels as we go forward. But we're going to be deliberate. We're going to continue to be smart about how we deploy promotions and discounting and continue to try and step off that journey more and more and reach the sweet spot there. As we continue to double down on our big partnerships with our on the wholesale side. So a lot of different moving pieces, and we are excited about the momentum on the product, on the brand, on the relationships. And we're excited to talk more about that when we get to the early May call. Kevin Plank: And, Brooke, maybe I'll just give you the sort of high-end version from that answer as well, which is I said earlier about winning with the winners. Today, Under Armour is famous for base layer. We're famous for heat gear and cold gear. Getting a really clear segmentation within both of those categories is a massive opportunity for us, ensuring that we can be present, you know, in distribution at the appropriate price and making sure there's a real reason for a consumer to spend more for it too. So that's been a lot of the work that Kara and the team are really attacking right now, and then extrapolating that out to, you know, multiple categories and as it relates to, you know, appropriate distribution. So we're definitely in this fight, but we got a really good strong base to build from, and you'll see, you know, better and better from us with that. Brooke Roach: Great. Thanks so much. Best of luck. Kevin Plank: Thanks, Brooke. Operator: This concludes our question and answer session. I would like to turn the conference back over to Kevin Plank for any closing remarks. Kevin Plank: Thank you, operator, and the listeners out there. I'd like to close with one final thought. We're thrilled to welcome Reza to UA's going to be filling some very big UA shoes as CFO for the next chapter with this brand. But I just want to start and say, Dave, thank you. Twenty-one years at Under Armour mean you joined just before the IPO in November 2005. We've been through a lot. Your alma mater, James Madison, made it to the college football playoffs, which is just another proof point that you can do anything. And you have here. Not even close to my terps. Joining from a great run at PwC, you're an accountant who became our controller to our CFO for the last nine years. But always the best teammate, partner, CFO, and even more importantly, an amazing husband, father, and friend. You and I have been through a lot of stuff. Dick and Finn, we've had amazing times together, and we've also been tested. Yet here we are still standing. Moving forward. You remain a major shareholder. Know you'll always be a part of this team and will honor and do a great job for you and all of our stakeholders. I give you my highest compliment. You're a true professional. Thank you. And on behalf of the brand, a heartfelt overwhelming thank you, Dave Bergman. We appreciate everyone joining us on today's call and ask you to have a great day. David Bergman: Thank you, operator. Kevin Plank: Thank you, Kevin. Thank you, UA. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and welcome to the AerCap Holdings N.V. Q4 2025 Financial Results. Today's conference is being recorded. A transcript will be available following the call on the company's website. At this time, I'd like to turn the conference over to Brian Kraniff, Group Treasurer. Please go ahead, sir. Brian Kraniff: Thank you, operator, and hello, everyone. Welcome to our fourth quarter 2025 conference call. With me today is our Chief Executive Officer, Aengus Kelly, and our Chief Financial Officer, Peter Juhas. Before we begin today's call, I would like to remind you that some statements made during this conference call which are not historical facts, may be forward-looking statements. Forward-looking statements involve risks and uncertainties that may cause actual results or events to differ materially from those expressed or implied in such statements. AerCap Holdings N.V. undertakes no obligation other than that imposed by law to publicly update or revise any forward-looking statements to reflect future events information or circumstances that arise after this call. Further information concerning issues that could materially affect performance can be found in AerCap's earnings release dated 02/06/2026. A copy of the earnings release and conference call presentation are available on our website at aercap.com. This call is open to the public and is being webcast simultaneously at aercap.com and will be archived for replay. We will shortly run through our earnings presentation and we'll allow time at the end for Q&A. As a reminder, I will ask that analysts limit themselves to one question and one follow-up. I will now turn the call over to Aengus Kelly. Thank you for joining us for our fourth quarter 2025 earnings call. This was a record year for AerCap Holdings N.V., with exceptional financial and operating performance driven by disciplined execution across all of our business lines. In 2025, we reported record GAAP net income of $3.8 billion, or $21.3 per share, and adjusted net income of $2.7 billion or $15.37 per share. Full-year revenues reached an all-time high of $8.5 billion while sales volumes totaled a record $3.9 billion. During the year, we had cash CapEx of $6.1 billion and we generated $5.4 billion of operating cash flow for the full year 2025. Building on these record results, we returned $2.6 billion of capital to our shareholders last year, our highest annual amount ever, through the repurchase of approximately 22.1 million shares and the payment of quarterly dividends. At the same time, we strengthened our balance sheet, resulting in a credit rating upgrade from Fitch and a net debt to equity level of 2.1 times at year-end. We received $1.5 billion of insurance and other recoveries related to the Ukraine conflict in 2025, in large part due to the successful court judgment in June. This brings total pretax recoveries related to the Ukraine conflict since 2023 to approximately $3 billion, which exceeds the net charge of $2.7 billion that we recognized in 2022. These key achievements underscore the strength of our company and the value we deliver to you, our shareholders, every single day. As we look to the year ahead, our outlook remains strong. And that is why we are announcing an adjusted EPS range of $12 to $13 per share for 2026, not including any gains on asset sales. We have also increased our quarterly dividend to $0.40 per share. This is on top of the new $1 billion share repurchase program we announced in December. Moving to business activity during the year, ongoing secular trends continue to underpin the strength of aviation assets globally. Demand remains robust, with recent industry-wide load factors at record highs, while delivery delays and maintenance backlogs have kept supply constrained. To that point, it is encouraging to see increases in OEM production rates in recent months, which should start to alleviate some of the backlog for new aircraft. That said, we do not expect to see a normalization of the supply-demand imbalance until sustained higher monthly production rates are achieved. As I have said before, aircraft manufacturing is a complex industrial process, and production surprises to the upside simply do not occur. So while demand dynamics may evolve, we remain confident that the current structural shortage of aircraft will persist at least through the end of this decade. Against this backdrop, in 2025, we executed 705 transactions positioning AerCap Holdings N.V. to capitalize on these favorable market conditions. This included the sale of 189 assets delivering a gain on sale margin of 27%, or 2x the book equity on our owned assets. The high volume of sales and consistently strong margins underscore the persistent demand we are seeing for our assets and our conservative book values. It is worth mentioning that aircraft sales were particularly elevated last year. We sold 108 owned aircraft at an average age of 15 years, generating strong gains while improving the overall quality of our portfolio. We also extended 87% of our leased aircraft in 2025, up from 79% in 2024, which further highlights the strength of customer demand. Airlines and lessors remain prominent buyers, accounting for more than 80% of the aircraft sales revenues last year. Balancing our robust sales activity, we also delivered strong organic fleet growth in 2025, with full-year cash CapEx reaching $6.1 billion. As noted on our last call, we acquired Spirit's order book of 52 Airbus A320 Neo family aircraft last year along with an additional 45 options from Airbus. More recently in January, we announced a sale-leaseback for six new Airbus A330 Neos with Virgin Atlantic, which will start delivering in the coming months. These are just two examples of bilateral transactions that enable us to secure today's most in-demand aircraft outside traditional OEM channels, and in most instances, with delivery certainty before the end of the decade. With our scale, market intelligence, and strong financial position, AerCap Holdings N.V. is uniquely positioned to continue executing such strategic transactions. Turning to the Engine business, in 2025, we strengthened our engine offering by expanding our existing partnership with GE Aerospace, which will provide support to the GE9X engine. This partnership enhances AerCap Holdings N.V.'s value proposition for airline customers worldwide at a time when engine support and spare engines are in exceptionally high demand. Our engine leasing business continues to offer a very attractive investment opportunity in this regard. At year-end, we have approximately 100 engines on order, which once delivered, will further expand our capabilities and reinforce our leadership in this critical space. Now turning to Cardinal, 2025 was a landmark year for our cargo business as we received certification for the 777-300ER SF passenger to freighter conversion program. This milestone allowed us to deliver the first ACE of our converted 777 aircraft to customers worldwide, helping them to meet strong and growing air cargo demand. The cargo market has shown tremendous resilience despite global trade tariffs and other geopolitical challenges. In addition to meeting demand, our cargo platform also extends the useful life of former passenger aircraft, enabling us to extract further value from our assets. Looking ahead, we remain focused on executing our robust pipeline of feedstock and expect to deliver another 15 cargo aircraft from our cargo conversion programs in 2026, five of which are part of the 777 conversion program. 2025 was equally momentous for Milestone, our helicopter business, as it celebrated fifteen years in operation. Demand across multiple segments remained strong, reflected in the full-year utilization rate reaching 99%. Today, we have no Sikorsky S-92 helicopters available for lease. To put this into perspective, Milestone had 18 S-92 helicopters on the ground in 2020, which underscores the sustained recovery in this market. Last year, we further strengthened our helicopter operator relationships by signing 71 lease agreements with 23 customers, the most recent being with Bristow Group for five new Airbus H160s in 2025, becoming the first lessor to bring this aircraft type into their fleet. In closing, 2025 was a tremendous year for AerCap Holdings N.V., a year that showcased the inherent strength and capabilities of our global industrial platform. Combining scale, expertise, and disciplined execution, we completed 705 transactions during the year, we purchased approximately $22.1 million of our outstanding shares, and generated $5.4 billion of operating cash flow, all while strengthening our balance sheet and growing book value per share. Looking ahead, we enter 2026 ready to build on this position of strength. We have over $3 billion of excess capital to deploy, which we will continue to allocate with the flexible and disciplined approach that has defined our strategy since inception. 95% of our order book is placed for the next two years, and we have an average remaining lease term of seven years on our existing fleet, providing us with exceptional visibility into future cash flows. This degree of forward revenue certainty is something very few sectors can offer. These factors, together with structural supply constraints and the strong demand for aviation assets, give us a high level of confidence in the outlook for the business. We look forward to executing our strategy and continuing to deliver long-term value for our shareholders in 2026 and beyond. I will now hand the call over to Pete to review the financials in more detail. Peter Juhas: Thanks, Gus. Good morning, everyone. Our GAAP net income for the fourth quarter was $633 million or $3.79 per share. The impact of purchase accounting adjustments was $74 million for the quarter or 45¢ a share. That included lease premium amortization of $25 million, which reduced basic lease rents, maintenance rights amortization of $36 million, which reduced maintenance revenue, and maintenance rights amortization of $13 million, which increased leasing expenses. During the fourth quarter, we had $43 million of recoveries related to the Ukraine conflict, or 26¢ per share. The tax effect of the purchase accounting adjustments and the net recoveries related to the Ukraine conflict was $5 million or $0.03 per share. So taking all of that into account, our adjusted net income for the fourth quarter was $660 million or $3.95 per share. I'll briefly go through the main drivers that affected our results for the fourth quarter. Basic lease rents were $1.688 billion, basically flat compared to last quarter, and maintenance revenues were $225 million. Net gain on sale of assets was $253 million. We sold 55 of our owned assets during the fourth quarter, for total sales revenue of just over $1.3 billion, resulting in an unlevered gain on sale margin of 24% for the quarter. As Gus mentioned, this brought our sales for the full year to a record $3.9 billion and a gain on sale margin of 27%, which translates into two times book equity value. Interest expense was $474 million for the quarter. Leasing expenses were higher than usual due to restructuring costs related to the Spirit Airlines bankruptcy. When we look at maintenance revenue and leasing expenses, we generally look at them in terms of net maintenance contribution on an adjusted income basis, which is maintenance revenue less leasing expenses other than maintenance rights amortization. When we generally expect the contribution to be around $30 to $50 million a quarter on average, although it does tend to fluctuate from quarter to quarter mainly due to the level of maintenance activity. In the fourth quarter, the net maintenance contribution was negative $106 million, so approximately $130 million to $150 million lower than normal. This reflects the net impact of the Spirit restructuring as well as other unusual items as well as the timing of maintenance activity that I mentioned earlier. Our income tax expense for the fourth quarter was $78 million. Equity and net earnings of investments accounted for under the equity method was $80 million, and that was primarily driven by continued strong earnings and gains on sale in the fourth quarter from our Shannon engine support joint venture. On the next slide, you can see a walk of our full-year earnings and EPS. And as you can see, it was a record year for AerCap Holdings N.V. across a number of areas, including GAAP net income, adjusted net income, GAAP EPS, and adjusted EPS. We had approximately $3.8 billion of GAAP net income for the year, which included $1.5 billion of net recoveries related to the Ukraine conflict. That resulted in a record $21.3 of GAAP EPS for the year. After adjusting for the insurance recoveries, as well as for purchase accounting items, our adjusted net income was approximately $2.7 billion. So that's an adjusted EPS of $15.37 per share, which is also a record. Our GAAP ROE for the full year is 21%, and our adjusted ROE was 15%. Operating cash flow was $5.4 billion for the year, and as a reminder, this does not include any proceeds from our insurance settlements or any gains on sale, both of which go through investing cash flow. We continue to maintain a strong liquidity position. As of December 31, our total sources of liquidity were approximately $21 billion. That compares to uses of around $11 billion, resulting in a next twelve-month sources to uses coverage ratio of 1.8 times. And that reflects excess cash coverage of around $9 billion. Our leverage ratio at the end of the quarter was 2.1 to one, and our operating cash flow was approximately $1.2 billion for the fourth quarter. Our secured debt to total assets ratio was 10% at the December, the same as last quarter, and our average cost of debt was 4.1%, a slight increase from 4% last quarter. During the fourth quarter, we bought back 3.5 million shares at an average price of $127.63 for a total of $444 million. And in December, we announced a $1 billion share repurchase program, and today, we've announced an increase in our dividend to 40¢ a share. One of the metrics that we focus on is growing book value per share. On this slide, you can see that AerCap Holdings N.V.'s book value per share has increased by over $45 or 68% since 2022. Over the past year, book value per share increased by 19%, and in fact, over the past three years, it has increased at a compound annual growth rate of 19%. Of course, this reflects in part the significant amount of insurance recoveries that we've had over the last three years, but it also reflects the company's ability to generate significant amounts of capital year after year. So that covers our 2025 performance. Now I'll turn to our guidance for 2026. For 2026, we're projecting adjusted EPS of $12 to $13, not including any gains on sale. On the next slide, you can see a walk from our record adjusted EPS of $15.37 in 2025 to our guidance for 2026. The largest item is gains on sale of $3.95 that we had in 2025, and we have not included any gains in our 2026 forecast. We had high levels of other income in 2025, related to a number of specific items as well as high interest income, so we're projecting other income to be 45¢ lower in 2026. Our effective tax rate was 13.6% in 2025, due to some releases related to prior years. For 2026, we're projecting an ETR of 15.5%, so that results in a reduction of $0.30. Other than those items, we're projecting our EPS to be higher by 1.8, which reflects the impact of lease rents, net maintenance contribution, SG&A, share repurchases, and other items. On the following slide, you can see a breakdown of our projected income statement for 2026 showing the major line items. For full-year 2026, we expect to have lease rents around $6.7 billion, maintenance revenues of around $700 million, and other income of around $200 million for total revenue of around $7.6 billion. On the expense side, we're projecting depreciation and amortization of around $2.6 billion and interest expense of around $2 billion. We expect leasing expenses, SG&A, and other expenses to total around $1.2 billion for the year. And I would note that the majority of the leasing costs associated with the Spirit restructuring recognized in 2025. We will, of course, have downtime on aircraft that we've taken back from Spirit, which has an impact on lease revenue. And that's been reflected in this forecast. We've assumed that we'll have cash CapEx of around $5.2 billion for the year, and we're forecasting asset sales of $2 billion to $3 billion. As you know, these figures can vary significantly as CapEx is largely dependent on OEM deliveries, and sales volume depends on the demand for assets and the time it takes to close those sales. As I mentioned, we've assumed an effective tax rate of 15.5%, which assumes no specific tax releases as we had in 2025. In 2026, we expect to recognize earnings around $200 million from our equity investments, and that's primarily our engine leasing joint venture, SES. So altogether, that gives us projected GAAP net income of around $1.7 billion. After adding back purchase accounting adjustments of around $300 million, we expect to have adjusted net income of around $2 billion for the year. That gives us an adjusted EPS range of $12 to $13, again, not including any gains on sale. So in closing, AerCap Holdings N.V. continued to perform very strongly during the fourth quarter, concluding a record year for the company across many fronts. As Gus mentioned, we continue to see a strong environment for leasing and a strong environment for aircraft sales, which is reflected in the record level of gains on sale for the full year. We're continuing to generate strong cash flows that in turn result in greater profitability and more financial flexibility, and we're deploying capital where we see the most attractive opportunities. We also continue to return capital to shareholders. In 2025, we returned $2.6 billion to our shareholders through share repurchases and dividends. We announced another new share repurchase authorization of $1 billion in December, and today, we've announced an increase in our quarterly dividend to $0.40 per share. These actions reflect our strong confidence in the value of AerCap Holdings N.V. and in our outlook for the future. And with that, operator, we can now open up the call for Q&A. Operator: Thank you. And would like to ask a question, please signal by pressing star one reach our equipment. Again, press star 1 to ask a question. If you are in the event via the web interface and would like to ask a question simply type your question in the ask a question box and click send. For our first question, we'll go to Jamie Baker with JPMorgan. Please go ahead. Jamie Baker: Good afternoon to the team. A couple of high-level questions for Gus Silkes. Gus, on the order book, you know, totally understand your preferences to order at the bottom of the cycle when the OEMs come to you. I trust that they fair characterization, but you know, we still keep coming back to that existing backlog. And the possibility that the next downturn is you know, hopefully a long ways away. So my question is, know, is there a point where the backlog window would grow so significant that you might feel you'd have no choice but to get in with an incremental sizable order. Aengus Kelly: Thanks, Jamie. Well, like you certainly hope that any downturn is a long, long way off. And in that regard, we certainly feel that, Jamie, given the supply dynamics that are in the market even if we did see any weakness on the demand side, the shortage of supplies we think, structural for a good bit of time. So know, I take your point on the order book. But that being said, Jane, last year, we added a 103 aircraft to our order book, including options. None of those aircraft came through direct orders from the OEMs. It was all because of our positioning in the industry and how we were able to assist our customers. We also ordered 22 helicopters and importantly, in the last two years, we have committed to purchase 281 brand new engines through our own engine business, which you 100% own in-house, and the SES joint venture. So we have found very significant growth away from the tent in Farnborough or La Bourget. That's not to say, of course, Jamie, that we won't order with the OEMs. I'm delighted to order with them. But it has to be in terms that make sense for our customers. And I do think just a bilateral straight-up deal it's hard to see how that will add value at the moment given the duration of when you deliver this stuff. But there are other things that AerCap Holdings N.V. can offer to OEMs and discussions we've had with OEMs about that. That they value. So I would say, you know, if the right opportunity comes, of course, we will. But I have a high level of confidence in the capability of the AerCap Holdings N.V. platform. It's global reach and penetration in the industry, and the unique skill sets it brings, particularly through its engine business as well. That give us access to opportunities that no one else would be able to open up. Jamie Baker: Okay. That's great color. And then sort of as a follow-up, Gus, you know, lessors if I just kinda step back, lessors are scaling up to sizes that at least for us, you know, ten or fifteen years ago, we wouldn't have thought it was likely. Right? So my question is, is there any size I don't know. Maybe it's a $100 billion. I mean, just make up a number. But is there any size where an individual lessor simply becomes potentially too large. Thanks in advance. Aengus Kelly: Thanks, Jimmy. I would say the nuanced answer in terms to me, the concern I had when we were acquiring GECAS was would be the other size where we had to participate in every transaction? Because we had so many aircraft coming at us or engines every week. So we had to place x aircraft, x engines, y helicopters, etcetera. And are you a price taker from the market? That was my concern at the time. It proved to be unfounded. And we are well able to exercise price discipline placement discipline, as evidenced by our results. So, to me, I think and, of course, there's constant what we so I would say on that one, so long as I don't believe that we will have to take every transaction in the market, and we're not price takers, which I don't see. I think you could grow quite a bit from where we are. I do believe that. And then on the on the liability side, which would have been, as you rightly say, ten, fifteen years ago, a very limiting factor as there were very few investment-grade lessors. There was very little public debt, offerings, etcetera. That's changed dramatically. While they're are nearly every lessor in the world issues public debt, every big institutional investor, bond fund, bank, has an aviation division now and has understood the space a lot more. And realizes through thick and thin that aircraft are a safe store of value and a hard dollar asset. That's great. Thank you, guys. Take care. Jamie Baker: Pleasure. Operator: Thank you. And we'll go next to Ronald Epstein with Bank of America. Please go ahead. Ronald Epstein: Hey. Good morning, guys. Last week, or was it two weeks ago, in Dublin, gosh. Right? There was a lot of talk about an A220-500 and what's your take on the airplane? What what's it mean? If Airbus were to do something like that, would that provoke some competitive response from Boeing and, you know, you yourself being a large fleet owner how do you think about it? Aengus Kelly: Look. Candidly, I just don't see anywhere in the market that the airplane is needed. Airbus are the market leaders in the narrow bodies. I think they'd be just cannibalizing their own market share, incurring a lot of cost, I know the A220-300 program, they wanna make it more profitable. I think they just focus on their efficiency of manufacturing the aircraft. Rather than trying to just scale up with more volume because I think they're only eating the raw market share. It's it's not solving a problem that exists in my view, that aircraft. Ronald Epstein: Got it. Got it. Yeah. That's clear. And then yep, end of quarter or in the year. Excuse me. And end of the quarter. You've guys been very successful at selling aircraft. When does that trade end? So maybe this is a follow-on to Jamie's question. Like, how how do we think about a transition from, you know, AerCap Holdings N.V. you know, selling aircraft at on a gain to maybe just more of a focus on the traditional leasing model? Aengus Kelly: Well, I'd say, Ron, if you look at our earnings profile, the vast, vast majority of our earnings comes from the operating business. While the gain on sales are percentage margins are higher than usual, I would say that if you go back to 2006 when we became a public company of twenty years, I think for all twenty years, maybe nineteen years, we have sold assets at a gain. That speaks to the discipline of how we acquire assets, but most importantly, how we manage them and how we manage the maintenance cost of those assets. And the condition we manage those assets too. Because at the end of the day, an aircraft is really just a piece of tin. And without records and management of those records, it is an expensive piece of tin. So to generate value on a consistent basis over twenty year period, which this company has done. It is about how you manage that asset every single day. We've demonstrated that. So I'd be highly confident that as we go forward, I mean, maybe we won't be at two times book equity forever. But if you look at our history, I think, piece at SWAT is that we, on average, last twenty years, we sell about 1.3 times book equity. It Peter Juhas: Yeah. A little above that, I'd say. Yeah. And that's going through the average of going through the financial crisis, COVID, Russia, And what I point to Ron I think is important is the stability of AerCap Holdings N.V.'s earnings through ThickenTen. Ronald Epstein: Our average Aengus Kelly: GAAP ROE for the last twenty years is nine fifty one basis points above the five-year treasury for that twenty-year period. And that is a GAAP number, which includes the impact of the loss in Ukraine, COVID, the financial crisis. I would challenge you to find any industrial company in the aerospace sector that could match the stability of those returns or indeed the outlook that this company has. Yeah. No. For sure. And then maybe maybe just one last quick one. Everything seems really good right now kind of across all the segments. When you when you think about risk mitigation, what what worries you? I mean, there's gotta be something that maybe doesn't keep you up at night, but at least in the back of your head, you know, what would get your spidey sense going that we gotta think about this? Aengus Kelly: Yeah. Ronald Epstein: Well, I I think that for me, Ron, Aengus Kelly: everything boils down to the day-to-day of the business. The operations of the business that we are 100% focused on making sure that our assets are moving efficiently as quickly as we can. They're on time, on spec, they're on budget. That is what drives the business. The internal operations of the business. That's the things like internal audit. They're boring. But things like that really make a difference in the long run of how you manage the business. We have very high-value assets, so very high CapEx, very low numbers of people against that, so not much in the way of labor. But it's vital, therefore, that all the process, the people you have, that there are a 100% focused every day on doing the right thing and following the process procedures that underpin how this company operates. And that runs from that, everything flows. If that breaks down, it's, you know, it's lights out. Ronald Epstein: Gotcha. Gotcha. Alright. Well, thank you very much. Operator: Thank you. And we'll take our next question from Moshe Orenbuch with TD Cowen. Please go ahead. Moshe Orenbuch: Great, thanks. And congrats on some really impressive results in the even a higher level of excess capital than three months ago. Maybe on that issue, could you talk a little bit about how you see that deployment of that excess capital? And seems like there isn't much, if any, of that embedded in your guide for 2026. Peter Juhas: Sure, Moshe. So in terms of the guide, first off, mean, we've assumed that we would use our remaining authorization and then do some other buybacks on top of that for modeling purposes. And, look, if you look at what we did in 2025, buying back $2.4 billion worth of stock, I mean, that's indicative, I think, of of our of our view there in terms of the attractiveness of the stock. I think in terms of leverage and how we use our excess capital, over the medium term, I would expect that to start to revert towards, more normal levels, towards our target. But as Gus mentioned before, you know, we're really focused on the opportunities. Where can you get the most value in deploying capital? Whether that's buying back stock, whether that's adding to the order book, the engines, all of those type of things. And so those opportunities come along from time to time, and then we act on them And we wanna be able to act on them in a big way. And I think given our positioning now, we obviously have a lot of capital that can be deployed for that purpose. Aengus Kelly: Right. And Moshe Orenbuch: you know, maybe, you know, in one of your slides, you noted, you know, over a 100 aircraft or added to your order book, you know, from Spirit and other transactions and, you know, kinda talked about that a little bit. As you look at the, you know, the the landscape do you think that future years will have, you know, comparable levels I mean, how should we think about you know, what the opportunity set is out there as we go forward? Aengus Kelly: Sure, Moshe. And you're right. We you know, not only did we add the 103 aircraft last year, but as I mentioned in an earlier comment, in the last two years, we've added 281 brand new engines. That's a significant amount of growth in our two engine businesses. And we like, my view has always been in this business. I've said to you guys, aviation is a growth business. Every fifteen to twenty years, the number of people traveling doubles. Leasing is a growth space within that The airlines will always need us. The airlines' net profit margin next year will be around close to 4% per IATA. That is a business that always needs capital. It's a business that will need aircraft, and we supply both, and we can manage both. So I would be very confident that as we look forward, as the aviation industry grows, opportunity come. We've demonstrated year in, year out that we've always found attractive opportunities for our shareholders Last year was no exception. This year is off to a good start as well. You saw the announcement that we added another six wide bodies with Virgin Atlantic. Again, these are bilateral transactions in time frames that are just not available traditional with traditional orders with the OEMs. And so we're always looking to how allocate the capital in the best way. And, of course, we we believe that our shares still represent the cheapest aircraft in the world. Moshe Orenbuch: Thanks very much. Operator: Thank you. And we'll next go to Terry Ma with Barclays. Please go ahead. Terry Ma: Hey, thank you. Good morning. Pete, I think you mentioned some of the downtime from the Spirit aircraft was kinda contemplated in the guide. I was maybe just hoping for an update timing of kinda when those get kinda released. Go back into service, and how much of that was actually contemplated for this year? Peter Juhas: Sure, Terry. So we've baked that into our numbers, into our guidance that we've provided here for 2026. We'd expect the first of those aircraft to start coming back. In the second half of the year. Terry Ma: Got it. And when do you think all of those actually come back? Is it this year or it kind of drift into '27? Peter Juhas: Some of it, I think it will go in. Some of it gonna go into '27. I mean, we'll see how fast we they can get done, obviously. We'd prefer sooner, but, you know, we've assumed that some of that, comes back in '26 and then bleeds into 2027. Terry Ma: Got it. Okay. That's helpful. And maybe just to follow-up on the capital allocation question. You guys gave some color on what the priorities are, kinda medium term, but as you kinda sit here today for 2026, like, maybe just kinda rank order kind of the most attractive uses of capital, whether it's, you know, buybacks or some, like, one-off deals that you see? Thank you. Thanks, Harry. Terry, you know, I wouldn't rank them per se. I mean, to me, the uses of capital, our return of capital to shareholders, obviously, the buybacks We have very small dividend. Asset acquisitions, be it engines, aircraft, or M and A for that matter. As you know, we participated in an M and A process earlier in the year, but the key is discipline, Terry. Any one of those three are just fine with me. So long as the the outcome of those decisions is to increase the value of this company by increasing earnings on a risk-adjusted basis. That's the only reason we're here. Nothing else. I'm not here to grow for the sake of growth. We're here to make a return for our shareholders. And whichever one of those capital allocation strategies, or all three of them for that matter, they'll be the ones who will follow that will add value. Operator: Thank you. Great. Thank you. And we'll go next to Catherine O'Brien with Goldman Sachs. Please go ahead. Catherine O'Brien: Hey, good morning, everyone. Thanks for the time. So I have a bit of a follow-up to Moshe and Terry's questions. Gus, you know, you've made it clear you continue to see very good value in buying back your own shares over the last couple of these calls. And last several years. Know, your leverage is still well below your target at 2.1 times at year-end. Should we interpret this as you seeing more unique and significant opportunities to acquire assets over the next year or so, and you wanna have dry powder? And and I guess, like, if that doesn't materialize over the next six, twelve months, how quickly and aggressively will you pivot to shareholder returns? I guess what just trying to understand is, is there a minimum leverage where you'd not wanna sit at for more than quarter or two? Aengus Kelly: I I think, Catherine, you gotta put a little bit of context around the current debt equity ratio because of the large insurance recovery that came in just a few months ago. And so that has had a big impact on it. So you don't just distribute that just as quickly. And if you look at what we did last year, it's a good indicator of how we think. As we said, we had a record amount of return of capital to shareholders with two best part of $2.5 billion. And in addition, we deployed $6.1 billion of CapEx last year. That was cash CapEx. And then we added a very significant amount of assets to the backlog. So, you know, as I look forward, I'm not concerned about the ability of the company to find attractive uses of capital, and, you know, if that is buybacks, as I said on the earlier call call, or asset acquisitions, etcetera, very happy to do it. But we have always managed to do that, and, I would imagine that we will. Pete, anything to add? Peter Juhas: No. I agree with that. Look. I think, Catherine, over time, as I said, I think it is gonna get closer to the target level. But you know, obviously, we're looking for the right opportunities to deploy it. The worst thing you could do is to try and chase growth by doing the wrong deal. Catherine O'Brien: Absolutely agree. I think, you know, your guys' results speak to that. Another one. In the industry, another owner of engine assets announced they'd be looking to convert engines to power turbines. To service data centers. Is that something you guys are exploring? And and can you just remind us how many engines you own that are not under your agreement with CFM? Peter Juhas: Sure. Well, to start with, Aengus Kelly: of course, we're looking at this. And if it turns out that the demand for what are currently commercial aerospace engines. If that demand to convert them into ground-based power generation for data centers is very durable, and is long-lived then, of course, we will participate in that either directly or indirectly, directly by converting the engines into ground-based power generation or indirectly by taking advantage of this surge in demand. But at the moment, we wanna make sure that this demand is a durable demand, and it's not fleeting. And that's our focus at the moment is sizing the market. And from there, then we will participate, as I said, one way or the other. In terms of the quantum of engines that we have ourselves, if you look at what's installed on our aircraft, take the CFM56 model, we are the largest owner of CFM56s in the world. And I would remind you, that all of our engines are serviceable. And have to be returned for the most part in full life condition. Which is very different to a portfolio of engines that is half-life or run-out engines and you're swapping modules to make a serviceable engine. So when we look at the engine portfolio that we have, Catherine, on any of those metrics, we would have more engines than anyone in the world. Catherine O'Brien: That's great. Excited to see how it all plays out. Thanks for the time. Operator: Thank you. And we'll go next to Kristine Liwag with Morgan Stanley. Please go ahead. Kristine Liwag: Hey, good afternoon, everyone. So maybe following up on the SPIRIT, order book that you've taken, and maybe this is a more theoretical question and practical But if you look at those aircraft slots that you were able to get, how much of a value did you get if you were to have ordered that on your own? I mean, are those planes even available to acquire? But but how how do you measure value Thanks. Aengus Kelly: Well, that's where the the knowledge and the wisdom is. You know? Understanding the difference between price and value. And I would say given our market knowledge, we lease more airplanes than anyone We lease more engines than anyone. We know where the delivery slots are with the OEMs. That all that data comes together to assess what we think the value of an aircraft is in any given year. And close to rain aircraft have a premium because it is availability. And so when we looked at the the proposition with Spirit and we saw the order book, we felt that there was significant value there versus the OEM alternative, and that value was composed of the proximity in terms of time, and also the absolute price level. Is that okay? Kristine Liwag: Okay. Great. And, would you like to quantify any of that, Gus? Aengus Kelly: I I I won't, if you don't mind. Thanks very much. Kristine Liwag: No. No worries. I thought I'd try. And if I could do another follow-up, you you've already received more in insurance proceeds than the charge you took regarding Ukraine. I was wondering, can you remind us how much more, you know, un unresolved or unsettled litigation you have, and if you're able to recover more, how much that could be? Peter Juhas: Well, Kristine, we do have a case ongoing This is pursuing the operator insurance reinsurers. So that's the case in London, that will we expect will go to trial late in late this year. We're we haven't included in our guidance or in our projections any further recoveries on that. Or, from the Russian insurers directly. It's possible that we could get some there, but it's just very hard to know. And, obviously, as you said, we've already gotten $3 billion back, which, from our perspective, is a huge result. Obviously, we'd take everything that we can, but at the moment, we're not projecting anything. Kristine Liwag: Great. Thank you very much. Operator: Sure. Thank you. And we'll go next to Erin Seganovich with Truist Securities. Please go ahead. Erin Seganovich: Thanks. I was wondering if you could talk a little bit about, any technology investments that you potentially could be making or any investments you have made recently that you know, are improving the efficiency of the company? I know your company's quite efficient already, but just curious what you're seeing on there. Aengus Kelly: Sure. Well, I would say the biggest investment we make is around and we always have because we have more data than any other participant in the aviation industry. And that data is used, as I just referenced in the earlier question, to assess what we believe value of an asset is. The value of an asset is a function of market demand, It's a function of the condition of your assets. And it's a function of where you think market demand will be and what you think the cost of maintaining assets, that particular asset, will be in the future. So you take all that that that gives you data, and we're always putting money into our into our IT systems, our technology systems in AerCap Holdings N.V. to improve, to enhance the efficiency of that data. The same is true then, in particular, when it comes to maintaining the assets. As I said on prior calls, if you spend a $100 million on an airplane, you will spend a $100 million on maintenance over its life, or you might spend a 120 if you don't know what you're doing, or you might spend 90 if you know what you're doing. The proof of whether you were did 90, a 100, or a 120 generally comes out in your margins, versus your peers and also your gain on sale of older life assets. And, you can see the results of that with our margins both our operating margins on the core business and as well as gain on sale. So we are always looking to try and utilize the vast quantity of data that we have to make our decisions better informed. That's not to say that we are that that doesn't mean that we're making some massive AI investment. That's not the case. The case is that we look at the different ways we can enhance the data we have all the time. Erin Seganovich: Okay. Thanks. And then this is kind of an small one, but the CapEx guide for the year, 5.2 billion. I think the last public disclosure of what the obligations were was in the second quarter as $5.8 billion of obligations. Like $600 million or so less now. Were those sales or delays? Just curious what the dropdown was. Peter Juhas: Well, we had a pretty significant amount that we did in the fourth quarter of this year. So I think that was a lot of CapEx in the fourth quarter. So you know, it wasn't, not meaningful delays from what we had before. I think it was just some of that may have been front-loaded that we did, last quarter. Erin Seganovich: So pull forward from the 2026 estimate? Peter Juhas: Yeah. I think so. Because we're we're giving a next twelve months estimate. Right? And so yeah. This, this last quarter was high for CapEx. It was $2 billion total in or 2.1 billion. Of cash payments that we made A fair amount of that was PDPs, but also deliveries in the fourth quarter. So you know, we think 5.3 billion is reasonable number for next year. It could grow if we find additional opportunities, but, you know, and we have seen that in the past where it's actually grown during the year because even though you might see some delays, because of production issues with the OEMs, we've also added, in some cases, whether that's engines or helicopters or aircraft during the course of the year. So I think it's a reasonable number for now. Erin Seganovich: Okay. Thank you. Peter Juhas: Sure. Operator: Thank you. And we'll go for our next question from Shannon Dougherty with Deutsche Bank. Please go ahead. Shannon Dougherty: Hi. Thank you for taking my questions, and congratulations on the strong results this year. Gus, this may be a follow-up to Ron's question asked earlier in the call. But in general, do you foresee any sort of systemic risk to aircraft lessors that some financially weaker airlines may fail to meet contractual return conditions just simply based on the high maintenance escalation costs that we're seeing I understand this would be a bigger problem for the airlines, but I'm just curious to get your thoughts. Aengus Kelly: Sure. I mean, look. The the the reality is, of course, the airlines are a noninvestment grade bunch great thing about them. They'll always need me. That's never changed, and I don't expect it to ever change. So there will be instances, no doubt, in the future where they're not able to meet return conditions they don't have the wherewithal. Now in many of those instances, that's where someone of our position and scale is able to provide alternatives that no one else can. So, if they can't meet engine return conditions we might say, okay. Can use our engine leasing business or just our scale or positioning with the engine MROs to facilitate, to secure slots, to provide spare engines, And in return for that then, we will cooperate with our partner airline and see what they can give us in return. That's happened on several occasions, for example, with GOL Airlines when they were in some difficulty in Chapter 11. We were able to provide them with engines. We took over some of their order book. Something similar with Spirit, etcetera. So you know, I would see it as part of the the daily cut and thrust of our business. And as something that we manage year in, year out for the last twenty years. Shannon Dougherty: Great. Thanks. And as my follow-up, you know, we know that lease extensions have been historically high over the past couple of years. When do you expect renewal rates to decline or perhaps normalize? And what percent of your existing fleet or COVID leases do you expect them to, you know, run off you know, let's say, 2031 or 2032. So thanks for taking the questions. Aengus Kelly: Sure. Let let me deal with the first part, then I'll ask Pete to comment on the COVID leases. Extensions are elevated. You're right. There are two things driving that. The first is, of course, the airlines know that the OEMs won't deliver on time. As I said in my prepared comments, you just don't get surprised to the upside on aircraft production. So they know that, and they know that it's not for you know, a year or two years. It's structural for the long term. And that's why we have seen these elevated extension levels for several years now, and I expect them to persist. The second reason that I expect them to persist is that even when the technology delivers, what's happening is that because of the strain put on the engines and on the aircraft, they do not last as long in service before they need an overhaul as the previous generation of A320s or 737s or A330s or 777s. And so, therefore, in order to fly the same number of flights, you know, you need to fly if you were flying ten 737s, you might need 11 Maxes or 11 Neos to do the same, over the long run. To accomplish the same number of flights because they do spend longer in the shop. Now, in time, I do expect the technology, which is always the case, that there are technology improvements that will improve that time on wing, and the next one coming up will be the Pratt and Whitney Advantage engine. We have the upgrades also to the LEAP 1A, which have begun. And the similar upgrades we put into the LEAP 1B, they'll begin later this year. So steadily over time, we will see time on Wing improve But before those improvements flow through the whole fleet, which is massive, you know, we'll be well into the 2030s. Peter Juhas: And then to answer your question on the COVID COVID era leases, so it's about 12% of our fleet today. And you're right. It will roll off, it'll roll off over time. But it will pretty much be done by 2031, 2032. Operator: And we'll go to our next question with Christopher Stathoulopoulos with SIG. Please go ahead. Christopher Stathoulopoulos: Thanks for taking my question. Angus, could you remind us so in your prepared remarks, you spoke about the normal normalization of supply-demand balance, and you don't see, I guess, monthly production rates meaningfully picking up Your Investor Day, I believe you said end of decade. Where you continue to see a supply shortage. And I think a quarter or two ago on a call, in response to a question, it was the same. Has that changed? And then could you also remind us at your Investor Day, you went into the economics of the engine market and and why I guess, the OEMs are really not incentivized to to produce excess units given the, I I guess, the initial sale and and and then the economics around servicing that in the secondary market. Thank you. Aengus Kelly: Sure. So with regards to the first part of the question, supply-demand imbalance, I still I I do believe that around 2030, Boeing and Airbus would probably pick up production to where it gets closer to meeting the demand But that being said, so it might be 2031 or 2032 or 2030, but that being said, the other point that's very important to remember is what I just said on the previous question. Is that the technology being used is not as durable as the previous generation. Take an A330-300 with Rolls Royce engines. That thing could go forever, or 777 GE 90. They're just not as durable today because those engines, they're pushed much harder they're running hotter, they're coming off wing, more often. Which means that the demand for aircraft in my view, the OEMs just won't be able to meet it for many years to come even when they get the basic production up. It's because once these assets are in service, they're just not lasting. And they're not they're not spending as much time in service as the previous generation. And that's a hidden aspect that it's not as visible, obviously, as Boeing missing a production target. So, in my view, I do believe that supply will be structurally limited for a very long time, well into the 2030s because of those two events. The other thing, though, that's very important, as you as I referenced and and you bring up from the investor day. We have never ever seen a significant period of oversupply of aircraft on a global basis in my career, which is thirty odd years. Never happened. Why is that? Because airlines do go bust. And that that was the case, of course, with all The US majors at some period of time. The reason is that yes, a region can be oversupplied with aircraft due to a downturn in that region. But the engine OEM sells their engine on day one, the air day the aircraft is delivered for about 25% of cost or 30% of cost. The airframer, Boeing or Airbus, gets 100% of their revenue on day one. Now the engine guy only makes money if those engines hit the shop probably three times. Once after maybe eight years, once after fourteen years, once at eighteen years. The single most important thing any engine OEM does is that last shop visit when the aircraft is around 18 years of age. That is the most cash flow positive highest margin thing they do The least attractive thing they do is deliver a new engine to Boeing and Airbus. So if they ever see and this is the case for the last thirty years, a period of significant oversupply coming to the market. They will be the ones who will lose the most because oversupply of new aircraft will mean early retirement of old aircraft. Those old aircraft are the ones where that shop visits is performed on. So it's Turkeys voting for Christmas, if they allow Boeing and Airbus to overproduce aircraft in a market where there is oversupply, and they have never ever done it. I don't expect they will. And that's one of the key reasons on a macro basis why AerCap Holdings N.V. has produced such stable returns for decades. And I don't see that changing. Christopher Stathoulopoulos: Great color. Thank you. And I guess along those lines, if you could speak to I know there's been a few questions around capital allocation and priorities this year and thoughts around I guess, buybacks and acquisitions. But one of the things that I think important and and and perhaps sometimes forgot about and what is unique and certainly shows up in your results here is this barbell approach to managing your portfolio At a high level, could you just you just run that down for us? I think that's important for us to to revisit, if you will. Thank you. Aengus Kelly: Certainly. And when we sell assets, we're not selling them to generate a gain. Of course, when we decide to sell an asset, we want to maximize to the greatest extent possible how much we get for the asset. But the driver is to look at where the portfolio will be. And so, the barbell approach, as you rightly say, the way we want the portfolio to be is if we have older technology assets like the seven three, the A320, the 777, the A330. We want them to be old assets. We do not want young variants of those assets. At some point, the 777 and the A320s will be replaced in large part by the Neos, by the Maxes, by the the seven eights, etcetera. It hasn't happened just yet, but it will happen at some point in the future. And so if you have, say, 2017 A320 or 777, for that aircraft, to return a a fair cost of capital over the lifespan It has to still be in service in 2042 if you bought it in 2017. It's twenty-five years of service. I simply do not believe that that will be the case. At some point in the 2030s, the demand for those assets will fall off. And therefore, you do not want to have young variants of those assets. Now having an old variant that's eighteen years old, of an A330 or 737 or 03/20, that's perfectly fine because you're going to get another five or six years five odd years out of it, and you'll do just fine off the assets. And then when it comes to buying assets, what we want to make sure is that we're in the assets of the future, the ones that we believe the most durable demand is out there, and that's where we invest in the A321 Neo, A320 Neo 737 Max 8, 787-9, A330-900, A350-900. Christopher Stathoulopoulos: Great. Thank you. Aengus Kelly: Very welcome. Operator: Thank you. I'd like to now turn the call back over to our speakers for any final or closing remarks. Aengus Kelly: Thank you, operator, and thank you all for joining us for the call. And, we look forward to speaking to you again in three months' time. Operator: Thank you. And that does conclude today's We thank you for your participation. You may now disconnect.
Operator: Greetings, and welcome to Proto Labs Fourth Quarter and Full Year 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ryan Johnsrud, Investor Relations. Thank you. Please go ahead. Thank you, Donna. Ryan Johnsrud: Good morning, everyone, and welcome to Proto Labs' fourth quarter and full year 2025 earnings conference call. I am joined today by Suresh Krishna, President and Chief Executive Officer, and Dan Schumacher, Chief Financial Officer. This morning, Proto Labs issued a press release announcing its financial results for the fourth quarter and full year ended December 31, 2025. The release is available on the company's website. In addition, a prepared slide presentation is available online at the web address provided in our press release. Our discussion today will include statements relating to future performance and expectations that are or may be considered forward-looking statements and subject to many risks and uncertainties that could cause actual results to differ materially from expectations. Please refer to our earnings press release and recent SEC filings, including our annual report on Form 10-K, for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward-looking statements made today. The results and guidance we will discuss include non-GAAP financial measures consistent with our past practice. Please refer to our press release and the accompanying slide presentation at the Investor Relations section of our company website for a complete reconciliation of GAAP to non-GAAP results. With that, I will now turn the call over to Suresh Krishna. Suresh? Suresh Krishna: Thanks, Ryan. Good morning, everyone, and thank you for joining our fourth quarter and full year earnings call. I am pleased to share our strong financial performance in 2025 and outline our strategic priorities as we move into 2026. Eight months into this role, I've spent significant time with customers, engineers, operators, and investors. What's become clear is that Proto Labs has exceptional assets and market relevance, but in recent years, we haven't fully translated that into consistent execution. The results this quarter are an early indication of what's possible when we align execution around the right priorities. We finished the year with clear momentum delivering double-digit year-over-year growth and another record revenue quarter. In constant currencies, fourth quarter revenue increased 11% and full year revenue grew 6%, representing Proto Labs' strongest quarterly and annual organic growth rate since 2018. Revenues per customer grew 13% in 2025, demonstrating major success on a key priority. In addition, we delivered year-over-year growth in earnings and generated another strong cash flow, reinforcing the strength of our business model. This was fueled by exceptional demand for CNC machining and sheet metal, which both delivered double-digit growth in 2025. In fact, US CNC revenue grew 25% in 2025. I'd like to thank Mark Dursa, our Senior Director of CNC Operations, and his team for their exceptional execution in delivering on robust CNC demand. Innovation-driven industries like drones, space exploration, satellites, and robotics continue to rely on Proto Labs as a critical partner. We also see strong momentum in data centers, another high-growth market where Proto Labs enables faster execution for customers like Amphenol and CommScope, leaders in data center infrastructure solutions. These are well-funded and long-cycle markets where our digital manufacturing model creates a durable, competitive advantage and has us well-positioned for 2026. Our financial results reflect Proto Labs' progress in improving the customer experience, strengthening customer relationships, and executing with speed, focus, and discipline. As a result of our strong finish in 2025, we've entered 2026 from a position of strength with clear momentum and growing confidence in the opportunities ahead. Now shifting to our long-term strategy, we have clarified our strategy to serve customers across the entire life cycle of a part, from prototype to production. This strategic direction is not new. However, what is new is the rigor, focus, and execution plan behind it. This approach reinforces our position as the world's fastest and most reliable provider of prototype parts, while deliberately building the capabilities required to be a trusted production supplier. Importantly, this strategy builds from our core strengths rather than shifting away from them. Excellence in prototyping and leadership in digital manufacturing are the foundations of our advantage, and they are the capabilities that enable us to expand credibly into production. Execution of this strategy is anchored by four strategic pillars. Number one, elevate customer experience, Number two, accelerate innovation, Number three, expand production, and Number four, drive operational efficiency. Ryan Johnsrud: First, Suresh Krishna: we are elevating the customer experience by removing friction, making it easier for customers to do business with Proto Labs and more efficient for our teams to serve them. Our strategy centers on deepening customer relationships and driving higher conversion, retention, and revenue per customer, ultimately improving unit economics and operating leverage. One tangible example is improvements to our e-commerce customer experience. Today, multiple factory and network storefronts create unnecessary friction. A more unified experience will simplify the customer journey and allow our teams to support customers more consistently and efficiently. With our second strategic pillar, accelerate innovation, we intend to return Proto Labs to its legacy of rapid, differentiated innovation, expanding offerings across our core manufacturing services to drive outsized growth. As one of the earliest and largest digital manufacturers, Proto Labs has unique assets that differentiate us, including over 60 patents and more than 60 trade secrets, a robust and growing CAD dataset, and deep experience applying automation and AI at scale. We are now translating these assets into a faster, more consistent cadence of customer-facing product and service launches through 2026 and beyond. Innovation for us means expanding manufacturing capabilities, improving speed and precision, enhancing coating and manufacturability feedback, and deploying smarter pricing and sourcing algorithms, always grounded in customer needs and clear return on investment. Next, expand production. While we currently offer production, our capabilities and customer engagement have historically been weighted towards prototyping. We are now strengthening the capabilities and certifications needed for true production work, opening access to a much larger market opportunity as we scale. For Proto Labs, expanding production requires a more deliberate customer-led approach, prioritizing the right customers, applications, and capabilities to unlock this opportunity. In January, we achieved ISO 13485 certification for our US factory injection molding operation, a critical requirement for medical device production programs. We already support prototyping work for all major medical device companies, and this certification opens a substantial opportunity to expand into production over the coming years. Moving forward, we will continue to add certifications and other capabilities required for production expansion. Our fourth strategic pillar, drive operational efficiency, enables profitable growth through improved productivity and cost discipline. This pillar is critical. It funds investments across the first three while acting as a force multiplier for profitability. This includes expanding factory and network gross margins, leveraging SG&A more effectively, simplifying how we operate, utilizing AI, and reallocating resources towards the highest priority initiatives. Each of our four strategic pillars reinforces the others, and collectively, they drive a more customer-centric, innovative, efficient, and scalable Proto Labs. While this strategy defines our organic priorities, selective inorganic opportunities can further advance our progress. We will continue to evaluate acquisitions that strengthen our capabilities and align closely with our strategic framework. We will remain disciplined and focused on opportunities that create durable, long-term shareholder value. With our long-term strategy established, let's shift to 2026. We expect 2026 will be a year of transformation and growth focused on execution. We are making foundational organizational, operational, and capability-building changes that position Proto Labs for faster growth and improved profitability. The first change is getting the right talent in place and properly structured. Mark Kermesch, our Chief Technology and AI Officer, is leading a reorganization of our technology group into a domain-focused organization structure, which better aligns how we build technology with how Proto Labs creates value for customers. Our product management teams are now part of Mark's technology organization, helping remove silos and accelerate innovation. The second change is focused on continuous improvement and quality. We are expanding our business operating system, which we call Proto Excellence, beyond our factory manufacturing operations and deploying it across the organization to drive productivity. We are also adding talent with significant manufacturing expertise to our quality team as we continue to build production capabilities. The third change for 2026 is the establishment of a global capability center or GCC in India. Proto Labs India will be a strategic extension of our global operating model designed to scale innovation, strengthen delivery, and deepen our global engineering and digital capabilities. Proto Labs India will serve as an integrated hub that complements our US and European teams, tapping into India's deep technical talent. Ashish Sharma has been appointed to lead this effort. Ashish has built and scaled GCCs for several large industrial companies, and we are excited to have him on board. Fourth, we are making important changes in Europe in 2026. Europe plays a critical role in Proto Labs' future, but revenues have declined over the past two years amid macro uncertainty as well as internal complexity that created friction for customers and employees. As a result, we are taking deliberate action to reset the business. We are implementing new go-to-market strategies and a renewed customer focus to reaccelerate revenue growth, aligning our cost structure with current revenue levels and improving productivity. We believe our addressable market size in Europe is similar to the US. Europe is not a growth drag structurally; it is an execution opportunity. Our strategic reset actions in 2026 are designed to stabilize margins and reset the cost base, positioning the region for growth and profitability. While 2026 is a year of transformation, it is also a year of acceleration. Here are a few initiatives that we expect will drive growth in 2026. On elevating the customer experience in Q1, we plan to launch ProDesk, a customer-facing experience designed to improve Ryan Johnsrud: customers' Suresh Krishna: engagement with Proto Labs across ordering, collaboration, and service. ProDesk is an important first step in improving the e-commerce experience through better user experience and functionality, while we continue to work towards a more fully unified platform over time. This initial launch is focused on removing friction today and setting the foundation for broader e-commerce simplification in the future. On accelerating innovation, we already released a few capability expansions late in 2025, including advanced CNC machining and expanded metal 3D printing. The pace of releases will continue in 2026, including improvements to our quoting experience, manufacturability software, expansions of our factory capabilities, additional secondary services, and more. As for expanding production, we will focus our efforts in 2026 on our largest and most strategic customers in aerospace and defense and medical, applying what we learn and scaling best practices across our customer base over time. We currently have two leading medical device customers in the pilot program, leveraging our new injection molding certifications and capabilities, including traceability, process validation, and automated inspection to support high precision production volumes. As you can see, we are making step changes in 2026 to achieve our four long-term strategic pillars. As a result of strong momentum exiting 2025 and the progress on key growth initiatives, we expect growth in 2026 to accelerate relative to 2025. Operator: Importantly, Suresh Krishna: while 2026 reflects a year of transformation and measured acceleration, the structural changes we are making are designed to position Proto Labs for a return to sustained double-digit revenue growth. Our path to double-digit growth is driven by three levers. First, improving conversion and retention through an improved customer experience and accelerated innovation. Second, growing revenue per customer in part by expanding in production. And third, continuing to accelerate penetration in high-growth verticals like aerospace, defense, medical, robotics, and data centers. Taken together, our long-term strategy and transformational work underway in 2026 positions Proto Labs for sustained revenue growth and operating leverage over the long term, reinforcing our position as a leader in cash flow generation in our industry. We believe our strategic framework will translate into measurable financial progress over the next several years, beginning in 2026. As outlined above, Proto Labs has a credible path to a billion dollars in annual revenue over time while delivering meaningful operating margin expansion. I'm proud of what the team accomplished in 2025 and encouraged by the momentum we enter into 2026 and confident in our ability to execute with speed, discipline, and innovation as we deliver long-term value to our customers and shareholders. With that, I'll turn it over to Dan to walk through the financials. Dan? Dan Schumacher: Thanks, Suresh. And good morning. I'll start with a brief overview of our fourth quarter and full year results, followed by our outlook for 2026. Fourth quarter revenue was a company record of $136.5 million, up 11% year over year in constant currencies. This is also the first time since 2017 that we grew revenue sequentially in the fourth quarter. Fourth quarter revenue in the US grew 15.9% year over year, while Europe declined 8.1% in constant currencies. CNC revenue in the US grew 35% in the fourth quarter. Revenue fulfilled to Proto Labs network was $30.5 million, up 11.2% in constant currencies. Non-GAAP gross margin was 44.8%, up 140 basis points year over year as volume growth in the US factories generated higher gross margins. Fourth quarter non-GAAP operating expenses were $48.7 million, up $5.2 million compared to the prior year, driven by higher incentive compensation, commissions, and medical expenses. On a percent of revenue basis, fourth quarter operating expenses were down 10 basis points year over year. Non-GAAP earnings per share were $0.44, above our guidance range and up 6¢ year over year due to increased volume and factory gross margin improvements, partially offset by a higher tax rate. Now on to our full year 2025 financial highlights. Revenue was a record $533.1 million, up 5.7% in constant currencies. Factory revenue grew 3.7% and Proto Labs network revenue grew 13.8%. 2025 revenue in the US grew 9.1% year over year, while Europe revenue declined 7% in constant currencies. As Suresh discussed, we have focused efforts planned for 2026 to reset our European operation, generating efficiencies and returning the region to growth. In 2025, CNC machining revenue grew 16.7% year over year in constant currencies. Strong demand in the US for CNC parts in drones, satellites, and rockets drove this outstanding performance. In the US, CNC grew 25% year over year. Injection molding revenue declined 1.9%. The service was negatively impacted by weakness in medical device and lower prototyping demand. 3D printing declined 4.7% year over year due to weak prototype demand for 3D printed plastic parts and older technologies. However, we are seeing strength in metal 3D printing. DMLS revenue in the US grew double digits. Sheet metal grew 12% year over year. This service also benefited from strong demand in US aerospace and defense. Full year 2025 non-GAAP gross margin was 45.1% compared to 45.2% in 2024. Our gross margin is unmatched in digital manufacturing, a testament to the strength of our combined factory and network fulfillment model. Factory non-GAAP gross margin was 49%, up 70 basis points year over year. I'd like to commend our factory operations and continuous improvement teams for their productivity improvements in 2025. Network non-GAAP gross margin was 31%, down 190 basis points year over year largely due to inefficiencies related to tariffs. 2025 non-GAAP operating expenses were $193.3 million or 36.3% of revenue, up slightly from 36% of revenue in 2024. As we said throughout 2025, the majority of the SG&A increase was in variable expenses tied to revenue growth, including incentive compensation and commissions. However, there is significant opportunity for leverage on our operating costs as we scale. Suresh already outlined a number of transformational initiatives in 2026 meant to drive efficiencies and productivity. We expect efforts within our operational efficiency pillar to generate operating leverage in the long term. Non-GAAP earnings per share were $1.66, up 3¢ year over year. We generated $74.5 million in cash from operations in 2025, as Proto Labs continues to lead the digital manufacturing industry in cash generation. We returned $43 million to shareholders in the form of repurchases. On December 31, 2025, cash and investments on our balance sheet were $142.4 million and zero debt. Turning to our forward outlook. We have momentum in the business, and we are actively laying the foundation to invest in our strategic pillars and grow the business to $1 billion in revenue. Suresh Krishna: Our focus on long-term margin expansion Dan Schumacher: will be driven by revenue growth, factory utilization and productivity, network margin refinement, and SG&A leverage. As these drivers scale, we believe Proto Labs has a path to expand operating margins while continuing to lead the industry in cash generation. As Suresh mentioned, 2026 is a year of transformation and acceleration for Proto Labs. With that said, we anticipate full year 2026 GAAP revenue growth of 6 to 8%. As is our standard practice, we will provide both revenue and earnings guidance for 2026 outlined on Slide 19. We expect revenue between $130 million and $138 million. At the midpoint, this implies 6% revenue growth year over year. We expect foreign currency to have a $2.1 million favorable impact on revenue compared to 2025. Our earnings guidance incorporates the following assumptions for 2026. Non-GAAP add-backs will include stock-based compensation expense of approximately $3.6 million, amortization expense of $900,000, and transformation and restructuring costs of $700,000. A non-GAAP effective tax rate between 24-25%. In summary, we expect first quarter 2026 non-GAAP earnings per share between $0.36 and $0.44. That concludes our prepared remarks. Please open the line for questions. Operator: Thank you. The floor is now open for questions. Suresh Krishna: Question queue. Operator: You may press star 2 if you would like to remove your question from the queue. Pressing the star keys. Again, that's star 1 to register a question at this time. Our first question today is coming from Greg Palm of Craig Hallum. Please go ahead. Greg Palm: I wanted to maybe start off with a little bit more color on Q4. And by the way, congrats on a great finish to the year and a really improved year overall. But as you kind of mentioned, you know, first time in a long time where revenue actually grew sequentially from Q3 to Q4. And I guess I'll sort of ask the same question. I can't recall you ever sequentially declining from Q4 to Q1, but obviously, that's what the midpoint implies. So how much of that is conservatism? What exactly did you see in Q4? Was there some pull forward of revenues? And maybe just a little bit more color on what you've seen quarter to date. Dan Schumacher: Yeah. Thanks, Greg, and thanks for the congratulations. You know, you've followed us for some time. I've talked about this in the past. As you go into the fourth quarter, it ends up being quite unpredictable in terms of when customers will have projects. And what we saw is like, through November and December, continued, you know, good order volumes driven by, you know, our engagement with customers in those key industries. And so that resulted in the results that you see. As we started in January, it was a more normalized start to the year, it's softer as people are coming back from the holidays. And we've seen order rates improve from that point. So it hasn't been since 2017 that we've seen that where in the fourth quarter, people continue to order right to the end of the year. But we do see some normalization now starting in January. Greg Palm: Okay. That's fair enough. And then, you know, just in terms of end markets applications, I think you've talked about a few of them that you've been sort of seeing, you know, a lot of growth in recent history. But can you just maybe go in a little bit more detail, you know, whether, you know, A&D so that, you know, the drones and satellites, space, I also think you mentioned data centers, and you haven't talked about a lot in the past. But, you know, are you, you know, presumably, some of these end markets are accelerating, but just give us a little bit more color exactly what you're seeing. Suresh Krishna: Yeah. Thanks, Greg. We are absolutely seeing innovation-led growth in these markets. And as you know, we are the default go-to place for prototyping for innovation. We are absolutely well-positioned to leverage all of these growth markets that are well-funded, long-cycle innovations starting now. And we serve almost all of these industries. So we feel pretty good about where we are positioned to serve the innovation-led growth in the US right now. Greg Palm: Okay. And, Phil, lastly, appreciate some of the commentary on the strategic pillars. I'm curious how much or what can sort of be done near term versus midterm versus long term? And, I mean, do you think you're starting to see some of the results from some of these strategic initiatives already, or is this more of a sort of to come kind of thing? Suresh Krishna: Yeah. Greg, we are just starting this now. And we will see acceleration in the outer years. This is a year of transformation. We are putting things in place. And we are getting organized. Greg Palm: Okay. Keep it up. Best of luck. Thanks. Suresh Krishna: Thanks, Greg. Operator: Thank you. Our next question is coming from Troy Jensen of Cantor Fitzgerald. Please go ahead. Troy Jensen: Hey, gentlemen. Congrats on the great results. Suresh Krishna: Thanks, Troy. Maybe just a couple of questions. Troy Jensen: Hey. Just a couple questions for me. Can you talk about just unique developers? It was down here, lowest we've seen in a bit? Is this a conscious decision to shed less profitable, or you just touch on the UDPs, please. Suresh Krishna: Yeah. Troy, you know, we are absolutely focused on increasing revenue per contact, and we saw acceleration in Q4 with revenue per contact up almost 23%. Having said that, we are also focused on driving more contacts, so we are aware that we have to grow both. But our focus has been to get more share of wallet from our existing customers, and that is borne by the facts of how Q4 performed. In fact, all of 2025 performed where we were up 13% year over year on revenue per contact. Troy Jensen: Alright. Alright. Fair. So just different question here. Can you talk there's been chatter or just I know the administration's really kind of in pushing US supply chains for defense. And I've just heard chatter that they're out, you know, even kind of talking to the machine shop builders of the world. But anything that you guys can talk about here that's kind of reshoring or this US-based supply for defense? Is this something that you've had discussions with? Or talk to administration about? Suresh Krishna: And as you can see from our results, we have good exposure to aerospace and defense. Good exposure to all the growth areas within aerospace and defense that includes drones, satellites, rockets, robotics, and you're seeing good growth from all of those end markets. Troy Jensen: Okay. But not specifically. Just defense really pushing US to reshore in the supply chains? It's more broad-based. Suresh Krishna: Yeah. I think, you know, I don't know how much specifics we can give you, but we have good exposure to all of these companies, and we are a preferred supplier to them when it comes to driving innovation. Troy Jensen: Okay. Alright, guys. Keep up the good work. Suresh Krishna: Thanks, Troy. Operator: Thank you. Our next question is coming from Brian Drab of William Blair. Please go ahead. Brian Drab: Since Troy is trying to get you to talk about all your defense work, I thought maybe I'd ask you to reveal all 63 secrets that you mentioned on the call. Can we talk through those? Dan Schumacher: They're secret for a reason, Brian. Brian Drab: I hadn't heard that stat before. 63 Secrets. I thought that was interesting. The injection molding business has been pretty steady here the last couple quarters, but, you know, this is obviously, you know, still one of the keys to the growth going forward is to reaccelerate growth in injection molding. I know that you've done some work around automation and you're working with enterprise customers, different verticals. But, like, what as you think about that 6 to 8% growth, which would be outstanding for 2026 for the overall company, what kind of visibility do you have to the injection molding business contributing to that type of growth? And I'm wondering if you just if you have some better visibility related to production programs with some customers or, you know, any color around that visibility would be great. Suresh Krishna: Yeah. Brian, thanks. Yeah. We have acknowledged in the past that prototyping in injection molding is down, and it remains down. Hence, our pivot towards production in injection molding in particular while we are going after production in all our service lines. Getting the ISO 13485 certification for the medical industry, which allows us to do traceability, process validation, and inspection, helps us pivot to more production in injection molding. We are in pilot with two medical device manufacturers right now for high precision, higher volume production parts for injection molding. And as that scales, we will be able to bring in more customers into that fold and thereby expand our injection molding revenues year over year. Brian Drab: Do you think that it's possible that injection molding grows at a comparable rate to CNC machining in 2026? Dan Schumacher: I don't think giving guidance as it relates to service at this point. Brian Drab: Fair. Okay. And then you launched these advanced CNC capabilities in October. And I'm just wondering is that still very early in the ramp, or did that affect, do you think, some of the CNC order activity in the fourth quarter? Suresh Krishna: Yeah. It's while it's early, it's performing well for us. We are only a few months in, but we are seeing significant excitement and customers wanting to use that service. It's something they've been asking us for a long time. When I talk about friction, it's these kinds of things where customers want something from us, and we are not responding. And we are able to do that now. And we are seeing a good lift for these services. Brian Drab: Okay. And then my last question for now is just on India. Should I be thinking about that as an opportunity to expand the network side of your business, which, you know, serving customers globally, or I think you mentioned I may have just missed it. Or is it more focused on, you know, customers with serving customers within India and the surrounding region? Suresh Krishna: Yeah. So we have been in India for some time with manufacturing partners that support our network business. By putting in a center in India, we are looking to expand how we can leverage India's technical talent to help us advance our innovation agenda, our AI agenda, and accelerate that with speed. So we are expanding India for supporting our global business. Brian Drab: Is it so is it am I what type of people are in this facility then? Is it software engineers or CNC machinists or what you know, can you just elaborate on that a little bit? Suresh Krishna: We'll share more as we build it out. We just started this in the beginning of the year. And as I said, we already had a presence with supplier quality engineers, supplier development engineers working with our manufacturing partners and making them capable to supply global customers in Europe and the US. And by putting in a head has helped build global capability centers, we can add more capability in our India office to support our entire business. Brian Drab: Okay. Perfect. Suresh Krishna: Thank you. Operator: Thank you. Our next question is coming from Jim Ricchiuti of Needham and Company. Please go ahead. Jim Ricchiuti: Hi, good morning. I'm wondering, is this decision to share full year growth targets with us today, is that a function of what you're seeing in terms of opportunity? I'm not gonna call it predictable demand. I don't think that's something necessarily that characterizes your business. But I'm wondering, are you seeing this opportunity a better view of this opportunity in several of the key markets you've identified? Or is it just is this accelerating growth due to, you know, just greater confidence in the changes you're making and the potential for that to provide more immediate benefit? I'm not sure if that question is confusing. I'm just trying to get a sense because normally, you guys have not talked about full year revenue growth. Dan Schumacher: So, Jim, we just had a quarter in which we had 11% growth year over year. And Suresh just laid out some transformational change that we're going through. So it's a year of, you know, quite a bit of change for us. I don't have better visibility to what the full year is, but I thought it would be helpful to share with you and the investors where we're thinking about for the full year in terms of growth. Jim Ricchiuti: And that's very helpful. And I think appreciated. The other question I had is, given all the changes you're making, what are some of the puts and takes on the investments required? Do you anticipate additional investments as you go through the year to potentially, you know, lay those foundation for stronger growth, or is this also gonna be a reallocation of resources? Dan Schumacher: It's gonna be a, you know, one, it's a reallocation of resources. We are driving initiatives. You can see some of the we had a transformational charge in the fourth quarter. We've got one in the first quarter. So we are looking at eliminating costs in certain areas, but reinvesting them into others. So, you know, from a full year perspective, I would not expect us to be expanding margin. What we're gonna be doing is we're gonna be looking to lower cost, but at the same time, reinvest that cost to drive some of the transformational change that Suresh talked about and start really moving growth. Jim Ricchiuti: Got it. And just one quick follow-up. I may have missed it. Could you provide the network gross margin in the quarter? I think they were lower for the year, but I wasn't quite sure. You may have mentioned that I missed it. Dan Schumacher: Network margin in the quarter was 30.3%. Jim Ricchiuti: Thank you. And I'll add my congratulations real nice finish to the year. Dan Schumacher: Thank you, Jim. Thank you. Operator: Thank you. Ladies and gentlemen, this brings us to the end of our question and answer session and today's conference. We would like to thank you for your participation and interest in Proto Labs. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day.
Operator: Hello. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cboe Global Markets Fourth Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star, then the number one on your telephone keypad. I would now like to turn the call over to Kenneth Hill, head of investor relations. Ken, please go ahead. Kenneth Hill: Good morning, and thank you for joining us for the fourth quarter earnings conference call. On the call today, Craig Donohue, our CEO, will discuss our performance for the quarter and provide an update on our strategic initiatives. Jill Griebenow, our Chief Financial Officer, will then provide an overview of our financial results for the quarter as well as discuss our 2026 financial outlook. Following their comments, we'll open the call to Q&A. Also joining us for Q&A will be Christopher Isaacson, our Chief Operating Officer, Prashant Bhatia, our Head of Enterprise Strategy and Corporate Development, and Robert Hocking, Global Head of Derivatives. I would like to point out that this presentation will include the use of slides. We will be showing the slides and providing commentary on each. A downloadable copy of the slide presentation is available on the Investor Relations portion of our website. During our remarks, we'll make some forward-looking statements, which represent our current judgment on what the future may hold. And while we believe these judgments are reasonable, these forward-looking statements are not guarantees of future performance and involve certain assumptions, risks, and uncertainties. Actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statement. Please refer to our filings with the SEC for a full discussion of the factors that may affect any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise after this conference call. During the call this morning, we'll be referring to non-GAAP measures as defined and reconciled in our earnings material. Now I'd like to turn the call over to Craig. Craig Donohue: Good morning, and thank you for joining us to review our fourth quarter and full-year results. Cboe Global Markets, Inc. delivered record net revenue and adjusted earnings for the quarter and year, powered by continued strength across our core businesses. These results demonstrate how our products continue to resonate with a diverse group of users across regions and asset classes. We remain focused on extending this momentum as we execute on our strategic direction we laid out on our last earnings call. Reducing our focus in certain areas while we redirect our time, talent, and capital to our core businesses and emerging opportunities. During the fourth quarter, Cboe grew net revenue 28% year over year to a record $671 million, and adjusted diluted EPS increased a robust 46% to a record $3.06. For the full year, Cboe delivered record net revenue of $2.4 billion, up 17% year over year, generating adjusted diluted EPS growth of 24% to $10.67 per share. The exceptional results in the fourth quarter were underpinned by double-digit net revenue growth in every segment and record results in each category at Cboe. Specifically, strong volumes in both our multi-list and proprietary index option products drove the strength in the derivatives category. Solid new sales growth led to gains on our Cboe DataVantage business, and robust industry volumes propelled our cash and spot markets higher. While 2025 was an impressive year, we remain focused on sustaining and amplifying our momentum by leveraging the strong secular trends across our core businesses. Taking a closer look at the fourth quarter trends by category, our derivatives franchise delivered a record fourth quarter with net revenue increasing 38% year over year to cap a record year in which revenue grew 22%. In our multi-list options business, net transaction and clearing fees revenue was up a strong 41% given higher industry volumes and positive pricing trends. The multi-list option space remains an area where we believe Cboe has a right to win, and we will continue to enhance our position within the industry to drive greater results over time. We're encouraged by the recent innovation in the space, underscored by the launch of Monday and Wednesday expirations for select multi-list names. While we are focused on educating market participants on the unique risks associated with single stock zero DTE trading, we believe these additions ultimately expand the toolkit available to investors. This development complements our index options franchise by elevating awareness of the utility zero DTE strategies provide while allowing us to reinforce the advantages of index options. Namely, the larger notional size, diversified risk profile, and daily cash-settled structure as compared to single stock options. More broadly on the index options side, net transaction and clearing fees revenue was up a strong 40% as our proprietary SPX options complex set new records powered by robust growth in zero DTE options trading. SPX zero DTE ADV was up an impressive 66% year over year, while overall SPX ADV increased 39% to a record 4.3 million contracts. Zero DTE options made up over 61% of SPX volumes, up from 51% share a year ago. We saw a similar dynamic in many SPX options where zero DTE ADV was up 135% as compared to 2024, making up just over half of the mini SPX volume to end the year. In our proprietary options business, it's worth noting that the 10 highest average daily volume months occurred in 2025 and 2026. In fact, nine of the 10 highest SPX days on record occurred in 2025 or 2026, pointing to the healthy momentum in the franchise today. We also saw growth in our VIX products. Volume in both VIX futures and VIX options gained 15% last quarter amidst increased market uncertainty with two notable spikes in volatility, generating robust trading opportunities. For the third year in a row, VIX options set a new record in trading volume, averaging 862,000 contracts a day in 2025. As concerns rise over the concentration risk in US markets, we're seeing renewed interest in small-cap stocks for those looking to diversify their equity exposure away from large-cap tech. Volume in our Russell 2000 index options jumped 20% last quarter to reach their highest level in almost ten years. We're excited to add 2000 index options to our global trading hour session starting this month, giving investors the opportunity to trade small-cap stocks around the clock. This will capitalize on the strong demand we have seen from international investors to access U.S. markets, with total volume in our GTH session up 34% last quarter. Looking ahead, we remain bullish on the outlook for our core derivatives franchise, anchored around strong retail demand, continued international growth, and further product innovation. Beyond these secular drivers, rising geopolitical tensions and increasing economic uncertainty should remain a tailwind for our products as investors turn to options to help better manage risk and generate income. Moving to cash and spot markets, net revenue was up a strong 27%, as we saw solid growth in our cash equities business in Europe and North America as well as in our global FX business. Led by another quarter of strength in our European transaction business, the Europe and Asia Pacific segment delivered a 24% year over year increase in net revenue. This was driven by a 33% year over year growth in net transaction and clearing fees, given strong industry volumes, stable market share trends, and improved net capture dynamics. Higher non-transaction revenues in the segment also contributed to the growth, with revenue up 15% year over year. North American Equities made a solid contribution with net transaction and clearing fees revenues up 18% given strong equity volumes in each of our markets. Non-transaction fees were also up double digits as our entire cash equity ecosystem benefited from the more active trading environment. Rounding out cash and spot markets, Global FX made another notable contribution, increasing net revenue 22% year over year in Q4. The fourth quarter results continue FX's long track record of revenue growth and caps an impressive 17% net revenue growth rate for 2025. Beyond the macro backdrop lifting activity across our cash and spot markets businesses, we are unlocking incremental revenue opportunities through our securities, financing transactions clearing service in Europe. Launched in response to strong client demand, this service has leveraged XevoClear Europe's pan-European footprint to introduce central clearing to a securities lending market that has traditionally operated on a bilateral basis. This market plays a key role in enabling asset owners to earn additional income by lending out their portfolios, enhancing returns for beneficial owners. By bringing clearing to this market, our service can provide participants with meaningful capital and risk efficiencies. The first trades were executed in March 2025, and we have seen hundreds of new contracts across 15 active European settlement locations cleared every day between borrowers and lenders, with notional outstanding loan values exceeding €1 billion in January 2026. Turning now to DataVantage. Net revenue increased by 9% on a year over year basis, reflecting continued momentum across our platform in the fourth quarter. Notably, roughly 90% of the growth across our market data and access businesses was again driven by new unit and new sales as opposed to pricing. This growth was underpinned by strong demand for access to our markets, a durable and growing international contribution, and favorable trends in our newer product offerings. If we look more broadly at the full-year results, net revenues increased 10% across the DataVantage platform. Importantly, we saw each component of our DataVantage business—market data and access, indices, and risk market analytics—all trend higher on a year over year basis. Now I'll turn the call over to Jill to walk through the details of our financials and 2026 guidance. Jill Griebenow: Thanks, Craig. Stifel posted another record quarter with adjusted diluted earnings per share up 46% on a year over year basis to a record $3.06. I will provide some high-level takeaways from this quarter's operating results before going through the segment results. Net revenue increased 28% versus 2024, to finish at a record $671 million. We saw healthy growth in all categories, with the strongest growth coming from our derivatives business. Specifically, derivatives markets net revenues grew 38%, cash and spot markets net revenues grew 27%, and DataVantage net revenues grew 9%. Adjusted operating expenses of $221 million were up 8% on a year over year basis. Adjusted operating EBITDA of $465 million grew 40%, and adjusted operating EBITDA margin expanded by 6.1 percentage points to 69.2%, a result of both our robust revenue results and disciplined expense management. The fourth quarter results capped a remarkable year at Cboe, where annual net revenue grew 17% to $2.4 billion, and adjusted earnings per share of $10.67 was up 24%, both setting new annual records. Turning to the key drivers of the quarter by segment. Our press release and the appendix of our slide deck include information detailing the key metrics for our business segments, so I'll provide some highlights for each. The option segment delivered another quarter of record net revenue, increasing 34% year over year. The growth was driven by a 40% increase in net and clearing fees in the fourth quarter. Total options ADV was up 24%, with a 35% increase in total index options volume and a 20% increase in multi-listed options volume. The rate per contract for our options business also increased 13% on a year over year basis, given a positive contribution from both our index and multi-list products. North American equities net revenue rose 17% versus 2024, with strong industry volumes driving an 18% increase in net and clearing fees. On the non-transaction side, market data fees grew 12%, and access and capacity fees increased 10%. Europe and APAC produced 24% year over year net revenue growth. Net transaction and clearing fees were up 33%, while non-revenues were up a combined 15%. Futures net revenue increased 12% from 2024. The increase was primarily due to a 16% up in total ADV, given a resurgence of VIX activity during the quarter. And finally, global FX net revenue was up 22% on a year over year basis, driven by a 17% increase in average daily notional value and an 8% increase in net capture. Looking at our Cboe DataVantage business, net revenues were up 9% year over year in the fourth quarter. Revenue growth was again underpinned by healthy new subscription and unit sales, representing approximately 90% of this quarter's growth, with the remainder coming from pricing changes. We remain encouraged by the success of our newer product offerings, including dedicated cores, time stamping services, and one-minute open-close data. Regionally, we saw incremental growth in index and market data sales, fueled by new brokers coming online in the Asia Pacific region. Overall, we remain pleased with the multiple avenues of durable growth in our DataVantage business. Turning to expenses. Total adjusted operating expenses were $221 million for the quarter, up 8% on a year over year basis. This increase is reflective of higher compensation and benefits expense, which primarily resulted from our strong 2025 revenue growth, increasing our short-term incentive compensation. Before detailing our 2026 guidance, I would like to provide a brief progress update on our strategic realignment over the past quarter and explain how these actions are reflected in our 2026 expectations. During the fourth quarter, we commenced the sales process for our Cboe Australia and Cboe Canada businesses. We have seen strong initial interest from potential buyers, and we will continue working towards an outcome that delivers a positive solution for all parties. Although we have initiated sales processes for Cboe Canada and Cboe Australia, we continue to operate those units as business as usual, and the revenue and expense contribution of each is included in our 2026 guidance. We plan to provide updates as milestones are met in the sales process and detail any subsequent financial impacts. We have also ceased operations on our corporate listings businesses while driving efficiency in our growing US ETP listings business, and European ETP listings business, as well as several of our smaller risk and market analytics businesses. Our 2026 guidance fully incorporates the anticipated revenue and expense impacts from these actions. And finally, last year, we made the decision to explore ways to reduce our cost footprint for Cboe Europe derivatives exchange, referred to as FedEx. As we further assess the business, it became clear that FedEx was unlikely to meet targeted revenue and profitability metrics given the retail investing landscape and market structure in Europe. And in January 2026, we made the decision to close FedEx. Our 2026 guidance includes the impact of our decision to wind down FedEx. The financial impact of the FedEx wind down is expected to be largely realized in 2026 and does not change the overall estimated revenue and expense impact ranges communicated on our October 31 earnings call related to our strategic realignment decision. For full-year 2026, we are introducing the following guidance. We anticipate our DataVantage organic net revenue growth to be in the mid to high single-digit range, and we expect our total organic net revenue growth to be in the mid-single-digit range. We are also introducing our 2026 adjusted operating expense guidance range of $864 million to $879 million, representing 3.3% growth on the low end and 5.1% growth on the high end. Our guidance accounts for some modest inflation in our core expenses, along with the expected financial implications associated with the recently announced leadership transition, and provides room for incremental investment in emerging opportunities. A few areas where we are excited to make some near-term incremental investments include expanding our securities financing transaction capabilities, as well as new product development around emerging event prediction markets. Our full-year guidance range for CapEx is $73 million to $83 million, and our depreciation and amortization is expected to be in the $56 million to $60 million range. We expect the effective tax rate on adjusted earnings under the current tax laws to come in at 27.5% to 29.5% for the full year, with the midpoint of the range 80 basis points below the 2025 rate as a result of an expected decrease in tax expense associated with uncertain tax positions. And while we don't provide formal guidance on interest income or interest expense, we expect that interest income, net of interest expense, will be a $3 million to $4 million positive contributor for 2026. On the capital front, we continue to look for ways to effectively allocate capital and drive long-term durable shareholder returns. In the fourth quarter, we returned $76 million to shareholders in the form of a $0.72 per share dividend, bringing the total amount of dividends paid in 2025 to $284 million. Factoring in both share repurchases and dividends, Cboe returned a total of $350 million to shareholders in 2025. We enter 2026 with a great deal of balance sheet flexibility. As evidenced by our adjusted cash position of $2.2 billion and a leverage ratio of 0.9 times. We are well-positioned to invest in organic or inorganic opportunities as well as redeploy capital to shareholders as dividends or opportunistic share repurchases. Moving forward, we remain focused on optimizing our capital deployment and look forward to delivering on long-term shareholder value objectives. Now I'd like to turn it back over to Craig for some closing comments. Craig Donohue: Thank you, Jill. As we move forward as an organization, we are focusing more attention on driving results in our core businesses and preparing for emerging opportunities across our industry. We believe that capitalizing on those opportunities starts with having the right group of leaders in place. As we announced last week, we are thrilled to welcome Heidi Fisher to head our cash and spot markets businesses and Scott Johnston as our new COO. Both bring a wealth of industry experience in their respective fields and strengthen our management capabilities across our core businesses at Cboe. I want to take a moment to express my sincere gratitude for the many contributions that Christopher Isaacson has made throughout his tenure at Cboe. From his early days as a founding BATS employee in 2005 to his meaningful contributions as a key member of our executive team and our COO, Chris has been an integral part of Cboe's growth and identity. Chris has embodied a Cboe-first mentality, and we are fortunate that he will continue to serve as an adviser through 2026. Now I'd like to turn the call to Chris to say a few words. Christopher Isaacson: Thank you, Craig. First, I'd like to thank my Cboe colleagues for everything we've accomplished together and your trust over the past twenty-plus years. It's been an incredible run together. To the investor community, I'm grateful for your engagement and thought interest through the years. It's been a privilege to build so many meaningful relationships with you during my time at BATS and Cboe. While leaving Cboe is certainly bittersweet for me, I'm excited for the opportunity to spend more time and be more fully present with my family. I feel there's no better time to pass the baton given the excellent momentum of the business under Craig's leadership, the recent strategic decisions we've made as an organization, and the support of a capable leadership team with long-tenured leaders as well as talented new ones coming into the organization. Thank you again. And with that, I'll hand it back to Craig. Craig Donohue: We have been incredibly deliberate in our efforts to strengthen leadership across our core businesses. This transition with Chris has been thoughtfully planned, and we are excited to bring in leaders of Heidi and Scott's caliber. With the addition of Heidi, Scott, and recent key hires in strategy and corporate development, global derivatives, clearing, and DataVantage, our management team has added an average of over twenty-five years of industry experience per hire. Importantly, these new hires are complemented by our efforts to elevate talent from within Cboe. Given the depth of talent now in place across each of our core businesses, along with a robust regional leadership team of proven executives, I believe we are better positioned than ever to capitalize on the numerous opportunities ahead. 2025 was a remarkable year on many fronts, and we begin 2026 with a position of real strength supported by healthy secular tailwinds, a fortified and aligned leadership team, and a sharpened focus on each of our core businesses. With this foundation in place, we are well-prepared to build on our momentum and unlock even greater value for our shareholders in the years ahead. I'll now turn the call back over to Ken for questions and answers. Kenneth Hill: At this point, we'd be happy to take questions. We ask that you please limit your questions to one per person to allow time to get to everyone. Feel free to get back in the queue, and if time permits, we'll take a second question. Operator: At this time, if you would like to ask a question, press star, then the number one, on your telephone keypad. To withdraw your question, simply press star 1 again. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Patrick Moley with Piper Sandler. Please go ahead. Patrick Moley: Yes. Good morning. So you guided to mid to high single-digit DataVantage revenue growth in 2026, which is consistent with what you've introduced guidance at the last few years. But more recently, you've been trending closer to high singles to low doubles. And it seems like a lot of that's been driven by momentum internationally and the new unit sales. So could you just elaborate on the decision to maintain the mid- to high single revenue growth target? Should we interpret that as just general conservatism? Or are you expecting growth to slow over the next few quarters? Thanks. Kenneth Hill: Hey, Patrick. Thanks for the question. So, you know, really, when we look to set the annual guidance, we look at it on a full-year basis as opposed to just the quarter-to-quarter piece. We continue to see the durability in the DataVantage business, but, yes, we set the guidance still very comfortable with that mid to high single-digit range. But, again, some good momentum coming from new usage. The sales were about 10% coming from the pricing. Craig Donohue: Yeah. And I think I'd add to that, you know, to Jill's point, just the timing of sales may vary quarter to quarter, but on an annual basis, we're pretty comfortable where we are. Just for some color around what's happening within DataVantage from a market data perspective, we see a lot of momentum from sales overseas, about 45% of our new data sales this quarter were from overseas clients, so that compares to about 35% a year ago. So we're seeing good momentum there. If you look at our recurring sales, during the quarter, three out of our top five recurring sales came from clients in the Asia Pacific region. So we're seeing good momentum there similarly across our CGI businesses analytics businesses. The utilization of our products in option-embedded ETFs continues to be strong, and there's a lot of client demand for that. So we're really positive on the continued growth in that mid to single-digit range. Patrick Moley: Okay. Thank you. Operator: Your next question comes from the line of Daniel Thomas Fannon with Jefferies. Please go ahead. Daniel Thomas Fannon: Thanks. Good morning. Craig, I was hoping you could expand upon your comments around the single name zero DTE, you know, recent rollout and why you, I guess, what gives you confidence around that not cannibalizing potentially your index business and ultimately, you know, expanding the pie, I think, is how you described it. I was hoping to get a little bit more context around that. Craig Donohue: Yes. Sure. Thanks, Dan. I'll start, but I'll turn it over really to Rob. I mean, I think we view it as additive to the market. But, I mean, fundamentally, there's a lot of differences between, from the customer perspective, including, you know, from the risk aspect, a lot of differences between our SPX products and single name zero DTE. So we actually don't think that they will be cannibalistic. We think they'll just be additive to the market, but Rob, why don't you comment? Robert Hocking: Yeah. And maybe I'll even, thanks, Craig. Maybe I'll even take a step back and just, this is obviously a popular question we're getting. So maybe just give an overview of what we've seen early days in the Monday, Wednesday trading as well as kind of to your cannibalization question. So, so far, I think early uptake of the Monday, Wednesday options has been good. They're largely concentrated really in two names, NVIDIA and Tesla. At this point, we have a very small dataset, obviously, but Monday, Wednesday options are ranging between 10% to 30% of the total number of that are trading in the nine names that were launched. And so, you know, of these options, a lot of them have been picked or they've all been picked up by all the different exchanges. We're pretty sure all the different retail broker platforms are offering them. From an access standpoint, we think, you know, we're there. On the cannibalization question with regards to SPX, you know, really that one, I think it helps to take a step back. And as Craig alluded to, you know, why are people trading each of these products and how differently they actually work. You know, SPX tends to be more smooth because it's a diversified basket. You know? Price moves tend to be more macro-driven. They're well telegraphed. Single names are different. They're driven by more company-specific news. Really means more gaps, call it sharper jumps, fatter tails. And so the strategies we see today in zero really better align with that smoother kind of intraday SPX price action. The retail activity we're seeing is around the open and then again and call it the final hour of the close. Where people are trading that momentum trying to collect, you know, premium decay throughout the day. And so those strategies are really less suited to underliers whose prices, we'll call it, are more unpredictable with kind of those higher probabilities of gap moves. Now, you know, do I think that that will keep people from trading single name zero DTE? Well, no. Investors will continue to develop new strategies and they'll introduce, you know, kind of these shorter tenors into their portfolios, but I think that will actually have a positive effect on industry volumes overall. I don't think they'll cannibalize for the reasons that, you know, trading both are differentiated enough that, you know, one is not a good replacement for the other. But I do think it's really important to note right now for investors that, you know, they'll have to deal with some really large fundamental differences in product design between trading single names in zero DTE and trading single name SPX. And so, for example, SPX options are cash-settled and European style, while single name options are physically settled and American style. So that difference brings early exercise into play with single names. And so on expiration day, SPX zero DTE positions settle into cash based on the index print. There's no overnight exposure. Your account gets debited or credited the next day. And really with single name options, instead, you end up with actual shares of stocks. I think that's really important for investors to understand. That means there's overnight risk. It also means you have to unwind those stock positions the next day to get your capital freed up to put into new option strategies. And so if you're trying to run some of those higher turnover zero DTE strategies in single names that we've seen, those differences kind of really matter. And so, you know, kind of these fundamental contract differences are also why Cboe is really hyper-focused on investor education. We think that's important at this stage of the game to really ensure that investors understand the differences between these two products and they're not caught off guard with cash and or stock moving through their accounts unexpectedly at expiration. So I know it's a long-winded answer. I think it's important to get all of those details out there because I like the introduction of Monday, Wednesday single names. I think it's good for volumes. But, really, we don't see them replacing SPX. We'd rather see them additive to the system. Daniel Thomas Fannon: Great. Thank you. Operator: Your next question comes from the line of Elias Abboud with Bank of America. Please go ahead. Elias Abboud: Good morning. Thanks for taking my question. You completed a number of introducing broker onboardings in 2024 and 2025. I was hoping you could give us Robinhood, of course, but then also several APAC brokers. Any sense of the contribution of these new brokers to the strong SPX volumes in 2025? And then, what does the pipeline look like for further broker adds in 2026? Robert Hocking: Yeah. This is Rob. Thanks, Elias. Maybe I'll take that question. Don't get down to specific SPX attribution, but I can take it up one notch for you. As you mentioned, we continue to expand access to our core products. Robinhood was a great add. We continue to see their options volume grow, which is super exciting. And they've been very public that they see good options growth in the midterm. I think I saw somewhere in an article, you know, they're estimating 40% to 45% kind of growth of options penetration. So we're excited about that. As you mentioned on the APAC side, we continue to see strong demand from international retail brokers and institutional clients wanting to connect to our exchanges, especially for SPX options, the Mega Tech, you know, the mega cap tech names are also in demand in our VIX. You know, they voiced that they're very anxious to really tap the large US pools of liquidity that we have. Korea has been a success story for SPX Options with seven of the 10 identified local brokers that we've seen all offering now as options at this point. Put that in perspective, that's compared to zero online two years ago. So that's expanding. We see that as a really good, you know, opportunity for growth. To give another region, Taiwan saw the first local retail broker launch of SPX and VIX options in Q4, and we're expecting others to follow this year, so more growth there. The continued demand keeps coming in. We see this volume not only showing up in some of our GTH sessions. I think you heard in Craig's remarks how that is growing at a very fast pace, but we're also seeing it actually show up in our regular trading hour sessions. And we're just really encouraged by kind of that international demand coming into the US, and we see it as a large area of growth in the years to come. Operator: Your next question comes from the line of Benjamin Budish with Barclays. Please go ahead. Benjamin Budish: Hi. Good morning, and thank you for taking the question. Don't think you've talked about prediction markets yet on the call. I know there's been some press indicating that you are either thinking about or having early discussions with brokers regarding sort of yes-no options. So could you maybe give us an update of where you are in the thinking in terms of product design, conversations with, you know, just distribution partners, market makers, anything else that you could share? Thank you. Robert Hocking: Yeah. Absolutely. We're excited about the continued growth in the event prediction markets. Really view this as a logical extension of Cboe's existing strengths. And they provide a clear entry point for new customers and really a pathway to broader Cboe product adoption. As you've heard us mention, our current focus is on the financial and economic style contracts. That's where we think we have the deepest expertise, where our core products already sit, and where we believe we can deliver value immediately to our end users. By staying, I would say, close to our core, we can leverage really our technology, the existing product liquidity, which I think is important, and our market structure experience, while offering customers the regulatory certainty and reliability that comes with trading on our established regulated exchange. I think that's important. You know, a few important points I think that's worth highlighting. You know, our first initial offerings will be securities products. We think that's the best way to reach the broadest set of end users, and it clearly differentiates what we're doing from a lot of the non-security-based platforms already in the market. Second, these products will closely align with our SPX options ecosystem. We already see more than 200,000 SPX Zero DTE contracts trade every day, many of which, you know, those trades have the same kind of defined risk or, as you mentioned, all-or-nothing payout profiles that this newer investor is looking for. And so this provides a very natural connection and something we feel we can leverage into being successful in that prediction market space. And so from a regulatory standpoint, I think it's also important to mention we're encouraged by the recent comments from both chair Atkins and chair Selig, especially around drawing clear lines between what's considered a security versus a CSD regulated swap. Their remarks reinforce the idea that securities products belong on a registered securities exchange, which really puts Cboe in a very strong position in the driver's seat, so to speak, with expanding into the space and then continuing the development. Now, the positive thing behind this regulatory clarity is it's giving people increased confidence, you know, as certainty improves, participation broadens, not just among individual investors, but also among retail brokerage platforms, which is important. You know, they've been previously cautious about entering the space, and so we think the timing is good with the added regulatory clarity, kind of how this product set intertwines with our existing, you know, SPX product set. And so as far as when, I think that's always the last question we get, which is when do you think we'll launch? You know, right now, we're targeting a second-quarter launch. Assuming regulatory approval and really most importantly partner readiness as we need to launch these with the various partners we have in the industry such as OCC, and a lot of the retail broker platforms. But as we get closer, we'll continue to provide more updates. But big picture, we're super excited about the space. Benjamin Budish: Alright. Thank you very much. Operator: Your next question comes from the line of Brian Bedell with Deutsche Bank. Please go ahead. Brian Bedell: Great. Thanks. Good morning. Thanks for taking my question. Maybe just a follow-on for that and then maybe just to add a question for Jill on the revenue guidance. With that. So, the second-quarter launch for the just to clarify, that's for the binary options, I believe. And then, I guess the follow-on question is, when do you would you expect to be launching the actual more traditional prediction market contracts? Is that just coming in future the next quarter or two? Or is that a longer-term development? And then I know the expenses for developing these are in the guidance. Is there any revenue assumption from these embedded in the revenue guide as well? And then, Jill, if you could just on that revenue expense guide, can you just reconfirm the part that you are including in that versus the commentary in the third-quarter call, I think the divestitures were 3% net revenue drop on an annualized basis with eight to 10% expense drop. Sounds like most of that's still in there because of the Canada and Australia commentary but just wanted to confirm. Robert Hocking: So, yeah. Thanks, Brian. I can start with your questions around the event contracts. So second quarter is for and I'm not going to give too much detail because we're going to make a bigger splash on this, I think, in a little while here. But it will be the all-or-none style combined with what we feel is a way to intertwine some of the spread trading that we see going on today in SPX. So that is what we're targeting for that second quarter. Once again, you know, think our core products think yes or no, but even a little bit of a different twist as a differentiator on that. And then once again, in the security space, we think that's super important. On the other contracts, you know, as we gain traction and as we get our initial contracts up on retail broker platforms, as they build let's call it, the GUIs that are able to those contracts and really give the user experience what they're after, we'll look to expand that into what you referenced as the more, call it, traditional contracts more, you know, yes, no around an event style contract. But think of that, you know, as market adoption happens, that will be a steady rollout into the future. Craig Donohue: Yeah. Ross, you might comment. I mean, what Rob is describing will still be focused on financial and economic events. But like this strategy. I like the synthesis on securities products. It capitalizes on, you know, hundreds of thousands of spread contracts that are trading every day in the market. And leverages our strengths in that way. Brian Bedell: Okay. On securities, yeah, securities, do you mean single name company securities or index? Securities or both? Robert Hocking: We'll be starting with index. That's just a natural fit at the moment. But that will potentially expand into other securities as well. Brian Bedell: Okay. Robert Hocking: Then to Craig's point real quick, you know, I mentioned the 200,000 SPX contracts we see each day trade. Those are in very, very tight minimum increment vertical spreads. And those minimum vertical, those minimum increment vertical spreads on expiration day have effectively a binary payout. A yes-no payout. So we believe we're seeing event style contracts that can exist in SPX today. And so as I talk about this all-or-none new contract, combined with the spreads that we're seeing, I mentioned, the 200,000 contracts, 200,000 plus contracts we see, that's where we think we can offer a very positive securities-based in the indices to start product offering to the market. Jill Griebenow: And then just to pick up on the second half of your question as it relates to the guidance impact. So a couple of different components to your question. Let me know if I miss anything here. But the first one, that I'll address is just on your question as to what we're including from the 2026 revenue guide as it relates to the new prediction and event contract opportunities that Rob has spoken to. I'll just say that there's, you know, a small contribution contemplated in the 2026 revenue guide, but we really do expect that to ramp more over time, and we'll continue to update our model as that becomes more clear. As it relates to the strategic realignment pieces and how those factor into the guidance, again, there are a few different tranches there that I tried to address in the prepared remarks, but we'll just take a couple of minutes here to further articulate and clarify those. So to your earlier point, we did communicate back in October that we expect the net impact of all of the realignment to result in about a 3% net revenue loss. So there are pieces of that that are already contemplated in the 2026 revenue guide. So those would relate to the decision to wind down the Japan equities business, corporate listings, and then some of the optimizations we've made within the risk and market analytics business as well as any revenue contemplated from the FedEx initiative. So, again, those knowns are built into the 2026 guide. The piece that still lives within the 2026 revenue guidance, though, is the contribution that's contemplated from Cboe Canada and Cboe Australia. Given that those businesses are still actively owned and operated by Cboe. As the sales progress progresses there and if and when there's an impact on either 2026 revenue or expense contributions from those businesses, we'll recast our guidance then communicate those impacts to the industry. Brian Bedell: That's great. And the expenses, the related expenses to what you just described is also in and out expenses in for Canada and Australia expenses out for the other things that you've closed. Jill Griebenow: Correct. So, the 2026 expense guidance does include what we expect expenses to relate to Canada and Australia, correct? And then there will be somewhat of a timing lag on some of the we're doing. But for the most part, we do see a bit of savings then in 2026 from, you know, the Japan piece, corporate listings, the risk and market analytics optimization. As well as the FedEx wind down. So those knowns are embedded within the 2026 expense guide. Brian Bedell: Great. Thank you so much. Operator: Your next question comes from the line of Alexander Kramm with UBS Financial. Please go ahead. Alexander Kramm: Hi, guys. Good morning. Thank you for the question. So a lot of the strategic initiatives that you've talked about meant to be organic build-outs. That feels consistent. The balance sheet obviously continues to be in a really good place, so I was hoping you could refresh us on your latest thoughts around share repurchases or any other use of capital over the next kind of twelve to eighteen months. Jill Griebenow: You bet. So, I mean, if you look back historically, our return on capital is actually we get some of the highest returns on organic investments. So on the heels of the strategic realignment, obviously, we are pivoting away from certain areas of the business. But what that is allowing is both time and balance sheet flexibility to really invest in areas where we do see some promise. So really looking to optimize around the core. A couple of the opportunities that we've mentioned today from an organic standpoint are the focused investments that we're making to further build out our securities financing transaction line of business as well as, you know, some of the product development and opportunities around the event prediction market. So we really are laser-focused on continuously looking at all of our core business lines to see what further enhancements or optimization we can make to generate that long-term revenue flow. That isn't to say, though, that share repurchases don't remain a priority. We absolutely still will look to do those again on an opportunistic basis. We do also have a history of paying a quarterly dividend and also have increased that annually. If you look back to August 2025, we did announce a 14% increase to the dividend. Really, you know, we like the flexibility that we have at the moment. We like the dry powder, and you know, we'll just continue to look to optimize the capital returns based upon the opportunities that are ahead of us. Alexander Kramm: Great. Thank you. Operator: Your next question comes from the line of Alex Kramm with UBS Financial. Please go ahead. Alex Kramm: Hey. Good morning, everyone. At the risk of asking Brian's question a little bit more specific on the expense side, Jill, of the 8% to 10% that you talked about on the last call, can you maybe just give us the number of how much of that is now basically out of the 2026 cost guide? Thank you. Jill Griebenow: Morning, Alex. No. We're not breaking it out on that discrete of a level. What I'll say, though, is there are quite a few tranches of things that are coming off and then, you know, some organic investments that we're making coupled with what I will say is, you know, the majority of the savings would come later on from some of the Canada, Australia pieces. But like I said, we already are starting to see the full-year benefit of the Japanese equities piece as well as looking for a good portion of the FedEx component to come out. So it really is a balance there. You do see it reflected in the guide that we came out with. So, you know, you look at the lower end of the range, the $864 million, higher end of the range, that $879 million, that suggests, you know, somewhere of a 3.3% to a 5.1% expense guide. Again, we will keep you updated over the course of the year as more becomes known with the timing of the Cboe Japan or Cboe Australia and Cboe Canada pieces. But, for now, again, feel good with that range that we've communicated given some of the pieces that are in motion. Alex Kramm: Understood. Figured I needed to ask. I'll be back with a follow-up. Thanks. Operator: Your next question comes from the line of Ashish Sabadra with RBC Capital Markets. Please go ahead. Ashish Sabadra: Thanks for taking my question. Was wondering if you could provide more color on the rollout of dedicated cores as well as talk about the new growth initiatives and new product roadmap within the DataVantage? Thanks. Craig Donohue: Yeah. So in general, you know, some of the products we've rolled out over the last year or so include dedicated cores. Again, that's reducing latency. In terms of accessing our equity markets. We've also rolled out time stamping and a one-minute open and closed dataset, and those are more focused on the datasets around our options exchanges. We've rolled those out. We started in the US, and then we took them across to markets in Europe. So those were some of the initiatives we had in place. As we looked at 2026, we've got some new launches planned as well. There's an option-like dataset that we've just launched early this year. We're already seeing some strong interest in the Asia Pac region around that dataset. And there's something that we'll put in around the middle of the year, around Cboe clock service that has good potential as well as we work with clients who really understand some demand around that. So we continue to innovate around new products and services that clients are really asking for. So we'll continue that rollout into '26 as well. Ashish Sabadra: Thank you. That's great, Connor. Operator: Your next question comes from the line of Jeffrey Schmidt with William Blair. Please go ahead. Jeffrey Schmidt: Hi. Good morning. You discussed on the last call that you're working on pricing improvements for your exchanges. And, you know, whether it's market maker incentives, more attractive rebate programs, things like that. Could you provide us with an update on what you're doing there? Is that really for the multi-listed options? Thanks. Robert Hocking: Hi. Yeah. This is Rob. I'll take that one. And, yeah, it's for the multi-list space. We're still, it's an exciting space for us and really core to Cboe. As all the reports show, you know, industry volumes continue to grow at a staggering pace. And so this is an area we're heavily focused on. But we'll say, as you point out, it's highly competitive. By early twenty-six here, we'll reach 20 exchanges in the space. But that said, you know, Cboe still controls, call it, around 22% market share in multi-list. And we're number one in overall market share. So without getting into, as you mentioned, we're constantly evolving different functionality, the different pricing schemes. And we're always actively evaluating and working through all of those pricing enhancements across our different medallions, but it's I think it's important to point out that we're always very intentional about how we manage the dynamic between market share and revenue capture. So we don't see that as a static kind of trade-off. As market conditions change, we'll continuously adjust pricing and incentives to make sure we're maximizing that overall opportunity set for Cboe rather than optimizing for a single metric in a given quarter. So that's kind of an ongoing thing, and it will continue to be an ongoing thing. On the more specific things we're doing, on the market structure side, we're preparing to launch multi-list trading during our limited GTH session. You've seen reports of that. That will pending regulatory approval later this year. And then another one that I think is important to mention that I'm not sure we've mentioned before, we're engaging with industry participants on the potential for options, the options regulatory fee or for form as you hear it referenced. Now ORF is a per contract fee charged on option trades to help pay for market regulation and oversight, and ORF is assessed on customer trades regardless of which exchange the trade is actually executed on. So the fee is used by options exchanges to fund their regulatory responsibilities, but because there are many options exchanges, as I mentioned 20 here in the first part of 2026. ORF can be charged by multiple venues on the same cleared trade, which is why it's become really a point of focus and discussion across the industry. Because as the number of exchanges grow, the cumulative burden on customer trades increases. Which is why the, you know, the industry, the derivatives industry has been discussing this offer form and aligning fees more closely with where trades actually occur to reduce friction, cost, improve overall market efficiency. And so this initiative is important to us. It's one Cboe firmly believes in is supportive of aligning fees with where the actual trades are done. And we feel, you know, overall, if you look at our approach towards pricing, extending GTH or for form, we still feel we're positioned well to remain an industry leader in multi-list. Jeffrey Schmidt: Okay. Thank you. Operator: Your next question comes from the line of Ken Worthington with JPMorgan. Please go ahead. Natalie Daleiden: Good morning. This is Natalie Daleiden on for Ken. Appreciate your earlier comments on single name cannibalization risk. But may you provide some more context or help us size the capital efficiencies customers could realize when trading across the new, you know, shorter duration equity risk management tools, whether it be single name zero DTE, the MAG10 index you launched, binary options, when trading in conjunction with the legacy S&P index stakes. Craig Donohue: Sure. Want me to? Yeah. You can start. Yeah. I mean, all these products are cleared through OCC. And so as a result, there's substantial capital and margin efficiencies because of the portfolio margining that's happening within OCC. So, you know, I think, again, that's kind of another sort of complementarity to the launch of these products, which is they're all held on the same pool. And therefore, you know, they get the multilateral of centralized clearing. I think that's your question. But Rob, is there something you want to add to that? Robert Hocking: And maybe to expand on that is just, you know, if you think events, think zero DTE, whether single name or index, think MAG 10. All of these, as Craig points out, are cleared at OCC. So all of them, we expand the product set, whether it's introducing new tenors existing products. So think, you know, Mag 10 is even introducing new products that are made up of top 10 names relative to the single names that already trade. All of those and that's kind of our strategy. All of those are going into the same bucket of risk at the OCC for offset and risk offset capital efficiency. So as we expand the toolkit, that's the beauty of it, is these people's portfolios, as you add these names, you're not introducing a completely new asset class that you have to fund as a completely new vertical. You're introducing new, call it, risk characteristics, new access points all within the existing verticals they have is a much more efficient way to trade. Natalie Daleiden: Thank you. Operator: Your next question comes from the line of Michael Cyprys with Morgan Stanley. Please go ahead. Michael Cyprys: I was just hoping you could share your updated thoughts on plans around extending trading hours to twenty-four-seven. Across your markets, what that path and some of the hurdles look like. I know for multi-list, you've announced to have extended sessions, I think, for certain options contracts. Just curious how you think about overcoming any sort of hurdles around fragmenting liquidity and ensuring real price discovery, particularly in some of those overnight hours. Craig Donohue: Thanks. Michael Cyprys: Yeah, Michael. I just want to remind you. So we already trade 23 or 23.5 by five. Futures index options and FX. I have for many years. And as we've mentioned on this call already, through the prepared remarks and Q&A, GTH volume or global trading hours really grown tremendously. 34% year over year. So we're seeing great growth in those markets where we already trade. In US equities, we trade from 4 AM eastern to 8 PM eastern today. Kind of the broadest hours of all the US markets. Coming in late November, assuming the market infrastructure, the consolidated tapes, and DTCC are ready, the industry, including our EDGX market, would be going to 23 by five in late November, but you'll see a room filing for that in the first half. And then to your specific question about 24 by seven, you know, we're already making plans. There's been a lot of talk here about the Fed prediction markets and some about crypto as well. So we certainly have the capability to trade 23 by five. We're taking a look at what would it mean for us to extend our clearing abilities to 24 by seven as well as our trading abilities to do that. And just, I'd say, just watch the space for when we see the appropriate market demand. To justify those projects. But those are definitely in the planning phase, and we look forward to bringing those to market when the customer demand is there to meet it. Robert Hocking: And then, Michael, real quick, if you're asking specifically about multi-list, you know, we're working to launch, you know, extended hours trading or that extended GTH session for Q, we'll call it Q3, pending regulatory approval. And in our filing, we would add a morning session from 07:30 to 09:25 eastern time and then a post-close session from four to 04:15 to supplement the existing US equity options hours that Craig meant, sorry, that Chris from 09:30 to four. Our plan would be to start with 25 names only. That represent kind of the highest market cap, most liquid, names across options and underlying equities. And as you highlighted, this is really in response to the surge we've seen in the equity option volumes and just the general industry push towards 24 by five. But those are kind of the specifics around how we're expanding that for multi-list. Michael Cyprys: So just on the multi-list, so that goes till four fifteen. Just curious why not extend a bit longer? How do you think about that? What are some of the hurdles? When do you think we can get to twenty-four five, twenty-four seven within multi-list? Robert Hocking: No. I think it's a great question. Really, you know, trying to expand the functionality slowly and deliberately to make sure market participants are prepared and it's a smooth transition process. Right now, these windows where we're expanding account for where we see the majority of volume in our current GTH session. With SPX. So we don't want to burden liquidity providers right out of the gate having to staff and provide liquidity all night over some of the lower, you know, traded hours or lower volume hours. So we feel like if we use SPX as an XSP kind of as a guide, this is where we're seeing the majority of the volumes. So let's expand 25 names there. Let's see how that works. Let's not burden liquidity providers and then hopefully expand as it makes sense. Michael Cyprys: Great. Thanks so much. Operator: That concludes our question and answer session. I will now turn the call back over to Cboe management for closing remarks. Craig Donohue: Thank you very much. Thank you for joining us today. I just want to take a last opportunity to thank Christopher Isaacson for his ten years of experience in his last earnings call with us. But he'll be with us for a while as an adviser and Chris, we thank you, and thank you for joining us. Christopher Isaacson: Thanks, Craig. Thank you all. Operator: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Hello, and welcome to the Unum Group 4Q 2025 Results and 2026 Outlook. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to withdraw your question, press 1 again. And please limit to one question and one follow-up. I will now turn the call over to J. Matthew Royal, Investor Relations. You may begin. J. Matthew Royal: Thank you, and good morning. Welcome to Unum Group's Fourth Quarter 2025 Earnings Call. Today, we will be discussing full year 2025 results along with highlights from the fourth quarter. We will also use the time to discuss our outlook for 2026. As such, we have extended our time today to allow for the additional presentation and discussion. Note, today's call may include forward-looking statements and actual results may differ materially. We are not obligated to update any of these statements. Please refer to our earnings release and our periodic filings with the SEC for a description of factors that could cause actual results to differ from expected results. Yesterday afternoon, Unum released our earnings press release, financial supplement, and webcast presentation for today's call. All of those materials may also be found on the Investors section of our website. Also, please note, references made today to core operation sales and premium including Unum International, are presented on a constant currency basis for comparability period to period. Participating in this morning's conference call are Unum's President and CEO, Richard Paul McKenney, and Chief Financial Officer, Steven Andrew Zabel. Following the remarks from Richard Paul McKenney and Steven Andrew Zabel, additional members of management will participate in Q&A, including Mark Till, who heads our Unum International business, Timothy Arnold, who heads our Colonial Life and voluntary benefits lines, and Christopher Wallace Pyne for group benefits. Now I will turn the call over to Richard Paul McKenney. Richard Paul McKenney: Morning, everyone, and thank you for joining us. 2025 was a year of disciplined operational performance across our core businesses, sustained investment in digital capabilities that create differentiation for Unum, and decisive progress in the closed block, materially improving its risk profile. We delivered for customers, advanced our strategy, and closed the year with strong capital and liquidity. On the earnings front, for full year 2025, adjusted EPS was $8.13. This was down year over year and below our expectations going into the year. The primary driver of the softer outcome for both the quarter and the year was higher than expected benefits experience. That experience varied in total and by line throughout the year. We will dig into our benefits experience more, but throughout the call today, you will hear more about our leading franchise in group benefits that has grown notably over time as we serve employers and their employees. As we have grown, we have done so profitably. As our core operations delivered approximately 20% return on equity. This reflects durable earnings power supported by disciplined underwriting, solid persistency, a focused product mix, and a sales force that appreciates building relationships with clients. Those fundamentals have been true for many years. Combined with strong risk management and capital management, we remain excited about the opportunity moving into 2026. As we look at the top line, this opportunity is demonstrated by a growing premium base and customer relationships. Core operations premium grew within our expected range at nearly 4.5% excluding transaction impacts. This includes a 3.1% premium growth at Colonial Life and 10% in international. Given our healthy persistency and the ongoing demand from employers who value integrated benefits, we are well-positioned to deliver premium growth within our long-term target range of 4% to 7% in 2026. A key enabler of that performance is the progress we are making in digital. Today, over one-third of our core premium base is associated with customers experiencing one of our leading digital capabilities. The idea is simple: connect our benefits to the HR platforms employers already use and wrap those connections with an experience of service, expertise, and empathy. The execution, particularly when building at scale, is complex, but our teams are up to the challenge. HR Connect, Broker Connect, and Total Leave strengthen the employer link. MyUnum, Gather, and The UK's Help at Hand make enrollment and administration easier while adding value-added services. AI-enabled tools help our teams respond faster and with higher quality. Where these capabilities are adopted, we see stronger engagement and persistency. We pair that digital momentum with paying attention to the fundamentals across the enterprise. In group disability and group life in the US, we maintain strong pricing discipline and risk selection, and returns remain attractive and industry-leading. In Colonial Life, we continue to strengthen our independent distribution model, improving agent productivity through better digital tools and workflow. This supported steady premium growth, strong returns, and sales that finished the year at a multi-year high, which included double-digit growth in the fourth quarter. In international, we also delivered double-digit premium growth, reflecting a sharper broker experience in the UK and continued progress in Poland. While 2025 had some variability in reported benefits experience, the underlying earnings power remains resilient. Our strategy continues to translate into durable growth and meaningful long-term value creation. This growth also flows through to our capital generation, conversion to free cash flow, and deployment. Consistent with our deployment philosophy, 2025 was a year in which we grew the company organically and made two small acquisitions. At the same time, with our continued strong statutory earnings, we were able to increase our dividend 10% and buy back $1 billion of our shares. That combination effectively returned to shareholders what we generated in the year. We ended the year with robust capital levels of 440% risk-based capital and $3.2 billion of cash at the holding company. 2025 will also be remembered as a year where we reached some pivotal moments in addressing the closed block. It dates back many years, but in 2023, we provided additional funding to our Fairwind entity and stated at that time that no further contributions would be necessary. Three years later, our position remains unchanged. Today, we have $2.2 billion of protection between reserves and capital to guard against any future adverse development. As you have heard before, a consistent part of our block management has been to seek price increases over time where appropriate. With our steady and mature approach, we have crossed the $5 billion mark in cumulative premium rate increases since initiating our program. Finally, in 2025, we completed a reinsurance transaction that ceded roughly 20% of long-term care reserves coupled with an internal reinsurance action that reduced potential capital volatility. Combined, we reduced LTC reserves by more than $4 billion in total through these transactions. Our progress in 2025 has meaningfully strengthened our risk profile while maintaining strong capital protections, and we remain focused on further reducing legacy exposures to drive the focus to our leading employee benefits franchise. We are excited about how we are positioned entering 2026. We are starting the year in a real position of strength. That is true in our market position and reputation, the depth and expertise of our team, and, of course, the financial flexibility to capitalize on opportunities when they present themselves. Our performance is grounded in purpose: helping the working world thrive throughout life's moments, delivered through the right balance of digital connection and human empathy. With our continued investment in technology, we expect a good year of growth in '26. Across the company, we see top-line growth in the range of 4% to 7%, with meaningful contributions from each part of the enterprise. This stems from both new sales and persistency, driven by the connections we have developed over the years. With disciplined focus on our margins, our EPS will return to growth of 8% to 12%, driven by our high ROE businesses. Finally, we continue to return value to our shareholders in a consistent manner, as we have done over the last several years with an increasing dividend and share repurchases of approximately $1 billion. Steven Andrew Zabel will now take you through the quarter details, and then we will cover our 2026 outlook. Steven Andrew Zabel: Great. Thanks, Richard Paul McKenney, and good morning, everyone. While earnings in the fourth quarter were below our expectations, our top line continues to grow, and the franchise remains strong. Core operation sales finished the fourth quarter on firm footing after a slower than expected first half and were up 1.1% in 2025 over the prior year. This included Colonial sales increasing 10% in the quarter over a year ago and 5.3% for the full year. We were also pleased with our persistency results, and we continue to see high levels across our businesses, including U.S. Group persistency of 90.2%. Considering all this, core operations premium in the fourth quarter increased 2.9% compared to a year ago and finished up 3.7% for the full year. When we adjust for the runoff stop-loss business and the ceded IDI business from the LTC transaction, core premium grew approximately 4.5%. This growth is consistent with our outlook from last February and within our long-term expectation of 4% to 7% annual premium growth. Turning to margins in the quarter, results across the franchise generally performed lower than our expectations. This was reflected in Unum US group disability, with a 64.2% benefit ratio in the fourth quarter, which was above our expectations, driven by lower average size of recoveries and lower than expected mortality on our claimant block. Despite this, we continue to be pleased with the high returns our business generates. In both the quarter and for the full year, adjusted ROE for our core operation was approximately 20%, a good reminder of the underlying earnings power of our business. Even when margins show volatility and are pressured in certain quarters. Altogether, these factors produced after-tax adjusted operating earnings of $322.3 million for the quarter, or $1.92 per share, and $1.4 billion or $8.13 per share for the year. These GAAP earnings translated to full-year after-tax statutory earnings of $1.1 billion, which exclude the impact of reinsurance transactions. This result was below our expectation of $1.3 billion to $1.6 billion coming into the year and largely reflects the lower than expected margins experienced in our GAAP results. However, our overall capital generation model still provided immense levels of capital optionality, enabling us to execute against our capital deployment priorities. Consistent with our priority of continued organic investment and capabilities, the full-year adjusted operating expense ratio finished in line with expectations. Outside of organic investments, we executed two small transactions for our core business, closed our first long-term care risk transfer transaction, and returned approximately $1.3 billion to shareholders through share repurchases and dividends. Our capital generation and strong excess position enabled this high level of capital flexibility in 2025, allowing for a wide range of capital uses which will continue into 2026. I will now briefly review our 2025 results by segment, provide updates on the Closed Block strategy, and then shift to our 2026 outlook. In Unum US, before-tax adjusted operating income was $289.7 million in the fourth quarter, 13.1% less than the prior year quarter, and full-year adjusted operating income decreased 11.6% from 2024 to $1.3 billion. In group disability, adjusted operating income was $102.3 million in the fourth quarter and $479.8 million for the full year, a decline of 22.8% from 2024. This year-over-year decline represents a normalization of our group disability benefit ratio after a historically low benefit ratio of 59% in 2024. This normalization paired with volatility throughout the year led to a group disability benefit ratio of 64.2% in the fourth quarter and 62.4% for the full year. Reported full-year premium of $3.1 billion was nearly flat. Adjusting for the runoff of our stop-loss business, premium increased nearly 3%. For Group Life and AD&D, fourth-quarter adjusted operating income increased 11.1% to $91.9 million, and full-year adjusted operating income decreased 7.3% to $319.4 million. Favorable levels of mortality counts led to a benefit ratio of 64.8% in the fourth quarter and 67.5% for the full year. Full-year premium increased 4.9% to $2.1 billion due to favorable sales, while persistency remained strong. In our supplemental and voluntary lines, adjusted operating income declined 8.2% to $95.5 million in the fourth quarter and was flat at $472.7 million for the full year. Fourth-quarter results were impacted by higher benefits experienced across all product lines. Excluding the impact of reinsurance, premium growth was strong, growing approximately 5.5% for the full year. Moving to Unum International, underlying earnings in the fourth quarter declined 11.7% to $33.2 million from the prior year and declined 3.5% to $152.3 million for the full year, driven mainly by unfavorable claims experience in UK group disability. Healthy sales and persistency bolstered double-digit top-line growth as fourth-quarter premiums grew 11.5% to $283.9 million and full-year premium increased 10% to $1.1 billion. In Colonial, adjusted operating earnings declined 7.2% in the fourth quarter to $113.9 million and for the full year declined 0.7% to $463.6 million. Like claim count volatility and higher expenses due to sales growth, led to lower margins in the fourth quarter. The benefit ratio of 48.3% in the quarter and 48.1% for the full year were elevated over 2024 but in line with our outlook. Fourth-quarter sales increased 10% to $203.9 million, the largest amount of quarterly sales since 2019. Full-year sales increased 5.3% to $560.3 million, one of our largest years ever. Additionally, favorable persistency also benefited top-line growth with full-year premium increasing 3.1% to $1.8 billion. The Corporate segment produced a loss of $51.1 million in the quarter as staffing and IT costs were elevated. For the full year, the segment produced a loss of $171.6 million compared to the full-year loss of $191.2 million in 2024. Moving now to the Closed Block segment, adjusted operating income was $21.1 million in the fourth quarter and $63.5 million for the full year, in line with the guidance provided in the third quarter. Regarding LTC fourth-quarter performance, claim counts were in line with our expectations and the net premium ratio decreased slightly to 97.5% from 97.6% sequentially. Finally, our alternative investment portfolio, which largely backs the long-term care block, generated $25.9 million in income translating to an annualized return of 7.6%. This marked the strongest yield achieved in 2025 and reflects positive momentum compared to the full-year yield of 6.4%. Since inception, our diversified alternative portfolio has produced returns in line with our long-term expectation of 8% to 10%. I will now move to our Closed Block strategy. As Richard Paul McKenney mentioned, we have made significant progress over time reshaping our closed block. On this journey, we have established a track record for executing on prudent risk management actions such as seeking actuarially justified premium rate increases and maturing our interest rate hedging program. On top of these successes, we further advanced our strategy in 2025 through three notable achievements. First, the reduction of $4 billion of LTC reserves through the execution of our risk transfer transaction with Fortitude Re and our internal funds withheld reinsurance transaction. Second, the removal of our morbidity and mortality improvement assumptions derisking our assumption set, and increasing predictability of the block. Lastly, the discontinuation of new employee coverage on existing group long-term care cases, which was effective February 1 of this year, resulting in the entirety of the block being in full runoff. To conclude, we are pleased with our actions in 2025 to derisk the block and continue to work toward our stated objectives of fully mitigating this risk. These actions continue to reinforce our expectation that we will no longer need to contribute capital to support LTC reserves, a view first established in 2023. Before moving on from the closed block and diving into the Outlook, one change I want to call out as we enter 2026 is a change in our go-forward presentation of adjusted operating income. Beginning with first-quarter results in 2026, we will exclude Closed Block earnings from our adjusted operating earnings measurements. Going forward in our disclosure, you will see a special item that encompasses the entirety of Closed Block earnings. As such, adjusted operating earnings will now be presented as the combination of our core businesses and our corporate segment. This change aligns with the actions we took in 2025 to reduce the footprint of our legacy closed blocks and provide sharper focus on the core business. As we continue to shrink the footprint of the closed block, we view the potential for increased earnings volatility that would otherwise distort our reported results. One recent example of this increased volatility in recent years is when we experienced GLTC case terminations which drove GAAP losses. While this outcome is positive for the block longer term, the GAAP earnings impacts may present a different result. In conjunction with this change, we also took the opportunity to holistically consider and adjust for two related impacts. First, we will no longer present non-contemporaneous reinsurance and the cost or gain of reinsurance as a special separate item. The related non-closed block amortized reinsurance gain and impact of non-contemporaneous reinsurance will move to segment operating results above the line, which impacts our individual disability line of business. Second, as part of this broader evaluation, we considered our methodology for allocating GAAP excess equity across our reporting segments. The result of this was a decrease in the allocated closed block equity and a corresponding increase in the ongoing operations. A function of our view that adjusted operating results are no longer supported by the closed block. Therefore, the corporate-owned excess should be represented in our reported results. Ultimately, this will drive higher investment income across our other reporting segments starting in the first quarter. Putting this all together, our 2026 adjusted EPS growth will be presented off of a redefined 2025 base of $7.93, which excludes closed block results and related items. For additional detail, we have added a slide in the appendix that illustrates the bridge from historically reported to our newly defined basis. Turning to the ongoing monitoring of the Closed Block, we have refreshed our disclosure as you can see here. We introduced these metrics during our fourth quarter 2023 earnings call to highlight the most relevant indicators of closed block health and performance. Given the change in presentation of closed block earnings, which was formerly used to help assess claim trends in the period, we would note that the MPR paired with the remeasurement line better captures near-term claims experience. When considering our view of no additional capital required for the block, our protection metric serves as a way to assess loss absorption capacity. This quarter, we took the opportunity to revise the presentation of this metric to fully be on a pretax basis aligning the treatment of both excess capital and reserve margins. Ultimately, these four metrics provide a comprehensive outlook of the block. As such, going forward, we will continue to provide details on a periodic basis. I will close by affirming that none of these reporting changes impacts our commitment to our strategy of reducing the footprint and capital demands of the closed block. Moving to the outlook for our core operations, I will start with our view of business growth and earnings power and discuss how that translates to capital generation. The key themes of our 2026 outlook are strong top-line growth, stabilizing margins, and robust capital return levels. Top-line results are expected to grow more in line with our long-term expectations and above what we achieved in 2025. While core sales in 2025 were lighter than anticipated, persistency was better than expected. As we enter 2026, we believe we can benefit from both strong sales growth and persistency in our core businesses. From a margin perspective, group disability was a main part of our story in 2025 as it normalized from historically high levels of margins in 2024. While volatile in 2025, we believe that we will still see a stabilizing benefit ratio of 62% to 64% in 2026, which still provides a very strong return on equity of greater than 25%. Combining these trends with our capital position and plans to repurchase approximately $1 billion of shares in 2026, we expect adjusted after-tax operating earnings per share in the range of $8.6 to $8.9 for full year 2026, representing growth of approximately 8% to 12% over our redefined 2025 result of $7.93 per share. I will now turn to our expectations for top-line growth, returns, and underwriting margins across our core businesses. Starting with Unum US, we expect premium growth to be between 4% to 6%. As Richard Paul McKenney mentioned, we will see continued tailwinds to our premium growth as a result of the success of our digital platforms. To quantify the impacts, I would note that for customers that utilize our HR Connect platform, we see close ratios that are roughly double when HR Connect is part of the experience and persistency at levels 2% to 4% higher than non-HR Connect customers. The benefit ratio outlook is relatively consistent from what we achieved in 2025 for group life and AD&D, but grading up slightly for group disability, which we expect to be in a range of 62% to 64%. Preliminary first-quarter indicators are broadly consistent with our assumptions and supportive of this outlook. Notably, through our financial planning process, clarity on the long-term benefit ratio outlook has emerged. As a result, we do not expect the group disability benefit ratio ultimately to be greater than 65% when considering normal volatility. This result translates to a robust ROE in the mid-20s. Underlying this future steady state is the expectation that our underlying claim trends are sustainable and that the move to a longer-term target is primarily influenced by expected pricing dynamics, which contributed a little under one percentage point to the ratio increase in 2025. Lastly, with the change I mentioned earlier to individual disabilities amortization of the deferred gain, we now expect supplemental and voluntary earnings to be in the $120 million to $130 million range per quarter, including an expected benefit ratio range of 48% to 50%. Altogether for Unum US, these results drive healthy expected ROEs this year in line with the 22.6% we experienced in 2025. I will shift now to Colonial where our outlook for top-line growth and underwriting margins is quite consistent with 2025 results. Strong persistency and our building sales momentum will enable top-line growth to continue in the 2.2% to 4% range. When paired with consistently strong margins, ROEs will continue in the high teens range reflecting our benefit ratio expectation of 48% to 50%. Then in international, a high level of top-line growth continues after 10% growth in 2025. While 2025 saw margins contract below our expectations, we do expect the benefit ratio to return to a range of 70% to 72% in 2026. This will result in earnings power for the International segment in the low $40 million range quarterly delivering high teens ROEs. Adding it all up for the total company, this translates to healthy premium growth in the 4% to 7% range, in line with our long-term expectations, attractive ROEs, and after-tax adjusted operating earnings per share in the range of $8.6 to $8.9 representing growth of approximately 8% to 12% with momentum building throughout the year. Consideration for the quarterly pattern of earnings reflects the realities of the seasonality of higher expenses in the first quarter along with the growth of our in-force block and impact of capital management throughout the year. Finally, included in this outlook is our expectation that the corporate segment will reduce quarterly losses consistent with the fourth quarter's result of approximately $50 million and our adjusted operating expense ratio for the full year will be 22%. Executing against this outlook will position the company very strongly in 2026. Turning to capital, the strong returns our business provides enables high levels of free cash flow conversion. Capital generation in 2026 is expected to be in the $1.4 to $1.6 billion range when considering our statutory earnings of $1.2 to $1.4 billion, international dividends of $100 million to $125 million, and other service fees of $75 to $100 million. After considering debt service of approximately $200 million, this leads to free cash flow generation of $1.2 to $1.4 billion. For deployment back to our shareholders, our 2026 plans remain consistent with 2025. We expect to repurchase approximately $1 billion of stock and grow our common dividend per share by 10%, deploying approximately $300 million. Combined, this brings expected capital deployment to shareholders to approximately 100% of the free cash flow we generate, a target we now expect to achieve for a second straight year. Finally, I will finish with our expectations for capital flexibility at the end of 2026. We expect capital levels to continue to be robust and well above levels needed to support our current ratings. As such, our outlook includes a risk-based capital in our traditional subsidiaries to be 400% to 425%, holding company liquidity to be $2 billion to $2.5 billion, and ample leverage capacity under 25%. While current metrics are well above these requirements, to remain an A-rated company with our rating agencies, we will ensure a prudent approach to capital management. As such, we do not plan for immediate changes to our capital position but rather will gradually manage metrics down over time. To wrap up my prepared remarks, we are happy with the progress we made in 2025. While earnings ended the year below expectations, there were plenty of bright spots to be encouraged by, including strong top-line growth in our core business, significant capital return to our shareholders, and many actions taken to reduce our LTC risk and exposure, including our first external long-term care reinsurance transaction. All these items position us well as we enter 2026. We remain optimistic for the year and ready to execute against our plans to continue to deliver on our promises to our customers, create a desired workplace for our employees, and deliver industry-leading margins for our shareholders. I will now turn it over to Richard Paul McKenney for his closing comments before we go to your questions. Richard Paul McKenney: Thank you, Steven Andrew Zabel. I would like to wrap up today's comments by stepping back and reflecting on what our company has delivered over the last decade. Strong and consistent top-line growth has translated into value creation. This has been possible with a very resilient business model and a team that has bought into our purpose. Core operations premium has grown at a 4% compound annual growth rate to $10 billion even through the disruption of the pandemic. Additionally, book value per share, excluding AOCI, compounded at 8% to over $78 per share, doubling where it was ten years ago. These through-the-cycle results demonstrate the impact of disciplined growth, strong risk management, and consistent execution across time. It reflects the essence of our purpose-driven strategy: serve more employees, deepen our relationships with employers and brokers, and consistently convert that growth into premiums, earnings, and long-term value creation. We now like to take time to take your questions. I will turn it back to J. Matthew Royal for the Q&A session. Operator: In the question and answer session, if you would like to ask a question at this time, simply press star followed by the number one on your keypad. Again, please limit to one question and one follow-up. We will pause for a brief moment to compile the Q&A roster. Our first question comes from the line of Wilma Jackson Burdis with Raymond James. Wilma, please go ahead. Wilma Jackson Burdis: Hey, good morning. Can you give us a little more detail on the drivers of the group's disability loss ratio and the outlook in '26? What gives you the confidence for the result to stay strong this year? Thanks. Richard Paul McKenney: Wilma, thanks for the question. I think Christopher Wallace Pyne will start. Let's talk a little about the market and what we are seeing out there as we think about this year, how we executed next year, and then maybe back to Steven Andrew Zabel to some of the underlying dynamics. Getting a little deeper than what he had in his prepared remarks. Christopher Wallace Pyne? Christopher Wallace Pyne: Yeah. Thanks, Richard Paul McKenney. Thanks, Wilma, for the question. Right now, we continue to experience a marketplace that is receptive to the type of problems that we have made investments in around lead management, connecting to the human capital management platforms of choice. The conversations are really centered around what we can do to help HR teams run more effectively, more efficiently, help their companies thrive. Obviously, price across the bundle, whether it is group insurance, supplemental health, whatever it might be, there is discussion around striking good deals, but we feel it is a very favorable environment to go at. With our pricing discipline, about capabilities, talk about the problems we are solving, understand that prospect really well. Again, that could be a prospect on the new side or one of our current customers, and really show them how we can be a key partner going forward. It gives us a lot of confidence in the discussion around price, and that is why we think we can drive those loss ratios into the future. Yeah. And then, Wilma, I will talk a little bit about just what we saw in the quarter and how we are thinking about the outlook and just the projection. More of a multiyear basis. First of all, it is normal to see some quarter-to-quarter volatility. We were actually really pleased with how the full year turned out. We had an overall annual loss ratio of just over 62% for the year. ROE greater than 20%. For the year, we feel pretty good. It was pretty consistent with our expectations coming into the year. In the quarter, what we did see, though, were a couple of things. First of all, I would start with recovery rates that we saw were still consistent with really what we have seen throughout the year and what our expectations would be. That has really been consistent as the entire year plays out. It is just the number of people that we can get back to work has been in our expectations. What happened specifically, I would say, in the fourth quarter, one, the size of recoveries of those recoveries were about 5% lower than maybe what our expectations would have been. It was really just the mix of those people that did recover and go back to work. The other thing that was very different, and this is similar to our group LifeBlock where we saw very low mortality, in the working world, we saw lower mortality counts for our LTD claimant block. Just to size that up, they were a little over 10% lower than what we would have expected for the quarter and what we have seen really for the year. That was a bit of an anomaly that we think is just quarterly volatility. Then we step back and we think about going forward. We are obviously getting the question a lot just around our thoughts on the longer-term benefit ratio and group disability. Our thinking here is for the near term, including 2026, we think that benefit ratio will operate in the 62% to 64% range. We do think that it will gradually over the next few cycles glide up to that 65% range. We think that will probably be kind of the max. We will still have quarter-to-quarter volatility there. What I will tell you is the confidence in that path is really that we feel great about claims performance. We do continue to think that that is very sustainable. Going to have quarter-to-quarter volatility, but we do think that that risk management is going to be consistent. We also think, though, that there is an active pricing dynamic, and Christopher Wallace Pyne did mention that whether it is new pricing coming in on new cases, or just how we manage the in-force block, that it is going to continue to impact how we think about benefit ratios going forward. We are trying to give a little bit more guidance. What I will tell you is that is what our planning assumptions would indicate as we just run the planning process going forward. We will have to see ultimately how pricing strategy does play out. Christopher Wallace Pyne said it, what we are seeing in the market has not really changed our thinking generally on the performance of this block, but we do know that there will be price adjustments as we go through the next few years. I just step back and say, longer term, the economics are great on this block. Start going to have margins in the mid-teens supporting the 25% plus ROE on this block of business. I am very happy about it. Knew the market was looking for maybe a little bit more clarity about the longer-term trajectory. Wanted to give a little bit more on that as part of the earnings call. Wilma Jackson Burdis: Thank you. Very helpful. Absolutely love the decision to move closed block below the line, and looking forward to not discussing those quarterly fluctuations with you in the future. Could you give us a little bit of color on how you view the '26 EPS outlook on an apples-to-apples basis? It looked favorable compared to my prior expectations, but it is a little bit tough to compare given the reporting change. Thanks. Steven Andrew Zabel: Yeah. I think, generally, it comes down to a few things. One is we do think we are going to be able to start growing top-line growth at a higher rate. You will see that with our expectation. We grew about 4.5% in '25. We do think that will pick up as we are going into '26 across all of our core businesses. We do think we are just going to generate more core business premium margin. Then we are also looking at just better ratio levels and by and large other than some of the dynamics that I discussed, we think those will be pretty consistent as we go into next year. Going to continue to have very disciplined expense management and really think about what kind of technical capabilities and innovation we can bring to make sure that we are doing the right thing around expense management. Then there is obviously a fair amount of capital deployment that builds into that outlook. When you bring all those things in, we feel good about an 8% to 12% EPS growth rate given the new definition of how we are thinking about adjusted operating earnings. Great. Thank you. Thanks, Wilma. Operator: Our next question comes from the line of Alex Scott with Barclays. Alex, please go ahead. Alex Scott: Hey, good morning. I just wanted to follow up on the decision to move the definition of operating earnings. It does not change anything economically, and we will still be able to analyze some of the LTC below the line. What I thought was interesting about it is it does seem to be an extension of this being prepared for life after LTC. You took the charge, aligned it more hopefully with where reinsurers are at. You have closed the block. Now you have made a decision to move it into below the line or whatever. It would potentially make a deal look a lot cleaner as you complete it. I am just wondering is that the right read on this? What are you seeing in the reinsurance market that is maybe motivating you to do some of these things? Do you potentially have the opportunity to do a bigger piece of the block, or will it need to just continue to be bite-size? Richard Paul McKenney: Thanks, Alex. It is Richard Paul McKenney. Just to take it through, I think you captured it well, as we have been actively working on this block of business for many years, but certainly over the last several, it has been a steady drumbeat of things that we are doing to really put LTC behind us. Many things you talked about in terms of improving the profitability around that block with the rate increases, the work that we did to put capital behind it to make the statement that we are not putting any more capital into this business. Then as you talk about, 2025 was a pivotal year in terms of doing our first reinsurance transaction, doing an internal reinsurance transaction, all the things that we talked about coming out of the third quarter with the group life, I am sorry, with the group LTC, etcetera. So very steady things that we are doing. This move is, I think, part of that. The last piece to talk about is what is next. It is something we have been talking about pretty consistently is we want to continue to take the opportunity to get out of this block of business, to do so through reinsurance. Be active in the markets around that. You asked, does this make us do anything different? Not really. I think that we are still on the same path of how we are going to look at different parts of the block of business that we want to look at reinsurance to use are still in active discussions. We have been in active discussions for a period of time. We will continue talking to counterparties about what are the ways to take this out. You asked about the sizing of a transaction. Those are all on the table in terms of things that we can look at continue to work through this. I think you captured it well. This is something we have not stopped on because we have changed the reporting. How does the reporting look? Does not mean we are changing anything about our activity around the strategic management of the block, including all the things we have done previously. We are going to stay on that. That is a key part of our overall strategies. Continue to put LTC behind us. Alex Scott: Got it. That is helpful. Next one I wanted to ask is on artificial intelligence. We are getting a lot of questions from investors around this, and related to group benefits, a lot of it is around your client base and if they have layoffs and so forth. I would be interested if you could comment at all about the types of industries you are exposed to, if you have done any work or put any thought behind how relatively more or less exposed you are and maybe even just broader thoughts on risk and opportunities related to AI. Richard Paul McKenney: Yeah. No. Thanks, Alex. We are continually monitoring what is happening in the macroeconomic conditions when you think about it. I think we have also talked about our book of business and what we see from a natural growth, which is the increase in that we see in payrolls and wages and how that fits into our overall block of business. I think this is part of that question that we look at. The awareness that we have and the balance we have across the portfolio of different types of industries that we are actually covering. Different types of workers that we are covering, I think is very well balanced across the piece. When we think about the potential labor impacts that AI can bring to the markets, when we look at that business mix that we have today, we think it is early. Our performance has remained consistent across the industries. Our book is well diversified. Diversified and so that helps mitigate localized or specific sector shifts that you might see over time. I think that, you know, this is kind of a common phraseology, but history does suggest that these advancements will reshape the nature of work rather than reduce it or eliminate it, and so certain roles may diminish. New functions will emerge. All those pieces, and we will be there to take care of those individuals at that time. What we look at. I think it is very early on that front. The last thing I would say too is, you know, our mix by type of work or one of the things that we talk about is protecting people is not for any one particular level in the organization. Our mix is probably sixty-forty. White collar, blue collar. We are going to make sure we are taking care of different people at different times. It is a fair question, but I think it is very early, it is one we are definitely on top of. Alex Scott: Thank you. Operator: Our next question comes from the line of Suneet Kamath with Jefferies. Suneet, please go ahead. Suneet Kamath: Yes, thanks. Just wanted to follow up on the LTC. You kind of answered the question, Richard Paul McKenney, in terms of what you guys are doing. What are you seeing in the marketplace? Are there more counterparties that are looking for this type of exposure? I mean, we have seen a couple deals. I am just trying to figure out, like, how much interest is there in these types of liabilities. Thanks. Richard Paul McKenney: Yeah. I take you back to some of the commentary made coming out of the transaction. Clearly, when we did this transaction early last year, we saw more interest coming up from different types of counterparties. That could be people that are interested in the morbidity aspects of the book, people that are very interested in the asset side of the book of business. That definitely picked up over that period of time. We see it ebb and flow continually, but there still is a lot of interest out there continually. We just watch the markets. As I say, having active conversation with multiple people, and we will continue to do that. It does tend to ebb and flow. We manage this over the longer term. I do not want people to think that there is anything imminent on that front. There still is interest certainly on the asset side, but on the morbidity risk side as well. Suneet Kamath: Okay. Then I guess on the capital, I fully appreciate 100% capital return based on what you are generating. To your point, it still leaves you with a sizable excess holding cash holding company cash position and RBC well above target. I know you want to manage this down over time, but I guess what is the time frame that we should be thinking about in terms of getting to those target RBC and holdco liquidity levels? Thanks. Richard Paul McKenney: Yeah. Sure, Suneet. I think when you think about the you have to go back to what our uses are and potential uses of deployment. First of all, grow the business. We can put more capital into growing the core franchise. That is what we are going to do first and foremost. Acquisitions, we will do so on a certainly a disciplined basis, thinking about how we put capital to work there. Those are two things that we would like to put it to work on. As you have seen over time, our capital has been in a very strong position. I would not put a time frame around it. We are going to address this as we look at plans every year. We kind of gave you our 2026 plan that we have today. As we look at future years, we will do the same. We feel very good about the position that we are in today, about how much we are deploying back to shareholders, at the same time sitting on a very robust capital base. Suneet Kamath: Okay. Thanks. Operator: Our next question comes from the line of Jamminder Singh Bhullar with JPMorgan. Jamminder Singh Bhullar, please go ahead. Jamminder Singh Bhullar: Hey. Good morning. Maybe first, if you could just comment on what you are seeing in terms of competition in the market and it seems like everybody has had very good margins in disability, recently, some of the companies have mentioned that they are seeing some price reductions, but the one one twenty-six renewals. Just talk about what you have seen. Christopher Wallace Pyne: Yeah. Jamminder Singh Bhullar, thanks. It is Christopher Wallace Pyne. I would start with traditional competitive continues. There is no question there is real interest in this business. It is a great business as Richard Paul McKenney and Steven Andrew Zabel have described. We really feel great about the strategy that we have deployed to operate well in that market. I do not think it is abnormal competition. I do not see abnormal kind of drops in the market that cause you to change your approach. We are going to go back to our disciplined pricing approach, understanding risk. We know that with the capabilities we have built we can be much more intentional about the companies that we promote our products to. Because they will respond really well and they are ready to take advantage of things like modern lead management on modern system, you know, where they have made an investment in a platform that is important to them, we can show them how we can make that decision even smarter. Then, you know, wrap it with a bundle of, you know, the best financial protection products out there that do really well for their employees. That is a nice kind of combination. Our team has been running this play for several years. We get better at it. The investment and capabilities gets deeper. It just deemphasizes that price comp part of the conversation. To your point, we are aware that people have healthy businesses and we stand prepared to compete both on new business and on renewals. We are seeing success. I might point out the second half of the year was really our strongest, you know, from a sales persistency perspective. We feel really good going into 2026. Jamminder Singh Bhullar: Okay. Then on your comments on margins sustaining guess, in the 60s, I think if you look longer term disability generally been a pretty good business. Even prior to COVID. In those days, it used to be a 70% plus loss benefits ratio business for most companies with still very good returns. I think you and most other companies were surprised as post-COVID, the margins improved as much as they have. Now they are starting to somewhat normalize. What gives what is different about the business, now versus that would not cause margins to maybe go back to what they used to be? Why does it just settle in the mid-sixties? Why should not it go in the seventies? Because that still is a fear that could return in the context of this industry. Steven Andrew Zabel: Yeah. This is Steven Andrew Zabel. What I would tell you is it was not COVID that necessarily created a step change, you know, in the margins that we have in this business. The biggest driver improvement in our book of business is around the rate that we can get people back to work. Recover. We did specific things. We increased our over that period of time in several areas. We think that that improvement is sustainable and is not something that just happened, you know, during a kind of an unusual time during COVID. We have seen that stabilize over the last couple of years, and we definitely think that that is achievable going forward. We continue to have very steady incidence rates. As Christopher Wallace Pyne mentioned, I mean, the pricing continues to be very reasonable there. We will run kind of our normal process that we do every year as we go through our new pricing a renewal process, but that is something that we have been doing for years. I do not view there as being pressure that we revert back to something that was, you know, pre-COVID because we have actually taken actions during that time and feel that we have very sustainable performance. Within our operational areas to maintain it. Yeah. That is why we feel confident that kind of the new norm for us will be somewhere in that mid-sixties range. What we see right now in our projections, that that benefit ratio would not go above 65% other than, you know, maybe some quarter-to-quarter volatility. Yeah. Jamminder Singh Bhullar, it is Christopher Wallace Pyne. I might add you have been doing this a long time. I know, I remember the days when the table stakes to get in on an RFP were jeez, can you meet the provisions of the contract? Whether you are a high-quality carrier or person who knew or entered, that was mark you had to achieve. It was a little bit easier to make sure you had filed the right provisions and they could enter the IRP and what sometimes into more of a price competition. The world has changed a lot. We went through COVID. That was just what was going on in the world. As a business, all the elements that Steven Andrew Zabel mentioned are foundationally changed the way we can execute for sure. Then you layer in a new set of table stakes around, are you welcome to come into this RFP? Can you do the lead services that are required? Do you have the tech connection to make it work? Are you able to run the enrollment solutions that are required by the customer? So that sophisticated customer who knows what they are looking for, that is who we are targeting, and we are able to provide a more modern set of solutions that make it much more difficult to just enter and make it a commodity sale. Jamminder Singh Bhullar: Yeah. I think you and some of some of you some of the peers, not all of them, they are generally ahead in terms of lead management and capabilities. It just seems like everybody else is investing in that too. The question is whether it gets completed away down the road or not. Guess we will see. Christopher Wallace Pyne: Well said. We look forward to that. Challenge because these things are you know, they are real. When you are thinking about leave for sure is very definable. But technological connections if they do not show up the way they are promised, that realized pretty quickly and we feel good about what our are experiencing. I will leave it at that. Jamminder Singh Bhullar: Thank you. Operator: Your next question comes from the line of John Barnidge with Piper Sandler. John, please go ahead. John Barnidge: Thank you for the opportunity, and good morning. My first question is on the investment portfolio. Can you talk about exposure to software in the investment portfolio that exists? After moving Yep. Maybe the closed block below the line because I know there are some alternatives. That go through that. Thanks. Steven Andrew Zabel: Yep. Great. Thanks, John. Yeah. This is Steven Andrew Zabel. We feel really good about our position. I will size it up a little bit and then let you know how we are feeling. We have less than a percent in our bond portfolio. What I would tell you, it is in our investment-grade bond portfolio, very well managed. They are integrated software providers. They tend to have a more stable, you know, credit profile and business profile. Really no leverage loan type of structures in our portfolio. We have pretty vanilla invest in some of the really large integrated software providers. If you look at our alternative assets portfolio, that is right around 0.5% maybe in that portfolio. Again, the types of investments we are making there, we feel really good about it. Obviously, we are going to monitor this. It obviously is on our watch list. What I will tell you is we feel good about how we are positioned and kind of the part of the broader software allocation where we really play, we feel good about. John Barnidge: Thank you. My follow-up question is on the international business. It looks like there were some unfavorable claims resolutions and higher incidents in the group long-term disability product line. Can you maybe talk about that? That sounds like maybe some frequency and, I do not know, severity. Love to hear more. Richard Paul McKenney: John. Maybe we will turn to Mark Till to just talk about the market of what we are seeing in the UK and then back to Steven Andrew Zabel to talk about the specifics that you asked. Mark Till? Mark Till: Yeah. Thank you, Richard Paul McKenney. The UK market at the moment is generally pretty buoyant as a place to do business. As you can see that in our top-line growth in the business, premium income up 8% for the year. There has been a little bit more volatility in the claims incident at the moment, which Steven Andrew Zabel can talk a bit about. We have got several government initiatives at the moment that are designed to try and improve the general health of the workforce. We have got something called keep Britain working that is coming. These things should be positive for our business more generally, but maybe, Steven Andrew Zabel, you want to talk about the claims. Steven Andrew Zabel: Yeah. Sure. Absolutely, John. The current quarter was one of the more challenging quarters that we have seen for a while. The international segment. It is performing actually very strong over the last few years, I would say. So been a very good business. Great top-line growth with very stable margins. This quarter, we saw a couple of things. One, we saw a higher number of just new disability claims and really no concentration from a geography or industry or anything like that. We did see a tick up in just the counts of our disability claims. We also saw something similar to what we saw in the US. Where some unfavorable volatility in just the size of the claims we terminated. We were pretty happy with the counts of those that recovered and got people back to work. It was just lower size than maybe what we would have expected. I just pull back in over the longer term and across really all the product lines in international we do expect the UK to contribute to the international benefit ratio being in the low seventies. Feel great about the business. Very cash generative, and, you know, we had kind of a tough quarter. We will just have to see how that plays out as we get into 2026. John Barnidge: Thank you. Richard Paul McKenney: Thanks, John. Operator: Our next question comes from the line of Thomas George Gallagher with Evercore ISI. Thomas George Gallagher, please go ahead. Thomas George Gallagher: Thanks. First question is how much of your alternatives portfolio will be put into this discontinued operations? After the earnings change and how much is going to remain in the closed in the open block still reported as operating earnings. Then I guess a related question, would another risk transfer deal Richard Paul McKenney, be an event that may cause you to reevaluate your excess capital deployment plans or no? Is that not something that you think would be on the table? Steven Andrew Zabel: Yeah, Thomas George Gallagher. It is Steven Andrew Zabel. I will take the easy one. It is pretty straightforward. The vast well, first of all, let me clarify. We are not putting the closed block in the discontinued operations. That is kind of a specific accounting designation. We are, in essence, taking those operations and just excluding them from our definition of adjusted operating earnings. It is settled, it is a difference. Yeah, that basically, the entire portfolio back the long-term care block. We have some other legacy, but it is de minimis. That is the way to think about it is the earnings that come off of our alternative investment portfolio will now be below the line. Richard Paul McKenney: The second part of your question, Thomas George Gallagher, was around the excess capital that we have and LTC transactions. It is hard to tell until you have a in front of you. We were very happy about the really little capital impact that the first transaction had to us. We are going to have to see when we get closer to the finish line on that. We are not holding back capital specifically for that type of event. I think we are managing our capital way. The thing that Steven Andrew Zabel mentioned in the comments we still have a lot of leverage capacity as well. We have got firepower to do both. I would say we also want to be clear that as we remove this legacy exposure, we want to ensure that these transactions are focused on that are shareholders will also view them that being in the best interest of the company. We want to make sure we are doing things that are smart overall for the long term. We clearly have a bias to removing this legacy, but we are going to do so in a shareholder-friendly way. I want to make sure people understand that, you know, we are going to be very thoughtful about any transactions we might do in the future. Thomas George Gallagher: Thanks for that. Then just my follow-up is, I guess, one of the big concerns that I hear from investors is they see every other day, you get a big layoff announcement from another company. You know, at least the perception is that this is going to translate into disability claims. That there is a strong correlation. I guess so my related question is, when look at the broad or number of corporate announcements, for layoffs, have you seen any increasing claims in those clients that you have? Is that something that you have looked into? Then maybe could you also comment on whether actually is a real correlation when you have looked at your own claims experience in periods of higher unemployment. Richard Paul McKenney: Yeah. I think it is a good question, Thomas George Gallagher. We talked to Alex Scott's question a little bit about just the overall employment base. When you think of disability particularly, I understand that these are for people that have a condition where they cannot work. When we look at it, sometimes in a recessionary environment, you will see an increase in submitted claims. People are, you know, out of work and they are looking for it, but we only pay on that are truly valid claims. We might see higher submitted, but we generally see maybe very, very different very, very small change you see in the paid claims. We would expect to see that in this type of environment. We might see a little bit higher submitted. We have not to date, so a lot of these announcements are just coming out, and they are announcements. We have not seen that come through our book at all to date. Over time, we are going to be very good about paying claims of people that are truly valid, and so we just do not expect necessarily to see that come up. Thomas George Gallagher: Okay. Thanks. Operator: Our next question comes from the line of Joel Robert Hurwitz with Dowling. Joel Robert Hurwitz, please go ahead. Joel Robert Hurwitz: Hey. Good morning. Wanted to start on group life. The experience has been very favorable for you and others. I guess, what are the drivers of you assuming a reversion back to the 68% to 72% target in '26? Is it pricing? Or are you assuming a normalization in more mortality trends from what you have experienced recently? Steven Andrew Zabel: Yeah. This is Steven Andrew Zabel. I would say it is of the latter. The latter. If we step back a little bit, we are going to continue to guide at the 70% benefit ratio. It does not appear as though there is anything structural kind of in the mortality market. Post-COVID. You know, we continue to be very happy with the group life performance. We have had another, you know, good quarter in the second quarter coming off of a pretty good year generally. Definitely just driven by lower counts of mortality. The average size of the mortality in our block is really consistent period to period, so that is usually not a driver. What I will tell you is in the fourth quarter specifically, that lower mortality was very consistent with what we saw in the group disability line. Just generally, it seemed like that was a fourth-quarter trend. Kind of working, you know, life type of mortality was just lower than what the normal expectation that you would see. This benefit ratio can bounce around quite a bit from quarter to quarter. Our full-year benefit ratio was 68%. For the year, and so we feel good about, I guess, the assumption that we put out there of 70%. Just have to see how the year actually plays out. Joel Robert Hurwitz: Got it. Then shifting to Colonial sales up 10% was a real positive in the quarter. You have been talking for a few quarters now about actions that you have been taking, but wanted to see if you could provide more color on the sales this quarter. The outlook for '26 sales. I guess, if sales are improving, is there potential upside to that top-line growth outlook? I mean, you did 3% premium growth in '25 off of a lower sales base. If sales improve, can we see something above, you know, top end of that 4% range? Timothy Arnold: Yeah. Thanks for the question. This is Timothy Arnold. Really appreciate you pointing it out. The strong quarter that we had at Colonial Life from a sales perspective. As Steven Andrew Zabel the sales overall up 10%. You know, as we think about leading indicators, we are also very pleased that new agents who joined us in the fourth quarter were up 14%. Sales from those agents were up 14% in the quarter for the year. Were up 22% in new agents, and sales from those new agents were up 25%. The success was really broad-based as well. You look at the public sector, which I have commented before, is our most profitable sector. Sales there were up 13.5% in the quarter. Sales through the broker channel up 12% in the quarter. Large case, our value prop continues to resonate across all market segments. Large case was up almost 20% in the quarter. We are also encouraged by the success of the agents who have joined us over the last three years that the agents who joined us in 2024 had sales increase of 20% in the fourth quarter and 11% for the year. The agency joined us in '23 had sales up 11% in the quarter and 10.5% for the year. Really, like where we are from a footprint perspective. We like the leading indicators that we have. All of our regional areas hit their plan in the fourth quarter, so we like the success we are seeing there. We are having real strong success with the products that we have introduced over the last few years. We are pleased with that. As, Christopher Wallace Pyne pointed out earlier relative to Unum US, Colonial Life is having a lot of success with our technology platform partnerships as well. We talked about agent assist in the past, which is our agent productivity tool. Making a lot of progress there on agent adoption. In fact, all of the cases that were new clients written in the fourth quarter were submitted through the Agent Assist app, which not only helps our agent with their productivity but also improves productivity in our home office areas as well. As we look at '26, you know, we are pleased with the momentum that we built, especially over the back half '25. We are pleased with the staffing we have. We are pleased with the number of new people we have been able to add and the number of agents we have been able to retain and the success they are having. Is it possible I think I was asked at the second quarter earnings call last year is it possible to get in the range, Timothy Arnold, because you are three and you need to get to five? Thankfully the sales teams delivered, and we did get into that 5% range of sales growth for the year. I would say that, you know, we are optimistic about the year, but we need to see how things play out. Joel Robert Hurwitz: Okay. Thank you. Operator: Our next question comes from the line of Tracy Benguigui with Wolfe Research. Tracy Benguigui, please go ahead. Tracy Benguigui: Good morning. You ended the year with $1.1 billion of statutory earnings. I believe last quarter, you talked about $1 billion for the first nine months of the year. That implies about $100 million in the fourth quarter. I am thinking, like, group disability trends are normalizing. What is driving the improvement in the statutory earnings to $1.2 to $1.4 billion in 2026? Steven Andrew Zabel: Yeah. This is Steven Andrew Zabel. There are a couple of things that kind of was that impacted, I would say, you know, as we were closing out the year. A little bit about cleanup on some of our reinsurance transactions that probably caused, you know, a little bit of volatility in that. Frankly, just kind of how we round some of the numbers. We still felt good about fourth-quarter generation. I will tell you, though, it was a little bit short of what our expectations would have been given a lot of what we saw in the GAAP results. Really flowed through from know, challenges in some of the margins, really flowed through to what we saw in the session results as well. Was a little challenge, was a little bit short of our expectation. For the full year, we also came up a little bit short from our cash generation. What was good is, I mean, we have stuck to the capital deployment expectations that we set for the year and really converted 100% of that generation into deployment. As we look towards 2026, the outlook that we put out there for statutory earnings and related cash generations again, is anchored upon how we think about the margins that we have generated in our gap income projections as well and the outlook that we gave there. We do think that there are going to be some places that we are going to generate more earnings. Again, it kind of gets back to through the top-line growth of our core businesses, as we think about driving productivity within the organization. Then some stabilization in some of the benefit ratios. It is really just a flow-through as well going into '26. Tracy Benguigui: Thank you. I just want to be sure the net investment income allocation to other segments that begins in the '26. In your exercise of redefining the 2025 EPS to $7.93, just for comparison purposes. Did that include that exercise as well? Reallocating investment income, and if you could size that for us? Steven Andrew Zabel: Yeah. It did not. That change is really just being made prospectively. The only thing that we really recast the 2025 EPS for was the redefinition of just adjusted operating earnings and what we did with the closed block. Generally. Then just from sizing it up, that changes about $5 million a quarter probably in that range, and it is going to be, you know, very distributed. Throughout the core businesses as we think about just allocating excess assets that are in the corporate kind of portfolio amongst the businesses. When you look at individual lines, it is going to be probably not even really negligible. When you add it up, it is going to be about $5 million a quarter. Tracy Benguigui: Thank you. Thanks, Tracy Benguigui. Operator: Our next question comes from the line of Mark Douglas Hughes with Truist. Mark Douglas Hughes, please go ahead. Mark Douglas Hughes: Yeah. Thanks. Good morning. On persistency, it sounds like you are seeing improvement. You mentioned the HR Connect gives you a higher persistence. I think you also talked about AI-enabled tools. How much improvement are you expecting in 2026 and what is driving the persistency? When we look at those or consider those different factors? Christopher Wallace Pyne: Yeah. Mark Douglas Hughes, thanks. It is Christopher Wallace Pyne. Yeah. Persistency, we hit it in the opening comments from Richard Paul McKenney and really you were right on target when you talked about the new invest or the invest we have been making for years that really do tie us into customers differently. That would naturally show up in two ways. One is new prospects close ratio. The other is when people are experiencing it, they feel really great about how we can help them run their businesses better, and that shows up by them sticking around longer. Maybe just a tiny bit of history on persistent in general. Like, '24 was a remarkably high persistency year. 'twenty-five we knew was going to revert back to a little bit of normalization. We exceeded target in '25, felt good about that. The outlook for '26, which is in our plans, we really feel good about. That is foundationally based on the fact that we continue to attract more customers put them into the block where they are coming for the right reasons around capabilities that we can deliver, solving big problems like weed management, going deep on technology. I talked a little bit about it before with Jamminder Singh Bhullar's question around when you are actually making their lives easier because information flow and things they need to run their business from staffing and return to work perspectives are showing up in modern kind of ways that fit their environment. They want to stay. Then we take our normal traditional discipline around approach around the full benefit package that we offer them, we are transparent around loss ratios that we need to achieve. We talk about stable pricing for them and their employees over the long term. Again, you just end up in a very logical and thoughtful discussion with long-term clients which is showing up as Richard Paul McKenney said before in higher persistency when tied to investments. Mark Douglas Hughes: Appreciate that. Then the lower average size of recoveries on the disability business, have you seen that in the past? Is that tied to any government policy perhaps? What do you think is driving that? Steven Andrew Zabel: Yeah. I do not think it is any one thing other than just it just depends on who actually recovers and goes back to work and the size of the claim reserve we have up on them. We have seen it in the past bounce around a little bit, but I think this quarter, it was low enough that we wanted to call it out. It was a little bit out of the norm. I do not think it is tied to anything structural. We do not see it being tied to anything kind of programmatic. It is just something that, you know, period to period, you will see fluctuations in size of new claims. You will see fluctuations in size of recoveries, and it just so happened in the fourth quarter, the size of recoveries was lower than we would expect. Then also, just the level of mortality in our claimant block was lower than we would have expected as well. Mark Douglas Hughes: Appreciate it. Thank you. Richard Paul McKenney: Thanks, Mark Douglas Hughes. Operator: Our next question comes from the line of Jack Matten with BMO Capital Markets. Jack Matten, please go ahead. Jack Matten: Hey, good morning. Just a follow-up on the strong persistency trends in group benefits. I guess in an environment with strong persistency, but maybe less growth in new sales, is that something that is out to a near-term kind of margin benefit for Unum? Guess, in other words, there has certainly been a new business penalty that is less of a headwind in the current environment. Christopher Wallace Pyne: Yeah. Jack Matten, it is Christopher Wallace Pyne. I will start. First, I would like to kind of look ahead toward what we are really excited about a strong sales outlook for the coming year. In any given quarter, you have puts and takes where we really strong 2024. We saw some nice sales in the third quarter of this year, which both combined to a strong second half. We have lots of new logos coming through. Then, you know, talk to persistency. We think the block growth that we put out there north of 5% is a really strong outlook. It comes with great margins, as Steven Andrew Zabel has been talking about. I just step back and appreciate your question, but really feel good about the combination of ways we are going to grow this business and doing it in a really healthy way. Again, we know it is foundationally tied to a long-term strategy. Based on investment in technology and other services. Jack Matten: Got it. Thank you. Then maybe on the supplemental and voluntary business, can you just unpack this quarter or what you saw this quarter on the claims side? Maybe just talk about what gives you confidence in the stronger earnings run rate outlook for next year? Steven Andrew Zabel: Yeah. Voluntary benefits is kind of interesting. You know, it is actually several businesses kind of embedded within that one product line. There is life business in there. There are other types of critical illness, accident health. I would say it was not really any maybe one line that really caused the drive of the loss ratio. It was a little bit up, obviously, from what we saw last year, which was very, very strong. We also had a really good quarter in the third quarter. It was elevated a little bit from those two. Still, I think it came in about 48.5%, something in that range. That is pretty consistent. With what our expectations would be, and, you know, it is going to bounce around within a percent or two as you go quarter to quarter. There is probably nothing specific that I would spike out on that one. Jack Matten: Thank you. Operator: Our next question comes from the line of Joshua Shanker with Bank of America. Joshua Shanker, please go ahead. Joshua Shanker: Well, thank you all for letting the call run so long and giving me an opportunity. Appreciate it. There are a couple of companies that have some issues in medical stop-loss. One of them said that they have seen a rise in cancer among young people that that is causing some of those issues. Are you seeing anything in that sort of cohort and experience that is causing you to make any changes in how you price disability or group life business? Richard Paul McKenney: Yeah, Joshua Shanker. It is Richard Paul McKenney. Let me try that. We are familiar with the stop-loss business. We exited that business going back a couple of years ago. What we have heard similar things, you know, we monitor across the board in terms of what we are seeing in the working lifetime. I would say that the particular that diagnosis in the US, you know, we have not seen a big change in terms of younger mortality coming from specifically cancer diagnosis. Understand ours is mortality within the working lifetime, so as you see trends within that, you are not expecting much in the way of mortality over that working lifetime, particularly at younger ages, so it is something we would watch but nothing has really stuck out to us that would be coming through in our group life block. As you saw, we have got very good live free good life re group life results really over the course of the year. Joshua Shanker: It does not exist in disability either that someone gets a diagnosis of kill them, but it takes them out of the workplace for a certain period of time. I am not asking my uriners. I am trying to discover whether it is true, the trend, and it is an issue at all. Richard Paul McKenney: Yeah. I think we just have not seen it coming into our book of business. That is a real diagnosis. Cancer is a large component of what we see from a long-term disability perspective. It is an we can help people through and get them back to work. What you are talking about on the more acute younger ages, certainly there is news about it, we have not seen that come in specifically into our books. You just see that our submitted levels on the LTD side are group life mortality levels. Both still you know, LTD in line and on the group life side have been favorable. Joshua Shanker: Thank you very much for the information. Operator: Our next question comes from the line of Wesley Collin Carmichael with Wells Fargo. Wesley Collin Carmichael, please go ahead. Wesley Collin Carmichael: Good morning. Thanks. I had a question on group disability, but maybe from a little bit of a different angle. I know everybody focuses on the benefit ratio. If I go back a couple of years to the outlook from 2023, I remember there was a slide on efficiency and investments you were making that I think you showed the expense ratio peaking in 2023 and declining post that. I know you continue to invest in this business and lead management, etcetera. Just curious if we go forward, is there a point where you think expenses can kind of inflect and we can get some operating leverage in the segment? Richard Paul McKenney: Yeah. I appreciate the question, Wesley Collin Carmichael. It is something that you have heard throughout the conversation today about the amount of investment that we are making. We have continued to see great opportunities. We have continued to invest. We did, your 2023, as you talked about that, we saw that inflection point somewhere in that range. I think it has moved out a little bit, but what we are expecting as we look 2026 is you will see our operating expense ratio come down. That is inclusive of a lot of investment, but also good productivity that we are going to see coming out of our teams and across the business. We do think there is operating expense leverage that we will see in the coming years, but you are right, it is because of the investment that we have been making that has delayed that a little bit. Steven Andrew Zabel: Yeah. What I would add is, you know, we always are driving productivity within the organization, and there are times that we decide to invest back in either within you know, back into our people to support our operations or also our technology. Yeah, we would expect going forward, maybe not, you know, immediately in '26, but over time, we would see that stabilize and then go down over time as I think we will see that productivity really overwhelm the investments that we are making back into the organization. Wesley Collin Carmichael: Great. That is helpful. Thank you. Just maybe a follow-up on LTC and premium rate increases. I just wanted to see if there is any real update on how the program is progressing. I know there was a pretty sizable request that was put in for 2023, but just wanted to see how that was performing and any other updates on that. Steven Andrew Zabel: Yeah. We feel really good about that program. Really coming in closing out the year, we just expanded the program back in the latter half of last year when we made our assumption update. Around our best estimate assumptions. We have launched that additional expansion. Along the way, we are at about 15% achievement approval for kind of the expanded program. We feel good about it. ISteven Andrew Zabel: would say the regulatory environment continues to be very open to this discussion. Similar to what I have kind of commented on in the past, it has turned into kind of an administrative process just working with the states and getting them what they need to support the request that we put in. Generally speaking, that has been a pretty stable environment for us, and we continue to make really good strides. I think Richard Paul McKenney mentioned it. We topped $5 billion of value as far as what we have been able to achieve really over a decade plus with those programs and have a really good team that is working with regulators to be able to get those approved. Wesley Collin Carmichael: Thank you. Operator: Our next question comes from the line of Thomas George Gallagher with Evercore ISI. Thomas George Gallagher, please go ahead. Thomas George Gallagher: Thanks for the follow-up, guys. I promise I am not trying to make this a two-hour call. I will make it quick. The paid family leave, is that a real opportunity for you guys? How big of a business is that? I see that new states are rolling out paid family leave. How big of an opportunity is that? I think I view that as sort of just a separate market. What do you think on that? Christopher Wallace Pyne: Yeah. Thomas George Gallagher, it is Christopher Wallace Pyne. Paid family medical leave is a very important and interesting topic. We have been very active in it. I do think of it as part of two things that we are really expert in, leave and short-term disability. When you think about leave management, which is really important for our employers and the capabilities we bring, and you think about their intention to help cover not just when an employee has a sickness or an accident needs to be away from work, but maybe when a family member needs additional support and that employee needs to be paid and have job protection away from work, Paid family medical leave is a real thing. It does expand the number of events that we cover. Where you have seen states take a specific action to put in programs that are very specific, we are a player there. A lot of those states this past quarter Minnesota and Delaware put in programs that allowed for a private insurance option. Again, we are thrilled to be able to offer that to current clients, maybe their current STD clients where the relationship gets bigger on that line. Because we are covering more events, but also the other lines that go with it. We sell bundles and we keep that customer. Also new customers who are looking for the PFM solution. We are able to step in, show them we are expert at that, but write other lines of business. State by state, and we have seen it over about 10 plus a dozen states so far, there has been opportunity. What I would say, though, is the opportunity going forward is not equal with each state. If a state is not going to put in some sort of a regulated mandate, PFML will not look the same. As it has where you see Minnesota, Delaware, soon to be Maine, put in programs. It does not mean it is not an important topic. It does not mean we know, you know, work with larger employers for corporate leaves and things that they want to put into place. For protecting their employees and their workforce. But it is part of the disability business. It is part of the leave business. You have seen us think about it more as absorbing it into the normal business flow that we have got. We have done that successfully. We will continue to manage the business like other insurance products where we will look at utilization, we will look at loss ratios, and we will mention over time and focus the employer and the employee on having that great experience so that we can handle that bundle, you know, again, with paid family medical leave, other services and, you know, you have seen the states where that has been in play. Then going forward, every state is equal and it will not be quite the robust addition of new states as we look out over the years. Thomas George Gallagher: Gotcha. Thank you. Can you provide any numbers? Like, what percent of your total disability business is and what kind of growth rate you are seeing? Christopher Wallace Pyne: Yeah. You know, I think that it is probably best to just look at our very large book of disability business and say, the way it has flowed in and again, we have seen all the way back to New York and Massachusetts, through the most recent quarter. There are quarters where it is in the numbers. It does flow through. We like to think about it as just something we can manage by absorbing it into the business. Thomas George Gallagher: Thank you. Operator: That concludes our question and answer session. I will now turn the call back over to Richard Paul McKenney for closing remarks. Richard Paul McKenney? Richard Paul McKenney: Great. Thank you. We do thank everybody for taking the time today this morning. We will be out in a series of events where we will be able to answer more questions, any follow-ups. Certainly, the team will be here to do that. We will be out as early as Monday actually to talk to you. We do appreciate you joining us today, and that does conclude the call. Operator: That concludes today's call. You may now disconnect.
Preben Ørbeck: Good morning, and welcome to Aker Solutions presentation of our fourth quarter and full year results. My name is Preben Orbeck, and I'm the Head of Investor Relations. With me today is our CEO, Kjetel Digre; and our CFO, Idar Eikrem. They will take you through the main developments of the quarter and the full year. After the presentation, we have time for questions. Those of you who are following the webcast can submit your questions via the online platform. And with that, I leave the floor to Kjetel Digre. Kjetel Digre: Thank you, Preben, and welcome to everyone tuning in. As usual, let me start the presentation with the main messages for today. First and foremost, I'm once again pleased to report that we continue to deliver solid financial results in a period of high activity. Our fourth quarter revenues were NOK 16.7 billion, which takes our full year revenues to more than NOK 63 billion, the highest in Aker Solutions' recent history. Our EBITDA margin for the quarter was 7.9% or 7.5% if you exclude the net income from SLB OneSubsea. Our net cash position increased to NOK 3.7 billion at the end of the year. This was fueled by strong cash generation in our segments and substantial dividends from our 20% ownership in SLB OneSubsea. Looking at 2025 as a whole, we have made good progress on our project portfolio and on our strategy. The Aker BP portfolio is progressing well with all key milestones met during the year. And I'm also encouraged to see high demand for our engineering and consultancy services, leveraging our 5,000 strong engineering muscle to solve energy challenges for a wide range of customers across the globe. Our life cycle business is well positioned to continue its strong development, underpinned by long-term frame agreements with strategic clients. And lastly, I also want to highlight our ownership in SLB OneSubsea, a leading player in the growing subsea market. The company is delivering strong cash generation, enabling solid dividends to Aker Solutions. So as you can see, 2025 has been a very important year for Aker Solutions. Going forward, we continue to expect revenues to decline from peak levels in 2025, and we are taking steps to adjust capacity and costs accordingly. Our financial position is robust, and the Board of Directors has decided to propose a dividend of NOK 3.6 per share for 2025, up from NOK 3.3 per share in 2024. I'll talk more about how we are positioning the company to continue delivering shareholder value. But first, I wanted to take a step back to reflect on our journey since 2020. When we merged Aker Solutions and Kvaerner back in 2020, we set ambitious targets for the period ending in 2025. As you can see from the graphs, I think it's safe to say that we have delivered. Since 2020, our revenues have grown from about NOK 20 billion to more than NOK 60 billion. And equally important, our margins have also improved significantly over the period. In 2025, we delivered an EBITDA margin of 8.4% or 7.3%, excluding net income from OneSubsea. This is an increase of about 500 basis points from 2020. We also secured several important new orders in 2025 with an order intake of about NOK 66 billion during the year. Our order backlog was about NOK 65 billion at year-end, dominated by projects under the Aker BP Alliance model and reimbursable contracts. And it's great to see that these results have generated solid returns to our shareholders. Since the announcement in July 2020, the value of Aker Solutions has increased sevenfold. This includes about NOK 13.7 billion in dividends and share buybacks distributed to our shareholders during the last 5 years. So how are we creating value? Well, since 2020, we have delivered strong operational and financial performance across our business segments. In Renewables and Field Development, we have seen the top line grow more than 4x since the merger. And going forward, we are broadening our customer base and geographical exposure. We do this mainly through our engineering and consultancy business as well as selectively targeting renewables opportunities with balanced risk reward profiles. Our second segment, Life Cycle has also had an impressive journey, delivering double-digit revenue growth with improved margins. With an asset-light business model characterized by reimbursable contracts with low investments, Life Cycle is an important contributor to Aker Solutions' performance and cash generation. Going forward, the segment is well positioned in a growing brownfield oil and gas market with a strong backlog dominated by long-term frame agreements with strategic customers. Lastly, I wanted to touch upon our ownership in SLB OneSubsea. In late 2023, we announced the closing of the transaction to create a leading global subsea player. Since then, SLB OneSubsea has delivered strong financial performance and cash generation. The company has an attractive dividend policy where all excess cash is distributed to shareholders. And as I will come back to, this is just the starting point. Supported by a strong subsea market, the company is well positioned for growth and value creation in the years to come. So let's go deeper into some of these important value drivers. A key element in our strategy is to safeguard the delivery of our projects. So how are we doing this? An excellent example is the Aker BP projects we are executing in the alliance model. There are several benefits working in this model. By aligning our incentives, sharing risk and rewards, we create win-win situations that drive innovation and efficiency. This way of working closely together with our strategic partners helps us deliver high-quality projects faster, which in turn means more energy to the markets quickly and responsibly. The Aker BP project portfolio consists of 4 new platforms with a combined weight of about 90,000 tonnes. This includes Hugin A, the largest topside ever assembled at Stord. And we're also delivering the Valhall PWP platform and the smaller Hugin B and Fenris platforms from our yards. In addition, we are involved in several projects within modification of existing assets such as Skarv as well as being delivery partner for One Subsea for the fabrication of subsea equipment. I'm very pleased to report that all critical milestones on these projects were met during 2025. This includes the delivery and sailaway of the jacket substructures for both Hugin A and Valhall PWP in the summer and the arrival of several large topside modules to Stord for final assembly. At Stord, we are progressing as planned with the stacking program preparing the topside for sailaway during 2026. In order to safeguard the delivery of these other projects, Aker Solutions is applying new ways of working, enabled by automization and digital solutions. These are not ends in themselves, but rather means of improving efficiency and safety in execution. One example is the use of augmented reality or AR for short. By overlaying the technical drawings with real-world construction, inspectors can spot issues earlier when it is easier and less costly to mitigate them. Another example is the use of virtual reality or VR, where engineers from our different locations around the world can meet virtually inside the digital model they are working on to collaborate and identify the best solutions. The technology has multiple use cases, including replacing offshore surveys in a range of operations. This frees up man hours otherwise spent on transport, reduces personnel on board and saves costly helicopter transport. These are just a couple of examples of how we turn digital ambitions into practical applications that can save both time and cost for our customers. As for the alliance model, I believe that the achievements for the alliance are a clear testament to the value of working closely together with aligned incentives. This in turn enables us to deliver quality projects with faster time to first energy. Another key pillar of our strategy is to grow our engineering and consulting business. At Aker Solutions, we are currently having more than 5,000 engineers with unique competencies across market segments covering all phases of the asset life. Our spearhead in emerging markets and client relationships is Entr, our consultancy arm. The core team at Entr currently consists of about 350 people, but draws on the competencies and capacity of the entire organization. A unique selling point for our engineering and consultancy services is how we are pioneering new digital solutions and data analytics powered by AI, artificial intelligence. By shifting from manual to automated processes, we can make better use of historical data and scenarios to design innovative solutions that unlock value for our customers. One example is a recent FPSO concept study. Here, our engineers were able to identify more than 200 potential improvements, significantly reducing both weight, costs and delivery times. From our key engineering hubs in Norway, U.K., U.S., Canada, India and Malaysia, we deliver consulting and engineering projects to a wide range of customers across the globe. Within oil and gas, we are actively engaged in several FPSO projects that we believe will move into next phases of development over the next 1 to 2 years. We're also seeing strong demand for our onshore, midstream and downstream capabilities. In these markets, we benefit from the experience and track record from our Indian office, where we have more than 1,000 engineers delivering projects across the globe. Likewise, we see that our track record in both CCS and offshore wind enables us to engage early with new clients in different geographical regions. In both offshore wind and CCS, we are now engaged in the second generation of projects. Compared to the first generation, which have been both operationally and commercially challenging, the new generation is progressing well, delivering healthy margins. So what has changed? Firstly, we have managed to negotiate commercial terms with balanced risk reward profiles and joint incentives for successful project deliveries. This means that we have moved away from traditional lump sum models to a model where both risks and upsides are much closer tied to our own performance. Secondly, we have managed to move away from customized one-off projects to leveraging standardization across several projects. One example is the Norfolk portfolio, where we are seeing the benefit of designing one and build several. For instance, both engineering and fabrication hours are significantly reduced on the second topside compared to the first. The same applies for our CCS portfolio, where learnings from the first wave of capture and storage projects are now being implemented at the Northern Lights Phase 2 and the Hafslund Celsio carbon capture and storage projects. All in all, I'm pleased to see that our focused approach is yielding positive results, positioning us in the markets with significant growth potential in the years to come. Moving over to our life cycle business. The segment has since 2020, delivered double-digit revenue growth with improved profitability and strong cash generation. At year-end, the backlog stood at about NOK 23 billion, dominated by long-term frame agreements and reimbursable modification projects on existing onshore and offshore assets. The segment also delivers hookup and commissioning services to ensure efficient and safe start-up of new oil and gas facilities and offshore wind components. Our long-term engagements on these critical assets enable us to expand our capabilities, offering unique technology-enabled services. This includes autonomous drone inspection, remote operations and AI-powered analytics. And talking about long-term engagements. I'm happy to report that we have secured several new long-term frame agreements for maintenance and modification services over the past months. Why is this important for Aker Solutions? For one, it creates transparency on activity levels for several years to come. As you can see on this slide, the recently awarded agreements in Norway have a duration of more than 10 years, including options. We are also working side-by-side with key international clients such as Exxon, Shell and BP to maintain and modify their critical infrastructure in Canada, U.K., Angola and Brunei. I believe one of the main reasons we've been awarded these contracts is our demonstrated ability to drive improvement. And we are not just talking about doing the same things we did yesterday only faster, we are talking about fundamentally challenging what we do and how we do it. That means not just applying new technology, but applying the right technology and digital solutions, where we truly move the needle and deliver measurable results. It is also about understanding our clients, how they think, how they prioritize and what matters most to them. Our deep understanding of the assets also positions us for modification projects, for instance, related to subsea tieback or the decarbonization through electrification. In Norway alone, Equinor expects to develop more than 75 subsea projects over the next decade. So to summarize, I'm impressed by how Life Cycle has developed over the last 5 years and believe that the segment is well positioned to continue its transformation journey in the years to come. Moving over to SLB OneSubsea. As mentioned, the company was established through the merger between SLB and Aker Solutions Subsea divisions with the ambition to create the leading subsea company in the world. The financial performance of the company speaks for itself, delivering strong margins and solid cash flows. The company has a very attractive dividend policy. And during 2025, SLB OneSubsea had paid out more than $400 million in dividends to its shareholders. After these payments, the company still has a robust financial position with net cash of more than $0.5 billion. And the outlook for the company is strong with global subsea spending expected to increase by around 25% over the next 5 years. Tendering activity is high, both within Subsea production systems, Subsea processing solutions and umbilicals and cable systems. SLB OneSubsea also has a highly resilient life of field service offering, enabled by the largest installed base of subsea equipment in the industry. The company recently announced targets of cumulative bookings exceeding $9 billion over the next 2 years, positioning the company for growth from 2027 and onwards. So as both the proud co-owner and delivery partner for OneSubsea, Aker Solutions sees great opportunities for continued strong value creation in the company going forward. And talking about shareholder value. As you can see from the graph on the left-hand side, share prices among players with exposure to the subsea equipment market have increased markedly during the last 6 to 12 months. If one uses such peer trading multiples, one may argue that our 20% ownership represents a significant upside to Aker Solutions current trading. In addition, Aker Solutions currently holds more than 5 million shares in SLB, which were used as considerations for the Subsea transaction. Since the closing of the fourth quarter, we have seen a substantial increase in the value of these shares. So to summarize, I am pleased to see that we continue delivering strong financial results that we have a solid backlog of healthy projects and that we continue positioning the company for the future. Finally, our financial situation is robust. This gives us a strong foundation to continue developing the company while generating solid returns to our shareholders. And with that, I leave the word to Idar, who will take you through the financials of the quarter and for the full year. Idar Eikrem: Thank you, Kjetel. I will now take you through the key financial highlights of the fourth quarter, the full year figures, our segment performance and run through our financial guidance. As always, all numbers mentioned are in Norwegian kroner. So let me start with the income statement. The fourth quarter revenue was NOK 16.7 billion. Full year revenue were NOK 63.2 billion, a 19% increase from 2024. The underlying EBITDA in the quarter was NOK 1.3 billion with a margin of 7.9%. During the quarter, Aker Solutions have taken provisions for restructuring costs of NOK 194 million in relation to the announced capacity adjustments. This is treated as a special item. The net income from OneSubsea was only NOK 80 million in the quarter. This was affected by one-off costs related to integration and restructuring. If adjusting for these one-off costs, the net income from the entity was in line with previous quarters. Full year EBITDA for the group was NOK 5.3 billion with a margin of 8.4% or 7.3% if you exclude the net income from SLB OneSubsea. The underlying EBIT in the quarter was NOK 940 million, up from NOK 888 million a year ago with a margin of 5.6%. The full year EBIT was NOK 3.8 billion with a margin of 6.1%. For the full year, net income, excluding special items, was NOK 2.9 billion, representing an earnings per share of NOK 6.1. This is somewhat lower than in 2024, mainly driven by lower interest income after the sale of liquid funds used for the payment of extraordinary dividend in 2024. As Kjetel mentioned, the Board of Directors will propose an ordinary dividend of NOK 3.6 per share for 2025, pending approval of -- in our Annual General Meeting in April. This represents approximately 60% of net income, excluding special items. Moving to our segment performance. For Renewables and Field Development, the fourth quarter revenue was NOK 12.4 billion. Full year revenues was NOK 46.1 billion, representing a year-on-year growth of 21%. The underlying EBITDA in the quarter was around NOK 1 billion with a margin of 8.1%. EBITDA for the full year was NOK 3.7 billion, representing a margin also of 8.1%. The legacy lump sum projects continue to be a drag on the margins throughout 2025. These projects are now in the offshore commissioning phase and commercial discussions are ongoing. And as previously mentioned, the second-generation renewable projects contribute with healthy margins in the period. The order intake in the period was NOK 11.6 billion, leading to a secured backlog of more than NOK 40 billion at year-end. Based on the secured backlog, we expect the revenues in this segment to be between NOK 30 billion and NOK 35 billion in 2026. For the Life Cycle segment, revenues in the fourth quarter was NOK 3.8 billion. Full year revenues was NOK 15 billion, an increase of about 13% from 2024. The underlying EBITDA was NOK 293 million in the quarter, representing a margin of 7.7%. This was enabled by continued solid performance on ongoing modification projects and long-term frame agreements. EBITDA for the full year was NOK 1.1 billion with a margin of 7.2%. The order intake in the quarter was NOK 7.7 billion, representing a book-to-bill of about 2x. During the quarter, Life Cycle was awarded long-term frame agreements with both ConocoPhillips in Norway and ExxonMobile in Canada. The secured backlog at the end of the year was NOK 23 billion, providing a good visibility for future activity levels. This, however, does not include the announced long-term frame agreement with Equinor awarded in the first quarter of 2026, representing additional intake of more than NOK 10 billion. Based on the secured revenues and backlog, we expect Life Cycle revenues to remain relatively stable in 2026 at around NOK 15 billion. Moving to our financial performance of SLB OneSubsea. In the fourth quarter, SLB OneSubsea delivered revenues of about NOK 10.5 billion. For the full year, revenues were about NOK 40 billion. EBITDA in the quarter was about NOK 1.9 billion, representing a margin of about 18%. For the full year of 2025, the company delivered an EBITDA margin of 19.4%. Net income before PP&A adjustment was NOK 527 million in the quarter. This was negatively affected by the mentioning provisions for one-off costs. After PP&A adjustment, Aker Solutions recognized NOK 80 million for our 20% share. The backlog for the entity is currently at NOK 47 billion. As mentioned, tendering activity is high, and the company has an ambition to exceed $9 billion in new orders over the next 2 years. In the fourth quarter, Aker Solutions received dividend of more than NOK 400 million. This was significantly above previous quarters, reflecting the solid financial position and performance of the entity. This takes me to our cash flow for the full year. Cash flow from operation was NOK 2.6 billion, mainly driven by EBITDA contribution from our operational segments offset by a reversal of working capital of about NOK 1.3 billion. CapEx for the full year was about NOK 500 million or 0.8% of revenues. For the full year, Aker Solutions received NOK 841 million in dividends from our 20% ownership in SLB OneSubsea, significantly above previous guiding from the company. Lastly, we have distributed about NOK 1.6 billion to our shareholders in 2025, in line with our ordinary dividend policy. The financial position remained robust with a net cash position that increased to NOK 3.7 billion during 2025. So to sum up, in 2025, Aker Solutions delivered record high revenues with solid margins and strong cash generation. As Kjetel mentioned, we continue to expect activity levels to come down in 2026, forecasting revenues between NOK 45 billion and NOK 50 billion for the full year. At this early stage, we expect the EBITDA margin to be in the range of 7% and 7.5% for the full year, excluding net income from SLB OneSubsea. CapEx is expected to be around 1% of revenues. While working capital is expected to continue its normalization to a level between negative NOK 4 billion and negative NOK 6 billion over time. Based on our robust financial position, the Board will propose a cash dividend of NOK 3.6 per share for 2025, pending approval in the Annual General Meeting to be held in April. Thank you for listening. That was the end of our presentation. In a few moments, we will open up for questions. Preben Ørbeck: Okay. We will start with a few questions from Martina Kverne in Nordea. The first question is if you can give an update on when the legacy lump sum projects are finished? Kjetel Digre: They are all currently in offshore mode. We have installed them, and they are completed structurally, and we are currently working on the commissioning part of the project and we completed all of it in 2026. Preben Ørbeck: Moving on to two questions on the tender pipeline. Whether Wisting is included. And also, if you can elaborate a bit on the split between Renewable, Field Development and Life Cycle. Kjetel Digre: Start by saying that Wisting is really high on our agenda, and we are working closely with Equinor on behalf of the license owners to look at the optimal concept and really helping them to make this a viable project. That's a super important work for us. It's not currently included in the tender pipeline numbers because it's in an early phase still. And then the split is, I would say, balanced. We are working on the classical greenfield oil and gas projects. But perhaps link it common to Life Cycle. We have in the start of 2026 and now we've gotten the important continued relationship with Equinor with many exciting agreements and tasks. And part of those agreements is actually not specific yet on what kind of work. So they are sort of empty contracts. But we know that with the ambitions of Equinor and other operators on the Norwegian continental shelf with, for instance, 75 subsea tiebacks that can potentially be filled with quite a lot of life cycle work going forward. Preben Ørbeck: Moving over to a few questions on OneSubsea. They announced a target of $9 billion in cumulative orders. Can you talk a bit about the timing and maybe also elaborate on the dividend expectations? Idar Eikrem: Thank you. I will. And the $9 billion is in U.S. dollars. So that is important. And the $9 billion is a target for the next 2 years. So '26 and '27 to secure $9 billion in new orders. In addition, SLB OneSubsea is sitting with an order backlog of $4.7 billion. So achieving $9 billion over the next couple of years with the current backlog is providing a solid and good visibility for activity level going forward. Currently, they are around $4 billion a year and with healthy margin close to 20%. And as we have seen, we received NOK 841 million for dividends from SLB OneSubsea during 2025. And the dividend policy is a good dividend policy for the shareholders. All excess cash is going to be distributed to the shareholders. And the current cash position at year-end was at NOK 5.7 billion. So with, call it, cash generation from the earnings that we expect in 2026 together with the cash position they're sitting on, we expect healthy dividends also for 2026 and onwards. Preben Ørbeck: Moving to a question on the Aker BP projects where you are noting good progress. Any upside to the margins in 2026? Idar Eikrem: For a project like this, there are incentive mechanism in place. And normally, they -- most of the sort of incentive mechanism are towards the end of the project lifetime and also linked up to start-up. We don't disclose or come with guidance on margins on specific contracts or segments. But as you can see from our guidance for 2026, we are guiding a margin of 7% to 7.5% at this stage. And with Life Cycle being a business that is currently at around 7.2%, you will understand that the Renewable and Field Development segment will be in the range that is in line with the group estimates. Preben Ørbeck: Thank you. Then moving over to a question from Oscar Ronnov in Kepler. If you can comment on how margins of new contracts signed in 2024 and also now in the beginning, '25 and into '26, how does that compare to the legacy portfolio? And if you're seeing a material step-up in underlying margins or risk returns on new awards? Idar Eikrem: I think the most important thing that we did and we communicated that clearly is some of those contracts that we signed in '21, '22, didn't have the right risk reward balance. We have, therefore, communicated that we will be very selective and make sure that we have the right risk reward balance on contracts that we are signing. That is what you have seen of the contracts that we have signed in '24, '25 and now into '26 with healthy margins. Renewables portfolio, we have not been satisfied with those on a historical one. However, that was the first generation. The second generation has healthy margins. And renewable projects are competing with oil and gas projects for our own internal resources. And we are requiring margins on renewable projects in line with our oil and gas projects. So healthy margins in the portfolio. Preben Ørbeck: Next question, how do you look at the potential future projects in the U.S.A., especially in wind industry under the Trump administration? Did the sentiment changed after the recent rhetoric? Kjetel Digre: It's quite obvious that the sentiment and the opportunities in this period of Trump administration has changed. And our role in this is obviously to work closely with our key clients, and they are looking at changing focus just now that has been seen and particularly towards Europe and back to what we are tendering for and potential project, that's where the major wind opportunities are currently worked on from our side. Back to U.S., we do have office in U.S. and with consultancy Entr focus. And there, we are working on exciting new opportunities around, for instance, CCS, but also within classical oil and gas industry. And just to make another connection, those kind of jobs in the U.S., particularly onshore, is also supported from our experienced Indian engineering muscle. Preben Ørbeck: Then a question from Martin on the structural competitive advantage of Aker Solutions that you believe can support a sustainable returns above cost of capital. Kjetel Digre: Well, that's a big question. It's almost our whole strategy. But I think what you see is that we tend to be sort of a key and closest partner to our clients, and that's the role we want to grow further. And I think we are preferred in many instances on that because we have the totality of the engineering through our very experienced engineering organization. We're also the ones that are handling and orchestrating the totality of the project puzzle when it comes into execution. Back to our strategy, what we are also careful about is that we know what we are really good at. We have a core business that we are improving, but also growing and also do that around our existing hubs so that we are taking careful steps outside those. And then I think also as a company, we are in a place where we have taken onboard the challenge and realized that we have to change, we change together with clients, but also orchestrating change and improvements in the whole supply chain. I think there are a few companies that can take that role, and we are one of them, for instance, within maturing and developing a digital and AI-based operational model and bringing that out to the rest of the supply chain. Preben Ørbeck: Maybe then elaborating to Idar if there are any key drivers of returns on invested capital expansion in terms of margin development, capital intensity and reinvestment efficiency. Idar Eikrem: Yes. I think I sort of point back to my guidance for next year or this year in '26 where we have put out our guidance NOK 45 billion to NOK 50 billion in turnover and then with a margin of 7% to 7.5% range. CapEx is going to be sort of lower than what we have had recently. We are now capitalizing on our CapEx and investment that we have done over the last few years. So we expect CapEx to be around 1% of revenues. We expect the working capital to normalize a bit more than what it is currently at minus 6.5% to a level of around minus 4% to minus 6%. When you combine all this, we should be in a position that generate healthy cash flows also going forward, being able to serve our shareholders as well. And in addition, as we spoke about earlier in this call, healthy dividends are coming in from our ownership in SLB OneSubsea close to NOK 850 million for last year. Preben Ørbeck: Moving then over to a question from Jorgen Lande. If you can elaborate on the NOK 80 million net income from OneSubsea and the details of the provisions for one-off costs related to integration and restructuring. Idar Eikrem: Yes. What you should read into this is when the 2 companies combined, Aker Solutions and SLB, there was certain plans for taking out synergies and restructuring part of it, and this is part of that program. So this quarter, a bit more than what you have seen historically and you should consider this as a one-off cost in the quarter. And as we have stated in our comments to this, if you adjust for this, the earnings is more in line with previous quarters. Kjetel Digre: Perhaps I'll just add. Preben, you know, we are following this closely, obviously. And we are doing a very good and optimal things both when it comes to structure and system harmonization on the people structure and then also the actual facilities taking out the synergies that Idar is alluding to. Preben Ørbeck: Okay. Should we then move to -- there's a few questions from Erik Aspen Fossa in Sparebank. As visibility into next year improves, what is the outlook for 2027? Idar Eikrem: Yes. I can probably start. First of all, we have provided our guidance for 2026. We have secured order backlog around NOK 15 billion for 2017. However, we have a tender pipeline of around NOK 80 billion. And of course, a result of those tenders will impact '27. In addition, the frame agreements in Life Cycle. And as you have picked up, we was awarded the frame agreement from Equinor, now in the first quarter in January 2026. That will also come on top and have impact for '27 as well as other contracts that we are currently in the tender phase that will be concluded shortly. So we expect, of course, the backlog to increase when we come a bit closer to '27. Kjetel Digre: So perhaps add on the MMO part of us, having these long-term frame agreements, not only Equinor but also the ones that we won last year. That's a starting point with an expected volume. We are then becoming close to the assets and the organization on the client side, and that positions us really well for projects that are mature and comes on top of the already planned volume of work. Preben Ørbeck: Thank you, Kjetel. I see there's a few similar questions on what the strategy and ownership agenda for our 20% holding in OneSubsea. Is it a long-term part of Aker Solutions asks Martin Huseby Karlsen. Kjetel Digre: Yes. As I said, you are closely linked and collaborating with SLB OneSubsea. We have to also remind ourselves that we are actually an important supplier from both our Egersund yard and our organization at large towards the tasks and projects that OneSubsea picks up. So that's a good position to be. And then obviously, our ambition is to build them to be the largest subsea player worldwide. Idar Eikrem: Yes. And there was also a question about SLB shares that we are owner of. And those shares was allocated in connection with the transaction to us or part of the payment. We consider that as cash and cash equivalent like and can be converted to cash quite quickly if we want to do that. And when it comes to the shareholding, 20% shareholding that we have in SLB OneSubsea, as we have spoken about, this is a good business. It's a growing business and interesting business to be in. And therefore, there is no sort of plan to exit from that one. Preben Ørbeck: A few questions from Victoria McCulloch from RBC on OneSubsea. If you can comment a bit on your views or your expectations in 2026 in terms of margin, in terms of order intake and market share. If you can elaborate a bit more on the targets and the performance of the entity. Kjetel Digre: Well, first of all, on the outlook, a bit more general. They are world-class in both the sort of subsea production system delivery part. They are class in umbilical and cable part. They are world-class in, I would say, really world leading on the subsea processing kind of projects and also in the more sort of Life Cycle aftermarket service segment. And my take is that the way forward looks promising, and we are currently winning work from that side, which makes the months and years ahead, looking really good also, capturing projects with new clients that broadens the footprint and opens up new opportunities. Preben Ørbeck: Then a question from Kim Uggedal. If the Q4 dividends from OneSubsea is a new run rate? Or what should we think about it in 2026? Idar Eikrem: Yes, the Q4 dividend was more than NOK 400 million in 1 quarter. I guess that is a bit higher than what we expect to see every quarter. However, the yearly sort of effect that is there is at least within reach when you look at the cash conversion that SLB OneSubsea is able to do. Preben Ørbeck: Then moving on to a question from Kim Uggedal on the order intake in Renewable and Field Development, which was very strong consider that we did not announce any contracts. And whether this is predominantly related to scope on the NCS portfolio or additional scope on HVDC platforms or other projects? Idar Eikrem: There are increased scope in some of the projects, and it's also a growth in the portfolio. However, the largest element is a catch-up effect from third quarter. Aker BP updated our CapEx forecast in the third quarter. We were allocated a substantial part of that one in the fourth quarter. So there is a catch-up from third quarter, that is the majority of the figures that is unannounced in fourth quarter for us. This has to do with approval of milestone -- new updates on the CapEx estimate and allocating it to the suppliers. Preben Ørbeck: Question from Martin Huseby Karlsen, DNB on the tender pipeline of NOK 80 billion. Is that as end of Q4 or as of today? And how much of the volume is related to Equinor? Kjetel Digre: Well, that tender pipeline is as of end of Q4. And now currently, as we said a few times now, the Equinor MMO volume is the starting point really for those contracts is the expected volume planned that are already. And then on top of that, as I said, we will compete for jobs then that are larger and linked to, for instance, all the subsea tiebacks they are planning. Preben Ørbeck: And maybe elaborate that it's the -- what we expected and not the full tender value that was set out to all the participants in the tender. Idar Eikrem: And just remind everybody about that one, then we booked it now in the first quarter, and it's more than NOK 10 billion on that contract. Preben Ørbeck: Then a question on the margin guidance, Idar, whether it includes provisions or incentives or for the incentives for projects. Idar Eikrem: Yes, the margin guidance for 2026 is for the group. And as I mentioned earlier on today, this is a combination, of course, of -- and this is excluding OneSubsea and the ownership of that one. So the earnings from that comes on top, but the 7% to 7.5% is then for the remaining part of the group, and it consists basically of Life Cycle that has currently delivered 7.2% last year. And then it's -- the rest is basically in Renewable and Field Development. So meaning Renewable and Field Development is having a margin that is more or less in line with the group figures. Preben Ørbeck: Thank you, Idar. It seems that we have no further questions. So from us here, it's time to close off the session. And thank you all for listening in.
Preben Ørbeck: Good morning, and welcome to Aker Solutions presentation of our fourth quarter and full year results. My name is Preben Orbeck, and I'm the Head of Investor Relations. With me today is our CEO, Kjetel Digre; and our CFO, Idar Eikrem. They will take you through the main developments of the quarter and the full year. After the presentation, we have time for questions. Those of you who are following the webcast can submit your questions via the online platform. And with that, I leave the floor to Kjetel Digre. Kjetel Digre: Thank you, Preben, and welcome to everyone tuning in. As usual, let me start the presentation with the main messages for today. First and foremost, I'm once again pleased to report that we continue to deliver solid financial results in a period of high activity. Our fourth quarter revenues were NOK 16.7 billion, which takes our full year revenues to more than NOK 63 billion, the highest in Aker Solutions' recent history. Our EBITDA margin for the quarter was 7.9% or 7.5% if you exclude the net income from SLB OneSubsea. Our net cash position increased to NOK 3.7 billion at the end of the year. This was fueled by strong cash generation in our segments and substantial dividends from our 20% ownership in SLB OneSubsea. Looking at 2025 as a whole, we have made good progress on our project portfolio and on our strategy. The Aker BP portfolio is progressing well with all key milestones met during the year. And I'm also encouraged to see high demand for our engineering and consultancy services, leveraging our 5,000 strong engineering muscle to solve energy challenges for a wide range of customers across the globe. Our life cycle business is well positioned to continue its strong development, underpinned by long-term frame agreements with strategic clients. And lastly, I also want to highlight our ownership in SLB OneSubsea, a leading player in the growing subsea market. The company is delivering strong cash generation, enabling solid dividends to Aker Solutions. So as you can see, 2025 has been a very important year for Aker Solutions. Going forward, we continue to expect revenues to decline from peak levels in 2025, and we are taking steps to adjust capacity and costs accordingly. Our financial position is robust, and the Board of Directors has decided to propose a dividend of NOK 3.6 per share for 2025, up from NOK 3.3 per share in 2024. I'll talk more about how we are positioning the company to continue delivering shareholder value. But first, I wanted to take a step back to reflect on our journey since 2020. When we merged Aker Solutions and Kvaerner back in 2020, we set ambitious targets for the period ending in 2025. As you can see from the graphs, I think it's safe to say that we have delivered. Since 2020, our revenues have grown from about NOK 20 billion to more than NOK 60 billion. And equally important, our margins have also improved significantly over the period. In 2025, we delivered an EBITDA margin of 8.4% or 7.3%, excluding net income from OneSubsea. This is an increase of about 500 basis points from 2020. We also secured several important new orders in 2025 with an order intake of about NOK 66 billion during the year. Our order backlog was about NOK 65 billion at year-end, dominated by projects under the Aker BP Alliance model and reimbursable contracts. And it's great to see that these results have generated solid returns to our shareholders. Since the announcement in July 2020, the value of Aker Solutions has increased sevenfold. This includes about NOK 13.7 billion in dividends and share buybacks distributed to our shareholders during the last 5 years. So how are we creating value? Well, since 2020, we have delivered strong operational and financial performance across our business segments. In Renewables and Field Development, we have seen the top line grow more than 4x since the merger. And going forward, we are broadening our customer base and geographical exposure. We do this mainly through our engineering and consultancy business as well as selectively targeting renewables opportunities with balanced risk reward profiles. Our second segment, Life Cycle has also had an impressive journey, delivering double-digit revenue growth with improved margins. With an asset-light business model characterized by reimbursable contracts with low investments, Life Cycle is an important contributor to Aker Solutions' performance and cash generation. Going forward, the segment is well positioned in a growing brownfield oil and gas market with a strong backlog dominated by long-term frame agreements with strategic customers. Lastly, I wanted to touch upon our ownership in SLB OneSubsea. In late 2023, we announced the closing of the transaction to create a leading global subsea player. Since then, SLB OneSubsea has delivered strong financial performance and cash generation. The company has an attractive dividend policy where all excess cash is distributed to shareholders. And as I will come back to, this is just the starting point. Supported by a strong subsea market, the company is well positioned for growth and value creation in the years to come. So let's go deeper into some of these important value drivers. A key element in our strategy is to safeguard the delivery of our projects. So how are we doing this? An excellent example is the Aker BP projects we are executing in the alliance model. There are several benefits working in this model. By aligning our incentives, sharing risk and rewards, we create win-win situations that drive innovation and efficiency. This way of working closely together with our strategic partners helps us deliver high-quality projects faster, which in turn means more energy to the markets quickly and responsibly. The Aker BP project portfolio consists of 4 new platforms with a combined weight of about 90,000 tonnes. This includes Hugin A, the largest topside ever assembled at Stord. And we're also delivering the Valhall PWP platform and the smaller Hugin B and Fenris platforms from our yards. In addition, we are involved in several projects within modification of existing assets such as Skarv as well as being delivery partner for One Subsea for the fabrication of subsea equipment. I'm very pleased to report that all critical milestones on these projects were met during 2025. This includes the delivery and sailaway of the jacket substructures for both Hugin A and Valhall PWP in the summer and the arrival of several large topside modules to Stord for final assembly. At Stord, we are progressing as planned with the stacking program preparing the topside for sailaway during 2026. In order to safeguard the delivery of these other projects, Aker Solutions is applying new ways of working, enabled by automization and digital solutions. These are not ends in themselves, but rather means of improving efficiency and safety in execution. One example is the use of augmented reality or AR for short. By overlaying the technical drawings with real-world construction, inspectors can spot issues earlier when it is easier and less costly to mitigate them. Another example is the use of virtual reality or VR, where engineers from our different locations around the world can meet virtually inside the digital model they are working on to collaborate and identify the best solutions. The technology has multiple use cases, including replacing offshore surveys in a range of operations. This frees up man hours otherwise spent on transport, reduces personnel on board and saves costly helicopter transport. These are just a couple of examples of how we turn digital ambitions into practical applications that can save both time and cost for our customers. As for the alliance model, I believe that the achievements for the alliance are a clear testament to the value of working closely together with aligned incentives. This in turn enables us to deliver quality projects with faster time to first energy. Another key pillar of our strategy is to grow our engineering and consulting business. At Aker Solutions, we are currently having more than 5,000 engineers with unique competencies across market segments covering all phases of the asset life. Our spearhead in emerging markets and client relationships is Entr, our consultancy arm. The core team at Entr currently consists of about 350 people, but draws on the competencies and capacity of the entire organization. A unique selling point for our engineering and consultancy services is how we are pioneering new digital solutions and data analytics powered by AI, artificial intelligence. By shifting from manual to automated processes, we can make better use of historical data and scenarios to design innovative solutions that unlock value for our customers. One example is a recent FPSO concept study. Here, our engineers were able to identify more than 200 potential improvements, significantly reducing both weight, costs and delivery times. From our key engineering hubs in Norway, U.K., U.S., Canada, India and Malaysia, we deliver consulting and engineering projects to a wide range of customers across the globe. Within oil and gas, we are actively engaged in several FPSO projects that we believe will move into next phases of development over the next 1 to 2 years. We're also seeing strong demand for our onshore, midstream and downstream capabilities. In these markets, we benefit from the experience and track record from our Indian office, where we have more than 1,000 engineers delivering projects across the globe. Likewise, we see that our track record in both CCS and offshore wind enables us to engage early with new clients in different geographical regions. In both offshore wind and CCS, we are now engaged in the second generation of projects. Compared to the first generation, which have been both operationally and commercially challenging, the new generation is progressing well, delivering healthy margins. So what has changed? Firstly, we have managed to negotiate commercial terms with balanced risk reward profiles and joint incentives for successful project deliveries. This means that we have moved away from traditional lump sum models to a model where both risks and upsides are much closer tied to our own performance. Secondly, we have managed to move away from customized one-off projects to leveraging standardization across several projects. One example is the Norfolk portfolio, where we are seeing the benefit of designing one and build several. For instance, both engineering and fabrication hours are significantly reduced on the second topside compared to the first. The same applies for our CCS portfolio, where learnings from the first wave of capture and storage projects are now being implemented at the Northern Lights Phase 2 and the Hafslund Celsio carbon capture and storage projects. All in all, I'm pleased to see that our focused approach is yielding positive results, positioning us in the markets with significant growth potential in the years to come. Moving over to our life cycle business. The segment has since 2020, delivered double-digit revenue growth with improved profitability and strong cash generation. At year-end, the backlog stood at about NOK 23 billion, dominated by long-term frame agreements and reimbursable modification projects on existing onshore and offshore assets. The segment also delivers hookup and commissioning services to ensure efficient and safe start-up of new oil and gas facilities and offshore wind components. Our long-term engagements on these critical assets enable us to expand our capabilities, offering unique technology-enabled services. This includes autonomous drone inspection, remote operations and AI-powered analytics. And talking about long-term engagements. I'm happy to report that we have secured several new long-term frame agreements for maintenance and modification services over the past months. Why is this important for Aker Solutions? For one, it creates transparency on activity levels for several years to come. As you can see on this slide, the recently awarded agreements in Norway have a duration of more than 10 years, including options. We are also working side-by-side with key international clients such as Exxon, Shell and BP to maintain and modify their critical infrastructure in Canada, U.K., Angola and Brunei. I believe one of the main reasons we've been awarded these contracts is our demonstrated ability to drive improvement. And we are not just talking about doing the same things we did yesterday only faster, we are talking about fundamentally challenging what we do and how we do it. That means not just applying new technology, but applying the right technology and digital solutions, where we truly move the needle and deliver measurable results. It is also about understanding our clients, how they think, how they prioritize and what matters most to them. Our deep understanding of the assets also positions us for modification projects, for instance, related to subsea tieback or the decarbonization through electrification. In Norway alone, Equinor expects to develop more than 75 subsea projects over the next decade. So to summarize, I'm impressed by how Life Cycle has developed over the last 5 years and believe that the segment is well positioned to continue its transformation journey in the years to come. Moving over to SLB OneSubsea. As mentioned, the company was established through the merger between SLB and Aker Solutions Subsea divisions with the ambition to create the leading subsea company in the world. The financial performance of the company speaks for itself, delivering strong margins and solid cash flows. The company has a very attractive dividend policy. And during 2025, SLB OneSubsea had paid out more than $400 million in dividends to its shareholders. After these payments, the company still has a robust financial position with net cash of more than $0.5 billion. And the outlook for the company is strong with global subsea spending expected to increase by around 25% over the next 5 years. Tendering activity is high, both within Subsea production systems, Subsea processing solutions and umbilicals and cable systems. SLB OneSubsea also has a highly resilient life of field service offering, enabled by the largest installed base of subsea equipment in the industry. The company recently announced targets of cumulative bookings exceeding $9 billion over the next 2 years, positioning the company for growth from 2027 and onwards. So as both the proud co-owner and delivery partner for OneSubsea, Aker Solutions sees great opportunities for continued strong value creation in the company going forward. And talking about shareholder value. As you can see from the graph on the left-hand side, share prices among players with exposure to the subsea equipment market have increased markedly during the last 6 to 12 months. If one uses such peer trading multiples, one may argue that our 20% ownership represents a significant upside to Aker Solutions current trading. In addition, Aker Solutions currently holds more than 5 million shares in SLB, which were used as considerations for the Subsea transaction. Since the closing of the fourth quarter, we have seen a substantial increase in the value of these shares. So to summarize, I am pleased to see that we continue delivering strong financial results that we have a solid backlog of healthy projects and that we continue positioning the company for the future. Finally, our financial situation is robust. This gives us a strong foundation to continue developing the company while generating solid returns to our shareholders. And with that, I leave the word to Idar, who will take you through the financials of the quarter and for the full year. Idar Eikrem: Thank you, Kjetel. I will now take you through the key financial highlights of the fourth quarter, the full year figures, our segment performance and run through our financial guidance. As always, all numbers mentioned are in Norwegian kroner. So let me start with the income statement. The fourth quarter revenue was NOK 16.7 billion. Full year revenue were NOK 63.2 billion, a 19% increase from 2024. The underlying EBITDA in the quarter was NOK 1.3 billion with a margin of 7.9%. During the quarter, Aker Solutions have taken provisions for restructuring costs of NOK 194 million in relation to the announced capacity adjustments. This is treated as a special item. The net income from OneSubsea was only NOK 80 million in the quarter. This was affected by one-off costs related to integration and restructuring. If adjusting for these one-off costs, the net income from the entity was in line with previous quarters. Full year EBITDA for the group was NOK 5.3 billion with a margin of 8.4% or 7.3% if you exclude the net income from SLB OneSubsea. The underlying EBIT in the quarter was NOK 940 million, up from NOK 888 million a year ago with a margin of 5.6%. The full year EBIT was NOK 3.8 billion with a margin of 6.1%. For the full year, net income, excluding special items, was NOK 2.9 billion, representing an earnings per share of NOK 6.1. This is somewhat lower than in 2024, mainly driven by lower interest income after the sale of liquid funds used for the payment of extraordinary dividend in 2024. As Kjetel mentioned, the Board of Directors will propose an ordinary dividend of NOK 3.6 per share for 2025, pending approval of -- in our Annual General Meeting in April. This represents approximately 60% of net income, excluding special items. Moving to our segment performance. For Renewables and Field Development, the fourth quarter revenue was NOK 12.4 billion. Full year revenues was NOK 46.1 billion, representing a year-on-year growth of 21%. The underlying EBITDA in the quarter was around NOK 1 billion with a margin of 8.1%. EBITDA for the full year was NOK 3.7 billion, representing a margin also of 8.1%. The legacy lump sum projects continue to be a drag on the margins throughout 2025. These projects are now in the offshore commissioning phase and commercial discussions are ongoing. And as previously mentioned, the second-generation renewable projects contribute with healthy margins in the period. The order intake in the period was NOK 11.6 billion, leading to a secured backlog of more than NOK 40 billion at year-end. Based on the secured backlog, we expect the revenues in this segment to be between NOK 30 billion and NOK 35 billion in 2026. For the Life Cycle segment, revenues in the fourth quarter was NOK 3.8 billion. Full year revenues was NOK 15 billion, an increase of about 13% from 2024. The underlying EBITDA was NOK 293 million in the quarter, representing a margin of 7.7%. This was enabled by continued solid performance on ongoing modification projects and long-term frame agreements. EBITDA for the full year was NOK 1.1 billion with a margin of 7.2%. The order intake in the quarter was NOK 7.7 billion, representing a book-to-bill of about 2x. During the quarter, Life Cycle was awarded long-term frame agreements with both ConocoPhillips in Norway and ExxonMobile in Canada. The secured backlog at the end of the year was NOK 23 billion, providing a good visibility for future activity levels. This, however, does not include the announced long-term frame agreement with Equinor awarded in the first quarter of 2026, representing additional intake of more than NOK 10 billion. Based on the secured revenues and backlog, we expect Life Cycle revenues to remain relatively stable in 2026 at around NOK 15 billion. Moving to our financial performance of SLB OneSubsea. In the fourth quarter, SLB OneSubsea delivered revenues of about NOK 10.5 billion. For the full year, revenues were about NOK 40 billion. EBITDA in the quarter was about NOK 1.9 billion, representing a margin of about 18%. For the full year of 2025, the company delivered an EBITDA margin of 19.4%. Net income before PP&A adjustment was NOK 527 million in the quarter. This was negatively affected by the mentioning provisions for one-off costs. After PP&A adjustment, Aker Solutions recognized NOK 80 million for our 20% share. The backlog for the entity is currently at NOK 47 billion. As mentioned, tendering activity is high, and the company has an ambition to exceed $9 billion in new orders over the next 2 years. In the fourth quarter, Aker Solutions received dividend of more than NOK 400 million. This was significantly above previous quarters, reflecting the solid financial position and performance of the entity. This takes me to our cash flow for the full year. Cash flow from operation was NOK 2.6 billion, mainly driven by EBITDA contribution from our operational segments offset by a reversal of working capital of about NOK 1.3 billion. CapEx for the full year was about NOK 500 million or 0.8% of revenues. For the full year, Aker Solutions received NOK 841 million in dividends from our 20% ownership in SLB OneSubsea, significantly above previous guiding from the company. Lastly, we have distributed about NOK 1.6 billion to our shareholders in 2025, in line with our ordinary dividend policy. The financial position remained robust with a net cash position that increased to NOK 3.7 billion during 2025. So to sum up, in 2025, Aker Solutions delivered record high revenues with solid margins and strong cash generation. As Kjetel mentioned, we continue to expect activity levels to come down in 2026, forecasting revenues between NOK 45 billion and NOK 50 billion for the full year. At this early stage, we expect the EBITDA margin to be in the range of 7% and 7.5% for the full year, excluding net income from SLB OneSubsea. CapEx is expected to be around 1% of revenues. While working capital is expected to continue its normalization to a level between negative NOK 4 billion and negative NOK 6 billion over time. Based on our robust financial position, the Board will propose a cash dividend of NOK 3.6 per share for 2025, pending approval in the Annual General Meeting to be held in April. Thank you for listening. That was the end of our presentation. In a few moments, we will open up for questions. Preben Ørbeck: Okay. We will start with a few questions from Martina Kverne in Nordea. The first question is if you can give an update on when the legacy lump sum projects are finished? Kjetel Digre: They are all currently in offshore mode. We have installed them, and they are completed structurally, and we are currently working on the commissioning part of the project and we completed all of it in 2026. Preben Ørbeck: Moving on to two questions on the tender pipeline. Whether Wisting is included. And also, if you can elaborate a bit on the split between Renewable, Field Development and Life Cycle. Kjetel Digre: Start by saying that Wisting is really high on our agenda, and we are working closely with Equinor on behalf of the license owners to look at the optimal concept and really helping them to make this a viable project. That's a super important work for us. It's not currently included in the tender pipeline numbers because it's in an early phase still. And then the split is, I would say, balanced. We are working on the classical greenfield oil and gas projects. But perhaps link it common to Life Cycle. We have in the start of 2026 and now we've gotten the important continued relationship with Equinor with many exciting agreements and tasks. And part of those agreements is actually not specific yet on what kind of work. So they are sort of empty contracts. But we know that with the ambitions of Equinor and other operators on the Norwegian continental shelf with, for instance, 75 subsea tiebacks that can potentially be filled with quite a lot of life cycle work going forward. Preben Ørbeck: Moving over to a few questions on OneSubsea. They announced a target of $9 billion in cumulative orders. Can you talk a bit about the timing and maybe also elaborate on the dividend expectations? Idar Eikrem: Thank you. I will. And the $9 billion is in U.S. dollars. So that is important. And the $9 billion is a target for the next 2 years. So '26 and '27 to secure $9 billion in new orders. In addition, SLB OneSubsea is sitting with an order backlog of $4.7 billion. So achieving $9 billion over the next couple of years with the current backlog is providing a solid and good visibility for activity level going forward. Currently, they are around $4 billion a year and with healthy margin close to 20%. And as we have seen, we received NOK 841 million for dividends from SLB OneSubsea during 2025. And the dividend policy is a good dividend policy for the shareholders. All excess cash is going to be distributed to the shareholders. And the current cash position at year-end was at NOK 5.7 billion. So with, call it, cash generation from the earnings that we expect in 2026 together with the cash position they're sitting on, we expect healthy dividends also for 2026 and onwards. Preben Ørbeck: Moving to a question on the Aker BP projects where you are noting good progress. Any upside to the margins in 2026? Idar Eikrem: For a project like this, there are incentive mechanism in place. And normally, they -- most of the sort of incentive mechanism are towards the end of the project lifetime and also linked up to start-up. We don't disclose or come with guidance on margins on specific contracts or segments. But as you can see from our guidance for 2026, we are guiding a margin of 7% to 7.5% at this stage. And with Life Cycle being a business that is currently at around 7.2%, you will understand that the Renewable and Field Development segment will be in the range that is in line with the group estimates. Preben Ørbeck: Thank you. Then moving over to a question from Oscar Ronnov in Kepler. If you can comment on how margins of new contracts signed in 2024 and also now in the beginning, '25 and into '26, how does that compare to the legacy portfolio? And if you're seeing a material step-up in underlying margins or risk returns on new awards? Idar Eikrem: I think the most important thing that we did and we communicated that clearly is some of those contracts that we signed in '21, '22, didn't have the right risk reward balance. We have, therefore, communicated that we will be very selective and make sure that we have the right risk reward balance on contracts that we are signing. That is what you have seen of the contracts that we have signed in '24, '25 and now into '26 with healthy margins. Renewables portfolio, we have not been satisfied with those on a historical one. However, that was the first generation. The second generation has healthy margins. And renewable projects are competing with oil and gas projects for our own internal resources. And we are requiring margins on renewable projects in line with our oil and gas projects. So healthy margins in the portfolio. Preben Ørbeck: Next question, how do you look at the potential future projects in the U.S.A., especially in wind industry under the Trump administration? Did the sentiment changed after the recent rhetoric? Kjetel Digre: It's quite obvious that the sentiment and the opportunities in this period of Trump administration has changed. And our role in this is obviously to work closely with our key clients, and they are looking at changing focus just now that has been seen and particularly towards Europe and back to what we are tendering for and potential project, that's where the major wind opportunities are currently worked on from our side. Back to U.S., we do have office in U.S. and with consultancy Entr focus. And there, we are working on exciting new opportunities around, for instance, CCS, but also within classical oil and gas industry. And just to make another connection, those kind of jobs in the U.S., particularly onshore, is also supported from our experienced Indian engineering muscle. Preben Ørbeck: Then a question from Martin on the structural competitive advantage of Aker Solutions that you believe can support a sustainable returns above cost of capital. Kjetel Digre: Well, that's a big question. It's almost our whole strategy. But I think what you see is that we tend to be sort of a key and closest partner to our clients, and that's the role we want to grow further. And I think we are preferred in many instances on that because we have the totality of the engineering through our very experienced engineering organization. We're also the ones that are handling and orchestrating the totality of the project puzzle when it comes into execution. Back to our strategy, what we are also careful about is that we know what we are really good at. We have a core business that we are improving, but also growing and also do that around our existing hubs so that we are taking careful steps outside those. And then I think also as a company, we are in a place where we have taken onboard the challenge and realized that we have to change, we change together with clients, but also orchestrating change and improvements in the whole supply chain. I think there are a few companies that can take that role, and we are one of them, for instance, within maturing and developing a digital and AI-based operational model and bringing that out to the rest of the supply chain. Preben Ørbeck: Maybe then elaborating to Idar if there are any key drivers of returns on invested capital expansion in terms of margin development, capital intensity and reinvestment efficiency. Idar Eikrem: Yes. I think I sort of point back to my guidance for next year or this year in '26 where we have put out our guidance NOK 45 billion to NOK 50 billion in turnover and then with a margin of 7% to 7.5% range. CapEx is going to be sort of lower than what we have had recently. We are now capitalizing on our CapEx and investment that we have done over the last few years. So we expect CapEx to be around 1% of revenues. We expect the working capital to normalize a bit more than what it is currently at minus 6.5% to a level of around minus 4% to minus 6%. When you combine all this, we should be in a position that generate healthy cash flows also going forward, being able to serve our shareholders as well. And in addition, as we spoke about earlier in this call, healthy dividends are coming in from our ownership in SLB OneSubsea close to NOK 850 million for last year. Preben Ørbeck: Moving then over to a question from Jorgen Lande. If you can elaborate on the NOK 80 million net income from OneSubsea and the details of the provisions for one-off costs related to integration and restructuring. Idar Eikrem: Yes. What you should read into this is when the 2 companies combined, Aker Solutions and SLB, there was certain plans for taking out synergies and restructuring part of it, and this is part of that program. So this quarter, a bit more than what you have seen historically and you should consider this as a one-off cost in the quarter. And as we have stated in our comments to this, if you adjust for this, the earnings is more in line with previous quarters. Kjetel Digre: Perhaps I'll just add. Preben, you know, we are following this closely, obviously. And we are doing a very good and optimal things both when it comes to structure and system harmonization on the people structure and then also the actual facilities taking out the synergies that Idar is alluding to. Preben Ørbeck: Okay. Should we then move to -- there's a few questions from Erik Aspen Fossa in Sparebank. As visibility into next year improves, what is the outlook for 2027? Idar Eikrem: Yes. I can probably start. First of all, we have provided our guidance for 2026. We have secured order backlog around NOK 15 billion for 2017. However, we have a tender pipeline of around NOK 80 billion. And of course, a result of those tenders will impact '27. In addition, the frame agreements in Life Cycle. And as you have picked up, we was awarded the frame agreement from Equinor, now in the first quarter in January 2026. That will also come on top and have impact for '27 as well as other contracts that we are currently in the tender phase that will be concluded shortly. So we expect, of course, the backlog to increase when we come a bit closer to '27. Kjetel Digre: So perhaps add on the MMO part of us, having these long-term frame agreements, not only Equinor but also the ones that we won last year. That's a starting point with an expected volume. We are then becoming close to the assets and the organization on the client side, and that positions us really well for projects that are mature and comes on top of the already planned volume of work. Preben Ørbeck: Thank you, Kjetel. I see there's a few similar questions on what the strategy and ownership agenda for our 20% holding in OneSubsea. Is it a long-term part of Aker Solutions asks Martin Huseby Karlsen. Kjetel Digre: Yes. As I said, you are closely linked and collaborating with SLB OneSubsea. We have to also remind ourselves that we are actually an important supplier from both our Egersund yard and our organization at large towards the tasks and projects that OneSubsea picks up. So that's a good position to be. And then obviously, our ambition is to build them to be the largest subsea player worldwide. Idar Eikrem: Yes. And there was also a question about SLB shares that we are owner of. And those shares was allocated in connection with the transaction to us or part of the payment. We consider that as cash and cash equivalent like and can be converted to cash quite quickly if we want to do that. And when it comes to the shareholding, 20% shareholding that we have in SLB OneSubsea, as we have spoken about, this is a good business. It's a growing business and interesting business to be in. And therefore, there is no sort of plan to exit from that one. Preben Ørbeck: A few questions from Victoria McCulloch from RBC on OneSubsea. If you can comment a bit on your views or your expectations in 2026 in terms of margin, in terms of order intake and market share. If you can elaborate a bit more on the targets and the performance of the entity. Kjetel Digre: Well, first of all, on the outlook, a bit more general. They are world-class in both the sort of subsea production system delivery part. They are class in umbilical and cable part. They are world-class in, I would say, really world leading on the subsea processing kind of projects and also in the more sort of Life Cycle aftermarket service segment. And my take is that the way forward looks promising, and we are currently winning work from that side, which makes the months and years ahead, looking really good also, capturing projects with new clients that broadens the footprint and opens up new opportunities. Preben Ørbeck: Then a question from Kim Uggedal. If the Q4 dividends from OneSubsea is a new run rate? Or what should we think about it in 2026? Idar Eikrem: Yes, the Q4 dividend was more than NOK 400 million in 1 quarter. I guess that is a bit higher than what we expect to see every quarter. However, the yearly sort of effect that is there is at least within reach when you look at the cash conversion that SLB OneSubsea is able to do. Preben Ørbeck: Then moving on to a question from Kim Uggedal on the order intake in Renewable and Field Development, which was very strong consider that we did not announce any contracts. And whether this is predominantly related to scope on the NCS portfolio or additional scope on HVDC platforms or other projects? Idar Eikrem: There are increased scope in some of the projects, and it's also a growth in the portfolio. However, the largest element is a catch-up effect from third quarter. Aker BP updated our CapEx forecast in the third quarter. We were allocated a substantial part of that one in the fourth quarter. So there is a catch-up from third quarter, that is the majority of the figures that is unannounced in fourth quarter for us. This has to do with approval of milestone -- new updates on the CapEx estimate and allocating it to the suppliers. Preben Ørbeck: Question from Martin Huseby Karlsen, DNB on the tender pipeline of NOK 80 billion. Is that as end of Q4 or as of today? And how much of the volume is related to Equinor? Kjetel Digre: Well, that tender pipeline is as of end of Q4. And now currently, as we said a few times now, the Equinor MMO volume is the starting point really for those contracts is the expected volume planned that are already. And then on top of that, as I said, we will compete for jobs then that are larger and linked to, for instance, all the subsea tiebacks they are planning. Preben Ørbeck: And maybe elaborate that it's the -- what we expected and not the full tender value that was set out to all the participants in the tender. Idar Eikrem: And just remind everybody about that one, then we booked it now in the first quarter, and it's more than NOK 10 billion on that contract. Preben Ørbeck: Then a question on the margin guidance, Idar, whether it includes provisions or incentives or for the incentives for projects. Idar Eikrem: Yes, the margin guidance for 2026 is for the group. And as I mentioned earlier on today, this is a combination, of course, of -- and this is excluding OneSubsea and the ownership of that one. So the earnings from that comes on top, but the 7% to 7.5% is then for the remaining part of the group, and it consists basically of Life Cycle that has currently delivered 7.2% last year. And then it's -- the rest is basically in Renewable and Field Development. So meaning Renewable and Field Development is having a margin that is more or less in line with the group figures. Preben Ørbeck: Thank you, Idar. It seems that we have no further questions. So from us here, it's time to close off the session. And thank you all for listening in.
Lluc Sas: Good morning, and thank you for joining Sabadell's results presentation for the fourth quarter and the full year 2025. We are joined today by our CEO, Cesar Gonzalez-Bueno; and our CFO, Sergio Palavecino. The presentation will follow a similar format as in previous quarters. First, our CEO will walk us through the key highlights of the year. Then our CFO will go into the financials and the balance sheet, before our CEO concludes with closing remarks. Finally, we will open the floor for a live Q&A session where you can ask your questions. So Cesar, over to you. Cesar Gonzalez-Bueno Wittgenstein: Thank you, Lluc, and good morning, everyone. We announced yesterday that the Board of Directors of the bank and I have agreed on my resignation as Sabadell's CEO, while Marc Armengol has been appointed new CEO. These changes will take place around May, following our AGM, and once regulatory approvals have been obtained. Until then, I will remain as Sabadell's CEO, and Marc will remain TSB's CEO. And I think now is the right moment for me to step down, and I say that absolutely sincerely. Our current strategy -- strategic plan is solid and well-defined and supported by everyone, including Marc, who has been a great part of its construction. Targets for '26 and '27 are ambitious but achievable, and we are in course. And now it's all about execution, execution and execution of the current plan and planting seeds for an exciting future. Therefore, the bank is on the right track to deliver its targets. And just very briefly, on a more personal note. Look, I had opted for retirement 6 years ago. And the opportunity of joining Sabadell was so tempting that I couldn't let it pass. I was called for this project. I could not refuse. It has been far more exciting and rewarding than I could have expected. And I think now, it's the time to go. But on top of delivering on our plan, Sabadell also needs to start thinking about this future beyond 2027. There's an increasing number of opportunities from banks arising from technology in general, and from artificial intelligence, in particular. I think we have done a tremendous development in digitalization, but AI goes beyond, and that plan needs to be accelerated and it will transform the bank not in the next year, but in the years to come, and this transformation will be profound. In this context, my dear and friend, Marc Armengol, is the perfect CEO to deliver our targets for '26 and '27 because he has the managerial skills. But beyond, Marc brings strategic vision and delivery, combining CEO experience with developing and executing corporate strategy in the U.S. and in U.K. He has proved his commercial mindset at TSB, where he has improved competitiveness by getting even closer to customers. He also brings exceptional technological, operational and digital expertise from business integrations to large case transformations in Spain, U.K., U.S. and Mexico. And very important, he knows everything about Sabadell. He is definitely not a newcomer. As a matter of fact, this is the first internal CEO appointment since Sabadell went public over a quarter of a century ago. And I think this proves maturity for this great institution. All in all, that is the right time for the bank to address this change. It is the right moment for me, and it is the right moment for Marc. And before moving to the result presentation, let me repeat it one more time. We have announced my resignation and the appointment of a new CEO, but we remain fully committed to delivering our plan and reaching our financial targets for '26 and '27. Key messages for the next full year, we are in Page 4. Given that the TSB sale is expected to be completed during the second quarter of 2026, we are presenting figures with reference to the ex-TSB perimeter. First, volumes grew at mid-single digit during the year, performing loans increased by 5.4% and customer funds by 6.4%. Second, core revenues performed in line with expectations with NII at EUR 3.6 million, while fees were up by 3.6% year-on-year. Third, asset quality continued its positive trend. Total cost of risk declined by 16 basis points and stands at 37 basis points. Moreover, NPAs decreased by 17% year-on-year, while the NPA coverage ratio stood at 64%, up 2 percentage points versus last year. Fourth, this year's shareholder remuneration is EUR 1.5 billion. We have already distributed EUR 700 million through 2 interim cash dividends. And in addition to this, we will allocate EUR 800 million to a new share buyback program. We have already received authorization from ECB and the program will start on Monday. Finally, return on tangible equity stands at 14.3% and the core Tier 1 ratio is 13.1%, after deducting the excess capital that will be distributed. During '25, before dividend accruals, we generated -- I think this is a big number, 196 basis points of capital. Slide 5. And this is a little bit of a reason why. Let me explain why Sabadell is well positioned to keep improving its profitability looking forward. We have a clear strategy that supports profitable growth, as we shared last July during the presentation of our strategic plan. Our ongoing transformation focuses on delivering growth alongside improved asset quality. Although this means marginally lower loan yields, these are more than offset by a much lower cost of risk. Overall, this results in both profitable growth and stronger capital generation. This is a structural and permanent looking forward. Let me explain a little bit further on this. I mean the probability of default is now at the levels of which we wanted. That is done. And the impact on the P&L is immediate because, of course, you lose income, because you're doing less risky assets. But the benefits of that come over time, and it depends also on the duration of the different portfolios. We will still see tails for a long time in terms of -- in the different products. We will see tails of improvement of the risk cost, and we will see tails of improvement of the capital generation due to this. And this is perfectly in line, as we said, with the strategy, and I think it will yield over the course of the year. And furthermore, it makes the bank very sound. But however, and now going to the right-hand side of the slide, following the tender offer period, our business was a bit less dynamic than expected for a time. And we have now clearly regained our commercial momentum. For instance, month-on-month evolution of on-balance sheet funds in December '25 was better than in December '24. And new lending to SMEs was also higher in December '25 than '24. And -- furthermore, and this is meaningful, customer acquisition in December '25 was also significantly higher than in '24. To sum up, we have solid fundamentals and a clear strategy that will support profitable growth and capital generation going forward. Let's go to Slide 6. Performing loans excluding TSB remained flattish quarter-on-quarter and grew by more than 5% year-on-year. At TSB, lending volumes at constant FX remained flattish in the quarter as expected. Moving on to customer funds. On balance sheet, funds regained momentum and increased by 3.4% in the quarter. And this momentum, as we just saw, was more towards the last part of the quarter. Off balance sheet funds also continued to perform well, rising by 1.9% in the quarter and 14% in the year. All in all, in '25, we increased our loan book by EUR 6 billion and our customer funds by EUR 11 billion ex-TSB. This represents mid-single-digit growth, which is in line with our guidance. And this in combination with the growth of capital because growing capital generation but not growing the business is not as attractive as doing both things at the same time. Let's move to Slide 7, loan origination in Spain. In Q4, new mortgages decreased by 3% year-on-year. We have been reducing our market share in new mortgage lending over the past few months as front book yields have compressed. We remain focused on managing our new lending through risk-adjusted return on capital, ensuring that growth is delivered in a profitable manner. New customer loans -- consumer loans in Q4 increased by 8% on a year-on-year basis. In the whole year, new lending of consumer loans increased by 16%. Quarterly new loans and credit facilities granted to SMEs and corporate decreased by 15% year-on-year. This results in a slight decline of 5% if we compare with the full year of '25 with '24. On the other hand, origination of working capital finance remained broadly stable in the year. All in all, a strong performance in new lending during the year delivered loan book growth across all products and segments. If we move to Slide 8, regarding payment-related services in 2025, card turnover increased by 6% year-on-year, while point-of-sale turnover increased by 2%. Let me share that the merchant acquiring business will remain within our perimeter looking forward. Therefore, we will keep this fee income stream. Regarding savings and investment products, we reached a total stock of EUR 70.6 billion in December '25. This represents an increase of EUR 4.2 billion in the year, driven by an increase in off-balance sheet products of EUR 6.5 billion, most of it becoming -- EUR 4.6 billion coming from net inflows. In Slide 9, the breakdown of performing loan book across segments and geographies excluding TSB. In Spain, performing loans fell by 0.9% in the quarter. Mortgages and consumer loans posted positive growth in the quarter. On the other hand, the SME and corporate lending fell by 3.6% quarter-on-quarter, mainly due to the fact that these firms have been growing less heavily on their credit facilities. Year-on-year, performing loans in Spain increased by 5.2%. The mortgage book grew by 5%, consumer loans delivered double-digit growth and the stock of SME and corporate loans increased by 2.4%. The international operations also delivered strong momentum, with performing loans rising by approximately 15% year-on-year at constant FX. If we move now to Slide 10, the U.K. business. As expected, TSB's performing loans and customer deposits remain broadly stable on both quarter-on-quarter and year-on-year. Looking at the main lines of the P&L, NII increased by 7.2% in the year, in line with high single-digit guidance. Fees, which are less relevant for the U.K. business, declined by 15% year-on-year. Total cost decreased by 2.6% in the year, also in line with the guidance, in line with the 3% decline guidance. Provisions increased by around 50% year-on-year. Let me remind you that in '24, TSB recorded releases related to the improvement of macroeconomic assumptions. The resulting cost of risk in 2025 was 13 basis points, considerably better than the 20 basis points guidance. All in all, TSB's net profit reached GBP 61 million in the quarter, translating into almost GBP 260 million for the full year. This implies growth of around 25% in 2025. Stand-alone return on tangible equity was 13.5% despite maintaining a high level of solvency, with a core Tier 1 ratio of 16.7%. Finally, tangible net asset value increased by GBP 154 million between April and December. This, together with the additional TNAV to be generated until the closing of the transaction, will be added to the GBP 2.65 billion sale price, ensuring that TSB continues to contribute to Sabadell until the transaction closes. On Slide 11, a summary of our results. In '25, we posted net profits of EUR 1.8 billion. This represents a 3% decline year-on-year. It is worth noting that when adjusting 2024 net profit for extraordinary items, net profit actually increased by 3.4% year-on-year. All lines have been performing in line with the expectations. Sergio will explain the P&L in more detail shortly. To conclude this section of the presentation, I will outline our shareholder remuneration. The amount for 2025 has been improved to EUR 1.5 billion. This is 9% of our market cap. 2025 remuneration includes EUR 700 million in cash, which have already been paid, and EUR 800 million in share buyback. Last year, we paid 2 interim cash dividends, one in August and one in December of EUR 350 million each. These distributions will be followed by a final dividend of EUR 365 million as well as a EUR 435 million of excess of capital. These amounts to EUR 800 million via share buyback program scheduled to begin next Monday. No doubt, exceptionally, the final dividend will be distributed entirely through a share buyback. The main reason is that we believe that the stock is currently trading at a discount to its fair value, making a buyback the best option to reward our shareholders. We expect to distribute EUR 2.5 billion across '26 and '27, which also represent 9% of the market cap each year, once we deduct the extraordinary dividend related to the sale of TSB. All in all, we are on track to deliver on our commitment to distribute a cumulative EUR 6.45 billion of remuneration over '25 and '27. On top of that, we reiterate our commitment to deliver an annual cash dividend per share above EUR 20.44 from '26 onwards. I will now pass the floor to Sergio, who will provide a more detailed overview of the bank's financial performance. Sergio Palavecino: Thank you, Cesar, and good morning, everyone. Let me begin by presenting the full detailed P&L. As we will explain during the presentation, the annual performance shows an alignment with our year-end targets. We recorded a net profit close to EUR 1.8 billion or EUR 1.46 billion when excluding TSB. Before we go through each line, I'd like to highlight a few extraordinary items and reclassifications recorded this quarter. Firstly, on the trading income line, we recorded an expense of EUR 15 million related to the exchange rate hedging on the full proceeds from the sale of TSB. This impact will be recurrent until the transaction closes. Secondly, and following the termination of the agreement to sell the merchant acquiring business, we have reclassified EUR 23 million from other provisions to depreciation and amortization. The impact of this on net profit is neutral. Finally, on the gain on sale of asset line, we adjusted EUR 20 million related to certain IT and software assets. We will now review the main P&L items in more detail, focusing on Sabadell's performance, excluding TSB. Starting with NII on Slide 15. We recorded EUR 3.6 billion in NII for the year, fully aligned with our guidance. In the quarter, Sabadell ex-TSB delivered close to EUR 900 million, broadly stable versus the previous quarter. Now let's look at the top right-hand side of the slide to understand the drivers behind this quarterly evolution. Moving from left to right, customer NII had a positive impact of EUR 2 million. Within this, the customer margin decreased by EUR 7 million due to the negative repricing of variable rate loans. Although interest rate pressure on loan yield has already eased significantly. The good news is that volumes more than offset the customer spread compression. ALCO, liquidity and wholesale funding contributed by EUR 3 million, supported by lower refinancing needs and lower spreads. Other items had a combined impact of minus EUR 9 million. This mainly reflects the negative impact of certain interest rate hedges related to the fixed rate mortgage portfolio. TSB added EUR 11 million positive this quarter, reaching EUR 314 million as the contribution from the structural hedge was higher than the depreciation of the sterling. For 2026, we expect NII to increase by more than 1% with a clear acceleration throughout the year. In fact, we expect NII to bottom in first quarter '26, mainly due to fewer calendar days and the final repricing of the variable rate loans. From that point, it should grow steadily quarter after quarter, being the fourth quarter of '26 mid-single digit higher versus the fourth quarter of '25. For these estimates, we are assuming interest rates to remain at the same levels as at the end of 2025. We are expecting volumes to perform in line with what we have seen this year, around 6% growth in loans and between 3% to 4% in on-balance sheet funds. Loan yield could decline some basis points in the first half of the year, but should return to current levels driven by higher growth in consumer and SME lending. On cost of deposits, we still see room for further improvement as we reprice the last part of the term deposits. And finally, the impact from the sale of TSB bonds in the ALCO portfolio will be offset by savings in wholesale funding as we will have lower MREL funding needs after the sale. Leaving the NII line aside and moving on to fees. Fees and commissions within the ex-TSB perimeter increased by around 4% year-on-year. Asset management and insurance fees were the main contributors, growing by 15% year-on-year. This performance was driven by strong volume growth in off-balance sheet funds, with -- fully aligned with what we presented at our Capital Markets Day. The fourth quarter was the strongest of the year, with ex-TSB fees rising by 6% quarter-on-quarter, supported by a strong commercial activity and the seasonal uplift in asset management and insurance fees, including a success fee component of EUR 12 million. Looking ahead, we expect fees to increase by mid-single digits in 2026. This growth will be, again, largely driven by asset management and insurance fees. Moving on to the costs on Slide 18. Total ex-TSB costs increased by EUR 44 million in the quarter, mainly driven by 2 factors: first, a reclassification of EUR 23 million from other provisions to amortization following the termination of the merchant acquiring agreement with Nexi. Consequently, going forward, the quarterly run rate for ex-TSB amortization line is expected at around EUR 100 million. And second, the special remuneration in shares to all employees related to the end of the takeover bid amounting to EUR 16 million. All in all, total costs at ex-TSB increased by 2.5% year-on-year. This evolution is totally consistent with the target of low single-digit growth, despite the reclassifications recorded at the one-off personnel costs I have just explained. For 2026, we expect total costs including amortization, to grow by around 3%, fully in line with the strategic plan targets. Moving on to Slide 19. We will now cover credit cost of risk and other provisions. Total cost of risk for the year 2025 was 37 basis points, better than the already improved guidance of 40 basis points for the ex-TSB perimeter. Meanwhile, credit cost of risk fell to 24 basis points, which represents 9 basis points reduction in the year. Now looking at the bridge of the different components of the total provisions for this quarter, on the top right-hand side, we booked EUR 107 million of loan loss provisions, excluding TSB. Then we had EUR 8 million positive impact by driven -- impact driven by real estate asset disposals, [indiscernible] double-digit premium. NPA management costs remain in line with the usual run rate. Other provisions, mainly related to litigations and other asset impairments, were impacted this quarter by the EUR 23 million reclassification previously mentioned. And finally, TSB provisions were EUR 18 million this quarter. For 2026, we expect total cost of risk to remain at around 40 basis points, underpinned by positive asset quality dynamics and the gradual impact of our risk management measures. This better asset quality will offset the potential shift in business mix as we expect stronger growth in companies and consumer lending. Moving on in the next section, I will walk you through asset quality, liquidity and solvency. On Slide 21, we can see that nonperforming loans and coverage ratio continued to improve during the year. Within the ex-TSB perimeter, NPLs decreased by close to EUR 700 million over the year, demonstrated continued success in portfolio derisking and proactive credit risk management. As a result, the NPL improved 66 basis points to 2.65%. The reduction in NPLs is also consistent with the improvement in Stage 2 loans, which declined by more than EUR 1.3 billion in the year. Finally, the coverage ratio increased by 3 percentage points, reaching 69%. Moving on, in terms of foreclosed assets, net NPAs as a percentage of total assets remained comfortably below the 1% threshold, confirming the bank's structurally improved risk profile. The stock of NPAs declined by 15% year-on-year, equivalent to more than EUR 800 million in absolute terms. Meanwhile, the coverage ratio has improved by 2 percentage points. The sales of real estate assets continued their positive trend as 23% of the stock was sold over the last 12 months with an average premium of around 10%. On Slide 23, we are happy to see the continued improvement in asset quality over the past 2 years, explained by 3 favorable dynamics: a consistently declining NPL ratio, a quarter-on-quarter improvement in the cost of risk, along with a higher coverage ratio. Turning now to liquidity and credit ratings. In short, liquidity buffers have remained broadly stable over the year, with credit ratings improved, as you can see on this slide. Standard & Poor's upgraded our rating by one notch to A- with a positive outlook. During the year, Moody's and Fitch also upgraded our rating by one notch to Baa1 and BBB, respectively, both with a stable outlook. Turning to the next slide, we can see our current MREL position, which stand well above the required levels. It is also in line with the buffer of more than 200 basis points set as a threshold in our strategic plan. It is important to note that in 2025, we issued a total of EUR 3.1 billion across the capital structure as well as through covered bonds. We also carried out 3 securitization transactions with significant risk transfer during this year using both synthetic and cash instruments. Let me highlight that once the TSB sale is completed, we will deconsolidate TSB's risk-weighted assets. And therefore, our funding needs will be lower this year. Note that we currently have excess buffer in AT1 even excluding the EUR 500 million issuance that we have just announced that it will be called in March. On the next slide, we can see that we have been able to generate 196 basis points of capital while growing our loan book at mid-single digits. Looking at the quarterly evolution in more detail, we recorded 20 basis points of capital generation before deducting the accrued dividend. This includes 25 basis points from organic CET1 generation after deducting AT1 coupons minus 6 basis points from higher risk-weighted assets, mainly from the update of operational risk, representing minus 14 basis points, and partially offset by the release obtained through the SRT transaction completed in Q4. Then the accrual of a 60% dividend payout ratio had a minus 29 basis points impact, bringing the capital ratio to 13.65%. Given that we are distributing EUR 435 million of excess capital, 54 basis points must be deducted, which takes the CET1 ratio to 13.11%, and in place, an ample MDA buffer close to 400 basis points. With that, I will hand over to Cesar, who will conclude today's presentation. Cesar Gonzalez-Bueno Wittgenstein: Thank you, Sergio. On Slide 28, you can see the achievement of our 2025 targets, a summary of the new guidance for '26 and the reconfirmation of our 2027 strategic plan targets. As we have seen throughout the presentation, the 2025 results have been in line with our year-end guidance. For '26, the guidance we are giving the main P&L lines points to recurrent return on tangible equity ex-TSB of around 14.5%, considering tangible equity of roughly EUR 10 billion. Of course, the return on tangible equity that will be reported will be higher because it would include the TSB impact. Our business model, which is built around strong capital generation, allows us to reconfirm shareholder remuneration of EUR 2.5 billion across '26 and '27. Last but not least, we are reconfirming every single one of the targets for '27 that we presented at our Capital Markets Day. And to conclude the presentation, I would like to summarize a little bit of our equity story. First, Sabadell is a franchise that pursues growth while preserving asset quality. This has been a major turnaround of the last years. Since the tender offer finished, we have been regaining commercial momentum, and we have room to gain some market share in a growing market in the products and segments of our choice. Second, we have strong capacity to generate capital while continuing to grow, which enables us to offer attractive shareholder remuneration. Third, it's all about execution, and this team knows about that. We've been consistently delivering on our guidance since '21, and we are now -- and we now have a clear path towards a 16% return on tangible equity in 2027. And all of this comes while we are trading at a discount to peers in terms both of total shareholder yield and multiples such as PE. Our distribution yield, meaning dividends plus excess capital returned to shareholders, was around 9% in 2025, and is expected to remain around that level in '26 and '27. This compares with a peer average of below 6% for '25. When looking at PE multiples, it's important to adjust Sabadell for market's cap for the extraordinary dividend associated with the disposal of TSB. Many market participants, we believe are not fully doing this. Once adjusted, Sabadell is actually trading at below 9x earnings, while Spanish peers are trading well below -- well above 10 times. There is therefore a clear opportunity here with considerable upside potential for Sabadell's stock. That's why the entire amount pending distribution to shareholders, the final dividend and the excess capital will be executed through a share buyback starting on Monday. It will be equivalent to more than 5% of our market cap, significantly higher than any other Spanish peer. And with this, I hand over to Lluc. Lluc Sas: Thank you, Cesar. We will now open the Q&A session. Given the limited time available, we would appreciate if you could please keep your questions to a maximum of 2. So operator, could you open the line for the first question, please? Operator: First question is coming from Maks Mishyn from JB Capital. Maksym Mishyn: [Audio Gap] in target? Could you walk us through the mathematics? And the second one is on deposit growth. Ex-TSB, it has slowed in the fourth quarter and grew below the sector average. Can you please walk us through your thinking on why this is happening? And what will you do to recover growth? Sergio Palavecino: Thank you very much, Maks, for these questions. In order to help with the mathematics of the NII for 2027 that we are confirming, it will be at around 3.9%. We've been sharing in Slide 16, what are the expected dynamics on the quarterly NII. And as you can see in the slide, we expect the trough in the first quarter of the year because we will have a fewer number of days. We still have the last part of the repricing of the variable rate loans, the ones replacing with Euribor 12 months. But then from there on, we will have the tailwinds that we are currently enjoying for volumes that cannot be seen in NII because of the headwinds of customer spread. Customer spread will stabilize. And then by the second half of 2026, volumes will be on -- compared to the quarter of the previous year, already growing at the mid-single digit. That dynamic in our view, will continue into 2027. And as customer spread will increase a little bit, we are still expecting our customer NII to get close to 300 basis points in 2027. Also, the rates today are somewhat more positive as we see that Euribor 12 months in 2027 will steepened somewhat. So the dynamics that we show for the end of 2026 will continue into 2027. And yes, in our mathematics, they will lead us to NII that will be close to around EUR 3.9 billion. And then the second -- your second question was deposits -- deposit growth. Deposit growth, it was, year-on-year, at 3.6%. It has accelerated from the third quarter, as you mentioned, but this is rather due to very strong growth, really strong growth in the fourth quarter of last year. So when we look at our dynamics on customer funds, we see that currently are strong. Customer growth -- customer funds have growth more than 6%, that's EUR 11 billion growth, a bit skewed towards the -- of balance sheet products: EUR 6.5 billion growth in the off-balance sheet products, EUR 4.5 billion growth in the on-balance sheet. The -- when you do the average growth of deposits, it's actually EUR 4.5 billion. So as Cesar has mentioned, we have acknowledged that we got some minor impacts during the tender of a period in September or October. But we have -- we're very happy to see that we have fully recovered the commercial momentum and December has been very good, and all commercial feedback getting into the new year is good. So we are positive on the volume growth that we are sharing with the market today. Cesar Gonzalez-Bueno Wittgenstein: I think, indeed, that's spot on. And I think that at the core -- at the helm of the hostile takeover, of course, there were some decline in balances, but we see very clearly the recovery, the momentum and everything is on track for the future, and that's why we're very positive. Operator: Next question is coming from Francisco Riquel from Alantra. Francisco Riquel: So first of all, congratulations, [indiscernible] 2 questions for me. First of all in a year -- I want to ask about the quarterly NII bridge in Slide 15, particularly on the core also others with EUR 9 million of interest rate hedges then you can give details on these hedges, what impacted in '26. If that should unwind in '27 or not. Also, if you can comment on the impact from the TSB, MREL and quantify, and the impact in '26 and '27. Also [indiscernible] NII and the improvement in the customer spread, that just said by end of '26 despite reducing the cost of deposits [indiscernible]. So how do you plan to achieve that? Do you think that you have been overpaying for online deposits in '25 and you will adjust your digital offering? And will you grow deposits even if you make less? And then my second question is on costs. Your 3% cost guidance for '26. I understand you include the full year impact of the D&A related to the merchant business, excluding that to cost inflation of just 1%. What type of efficiency measures will you implement to get there? And how can you reassure that you will not be under-investing in the technological transformation? Sergio Palavecino: Thank you, Paco, for your questions. Let me see if we got them all. The first one is regarding the hedges that we show in Page 15. I think we already shared with you guys in the third quarter that we're having an impact on the hedge that we have of the fixed rate mortgage portfolio. As you know, the Spanish market now for a number of years and us in particular, we have been originating virtually everything in mortgages in fixed rate. And now it's been a number of years and recently quite a strong production. So that's a lot of duration, and therefore, we've been hedging that duration. That means that the hedges we pay fixed as we get pay fixed in the mortgage. And we received Euribor 6. So these hedges -- we pay fixed, we received Euribor 6. Euribor 6 has been trending down for a number of quarters, but the good news is that this has been the last quarter, the way we see it, because Euribor 6 has been already flat in the fourth quarter. So in the -- going forward, we no longer expect impact from the hedge, of course, connected with Euribor 6 and then if Euribor 6 goes up and down, of course, it will have an impact. But so far, with the current level of rates, it should be flat. And then your second question was on MREL. MREL currently -- the MREL bonds of TSB are roughly EUR 1.4 billion, and the spread is around 200 basis points. That MREL then is -- MREL that we raised in group in the capital markets. So when this -- we will no longer have this income, but we no longer have the cost in the wholesale funding. This may take some quarters, but at the beginning, we will also have the help of the price that we will get from the sale. Initially, it will be close to EUR 5 billion. If you add up the price of the shares and the price of the bonds, and that will yield in the treasury account, and that will also help to -- that will combine with the savings in the wholesale funding, altogether will offset the impact of the lower MREL of TSB in the ex-TSB perimeter. And for deposits, yes, we expect, as we have written in the presentation, still somewhat reduction in the cost. And this is not only connected with the online, of course, it's also connected with the online. On the online, we have a strategy like any other one-off acquiring, having a very attractive offer, acquiring customers, and then we manage the acquisition. Connected with that, we have an offering, then the price of the book will go down in March, and we will keep on having new offerings. It's a dynamic, of course, product. And we're quite happy because it's been quite successful. The reduction is more coming from term deposits 1 year, 2 years that will come due, either have already matured at the end of the last quarter or will mature in the first quarter of 2026. And we -- when this is renewed, when this is -- the price is lower, connected with the lower prices that we have in the market. And finally, cost that you mentioned, the reclassification of EUR 23 million that we did is permanent because we are not considering the sale of the payment business. The payment business is going to remain within the perimeter. So therefore, the -- it's apple with apples. So the comparison with 2026 and the increase in the 3% is not going to be distorted by that. So in the 3% rate and CAGR that we already shared with the market in the Capital Markets Day, there are 3 major components: salaries, we are expecting salaries to grow at inflation and that is, let's say, close to 2%; then we are seeing general cost flattish, thanks to the different efficiency initiatives that we are running in the bank; and then amortizations connected with the investment in IT are going to be higher, probably at mid-single digit or so. So we are really allowing ourselves with the room that we need in order to keep investing into the business so that we ensure that we make this business growth as we expect. And I don't know, Cesar, if you want to add something? Cesar Gonzalez-Bueno Wittgenstein: Yes, just on the -- I think it. Just on the digital account and to explain a little bit the rationale and the commercial rationale of all of it and so forth. First, more than 50% of our new client acquisition comes from digital, and we think that, that is a phenomenal success. And when interest rates were at 4%, we paid 2%. But now that interest rates are at 2%, we are going down, as you mentioned, Sergio, to 1% starting on March. This is very attractive because it's a full service and with all the gadgets current account that at the same time has a remuneration, but it is capped at EUR 50,000. And therefore, what it is doing, it is attracting customers with 50% of their payrolls, 45% of them do payments every day. And we are getting them to be part of the bank in an attractive way. So this is not a funding strategy. But nevertheless, because the volumes are starting to be significant, now it is the time to reduce the payment from 2% to 1%. It has already been announced to clients. It needs a lead period until you can implement from the moment you announced, and it will happen on March, and it will have progressively impact -- some impact. It's around EUR 30 million year-on-year over the course of the year. Lluc Sas: I would kindly suggest to switch off the microphone when the analysts are asking the questions because we've been told that they cannot hear the questions when they talk. So operator could you open the line to next question, please? [ Technical Difficulty ] Sergio Palavecino: Thank you, Britta. Regarding the MREL dynamics, that the maturities in the group are quite front loaded. So actually, what we are seeing is that by the fourth quarter of 2026, the impact of the sale of the TSB bonds will have already been -- will be already -- being offset by lower funding needs in group already in the fourth quarter of 2026. Regarding the volume developments that you wanted to discuss. At the end of last year, as you can see, we're seeing mortgages growing at a 5%, consumer at a high double digit and SME corporate is growing at a low single digit, right? We are seeing corporate and SME poised to accelerate growth. So in our expectation of 6% growth of the loan book, we are considering still consumer loans to grow at a double digit, SMEs and corporates to accelerate from the current low single digit to mid-single digit. And we expect some -- this acceleration on the growth of mortgages from the currently 5% to maybe something between 4% or between 3% to 4%. Those are our assumptions and those are the assumptions that give a combined net growth of 6% in the loan book. And I think there was a last question? Cesar Gonzalez-Bueno Wittgenstein: That was about the liability side, but let me just add a couple of comments here. I think this is what Sergio explained, is just in line with what we did during the during the Strategy Day, corporates and SMEs above, mortgages in line, and consumer loans well above. And on the liability side, I think what we are expecting is a larger growth than we originally expected from the on-balance sheet part, and that will partially compensate. On the mortgages, I think there has been a lot of hype around this. And I have to say that when the interest rates of the new production were above the 8-year swap, we were gaining market share. We got to a point in quarter 3 '24 in which we went -- when this gap was still positive, we went to almost a 9.5% market share of new acquisition. We are down to 7% purposely, strategically, so we are not gaining market share. We have been declining over the course of the quarters until for Q4 '25 in which we landed at 7% market share of new production. And that is purposely because despite the fact that they have positive RaRoC of above 20% or around 20%, their margin is negative and the investments and the upfront costs are important. So their value creation in the longer term, but they have a negative impact in the short term on the P&L and certainly, in NII, they are not the most exciting thing. But nevertheless, with the cross-selling, they become attractive. So this confirms in a line that has had a lot of discussion, which is mortgages that we will be in line with our current market share, which is approximately 7%, and adapting up and down depending on the attractiveness and the pricing of the market. Sergio Palavecino: Yes. And I think your last question was regarding our expectations of the ALCO book. When we say it's the ALCO book, it's mainly connected with our liquidity and with our ALM. Liquidity is expected to remain strong because on top of this dynamics of loans and deposits, we will have the inflow of the price of the TSB transaction. So when we look at the expected evolution of liquidity will be positive, and that we also expect liabilities, current accounts to grow. So we expect a marginal growth on the ALCO book in line with the balance sheet. Operator: Next question is coming from Ignacio Ulargui from BNP Paribas. Ignacio Ulargui: Congratulations. I just have one question on costs and one question on capital. So looking to costs. I was just wondering whether at a given point in time, you could consider using part of the capital generation that you have to fund an early retirement plan or a voluntary scheme so that you can -- have to compensate on that side, the investments that you have in IT? And the second question on capital generation, I mean going forward, is there any lever that could accelerate the capital generation that we see for 2025 around 200 bps? Then anything that we could have in terms of DTA that could accelerate the capital generation going forward? Cesar Gonzalez-Bueno Wittgenstein: I think -- on the first one, I think there has been a long time since we did the restructuring in '21. That means that the age of part of the population here at Sabadell is 4 years older. And therefore, I think we are starting to consider, starting as there's nothing final yet as ongoing and without nothing extraordinary, but we are starting to consider that there could be some early retirements from now on. And as I say, it's not a major thing probably, but we are looking into it as we speak. Sergio Palavecino: And regarding capital generation, Ignacio, it's been quite strong as we have explained in 2025, 196 basis points. It has also -- it has benefited from the impact of the first application of CRR3, also from the 3 securitizations that we have done. And it's important to take into account that we are self-financing the growth in the loan book. So going forward, we are actually looking at fantastic opportunities of keep increasing the loan book. So of course, that has been taken into account in our projections. And therefore, we think that they both consider profitability, but also growth. And of course, growing the loan book, it weighs on capital, but we believe that it's a very good opportunity to actually improve profitability going forward. So the capital generation is connected with both the increased level of profitability and the good momentum in the loan book growth that we're seeing. [ Technical Difficulty ] Lluc Sas: Matthew, we cannot hear you. I don't know if you have unmuted your mobile. Could you please check that? Okay. Yes, we can hear you now, yes. Unknown Analyst: Sorry for that. So yes, I have 2 questions, basically. The first one is on the EUR 2.5 billion distribution accumulated in '26, '27. If you can give a bit of color on the mix between cash buyback? And the second one, a bit more generic, on the impact. Do you think the neobanks, fintechs, new entrants are having in terms of the deposit cost environment in Spain. So we're seeing a lot of banks actually launching digital campaigns like you guys, Bankinter, et cetera. So I'm trying to understand, actually, to what extent that is also driven by the fact that you have new players exploring that type of segment? Cesar Gonzalez-Bueno Wittgenstein: So on the first one, and you can complete, of course, Sergi. The EUR 2.5 billion, the distribution between what is dividends and what is share buybacks, of course, will depend on final decisions of the Board and we cannot anticipate that. But what we have is a commitment of distributing 60% of the proceeds through dividends and no less than EUR 0.20-plus per share per year. And we expect in excess of capital generation over that. And it would make sense at that point in time that, that would be share buybacks. Neobanks have been in play for a while. I think they have an impact. I think I was very close to that because the first kind of neobank was ING Direct, 25 years ago. And they continue having an impact. They acquired a lot of customers, and that's mainly the account opening, where they have more success. The challenge for them, and that doesn't -- it's not a negative comment at all. The challenge for them is cross-selling, deep selling, having savings, having a number of things. So we certainly see that there is a challenge there, but we continue seeing very successful, as I mentioned before, that our digital account is bringing a significant number of clients, and it will be at 1%, as I mentioned before, not for the acquisition, which will still have promotions and the forth. And it's 50% of our acquisition. So we can live with them, and we congratulate them because, of course, in terms of number of accounts, they are doing extremely well. Operator: Next question is coming from Carlos Peixoto from CaixaBank. Carlos Peixoto: Yes. Actually just a couple of follow-up questions on my side. So when you're discussing the outlook for NII in 2027, you mentioned 300... Lluc Sas: Carlos, Carlos, I don't know if you could check your microphone, please, because we cannot hear you very well. Could you check that or speak louder, please? Carlos Peixoto: Yes. Lluc Sas: Yes, much better, much better, yes. Thank you, Carlos. Carlos Peixoto: Okay. So as I was saying, that basically a follow-up question. So the 300 basis points customer spread improvement to 300 basis points that you mentioned is it something that you see as being achievable already before year-end 2026? Or something that you intend to get to by 2027? And also, along with that or in those lines, I might have missed it, how much do you expect volume growth, loan growth and deposit growth to occur? And how much you expect in 2027, you see at a level similar to the 2026 levels? Just trying to get a closer -- better reach to the EUR 3.9 billion in 2027. Sergio Palavecino: Yes. Yes. Thank you, Carlos. Of course, we'll do our best. The customer spread at the end of this year has been 288 basis points. And it will -- in our model and our expectations, it will be marginally higher, but probably very few basis points at the end of 2026. And then it will keep on gradually growing until reaching the -- around -- at around 300 basis points that actually we share with you guys at the Capital Markets Day. Regarding the composition of the expected volume growth behind that assumption at the end of the day, we, in Capital Markets Day, we guided for a CAGR of mid-single digit of loans and deposits. I think we were at a rate of 4%. So I think we are on track to get to those volume growth. In 2025, the Spanish economy performed very well. GDP expanded by 2.9%, in 2026, the consensus is already above 2%. So connected with this growth, we expect a similar levels of growth in the loan portfolio and in the deposit book. So similar rates of growth we are assuming for 2026 at this moment in time. Operator: Next question is coming from Borja Ramirez from Citi. Borja Ramirez Segura: I have a couple of questions on the NII outlook, please. So firstly, I understand that after the sale of TSB, your MREL requirements may be lower. So maybe there's some opportunity for funding cost savings in case you're able to amortize more expensive MREL issuances? And then my second question would be on the digital deposits. If you could kindly provide the amount outstanding of the digital deposits. And also, what are your expectations for the costs and the volumes of digital deposits going forward? And lastly, I would like to ask on, if you could provide details on corporate CapEx outlook and investment from corporates in Spain, please? Sergio Palavecino: Thank you, Borja, for your questions. Regarding the first one, connected with MREL. MREL requirement will not decrease after the sale of TSB, but it's a percentage of the risk-weighted assets. What we -- what it will go down are the risk-weighted assets once TSB is sold. And then as a matter of fact, once we have less risk-weighted assets, we will have a lower total amount of MREL requirements, right? So that's why we're saying that after the sale, we will issue -- we will have lower funding needs, and therefore, we will have -- we will be issuing less in the market. So the -- we will sort of fix this by not rolling the coming maturities. So it will be very natural. And yes, we will have savings from not rolling the maturities and therefore, having a lower fund -- lower capital -- lower wholesale funding needs. And then for the digital deposits, would you like to take this one, Cesar? Cesar Gonzalez-Bueno Wittgenstein: Yes, on digital deposits, we have, from the beginning, decided not to give the exact numbers. And what I can say again and repeat is that this is more than for the volumes, it is for the customer acquisition and for the whole relationship that comes with it and the cross-selling that comes with it. I already shared that the new pricing and review the pricing will give us a saving of around EUR 30 million on full year terms, and that starts on March. It's 50% of our acquisition, it's relevant, and I think we can leave it at that. In corporates and SMEs, we closed the year at a growth -- with a growth of 2.4%. And as we mentioned before, looking forward, loan demand from corporates and SMEs remain solid, and we have particularly a strong pipeline of medium- and long-term loans. Therefore, we are confident that the growth will accelerate back to mid-single-digit levels. And by the way, the front book yields and spreads remain stable. Operator: Next question is coming from Pablo de la Torre from RBC Capital Markets. Pablo de la Torre Cuevas: My first question -- your guidance for -- you mentioned an insurance worth... Lluc Sas: Pablo, so sorry to interrupt. I think -- we cannot hear you very, very clear. It looks like the sound is -- I don't know if you could check your mobile or could you try again, please? Pablo de la Torre Cuevas: Is it better now? Lluc Sas: I think so. Can you start the question, please? Pablo de la Torre Cuevas: Yes. Sure. And my first question was degrowth in 2026, you mentioned... Lluc Sas: Pablo, Pablo, I'm afraid, it doesn't work. I don't know if you could please send us or send me an e-mail, and we'll -- I will read the question for you, if it's possible. I'm sorry for that. So operator, could we move to the next question, please, while Pablo is sending us an e-mail? Operator: Next question is coming from us from Hugo Cruz from KBW. Hugo Moniz Marques Da Cruz: Can you hear me? So my 2 questions. So first of all, on OpEx, I mean the 3% -- and I'm talking about slide, I think it's 28. So the 3% CAGR seems like an acceleration versus '25. And when you've talked about the moving parts, staff growing, inflation, there have been flat D&A growing, I think, mid-single digits. So I just can't see how we get to 3%. I get to more something like a 2%, 2% in EBIT. So is the guidance too conservative on OpEx? And the second question is similar. Cost of risk. You have a slide where the total cost of risk keeps coming down, ended at 37, but then the guidance assumes you pick up to 40. Again, are you being a bit too conservative there or not? Sergio Palavecino: Yes. Thank you, Hugo, for your questions. We try to be prudent and the guidance on cost has the components that we have just gone through. What we would say is that we are very comfortable with the 3%, and this means that we're not going to be higher than that. So we will work, and Cesar mentioned, some different work streams that we are already exploring so that we can improve the outlook for growth in costs and therefore, improve efficiency going forward. Regarding cost of risk, in 2025, we have reported a 37 basis points cost of risk. 24, credit, 13, others. For 2026, again, we're very comfortable with the 40. We think that credit cost of risk is not going to be higher than 30 basis points, and the -- all the rest is going to be around 10. So again, it's a very comfortable cost of risk that takes into account that we are seeing a very growth momentum in things like consumer and SME, and that may marginally add a little bit more because we are not seeing any increase in cost of risk in the different products. But of course, the cost of risk of consumer is higher than the ones in mortgages, for instance. So growing progressively more in consumer has an impact. Actually, that impact is rather offset by the good performance in the cost of risk of each different product. So what -- I think what I would say is that we feel very comfortable in the guidance of this cost and cost of risk. Could you agree with that, Cesar? Cesar Gonzalez-Bueno Wittgenstein: Yes, I agree fully. And I think the perfect expression is we feel very comfortable with the 40 basis points. Is it conservative or not? The time will tell. But as I think we tried to explain during the presentation, the fact that we have reached a much clearer and lower levels of probabilities of default across all product lines has a lagged effect on cost of risk and on capital generation. And therefore, that's a tailwind that should help the cost of risk. How much of that will be offset by a change in mix into more profitable and better yielding products like the consumer lending and the SME lending in which we expect marginally more growth and significant more growth than the market in consumer lending? How much that will offset that? It's difficult to know. But in general, I think the perfect expression is that we feel confident with the 40 basis points. Lluc Sas: Okay. Then we also have the questions that Pablo sent to me. The first one is regarding the asset management and insurance business. So if we could elaborate a little bit more on the assumptions that we've made in terms of market impacts and others when we guided for this fee growth for 2026? And the second one is regarding the breakdown of the on-balance sheet funds between fixed term and current accounts going forward. Cesar Gonzalez-Bueno Wittgenstein: Yes. I think we'll share this one. From a qualitative perspective, I think we are growing very handsomely already in asset management. And I think we are in record productions in terms of insurance. Over the course of the years, I think we are going to see that fees gradually increase as a percentage of core banking revenues and therefore, reduce somewhat the bottom line P&L sensitivity to interest rate movements, and that's on the back of asset management and mortgages. Sergio Palavecino: Indeed, in 2025, we had a very sound growth in Asset Management and Insurance. This was 14% growth. And the growth that we see in fees connected with that was 15%. So we are seeing that clearly, the revenue is fully connected with the volumes. And for 2026, we're expecting a similar pattern with double-digit growth in insurance and asset management. Very happy, very successful performance in the business. Regarding on-balance sheet funds, Out of the EUR 128 billion, I think, of on-balance sheet ex-TSB, roughly 1/3 of that is remunerated. So more than 2/3 are non-remunerated. So more than EUR 80 billion are stable and transactional current accounts, not remunerated, and the other 1/3 is term deposits or remunerated current accounts. And that is connected with the different customers that we have and the different franchises. Of course, the remunerated part is the part sensitive to interest rates. Operator: Next question is coming from Cecilia Romero from Barclays. Cecilia Romero Reyes: Congratulations, Cesar, on your trajectory, and also wishing you all the best for the next stage. So my first question is a follow-up on a recent question. Looking at recent trends, the new production has been largely dominated by mortgages and consumer lending. And you also expect, during the call, and in your strategic plan, your intention to grow in corporate and SMEs. And I was just wondering if you were able to specifically tell us what's the cost of risk you are observing in SME and corporate lending, and also in consumer lending where you have been expanding quite rapidly? And then just a small one on fees. I just wanted to make sure that the fees from your payment business have been included in the fee line for the entire 2025. So just wondering if the 5% growth is like-for-like '26 versus '25? Sergio Palavecino: Let me take the second one, and thank you, Cecilia, for your questions. Regarding the fee lines, yes, fully comparable. So the payment business fees are included in the 2025 reported figures and the expected growth considers the same. So the answer is yes. Cesar Gonzalez-Bueno Wittgenstein: On the first one, I don't think we have given a specific cost of risk for consumer lending or SMEs. The only thing I can tell you is that the PDs have gone down by 50% since '24. And that is the major driver for the cost of risk. And we are at the level in -- we have reached the levels of cost of risk that we want to have on the longer term, although as I said before, they will take some time to go fully through the P&L, both in terms of cost of risk and capital generation. Lluc Sas: Okay, we've got one final question. So operator, please? Operator: Last question is coming from Lento Tang Bloomberg. Lento (Guojing) Tang: I have a follow-up on the hedging on the NII. So the EUR 9 million, I'm just wondering how long is this hedged? And what is the sensitivity to Euribor? And then another question on your ambition of the international business. Lluc Sas: So I guess, Lento, the last question is regarding the international business, the strategy, okay. Sergio Palavecino: Okay. Let me take the first question, the hedge of the fixed rate mortgages. I think we just mentioned that hedge is connected with this fixed rate and is a hedge where we pay fixed, we receive a floating Euribor 6. As Euribor 6 has been going down, that is the source of the impact. But the good news is that Euribor 6 months has been already stable for a number of months. So this will be -- this effect will fade completely in the next quarter. And Cesar, would you like to take the one on the international business? Cesar Gonzalez-Bueno Wittgenstein: Yes, I think -- well, Mexico and Miami represent more or less, give or take, 5% of our capital each. And we are seeing currently quite a lot of opportunities for growth. They are profitable. They have positive returns on tangible equity. And we have been seeing that the growth in '27, I mean, our expectations of our growth for '27 are higher than the national growth, but that doesn't mean a change in our ambition. It's marginal. It's not very significant. It's just that we are seeing opportunities there. They are very linked to our verticals in which we have a lot of expertise. They are linked to Spanish customers. So it's difficult to separate what is international and what is national. And the 2 verticals in which we do extremely well is, especially, hospitality and energy and to a lesser extent, civil engineering. Lluc Sas: Right. So that concludes our presentation today. Thank you, Cesar and Sergio, and thanks to all of you for joining us today. If you have any further questions, the Investor Relations team is always here to help. Have a great day. Cesar Gonzalez-Bueno Wittgenstein: Thank you very much. Sergio Palavecino: Thank you.
Lluc Sas: Good morning, and thank you for joining Sabadell's results presentation for the fourth quarter and the full year 2025. We are joined today by our CEO, Cesar Gonzalez-Bueno; and our CFO, Sergio Palavecino. The presentation will follow a similar format as in previous quarters. First, our CEO will walk us through the key highlights of the year. Then our CFO will go into the financials and the balance sheet, before our CEO concludes with closing remarks. Finally, we will open the floor for a live Q&A session where you can ask your questions. So Cesar, over to you. Cesar Gonzalez-Bueno Wittgenstein: Thank you, Lluc, and good morning, everyone. We announced yesterday that the Board of Directors of the bank and I have agreed on my resignation as Sabadell's CEO, while Marc Armengol has been appointed new CEO. These changes will take place around May, following our AGM, and once regulatory approvals have been obtained. Until then, I will remain as Sabadell's CEO, and Marc will remain TSB's CEO. And I think now is the right moment for me to step down, and I say that absolutely sincerely. Our current strategy -- strategic plan is solid and well-defined and supported by everyone, including Marc, who has been a great part of its construction. Targets for '26 and '27 are ambitious but achievable, and we are in course. And now it's all about execution, execution and execution of the current plan and planting seeds for an exciting future. Therefore, the bank is on the right track to deliver its targets. And just very briefly, on a more personal note. Look, I had opted for retirement 6 years ago. And the opportunity of joining Sabadell was so tempting that I couldn't let it pass. I was called for this project. I could not refuse. It has been far more exciting and rewarding than I could have expected. And I think now, it's the time to go. But on top of delivering on our plan, Sabadell also needs to start thinking about this future beyond 2027. There's an increasing number of opportunities from banks arising from technology in general, and from artificial intelligence, in particular. I think we have done a tremendous development in digitalization, but AI goes beyond, and that plan needs to be accelerated and it will transform the bank not in the next year, but in the years to come, and this transformation will be profound. In this context, my dear and friend, Marc Armengol, is the perfect CEO to deliver our targets for '26 and '27 because he has the managerial skills. But beyond, Marc brings strategic vision and delivery, combining CEO experience with developing and executing corporate strategy in the U.S. and in U.K. He has proved his commercial mindset at TSB, where he has improved competitiveness by getting even closer to customers. He also brings exceptional technological, operational and digital expertise from business integrations to large case transformations in Spain, U.K., U.S. and Mexico. And very important, he knows everything about Sabadell. He is definitely not a newcomer. As a matter of fact, this is the first internal CEO appointment since Sabadell went public over a quarter of a century ago. And I think this proves maturity for this great institution. All in all, that is the right time for the bank to address this change. It is the right moment for me, and it is the right moment for Marc. And before moving to the result presentation, let me repeat it one more time. We have announced my resignation and the appointment of a new CEO, but we remain fully committed to delivering our plan and reaching our financial targets for '26 and '27. Key messages for the next full year, we are in Page 4. Given that the TSB sale is expected to be completed during the second quarter of 2026, we are presenting figures with reference to the ex-TSB perimeter. First, volumes grew at mid-single digit during the year, performing loans increased by 5.4% and customer funds by 6.4%. Second, core revenues performed in line with expectations with NII at EUR 3.6 million, while fees were up by 3.6% year-on-year. Third, asset quality continued its positive trend. Total cost of risk declined by 16 basis points and stands at 37 basis points. Moreover, NPAs decreased by 17% year-on-year, while the NPA coverage ratio stood at 64%, up 2 percentage points versus last year. Fourth, this year's shareholder remuneration is EUR 1.5 billion. We have already distributed EUR 700 million through 2 interim cash dividends. And in addition to this, we will allocate EUR 800 million to a new share buyback program. We have already received authorization from ECB and the program will start on Monday. Finally, return on tangible equity stands at 14.3% and the core Tier 1 ratio is 13.1%, after deducting the excess capital that will be distributed. During '25, before dividend accruals, we generated -- I think this is a big number, 196 basis points of capital. Slide 5. And this is a little bit of a reason why. Let me explain why Sabadell is well positioned to keep improving its profitability looking forward. We have a clear strategy that supports profitable growth, as we shared last July during the presentation of our strategic plan. Our ongoing transformation focuses on delivering growth alongside improved asset quality. Although this means marginally lower loan yields, these are more than offset by a much lower cost of risk. Overall, this results in both profitable growth and stronger capital generation. This is a structural and permanent looking forward. Let me explain a little bit further on this. I mean the probability of default is now at the levels of which we wanted. That is done. And the impact on the P&L is immediate because, of course, you lose income, because you're doing less risky assets. But the benefits of that come over time, and it depends also on the duration of the different portfolios. We will still see tails for a long time in terms of -- in the different products. We will see tails of improvement of the risk cost, and we will see tails of improvement of the capital generation due to this. And this is perfectly in line, as we said, with the strategy, and I think it will yield over the course of the year. And furthermore, it makes the bank very sound. But however, and now going to the right-hand side of the slide, following the tender offer period, our business was a bit less dynamic than expected for a time. And we have now clearly regained our commercial momentum. For instance, month-on-month evolution of on-balance sheet funds in December '25 was better than in December '24. And new lending to SMEs was also higher in December '25 than '24. And -- furthermore, and this is meaningful, customer acquisition in December '25 was also significantly higher than in '24. To sum up, we have solid fundamentals and a clear strategy that will support profitable growth and capital generation going forward. Let's go to Slide 6. Performing loans excluding TSB remained flattish quarter-on-quarter and grew by more than 5% year-on-year. At TSB, lending volumes at constant FX remained flattish in the quarter as expected. Moving on to customer funds. On balance sheet, funds regained momentum and increased by 3.4% in the quarter. And this momentum, as we just saw, was more towards the last part of the quarter. Off balance sheet funds also continued to perform well, rising by 1.9% in the quarter and 14% in the year. All in all, in '25, we increased our loan book by EUR 6 billion and our customer funds by EUR 11 billion ex-TSB. This represents mid-single-digit growth, which is in line with our guidance. And this in combination with the growth of capital because growing capital generation but not growing the business is not as attractive as doing both things at the same time. Let's move to Slide 7, loan origination in Spain. In Q4, new mortgages decreased by 3% year-on-year. We have been reducing our market share in new mortgage lending over the past few months as front book yields have compressed. We remain focused on managing our new lending through risk-adjusted return on capital, ensuring that growth is delivered in a profitable manner. New customer loans -- consumer loans in Q4 increased by 8% on a year-on-year basis. In the whole year, new lending of consumer loans increased by 16%. Quarterly new loans and credit facilities granted to SMEs and corporate decreased by 15% year-on-year. This results in a slight decline of 5% if we compare with the full year of '25 with '24. On the other hand, origination of working capital finance remained broadly stable in the year. All in all, a strong performance in new lending during the year delivered loan book growth across all products and segments. If we move to Slide 8, regarding payment-related services in 2025, card turnover increased by 6% year-on-year, while point-of-sale turnover increased by 2%. Let me share that the merchant acquiring business will remain within our perimeter looking forward. Therefore, we will keep this fee income stream. Regarding savings and investment products, we reached a total stock of EUR 70.6 billion in December '25. This represents an increase of EUR 4.2 billion in the year, driven by an increase in off-balance sheet products of EUR 6.5 billion, most of it becoming -- EUR 4.6 billion coming from net inflows. In Slide 9, the breakdown of performing loan book across segments and geographies excluding TSB. In Spain, performing loans fell by 0.9% in the quarter. Mortgages and consumer loans posted positive growth in the quarter. On the other hand, the SME and corporate lending fell by 3.6% quarter-on-quarter, mainly due to the fact that these firms have been growing less heavily on their credit facilities. Year-on-year, performing loans in Spain increased by 5.2%. The mortgage book grew by 5%, consumer loans delivered double-digit growth and the stock of SME and corporate loans increased by 2.4%. The international operations also delivered strong momentum, with performing loans rising by approximately 15% year-on-year at constant FX. If we move now to Slide 10, the U.K. business. As expected, TSB's performing loans and customer deposits remain broadly stable on both quarter-on-quarter and year-on-year. Looking at the main lines of the P&L, NII increased by 7.2% in the year, in line with high single-digit guidance. Fees, which are less relevant for the U.K. business, declined by 15% year-on-year. Total cost decreased by 2.6% in the year, also in line with the guidance, in line with the 3% decline guidance. Provisions increased by around 50% year-on-year. Let me remind you that in '24, TSB recorded releases related to the improvement of macroeconomic assumptions. The resulting cost of risk in 2025 was 13 basis points, considerably better than the 20 basis points guidance. All in all, TSB's net profit reached GBP 61 million in the quarter, translating into almost GBP 260 million for the full year. This implies growth of around 25% in 2025. Stand-alone return on tangible equity was 13.5% despite maintaining a high level of solvency, with a core Tier 1 ratio of 16.7%. Finally, tangible net asset value increased by GBP 154 million between April and December. This, together with the additional TNAV to be generated until the closing of the transaction, will be added to the GBP 2.65 billion sale price, ensuring that TSB continues to contribute to Sabadell until the transaction closes. On Slide 11, a summary of our results. In '25, we posted net profits of EUR 1.8 billion. This represents a 3% decline year-on-year. It is worth noting that when adjusting 2024 net profit for extraordinary items, net profit actually increased by 3.4% year-on-year. All lines have been performing in line with the expectations. Sergio will explain the P&L in more detail shortly. To conclude this section of the presentation, I will outline our shareholder remuneration. The amount for 2025 has been improved to EUR 1.5 billion. This is 9% of our market cap. 2025 remuneration includes EUR 700 million in cash, which have already been paid, and EUR 800 million in share buyback. Last year, we paid 2 interim cash dividends, one in August and one in December of EUR 350 million each. These distributions will be followed by a final dividend of EUR 365 million as well as a EUR 435 million of excess of capital. These amounts to EUR 800 million via share buyback program scheduled to begin next Monday. No doubt, exceptionally, the final dividend will be distributed entirely through a share buyback. The main reason is that we believe that the stock is currently trading at a discount to its fair value, making a buyback the best option to reward our shareholders. We expect to distribute EUR 2.5 billion across '26 and '27, which also represent 9% of the market cap each year, once we deduct the extraordinary dividend related to the sale of TSB. All in all, we are on track to deliver on our commitment to distribute a cumulative EUR 6.45 billion of remuneration over '25 and '27. On top of that, we reiterate our commitment to deliver an annual cash dividend per share above EUR 20.44 from '26 onwards. I will now pass the floor to Sergio, who will provide a more detailed overview of the bank's financial performance. Sergio Palavecino: Thank you, Cesar, and good morning, everyone. Let me begin by presenting the full detailed P&L. As we will explain during the presentation, the annual performance shows an alignment with our year-end targets. We recorded a net profit close to EUR 1.8 billion or EUR 1.46 billion when excluding TSB. Before we go through each line, I'd like to highlight a few extraordinary items and reclassifications recorded this quarter. Firstly, on the trading income line, we recorded an expense of EUR 15 million related to the exchange rate hedging on the full proceeds from the sale of TSB. This impact will be recurrent until the transaction closes. Secondly, and following the termination of the agreement to sell the merchant acquiring business, we have reclassified EUR 23 million from other provisions to depreciation and amortization. The impact of this on net profit is neutral. Finally, on the gain on sale of asset line, we adjusted EUR 20 million related to certain IT and software assets. We will now review the main P&L items in more detail, focusing on Sabadell's performance, excluding TSB. Starting with NII on Slide 15. We recorded EUR 3.6 billion in NII for the year, fully aligned with our guidance. In the quarter, Sabadell ex-TSB delivered close to EUR 900 million, broadly stable versus the previous quarter. Now let's look at the top right-hand side of the slide to understand the drivers behind this quarterly evolution. Moving from left to right, customer NII had a positive impact of EUR 2 million. Within this, the customer margin decreased by EUR 7 million due to the negative repricing of variable rate loans. Although interest rate pressure on loan yield has already eased significantly. The good news is that volumes more than offset the customer spread compression. ALCO, liquidity and wholesale funding contributed by EUR 3 million, supported by lower refinancing needs and lower spreads. Other items had a combined impact of minus EUR 9 million. This mainly reflects the negative impact of certain interest rate hedges related to the fixed rate mortgage portfolio. TSB added EUR 11 million positive this quarter, reaching EUR 314 million as the contribution from the structural hedge was higher than the depreciation of the sterling. For 2026, we expect NII to increase by more than 1% with a clear acceleration throughout the year. In fact, we expect NII to bottom in first quarter '26, mainly due to fewer calendar days and the final repricing of the variable rate loans. From that point, it should grow steadily quarter after quarter, being the fourth quarter of '26 mid-single digit higher versus the fourth quarter of '25. For these estimates, we are assuming interest rates to remain at the same levels as at the end of 2025. We are expecting volumes to perform in line with what we have seen this year, around 6% growth in loans and between 3% to 4% in on-balance sheet funds. Loan yield could decline some basis points in the first half of the year, but should return to current levels driven by higher growth in consumer and SME lending. On cost of deposits, we still see room for further improvement as we reprice the last part of the term deposits. And finally, the impact from the sale of TSB bonds in the ALCO portfolio will be offset by savings in wholesale funding as we will have lower MREL funding needs after the sale. Leaving the NII line aside and moving on to fees. Fees and commissions within the ex-TSB perimeter increased by around 4% year-on-year. Asset management and insurance fees were the main contributors, growing by 15% year-on-year. This performance was driven by strong volume growth in off-balance sheet funds, with -- fully aligned with what we presented at our Capital Markets Day. The fourth quarter was the strongest of the year, with ex-TSB fees rising by 6% quarter-on-quarter, supported by a strong commercial activity and the seasonal uplift in asset management and insurance fees, including a success fee component of EUR 12 million. Looking ahead, we expect fees to increase by mid-single digits in 2026. This growth will be, again, largely driven by asset management and insurance fees. Moving on to the costs on Slide 18. Total ex-TSB costs increased by EUR 44 million in the quarter, mainly driven by 2 factors: first, a reclassification of EUR 23 million from other provisions to amortization following the termination of the merchant acquiring agreement with Nexi. Consequently, going forward, the quarterly run rate for ex-TSB amortization line is expected at around EUR 100 million. And second, the special remuneration in shares to all employees related to the end of the takeover bid amounting to EUR 16 million. All in all, total costs at ex-TSB increased by 2.5% year-on-year. This evolution is totally consistent with the target of low single-digit growth, despite the reclassifications recorded at the one-off personnel costs I have just explained. For 2026, we expect total costs including amortization, to grow by around 3%, fully in line with the strategic plan targets. Moving on to Slide 19. We will now cover credit cost of risk and other provisions. Total cost of risk for the year 2025 was 37 basis points, better than the already improved guidance of 40 basis points for the ex-TSB perimeter. Meanwhile, credit cost of risk fell to 24 basis points, which represents 9 basis points reduction in the year. Now looking at the bridge of the different components of the total provisions for this quarter, on the top right-hand side, we booked EUR 107 million of loan loss provisions, excluding TSB. Then we had EUR 8 million positive impact by driven -- impact driven by real estate asset disposals, [indiscernible] double-digit premium. NPA management costs remain in line with the usual run rate. Other provisions, mainly related to litigations and other asset impairments, were impacted this quarter by the EUR 23 million reclassification previously mentioned. And finally, TSB provisions were EUR 18 million this quarter. For 2026, we expect total cost of risk to remain at around 40 basis points, underpinned by positive asset quality dynamics and the gradual impact of our risk management measures. This better asset quality will offset the potential shift in business mix as we expect stronger growth in companies and consumer lending. Moving on in the next section, I will walk you through asset quality, liquidity and solvency. On Slide 21, we can see that nonperforming loans and coverage ratio continued to improve during the year. Within the ex-TSB perimeter, NPLs decreased by close to EUR 700 million over the year, demonstrated continued success in portfolio derisking and proactive credit risk management. As a result, the NPL improved 66 basis points to 2.65%. The reduction in NPLs is also consistent with the improvement in Stage 2 loans, which declined by more than EUR 1.3 billion in the year. Finally, the coverage ratio increased by 3 percentage points, reaching 69%. Moving on, in terms of foreclosed assets, net NPAs as a percentage of total assets remained comfortably below the 1% threshold, confirming the bank's structurally improved risk profile. The stock of NPAs declined by 15% year-on-year, equivalent to more than EUR 800 million in absolute terms. Meanwhile, the coverage ratio has improved by 2 percentage points. The sales of real estate assets continued their positive trend as 23% of the stock was sold over the last 12 months with an average premium of around 10%. On Slide 23, we are happy to see the continued improvement in asset quality over the past 2 years, explained by 3 favorable dynamics: a consistently declining NPL ratio, a quarter-on-quarter improvement in the cost of risk, along with a higher coverage ratio. Turning now to liquidity and credit ratings. In short, liquidity buffers have remained broadly stable over the year, with credit ratings improved, as you can see on this slide. Standard & Poor's upgraded our rating by one notch to A- with a positive outlook. During the year, Moody's and Fitch also upgraded our rating by one notch to Baa1 and BBB, respectively, both with a stable outlook. Turning to the next slide, we can see our current MREL position, which stand well above the required levels. It is also in line with the buffer of more than 200 basis points set as a threshold in our strategic plan. It is important to note that in 2025, we issued a total of EUR 3.1 billion across the capital structure as well as through covered bonds. We also carried out 3 securitization transactions with significant risk transfer during this year using both synthetic and cash instruments. Let me highlight that once the TSB sale is completed, we will deconsolidate TSB's risk-weighted assets. And therefore, our funding needs will be lower this year. Note that we currently have excess buffer in AT1 even excluding the EUR 500 million issuance that we have just announced that it will be called in March. On the next slide, we can see that we have been able to generate 196 basis points of capital while growing our loan book at mid-single digits. Looking at the quarterly evolution in more detail, we recorded 20 basis points of capital generation before deducting the accrued dividend. This includes 25 basis points from organic CET1 generation after deducting AT1 coupons minus 6 basis points from higher risk-weighted assets, mainly from the update of operational risk, representing minus 14 basis points, and partially offset by the release obtained through the SRT transaction completed in Q4. Then the accrual of a 60% dividend payout ratio had a minus 29 basis points impact, bringing the capital ratio to 13.65%. Given that we are distributing EUR 435 million of excess capital, 54 basis points must be deducted, which takes the CET1 ratio to 13.11%, and in place, an ample MDA buffer close to 400 basis points. With that, I will hand over to Cesar, who will conclude today's presentation. Cesar Gonzalez-Bueno Wittgenstein: Thank you, Sergio. On Slide 28, you can see the achievement of our 2025 targets, a summary of the new guidance for '26 and the reconfirmation of our 2027 strategic plan targets. As we have seen throughout the presentation, the 2025 results have been in line with our year-end guidance. For '26, the guidance we are giving the main P&L lines points to recurrent return on tangible equity ex-TSB of around 14.5%, considering tangible equity of roughly EUR 10 billion. Of course, the return on tangible equity that will be reported will be higher because it would include the TSB impact. Our business model, which is built around strong capital generation, allows us to reconfirm shareholder remuneration of EUR 2.5 billion across '26 and '27. Last but not least, we are reconfirming every single one of the targets for '27 that we presented at our Capital Markets Day. And to conclude the presentation, I would like to summarize a little bit of our equity story. First, Sabadell is a franchise that pursues growth while preserving asset quality. This has been a major turnaround of the last years. Since the tender offer finished, we have been regaining commercial momentum, and we have room to gain some market share in a growing market in the products and segments of our choice. Second, we have strong capacity to generate capital while continuing to grow, which enables us to offer attractive shareholder remuneration. Third, it's all about execution, and this team knows about that. We've been consistently delivering on our guidance since '21, and we are now -- and we now have a clear path towards a 16% return on tangible equity in 2027. And all of this comes while we are trading at a discount to peers in terms both of total shareholder yield and multiples such as PE. Our distribution yield, meaning dividends plus excess capital returned to shareholders, was around 9% in 2025, and is expected to remain around that level in '26 and '27. This compares with a peer average of below 6% for '25. When looking at PE multiples, it's important to adjust Sabadell for market's cap for the extraordinary dividend associated with the disposal of TSB. Many market participants, we believe are not fully doing this. Once adjusted, Sabadell is actually trading at below 9x earnings, while Spanish peers are trading well below -- well above 10 times. There is therefore a clear opportunity here with considerable upside potential for Sabadell's stock. That's why the entire amount pending distribution to shareholders, the final dividend and the excess capital will be executed through a share buyback starting on Monday. It will be equivalent to more than 5% of our market cap, significantly higher than any other Spanish peer. And with this, I hand over to Lluc. Lluc Sas: Thank you, Cesar. We will now open the Q&A session. Given the limited time available, we would appreciate if you could please keep your questions to a maximum of 2. So operator, could you open the line for the first question, please? Operator: First question is coming from Maks Mishyn from JB Capital. Maksym Mishyn: [Audio Gap] in target? Could you walk us through the mathematics? And the second one is on deposit growth. Ex-TSB, it has slowed in the fourth quarter and grew below the sector average. Can you please walk us through your thinking on why this is happening? And what will you do to recover growth? Sergio Palavecino: Thank you very much, Maks, for these questions. In order to help with the mathematics of the NII for 2027 that we are confirming, it will be at around 3.9%. We've been sharing in Slide 16, what are the expected dynamics on the quarterly NII. And as you can see in the slide, we expect the trough in the first quarter of the year because we will have a fewer number of days. We still have the last part of the repricing of the variable rate loans, the ones replacing with Euribor 12 months. But then from there on, we will have the tailwinds that we are currently enjoying for volumes that cannot be seen in NII because of the headwinds of customer spread. Customer spread will stabilize. And then by the second half of 2026, volumes will be on -- compared to the quarter of the previous year, already growing at the mid-single digit. That dynamic in our view, will continue into 2027. And as customer spread will increase a little bit, we are still expecting our customer NII to get close to 300 basis points in 2027. Also, the rates today are somewhat more positive as we see that Euribor 12 months in 2027 will steepened somewhat. So the dynamics that we show for the end of 2026 will continue into 2027. And yes, in our mathematics, they will lead us to NII that will be close to around EUR 3.9 billion. And then the second -- your second question was deposits -- deposit growth. Deposit growth, it was, year-on-year, at 3.6%. It has accelerated from the third quarter, as you mentioned, but this is rather due to very strong growth, really strong growth in the fourth quarter of last year. So when we look at our dynamics on customer funds, we see that currently are strong. Customer growth -- customer funds have growth more than 6%, that's EUR 11 billion growth, a bit skewed towards the -- of balance sheet products: EUR 6.5 billion growth in the off-balance sheet products, EUR 4.5 billion growth in the on-balance sheet. The -- when you do the average growth of deposits, it's actually EUR 4.5 billion. So as Cesar has mentioned, we have acknowledged that we got some minor impacts during the tender of a period in September or October. But we have -- we're very happy to see that we have fully recovered the commercial momentum and December has been very good, and all commercial feedback getting into the new year is good. So we are positive on the volume growth that we are sharing with the market today. Cesar Gonzalez-Bueno Wittgenstein: I think, indeed, that's spot on. And I think that at the core -- at the helm of the hostile takeover, of course, there were some decline in balances, but we see very clearly the recovery, the momentum and everything is on track for the future, and that's why we're very positive. Operator: Next question is coming from Francisco Riquel from Alantra. Francisco Riquel: So first of all, congratulations, [indiscernible] 2 questions for me. First of all in a year -- I want to ask about the quarterly NII bridge in Slide 15, particularly on the core also others with EUR 9 million of interest rate hedges then you can give details on these hedges, what impacted in '26. If that should unwind in '27 or not. Also, if you can comment on the impact from the TSB, MREL and quantify, and the impact in '26 and '27. Also [indiscernible] NII and the improvement in the customer spread, that just said by end of '26 despite reducing the cost of deposits [indiscernible]. So how do you plan to achieve that? Do you think that you have been overpaying for online deposits in '25 and you will adjust your digital offering? And will you grow deposits even if you make less? And then my second question is on costs. Your 3% cost guidance for '26. I understand you include the full year impact of the D&A related to the merchant business, excluding that to cost inflation of just 1%. What type of efficiency measures will you implement to get there? And how can you reassure that you will not be under-investing in the technological transformation? Sergio Palavecino: Thank you, Paco, for your questions. Let me see if we got them all. The first one is regarding the hedges that we show in Page 15. I think we already shared with you guys in the third quarter that we're having an impact on the hedge that we have of the fixed rate mortgage portfolio. As you know, the Spanish market now for a number of years and us in particular, we have been originating virtually everything in mortgages in fixed rate. And now it's been a number of years and recently quite a strong production. So that's a lot of duration, and therefore, we've been hedging that duration. That means that the hedges we pay fixed as we get pay fixed in the mortgage. And we received Euribor 6. So these hedges -- we pay fixed, we received Euribor 6. Euribor 6 has been trending down for a number of quarters, but the good news is that this has been the last quarter, the way we see it, because Euribor 6 has been already flat in the fourth quarter. So in the -- going forward, we no longer expect impact from the hedge, of course, connected with Euribor 6 and then if Euribor 6 goes up and down, of course, it will have an impact. But so far, with the current level of rates, it should be flat. And then your second question was on MREL. MREL currently -- the MREL bonds of TSB are roughly EUR 1.4 billion, and the spread is around 200 basis points. That MREL then is -- MREL that we raised in group in the capital markets. So when this -- we will no longer have this income, but we no longer have the cost in the wholesale funding. This may take some quarters, but at the beginning, we will also have the help of the price that we will get from the sale. Initially, it will be close to EUR 5 billion. If you add up the price of the shares and the price of the bonds, and that will yield in the treasury account, and that will also help to -- that will combine with the savings in the wholesale funding, altogether will offset the impact of the lower MREL of TSB in the ex-TSB perimeter. And for deposits, yes, we expect, as we have written in the presentation, still somewhat reduction in the cost. And this is not only connected with the online, of course, it's also connected with the online. On the online, we have a strategy like any other one-off acquiring, having a very attractive offer, acquiring customers, and then we manage the acquisition. Connected with that, we have an offering, then the price of the book will go down in March, and we will keep on having new offerings. It's a dynamic, of course, product. And we're quite happy because it's been quite successful. The reduction is more coming from term deposits 1 year, 2 years that will come due, either have already matured at the end of the last quarter or will mature in the first quarter of 2026. And we -- when this is renewed, when this is -- the price is lower, connected with the lower prices that we have in the market. And finally, cost that you mentioned, the reclassification of EUR 23 million that we did is permanent because we are not considering the sale of the payment business. The payment business is going to remain within the perimeter. So therefore, the -- it's apple with apples. So the comparison with 2026 and the increase in the 3% is not going to be distorted by that. So in the 3% rate and CAGR that we already shared with the market in the Capital Markets Day, there are 3 major components: salaries, we are expecting salaries to grow at inflation and that is, let's say, close to 2%; then we are seeing general cost flattish, thanks to the different efficiency initiatives that we are running in the bank; and then amortizations connected with the investment in IT are going to be higher, probably at mid-single digit or so. So we are really allowing ourselves with the room that we need in order to keep investing into the business so that we ensure that we make this business growth as we expect. And I don't know, Cesar, if you want to add something? Cesar Gonzalez-Bueno Wittgenstein: Yes, just on the -- I think it. Just on the digital account and to explain a little bit the rationale and the commercial rationale of all of it and so forth. First, more than 50% of our new client acquisition comes from digital, and we think that, that is a phenomenal success. And when interest rates were at 4%, we paid 2%. But now that interest rates are at 2%, we are going down, as you mentioned, Sergio, to 1% starting on March. This is very attractive because it's a full service and with all the gadgets current account that at the same time has a remuneration, but it is capped at EUR 50,000. And therefore, what it is doing, it is attracting customers with 50% of their payrolls, 45% of them do payments every day. And we are getting them to be part of the bank in an attractive way. So this is not a funding strategy. But nevertheless, because the volumes are starting to be significant, now it is the time to reduce the payment from 2% to 1%. It has already been announced to clients. It needs a lead period until you can implement from the moment you announced, and it will happen on March, and it will have progressively impact -- some impact. It's around EUR 30 million year-on-year over the course of the year. Lluc Sas: I would kindly suggest to switch off the microphone when the analysts are asking the questions because we've been told that they cannot hear the questions when they talk. So operator could you open the line to next question, please? [ Technical Difficulty ] Sergio Palavecino: Thank you, Britta. Regarding the MREL dynamics, that the maturities in the group are quite front loaded. So actually, what we are seeing is that by the fourth quarter of 2026, the impact of the sale of the TSB bonds will have already been -- will be already -- being offset by lower funding needs in group already in the fourth quarter of 2026. Regarding the volume developments that you wanted to discuss. At the end of last year, as you can see, we're seeing mortgages growing at a 5%, consumer at a high double digit and SME corporate is growing at a low single digit, right? We are seeing corporate and SME poised to accelerate growth. So in our expectation of 6% growth of the loan book, we are considering still consumer loans to grow at a double digit, SMEs and corporates to accelerate from the current low single digit to mid-single digit. And we expect some -- this acceleration on the growth of mortgages from the currently 5% to maybe something between 4% or between 3% to 4%. Those are our assumptions and those are the assumptions that give a combined net growth of 6% in the loan book. And I think there was a last question? Cesar Gonzalez-Bueno Wittgenstein: That was about the liability side, but let me just add a couple of comments here. I think this is what Sergio explained, is just in line with what we did during the during the Strategy Day, corporates and SMEs above, mortgages in line, and consumer loans well above. And on the liability side, I think what we are expecting is a larger growth than we originally expected from the on-balance sheet part, and that will partially compensate. On the mortgages, I think there has been a lot of hype around this. And I have to say that when the interest rates of the new production were above the 8-year swap, we were gaining market share. We got to a point in quarter 3 '24 in which we went -- when this gap was still positive, we went to almost a 9.5% market share of new acquisition. We are down to 7% purposely, strategically, so we are not gaining market share. We have been declining over the course of the quarters until for Q4 '25 in which we landed at 7% market share of new production. And that is purposely because despite the fact that they have positive RaRoC of above 20% or around 20%, their margin is negative and the investments and the upfront costs are important. So their value creation in the longer term, but they have a negative impact in the short term on the P&L and certainly, in NII, they are not the most exciting thing. But nevertheless, with the cross-selling, they become attractive. So this confirms in a line that has had a lot of discussion, which is mortgages that we will be in line with our current market share, which is approximately 7%, and adapting up and down depending on the attractiveness and the pricing of the market. Sergio Palavecino: Yes. And I think your last question was regarding our expectations of the ALCO book. When we say it's the ALCO book, it's mainly connected with our liquidity and with our ALM. Liquidity is expected to remain strong because on top of this dynamics of loans and deposits, we will have the inflow of the price of the TSB transaction. So when we look at the expected evolution of liquidity will be positive, and that we also expect liabilities, current accounts to grow. So we expect a marginal growth on the ALCO book in line with the balance sheet. Operator: Next question is coming from Ignacio Ulargui from BNP Paribas. Ignacio Ulargui: Congratulations. I just have one question on costs and one question on capital. So looking to costs. I was just wondering whether at a given point in time, you could consider using part of the capital generation that you have to fund an early retirement plan or a voluntary scheme so that you can -- have to compensate on that side, the investments that you have in IT? And the second question on capital generation, I mean going forward, is there any lever that could accelerate the capital generation that we see for 2025 around 200 bps? Then anything that we could have in terms of DTA that could accelerate the capital generation going forward? Cesar Gonzalez-Bueno Wittgenstein: I think -- on the first one, I think there has been a long time since we did the restructuring in '21. That means that the age of part of the population here at Sabadell is 4 years older. And therefore, I think we are starting to consider, starting as there's nothing final yet as ongoing and without nothing extraordinary, but we are starting to consider that there could be some early retirements from now on. And as I say, it's not a major thing probably, but we are looking into it as we speak. Sergio Palavecino: And regarding capital generation, Ignacio, it's been quite strong as we have explained in 2025, 196 basis points. It has also -- it has benefited from the impact of the first application of CRR3, also from the 3 securitizations that we have done. And it's important to take into account that we are self-financing the growth in the loan book. So going forward, we are actually looking at fantastic opportunities of keep increasing the loan book. So of course, that has been taken into account in our projections. And therefore, we think that they both consider profitability, but also growth. And of course, growing the loan book, it weighs on capital, but we believe that it's a very good opportunity to actually improve profitability going forward. So the capital generation is connected with both the increased level of profitability and the good momentum in the loan book growth that we're seeing. [ Technical Difficulty ] Lluc Sas: Matthew, we cannot hear you. I don't know if you have unmuted your mobile. Could you please check that? Okay. Yes, we can hear you now, yes. Unknown Analyst: Sorry for that. So yes, I have 2 questions, basically. The first one is on the EUR 2.5 billion distribution accumulated in '26, '27. If you can give a bit of color on the mix between cash buyback? And the second one, a bit more generic, on the impact. Do you think the neobanks, fintechs, new entrants are having in terms of the deposit cost environment in Spain. So we're seeing a lot of banks actually launching digital campaigns like you guys, Bankinter, et cetera. So I'm trying to understand, actually, to what extent that is also driven by the fact that you have new players exploring that type of segment? Cesar Gonzalez-Bueno Wittgenstein: So on the first one, and you can complete, of course, Sergi. The EUR 2.5 billion, the distribution between what is dividends and what is share buybacks, of course, will depend on final decisions of the Board and we cannot anticipate that. But what we have is a commitment of distributing 60% of the proceeds through dividends and no less than EUR 0.20-plus per share per year. And we expect in excess of capital generation over that. And it would make sense at that point in time that, that would be share buybacks. Neobanks have been in play for a while. I think they have an impact. I think I was very close to that because the first kind of neobank was ING Direct, 25 years ago. And they continue having an impact. They acquired a lot of customers, and that's mainly the account opening, where they have more success. The challenge for them, and that doesn't -- it's not a negative comment at all. The challenge for them is cross-selling, deep selling, having savings, having a number of things. So we certainly see that there is a challenge there, but we continue seeing very successful, as I mentioned before, that our digital account is bringing a significant number of clients, and it will be at 1%, as I mentioned before, not for the acquisition, which will still have promotions and the forth. And it's 50% of our acquisition. So we can live with them, and we congratulate them because, of course, in terms of number of accounts, they are doing extremely well. Operator: Next question is coming from Carlos Peixoto from CaixaBank. Carlos Peixoto: Yes. Actually just a couple of follow-up questions on my side. So when you're discussing the outlook for NII in 2027, you mentioned 300... Lluc Sas: Carlos, Carlos, I don't know if you could check your microphone, please, because we cannot hear you very well. Could you check that or speak louder, please? Carlos Peixoto: Yes. Lluc Sas: Yes, much better, much better, yes. Thank you, Carlos. Carlos Peixoto: Okay. So as I was saying, that basically a follow-up question. So the 300 basis points customer spread improvement to 300 basis points that you mentioned is it something that you see as being achievable already before year-end 2026? Or something that you intend to get to by 2027? And also, along with that or in those lines, I might have missed it, how much do you expect volume growth, loan growth and deposit growth to occur? And how much you expect in 2027, you see at a level similar to the 2026 levels? Just trying to get a closer -- better reach to the EUR 3.9 billion in 2027. Sergio Palavecino: Yes. Yes. Thank you, Carlos. Of course, we'll do our best. The customer spread at the end of this year has been 288 basis points. And it will -- in our model and our expectations, it will be marginally higher, but probably very few basis points at the end of 2026. And then it will keep on gradually growing until reaching the -- around -- at around 300 basis points that actually we share with you guys at the Capital Markets Day. Regarding the composition of the expected volume growth behind that assumption at the end of the day, we, in Capital Markets Day, we guided for a CAGR of mid-single digit of loans and deposits. I think we were at a rate of 4%. So I think we are on track to get to those volume growth. In 2025, the Spanish economy performed very well. GDP expanded by 2.9%, in 2026, the consensus is already above 2%. So connected with this growth, we expect a similar levels of growth in the loan portfolio and in the deposit book. So similar rates of growth we are assuming for 2026 at this moment in time. Operator: Next question is coming from Borja Ramirez from Citi. Borja Ramirez Segura: I have a couple of questions on the NII outlook, please. So firstly, I understand that after the sale of TSB, your MREL requirements may be lower. So maybe there's some opportunity for funding cost savings in case you're able to amortize more expensive MREL issuances? And then my second question would be on the digital deposits. If you could kindly provide the amount outstanding of the digital deposits. And also, what are your expectations for the costs and the volumes of digital deposits going forward? And lastly, I would like to ask on, if you could provide details on corporate CapEx outlook and investment from corporates in Spain, please? Sergio Palavecino: Thank you, Borja, for your questions. Regarding the first one, connected with MREL. MREL requirement will not decrease after the sale of TSB, but it's a percentage of the risk-weighted assets. What we -- what it will go down are the risk-weighted assets once TSB is sold. And then as a matter of fact, once we have less risk-weighted assets, we will have a lower total amount of MREL requirements, right? So that's why we're saying that after the sale, we will issue -- we will have lower funding needs, and therefore, we will have -- we will be issuing less in the market. So the -- we will sort of fix this by not rolling the coming maturities. So it will be very natural. And yes, we will have savings from not rolling the maturities and therefore, having a lower fund -- lower capital -- lower wholesale funding needs. And then for the digital deposits, would you like to take this one, Cesar? Cesar Gonzalez-Bueno Wittgenstein: Yes, on digital deposits, we have, from the beginning, decided not to give the exact numbers. And what I can say again and repeat is that this is more than for the volumes, it is for the customer acquisition and for the whole relationship that comes with it and the cross-selling that comes with it. I already shared that the new pricing and review the pricing will give us a saving of around EUR 30 million on full year terms, and that starts on March. It's 50% of our acquisition, it's relevant, and I think we can leave it at that. In corporates and SMEs, we closed the year at a growth -- with a growth of 2.4%. And as we mentioned before, looking forward, loan demand from corporates and SMEs remain solid, and we have particularly a strong pipeline of medium- and long-term loans. Therefore, we are confident that the growth will accelerate back to mid-single-digit levels. And by the way, the front book yields and spreads remain stable. Operator: Next question is coming from Pablo de la Torre from RBC Capital Markets. Pablo de la Torre Cuevas: My first question -- your guidance for -- you mentioned an insurance worth... Lluc Sas: Pablo, so sorry to interrupt. I think -- we cannot hear you very, very clear. It looks like the sound is -- I don't know if you could check your mobile or could you try again, please? Pablo de la Torre Cuevas: Is it better now? Lluc Sas: I think so. Can you start the question, please? Pablo de la Torre Cuevas: Yes. Sure. And my first question was degrowth in 2026, you mentioned... Lluc Sas: Pablo, Pablo, I'm afraid, it doesn't work. I don't know if you could please send us or send me an e-mail, and we'll -- I will read the question for you, if it's possible. I'm sorry for that. So operator, could we move to the next question, please, while Pablo is sending us an e-mail? Operator: Next question is coming from us from Hugo Cruz from KBW. Hugo Moniz Marques Da Cruz: Can you hear me? So my 2 questions. So first of all, on OpEx, I mean the 3% -- and I'm talking about slide, I think it's 28. So the 3% CAGR seems like an acceleration versus '25. And when you've talked about the moving parts, staff growing, inflation, there have been flat D&A growing, I think, mid-single digits. So I just can't see how we get to 3%. I get to more something like a 2%, 2% in EBIT. So is the guidance too conservative on OpEx? And the second question is similar. Cost of risk. You have a slide where the total cost of risk keeps coming down, ended at 37, but then the guidance assumes you pick up to 40. Again, are you being a bit too conservative there or not? Sergio Palavecino: Yes. Thank you, Hugo, for your questions. We try to be prudent and the guidance on cost has the components that we have just gone through. What we would say is that we are very comfortable with the 3%, and this means that we're not going to be higher than that. So we will work, and Cesar mentioned, some different work streams that we are already exploring so that we can improve the outlook for growth in costs and therefore, improve efficiency going forward. Regarding cost of risk, in 2025, we have reported a 37 basis points cost of risk. 24, credit, 13, others. For 2026, again, we're very comfortable with the 40. We think that credit cost of risk is not going to be higher than 30 basis points, and the -- all the rest is going to be around 10. So again, it's a very comfortable cost of risk that takes into account that we are seeing a very growth momentum in things like consumer and SME, and that may marginally add a little bit more because we are not seeing any increase in cost of risk in the different products. But of course, the cost of risk of consumer is higher than the ones in mortgages, for instance. So growing progressively more in consumer has an impact. Actually, that impact is rather offset by the good performance in the cost of risk of each different product. So what -- I think what I would say is that we feel very comfortable in the guidance of this cost and cost of risk. Could you agree with that, Cesar? Cesar Gonzalez-Bueno Wittgenstein: Yes, I agree fully. And I think the perfect expression is we feel very comfortable with the 40 basis points. Is it conservative or not? The time will tell. But as I think we tried to explain during the presentation, the fact that we have reached a much clearer and lower levels of probabilities of default across all product lines has a lagged effect on cost of risk and on capital generation. And therefore, that's a tailwind that should help the cost of risk. How much of that will be offset by a change in mix into more profitable and better yielding products like the consumer lending and the SME lending in which we expect marginally more growth and significant more growth than the market in consumer lending? How much that will offset that? It's difficult to know. But in general, I think the perfect expression is that we feel confident with the 40 basis points. Lluc Sas: Okay. Then we also have the questions that Pablo sent to me. The first one is regarding the asset management and insurance business. So if we could elaborate a little bit more on the assumptions that we've made in terms of market impacts and others when we guided for this fee growth for 2026? And the second one is regarding the breakdown of the on-balance sheet funds between fixed term and current accounts going forward. Cesar Gonzalez-Bueno Wittgenstein: Yes. I think we'll share this one. From a qualitative perspective, I think we are growing very handsomely already in asset management. And I think we are in record productions in terms of insurance. Over the course of the years, I think we are going to see that fees gradually increase as a percentage of core banking revenues and therefore, reduce somewhat the bottom line P&L sensitivity to interest rate movements, and that's on the back of asset management and mortgages. Sergio Palavecino: Indeed, in 2025, we had a very sound growth in Asset Management and Insurance. This was 14% growth. And the growth that we see in fees connected with that was 15%. So we are seeing that clearly, the revenue is fully connected with the volumes. And for 2026, we're expecting a similar pattern with double-digit growth in insurance and asset management. Very happy, very successful performance in the business. Regarding on-balance sheet funds, Out of the EUR 128 billion, I think, of on-balance sheet ex-TSB, roughly 1/3 of that is remunerated. So more than 2/3 are non-remunerated. So more than EUR 80 billion are stable and transactional current accounts, not remunerated, and the other 1/3 is term deposits or remunerated current accounts. And that is connected with the different customers that we have and the different franchises. Of course, the remunerated part is the part sensitive to interest rates. Operator: Next question is coming from Cecilia Romero from Barclays. Cecilia Romero Reyes: Congratulations, Cesar, on your trajectory, and also wishing you all the best for the next stage. So my first question is a follow-up on a recent question. Looking at recent trends, the new production has been largely dominated by mortgages and consumer lending. And you also expect, during the call, and in your strategic plan, your intention to grow in corporate and SMEs. And I was just wondering if you were able to specifically tell us what's the cost of risk you are observing in SME and corporate lending, and also in consumer lending where you have been expanding quite rapidly? And then just a small one on fees. I just wanted to make sure that the fees from your payment business have been included in the fee line for the entire 2025. So just wondering if the 5% growth is like-for-like '26 versus '25? Sergio Palavecino: Let me take the second one, and thank you, Cecilia, for your questions. Regarding the fee lines, yes, fully comparable. So the payment business fees are included in the 2025 reported figures and the expected growth considers the same. So the answer is yes. Cesar Gonzalez-Bueno Wittgenstein: On the first one, I don't think we have given a specific cost of risk for consumer lending or SMEs. The only thing I can tell you is that the PDs have gone down by 50% since '24. And that is the major driver for the cost of risk. And we are at the level in -- we have reached the levels of cost of risk that we want to have on the longer term, although as I said before, they will take some time to go fully through the P&L, both in terms of cost of risk and capital generation. Lluc Sas: Okay, we've got one final question. So operator, please? Operator: Last question is coming from Lento Tang Bloomberg. Lento (Guojing) Tang: I have a follow-up on the hedging on the NII. So the EUR 9 million, I'm just wondering how long is this hedged? And what is the sensitivity to Euribor? And then another question on your ambition of the international business. Lluc Sas: So I guess, Lento, the last question is regarding the international business, the strategy, okay. Sergio Palavecino: Okay. Let me take the first question, the hedge of the fixed rate mortgages. I think we just mentioned that hedge is connected with this fixed rate and is a hedge where we pay fixed, we receive a floating Euribor 6. As Euribor 6 has been going down, that is the source of the impact. But the good news is that Euribor 6 months has been already stable for a number of months. So this will be -- this effect will fade completely in the next quarter. And Cesar, would you like to take the one on the international business? Cesar Gonzalez-Bueno Wittgenstein: Yes, I think -- well, Mexico and Miami represent more or less, give or take, 5% of our capital each. And we are seeing currently quite a lot of opportunities for growth. They are profitable. They have positive returns on tangible equity. And we have been seeing that the growth in '27, I mean, our expectations of our growth for '27 are higher than the national growth, but that doesn't mean a change in our ambition. It's marginal. It's not very significant. It's just that we are seeing opportunities there. They are very linked to our verticals in which we have a lot of expertise. They are linked to Spanish customers. So it's difficult to separate what is international and what is national. And the 2 verticals in which we do extremely well is, especially, hospitality and energy and to a lesser extent, civil engineering. Lluc Sas: Right. So that concludes our presentation today. Thank you, Cesar and Sergio, and thanks to all of you for joining us today. If you have any further questions, the Investor Relations team is always here to help. Have a great day. Cesar Gonzalez-Bueno Wittgenstein: Thank you very much. Sergio Palavecino: Thank you.
Operator: Good day, and thank you for standing by. Welcome to the PAA and PAG fourth quarter 2025 earnings call. At this time, all participants are in a listen-only mode. After the speakers' presentation, we'll open up for questions. To ask a question during the session, you will need to press 11 on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's call is being recorded. I would now like to hand it over to your speaker, Blake Fernandez, Vice President of Investor Relations. Please go ahead. Blake Fernandez: Thank you, Victor. Good morning, and welcome to Plains All American Pipeline, L.P. fourth quarter 2025 earnings call. Today's slide presentation is posted on the Investor Relations website under the News and Events section at ir.plains.com. An audio replay will also be available following today's call. Important disclosures regarding forward-looking statements and non-GAAP financial measures are provided on Slide two. An overview of today's call is provided on Slide three. A condensed consolidating balance sheet for PAGP and other reference materials are in the appendix. Today's call will be hosted by Willie Chiang, Chairman and CEO and President, and Al Swanson, Executive Vice President and CFO, along with other members of the management team. With that, I'll turn the call over to Willie. Willie Chiang: Thank you, Blake. Good morning, everyone, and thank you for joining us. Earlier this morning, we reported fourth quarter and full-year adjusted EBITDA attributable to Plains of $738 million and $2.833 billion, respectively. 2025 was a pivotal year for Plains. The market environment presented multiple challenges including geopolitical unrest, actions from OPEC to increase oil supply, and uncertainty on the economic impact from tariffs. As highlighted on Slide four, despite these distractions, we remain focused on transitioning to a pure-play crude company, which also serves as a catalyst to streamline our operations and better position Plains for the future. This transition is accelerated through the sale of our NGL business, along with the recent acquisition of the EPIC pipeline now renamed Cactus III. These transactions enhance the quality and the durability of our cash flow stream while improving distributable cash flow and positioning us well for future market cycles. 2026 will be a year of execution and self-help, with a focus on three initiatives. First, we remain on schedule to close the NGL divestiture near the end of the first quarter, pending Canadian competition approval. Second, we're integrating the recently acquired Cactus III pipeline and expect to drive synergies related to that system to improve EBITDA. And third, we're streamlining the organization with a focus on efficiency and improving our cost structure. Over the past several months, we have advanced our streamlining initiatives and are targeting $100 million of identified annual savings through 2027, with approximately 50% expected to be realized in 2026. The key drivers of these efficiencies are outlined on Slide five and include reducing G&A and OpEx to reflect a more simplified business, consolidating operations, and exiting or optimizing lower-margin businesses. One example that illustrates our focus on higher-margin businesses is the sale of our Mid-Continent lease marketing business in 2025 for a total consideration of approximately $50 million with minimal impact to EBITDA. This sale removes working capital needs associated with line fill, simplifies operations with an improved cost structure while adding long-term contracts to our business. While this transaction is relatively small, it illustrates an opportunity that we have executed on to streamline our business, improve margins, and do more with less. On the bolt-on acquisition front, in January, we acquired the Wild Horse Terminal in Cushing, Oklahoma, from Keyera for a net cash consideration of approximately $10 million, which includes an upward purchase price adjustment of approximately $65 million upon the closing of the pending NGL divestiture. This asset adds approximately 4 million barrels of storage adjacent to our existing terminal assets and is expected to generate returns well above our internal thresholds. Looking to 2026, and as highlighted on Slide six, we are providing adjusted EBITDA guidance of $2.75 billion net to Plains at the midpoint plus or minus $75 million, with an oil segment EBITDA midpoint of $2.64 billion net to Plains, which implies a 13% growth year-over-year in the crude segment. We expect the $100 million of EBITDA from the NGL segment assuming the divestiture closes at the end of the first quarter and $10 million of other income. We forecast Permian crude production to be relatively flat year-over-year in '26 with overall basin volumes remaining about 6.6 million at the end of the year, similar to 2025 levels. That said, we expect growth to resume in 2027 underpinned by more constructive oil market fundamentals driven by ongoing global energy demand growth and diminishing OPEC's spare capacity. Regarding capital allocation, we recently announced a 10% increase in the quarterly distribution payable on February 13 for both PAA and PAGP. On an annualized basis, the distribution represents a 15¢ per unit increase from the November level bringing the annual distribution to $1.67 per unit representing an 8.5% yield based on the recent equity price for PAA. With the simplification and streamlining of our business, stable cash flow contributions from the Cactus III acquisition, and reduced commodity exposure following the NGL sale, we are modestly reducing our distribution coverage ratio threshold from 160% to 150%. This reflects improved visibility for our business, better alignment with peers, and it paves the way for future distribution growth while still maintaining a prudent level of coverage. Our targeted annualized distribution growth remains 15¢ per unit, and the lower distribution coverage gives us more confidence in our ability to deliver increasing returns to our unitholders. Al will cover specific CapEx guidance for the year, but we expect a meaningful reduction in gross spending versus 2025 levels and maintenance capital will naturally decrease following the NGL divestiture. We remain committed to our efficient growth strategy, generating significant free cash flow, optimizing our asset base, maintaining a flexible balance sheet, and returning cash to unitholders via our disciplined capital allocation framework. With that, I'll turn the call over to Al to cover our quarterly performance and other financial matters. Al Swanson: Thanks, Willie. Slide seven and eight contain adjusted EBITDA blocks that provide additional details on our performance. For the fourth quarter, we reported crude oil segment adjusted EBITDA of $611 million, which includes two months of contribution from the Cactus III acquisition partially offset by a full quarter impact of recontracting on our long-haul systems. Moving to the NGL segment, we reported an adjusted EBITDA of $122 million reflecting a seasonal uptick that was moderated somewhat by warm weather impacts on sales volumes and relatively weak frac spreads. A summary of 2026 guidance and key assumptions are on Slide nine. We remain focused on making disciplined capital investments and expect to invest approximately $350 million of growth capital and approximately $165 million of maintenance capital net to PAA in 2026. Key drivers for EBITDA year-over-year include full-year contributions from acquisitions primarily Cactus III, efficiency and optimization gains partially offsetting the impact of the NGL sale and recontracting as provided on Slide 10. Importantly, I would note that while headline EBITDA will decline slightly from the divestiture, distributable cash flow is expected to increase approximately 1% driven by lower corporate taxes and maintenance capital. As illustrated on Slide 11, we remain committed to generating significant free cash flow and returning capital to unitholders while maintaining financial flexibility. For 2026, we expect to generate approximately $1.8 billion of adjusted free cash flow excluding changes in assets and liabilities and excluding sales proceeds from the NGL divestiture. With regard to the potential special distribution previously communicated, we expect the Cactus III acquisition to mitigate a significant portion of the expected tax liability to unitholders resulting from the NGL sale. From this perspective, we now expect a special distribution of 15¢ per unit or less after closing and pending board approval. Regarding our balance sheet, in November, we issued $750 million senior unsecured notes consisting of $300 million due in 2031 at a rate of 4.7% and $450 million in 2036 at a rate of 5.6%. Proceeds were used to partially fund the EPIC acquisition. Additionally, in the fourth quarter, we paid off the $1.1 billion EPIC term loan assumed as part of the EPIC acquisition by issuing a $1.1 billion senior unsecured term loan at BAA. As a reminder, since we invested $2.9 billion to acquire Cactus III, the majority of the proceeds from the NGL sale will be used to reduce debt. Post-closing, we expect our leverage ratio to trend toward the middle of our established target range of 3.25 to 3.75 times. With that, I'll turn the call back to Willie. Willie Chiang: Thanks, Al. 2025 is a transformational year for Plains. And we're taking steps to further strengthen our company for the future. Despite a complex macro backdrop, we proactively executed several major transactions and implemented efficiency initiatives to position Plains as the premier North American pure-play crude oil midstream company. 2026 will be a year of execution and self-help as we focus on closing the NGL sale, advancing our efficiency initiatives, and driving synergies on the Cactus III system. Collectively, these actions will help position Plains more competitively for the future. I also want to take this moment to express thanks to our Plains team whose dedication and professionalism showed through and through as we also achieved our best-ever safety performance as measured by our best TRIR safety rate as well as the lowest severity of injuries as measured by total loss workdays. In closing, I would like to reiterate that we remain committed to our efficient growth strategy, simply stated, generate significant free cash flow, maintain a flexible balance sheet, and return capital to our unitholders. I will now turn the call back over to Blake to lead us into Q&A. Blake Fernandez: Thanks, Willie. As we enter the Q&A session, please limit yourself to two questions. For those with additional questions, please feel free to return to the queue. This will allow us to address questions from as many participants as in our available time this morning. The IR team will also be available after the call to address any additional questions you may have. Victor, we're ready to open up the call, please. Operator: Thank you. And to answer the question, you may press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please stand by. We provide the Q&A roster. Moment for our first question. First question will come from the line of Manav Gupta from UBS. Your line is open. Manav Gupta: Good morning, guys. I actually wanted to focus a little bit more on the Cactus pipeline and all the synergy benefits you're talking about. And, also, I know it is not the right macro, but, eventually, the macro will turn, and I'm trying to understand what's your ability to expand Cactus III without actually putting more pipe in the ground. If you could talk about some of those factors. Thank you. Jeremy Goebel: Manav, good morning. It's Jeremy. First on the synergies question, the $50 million of synergies we disclosed we believe we're already on run rate for that now. Roughly half of that was associated with G&A and OpEx reductions as well as removing things like insurance and other things that the pipeline had to keep because it was a private equity-backed entity. Those are gone. So half the synergies were achieved in the fourth quarter as we shed those costs. The other 25% are associated with filling the pipeline with supply that we have, doing shorter-term deals, just to build out available capacity. Associated with quality management. Those were ramping up now. So we would imagine during the first quarter, we'll be substantially there on the run rate for the $50 million, and we should hit that number this year. As to your second question on the ability to expand the pipeline, our team, as we recontract the base pipeline to add term and improve rates for that uncontracted capacity now. In parallel, Chris's team is taking a look at all the capital-efficient ways to optimize our upstream connectivity, our downstream connectivity, and then for incremental expansions of the pipeline that don't require new pipe and that do require new pipe. So we're looking at the most capital-efficient ways to do that. We should finish that during the first half of this year. And in parallel, like I said, we are recontracting for term the rest of the pipeline then we'll be in a position to discuss expansions with our customers, etcetera. But first, it's stabilize the base pipeline, and then it's look at capital-efficient expansions from there. In increments that make sense to grow with the base. Willie Chiang: Manav, this is Willie. I think one key point that Jeremy highlighted is it's not a binary expansion at one time. We've got an opportunity to do it in phases and really match the capacity to demand that's out in the market. Manav Gupta: Perfect. My very quick follow-up is can you also talk a little bit about the, you know, $100 million in cost savings through 2027 efficiencies and other initiatives that you are undertaking at the franchise level. Thank you. Chris Chandler: Good morning, Manav. This is Chris Chandler. So the sale of our NGL business in Canada really creates a unique opportunity for us to rethink how our company is structured and organized. So that business, as you might expect, carried a fair amount of operational and commercial complexity. That simply won't exist once the assets are sold. So we're taking a fresh look, from top to bottom at how we're organized, where we're located, a fresh look at, you know, some of the maybe non-core businesses that might be better in somebody else's hands or, for example, outsourced to third parties that could do it more efficiently. So it's really an across-the-board look that, you know, you don't get the opportunity to do this very often. As far as the capture rate, it's a $100 million run rate by the end of 2027. So we expect to achieve $50 million of that in '26. Another $50 million in 2027. Manav Gupta: Thank you so much for taking my questions. I'll turn it over. Blake Fernandez: Thanks, Manav. Operator: Thank you. One moment for our next question. Our next question comes from the line of Brandon Bingham from Scotiabank. Your line is open. Brandon Bingham: Hey. Good morning. Thanks for taking the questions. Maybe first, just looking at the Permian Basin outlook and kind of some of the commentary you just went through, just trying to harmonize it with some of the larger producer commentary from recent earnings calls. How is the sentiment among your producer customers? And maybe what are some of the current discussions like assuming that $60-$65 WTI scenario in your guide? Jeremy Goebel: Good morning, Brandon. This is Jeremy. First, I would say that $60 to $65 is 10% higher than it was a few weeks ago. So it's a very volatile time period. But what I would say is the larger the producer, the less sensitive they are to the plus or minus $5 swings that we used to incur. So I'd say cautiously optimistic. Because if you look consistently across the producer landscape, what used to hold the Permian Basin flat was 325 rigs with less production. Now it's 230 rigs, so you can see those efficiencies are working through the system. There what I would tell you is that they're working to preserve an inventory. They're working to continue to get more efficient with how they develop it. Improve recoveries. All of those things are good for stabilizing earnings for us. And we remain consistent that while 2026 may be flattish, we think a more constructive environment for 2027 and beyond for growth. And that's very consistent with taking a pause, getting better at doing things, becoming more efficient. So that continues to be the case for us. Willie Chiang: And, Brandon, this is Willie. Think a little couple other things to point out. You know, as we develop these basins, it's an exercise in constraint removal. So one observation is gas has been tight there's a number of projects that are there to alleviate that. And when you alleviate the gas constraint, actually, the breakevens for the producers improve, which allows them to be able to be more durable going forward. And I think just to reinforce your point, you know, we've had some consolidation in the upstream section with a couple of producers recently announced. And for us, we like that because it bolsters the producer environment to develop the basins in a more thoughtful way. And I'm actually very, very encouraged by some of the technology improvements that some of the majors are focused on resource recovery. So when you factor all that in, we're very confident and constructive on the ability for the Permian to be a key part of the incremental supply for the world for quite some time. And then would expect growth to come back as fundamentals improve. Brandon Bingham: Very helpful. Thank you. And then maybe just looking at the capital allocation priorities, would be curious to hear if maybe there's a shift in any of them versus what they have been. And specifically thinking around the payout ratio is that 150% level more so to just continue the bolt-on strategy or other priorities? Or is there room to maybe further reduce it and maintain that 15¢ per unit distribution growth cadence a little bit longer? Al Swanson: Brandon, this is Al. Our view on capital allocation has not changed. I think I noted in the prepared comments, there's two ways to look at it. We got the net proceeds coming from the divestiture. We've really redeployed that already in the Cactus III. So the proceeds there, I'll go to pay down debt. When you look ahead post that, it's all the same viewpoints that we had before. Our primary way of returning cash to shareholders is gonna be through distribution growth. That's part of the 160 to 150. We're comfortable with the 150 level. We think it's actually consistent with a large number of our peers. And so we'll be looking to continue looking at bolt-ons where they make economic sense. Distributing cash through distribution growth. Secondly, we do have some preferred securities as well as common unit repurchases. Those will be more on an opportunistic basis. Brandon Bingham: Very helpful. Thank you. Willie Chiang: Thanks, Brandon. Operator: One moment for our next question. Our next question comes from the line of Michael Blum from Wells Fargo. Your line is open. Michael Blum: Thanks. Good morning, everyone. Maybe you could stay on the distribution coverage conversation. I'm really just wanting to get a little more of your thought process on you landed at 1.5 and know, not 1.4 or 1.3. Just exactly there any kind of formulaic way we should be thinking about this? You know, you mentioned some of your peers, but, you know, I could take one peer off the top of it. Top of my head that, you know, says 1.3 is the right coverage. So just trying to get a little more insight into your thinking on that. Willie Chiang: Willie, this is Willie, Michael. You know, when you think about how we came up with the $1.60, right, that was in November '22. And it was intended to be a coverage threshold that was conservative, reflecting in our focus on the balance sheet, I wouldn't try to read too much into the delta. Other than at $1.50, it's still a conservative approach to distribution. And for us, it sets a nice balance for us as we look forward on the ability for multiyear distribution growth. So I would look at it as kind of a reset to the a modest reset, consistent with our peers. As we go forward, we think we have a much more durable cash flow stream, and it's really set there to allow us to feel good about our multiyear distribution growth. Michael Blum: Got it. Thanks for that. And then just wanted to ask on the growth CapEx of $350 million I guess, twofold. One, can you give us any details about any discrete projects that make that up or just some color around what's in that number? And then is this a good way to think about a run rate going forward now that you're really focused in the current markets? Thanks. Chris Chandler: Good morning, Michael. It's Chris Chandler. So, yes, our guide for 2026 is $350 million. That brings us into our more typical $300 to $400 million range, which do think is a good number going forward absent any large investments, which we would call out separately. When I think about how we got to $350 and comparing it to prior years, we, of course, finished up the NGL Fractionator Expansion Last Year In Canada. We finished up a number of Permian crude oil infrastructure projects, and we finished a project to unload Uintawax crude in the Mid Continent. So those obviously all brought the number down on a year-on-year basis. As far as how we build up into the 350, we have a healthy Permian program that's ongoing. In 2025, we connected more wells than we connected in 2024, and 2026 looks to be on a similar pace so far. We're also of course, doing some modest investment to integrate the Cactus III pipeline. To capture synergies as Jeremy mentioned, with additional connectivity and opportunities for quality optimization and cross-connecting between our other cactus pipes. For energy efficiency. And then we see some good opportunities to potentially invest capital into our Canadian crude oil business. We're pursuing a number of potential contracts that would underwrite expansions there and have assumed some of that moves forward in 2026 as part of our capital spending. Michael Blum: Thank you. Chris Chandler: Welcome. Operator: Thank you. One moment for next question. Our next question will come from the line of Jeremy Tonet from JPMorgan Securities. Your line is open. Jeremy Tonet: Hi. Good morning. Thanks for the color today. I just wanted to take a step back here, and there's been some geopolitical developments recently, you know, particularly up, you know, what's been happening in Venezuela. And it seems like there could be a domino effect in a lot of different directions of what happens. So I just wondering if you might be able to share any thoughts on how things could unfold, how could it impact Plains flows on assets, utilization, or even repurposing of assets? Jeremy Goebel: Hey, Jeremy. Jeremy Goebel. How are you? I was calling I mean, the idea around Venezuela, think it was the initial response of 50 million barrels sold into The US Gulf Coast, a significant portion. Do you restructure some of the slates and get consistent with what maybe Pascagoula or the St. James Refiners or the Houston Refiners that run that immediate impact was widening of Canadian differentials in the Gulf Coast the other heavy sour differentials, the Mid Continent and Canada. That creates opportunities more opportunities for quality optimization, cross-border flows, and other movements. Going forward, if you look out a few years and maybe add two to three hundred thousand barrels a day, that might change some buying habits that shouldn't be enough with the commodity prices where they are to change Canadian flows materially. They'll have to price to move. So that would probably be a little bit wider Canadian differentials than otherwise would have been. It would take materially more than that to probably repurpose pipelines. But if you look if you added a million barrels a day, that does different things. Right? That now may push Canadian barrels to the West Coast. That may create other to repurpose pipes from the Gulf Coast to other markets to feed heavy sours into those. So I think it's there's no easy answer because first, you need stability in the government. You substantial reinvestment. Near term, I think it creates some opportunities around quality management. And use of our cross-border pipes. Intermediate term, it creates some logistical opportunities for us as well. But longer term, I think it's gonna take substantial investment in time repurposing, but we're certainly monitoring and paying attention to it. Jeremy Tonet: Got it. That's very helpful, Dan. And one other high-level question if I could. Plains has been active in, you know, industry consolidation bolt-on M&A, what have you over time. And I was just wondering, from your perspective, Willie, where do you think what inning are we in right now for consolidation in the crude oil infrastructure industry, bolt-on, larger consolidation, what have you? Willie Chiang: Well, I would say it's not a perfectly smooth trajectory if you think about consolidation. And you know, and specifically for us, we've made a couple of large transactions. Our focus right now is really to execute on those. We look at all kinds of opportunities that are out there. So you can be assured that as we look at things, we'll stay capital on being able to acquire things. But I do think there will be more opportunities that are out there. And, frankly, you know, to your earlier question, when you think about the macro and you look at the North American infrastructure, you asked about Venezuela. Everyone has a different outlook and view of what might happen there. I personally think it's gonna be very challenged to get a amount of growth out of Venezuela, which leads, know, leads us to a more constructive, crude oil environment going forward. When you think about the infrastructure that we have in ground and the ability to repurpose, if it makes sense, there's a lot of need opportunities there. And know, I mentioned this on one of the last calls. If you think about the basins that you wanna be involved in, the Permian Basin, obviously, is key, close to markets, growth, low breakevens, but you also have Western Canada. And everyone's aware of the desire for them to go to the West Coast. And, you know, we stay very involved in potential of bringing more barrels down to the US. So there's a lot of need opportunities, and you can expect us to stay on track at looking at those with financial discipline. Jeremy Tonet: Got it. That's helpful. Thank you. Willie Chiang: Thanks, Jeremy. Operator: Thank you. One moment for our next question. Next question will come from the line of Keith Stanley from Wolfe Research. Your line is open. Keith Stanley: Hi. Good morning. Wanted to ask on coverage. So the release specifically says that the change in threshold to 150% provides a multiyear runway for 15 cent increases. I wanna confirm, should we interpret that as the plan would be 15 cent increases for at least two more years? And if that's right, it implies a fair amount of growth. Since, you know, you'd have to stay above that 150%. Can you just talk to some of the growth drivers you see in the next twenty-seven and twenty-eight that would support that? Willie Chiang: Yeah, Keith. This is Willie. You're very astute as you did your calculations. The message we wanted to send is we have the ability to continue to grow beyond 2026. If you think of our EBITDA this year, we've got a $100 million of NGL contribution. And if you think about '27 plus, we've got self-help that chews up easily half of that. Our comments earlier about additional growth in the Permian gives us confidence in that. And, we know we're gonna be able to extract additional efficient growth synergies out of that. So out of our asset base. So we are telegraphing that we think we can grow beyond 2026. Keith Stanley: Okay. Great. And then one other coverage one. So you've talked to the rationale for 150% of DCF. When you assess where you wanna go from a coverage perspective, do you look at it on a free cash flow basis too? Because you have pretty steady $300-$400 million a year of investment capital. Just how do you look at it, I guess, on a free cash flow perspective as well? Al Swanson: Keith, this is Al. We've really set it based on DCF. In the view that the DCF coverage of say, one sixty or now one fifty would allow us to fund what we would call routine organic capital, the $300 to $400 million kind of range that we think is more of a normalized level. Plus a small bit for bolt-ons. So we think of it more of the coverage funding routine investments. Clearly, if we see investments that are outside of what is routine or larger, that we'll use the balance sheet for that. So it's not a precision on free cash flow. It's really a percentage of free cash flow, but we are allowing for that kind of self-funding of what we think is a routine kind of profile of investment capital. Keith Stanley: Thank you. Willie Chiang: Thanks, Keith. Operator: Thank you. One moment for our next question. Next question comes from the line of John McKay from Goldman Sachs. Your line is open. John McKay: Hey, guys. Thank you for the time. I wanna touch on the long-haul Permian volume guidance for a second. It's a little maybe if you can just talk a little bit about the year-over-year bridge. I think it's a little stronger than what we were looking for, but maybe the overall margin intact. So a little bit of that volume versus margin mix and bridging us to that pretty high 26 number. Thanks. Jeremy Goebel: John, good morning. It's Jeremy. There's three components to it. First, you've got the full-year run rate of the Cactus III integration into the system. Second, you've got a significant uptick in contracted capacity on the basin pipeline system. And so that would explain some of the lower margins just because the rate from Midland to Cushing is lower than that to the Gulf Coast. And then third, you'd have the BridgeTex pipeline full-year run rate. John McKay: That's very helpful, Jeremy. I appreciate that. Second one, maybe just looking a little more near term. What did you guys see in terms of storm impacts on volumes across the board? I think that the visibility on the gas side has been clear. But maybe just walk us through kind of what you saw the last week or two and kind of where the recovery stands right now. Jeremy Goebel: Thanks, John. To start with the recovery, that's already happened. So it was roughly a seven to ten-day period. When you had back-to-back freezes. A lot of that impacted the gas infrastructure, made it difficult. And once gas infrastructure is impacted, it shuts in the crude. So we saw almost like a reverse check mark type recovery went down and slow to come back. I would say that basin as a whole probably lost 10 to 12 million barrels production. The crude side and NGLs may be half that. Over that seven to ten-day period, but we're back we're out of that trough and have been for a few days. John McKay: Super interesting. I appreciate the color. Thank you, guys. Jeremy Goebel: Thank you. And that's all been considered in our guidance. So just for the record there, that impact has been considered. Operator: Thank you. Our next question will come from the line of Sunil Sibal from SIP Global. Your line is open. Sunil Sibal: Yeah. Hi. Good morning. Thanks for the time. Most of my questions have been hit, but just a couple of clarifications. So in regards to your lowering of distribution coverage to 150%, So, obviously, you're in a more contracted cash flows coming in through Cactus. But I was kind of curious if there is anything else in terms of, you know, how you manage your other assets in terms of contracting that we should be thinking about there. Al Swanson: Sunil, this is Al. No. I mean, we are comfortable with the one fifty. We think the crude segment is a stable cash flow stream. Clearly, the epic contract is highly contracted. But as we look at it, we think the one fifty coverage is actually still remains a conservative coverage level. Relative to our company, and we also think it funds what I described as a routine kind of investment capital going forward. Sunil Sibal: Okay. Thanks for that. And then I think in your prepared remarks, you mentioned about some storage acquisition, the Wildhorse Terminal. Could you walk through that a little bit again, I think you said 4 million barrels of storage. But what's the approximate cost for that? Jeremy Goebel: Sunil, hi. This is Jeremy. Good morning. What I would say. So that's four to 5 million barrels for functional right now. It's adjacent to our existing facility. Our net cost is in his to be $10 million. It'll may take us some time to integrate the facility. It's got an existing operation today. We feel like we have sufficient demand. Our existing Cushing facility is fully contracted to downstream partners. We would just think of this as an addition to that business with a low-cost basis. For us. We could not build those tanks for $10 million. So we're excited about the opportunity to grow our relationships with our customers. Sunil Sibal: Okay. Thanks for that. Operator: Thank you. One moment for our next question. Our next question will come from the line of AJ O'Donnell from TPH. Your line is open. AJ O'Donnell: Hey. Thanks for your time, everyone. Just one question for me. I'm not sure where the developments of Venezuela kind of fit on the timeline of your budget. But just curious as you sit here today and think about where dips are and how quality dips have moved. Just curious how you think about the market-based opportunities trending above or below kind of that $50 million mark that you outlined in your deck? Jeremy Goebel: AJ, good morning. What I would say is the current market reflects what our budget is. So those happened towards the end of last year, giving us the opportunity to lock in spreads across the board. So it significantly derisked the opportunity for us, and they moved out. So things move all the time. But when you have a movement like this, it gives you the opportunity to lock some things in. So I'd say it firmed up part of our plan. AJ O'Donnell: Okay. Thanks for the color. Operator: Thank you. One moment for our next question. Our next question comes from the line of Jeremy Tonet from JPMorgan Securities. Your line is open. Jeremy Tonet: Hi there. Thank you for squeezing me back in. Just a couple quick ones if I could add. We talked a good amount about the 60% of business at the Permian, but just wondered if you could provide maybe a little bit more color on the other 40% of business and what trends you're seeing there. And I get that there's cross currents or it's influenced by, you know, cost cut savings you're seeing there. And that will have some impact. But just how do you think about volumes and EBITDA for that other 40% of business kinda trending over time? Jeremy Goebel: Jeremy, good morning. What I would say is let's start from the north. Excited about Canada, as Chris mentioned. Opportunities around our rainbow system to expand our rangeland system, more activity. The rest of the business is largely flat in Canada. So if you take our Rockies position, everything North Of Cushing and West Of Cushing, that's relatively stable and contracted, so flattish would be the view of that position. Cushing throughput continues at all-time highs year over year for us. So we think that those assets in Cushing and the refinery feed assets consistent with the refiners' performance, that should perform well this year. The South Texas is really somewhat of an extension of the Permian Basin business. It's a wellhead gathering business trucking to support it. And so that stepped down from the cactus contract did impact that business as well. As far as volumes and opportunity set following Ironwood Cactus III, and the integration with our legacy system, we're excited about what we see in South Texas. Now East Of Cushing, the cap line system and Liberty in Mississippi, those are assets we're looking to fill longer term and working on some longer-term contracting. And St. James continues to perform and with the expectation of growth in the Uinta Basin over the next eighteen months to continue to come through to our St. James facility. So think we've got exciting things across that platform. It's not as volatile, and it's not much growth in the other, but you'll see some potential capital investments there as we get contracts to support. Jeremy Tonet: Got it. That's helpful there. Thanks. And, Jim, just one last one if I could. As it relates to the sensitivities for the 100,000 barrels per day change in total Permian production having a 10 to 15 million impact, on the business. Just wondering if there's any more color you could provide there, if, how that sensitivity might change if volumes grow over time, is it linear or could there be an inflection realizing there's an interplay with differentials there? But just any other color, I guess, on how that could fall out. Jeremy Goebel: Jeremy, here's what I'd say. I think the business is very large. Right? So when we talk a 100,000 barrel a day out of a basin, that's over 6 million barrels a day, the impact of the gathering system is gonna be relatively modest. So that's 10 to 15 million of 100,000 barrels a day probably still applies. The integrated benefit may grow over time. I think that's more of the impacts of the price to go to Midland and what could change it might be on the margins, some differentials around WTI. But I think just because of the size of that business, it's probably gonna stay in a very tight band. The impact might be to the long-haul margin since we've been reset to what is the new market. Our expectations would be those would widen out over time. So you might see more of an impact to the long-haul business. Jeremy Tonet: Got it. That's helpful. All you've been there. Thanks. Willie Chiang: We'll see you next time, Jeremy. Operator: Thank you. I'm not showing any questions in the queue right now. I will now turn it back over to management for closing remarks. Blake Fernandez: Thanks, Victor, and thanks to all of you for dialing in. We look forward to visiting with you on the road, and I hope you have a safe weekend. Operator: Thank you. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.
Operator: Good day, and thank you for standing by. Welcome to the PAA and PAGP fourth quarter 2025 earnings call. At this time, all participants are in a listen-only mode. After the speakers' presentation, we will open up for questions. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's call is being recorded. I would now like to hand over to your speaker, Blake Fernandez, Vice President of Investor Relations. Please go ahead. Blake Michael Fernandez: Thank you, Victor. Good morning, and welcome to Plains All American fourth quarter 2025 earnings call. Today's slide presentation is posted on the Investor Relations website under the News and Events section at ir.plains.com. An audio replay will also be available following today's call. Important disclosures regarding forward-looking statements and non-GAAP financial measures are provided on Slide two. An overview of today's call is provided on Slide three. Our condensed consolidating balance sheet for PAGP and other reference materials are in the appendix. Today's call will be hosted by Willie Chiang, Chairman and CEO and President, and Al Swanson, Executive Vice President and CFO, along with other members of the management team. With that, I will turn the call over to Willie. Wilfred C.W. Chiang: Thank you, Blake. Good morning, everyone, and thank you for joining us. Earlier this morning, we reported fourth quarter and full-year adjusted EBITDA attributable to Plains of $738 million and $2.833 billion, respectively. 2025 was a pivotal year for Plains. The market environment presented multiple challenges, including geopolitical unrest, actions from OPEC to increase oil supply, and uncertainty on the economic impact from tariffs. As highlighted on Slide four, despite these distractions, we remain focused on transitioning to a pure-play crude company, which also serves as a catalyst to streamline our operations and better position Plains for the future. This transition is accelerated through the sale of our NGL business, along with the recent acquisition of the EPIC pipeline, now renamed Cactus III. These transactions enhance the quality and durability of our cash flow stream while improving distributable cash flow and positioning us well for future market cycles. 2026 will be a year of execution and self-help, with a focus on three initiatives. First, we remain on schedule to close the NGL divestiture near the end of the first quarter, pending Canadian Competition Bureau approval. Second, we are integrating the recently acquired Cactus III pipeline and expect to drive synergies related to that system to improve EBITDA. And third, we are streamlining the organization with a focus on efficiency, improving our cost structure. Over the past several months, we have advanced our streamlining initiatives and are targeting $100 million of identified annual savings through 2027, with approximately 50% expected to be realized in 2026. The key drivers of these efficiencies are outlined on Slide five and include reducing G&A and OpEx to reflect a more simplified business, consolidating operations, and exiting or optimizing lower-margin businesses. One example that illustrates our focus on higher-margin businesses is the sale of our Mid-Continent lease marketing business in 2025 for a total consideration of approximately $50 million with minimal impact to EBITDA. This sale removes working capital needs associated with line fill, simplifies operations with an improved cost structure, while adding long-term contracts to our business. While this transaction is relatively small, it illustrates an opportunity that we have executed on to streamline our business, improve margins, and do more with less. On the bolt-on acquisition front, in January, we acquired the Wild Horse Terminal in Cushing, Oklahoma, from Kira for a net cash consideration of approximately $10 million, which includes an upward purchase price adjustment of $65 million upon the closing of the pending NGL divestiture. This asset adds approximately 4 million barrels of storage adjacent to our existing terminal assets and is expected to generate returns well above our internal thresholds. Looking to 2026, and as highlighted on Slide six, we are providing adjusted EBITDA guidance of $2.75 billion net to Plains at the midpoint, plus or minus $75 million. With an oil segment EBITDA midpoint of $2.64 billion net to Plains, which implies a 13% growth year-over-year in the crude segment. We expect the $100 million of EBITDA from the NGL segment, assuming the divestiture closes at the end of the first quarter, and $10 million of other income. We forecast Permian crude production to be relatively flat year-over-year in '26, with overall basin volumes remaining about 6.6 million at the end of the year, similar to 2025 levels. That said, we expect growth to resume in 2027, underpinned by more constructive oil market fundamentals, driven by ongoing global energy demand growth and diminishing OPEC's spare capacity. Regarding capital allocation, we recently announced a 10% increase in the quarterly distribution payable on February 13 for both PAA and PAGP. On an annualized basis, the distribution represents a 15¢ per unit increase from the November level, bringing the annual distribution to $1.67 per unit, representing an 8.5% yield based on the recent equity price for PAA. With the simplification and streamlining of our business, stable cash flow contributions from the Cactus III acquisition, and reduced commodity exposure following the NGL sale, we are modestly reducing our distribution coverage ratio threshold from 160% to 150%. This reflects improved visibility for our business, better aligns us with peers, and paves the way for future distribution growth while still maintaining a prudent level of coverage. Our targeted annualized distribution growth remains 15¢ per unit, and the lower distribution coverage gives us more confidence in our ability to deliver increasing returns to our unitholders. Al will cover specific CapEx guidance for the year, but we expect a meaningful reduction in gross spending versus 2025 levels, and maintenance capital will naturally decrease following the NGL divestiture. We remain committed to our efficient growth strategy, generating significant free cash flow, optimizing our asset base, maintaining a flexible balance sheet, and returning cash to unitholders via our disciplined capital allocation framework. With that, I will turn the call over to Al to cover our quarterly performance and other financial matters. Al P. Swanson: Thanks, Willie. Slides seven and eight contain adjusted EBITDA walks that provide additional details on our performance. For the fourth quarter, we reported crude oil segment adjusted EBITDA of $611 million, which includes two months of contribution from the Cactus III acquisition, partially offset by a full quarter impact of recontracting on our long-haul systems. Moving to the NGL segment, we reported an adjusted EBITDA of $122 million, reflecting a seasonal uptick that was moderated somewhat by warm weather impacts on sales volumes and relatively weak frac spreads. A summary of 2026 guidance and key assumptions are on Slide nine. We remain focused on making disciplined capital investments and expect to invest approximately $350 million of growth capital and approximately $165 million of maintenance capital net to PAA in 2026. Key drivers for EBITDA year-over-year include full-year contributions from acquisitions, primarily Cactus III, efficiency and optimization gains partially offsetting the impact of the NGL sale and recontracting as provided on Slide 10. Importantly, I would note that while headline EBITDA will decline slightly from the divestiture, distributable cash flow is expected to increase approximately 1% driven by lower corporate taxes and maintenance capital. As illustrated on Slide 11, we remain committed to generating significant free cash flow and returning capital to unitholders while maintaining financial flexibility. For 2026, we expect to generate approximately $1.8 billion of adjusted free cash flow, excluding changes in assets and liabilities, and excluding sales proceeds from the NGL divestiture. With regard to the potential special distribution previously communicated, we expect the Cactus III acquisition to mitigate a significant portion of the expected tax liability to unitholders resulting from the NGL sale. From this perspective, we now expect a special distribution of 15¢ per unit or less after closing and pending board approval. Regarding our balance sheet, in November, we issued $750 million in senior unsecured notes, consisting of $300 million due in 2031 at a rate of 4.7% and $450 million in 2036 at a rate of 5.6%. Proceeds were used to partially fund the EPIC acquisition. Additionally, in the fourth quarter, we paid off the $1.1 billion EPIC term loan assumed as part of the EPIC acquisition by issuing a $1.1 billion senior unsecured term loan at BAA. As a reminder, since we invested $2.9 billion to acquire Cactus III, the majority of the proceeds from the NGL sale will be used to reduce debt. Post-closing, we expect our leverage ratio to trend toward the middle of our established target range of 3.25 to 3.75 times. With that, I will turn the call back to Willie. Wilfred C.W. Chiang: Thanks, Al. 2025 is a transformational year for Plains, and we are taking steps to further strengthen our company for the future. Despite a complex macro backdrop, we proactively executed several major transactions and implemented efficiency initiatives to position Plains as the premier North American pure-play crude oil midstream company. 2026 will be a year of execution and self-help as we focus on closing the NGL sale, advancing our efficiency initiatives, and driving synergies on the Cactus III system. Collectively, these actions will help position Plains more competitively for the future. I also want to take this moment to express thanks to our Plains team, whose dedication and professionalism showed through and through as we also achieved our best-ever safety performance as measured by our best TRIR safety rate as well as the lowest severity of injuries as measured by total loss workdays. In closing, I would like to reiterate that we remain committed to our efficient growth strategy, simply stated, generate significant free cash flow, maintain a flexible balance sheet, and return capital to our unitholders. I will now turn the call back over to Blake, who will lead us into Q&A. Blake Michael Fernandez: Thanks, Willie. As we enter the Q&A session, please limit yourself to two questions. For those with additional questions, please feel free to return to the queue. This will allow us to address questions from as many participants as possible in our available time this morning. The IR team will also be available after the call to address any additional questions you may have. Victor, we are ready to open up the call, please. Operator: Thank you. To ask a question, you may press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please stand by. We will provide the Q&A roster. One moment for our first question. The first question will come from the line of Manav Gupta from UBS. Your line is open. Manav Gupta: Good morning, guys. I actually wanted to focus a little bit more on the Cactus pipeline and all the synergy benefits you are talking about. Also, I know this is not the right macro, but eventually, the macro will turn. I am trying to understand your ability to expand Cactus III without actually putting more pipe in the ground. If you could talk about some of those factors. Thank you. Jeremy L. Goebel: Manav, good morning. It is Jeremy. First, on the synergies question, the $50 million of synergies we disclosed, we believe we are already on run rate for that now. Roughly half of that was associated with G&A and OpEx reductions as well as removing things like insurance and other things that the pipeline had to keep because it was a private equity-backed entity. Those are gone. So half the synergies were achieved in the fourth quarter as we shed those costs. The other 25% are associated with filling the pipeline with supply that we have, doing shorter-term deals just to fill that available capacity associated with quality management. Those were ramping up now. So we would imagine during the first quarter, we will be substantially there on the run rate for the $50 million, and we should hit that number this year. As to your second question on the ability to expand the pipeline, our team, as we recontract the base pipeline to add term and improve rates for that uncontracted capacity now, in parallel, Chris's team is taking a look at all the capital-efficient ways to optimize our upstream connectivity, our downstream connectivity, and then for incremental expansions of the pipeline that do not require new pipe and that do require new pipe. So we are looking at the most capital-efficient ways to do that. We should finish that during the first half of this year. In parallel, like I said, we are recontracting for term, the rest of the pipeline. Then we will be in a position to discuss expansions with our customers, etcetera. But first, it is to stabilize the base pipeline, and then it is to look at capital-efficient expansions from there. In increments that make sense to grow with the base. Wilfred C.W. Chiang: Manav, this is Willie. I think one key point that Jeremy highlighted is it is not a binary expansion at one time. We have got an opportunity to do it in phases and really match capacity to demand that is out in the market. Manav Gupta: Perfect. My very quick follow-up is can you also talk a little bit about the $100 million in cost savings through 2027 efficiencies and other initiatives that you are undertaking at the franchise level. Thank you. Christopher R. Chandler: Good morning, Manav. This is Chris Chandler. So the sale of our NGL business in Canada really creates a unique opportunity for us to rethink how our company is structured and organized. That business, as you might expect, carried a fair amount of operational and commercial complexity that simply will not exist once the assets are sold. So we are taking a fresh look, from top to bottom, at how we are organized, where we are located, a fresh look at some of the maybe non-core businesses that might be better in somebody else's hands or, for example, outsourced to third parties that could do it more efficiently. So it is really an across-the-board look that you do not get to do this very often. As far as the capture rate, it is a $100 million run rate by the end of 2027. So we expect to achieve $50 million of that in 2026, another $50 million in 2027. Manav Gupta: Thank you so much for taking my questions. I will turn it over. Operator: Thanks, Manav. Thank you. One moment, our next question. Our next question comes from the line of Brandon Bingham from Scotiabank. Your line is open. Brandon B. Bingham: Hey. Good morning. Thanks for taking the questions. Maybe first, just looking at the Permian Basin outlook and kind of some of the commentary you just went through, just trying to harmonize it with some of the larger producer commentary from recent earnings calls. How is the sentiment among your producer customers? And maybe what are some of the current discussions like, assuming that $60-$65 WTI scenario in your guide? Jeremy L. Goebel: Good morning, Brandon. This is Jeremy. First, I would say that $60 to $65 is 10% higher than it was a few weeks ago. So it is a very volatile time period. But what I would say is the larger the producer, the less sensitive they are to the plus or minus $5 swings that we used to incur. So I would say cautiously optimistic. Because if you look consistently across the producer landscape, what used to hold the Permian Basin flat was 325 rigs with less production. Now it is 230 rigs, so you can see those efficiencies are working through the system. There what I would tell you is that they are working to preserve an inventory. They are working to continue to get more efficient with how they develop it and improve recoveries. All of those things are good for stabilizing earnings for us. And we remain consistent that while 2026 may be flattish, think a more constructive environment for 2027 and beyond for growth. And that is very consistent with taking a pause, getting better at doing things, becoming more efficient. So that continues to be the case for us. So I would say that is consistent with our discussion with producers. Wilfred C.W. Chiang: And, Brandon, this is Willie. I would take a look. A couple of other things to point out. You know, as we develop these basins, it is an exercise in constraint removal. So one observation is gas has been tight, and there are a number of projects that are there to alleviate that. And when you alleviate the gas constraint, actually, the breakeven for the producers improves, which allows them to be more durable going forward. And I think just to reinforce your point, you know, we have had some consolidation in the upstream section with a couple of the producers recently announced. And for us, we like that because it bolsters the producer environment to develop the basins in a more thoughtful way. And I am actually very, very encouraged by some of the technology improvements that some of the majors are focused on resource recovery. So when you factor all that in, we are very confident and constructive on the ability for the Permian to be a key part of the incremental supply for the world for quite some time. And then we would expect growth to come back as fundamentals improve. Brandon B. Bingham: Very helpful. Thank you. And then maybe just looking at the capital allocation priorities, would be curious to hear if maybe there is a shift in any of them versus what they have been. And specifically thinking around the payout ratio, is that 150% level more so to just continue the bolt-on strategy or other priorities? Or is there room to maybe further reduce it and maintain that 15¢ per unit distribution growth cadence a little bit longer? Al P. Swanson: Brandon, this is Al. Our view on capital allocation has not changed. I think I noted in the prepared comments, there are two ways to look at it. We got the net proceeds coming from the divestiture. We have really redeployed that already in the Cactus III. So the proceeds there will go to pay down debt. When you look ahead post that, it is all the same viewpoints that we had before. Our primary way of returning cash to shareholders is going to be through distribution growth. That is part of the 160 to 150. We are comfortable with the 150 level. We think it is actually consistent with a large number of our peers. And so we will be looking to continue looking at bolt-ons where they make economic sense. Distributing cash through distribution growth. Secondly, we do have some preferred securities as well as common unit repurchases. Those will be more on an opportunistic basis. Brandon B. Bingham: Very helpful. Thank you. Operator: Thanks, Brandon. One moment for our next question. Our next question comes from the line of Michael Blum from Wells Fargo. Your line is open. Michael Jacob Blum: Thanks. Good morning, everyone. Maybe you could stay on the distribution coverage conversation. I am really just wanting to get a little more of your thought process on how you landed at 1.5 and not 1.4 or 1.3, just exactly there any kind of formulaic way we should be thinking about this? You know, you mentioned some of your peers, but, you know, I could take one peer off the top of my head that, you know, says 1.3 is the right coverage. So just trying to get a little more insight into your thinking on that. Wilfred C.W. Chiang: Willie, this is Willie, Michael. You know, when you think about how we came up with the one sixty, right, that was in November '22. And it was intended to be a coverage threshold that was conservative, reflecting in our focus on the balance sheet. I would not try to read too much into the delta. Other than at one fifty, it is still a conservative approach to distribution. And for us, it sets a nice balance for us as we look forward on the ability for multiyear distribution growth. So I would look at it as kind of a reset to a modest reset, consistent with our peers. As we go forward, we think we have a much more durable cash flow stream, and it is really set there to allow us to feel good about our multiyear distribution growth. Michael Jacob Blum: Got it. Thanks for that. And then just wanted to ask on the growth CapEx of $350 million, I guess twofold. One, can you give us any details about any discrete projects that make that up or just some color around what is in that number? And then is this a good way to think about a run rate going forward now that you are really focused in the current markets? Christopher R. Chandler: Thanks. Good morning, Michael. It is Chris Chandler. So, yes, our guide for 2026 is $350 million. That brings us into our more typical $300 million to $400 million range, which we do think is a good number going forward absent any large investments, which we would call out separately. When I think about how we got to $350 and comparing it to prior years, we, of course, finished up the NGL fractionator expansion last year in Canada. We finished up a number of Permian crude oil infrastructure projects, and we finished a project to unload Uinta wax crude in the Mid-Continent. So those obviously all brought the number down on a year-on-year basis. As far as how we build up into the $350, we have a healthy Permian connection program that is ongoing. In 2025, we connected more wells than we connected in 2024, and 2026 looks to be on a similar pace so far. We are also, of course, doing some modest investment to integrate the Cactus III pipeline to capture synergies, as Jeremy mentioned, with additional connectivity and opportunities for quality optimization and cross-connecting between our other Cactus pipes for energy efficiency. And then we see some good opportunities to potentially invest capital into our Canadian crude oil business. We are pursuing a number of potential contracts that would underwrite expansions there and have assumed some of that moves forward in 2026 as part of our capital spending. Michael Jacob Blum: Thank you. Operator: Welcome. Thank you. One moment for our next question. Our next question will come from the line of Jeremy Tonet from JPMorgan Securities. Your line is open. Jeremy Tonet: Hi. Good morning. Good morning. Can you hear me? Thanks for the color today. I just wanted to take a step back here, and there have been some geopolitical developments recently, you know, particularly up, you know, what has been happening in Venezuela. And it seems like there could be a domino effect in a lot of different directions of what happened there. So I just wondering if you might be able to share any thoughts on how things could unfold, how could it impact Plains flows on assets, utilization, or even repurposing of assets. Jeremy L. Goebel: Hey, Jeremy. Jeremy Goebel. How are you? I was calling I mean, the idea around Venezuela, think of it the initial response 50 million barrels sold into The US Gulf Coast, a significant portion. Do you restructure some of the slates and get consistent with what maybe Pascagoula or the St. James refiners or the Houston refiners had run. That immediate impact was widening of Canadian differentials in the Gulf Coast, the other heavy sour differentials, the Mid-Con and Canada. That creates opportunities more opportunities for quality optimization, cross-border flows, and other movements. Going forward, if you look out a few years and maybe add two to three hundred thousand barrels a day, that might change some buying habits that should not be enough with the commodity prices where they are to change Canadian flows materially. They will have the price to move. So that would probably be a little bit wider Canadian differentials than otherwise would have been. It would take materially more than that to probably repurpose pipelines. But if you look if you added a million barrels a day, that does different things. Right? That now may push Canadian barrels to the West Coast. That may create other opportunities to repurpose pipes from the Gulf Coast to other markets to feed heavy sours into those. So I think it is there is no easy answer because first, you need stability in the government. You need substantial reinvestment. Near term, I think it creates some opportunities around quality management and use of our cross-border pipes. Intermediate term, it creates some logistical opportunities for us as well. But longer term, I think it is going to take substantial investment and time for repurposing, but we are certainly monitoring and paying attention to it. Jeremy Tonet: Got it. That is very helpful there. And one other high-level question if I could. Plains has been active in, you know, industry consolidation, bolt-on M&A, what have you over time. And I was just wondering from your perspective, Willie, where do you think what inning are we in right now for consolidation in the crude oil infrastructure industry, bolt-on, larger consolidation what have you. Wilfred C.W. Chiang: Well, I would say it is not a perfectly smooth trajectory if you think about consolidation. And know, and specifically for us, we have made a couple of large transactions. Our focus right now is really to execute on those. We look at we look at all kinds of opportunities that are out there. So you can be assured that as we as we look at things, stay capital disciplined on being able to acquire things. But I do think there will be more opportunities that are out there. And frankly, you know, to your earlier question, when you think about the macro and you look at the North American infrastructure, you asked about Venezuela. Everyone has a different outlook and view of what might happen there. I personally think it is going to be very challenged to get a significant amount of growth out of Venezuela. Which leads, know, leads us to a more constructive crude oil environment going forward. When you think about the infrastructure that we have in ground and the ability to repurpose, if it makes sense, there is a lot of need opportunities there. And know, I mentioned this on one of the last calls. If you think about the basins that you want to be involved in, The Permian Basin, obviously, is key, close to markets, growth. Low breakevens, but you also have Western Canada. And everyone is aware of the desire for them to go to the West Coast. And, you know, we stay very involved in potential of bringing more barrels down to the to The US. So there is a lot of need opportunities, and you can expect us to stay on track and looking at those with financial discipline. Jeremy Tonet: Got it. That is helpful. Thank you. Operator: Thanks, Jeremy. Thank you. One moment for our next question. Next question will come from the line of Keith Stanley from Wolfe Research. Your line is open. Keith Stanley: Hi. Good morning. Wanted to ask on coverage. So the release specifically says that the change in threshold to 150% provides a multiyear runway for 15¢ increases. I want to confirm, should we interpret that as the plan would be 15¢ increases for at least two more years? And if that is right, it implies a fair amount of growth. Since, you know, you would have to stay above that 150%. Can you just talk to some of the growth drivers you see in the next twenty-seven and twenty-eight that would support that? Wilfred C.W. Chiang: Yeah, Keith. This is Willie. You are very astute as you did your calculations. The message we wanted to send is we have the ability to continue to grow beyond 2026. If you think of our EBITDA this year, we have got a $100 million of NGL contribution. And if you think about '27 plus, we have got self-help that chews up easily half of that. Our comments earlier about additional growth in the Permian gives us confidence in that. And, we know we are going to be able to extract additional efficient growth synergies out of that. So out of our asset base. So we are telegraphing that we think we can grow beyond 2026. Keith Stanley: Okay. Great. And then one other coverage one. So you have talked to the rationale for 150% of DCF. When you assess where you want to go from a coverage perspective, do you look at it on a free cash flow basis too? Because I you have pretty steady $300-$400 million a year of investment capital. Just how do you look at it, I guess, on a free cash flow perspective as well? Al P. Swanson: Keith, this is Al. We have really set it based on DCF. In the view that the DCF coverage of say, one sixty or now one fifty would allow us to fund what we would call routine organic capital, the $300 to $400 million kind of range that we think is more of a normalized level. Plus a small bit for bolt-ons. So we think of it more of the coverage funding routine investments. Clearly, if we see investments that are outside of what is routine or larger, that we will use the balance sheet for that. So it is not a precision on free cash flow. It is really a percentage of free cash flow, but we are allowing for that kind of self-funding of what we think is a routine kind of profile of investment capital. Keith Stanley: Thank you. Operator: Thanks, Keith. Thank you. One moment for our next question. Next question comes from the line of John McKay from Goldman Sachs. Your line is open. John Ross Mackay: Hey, guys. Thank you for the time. I would want to touch on the long-haul Permian volume guidance for a second. It is a little maybe if you can just talk a little bit about the year-over-year bridge. I think it is a little stronger than what we were looking for, but maybe the overall margin intact. So a little bit of that volume versus margin mix and then bridging us to that pretty high 26 number. Jeremy L. Goebel: Thanks. John, good morning. It is Jeremy. There are three components to it. First, you have got the full-year run rate of the Cactus III integration into the system. Second, you have got a significant uptick in contracted capacity on the basin pipeline system. And so that would explain some of the lower margins just because, like, the rate from Midland to Cushing is lower than that to the Gulf Coast. And then third, you would have the Bridgestex pipeline full-year run rate since that was acquired during partially half the year. John Ross Mackay: That is very helpful, Jeremy. I appreciate that. Second one, maybe just looking a little more near term. What did you guys see in terms of storm impacts on volumes across the board? I think that the visibility on the gas side has been clear. But maybe just walk us through kind of what you said the last week or two and kind of where the recovery stands right now. Jeremy L. Goebel: Thanks, John. Start with the recovery, that is already happened. So it was roughly a seven to ten-day period when you had back-to-back freezes. A lot of that impacted the gas infrastructure, made it difficult. And once gas infrastructure is impacted, it shuts in the crude. So we saw almost like a reverse check mark type recovery. It went down and slow to come back. I would say that basin as a whole probably lost 10 to 12 million barrels of production. The crude side and NGLs may be half that over that seven to ten-day period, but we are back we are out of that trough have been for a few days. John Ross Mackay: Super interesting. I appreciate the color. Thank you, guys. Jeremy L. Goebel: Thank you. And that is all been considered in our guidance. So just for the record there, that impact has been considered. Operator: Thank you. Our next question will come from the line of Sunil Sibal from Global. Your line is open. Sunil Sibal: Yeah. Hi. Good morning. Thanks for the time. Most of my questions have been hit, but just a couple of clarifications. So in regards to your loading of distribution coverage to 150%, so obviously, you have, you know, more contracted cash flows coming in through Cactus. But I was kind of curious if there is anything else in terms of, you know, how you manage your other assets in terms of contracting that we should be thinking about there. Al P. Swanson: Sunil, this is Al. No. I mean, we are with the one fifty. We think the crude segment is a stable cash flow stream. Clearly, the EPIC contract is highly contracted. But as we look at it, we think the one fifty coverage is actually still remains a conservative coverage level relative to our company, and we also think it funds what I described as a routine kind of investment capital going forward. Sunil Sibal: Okay. Thanks for that. And then I think in your prepared remarks, you mentioned about some storage acquisition, the Wild Horse Terminal. Could you walk through that a little bit again? I think you said 4 million barrels of storage. But what is the approximate cost for that? Jeremy L. Goebel: Sunil, hi. This is Jeremy. Good morning. Here is what I would say. So that is four to 5 million barrels for, functional right now. It is adjacent to our existing facility. Our net cost is in his to be $10 million. It may take us some time to integrate the facility. It has got an existing operation today. We feel like we have sufficient demand. Our existing Cushing facility is fully contracted to downstream partners. We would just think of this as an addition to that business with a low-cost basis. For us. We could not build those tanks for $10 million. We are excited about the opportunity to grow our relationships with our customers. Sunil Sibal: Okay. Thanks for that. Operator: Thank you. One moment for our next question. Next question will come from the line of AJ O'Donnell from TPH. Your line is open. AJ O'Donnell: Hey. Thanks for your time, everyone. Just one question for me. Not sure where the development of Venezuela kind of fit on the timeline of your budget. But just curious as you sit here today and think about where dips are and how quality dips have moved. Just curious how you think about the market-based opportunities trending above or below kind of that $50 million mark that you outlined in your deck? Jeremy L. Goebel: AJ, good morning. What I would say is the current market reflects what our budget is. So those happened towards the end of last year, giving us the opportunity to lock in spreads across the board. So significantly derisked the opportunity for us, and they moved out. So things move all the time. But when you have a movement like this, it gives you the opportunity to lock some things in. So I would say it firmed up part of our plan. AJ O'Donnell: Okay. Thanks for the color. Operator: Thank you. One moment for our next question. Our next question comes from the line of Jeremy Tonet from JPMorgan Securities. Your line is open. Jeremy Tonet: Hi there. Thank you for squeezing me back in. Just a couple quick ones if I could add. We talked a good amount about the 60% of business at the Permian, but just wondering if you could provide maybe a little bit more color on the other 40% of the business and what trends you are seeing there. And I get that there are cross currents or it is influenced by, you know, cost cut savings you are seeing there and that will have some impacts. But just how do you think about volumes and EBITDA for that other 40% of business kind of trending over time? Jeremy L. Goebel: Jeremy, good morning. What I would say is let us start from the North. Excited about Canada. As Chris mentioned, opportunities around our rainbow system to expand our rangeland system, more activity. The rest of the business is largely flat in Canada. So if you take our Rockies position, everything North Of Cushing and West Of Cushing, that is relatively stable and contracted, so flattish would be the view of that position. Cushing throughput continues at all-time highs year over year for us. So we think that those assets in Cushing and the refinery feed assets consistent with the refiners' performance, that should perform well this year. The South Texas is really somewhat of an extension of the Permian Basin business. It is a wellhead gathering business with trucking to support it. And so that step down from the Cactus contract did impact that business as well. As far as volumes and opportunity set following Ironwood, Cactus, three, and the integration with our legacy system, we are excited about what we see in South Texas. Now East Of Cushing, the cap line system and Liberty in Mississippi, those are assets we are looking to fill longer term and working on some longer-term contracting. And St. James continues to perform and with the expectation of growth in the Uinta Basin over the next eighteen months to continue to come through to our St. James facility. So think we have got exciting things across that platform. It is not as volatile, and it is not much growth on the other, but you will see some potential capital investments there as we get contracts to support it. Jeremy Tonet: Got it. That is helpful there. Thanks. And, Jen, just one last one if I could. As it relates to the sensitivities for the 100,000 barrels per day change in total Permian production having a 10 to 15 million impact on the business. Just wondering if there is any more color you could provide there, if, how that sensitivity might change, if volumes grow over time? Is it linear or could there be an inflection realizing there is an interplay with differentials there? But just any other color, I guess, on how that could fall out. Jeremy L. Goebel: Jeremy, here is what I would say. I think the business is very large. So when we talk 100,000 barrels a day out of a basin, that is over 6 million barrels a day, the impact of the gathering system is going to be relatively modest. So that is 10 to 15 million of per 100,000 barrels a day probably still applies. The integrated benefit may grow over time. I think that is more of the impact of the price to go to Midland and what could change it might be on the margins, some differentials around WTL and WTI. But I think just because of the size of that business, it is probably going to stay in a very tight band. The impact might be to the long-haul margin since we have been reset to what is the new market. Our expectations would be those would widen out over time, so you might see more of an impact to the long-haul business. Jeremy Tonet: Got it. That is helpful. All you have been there. Thanks. Jeremy L. Goebel: We will see you next time, Jeremy. Operator: Thank you. I am not showing any questions in the queue right now. I will now like to hand back over to management for closing remarks. Wilfred C.W. Chiang: Thanks, Victor, and thanks to all of you for dialing in. We look forward to visiting with you on the road, and I hope you have a safe weekend. Thank you. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.
Operator: Thank you for standing by. This is the conference operator. Welcome to the TMX Group Limited Fourth Quarter 2025 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Amin Mousavian, Vice President of Investor Relations and Treasury and Interim Chief Risk Officer. Please go ahead, Mr. Mousavian. Amin Mousavian: Thank you, Drew, and good morning, everyone. We join you today to discuss the 2025 fourth quarter results for TMX Group. We announced our results for another outstanding quarter and our sixth consecutive double-digit revenue growth, highlighting strong performance across all of our business units last night. Copies of our press release and MD&A are available on tmx.com under Investor Relations. This morning, we have with us John McKenzie, our Chief Executive Officer; and David Arnold, our Chief Financial Officer. Following the opening remarks, we will have a question-and-answer session. Before we begin, let's cover our forward-looking legal disclosure. Certain statements made during this call may relate to future events and expectations and constitute forward-looking information within the meaning of Canadian securities law. Actual results may differ materially from these expectations and additional information is contained in our press release and periodic reports that we have filed with the regulatory authorities. Now I will turn the call over to John. John McKenzie: Well, thanks, Amin, and good morning, everyone. Thank you for joining us on the call this morning. And as Amin mentioned, last night, we released our Q4 financial results, and I am very, very proud to report that we finished 2025 on a high note by every measure, delivering excellent results for each quarter of 2025 with strong increases in revenue, including 15% higher organic revenue compared to 2024, as well as record adjusted earnings per share and operating income. And we'll turn it over to David in just a few minutes to talk you through the quarter in details. Now looking back and although it only ended 6 weeks ago, 2025 already seems like a distant memory as it's been a very eventful 6 weeks. And importantly, as we discuss what went right in 2025, the key contributing factors to our best year ever, we're not talking about stand-alone achievements. The success of 2025 reflect an adaptive high-performance business model and the benefits of adhering to a consistent growth strategy. And market activity in 2025 surged, fueled by macroeconomic forces, ongoing volatility and as we continue to build TMX ever stronger for the future, more innovative, more global, more essential to our clients and stakeholders all across the vital capital markets ecosystem. Now turning to these 2025 results. Overall revenue increased 18% compared to 2024, reflecting strong performances across the enterprise, including double-digit revenue growth from derivatives trading and clearing, equity trading, TMX Trayport and TMX VettaFi. And we are also encouraged by a 9% increase in capital formation revenue due to strength in additional financings in the second half of the year as listed companies of all sizes on TSX and TSX Venture increasingly turn to the proven public market ecosystem to fund their growth plans. Organic revenue, excluding those recent acquisitions, increased 15% and adjusted diluting earnings per share increased 25% compared to last year. Overall, operating expenses increased 16% year-over-year, largely as a result of acquisition-related expenses and continued investment in organic growth as well as some BOX costs related to the SEC's mandated consolidated audit trail and some increased litigation costs. David will discuss these expenses in more detail following my comments this morning. Now moving to highlights from our business areas. Activity remained strong across our core domestic markets through the fourth quarter, capping off a tremendous year. Derivatives trading and clearing revenue, excluding BOX, increased 31% compared to 2024, driven by pronounced activity growth and the success of recent product initiatives to address client demand. MX 2025 year-over-year activity highlights include 80% growth in ETF option volume, double-digit growth on volumes across our expanded bond futures offering and record-breaking performances in our fixed income suite, specifically the 3-month CORRA futures contract, or CRA, which replaced the BAX in mid-2024. The CRA surpassed all-time BAX's daily volume records and open interest levels in December. Similarly, in equity markets, sustained volatility drove higher activity. On a combined basis, TSX, TSX Venture and Alpha volumes increased 27% when compared to 2024, highlighted by a 45% gain in volume traded on TSX Venture Exchange. And our markets stood tall amongst our peers. The benchmark S&P/TSX Composite Index broke through the 30,000 mark for the first time in September, and the S&P/TSX Venture Composite Index increased 60% compared to 2024, outperforming major global indices. Overall revenue from equities and fixed income trading and clearing increased 12% year-over-year, due to higher volumes and higher yields on premium products. And the successes of 2025 extend beyond our more traditional marketplaces and candidly beyond our borders. Alpha ex U.S., our U.S. equity trading venue, just celebrated its first anniversary last month. It has been a fantastic inaugural year in terms of volume traded and participant sign-ons and engagement. And following TMX's strong tradition of leadership in exchange technology, the AlphaX U.S. team was recognized with 2 prestigious industry awards for innovation and alternative trading systems by the trade and for most innovative third-party technology vendor, trading, risk and compliance by WatersTechnology. Now I'd like to turn over to Global Insights. Revenue here increased 16% compared to 2024, led by double-digit increases from TMX Trayport and TMX VettaFi. TMX Trayport's powerful and dynamic network plays an essential role at the heart of European energy trading ecosystem. Revenue grew 18% year-over-year or 12% in pound sterling, driven by a number of factors, primarily an increase in the number of licensees and increased adoption of analytics and other trade products. TMX's Trayport strategy is rooted in client-centric approach to serving the needs of new and existing clients, investing in continuous innovation in our core market offering to deliver performance, reliability and security, while supporting advanced capabilities, products and services and expanding into new asset classes and geographies, targeting opportunities to apply proven expertise in markets around the world, and that includes introducing digitized solutions to voice brokered markets and capitalizing on shifting dynamics and increased demand for modern trading products in transition markets. Now with TMX VettaFi, revenue increased 24% year-over-year or 21% in U.S. dollars due to higher indexing revenue driven by organic growth in assets under management and recent acquisitions. A relative upstart among our deep and diverse set of business areas, the team continued to execute against an opportunistic strategy in 2025, with 3 new acquisitions, the Credit Suisse Bond Indices in February, ETF Stream in June and a set of nuclear energy indices in October. These latest additions enhance TMX VettaFi's diverse product suite, while growing our presence in targeted regions. Next month, TMX VettaFi hosts Exchange, our marquee event and the premier gathering of ETF and wealth management community in Las Vegas. Now on to capital formation. As I mentioned earlier, revenue increased 9% year-over-year, primarily due to higher volume -- sorry, higher revenue from additional listing fee and the inclusion of a full year of Newsfile revenue. Now in a year clouded by economic uncertainty and headline disruption, the signature strength of public markets shown brightly, providing stakeholders with critical resiliency and an opportunity for growth. And our pledge to serve the evolving needs of this powerful interconnected ecosystem of companies, participants and investors remains firm. We saw a surge in financing dollars raised by issuers listed on both TSX and TSX Venture, particularly in the second half of the year, including a 44% increase in the number of transactions that we bill with the maximum fee threshold at TSX. Now big financing deals don't capture the same headlines as IPOs, but they are the clear indicators of the health and vitality of the market, and these transactions highlight the key role the exchange network plays in helping companies fund their growth throughout their life cycle. And 2025 featured some game-changing deals. In September, RFA and Artis REIT announced a business combination through a share exchange transaction to form RFA Financial, a more diversified financial services platform. On October 1, Maple Leaf Foods completed the spin-off of Canada Packers, Inc. as an independent public company. In November, TSX Venture-listed Carcetti Capital completed the acquisition of Hemlo Gold Mine and via reverse takeover emerged as Hemlo Mining Corp., a new mid-tier gold producer trading on the Venture Exchange. And there were many more. Now as many of you listening this morning are aware, Toronto Stock Exchange and TSX Venture Exchange are home to almost 50% of the world's public mining companies. The industry is vital to our markets, vital to Canada's economy and vital to the country's global competitive prospects, and the mining sector is thriving. Financing dollars have increased 53% when compared to 2024. Mining sector surpassed $1 trillion in overall market capitalization in 2025. And of the 11 companies to graduate from TSX Venture Exchange to the senior market in 2025, 10 of these were mining companies. So looking more broadly across the marketplace ecosystem, it was also a stellar year for the Canada's ETF industry with over $125.8 billion in net inflows. We welcomed 239 new ETFs to Toronto Stock Exchange during 2025, surpassing the all-time record of 127 set just last year. TSX is now also the market of choice for Canadian Depository Receipts with 116 new CDRs coming to our market last year. Our pipeline of new issuer prospects is also strong, and our business development team is as busy as ever with all signs pointing to a very active 2026 in terms of potential IPOs. Now as I said in the opening of my remarks, a lot went right in 2025. It's our best year ever. But always, our focus is always on what comes next. And at no time in my 25 years here, including 6 years leading TMX, have we had so many immediate and potentially impactful trends pushing the pace of change in our global environment, including AI adoption, tokenization, 24-hour trading and the rise of private markets. There is no denying that there are areas across the finance sector that are due for modernization. But the truth is that the traditional finance industry, as it has been called, has been continuously evolving over the past 100-plus years, reshaping and transforming many times over paced by advances in technology. And Canada's markets have long stood at the forefront of industry progress. TSX was actually the first fully electronic exchange in North America. It was the birthplace of the exchange-traded fund, and it should come as no surprise that TMX is actively pursuing client-driven solutions to build on this proud history of innovation. Today, public markets trading is a hyper-efficient connected digital ecosystem. And our approach is to seek out purpose-driven innovation, measures that make markets better rather than innovation for innovation's sake. And necessarily, our next steps are rooted in a commitment to preserving the core capital markets principles of market integrity, fairness and transparency. Now tokenization of public assets is a headline topic right now in the exchange industry. And while it may prove to be transformative in the long run, there are hurdles to clear yet in moving toward a broad market adoption, including defining an appropriate regulatory framework and operating standardization. It is the next evolution of blockchain, and we've exploring potential use cases for blockchain technology for more than 15 years, including in the early stages of developing our game-changing post-trade modernization program, which we delivered in 2025. And we see promise in near-term opportunities emerging on the clearing side, including the tokenization of collateral management, which could allow collateral to move between accounts and even different clearing houses fluidly and more efficiently. And we continue to assess the client demand for things like 24-hour trading. Round-the-clock trading is not a new concept for us. Montreal Exchange introduced extended hours trading for derivatives to sync with the Asia Pacific markets in 2021 to support growing investor demand. And the current push for 24-hour equity trading is driven by a global appetite, but primarily for major U.S. stocks. So our forward strategy includes gauging client needs as well as a full consideration of the ecosystem impacts. And an important stakeholder, not often mentioned in this discussion of either 24-hour trading or tokenization is the listed issuer. 2/3 of the public companies on TSX and TSX Venture are small or medium enterprises. And our public venture market is the bedrock of our 2-tiered ecosystem. Small issuers and their investors would not necessarily see a benefit of further diluting their liquidity over an extended trading venue. And so our commitment remains to making markets better, and that extends beyond public markets. So over the past 2 years, we have also continued to build out new capabilities and solutions for serving private companies. TMX Corporate Solutions provides end-to-end services to private as well as public companies through all of their capital raising activities and all stages of evolution. Markette Ventures, a joint venture with Canaccord Genuity to digitize and streamline the private placement process and improve investor access was just launched this last year. So in closing today, as always, I want to thank our team of employees around the world. This is the engine of TMX success last year, this year and every year. And in considering each of our milestones and recent accomplishments, I am most encouraged by the progress we have made and continue to make in preparing for the future, with a focus on accelerating growth and fulfilling our purpose to make markets better and empower bold ideas. I have tremendous confidence in our organization that it is well equipped to tackle near- and long-term challenges and capitalize on the exciting opportunities and transformation in front of us. And with that, I'll pass the call over to you, David. David Arnold: Thank you very much, John. Good morning, everyone, and thank you for joining us today. I'm pleased to report that the TMX Group delivered outstanding financial results in the fourth quarter of 2025, capping off an exceptional year. This quarter, we achieved double-digit revenue growth across the enterprise and coupled with our disciplined approach to cost management, delivered record income from operations. The strong financial performance reflects the successful execution of our diversification strategy and our team's commitment to operational excellence. We achieved record quarterly revenue of $457.8 million in Q4, representing a robust 16% year-over-year growth. This outstanding performance was driven by strength across all of our business segments with particularly strong contributions from our derivatives trading and clearing, TMX VettaFi, TMX Datalinx and Capital Formation businesses. The 2025 fourth quarter diluted EPS of $0.41 was 29% lower than Q4 of last year. This decrease in reported diluted earnings per share included $0.19 per share decrease related to the net noncash foreign exchange accounting losses on our U.S. dollar-denominated intercompany loans in Q4 of 2025 compared with noncash accounting gains in Q4 of last year. Notwithstanding, our adjusted diluted earnings per share increased 22% from Q4 of last year, reflecting a 14% growth in income from operations. Turning now to our businesses, beginning with the segments that saw the largest year-over-year increases. Global Insights revenue grew by 16% this quarter, reflecting double-digit increases across all 3 businesses in the segment. Revenue from TMX Datalinx grew 18% from Q4 last year, which includes $7.9 million from the inclusion of Verity, which was acquired on October 1, as well as an increase in subscribers and usage, data feeds and also higher revenue in colocation. Excluding Verity, TMX Datalinx grew 5% organically. Revenue from TMX VettaFi grew 23% in Canadian dollars and 25% in U.S. dollars this quarter. This growth included $3.7 million of revenue from recent acquisitions, namely bond indices, ETF stream and the addition of nuclear sector indices. Revenue, excluding these 3 acquisitions, increased 13% in the fourth quarter, reflecting strong organic growth in assets under management and higher revenue from digital distribution. TMX VettaFi's assets under management grew 49% from December 31, 2024, to over USD 77 billion at December 31, 2025. Revenue from Trayport grew 11% in Canadian dollars or 8% in pound sterling this quarter, primarily driven by a 6% increase in total licensees, annual price adjustments and incremental revenue from data analytics and other trader products compared with last year. TMX Trayport's average recurring revenue for the quarter on an annualized basis was approximately CAD 276 million or GBP 150 million, up 17% and 14%, respectively, compared with the same period last year. Trayport continues to grow in line with our expectation of high growth over the long-term. As our core European market matures, we are actively developing Trayport's product offerings, expanding into new geographies and asset classes to unlock further growth opportunities. Revenue in our derivatives trading and clearing businesses, excluding BOX, was up 27% from Q4 of last year. This strong performance was driven by a 32% growth in Montreal Exchange and a 17% growth in CDCC revenue, reflecting both higher rate per contract and a 10% increase in derivatives volumes. The increase in average rate per contract this quarter reflects the sunset of the CORRA market making program at the end of Q2 of 2025 and the sunset of the 2-year Government of Canada Bond Futures market making program at the end of November of 2025. Our derivatives business maintained its strong trajectory through 2025 and open interest at the end of December was up a staggering 33%. Revenue from BOX increased 16% this quarter, driven by a 17% growth in volumes compared with Q4 of last year. In our Capital Formation business, we saw an increase in capital-raising activities this quarter, which translated into a 13% year-over-year revenue growth. Additional listing fees grew 53% from Q4 of last year, reflecting an increase in the number of transactions billed at the maximum fee on both TSX and TSX Venture Exchange or TSXV for short. Sustaining listing fees and initial listing fees also grew compared to last year, driven by continued growth in ETFs. The increased revenue in listings was partially offset by a 5% decrease in TMX Corporate Solutions revenue in Q4, mainly reflecting lower net interest income revenue due to lower yields and lower balances compared with Q4 of last year. Turning now to our Equities and Fixed Income Trading and Clearing segment. Revenue was up 13% in the quarter, driven by growth in equities trading. The increase in equities and fixed income trading reflected a 38% volume growth in our equities marketplaces, including 24% on TSX, 74% on TSX Venture and 35% on Alpha Exchange, X and DRK combined. Our combined equities trading market share for TSX and TSXV listed issues was approximately 61% this quarter, down a minor 2% from the same period last year. We saw a modest 2% growth from our clearing business this quarter. In our fixed income trading business, revenue in the quarter decreased from last year, primarily reflecting lower credit and swap activity. Now taking a closer look at our expenses. Operating costs in the fourth quarter increased by 19% and included the following notable items. First, we accounted for a $15.3 million regulatory charge passed through to BOX by its self-regulatory organization in Q4, resulting from the impairment of an asset related to the Consolidated Audit Trail or CAT for short, a system the SEC requires marketplaces to track U.S. equity and options trading. Second, we incurred $8.9 million of additional operating expenses related to new acquisitions; and third, a $3.3 million increase in dispute and litigation costs compared with Q4 of last year. Now excluding these items, our operating expenses increased by approximately 6% on a comparable basis, largely due to 3 key drivers: first, roughly 2/3 of this increase or $8.4 million is driven by higher headcount, year-over-year merit increases and severance costs; second, approximately 1/4 of this increase or $3 million relates to IT operating costs, reflecting higher licensing and subscription fees and cloud services compared to last year. The remaining increase relates to higher amortization related to the launch of our post-trade system earlier this year, partially offset by savings from the strategic realignment updates completed earlier in 2025. On a reported basis, we had slightly negative operating leverage of 2% in the fourth quarter. However, excluding the 3 items I discussed a few minutes ago, namely; first, the CAT-related fees; second, recent acquisitions; and finally, dispute and litigation costs. I am pleased to report we produced positive operating leverage of 7% in the fourth quarter, which is a direct result of our focused strategy with our robust 13% organic revenue growth outpacing a well-managed 6% increase in operating expenses on a comparable basis. Now looking at our results sequentially, our revenue increased by $39.2 million or 9% from the third quarter, reflecting increases from, first, higher revenue from our Global Insights segment, driven by TMX Datalinx, which included revenue from Verity in Q4 and VettaFi AUM growth I spoke to earlier; higher revenue from capital formation driven by higher additional listings; and finally, higher revenue from both our equities and fixed income trading and clearing and our derivatives trading and clearing businesses, reflecting higher trading volumes. Turning to our sequential expense analysis. Operating expenses in Q4 increased $25.3 million or 11% from the third quarter, primarily reflecting $15.3 million of CAT-related regulatory fees passed through to BOX, $5.5 million of operating expenses related to Verity and higher employee incentive plan costs and higher software license and subscription costs. On the balance sheet front, our debt to adjusted EBITDA ratio at December 31 was 2.2x, which is within our target leverage range of 1.5 to 2.5x. We continue to maintain a disciplined approach to capital deployment and prioritize driving shareholder value. Turning now to our cash and marketable securities financial position. As of December 31, we held approximately $513 million in cash and marketable securities, which is approximately $273 million in excess of the approximate $240 million we target to retain for regulatory purposes. Net of excess cash, our leverage ratio was 1.9x at December 31, 2025. I'm pleased to announce that last night, our Board of Directors approved a 9% increase to our quarterly dividend to $0.24 per common share, payable on March 6 to shareholders on record as of February 20, and this positions our last 12-month dividend payout ratio at 42%, consistent with our target payout range of 40% to 50%. Now as we look to 2026 and beyond, we remain focused on building on this momentum and continued execution of our TM2X strategy to accelerate our growth. Our robust cash generation capabilities, our strong balance sheet and our diverse portfolio of interconnected global businesses positions us well for continued success. So with that, I'll turn the call back to you, Amin, for our Q&A period. Amin Mousavian: Thank you, David. Drew, would you please outline the process for the Q&A session? Operator: [Operator Instructions] The first question comes from Benjamin Budish with Barclays. Benjamin Budish: Maybe just to start out on Trayport. I know your ARR was up a little bit. It looks like the revenue trend has been a little bit more flattish over the last couple of quarters. Just curious, maybe a 2-parter, if you could remind us, how do you think about like energy price volatility translating into revenue growth, subscription growth? I imagine there's a little bit of a lag. And how are you thinking about the recent volatility and how that could translate into growth going into next year? That would be the first question. David Arnold: Thank you very much, Ben. So it's David here. I'll deal with the last part of your question first and then hand it over to John, and we can talk a little bit about our overarching Trayport strategy. I mean, yes, I mean, if there is more volatility and activity in the energy markets in Europe and various trading houses decide to either expand their operating desks, then obviously, that would have a potential uplift for us as they subscribe to additional licenses or seek to renew, let's say, an enterprise site license if they have that with us. But it goes without saying, as we've said many times before, we don't directly benefit from energy market trading. Our billing process and site license agreement is really based on subscribers. And then maybe I'll just hand it back to John, and he'll talk a little bit about our overarching long-term strategy with Trayport and our long-term growth objectives. John McKenzie: Thanks, David, and thanks for the question, Ben. Yes. And one of the pieces I just do that, I do want to iterate, we've had this conversation in previous calls as well. As we bring clients in over time, that can be lumpy. So clients will come in, they will take a number of seats, they renew at different times. So it's very difficult to look at that quarter-by-quarter to create the trend. And that's why we always guide towards the long-term guidance on this business in terms of that high single, low double-digit growth, which we continue to be just as bullish on as we have been in the past. So there is no change in outlook for us in terms of what we can do with this business. So as David said, you continue to have upside in the European market as volatility does come back, as you start to see other people coming into the market, as the market demand expands because it is still a growth market from an energy usage standpoint, you've got long-term tailwinds there. But what we're really looking to, to create that long-term growth curve is what I talked about in my earlier comments as well is the continued build-out of new asset classes and new geographies. So while the European market is well developed, we are not the same degree of development in the U.S. and Asia, and we're continuing to build that out. We are looking at how do we bring other commodities on, and we are in discussions in terms of particularly the refined oil market. That is a long-term program to bring those additional commodities on. So we see this as a business that has got a lot of white space for growth, and that's why we're able to continue to iterate that long-term guidance. Benjamin Budish: I appreciate that. Maybe just a follow-up. The Montreal Exchange has seen very robust growth over the last several years. Some of that is market-driven, but some of it is driven by TMX's various initiatives. As you look into '26, '27, what other levers or initiatives do you have kind of in the works that might either continue or accelerate or sustain that growth sort of ex whatever market volatility does? John McKenzie: Yes, happy to. So I mean, as you're right, we are really happy with how that business is performing. And I always equate it to a bit of a large sailing ship, which is -- you don't have the ability to catch all that wind unless you put up all the right sales, which our team has been continuing to do in terms of product innovation, operating our innovation, et cetera, et cetera. And even in the things that we've launched, we have room to grow and mature in them. We have the market making agreements that are rolling off for potential upside on the revenue side. But to your question around go forward, I really put it into 2 categories. So one, we are continuing to look at a product road map of new and enhanced products. You'll continue to see us bring out new things that will give new on-exchange things for people to trade. We are also looking at new product expansion on the clearing side. So the unique vertical we have with MX and CDCC means we can do more on the cleared product side like we do with repo when there's opportunity to do more there. And then the other piece of this is continued market reforms. So as the market has grown, we've identified areas where there are some limitations on market making that have made it difficult for people to do more on the market, and we are making changes there that will allow more expansion in things like ETF options and otherwise, so that our participants can do more within the ecosystem. So it's product introductions, it's clearing capabilities and new clearing over-the-counter product and marketplace reforms that allow for more activity. Operator: The next question comes from Etienne Ricard with BMO Capital Markets. Etienne Ricard: Just to circle back on Trayport. Can you remind us what the long-term growth algorithm for this business is between volume and price? And specific to volume, should we expect the new connection growth going forward to be largely driven by non-European clients? David Arnold: Thanks so much, Etienne. It's David. So let me talk a little bit about the algorithm for growth in Trayport, and it's a bit of a refresher. So as you know, I mean, in Trayport, it's a Software-as-a-Service business, which is really subscriber-driven. We really have 2 types of subscribers. We have enterprise site license subscribers and then effectively shorter-term pay-as-you-go, if you will, site licenses. And really, the growth algorithm there is pricing, which effectively automatically resets every year in December. All of our agreements have a Consumer Price Index, which is pegged to Bank of England's published Consumer Price Index. And in and around early December each year, we do reach out to all of our clients, notify them as to what pricing changes are going to occur in the next year. And as you can see in our disclosure, we've indicated what that is for 2026 for Trayport. And then the second piece is really as our clients grow, right? And what that really means is in the European market is do they -- as I mentioned when I was answering Ben's question, do they expand their usage, i.e., do they have a trading desk of 4 that now becomes a trading desk of 8? And if it is, a trading desk of 8 and they need a Trayport screen. Then if they're on a pay-as-you-go approach, they'll approach us and they'll purchase additional licenses. And if they're on a site license, they won't have an immediate revenue impact because we'll wait until we renew the agreement with them to actually upsell. But the second part is really what we would refer to as our premium products, right, whether it would be algorithmic trading, chatting charting and analytics. Our team in Trayport are constantly working with our clients on how to enhance the platform. And so in doing that, they're adding features that upon renewal, enable upsell with our clients. And really, it's meeting a client-driven need as opposed to something that we thought of and have offered. It's really listening to our clients and building the capabilities that they would like. And for example, one we spoke about at our Investor Day, is the chat capability, which is something that we're working on actively. And then as John said, and that's the most important one is how do we expand into other asset classes and other geographies. And that really, when put all together is the long-term algorithm. John, do you want to add anything? John McKenzie: Yes. The only thing I'll add is -- this is the interesting, continued transformation of the business that even the marketplaces themselves, in some cases, are becoming less geographic. So while this business was largely built in the European marketplace, areas like natural gas are very much becoming a global market, a globally priced market, especially if you have the more advent of LNG. So things like Japan, the trade reporting facility, things like that are getting much more global pricing. So you've got the ability not just to continue to grow in Europe, but to grow beyond it because these asset classes are becoming more global. Etienne Ricard: Very helpful. And then switching on VettaFi. So I know you've talked about more M&A opportunities to continue scaling the business. And VettaFi has had a lot of success with some thematic and factor-based products. So as you look at some new acquisitions here, would you prefer to continue acquiring more thematic indices or maybe look at more diversified products? John McKenzie: We're actually not limited to either one. So what the team has built out and the scalability of the VettaFi platform and now a proven track record that our team has had on being able to bring in new product and build it onto the platform and distribute it to the audience is not limited. So when we are looking at new opportunities, we are more looking at, okay, what is the unique opportunity of those assets and indices and our ability to scale them. And so they could be thematic, but we want thematic that has potential like the investment in the nuclear indices because we saw the long-term potential for increased investor demand in those interest areas. So it really can be across the spectrum. We are also continuing to look for more geographic distribution. That's why we've done some more work in the European sphere. That's why we brought the index research team on, if you remember, just over a year ago. So expect that to be the continued approach. And candidly, though, we look at far more than we will execute on because we are continuing to be very disciplined about what are the products, the ability to scale up, the interest level to the investor audience and the ability for us to integrate it in. And that's really a critical touch point in terms of how we do these things is we want to be able to scale it up on the platform in a way that's really efficient. Operator: The next question comes from Aravinda Galappatthige with Canaccord Genuity. Aravinda Galappatthige: Congrats on another excellent quarter. I wanted to maybe just picking up on the M&A question, talk about -- or ask you about your thoughts with respect to sort of the M&A market in general. Obviously, in the last couple of days, we've seen sort of an extension of the sell-off in software with -- obviously, the analytics and data businesses getting hit in multiple industries, including financial. I guess on one hand, as your balance sheet gets better, I mean, these potentially opens up interesting opportunities for you as this sort of extends into the private markets. And then on the other hand, though, perhaps you can talk about sort of the moats that you have with respect to your existing businesses in terms of sort of addressing the potential threats from some of the emerging technologies? John McKenzie: Yes. I'm so glad you asked that question because it's so timely and thoughtful for where we are in terms of this point in history. Our strategy is unchanged. And I'll get to that in terms of the defensive moats in a little bit. But our strategy is unchanged. The areas we are looking to invest are unchanged. If anything happened this week, things got -- things went on sale and maybe that will create different opportunities for us to bring things in it at valuations that make sense because it's always been a sector where valuation has been challenging in terms of ensuring that you can get good return for the investors to bringing things in. And candidly, to your point, our strategy has been to bring in things that we can integrate and scale as part of our ecosystem. And that really gets to the heart of the defensive moat pieces we bring it in. So as you saw recently, the pieces that we brought in around data, the Verity team, which actually does have AI-enhanced data capabilities in it is designed to integrate with our Datalinx business, which uses a lot of proprietary data and creates unique opportunities that you can't create necessarily just as an AI agentic outside. And so that's the real reminder that we want to make sure that people understand about our business and particularly about our Global Insights businesses that are very much proprietary based. So Datalinx, very much proprietary data, Trayport, proprietary networks that you need to be connected to be able to get the visibility and the activity on the VettaFi applications, those benchmarks, proprietary benchmarks that are integrated in products that are in investors' hands. These are very difficult to disrupt with the types of technology advancements [ we've ] been talked about in the AI market these days. So candidly, I think this reaction was an overreaction, and I don't think it's particularly appropriate for a company like us. Aravinda Galappatthige: And just a quick follow-up, perhaps for David. Great analysis of the OpEx piece as usual. Looking forward, obviously, a lot depends on sort of the growth trajectory we see in '26. How should we think about sort of the organic OpEx inflation from here on? Any kind of -- any components we should be aware of as we sort of model through? David Arnold: Yes, it's a great question, Aravinda, and pleased to actually take it. I mean, we continue, and this echoes what John said about our strategy, right, which is unchanged, is we continue to invest in growth in 2026. And the thing that is the biggest guidepost for both the management team and when we review with our Board of Directors is being focused on the positive operating leverage, right? And as I've said before, it's less about the quarter. It's really about the full year and the multiyear. This quarter, obviously, it was an outstanding performance at 7% operating leverage generated obviously, through '25. Now as you know, I don't traditionally provide expense guidance and there -- but there are 2 things that I can share with you, right? So first, looking at our most current quarter's expenses, really using Q4 as kind of a jumping off point. I would use the comparable basis as kind of the best jumping off point. And then from there, as you look to the next quarter, I would adjust for what you would typically expect are pluses and minuses, right? And the best way to look at that is to say, okay, as we head into Q1, we typically have higher payroll expenses as things reset at the end of the year as well as we typically have the VettaFi Exchange conference, right? So those would be the 2 things that you would look at. And then secondly, as I've said in the past, right, like we try and maintain expense growth to inflation. And really, inflation is on an annual basis. But as we've noted in the past, like we have various expense categories that are subject to different types of inflation. So for example, compensation and benefits really tracks more as wage inflation in the various countries in which we operate. And dare I say inflation is not quite similar in some of these jurisdictions. So that's number one. And then number two, we factor in obviously movements in total shareholder return relative to the S&P Composite Index because that changes the valuation of our performance share units and the multiplier, which we don't hedge, as I've spoken in the past. So that's really kind of on the salaries and benefits, which is about half of our expense base. And then on the technology front, the rate of inflation, Aravinda, as you know best, differs from general wage rate inflation. And then we move to SG&A, right? And that really is moving more on some part of the Consumer Price Index, but other parts like travel and entertainment seem to be somewhat disconnected from the typical Consumer Price Index. So we factored that all in, but we go back to the most important guide point, which is positive operating leverage and investing for growth. Go ahead, John. John McKenzie: I want to add in one piece because it actually then circles back to your first question. I don't want to lose sight in the discussion about the AI opportunity here for us and the work we are doing there. That is actually integral to how we see the future state of how we manage the investment, the talent base in the organization. We are already seeing some early wins. So we have AI adoption within some of our development teams. That's actually allowed us for the first time in the time that we've actually owned Trayport to essentially hold our development team flat year-over-year because of the additional productivity we're getting out of that tool deployment, so we can get more with the team that we have in terms of developing more product, more software. So we're looking into this year in terms of actually how do we scale that up, move it across more of the divisions. We're actually deploying tools across the entire population base to improve productivity throughout the firm. So that's part of then what the tool base is for help us to maintain that cost discipline going forward by using these things smartly in terms of how we would work every day. Operator: The next question comes from Jaeme Gloyn with National Bank Financial. Jaeme Gloyn: Just want to go back to the AI risks and opportunities as well. And as we look at some of the companies in your peer group or adjacent peer group like an LSEG or FactSet, getting hit a little bit harder than yourselves. It seems to be maybe perhaps focused on some of these data and analytic screens or tools that would maybe be comparable to like a Trayport. So I appreciate your commentary around the proprietary network and difficulty to disrupt that network. I would agree with that. I'm just wondering, are there other strategies or other projects underway to reaffirm that moat you have in the Trayport business as it relates to potential threats? John McKenzie: Yes. And Jaeme, thank you for that. And I think we've actually talked about this in the past that we've actually been on a continuous investment program within Trayport. We're actually just reaching the end of an investment period, which we call JUUL 2.0, which is an entire replatforming of the Trayport system, which actually then makes it even easier and quicker for us to bring new features and capabilities to the user base to keep them connected. And so that's -- like the value of a really strong network is you can only get that value by being connected to it. The data that goes through a Trayport screen is not publicly available data. You can build any AI agent you want, but the data is not available for it to do anything with. And that's what I mean by it being a proprietary network. And the users on it don't want that data exposed in a public way because it's their value-added data as well in terms of how they act with other participants. And so that's the nature of the business. Our job is to compete is to continue to innovate around it. There have been folks building competitive alternatives, the entirety of the time we've been in this business and before we owned it. And the strength in it continues to be building that value-add network that has the best price discovery in that closed market. So that's what we're going to continue to do. So it really isn't comparable to those other organizations you talk to, and those are really about screens that are actually aggregating public data that's otherwise readily available. And that really is the differentiating point. Now the second piece on that, in all of our data businesses, we are looking at where do we actually incorporate AI capabilities to both make them more efficient, but also potentially create more data and insight sets on top of them. That is what we're doing in terms of Verity team that's using public information with an AI component on top it to create investor signals on that, that you wouldn't otherwise have. We're similarly doing that with what we can potentially do in the data sets, and our analytics sets around Trayport, around Datalinx as well. So you are going to see more of that coming forward in terms of the areas where we invest. But we're focused on areas where it makes the data sets more efficient and helps to create more information and useful investor site signals to the investor audience. But I always want to remind people, the underlying proprietary data comes from us, and that is a really strong asset as this industry evolves. Jaeme Gloyn: Okay. And then still in Trayport, it looks like there were some lower nonrecurring consulting fees this quarter. Not something I think I've seen called out in the past that perhaps is what's driving maybe organic revenue growth a little bit slower this quarter than what we're used to seeing. Is that the driver? Is there something else that we should be thinking about here in terms of that organic revenue growth number? I mean, you spoke very convincingly of the high single, low double-digit target in the near term as well. But maybe talk through some of those consulting fees and what kind of movement it can have from a quarter-to-quarter or year-to-year basis? David Arnold: Yes. I appreciate that, Jaeme. Yes. I mean, effectively, what it was is it's less than GBP 0.5 million year-over-year delta. But it was meaningful for us just to call out because it was a variance year-over-year. That's kind of why we did it because it was notable. But typically, as you know, in many of our quarters, we don't call that out because the year-over-year variance is kind of not material. And this time, it was just slightly on the material side on that not material, material kind of judgment. So we thought it would be good to provide that color. But yes, that is something that is also a really good harbinger of new client kind of growth because typically, the nonrecurring projects are us helping onboard either a broker or a trading desk and so on and so forth. But it's not the big driver of our results. But in this particular quarter, it just was notable to call it out. Operator: The next question comes from Graham Ryding with TD Securities. Graham Ryding: Maybe we could jump to equity tokenization. The SEC in the U.S. seems to be encouraging the development of platforms to trade and settle tokenized equities. We're also seeing some initiatives here from some of your peers like NASDAQ, NYSE and I guess, the Clearing Corp in the U.S., DTCC, they've all sort of rolled out some new initiatives or announced new initiatives. So maybe you could just comment on what do you expect from the Canadian regulators here? Should they be following the lead of the U.S. to some extent? And then should we be expecting some announcement or initiatives from you on this front in 2026? John McKenzie: Yes. It's a great question, and it's so timely. So thank you. So let me start with in terms of where the transformation is coming from. And this transformation, again, we had talked about in some of the comments, is a technology capability that has the potential to make markets more efficient in some ways, but in some ways, less efficient than they are today. The marketplaces, particularly around equity trading throughout North America, are some of the most liquid, deep and effective markets in the world. So when we think about how we tokenize and we think about what is the value add and what is the way to do that constructively. And so actually, I really applaud the work that NASDAQ and NYSE are doing in terms of the leadership position in the U.S. where the activity on this is the highest to try to chart out what is the way to do it appropriately, so that you continue to have the benefit of price discovery, deep liquid markets, fungibility, standardization. And that's what they're looking to do in conjunction with DTCC in terms of their applications. So from a Canadian standpoint, we do have a bit of a benefit of the ability to be observing and participating in this to see how we can standardize and be part of that discussion. We've got our team engaged on that as well. And one of the unique advantages we bring to the equation is that we actually have the entirety of the ecosystem to work with. So like -- unlike in other markets, we've got exchanges and clearing houses that are separate. The fact that we have both the primary exchanges, CDS in terms of the depository and clearing, the trust and transfer agent capability, we have that full value chain so we can actually explore where we can see the abilities to innovate through this and actually create value. And what we're really encouraging in our discussions with the industry and with regulators is that we do this in a way that thinks about the industry itself, how do you standardize and ensure that the efficiency we've collectively created isn't lost as part of the innovation. And so that -- again, that IDBB how do you standardize, how do you make sure things are fungible. Now in that, I'll be candid, we've had actually discussions with companies for years that have considered bringing their issue to market in a tokenized form as opposed to a security form. It's actually not materially different in terms of the security itself because any security that's listed today is a fully digitized product, digitized from the front end all the way through, through trading and clearing. It's the question of whether or not you want it centralized or decentralized. And so the model that the U.S. is pursuing is a way to potentially still have it as the same vehicle, but decentralized so you can remove the token from the depository and take it in the old wallet, which is a question in terms of the benefit, in terms of -- for some large users, they may see a benefit in that because they can use it for those things. But for some small users, there actually may security concerns around it. So these are all the things that we're considering. And we think it's our role as the leading marketplace to take a lead role in helping to identify the best way to adopt innovation for the marketplace. So it benefits all the various parties as opposed to just adopting for adopting. So you will see announcements from us as we see practical applications that can be utilized. But we won't be doing this kind of what I'll call announcement for the sake of announcing. We're doing the work, and we want to see how we can get it right. I mentioned in my comments; we've actually been working on blockchain solutions and tokenization use cases for about 15 years. I do believe that the real biggest potential in the near term is going to be around large capital moves, collateralization. The Bank of Canada stablecoin legislation is an enabler of that because it will allow the development of stablecoins in a way that candidly to begin are stable. But that also means you have to have liquid assets behind them. You have to have them property custody, and we can be part of that solution set. So those are the things that we're working on exploring, and we'll be active in the conversation going forward. Graham Ryding: Great. Thanks for the thorough answer. Is it fair to say that there may be some areas of your business at risk, but there also could be some areas of sort of new market opportunities if the market structure does move in some extent towards blockchain and tokenized securities? John McKenzie: Yes. What I think is that there would be some areas of the business that would change. If -- I don't see where we're going to move to what I would call a 100% on-chain market because these markets are going to have to integrate. Even in the existing market today for equities, as I mentioned, everything that's been listed in the last 20-plus years is fully digital. But everything that was listed before that is a hybrid of digital and quite candidly, papers and gram of safes. And so what we do is we actually make all that work and integrate together. And so as we move down the world of potentially tokenizing things along the side, we want to make sure that it all integrates together so that it can be fungible, not just through a marketplace standpoint, seamless from a user experience standpoint, seamless from a bank or dealer to be able to connect to all of these things at the same time. And so I think it's more about how does that ecosystem transform over time in terms of how you support it. So for example, a transfer agent today maintains a register of both the centralized security that's on the centralized book and the decentralized security that's sitting on certificates. This would be another leg of that, that needs to be integrated together for it to be effective. I will be candid; the one place I do not think is an effective solution is the solutions that are more about creating a token on top of an existing equity. That's a big question mark for me because it actually doesn't confer the rights back to the user. It's not fungible. It impacts price discovery and capital formation in a way that's not necessarily positive. And I'm not sure the actual investor at the end of the day understands what they're buying or has the same liquidity when they choose to sell it. So those are the things we want to make sure we're very thoughtful about in terms of how we do market structure. Operator: The next question comes from Bart Dziarski with RBC Capital Markets. Bart Dziarski: Lots of good discussion around AI and tokenization. So maybe I'll ask about the capital formation business, seeing really good growth there momentum. Just can you give us an update on what you're seeing early days to start 2026 and how you expect kind of the rest of the year to play out on that front? John McKenzie: Yes. Thank you for the question. And I mean early '26 really flows from the end of 2025. I mentioned in my comments that the financing activity in the back half of '25 was outstanding. If you actually look at the financing activity for all of the totality of 2025 now was up 60% year-over-year, 44% in the senior market, over 100% in the junior market, multi-sector behind it in terms of resources, financials, technology. So that is a very strong leading indicator. We're seeing that strength continue into 2026. And then in terms of the new issue pipeline, this is -- it's always conversation-based because we can never give actual visibility to when a company will choose to go public. But we have one of the deepest IPO pipelines that we are engaged with. If you talk to the investment banking community, they would tell you the same thing, one of the deepest pipelines we've seen in a number of years. And again, multi-sector in terms of companies that could be coming to market. So you're seeing a return of technology companies interested in raising public money, which we haven't seen over the last number of years since basically 2021. So we're pretty excited about the potential. I always use the word potential because global events can be disruptive as we have seen in the past. But the potential is there. Market values are strong. Liquidity is very deep. The liquidity in the marketplace is the strongest it's been in decades. So the conditions are good for companies that want to go forward. And now it's a question of which ones go when. Bart Dziarski: Great. And then just wanted to ask around the Corporate Solutions business you're building out. You're tapping into private markets. It's a new asset class. Like how should we think about that in terms of the opportunity for you over, call it, the next 3 to 5 years as you address that asset class for new growth? John McKenzie: Yes. I mean one of the simple ways we've thought about it in terms of how we've kind of set up our objectives internally is when we think about the whole Capital Formation space in terms of Capital Formation and Corporate Solutions, Capital Formation being very much the capital raising activities of the exchanges and Corporate Solutions being all the solution sets of public and private issuers. Right now, the Corporate Solutions is about 44%, I think, of the total revenue of that division. We're looking for that to be actually the larger piece. So more than 50% of the Capital Formation overall business, which actually means we have to grow even faster when the capital raising activity is strong in that piece. And the reason we believe that, that has potential is because those solutions, they are not limited to public companies. The ecosystem, the client base is capital raisers, whether you're raising from a private source or a public source that transfer agency, that trustee capability, that employee plan, the disclosure tools are useful for all of them. And we've really seen this through our expansion of the Trust business, the Newsfile business when we came in, had hundreds of clients that were in the private space as well. And so all those ones have a lot of growth space to get deeper relationships. And the unique piece around as we build this out is it allows us to have multi-solution conversations with clients that we didn't have the ability to do in the past. So when we can talk to a client about not just the transfer agency capability, but the disclosure as well or vice versa. And that applies not just to private companies, but candidly, it applies to some of our largest blue-chip companies as well that use other providers that now we can have discussions with. So that's why we get really excited about that solution space because it's not bound by public. It's capital raisers in general. And as we sell into private companies, either through solutions or through the Marquette initiative I mentioned earlier, it allows us to build that relationship deeper with a company that has a go-public potential in the future. So again, when you build your pipeline for who can go public, we're starting that relationship earlier in the life cycle by being able to serve them in their capital raising activities while they're still private. Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Mousavian for closing remarks. Amin Mousavian: Thank you, Drew. If you have any further questions, contact information for Investor Relations as well as media is in our press release, and we'll be more than happy to get back to you. I know your valuable time is finite, and we thank you for spending with us this morning. Until next time, goodbye. Operator: This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the MarketAxess Holdings Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. To withdraw your question, press star one again. As a reminder, this conference call is being recorded on February 6, 2026. I would now like to turn the call over to Stephen Davidson, Head of Investor Relations at MarketAxess Holdings Inc. Please go ahead, sir. Stephen Davidson: Good morning, and welcome to the MarketAxess Holdings Inc. fourth quarter and full year 2025 Earnings Conference Call. For the call, Christopher Concannon, Chief Executive Officer, will provide you with an update on our strategy and our business, and Ilene Bieler, Chief Financial Officer, will review our financial results. Before I turn the call over to Christopher Concannon, let me remind you that today's call may include forward-looking statements. These statements represent the company's belief regarding future events that, by their nature, are uncertain. The company's actual results and financial condition may differ materially from what is indicated in those forward-looking statements. For a discussion of some of the risks and factors that could affect the company's future results, please see the description of risk factors in our annual report on Form 10-K for the year ended December 31, 2024. I would also direct you to read the forward-looking statement disclaimer in our quarterly earnings release, which was issued earlier this morning and is now available on our website. Now let me turn the call over to Christopher Concannon. Christopher Concannon: Good morning, and thank you for joining us to review our fourth quarter and full year 2025 financial results. We are pleased with the progress we achieved in delivering new protocols and functionality in 2025, and excited about our prospects and plans for 2026. First, we enhanced the MarketAxess Holdings Inc. advantage in 2025 by expanding our global network, enhancing our differentiated liquidity, and strengthening our deep proprietary data and analytics. These key components of the MarketAxess Holdings Inc. advantage are further complemented by our investment in multi-protocol solutions for the buy side and for the sell side. We have made significant progress in 2025 delivering and growing protocols across our three channels: portfolio trading protocols, block trading protocols, dealer matching protocols, automation protocols, and our closing auction protocol. Next, we have a clear and achievable technology and product roadmap that positions us to achieve our three-year targets that we announced in December. In 2025, we delivered critical protocols and workflow tools that will help achieve the first year's milestones. Now 2026 is about execution and building on the momentum we had as we exited 2025. Turning to our financial results on Slide three. In 2025, we generated record revenue of $846 million, including strong 10% growth in product areas outside US credit. Record total revenue was underpinned by record total ADV, driving record commission revenue combined with record services revenue, helping to drive record annual free cash flow generation of $347 million. Momentum continued to build with our new initiatives last year. We exited 2025 with a 29% increase in block trading ADD, including record block trading ADD in emerging markets, 28% estimated market share in US high yield portfolio trading, and over $3 billion in trading volume in our new dealer initiative protocol MIDEX. We continue to be disciplined with our expense management, with 5% growth in non-GAAP expenses in 2025. We have returned a total of $474 million to investors, through $360 million of share repurchases, and $114 million in dividends. In addition to establishing our three-year plan, we announced an enhanced capital return plan of $400 million, including a $300 million ASR. We just completed the ASR earlier this week with the final delivery of 360,000 shares. Through the completion of the ASR, we have now retired 1.7 million shares to date. In summary, I'm encouraged by the significant product deliveries that we made in 2025 and the progress we achieved across our strategic channels, portfolio trading, dealer initiated, and block trading. The investments that we are making to help drive higher levels of revenue and market share growth in US credit are beginning to show some progress. I just wanted to provide some context for our January trading volume statistics that we released yesterday. In January, we generated record total credit ADV, driven by strong growth across all credit product areas, with record ADV in our emerging markets business up 50%. Strong market volumes, combined with the continued momentum in our new initiatives, helped drive strong growth in our total credit preliminary variable commission revenue. Estimated market share in US high grade was lower than we would have liked, but it was negatively impacted by a 92% increase in new issue block activity. While this has a temporary impact on share, it's good for overall market volumes and turnover growth over time. US high grade turnover increased 95% in January, levels we have not seen since approximately 2011. Before moving to the next slide, I wanted to welcome two new members to our Board of Directors, Doug Sifu and Ken Skijano, who will be joining our board as of March 1. Doug brings deep fintech market structure and regulatory expertise from a major global market maker, and Ken has three decades of experience in fintech and private equity. Both will be integral to the board and me as we continue to execute our long-term strategy. Slides four and five really drive home how well we have enhanced the MarketAxess Holdings Inc. advantage in 2025. Most of the KPIs on slide four show healthy growth rates reflecting the underlying health of our franchise. This shows that the investments we have made to enhance our products and provide clients with new workflow tools and protocols are paying off. While we are pleased with these results, US credit market share continues to require attention and focus. The good news is we have a detailed plan to address it, which is embedded in our three-year targets. Slides six and seven highlight how well we are executing on our new initiatives across our three strategic channels, including strong growth continuing in our automation suite. On slide seven, in the client-initiated channel, we continue to make progress with block trading globally. Our block solutions continue to grow in US credit, emerging markets, and euro bonds, proving that blocks will move from phone to platform. We also recently launched a new axe trading solution for dealers to send axes directly to specific clients. The rollout is in progress, and the client feedback has been positive. We generated 24% growth in ADV to a record $5 billion of block activity across US credit, emerging markets, and euro bonds, with record block trading ADV across all three products. Our US credit ADV record was driven by record block trading ADD in US hybrid, of over $2 billion, which represented an 18% increase. Our ADV record in US high yield of over $800 million in block trading represented an increase of 19%. The strong growth continued in January, with a 56% increase in block trading ADD last month. Block trading in US credit, emerging markets, and Eurobonds now makes up about a third of our credit ADV and represents the next step in the growth of electronic trading. In the portfolio trading channel, we generated a 48% increase in total global portfolio trading ADV to a record $1.4 billion, with record US credit ADD and market share. US credit portfolio trading market share increased by 270 basis points in 2025. In January 2026, total portfolio trading ADD was up 126% and market share in US credit portfolio trading increased by 620 basis points. In the dealer-initiated channel, we generated a 33% increase in dealer-initiated ADV for the year, and we exited 2025 with a strong contribution from our new US credit MIDEX protocol with over $3 billion in trading volume in December alone. Again, this strong growth continued into January, with a 13% increase in our dealer-initiated ADV. Total Midex trading volume was a record $7 billion, representing an increase of 383%. Last in the automation suite, we had another strong year as clients continue to leverage automation enabling them to do more with less. Additionally, we were very pleased to see a significant increase in Adaptive Auto Ex algo trading volume in the fourth quarter. Several key clients adopted more customized adaptive algo workflows to increase execution performance and generated over $8 billion in trading volume in the fourth quarter. I'm also happy to report that our Pragma acquisition, which is powering our recent Algo success, is fully accretive while also adding strategic value across our matching and automation technology modernization, including driving growth in our rates complex. Slide eight shows the strong growth of our new initiatives with our top 25 clients. Our top 25 clients have been driving our growth in portfolio trading with an 85% increase in PT volume coming from the top 25. While our top 25 clients have been leveraging our platform for portfolio trading, they've also been leveraging our automation suite for block trading. Automated block trading volume from our top 20 is up over 125%. And not surprisingly, given the benefits of Xpro in managing RFQ and portfolio trades with our rich proprietary pre-trade analytics and data, trading volume through Xpro is also up 80%. Slide nine highlights the increase in market share in US high yield portfolio trading in 2025 as a result of several enhancements we made last year. The enhancements allow clients to better evaluate the pricing they receive for their high yield portfolios. While this chart highlights the dramatic increase in estimated US high yield PT market share, we have also seen our traditional RFQ high yield market share increase by approximately 100 basis points in 2025. Slide 10 highlights the increase in the long-term e-trading opportunity that we have seen in just the last several years. This is a point worth emphasizing that I believe many market followers have been missing, particularly with our recent growth in blocks. While total electronification percentage rates may have plateaued in US credit over the last year, the US high grade market overall has increased by approximately 52% and US high yield has grown by approximately 28%. We believe that we are well positioned to capture this expanding e-trading opportunity as a result of the new initiatives that we have in the market right now as well as the ones we plan to deliver in 2026. This is why we feel good about our position and our ability to return to higher levels of revenue growth in the coming quarters. Now let me turn the call over to Ilene Bieler to review our financial performance. Ilene Bieler: Thank you, Christopher Concannon. Turning to our results. On slide 12, we provide a summary of our fourth quarter financials. We delivered 3.5% revenue growth to $209 million, which includes a $2 million benefit from foreign currency translation. We reported diluted earnings per share of $2.51 or $1.68 per share excluding notable items. The net $0.83 per share impact of notable items in the quarter consisted of approximately $1 million or $0.02 per share in repositioning charges, our expenses in the employee compensation and benefits line, and $31 million or $0.85 per share for reserve release related to the tax-related reserve we established in 2025. My comments on our results from this point forward will largely exclude the impact of notable items and will be on a non-GAAP basis where applicable. Looking at each of our revenue lines in turn, total commissions revenue increased 4% to $181 million compared to the prior year. Services revenue increased 2% to $28 million. Information services revenue of $13 million increased 2%. Post-trade services revenue of $11 million increased 1% versus the prior year. Technology services revenue of $4 million increased 2%, driven by higher license fees as well as connectivity fees from RFQ Hub. Total other income decreased approximately $1 million, driven by lower investment income on lower rates and increased interest expense related to borrowings for the ASR, partially offset by unrealized investment gains in the quarter. The effective tax rate was a negative 15.8% or a positive 23.4%, excluding the impact of the tax-related notable I referenced earlier. On slide 13, we provide more detail on our commission revenue and our fee capture. Total credit commission revenue of $165 million increased 2% compared to the prior year. 4% growth in U.S. high yield, 6% growth in emerging markets, and 9% growth in Eurobonds total commission revenue was partially offset by a 1% decline in US high grade and a 14% decline in municipals. We are very pleased with the improvement in US high yield revenue generation at the 2025. The reduction in total credit fee capture both year over year and quarter over quarter was principally due to protocol mix, partially offset by the higher duration of bonds traded in US high grade. On slide 14, we provide a summary of our operating expenses. Excluding notable items, total expenses increased 8%, which included a headwind of $1 million due to the impact of foreign currency translation. The increase was driven principally by higher consulting, technology and communications, and employee compensation costs as we continue to invest in our technology modernization and upgrade talent to drive future growth. We are continuing to invest while at the same time looking for cost efficiencies. Headcount was 869, down 2% from 891 in the prior year period and down 3% from 2025. On slide 15, we provide an update on our capital management and cash flow. Our balance sheet continues to be strong, with cash, cash equivalents, and corporate bond and U.S. Treasury investments totaling $679 million as of December 31, 2025. We generated a record $347 million in free cash flow in 2025, and we returned a total of $474 million to investors through share repurchase and dividends during the year. We repurchased 2 million shares for a total of $360 million in '25, including 595,000 shares in open market repurchases, $120 million approximately 1.4 million shares for $240 million with the commencement of our $300 million ASR in December. I'm pleased to report that we just completed the ASR earlier this week, with the final delivery of an additional 360,000 shares bringing the total shares repurchased through the ASR to 1.7 million. As of January 31, 2026, $25 million remain on the board's share repurchase authorization. Stephen Davidson: On slide 16 is our full year 2026 guidance. Ilene Bieler: Before I move to guidance for 2026, please note that for 2025, total revenue outside of US credit grew 10% and US credit revenue decreased 2%. Now in terms of guidance for 2026, total services revenue, which includes information, post-trade, and technology services, is expected to grow in the mid-single-digit percent in 2026. We expect total expenses ex-notables to be in the range of $530 million to $545 million. This would imply a growth rate of approximately 8% to the midpoint of the 2026 range. This includes the full year effect of 2025 hires, inflationary increases, as well as tech investments and higher variable costs. A note on our full year 2026 expense guidance relative to our average annual operating margin expansion target. As I have stated previously, our three-year average annual targets of 8% to 9% revenue growth and operating margin expansion of 75 to 125 basis points are exactly that: averages over three years. Turning to taxes, we expect that the effective tax rate will be in the range of 24% to 26%. Capital expenditures are expected in the range of $65 million to $75 million, of which roughly 80% relates to capitalized software development costs for investments we are making in new protocols and trading platform enhancements. Now let me turn the call back to Christopher Concannon for his closing comments. Christopher Concannon: Thanks, Ilene. In summary, on slide 17, we are continuing to execute our long-term strategy. We have significantly enhanced the MarketAxess Holdings Inc. advantage with our investments over the last several years. The growth profile of the company outside US credit is strong, and we are confident in our ability to return to higher levels of revenue growth in US credit with our three-year financial targets. We continue to make strong progress with our new initiatives across our three strategic channels. We are confident in our ability to execute in 2026, and we are continuing to focus on expense discipline and optimizing capital deployment to maximize long-term shareholder value. Now we would be happy to open the line for your questions. Operator: We will now begin the question and answer session. In order to ask a question, simply press star followed by the number one on your telephone keypad. Our first question will come from the line of Patrick Moley with Piper Sandler. Please go ahead. Patrick Moley: Yes. Good morning. Wanted to ask about block trading. Christopher Concannon, you noted in your prepared remarks the strength you've seen there, up 24% last year and then up 56% year over year in January. So could you break down the strength that you're seeing there, where it's coming from, and the different ways that you're attacking that market? Just trying to get a better sense for what's going on behind the scenes there. Thanks. Christopher Concannon: Sure. And thanks, Patrick, for that question. Obviously, we've been investing in our key initiatives, all our new initiatives, portfolio trading, dealer initiative, and then block. As part of the larger initiatives, we're seeing returns across all three, so it's quite exciting. The block volumes that we're seeing are quite substantial. So I'll just run through some of the stats and then get back to your question around where we're seeing blocks come through the platform. First of all, in 2025, you heard it in my prepared remarks, we've seen growth of block trading on the platform and IG of 18% and high yield of 19%. And then key areas where we first started to deploy our block protocols, EM is up 27% and euros up a staggering 66%. So the good news is the block opportunity is there. And the tools we're deploying are increasing our share of blocks on the market. Again, Q4, as you mentioned, a 24% increase, a total of $5 billion in block volume across the platform. And then here in January, still increasing our overall block volume. I'm happy to report a third of our credit volume is now in blocks during the month of January. And you know, in January, hybrid was up 33%, high yield up 42%, and EM up 92%, with the euros up 89%. So all sizable growth numbers across the block platform. We have a number of protocols that are seeing block volume pass through it. Obviously, the data is a key ingredient to our success in block. We are now able to price blocks based on their size and their direction, and that's a key feature that clients are asking us more and more about. Our targeted RFQ, which was launched in EM and Euros, is where we're seeing the strongest growth rates in our block growth rates. And then we are seeing traditional, RF all to all RFQ we are seeing blocks come through the platform there. It's just the liquidity levels are quite high. The market impact of sharing your block with all participants is quite reduced. Then the other areas, other exciting areas that we're seeing block content is in our automation solution. We're seeing very large institutional investors increase their size of block activity through automation. So there's no human involved. It's just a large block going through our AutoX platform. And then we're seeing blocks in our algo suite, which is really designed for block solutions, and we're seeing a pickup in blocks there. We've also seen block size in our newly launched MIDX solution, which was just launched in the fourth quarter of last year. And then we're seeing block sizes come through our newly launched auctions, closing auction platform there. That is designed for block size as well. So we have a number of protocols, some specifically designed to compete with IV chat and phone, and others where we're just seeing an increase in an appetite for putting blocks over the platform. The other piece of the market that we're seeing higher levels of block was around new issue. So the block market in the new issue market in January increased quite substantially. So in order to move the overall trace volumes that we're seeing, while PT is an important protocol to put exposure on and off, we're seeing higher levels of blocked activity across the market and trying to address that activity. Thanks. Operator: Our next question will come from the line of Jeffrey Schmitt with William Blair. Please go ahead. Jeffrey Schmitt: The average fee rate in credit has obviously been sliding for the last few years and really just from a shift in the protocol mix. Can you maybe talk about if there's competitive pricing pressures driving that as well? And what type of decline are you assuming in the fee rate in your medium-term revenue growth outlook? Thank you. Christopher Concannon: Yes. Great question. Again, there's a lot of parts that impact our fee per million. Just to kind of go through some of them. So the product mix, as you mentioned, can impact our fee per million. Obviously, protocol selection will definitely impact our fee per million. Maturity, average maturity impacts our fee per million. And then things like spread and volatility have an indirect impact on our fee per million. So a lot of moving parts around fee per million. We've seen some of the largest adjustments in fee per million through the protocol and product mix. A perfect example is the move to portfolio trading that comes in at a much lower fee per million. But, again, we're all about growing our incremental revenue, and much of the new initiatives that may come in at a lower fee per million are obviously growing revenue, incremental revenue. The areas that we have seen fee per million impact, one area in particular, we just talked about the growth in block volume. In January, our growth in block volume does impact our fee per million. But it has a net benefit to our revenue. I'll just walk you through an example so you can understand the implications of doing more volumes by block. If we trade a $50,000 order, which is quite a small size order on MarketAxess Holdings Inc., we'll incrementally make $17 on that trade, but that comes in at a $350 fee per million. A $5 million block trade will make $700 on that same transaction, but that comes in at a fee per million of a 140,000,000. So you can see that as we grow these new protocols and grow into incremental volume, it will have an impact on our fee per million calculation. And that's an important factor because we are growing all of these new initiatives, portfolio trading, block volume, and, obviously, automation and our dealer initiative is growing as well. All of those can have an impact on our fee per million. I'll turn it over to Ilene Bieler to round out the question. Ilene Bieler: Yeah. Let me just give a little bit of context also to support what Christopher Concannon is saying. So if you think about the month-over-month January decline to 132 from 137, for instance, in fee per million, as you noted, it's volume mix shift largely into lower fee capture product, as Christopher Concannon just discussed. But to put some more texture around it, we had a very strong month in Eurobonds with ADV up 74%. And we know Eurobonds come in at a lower capture, but we expect this, right? That's a good thing. We want to continue to see that business growing. And then also, obviously, with high-grade flux, that ADV was up 82% on a month-over-month basis. And it really goes to what Christopher Concannon was talking about before on the question on block. Now, there was a little bit of offset. There wasn't a huge change in the weighted average years to maturity month over month. It went from about, you know, 9.47 to 9.49. So there was a little bit of offset in terms of high-grade duration there. But by and large, you can see these trends, and this is not new. This is what we've been talking about in terms of both product and protocol shift. Let me get back to you also on your medium-term target question because I understand where that's coming from. And it's important to take a step back when you think about the medium-term targets. And you've heard me say this before. I said it in my prepared remarks, right? We know that the 8% to 9% average growth is just that: average. And there could be variability on phasing in over the course of the three years. Having said that, you may recall that we're being pretty clear that this is really about revenue growth and the way that we are expecting to achieve that. We think that in the first year, US credit will be about 20% of the total incremental revenue growth for the company. And then by the end of our three-year plan, we think that's going to be about 35% of incremental growth expected to come from US credit. Now, we also have our services business, and you heard that guide today in terms of, you know, in the aggregate, single digits for 2026. And we haven't included assumptions for increases in velocity, for instance, in these three-year targets in our three-year plan. While I'm not going to give you specifics on fees per million, I can confirm that we have not baked in any fee per million accretion. Our objective, really importantly, we keep talking about this, but just to bring it back, is that we really are looking at our ways, the levers we can use to drive revenue growth. And Christopher Concannon talked a lot about those initiatives, and I'm sure we're happy to go into it further. But just wanted to get back to you on that point. Jeffrey Schmitt: Okay. Great. Thank you. Operator: Our next question will come from the line of Alex Kramm with UBS. Please go ahead. Alex Kramm: Yes. Hey, everyone. Can you give us a quick update on emerging markets? Seems like that's one of the biggest standout success stories for you here over the last few years. I know it's still a very underpenetrated market, so maybe define really what the roadmap is, what you're excited about maybe in 2026. Then, you know, look, obviously, others are watching you. So just wondering if you see any sort of shift in competitive dynamics, if you're running into other people a little bit more. Or if this is still kind of a large market for you to capture? Christopher Concannon: Thanks, Alex. And, obviously, emerging markets is an exciting area for us. We're obviously, just to size the market, it's similar in size to US credit when you talk about the global emerging market. And you have two types of markets, both sovereign as well as corporate local, as well as hard currency. So it's quite a diverse market. The nice thing about that market, it is a diverse dealer market as well. It's not what I would call top-heavy. So having a diversity of dealer communities both in the local markets and the global dealer community is a key ingredient to the liquidity that we see over the platform. And as you mentioned, our EM, our emerging market growth has been quite attractive over the last couple of years. It continues into January where we saw our EM growth continue into January. Our market ADD and EM just for January was over $5 billion, which was a record and up 50% year over year. Up 56% month over month. So you just can see that trend line is quite positive. In terms of the competitive landscape, we're not seeing, you know, we're competing dramatically with chat and phone in the EM market. It's not a well-penetrated electronic market. I think, you know, we try to estimate the electronic penetration in EM as somewhere under 10% and growing. So we see that as a huge market opportunity for us. You do need people on the ground in the local markets. So it is an investment in sales, investment in regional offices, and those investments we have made for quite some time with folks in Latin America, teams in APAC, and across other areas of the globe. So exciting, a great deal of, and we mentioned earlier the block volume growth. We're seeing block volume in EM as well, helping us drive that growth. As we mentioned earlier, that was up 92% in January and up 70% month over month as well, setting a new record in block. So a lot of exciting things to come, and we're obviously very focused on protocol solutions in EM. That's one area where not only do we have an all-to-all RFQ, but we have an RFM as well, which is helping to drive some of our block volume growth both in the local market as well as in the hard currency market. Alex Kramm: Very good. Thanks. Operator: Our next question will come from the line of Alex Blostein with Goldman Sachs. Please go ahead. Alex Blostein: I wanted to go back to your comment around revenues outside of U.S. Credit. Growing, I think you said 10%, in 2025. When you zoom out, and I know there's a lot of things that go in there. Obviously, there's some trading business like non-US, but also there's recurring revenues within there as well. I think at the slide, at the slide deck at our conference, in December, you talked about that being, I think, like, a mid-teen percent grower over time. So maybe talk a little bit about what has driven sort of the slower growth last year and how do you think about the growth in that non-US trading part of the business on a multiyear basis as part of your overall revenue growth, Algo? Ilene Bieler: Thanks for the question, Alex. Yeah, of course, I know the slide you're talking about and keeping in mind that was a CAGR over five years, right? And so if you think about, let's just take your service point to start and look at the full year 2025, right? Our services revenue there was about 6% this year, and we are guiding to, for 2026, mid-single-digit growth there as well. And so I think that all fits. And then you would expect to see higher revenue growth in our trading businesses outside of US credit. So this algorithm still fits, and it still is exactly as we said. If you think about the 8% to 9% average annual overtime with the phase-in and variability. And I would just say that there are different levers. Right? If you think about this plan, there's obviously the volume levers, and while we don't control volume, needless to say, in the marketplace, we know that the electronification has definitely velocity, and Christopher Concannon has certainly talked about it in the past. And if you even look at turnover in January, Alex, that was 95%. And we also, again, while we don't control volume, we went back and we did an analysis over time and we looked at volumes. And the only time in the last since 2014, for instance, since volumes have contracted in this market really was in that one post-COVID year, and we all know what 2020 was like. So we're continuing. The important thing for us, though, in terms of driving more velocity and driving turnover is making sure we have the protocols in place, the initiatives in place that's really going to enhance for our clients what they need. We want to be there to have the solutions there. And that goes to the market share component of the algorithm. Right? When we really are looking at market share, we're looking at it as what can we do to make sure that we are protocol agnostic. And Christopher Concannon has talked a lot about that. And so if you think about all of these things together, that is really what's driving the three-year plan. A lot of it is really based on just sort of how do you maximize for when you're seeing volumes in the marketplace, what we're doing on the initiatives, then, obviously, the last part of that is the pay per million, which we talked about. I don't know if Christopher Concannon if you wanted to add to that? Christopher Concannon: Yes. No, Alex, it's the right question. Look, our international business has been growing double digits for some time. That's really powered by EM and euros, where we see exciting growth. And, again, in EM, still early penetration for electronic trading. So the market opportunity is quite sizable. Around the services, particularly the data business, we have historically, I've on these calls have many times said, we will not sell some of our data. That is proving strategically correct at this point as we see what's happening around the AI space. Keeping our data, which is proprietary, in-house to then leverage through our own use of AI is going to be a critical ingredient going forward. So I think it comes to services and particularly market data revenue, we've strategically decided to keep that at a single-digit number because we want to actually hold our data for our own AI uses, which will actually help our transaction business. So it was a strategic decision we made quite a number of years ago, but now it's proving to be quite valuable. As we start to look at the use of AI within our data set. Just to give you a sense of how much that data asset is growing, in 2025, we saw $5.3 trillion in inquiry volume. That's up about 13% from the prior year. That inquiry volume triggered close to 91 million in prices. So it's an increase in prices coming back. That is all unique data that is across the globe. Across all the assets that we trade, and we're seeing over $35 trillion in notional prices on our platform each year. So it's quite a powerful data set. Our choice is not to sell it all in raw form. Our choice is to leverage that data for AI purposes to create higher volumes, more sticky services around our trading businesses. So that's part of what factors into our thought process around data and data growth. Operator: Our next question will come from the line of Benjamin Budish with Barclays. Please go ahead. Chris O'Brien: This is Chris O'Brien on for Benjamin Budish. I just had a question about capital return. So it's been quite a strong start to the year for volumes across the industry and on platform at MarketAxess Holdings Inc. So just curious if we saw continued momentum through the rest of the year, how are you guys thinking about share repurchases as we go through 2026? Thanks. Ilene Bieler: Sure. Thanks for the question. I think, as you just noted, you know, we, in particular, obviously have significant capital return with our ASR and just closing it out. And I would remind everybody that we did take out about $220 million on our revolver in order with the cash outlay in order to put a little bit of leverage on it to do that ASR. So our first order of business is going to be to pay that down over time. And so we do know that we have $25 million left in authorizations, and so we're just going to see how that goes. There's no end date on that authorization. So that's really how we're thinking about capital right now. And you probably also saw today that we did increase our dividend to $0.78 per share. So that's another thing that we're thinking about in terms of increasing capital return, at least on the dividend side in the short term. Chris O'Brien: Great. Thank you. Operator: Our next question will come from the line of Daniel Fannon with Jefferies. Please go ahead. Daniel Fannon: So wanted to follow-up, Christopher Concannon, on your comments around Slide 10 and just the addressable market. I think you mentioned that 2025, some of the e, or the electronification slowed. Just wanted to get a sense of what gives you confidence about that reaccelerating here in '26 more broadly as we just think about, obviously, the protocols you've been doing, but if there are other things idiosyncratic in the market, competition-wise that maybe slowed that down. Christopher Concannon: Sure. Great question. Something we obviously focus on is converting this market from phone to platform. And the market opportunity is larger than what has been converted today. So when you think about that, the opportunity is enormous, and we're still early in the journey of electronification of the global fixed income market. With regard to our slides, really, if you look at US credit, that's really where the growth of electronification across the entire market has plateaued. Kind of flatlined. Somewhere, it's hard to estimate, but somewhere in the 45 to 50% range. What's holding it back from further conversion when you analyze what is not on platform, it's really phone and chat block market. So that block market makes up the next 50% roughly, and that's the market opportunity that we are chasing. And very focused on. If you look at portfolio trading, the growth of portfolio trading because it's all electronic, should have increased the overall electronic footprint in the market. Ironically, it did not. It converted what was already largely electronic RFQ into just larger baskets traded as a single price basket. So it was really the growth of portfolio trading that did a really a conversion of e RFQ to e portfolio trading. Now and look. The market was quite focused on portfolio trading, both platforms, dealers, and clients were making huge investments to convert their RFQs to portfolio trading. I will tell you the focus of clients, dealers, and platforms today has shifted to that 50% of US credit. It's all targeting block market. That's the exciting piece, and our earlier discussion on our block growth is really reflective of the investment we're making in that block market. When you jump from US credit into other product areas, EM in particular, we're still early days electronic penetration. So we're seeing our portfolio trading in EM grow dramatically. We're seeing electronic RFQ, all-to-all. We're seeing block growth in EM as well. And then finally, our automation suite of products is growing quite handsomely in EM as well. Again, a very low automation penetration in that EM bucket. So overall, I just love the fact that our market opportunity is greater than what has been converted today. Around the globe, and that just is an exciting opportunity for us as we deploy more and more products targeting that specific block market, which is left to convert. Daniel Fannon: Great. Thank you. Operator: Our next question comes from the line of Elias Abboud with Bank of America. Please go ahead. Elias Abboud: I wanted to follow-up on the last one about the overall kind of slowdown in electronification and U.S. Credit this past year. I wonder if that has changed how you think about capital allocation. Does it still make sense to allocate the incremental dollar to US credit versus other areas like emerging markets or munis that are growing faster? Then if I could just squeeze in, like, a follow-up here. I was hoping we could get an update too on the opening and closing auction initiative and what the early returns have been there. Thanks. Christopher Concannon: Sure. Yeah. First, what's great about the opportunity and we really, we were just talking about blocks where we had substantial growth. Our investment in the block opportunity is actually very similar across product set. So whether we're investing in EM blocks or we're investing in US credit blocks, the way we have built our technology, our new technology on X Pro, it scales across both product sets. So the incremental investment has very high returns because we have shifted to investing our protocols into global protocols as opposed to individual product protocols. So that's the exciting part. So any investment in a block solution is an investment in a block solution across a protocol. So the high return on that investment is quite attractive. And we'll continue to roll out our X Pro solution, which is really delivering multiple protocols from portfolio trading, to blocks to our automation delivery as well as traditional list RFQ. All delivered on the same technology stack and the same platform as we roll that out across the globe. So investments high return because we're attacking the same unpenetrated market of EM or US credit with very similar techniques and protocol. Turning to our matching solutions, things like MIDX, and auctions, these are all new investments, quite an exciting incremental revenue investment. So we're seeing sizable growth across our matching solution MIDEX, I know, Elias Abboud, you did a nice report on that in January. I appreciate all the kind remarks around our dataset and the feedback from our clients. We promise we will use it as a marketing tool to talk to the dealer community. But Midex has been growing since we launched it in the fall of last year. It's quite exciting to be a part of that match, match business, in the dealer-to-dealer market. Again, we only have one match a day. We plan to increase that to multiple matches per day. So a lot of exciting growth there. Your question on closing auctions again, a newly launched auction solution. Right now, we're just focused on a closing auction, not an opening auction. And that was launched on an entirely new tech stack brought to us by our Pragma acquisition. So very exciting new tech stack with a new front end used by both clients and dealers. The closing auction was launched really sometime in the fourth quarter. It was in a pilot phase, and we just rolled out the auction to a broader set of clients. So we're as of two weeks ago, we opened it up to a broader set. But we are seeing pretty exciting participation. We've got three dealers now supporting liquidity in the auction. We have about 11 buy-side clients that are active in the auction, and we have some just some very key at what I call anchor dealers that are now posting block size liquidity into the auctions. Some of the stats that we're seeing again, this was pilot about $2 billion in notional orders. Staged in the auction. Over $900 million of orders submitted into the auction, and so we're seeing a great deal of participation. It's interesting. We had a really great call with our clients. We did a call on this, a webinar just on the closing auction. We had over 600 participants join. It was kind of one of our record webinars that we've ever seen. But the feedback has been exciting. We've had clients looking for additional bonds to be listed in the auction. And looking to understand. It is a new protocol that clients have to get used to because it is a time protocol in the late afternoon of the day, which is new to the buy side. So again, we don't expect that to ramp up dramatically in the coming quarters. We think that will grow over time and be a key ingredient for larger block size trades near the end of the day. Elias Abboud: Perfect. Thanks, Christopher Concannon. Operator: Our final question will come from the line of Michael Cyprys with Morgan Stanley. Please go ahead. Michael Cyprys: Just a question around artificial intelligence. I was hoping you could speak to some of your ambitions and visions around embedding AI more broadly across the business. Curious what portion of client flows do you think is ultimately automatable? And how do you think about execution outcome feedback in your AI models? And does that create any sort of flywheel that others cannot catch? Christopher Concannon: Sure. Exciting area for us, an area that we've been investing in for some time. Obviously, a number of our data products are AI-based. So we are along that journey in creating commercial products through AI. I'll take a step back and just mention the AI boom itself is very helpful to the bond market. If you look at the size of the bond market more recently, it is growing as a result of the funding that AI needs. Both in terms of the equipment and chips that people are buying through funding using the bond market, but also the data center build-outs are all through bonds. And then you'll finally need the utilities and the infrastructure to support those data centers will likely also come through bond funding. So it's just going to grow the bond market quite dramatically, and we feel we'll feel the benefits of that over the years to come. With regard to our use of AI, we're pretty excited about where AI can obviously help us. There's the, I refer to as the corporate AI use where it will make us more productive. Whether it's someone in finance using AI or one of our developers deploying code through AI. We're already seeing the benefits of that development, so we're excited about what's to come, and I think we're still in the early stages of leveraging AI to increase our productivity both in terms of product design as well as product and code writing. When it comes to commercialization of AI within our trading platform, the dataset is probably the most powerful leverage that we have. And I'm happy to report, as I mentioned earlier, our dataset or our data footprint that we can leverage through AI continues to grow. So things like EM, most local markets are not transparent markets, and so we are leveraging AI to produce transparency in those local markets. The other areas that we're seeing pretty interesting exploration using AI. A portfolio construction is a powerful area where we can see clients giving us what I'd call market exposures and not specific bonds, and then we would use AI to produce an outcome or a suggested basket that they could buy either through a PT or something that's available in the market. So the other area that we're exploring is trading signals. We have quite a sizable portion of the world's bond market activity. Across EM, US credit, eurobonds, and now treasuries. We are seeing that activity before we wake up here in the morning in New York. And so the signals that are born using AI across the patterns of behavior on a marketplace are quite powerful. And we have a number of clients asking us about, you know, indicators or heat maps across sectors across the globe. There's a number of areas that we see ourselves deploying AI using our proprietary data. Another area is depth of liquidity in the market. Most people can't see the depth of the bond market. It's individually priced inquiries or over chat. We have the full depth of the market because of all the prices that we collect on the platform. So these are all areas. Another area is spread prediction. Where we are able to predict movement in spread using AI. Again, that's a very powerful piece of information if you're a bond trader, whether you're a dealer or a client. So there's lots of uses that we're exploring right now. The last use is just basic chat functionality using AI questions, basic language models. For our clients to understand the market. Or make requests of our data using chat. So there's a number of places that we're exploring. The opportunities are huge, and like I mentioned earlier, we made a strategic decision not to sell all of our data and to use it for things like trading solutions that I just described. So an exciting new area for us, an exciting new area that we're going to clearly leverage here in 2026. Michael Cyprys: Great. Thank you. Operator: And that will conclude our question and answer session. I'll hand the call back over to Christopher Concannon for any closing remarks. Christopher Concannon: Thank you all for joining us. We look forward to talking to you on our next quarterly call. Again, and have a great weekend. Operator: This concludes our call today. Thank you all for joining. You may now disconnect.
Operator: Hello, everyone, and welcome to the Johnson Outdoors First Quarter 2026 Earnings Conference Call. Today's call will be led by Helen Johnson-Leipold, Johnson Outdoors' Chairman and Chief Executive Officer. Also on the call is David W. Johnson, Vice President and Chief Financial Officer. Prior to the question and answer session, all participants will be placed in a listen-only mode. After the prepared remarks, the question and answer session will begin. If you would like to ask a question during that time, please press star then the number 11 on your telephone keypad. The call is being recorded. Your participation implies consent to our recording this call. If you do not agree to these terms, simply drop off the line. I'll now turn the call over to Patricia G. Penman from Johnson Outdoors. Please go ahead, Ms. Penman. Patricia G. Penman: Good morning, and thank you for joining us for our discussion of Johnson Outdoors' results for the 2026 fiscal first quarter. If you need a copy of today's news release, it is available on our website at johnsonoutdoors.com under Investor Relations. I also need to remind you that this conference call may contain forward-looking statements. These statements are made on the basis of our current views and assumptions and are not guarantees of future performance. Actual events may differ materially from those statements due to a number of factors, many beyond Johnson Outdoors' control. These risks and uncertainties include those listed in our press release and filings with the Securities and Exchange Commission. If you have additional questions following the call, please contact David W. Johnson or myself. It is now my pleasure to turn the call over to Helen Johnson-Leipold. Helen Johnson-Leipold: Good morning, everyone. I'll begin by sharing our start to fiscal 2026 as well as an update on the strategic priorities for our businesses. David will review the financial highlights, and then we'll be happy to take your questions. In 2026, we saw markets stabilize and solid reception to our new products. That combination helped drive double-digit growth in the quarter, which is encouraging given that this quarter is typically a slower period as we ramp up through the primary selling season. Additionally, the ongoing hard work we've been doing to improve our profitability has been showing results. Our operating loss through this first quarter was much improved versus the prior year quarter. While there are still uncertainties in the broader environment, we're encouraged by how the fiscal year has started and feel good about the execution of our plans to accelerate the growth of our business and brands. Starting with Fishing, both our Minn Kota and Humminbird brands delivered solid performance in the quarter with the category benefiting from improved trade dynamics. Demand remains strong for Humminbird's Explorer series and Mega Live 2 fish finders, which launched last fiscal year, and we saw healthy demand across Minn Kota's full lineup of trolling motors. Turning next to camping and watercraft. This is an area where our investments in digital and e-commerce are really paying off. David W. Johnson: Across Jetboil and Old Town, we've been focused on meeting consumers where they are, which is online, and making it easier for them to discover and purchase our products. These efforts helped drive growth in the quarter. Both Old Town and Jetboil remained strong leaders in their respective markets. Jetboil continues to see strong demand for its fast-boil cooking systems, which has exceeded our expectations. Finally, in diving, improved conditions across the global markets and our innovation helped drive an increase in sales for the quarter. We continue to see positive momentum for Scubapro's new Hydros Pro 2 product that we began shipping in December. Hydros Pro 2 builds on the award-winning legacy of our original Hydros Pro, incorporating meaningful innovation of comfort, fit, and performance needed in the buoyancy control device. Digital engagement is becoming increasingly important in diving, as well, from educating on new technologies to supporting dealers with better digital tooling content. We see this as another opportunity to strengthen the connection between our products, our retail partners, and consumers. Overall, we are pleased with the start of fiscal 2026. While it's still too early to predict how the rest of the fiscal year will unfold, our priorities remain clear across all our businesses: maintaining a strong and robust innovation pipeline, building a growing momentum in digital and e-commerce, and continuing to improve product costs and operating efficiency with our cost savings. These are the right drivers to position Johnson Outdoors for sustainable growth and long-term success. Now I'll turn the call over to David for more details on financials. David W. Johnson: Thank you, Helen. Good morning, everyone. Loss before income taxes for the first quarter was $1.3 million compared to a pre-tax loss of $18.9 million in the previous year quarter. The improvement is driven mostly by revenue growth and improving margins. Gross margin for the first quarter improved to 36.6%, up 6.7 points from the prior year. Overhead absorption from higher volumes was the main driver of the improvement in gross margin. Additionally, price increases and our ongoing progress on cost savings initiatives helped offset increases in material costs. Operating expenses increased $2.1 million from the prior year first quarter, due primarily to increased sales volume-related expenses, partially offset by decreased warranty expense. Tax expense for the quarter was about $2 million, driven mainly by an adjustment related to our US valuation allowance on deferred tax assets. We continue to make good progress on our inventory levels. Inventory balance at the end of the first quarter was $103.9 million, down about $17.7 million from the previous year quarter. I want to highlight that our balance sheet remains debt-free, and we continue to pay a meaningful dividend to shareholders, with the Board approving our most recent dividend announced in December. We remain confident in our ability and plans to create long-term value for shareholders. Now I'll turn the call over to the operator for the Q&A session. Operator: Thank you. At this time, we'll conduct a question and answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please stand by while we compile the Q&A roster. And our first question comes from the line of Anthony Chester Lebiedzinski of Sidoti. Your line is now open. Anthony Chester Lebiedzinski: Thank you, and good morning, everyone. Certainly a great start to the fiscal year, and thanks for taking the questions. So first, just a general kind of question in terms of pricing versus unit volumes. I don't need specific numbers, but just kind of, you know, maybe if you can just talk about what you saw as far as pricing versus unit volumes. That'd be a good start. Thanks. David W. Johnson: Well, yeah, most of the increase in the quarter was unit volume driven, but we did take pricing across the businesses to react to the cost increases we had. So, but I would say most of the increase we're seeing is unit volume related. Anthony Chester Lebiedzinski: That's encouraging. Yeah. Thanks, David. So you guys have for years focused strongly on innovation. Can you share broadly as far as what, as far as your sales are concerned, what's coming from new product versus a few years ago? Has there been a meaningful change in terms of the new product component of your sales? Helen Johnson-Leipold: You know, I mean, innovation has always been critical for us, and we have been focusing on improving our success rate. So competition is strong, and our main way of maintaining leadership is innovation. So I would say we continue to make it stronger. And I don't know about the David, you can comment on the percent of volume, but it truly is the driver of growth. David W. Johnson: Absolutely. And we've seen improvement in our new product success over the last couple of years. I think, you know, during the COVID cycle, you know, that may have come down a little bit, but we're seeing improvement in that area. Anthony Chester Lebiedzinski: Gotcha. Thanks. And then you also talked about the growth in the e-commerce channel. Can you share with us what percentage of your revenue is now related to e-commerce? And do you guys have a goal in mind as far as what you want to get to in the next few years? Helen Johnson-Leipold: Well, all you know, what we can say is that it's the fastest growing channel we have. And it's definitely expansive growth for us. Our goal is to continue to grow that at a faster pace than across our businesses. It's a key contributor to growth year on year. Anthony Chester Lebiedzinski: Mhmm. Gotcha. Alright. And then so you've had a great start here to the fiscal year, strong sell-in to retailers in December. What is your sense now about the current trade inventory levels? Helen Johnson-Leipold: Well, we were glad that they marked when we said stabilized, it's more that the trade was in a good position from an inventory standpoint to react to good sell-in. And we had a good sell-in during the first quarter, and so they are in a good position. Hopefully, we get the consumer takeaway as the season begins. So I think that the trade is in a healthy position right now. Anthony Chester Lebiedzinski: Okay. That's good to hear. And you've done a lot with your cost savings efforts, and it's clearly evident in the gross margin improvement. I know there were some fixed cost absorption components to that as well. But as it relates to the cost savings initiatives, should we expect more to come on that program as we look forward to the rest of the fiscal year? David W. Johnson: Yeah. It's a key strategy for us going forward, especially in these volatile times with the supply chain. So it'll be critical for us to continue to work on optimizing product costs, being as efficient as possible. We've got a whole slew of initiatives that we're working on to make that happen. Anthony Chester Lebiedzinski: Mhmm. Okay. And then in terms of the warranty expense, you know, how significant was that as far as the adjustment to the OpEx? David W. Johnson: Yes. I mean, it was probably less than a point of the operating expense percentage going down. So, but it did come down in the quarter. So we wanted to point that out. Anthony Chester Lebiedzinski: Gotcha. Okay. That makes sense. Okay. And lastly for me, I mean, so, David, you did touch on the tax expense, which we were not expecting for the quarter. Going forward, what's the, you know, where should we expect the tax rate to fall for the balance of the fiscal year? David W. Johnson: Yeah. I mean, the challenge for us is, you know, just the profits in the geographies in which we serve. So we've got, you know, the valuation allowance in the US. And as we make money in the US, you know, that it that that won't we won't have tax benefit or expense on that because it's all reserved for us. So the tax rate will be kind of wonky going forward until we can kind of stabilize our profits. Anthony Chester Lebiedzinski: Mhmm. Okay. Gotcha. Alright. Well, thank you very much, and best of luck. Operator: Thank you. Thanks, Anthony. Thank you. I'm showing no further questions at this time. I'll now turn it back to Helen Johnson-Leipold for closing remarks. Helen Johnson-Leipold: Okay. Just want to thank everybody for joining us, and have a great day. Operator: Thank you for your participation in today's conference. This concludes the program. You may now disconnect.
Operator: Standby 20 Karla, and I will be your conference operator today. At this time, we'd like to welcome everyone to GrafTech International Ltd. Fourth Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Simply press star followed by the number one on your telephone keypad. Thank you. I would now like to turn the call over to Mike Dillon, Vice President Investor Relations. Please go ahead. Mike Dillon: Good morning, and welcome to GrafTech International Ltd.'s fourth quarter and full year 2025 Earnings Call. Thank you for joining us. Joining me on the call are Timothy Flanagan, Chief Executive Officer, and Rory O'Donnell, Chief Financial Officer. Tim will begin with opening comments on our 2025 performance and an update on the commercial environment. Rory will then provide more details on our quarterly results and other financial matters. And Tim will close with additional comments on our outlook. We will then open the call to questions. Turning to our next slide. As a reminder, our comments today may include forward-looking statements regarding, among other things, performance, trends, and strategies. These statements are based on current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from those indicated by forward-looking statements are shown here. We will also discuss certain non-GAAP financial measures, and these slides include the relevant non-GAAP reconciliations. You can find these slides in the Investor Relations section of our website at www.graftech.com. A replay of the call will also be available on our website. I'll now turn the call over to Tim. Timothy Flanagan: Good morning. And thank you for joining GrafTech International Ltd.'s fourth quarter earnings call. We are operating in one of the most challenging environments the graphite electrode industry has seen in almost a decade. Marked by global overcapacity, aggressive competitor behavior, geopolitical uncertainty, and steel production trends that remain subdued in many regions. Despite these headwinds, our team continued to deliver for our customers, manage our cost structure aggressively, operate safely, and make meaningful progress on the priorities we laid out at the beginning of 2025. One of our primary objectives for the year was to continue to grow our volumes and market share and improve our geographic mix by shifting more business towards regions with stronger pricing fundamentals, particularly The United States. Our team executed the strategy effectively. On a full-year basis, we increased sales volume by 6%. As we have shared, our commercial strategy includes making deliberate decisions to walk away from volume opportunities that do not meet our margin requirements. This discipline is essential to protecting our long-term value. And we at GrafTech refuse to follow some of our competitors in the race to the bottom. While this meant that our full-year volume finished below our most recent guidance range, it was the right decision for our business and consistent with our commitment to value-focused growth, not volume for volume's sake. As it relates to our geographic mix shift, in The United States, our sales volume grew 48% for the full year, and in the fourth quarter alone, our US volume was up 83% versus the prior year. The shift towards The US, which remains the highest price region globally, helped mitigate some of the pricing pressure we experienced in other markets, as we'll speak to later. Cost management was another key area of focus for 2025, and we delivered meaningful results without compromising our commitment to quality, safety, or the environment. For the full year, we achieved an 11% reduction in our cash cost of goods sold per metric ton. This brings the cumulative reduction since 2023 to 31%, a remarkable achievement over a two-year period. Our ongoing cost management initiatives, including enhanced procurement strategies, energy efficiency improvements, and disciplined production scheduling, have been instrumental in driving these results. In addition, a key element of our strong cost performance in 2025 was the effective management of the impact of tariffs on our cost structure. Overall, our cost management efforts have created a more agile, more efficient manufacturing footprint that positions us well to control our production costs while navigating volatility in demand. These actions, combined with the effective management of our working capital and capital expenditure levels, resulted in full-year cash flow performance and a year-end liquidity position that exceeded our expectations. To that point, including cash on hand of $138 million, we ended 2025 with a liquidity position of $340 million, a level which enables us to maintain stability despite the persistence of industry-wide challenges. Lastly, we delivered on all of these objectives while achieving meaningful improvement in our safety performance. Turning to the next slide and building on this point. As you can see, our total recordable incident rate improved to 0.41 in 2025, representing our best safety performance on record. As we enter 2026, sustaining and building on this momentum must remain a critical focus. Our ultimate goal is zero injuries, and we will continue to work relentlessly towards that standard every single day. Looking back on all that was accomplished in 2025, I want to sincerely thank our entire team around the world for their remarkable efforts, resilience, and commitment during this pivotal time. Turning to the next slide. Let me provide our current thoughts on steel industry trends as context for the rest of our discussion around our performance and outlook. Global steel production outside of China was 843 million tons in 2025, up less than 1% compared to the prior year, with a global utilization rate of approximately 67% on a full-year basis in 2025. Looking at some of our key commercial regions using data recently published by the World Steel Association, for North America, steel production was up 1% in 2025 compared to the prior year, driven by 3% year-over-year growth in The United States. Conversely, in The EU, steel output in 2025 decreased 3% compared to 2024, remaining well below historical levels of steel production and utilization for that region. In fact, with 126 million tons of steel production within The EU in 2025, this represented a decline of more than 15% compared to the historical high levels of EU steel production achieved in 2021. Further, we estimate the steel utilization rates within the EU averaged just over 60% in 2025, which is well below the global average. Although the overall steel sector is still experiencing short-term challenges, as we've mentioned previously, there are indicators of a rebound in the steel market that have started to appear. Based on World Steel's most recent short-range outlook for steel demand, globally outside of China, World Steel is projecting 2026 steel demand to grow at 3.5% year-over-year. For The US, where the steel industry has experienced relative stability, World Steel is projecting a 1.8% steel demand growth in 2026. Along with this demand growth, favorable trade policies are expected to further support US steel production. In Europe, where the steel industry has been more challenged, World Steel is projecting a return in steel demand growth in the near term, forecasting demand growth of 3.2% for 2026. This reflects some of the demand drivers we've discussed in the past, including initiatives to increase infrastructure investments and defense spending, representing some of the key steel-intensive industries. In addition, provisions within the carbon border adjustment mechanism, or CBAM, implemented at the beginning of 2026, as well as new tariff protection measures that will be effective later this year, are expected to support higher levels of production in this key commercial region for GrafTech. Against this backdrop, we estimate that globally outside of China, demand for graphite electrodes will increase slightly in 2026, with all major regions expected to contribute. That said, it's not the level of electrode demand that's the key factor holding back our industry today. It's the supply side imbalance and ultimately pricing. This supply imbalance is driven by the gross overcapacity that has been built in both China and India, with Indian manufacturers expressing plans to bring additional and unneeded capacity to the market. Combined, they are flooding the markets with cheaply priced exports, which continue to distort the competitive landscape and threaten to destabilize the entire supply chain. In response, pricing behavior of other competitors has become increasingly aggressive and arguably irrational. All of this has translated into realized prices for the graphite electrode industry that have declined significantly over the past few years. For some time, we've been clear that the pricing levels are unsustainably low and not aligned with the indispensable nature of an electrode, let alone the level of investment required to maintain a stable, reliable supply of graphite electrodes for the steel industry. Further, the level of capacity rationalization that has been announced by ex-Chinese electrode producers to date has been inadequate to address the structural overcapacity issues in our industry. As a result, we saw a deterioration of competitor pricing discipline in the fourth quarter and expect that pressure to continue into 2026. This has happened even as steelmakers in The US and Europe announced price increases for finished steel products, reinforcing the disconnect between value creation in the steel industry and the pricing environment for graphite electrodes, a mission-critical consumable. Ultimately, the current market dynamics endanger the long-term viability of the graphite electrode industry. Given these realities, structural change on the supply side is long overdue. A failure to change the current course of the electrode industry will undoubtedly result in an equilibrium that will harm the steel industry for the long term. As the only pure-play graphite electrode producer outside of India and China, we remain committed to actively shifting this dynamic in order to support our customers who rely on us for quality and reliable products. To that end, let me send a clear message to all of our stakeholders. As a leader in the graphite electrode industry, GrafTech has and will continue to act decisively. In light of the prolonged downturn in the market environment, management, with the support of our Board, continues the evaluation of a number of areas, including optimizing our manufacturing footprint, opportunities for trade or policy-making support on a number of fronts, as well as other potential strategic partnerships and sources of capital. The focus of these efforts is to identify opportunities to enhance efficiency, preserve optionality, and position GrafTech for long-term value creation. With that, I'm going to turn the call over to Rory, who will provide some more color on our commercial and financial performance for the fourth quarter. I'll then wrap up our prepared remarks with further comments on our outlook, after which we'll take your questions. Rory O'Donnell: Thank you, Tim, and good morning, everyone. Starting with our operations. Our production volume for the fourth quarter was approximately 28,000 metric tons, resulting in a capacity utilization rate of 60% for the quarter. This brought our full-year production level and utilization rate to 112,000 metric tons and 63%, respectively. On the commercial front, our sales volume in the fourth quarter was approximately 27,000 metric tons. This was flat to the prior year and fell short of our original expectations for the quarter. While a portion of the shortfall was attributed to the timing of certain shipments that shifted into 2026, as Tim noted, it also reflected our commercial strategy to not pursue certain volume opportunities that do not meet our margin expectations, particularly in The Middle East and in Europe. In The US, we grew our sales volume in the fourth quarter by 83% year-over-year, reflecting our ongoing success in shifting a significant portion of our volume to this key region. As we have discussed, for the full year, our sales volume within The US grew 48% compared to 2024, which is an impressive result given that steel production in The US was up only 3% in 2025. As a result, shipments to our US customers represented 31% of our full-year sales volume in 2025, compared to 22% in the prior year. Turning to price. Our average selling price for the fourth quarter was approximately $4,000 per metric ton, which represented a 9% decline compared to the prior year, and sequentially a 5% decline compared to the third quarter. The year-over-year decrease was driven by the substantial completion in 2024 of higher-priced long-term agreements, while the sequential decline reflected the competitive pricing dynamics that Tim discussed. Our strategy to shift more of our geographic mix towards The US helped to partially mitigate these impacts. In fact, we estimate that the higher mix of US volume compared to the prior year boosted our weighted average selling price for the fourth quarter by nearly $200 per metric ton, and by approximately $135 per metric ton on a full-year basis. Turning to cost. For the fourth quarter, our cash costs on a per metric ton basis were $4,019, representing a 2% year-over-year decline. While this is higher than our cost per metric ton reported in the first three quarters of the year, as we have noted in prior calls, we will have periodic quarter-to-quarter fluctuations in our cash cost recognition as a result of timing impacts, and this sequential increase was anticipated. For the full year, our cash costs were just over $3,800 per metric ton, an 11% reduction compared to 2024. This exceeded our previous guidance of a 10% year-over-year decline and remarkably resulted in a two-year cumulative decline in our cash COGS per metric ton of 31% compared to 2023. Our continued outperformance in this area reflects the team's extraordinary work in identifying and executing cost reduction opportunities across various components of our variable and fixed spending in order to control production costs at various levels of demand. These include drawing on our extensive experience in research and development to reduce the consumption of specific raw materials, executing procurement initiatives related to broadening our supplier network, helping us to minimize our variable costs even further, and capitalizing on our volume growth to enhance our fixed cost leverage. Further, we are achieving all of this while maintaining our dedication to product quality and reliability, as well as upholding our commitments to environmental responsibility and safety. Overall, we are pleased with this ongoing progress towards achieving our long-term expectation of cash costs being approximately $3,600 to $3,700 per metric ton. Turning to the next slide. Factoring all of this in, for the fourth quarter, we had a net loss of $65 million or $2.5 per share. This compares to a net loss of $49 million or $1.92 per share in the prior year, as the reduction in our costs only partially offset the year-over-year decline in weighted average price. For the fourth quarter, adjusted EBITDA was negative $22 million compared to negative $7 million in the prior year, with the change reflecting the same drivers I just noted. Turning to cash flow. For the fourth quarter, cash used in operating activities was $21 million, while adjusted free cash flow was negative $39 million. As a reminder, our semiannual interest payments of approximately $34 million related to our senior notes occur in the second and fourth quarters of each year. In addition, our CapEx spending for 2025 was heavily weighted toward the fourth quarter, with $18 million of our $39 million full-year spend coming in the fourth quarter. These factors were partially offset by a favorable change in net working capital for the fourth quarter, as was expected. Overall, as Tim noted, on a full-year basis, we performed ahead of our cash flow projections for 2025 and exceeded our year-end liquidity expectations. Turning to the next slide and expanding on this point. We ended the year with total liquidity of $340 million, consisting of $138 million of cash, $102 million of availability under our revolving credit facility, and $100 million of availability under our delayed draw term loan. As a reminder, the uncapped portion of our delayed draw term loan is available to be drawn until July 2026, and our expectation remains to draw on this residual portion. As it relates to our $225 million revolving credit facility, which matures in November 2028, we had no borrowings outstanding as of the end of the year. However, based on a springing financial covenant that considers our recent financial performance, borrowing availability under the revolver remains limited to approximately $115 million less currently outstanding letters of credit, which were approximately $14 million as of the end of the year. Overall, we believe our $340 million liquidity position, along with the absence of substantial debt maturities until December 2029, will support our ability to manage through near-term industry-wide challenges and provide strategic flexibility as we evaluate to ensure the long-term viability of our business. In my closing remarks, I would like to echo Tim's sentiments and extend my gratitude for the outstanding commitment and hard work demonstrated by our team members worldwide and thank our customers and our investors for their continued partnership. I will now turn the call back to Tim. Timothy Flanagan: Thank you, Rory. I'll conclude our prepared remarks with some further comments on our outlook. As we've noted, given the persistent market challenges, we must evaluate and take decisive actions to preserve the long-term sustainability of our business. I want to be clear that while doing so, we remain committed to safety, product quality, delivering on our financial objectives, and ultimately meeting the needs of our customers who rely on us for high-quality, reliable products. To that end, we've established a number of strategic priorities for 2026 that leverage the commercial, operational, and financial progress that we've made over the past couple of years. These include building on our commercial momentum to further grow our volume and market share in 2026. For the year, we expect to grow our sales volume by 5% to 10% year-over-year, including a further shift in our geographic mix towards The United States. Currently, of our anticipated 2026 sales volume, we have approximately 65% committed in our order book, following the completion of customer negotiations that occur in the fourth quarter of each year, which is tracking slightly ahead of where we were at this point last year. Specific to 2026, we'd expect the year-over-year increase in our sales volume of approximately 10%. In addition, we will continue our initiatives to improve our cost structure. As we've noted, our cash cost per metric ton has declined by a cumulative 31% since 2023. While this level of savings is not repeatable, by continuing to enhance the efficiency of our production and other measures to optimize production costs, we anticipate a low single-digit percent year-over-year decline in our cash costs per metric ton in 2026. Further, we'll continue to manage our working capital levels and capital expenditures. For 2026, reflecting our anticipated volume growth, we expect a modest increase in our net working capital levels for the full year, most notably in the first half of the year, reflecting the timing of planned plant maintenance and other timing factors. Lastly, we anticipate our full-year 2026 capital expenditures will be approximately $35 million, which we believe is an adequate level to maintain our assets at current utilization levels. While much of our commentary today has been focused on near-term challenging market dynamics and our response, it's important to not lose sight of the fact that we are in an industry that is mission-critical to electric arc furnace steel production, with structural tailwinds that will support long-term demand growth. According to the most recent full-year data published by the World Steel Association, the EAF method of steelmaking further increased its market share in 2024, accounting for 51% of the steel production outside of China. This is a continuation of the steady share growth that the EAF industry has experienced for a number of years. Driven by decarbonization efforts, we expect this trend to continue. In The US, which produces 80 million tons of steel annually, over 20 million tons of new EAF capacity have either recently come online or are planned for the coming years, with further announcements expected as we move ahead. This will further drive share gains for the EAF steel production in this key region. In The EU, while some European steelmakers have announced temporary delays in their EAF transition plans, other projects continue to move forward. And we continue to expect a meaningful mix shift towards EAF steelmaking within the EU in the medium to longer term. Given the expected growth in demand and tariff protections impacting certain foreign graphite electrode producers, The US and The EU remain important strategic regions for GrafTech for the long term. With our strong commercial momentum in these regions and our focus on meeting the evolving needs of our customers, we are well-positioned to capitalize on demand growth. Let me now briefly speak on the topic of trade, which continues to be an evolving landscape. We are continuously assessing a range of potential tariff outcomes and how those scenarios could influence steel industry trends, shape the commercial environment for graphite electrodes, and more broadly, synthetic graphite. Specific to The US, we continue to be encouraged by the steps the administration has taken to create a more level playing field from a trade perspective and to protect critical industries. As it relates to the steel industry, the expanded section 232 tariffs that have been implemented on steel imports into The US continue to have the desired impact of higher domestic steel production, supporting manufacturing initiatives within The United States. With respect to critical minerals, more importantly, synthetic graphite made from petroleum needle coke, steelmakers remain critically reliant on graphite electrodes and need a stable and healthy supply base. As noted, we expect to see growing demand in this market driven by the growth in EAF steelmaking and expect further synthetic graphite demand to result from the building of Western supply chains for battery needs, whether for electric vehicles or energy storage applications. However, the establishment of those Western supply chains remains in early stages as this is an industry that is suffering from overcapacity in China. We believe that the potential for international trade disruption further highlights the strategic importance of strengthening supply chains and that the West reducing its reliance on China for critical minerals such as synthetic graphite and to accelerate the development of its domestic supply chain. With the support of further policymaking, while additional policy measures are needed, we welcome the action of the US Department of Commerce with the preliminary anti-dumping tariffs against graphite active anode material from China, along with recent announcements related to initiatives on the sourcing and pricing of rare earths and other critical minerals. All of this demonstrates a strategic intent on the part of the US government to foster an ex-China supply chain for these key materials. As it relates to GrafTech, given the fluid nature of global trade policy and the heightened attention on critical minerals, we are taking proactive measures that seek to one, minimize the risk for GrafTech, two, capitalize on emerging opportunities, and lastly, promote fair trade in our key markets. All of this is consistent with our approach to optimally position GrafTech and its stakeholders for long-term success. In closing, this is a pivotal time for GrafTech and our broader industry. Near-term demand fundamentals are beginning to improve, and long-term drivers, including decarbonization, the continued shift to EAF steelmaking, and the growing demand for needle coke and synthetic graphite, are firmly in place. However, the supply side remains structurally out of balance, and the pricing environment remains inconsistent with the indispensable nature of graphite electrodes and the level of investment required to maintain a stable, reliable supply of graphite electrodes for the steel industry. As such, we must continue to operate with urgency, adaptability, and a willingness to make difficult decisions. To our stakeholders, we are committed to supporting our customers with dependable high-quality electrodes, protecting the long-term viability of our business by identifying opportunities to enhance efficiencies and preserve optionality, being transparent about the challenges and decisions ahead, and ultimately positioning GrafTech for long-term value creation by capitalizing on the structural trends that are set to shape the future of our industry. Lastly, I want to again thank our entire GrafTech team. Their dedication and resilience give me confidence in our ability to navigate through this period and emerge stronger. That concludes our prepared remarks. With that, we'll now open the call for questions. Operator: At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. Your first question comes from Bennett Moore with JPMorgan. Bennett Moore: Good morning, Tim and Rory. Thank you for taking my questions. Timothy Flanagan: Good morning. Good morning, Bennett. Bennett Moore: You've highlighted, you know, continued aggressive competitor pricing. I'm just wondering if these dynamics have worsened at all, particularly in The US. And if so, is this being driven by imports? Other local players? Timothy Flanagan: Yeah. So I guess with respect to pricing and the commentary about the aggressive nature, I'm sure you can understand that we're not going to provide a ton of specifics around geographies and levels or any specific names or actions. But, I mean, at the end of the day, what we're seeing is across the globe, pressure on pricing and behaviors that, you know, when you take a step back and you think about what role electrodes play in the production of steel and the indispensable nature of electrodes in the production of steel, again, remember, you can't produce 70 million tons of steel in The US or 65 million tons of steel in Europe without an electrode. The level of pricing that people are quoting and behaving within the market doesn't reflect the asset-intensive nature of our business. It doesn't incentivize R&D spending, and it really doesn't reflect or allow for adequate returns to be generated for shareholders. So, that's what we're seeing in the market. And I think that's problematic as we look out into the future. Bennett Moore: Thanks for that color. And the import side, sorry. Sorry. Let me go ahead. To finish the second half of your question. And is it being driven by imports? I think it's being driven, you know, across the globe, so it's not specific to a particular region. You know, imports and certainly the amount of material that's coming out of China and India, both at relatively low prices, is certainly problematic across the globe. I think you've seen some trade protections put in place in The US in particular, and now you're seeing actions taking place in Europe as well that will help with that. But it's really just the amount of material that's being dumped into the market. Bennett Moore: Thanks for that, Tim. And I guess just bringing, you know, those comments together, you've talked about expectations of improving demand, but that being more than offset by excess supply and competitive pricing. You've got 65% of your US book already locked in, which is the highest pricing. I mean, is it reasonable to assume that in 2026, realized pricing is at least going to be another directionally lower year for GrafTech? Timothy Flanagan: Yeah. And again, Bennett, thanks for the question. You know, sticking to our policy of not providing specific price guidance, I think it would be fair to say based on what we disclosed for 2025 and our commentary that we just provided around the state of the market, and to my answer to your previous question, you know, I think it's fair to say that absolute pricing that we're observing thus far, as we head into '26, isn't better than what we're seeing at the '25 level. Bennett Moore: Understood. I'll get back in the queue. Thanks so much, and best of luck navigating these waters. Timothy Flanagan: Thanks, Bennett. Operator: Your next question comes from Arun Viswanathan with RBC. Arun Viswanathan: Good morning, Arun. Yeah. Thanks for taking my question. Hope you guys are well. Good morning. Just on the pricing. So, you know, it sounds like you guys are being disciplined in, you know, it sounds like some of the competition is bordering on not being disciplined and maybe even some irrational tactics. So, you know, it seems like there's been some capacity additions as well in India and China. For a very long time, I guess, we've been under the impression that a lot, you know, the quality of those electrodes were subpar. It seems like, you know, there's a lot of customers who are now, you know, okay using those electrodes. So is that the case? And if that is the case, and you are walking away from some badly priced dynamics, how do you win back share from here? So, you know, is it service? And, you know, because it doesn't seem like there's going to be any halt in that, you know, supply addition. And, yeah, maybe you can just also discuss kind of the oncoming supply if you see any there. Thanks. Timothy Flanagan: Thanks, Arun. And as always, you packed a lot into a single question. So hopefully, I can hit all the high points there. You know, let me start with supply. Right? And we've talked about the overcapacity that exists in the market. You know, I don't think we've seen any incremental supply come on into the market here in 2025. But you've heard the announcements made by some producers that they intend to bring on additional capacity here over the next couple of years, which again, we provided commentary and our thoughts on in terms of the need for that in the market. So not additional supply in '25, but certainly some announcements that aren't otherwise favorable. You know, I think if you think about the overall pricing dynamics and where we're focusing our energies, we've stated that we will continue to focus our attention on moving volumes into The US market and to a lesser extent, the European market. This has been a commercial strategy we've talked about for the better part of a year and a half now, and we've had a lot of success. Again, we've seen tremendous growth in The US, and we'll continue to do that. We fully expect as we head into '26 to grow our volumes. We're guiding to a 5% to 10% increase in our volumes year-over-year. But that's being done with discipline. Again, we're not chasing volume for volume's sake, and certainly, as we stated around the Q4 results, we have walked away and will continue to walk away from volumes that don't meet our objectives from a margin perspective. Where that pressure is the greatest on us is certainly those regions outside of The US and Europe. And, you know, if you think about Southeast Asia, The Middle East, South America, those are regions where we have to be much more selective. To your point of how do we win market share, you know, this really comes down to the value proposition we've talked about a lot here over the last two years. And what the team continues to try to do in terms of improving our value proposition. You know, again, as the pure-play electrode player outside India and China, we focus a lot of time in R&D, bringing new products. We spend a lot of money and effort on our customer technical service teams and architect and really look to partner with our customers and add value to their furnaces and their steelmaking processes. We think that along with the quality electrodes we produce, certainly will continue to allow us to gain market share in those regions that value that. Regions where they're buying just purely on price, those are going to be the regions, again, we have to be much more selective and maybe don't have as much opportunity to grow our share. Arun Viswanathan: Okay. I appreciate that. And just as a follow-up. So, you know, you're also in the unique position where you have the integration into needle coke. And so, you know, theoretically, if the market is oversupplied, what is your ability to shift away from the graphite electrode market? And repurpose your needle coke capacity into, you know, the EV battery side or, you know, ESS batteries. You know, there's definitely very robust growth on that side, and is that something that you can pivot towards? And I know you talked about it in the past, but is there a little heightened focus there? And any timeline or any milestones that we can think about that you're pursuing? Thanks. Timothy Flanagan: Yeah. Thanks for that. And I would start by saying that there's a heightened focus on every element of our business. Both our core business of producing and selling graphite electrodes, but also, you know, how we can become a more significant player in, you know, the establishment of supply chains outside of China for anode material, whether, again, like you stated, going into energy storage applications or into EVs. I think we're well-positioned to do that with Seadrift. We've spent a lot of time in the past talking about our technical capabilities and our ongoing work with those looking to develop anode plants both in The US and Europe. And I think if you look at the trade landscape that continues to develop in Washington right now in particular, you've got an anode case that is rounding third and heading home in terms of finalization against the Chinese. I think those hearings are here later in February and will be finalized in the month of March. Again, I think that's very constructive for the battery makers who are looking to establish and put plants in The US. And I think we'll be well-positioned to help them as they move forward. And I think more broadly, if you think about synthetic graphite and what the government's doing around price floors or pricing mechanisms, some recent announcements around the vault and stockpiles. You know, all of this is, I think, a good parallel to what we can do on the synthetic graphite front. You know, again, I think we're well-positioned. We're just in the early innings of the development of some of these markets and some of this demand here in The US. Arun Viswanathan: Okay. And then just lastly, given that you are in the early innings there, we do have, you know, we've seen some price declines, and I know you're calling for a volume uplift. But understanding that it's still a relatively low utilization rate globally at 67%, you know, how much liquidity do you guys have to wade through this downturn, you know, from here? And then, you know, if conditions get worse, you know, what are some of the plans? And then similarly, are you in a position to actually pursue that development from a financial standpoint? Or is it, you know, is that going to depend on a stronger recovery? Timothy Flanagan: Yes. Let me start with the last part of your question. I think we've been consistent all along as we've talked about our aspirations and the role that we can play in the establishment of the Western supply chains. Right? This is not an area where GrafTech is going to be able to make, you know, multibillion-dollar investments on a standalone basis. Right? But we think that we possess a unique set of skill sets and assets and capabilities as a leader in synthetic graphite that allows us to partner with those that are out raising capital and building plants. And, again, that can be in a number of areas within their own value chain, whether it's raw material supply out of Seadrift, providing graphitization capacity or expertise, or also just some of our own, you know, technological advancements that our R&D team has been working on. So it'll likely come in the form of a partnership or a series of partnerships as we think about how that develops for us going forward. You asked about liquidity and what we're feeling or thinking about there. I mean, at the end of the day, we have $140 million of liquidity as of December 31. But I think more importantly is kind of our comments around, you know, as a company, over the last two years, we've acted decisively. Right? We've taken a lot of steps to preserve our liquidity, to enhance our liquidity. Right? You think back to the beginning of '24, we idled some capacity. We streamlined our overhead structure. We readjusted our commercial structure. We've aggressively cut costs and managed our balance sheet. So all of those things are things that we'll continue to do and just need to reiterate to shareholders and stakeholders at large that we'll continue to take the actions necessary for as long as this downturn exists. And, you know, that's the message here for today. Arun Viswanathan: Okay. Thanks. Operator: Next question comes from Abe Landa with Bank of America. Abe Landa: Maybe first one. You kind of alluded to this when talking about The US environment. Obviously, there had been some significant Indian tariffs kind of through the fourth quarter, and obviously, it's somewhat changed. I guess, what was the impact of Indian tariffs on the US contracting overall process and kind of how do you expect the newly signed Indian trade deal to kind of impact The US market specifically? Timothy Flanagan: Yeah. I mean, if you think about the way that The US market tends to contract, you know, they go out in the third and fourth quarter and contract a sizable amount of their full-year volume for the next year. We are largely through that at this point in time. So while we think that the repealing of the 50% tariff against the Indians down to 18% is probably a step too far, you know, we're comfortable with the position that we're in heading into 2026 with respect to our US customers. Again, fully anticipate overall volume growth for the business in '26 and fully anticipate continuing to grow our US business. And again, if you think about the strength of The US steel market as it exists today and the operating levels where they're at, quality carries the day, and service carries the day, and we think that's what differentiates GrafTech from some of the competitors in the marketplace and think that ultimately that's why customers will choose us going forward. We'll continue to enhance that value proposition and are confident that we'll continue to be able to grow that market share as we look out to the future. Abe Landa: That's helpful commentary. And then maybe shifting regions to Europe, you kind of mentioned that volumes overall for the full year didn't hit your expectations, and partially on aggressive pricing in Europe. I know there's been a number of capacity movements there, and obviously, you have two of your three main plants there. So I guess can you just kind of maybe discuss a little bit within your kind of supply and demand environment and how that relates to what you're seeing in terms of pricing within Europe and early into '26? Timothy Flanagan: I mean, Europe still is and will remain a key market for us. If you just think about the amount of steel made via EAFs in Europe, while overall steel production was down in Europe year-over-year and is down 15% from the high in 2021, Europe is still a big steel-producing area. And given the proximity to our two plants in France and Spain, it remains a key area for us. So, you know, I think the Europeans are finally starting to take some action on the trade front and the protectionism, if you want to call it that, with both CBAM and some of the announced tariff actions last quarter. But it's still a challenged market from an overall demand standpoint because of power prices and just the overall level of competition. So, again, it's a lower-priced market for us. It's a market that we focus our energies on. Again, the European buyers are also value buyers. We're not just price buyers, so I think the value proposition that I just spoke to again differentiates us in the market. And, again, we think we're confident in our position in Europe, and we'll continue to push to grow volumes in Europe as well. I don't know if the pricing in Europe is any more aggressive than it is elsewhere in the world, but there certainly is some pressure there. Abe Landa: Another question on you kind of alluded to China overcapacity kind of impacting or their exports kind of impacting the rest of the world. Obviously, always kind of tough to kind of get a good read on what's going on within China, but just maybe talk about what's going on with the supply picture of graphite electrodes coming out of China, what it looks like today, any future capacity they're looking to add? What you're seeing in the export front from China? Timothy Flanagan: Yeah. Sure. And I think when you talk about China, you really have to talk about two elements of China and their export behavior. One is the headline, which is Chinese steel exports hitting over 120 million tons this year and flooding the world with steel, which just puts pressure on a lot of our customers around the globe. So that's one element of it. And you see a lot of trade action being taken in certain geographies to protect domestic steel, both in The US and EU. Again, very important regions for us. On the electrode side, you know, the Chinese continue to export at increasing levels on an annual basis. So I'd say they're over 300,000 tonnes of UHP or 300,000 tons of total exports in, you know, somewhere in the two to two fifty range of UHP exports here over the past year. And they probably represent, you know, maybe a third of the non-Chinese market right now in terms of total demand. You know, whether or not there's additional capacity coming online in China or not is kind of irrelevant given the size of that overall market, which is well overbuilt for what their domestic EAF needs are. Right? If you think about China, it produces probably 90 million tons via the EAF, and they have probably 800,000 tons of electrode capacity. Most of that is idled or not exportable given its location or the quality, but there's a tremendous amount of volume there that sits in the market. So maybe that's a little bit of color in terms of where the Chinese are at. How much capacity more do they have to export? You know, it's hard to say, but certainly, we feel the pressure of the Chinese exports globally right now. Abe Landa: And then maybe last question. And thank you for taking the time. Maybe being a little bit more direct. But are you having conversations regarding Project Vault or any kind of related government-type support programs, and maybe can you quantify that opportunity within the synthetic graphite? Timothy Flanagan: Sure. Yeah. You know, I'm not going to comment on any of the nature of discussions we're having. I think we've spoken in the past about, you know, like any other company, government advocacy, whether at the state or federal level, is something that we engage in, and we're not going to provide specifics around what departments and whom we're speaking to. But I can say that, you know, we continue to advocate for the benefit of GrafTech in the broader industry, and it really focuses around a number of areas. Trade and promoting, you know, fair trade and the importance of ensuring that, you know, domestic markets are strong. You know, I think we've spent time educating various constituencies about the role synthetic graphite as a critical mineral plays both in the steel industry and in the indispensable nature of a graphite electrode. That's not a linkage that everybody gets on the surface. So we've spent some time explaining that to folks. As well as, you know, synthetic graphite in the form of anode powder and the role that can be played there. So we'll continue to talk about who we are and what we do and our strengths, you know, relative to the market and what the needs are, but I certainly think that this is an area we'll continue to spend time on. Abe Landa: Thank you very much. Operator: Your next question comes from Kirk Ludtke with Imperial Capital. Kirk Ludtke: Hello, Tim. Rory, Mike. Thank you for the call. You mentioned a couple of times that you thought quality and service carry the day. Are you able to price your products at a premium, or is it more that you win ties? Timothy Flanagan: Yeah. I think it depends on the market. I mean, all right? We think that our value proposition is superior in a number of cases. And, you know, there are competitors that we would put on the same tier as us from a quality standpoint, and you price competitively against those, and you hope that your service and offerings are what breaks ties. There's still a quality and market differential between the tier two and tier three producers, both Indians and the Chinese. But, again, it depends on the end market ultimately that you're selling into. Certain markets are price buyers and only price buyers, and those markets are head-to-head. And those aren't the markets that we want to focus our energies on. Kirk Ludtke: Got it. What percentage of the demand out there? I know this is probably a tough question to answer, but what percentage of the demand out there do you think is sensitive to quality and service? Timothy Flanagan: Well, I mean, at the end of the day, 100% of the demand is sensitive to quality. Right? No steelmaker wants an electrode breaking in their furnace for it. It costs them money at the end of the day. The question is how much are they willing to pay for the incremental quality? And that's a tough question to answer. But, again, that is the underpinning of our commercial strategy and why we focused on the markets we're focusing on. And willing to walk away from those folks that just demonstrate pure price buying in other regions. Kirk Ludtke: Got it. Thank you. On this $12 billion critical material fund, is that enough to move pricing in any of your end markets? Timothy Flanagan: Yeah. I mean, I think it's hard to say or maybe it's too early to say in terms of exactly how all these roll out. I mean, I think in the totality of whether it's the vault, whether it's the initiatives that the Department of War is rolling out, whether it's the initiatives from the Department of Energy, whether it's what you see from some of the larger banks rolling out infrastructure and critical mineral funds, you know, all of those things in totality and a conscious effort towards the establishment of supply chains and creating a constructive environment, all of those will have a positive uplift. Which one has the bigger weighting or which one drives more of that across the board, it's tough to say. But, you know, I think we're happy to see, you know, from a market participant perspective, that, a, that people are recognizing synthetic graphite as a critical mineral, b, that the government is taking action and decisive action and moving swiftly and not getting bogged down with bureaucracy and decision-making and really working towards establishing supply chains and supporting the domestic infrastructure. Kirk Ludtke: Thank you. And then lastly, we talked a lot about capacity additions. Do you have any expectation that your competitors might reduce capacity? Timothy Flanagan: You know, other than what you hear publicly and that's the same thing that we hear. So in terms of expectations, you know, I'm not sure that there's anything that is pending in the market as we speak. But I think broadly speaking, and part of our commentary was aimed at this, in a market that isn't rewarding producers for producing a product that is essential and allowing for investment in an asset-intensive industry and allowing for returns to shareholders. At some point in time, that logjam or that capacity surplus has got to come offline. People will start to make decisions based on that. Kirk Ludtke: Got it. I appreciate it. Thank you very much. Timothy Flanagan: Thank you. Operator: There are no further questions at this time. I'll now turn the call back over to Tim Flanagan for closing remarks. Timothy Flanagan: Thank you, Carly. And I'd like to thank everyone on this call for your interest in GrafTech, and we look forward to speaking with you next quarter. Have a wonderful day. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Welcome to the Post Holdings First Quarter 2026 Earnings Conference Call and Webcast. [Operator Instructions] I would now like to turn the call over to Daniel O'Rourke, Investor Relations for Post. Daniel O'Rourke: Good morning. Thank you for joining us today for Post's First Quarter Fiscal 2026 earnings question-and-answer session. This call is being recorded and an audio replay will be available on our website at postholdings.com. During today's call, we may make forward-looking statements, which are subject to risks and uncertainties that should be carefully considered by investors as actual results could differ materially from these statements. These forward-looking statements are current as of the date of this call and management undertakes no obligation to update these statements. The press release that supports today's call is posted on both the quarterly results and the SEC filings section of our website under the Investors section and is available on the SEC's website. This call will discuss certain non-GAAP measures. For a reconciliation of these non-GAAP measures to the nearest GAAP measure, see our press release issued yesterday and posted on our website. I'm joined this morning by Rob Vitale, our President and CEO; Nico Catoggio, our COO; and Matt Mainer, our CFO and Treasurer. We're doing things a little differently this quarter as we posted management remarks last night in the Investors section of our website. A rationale for these changes to give you additional time to digest our commentary in advance of this call. In addition, given our M&A activity, our convertible debt structure and the magnitude of recent share repurchases, we wanted to bridge our enterprise value calculation, which is furnished as an appendix to our posted remarks. I hope you've had a chance to review this document. The key highlights are that fiscal '26 is off to a great start as we delivered Q1 adjusted EBITDA well above expectations. This operating performance, coupled with an update to our Foodservice normalized run rate allowed us to significantly increase our guidance. We have continued aggressive share repurchases so far this year and our strong operating performance, along with our Q1 sale of the 8th Avenue Pasta business has allowed us to hold net leverage flat. And from this position, we continue to maintain significant flexibility for opportunistic capital allocation. With that, I'll turn the call back over to the operator to open up Q&A. Operator: [Operator Instructions] Our first question will come from Andrew Lazar with Barclays. Andrew Lazar: Great. Thanks so much. Good morning, everybody. Robert Vitale: Before we jump in, say, welcome, Nico? Andrew Lazar: Yes. And welcome, Nico, congratulations on the COO role. And good morning, everybody, and thanks for putting out the prepared remarks last night. That's really helpful. Maybe Rob to start off. obviously, Post has been aggressively buying back stock for some time now as that's where obviously the company sees the best way to deploy free cash flow at the moment. But obviously, we've seen market valuations for a bunch of small cap growth your food companies dropped pretty meaningfully over the past year, yet there really still hasn't been much in the way of M&A activity including for one that Post obviously has great familiarity with. I guess, are market valuations still not yet attractive enough for some of these maybe smaller public entities to warrant thinking a bit differently about capital allocation? I guess as my first question. Robert Vitale: Well, I think that, that is certainly changing as the multiples change. Whether it's exactly where it needs to be yet or no, I think is in the eye of the -- but I think as that multiples come down, M&A becomes a much more interesting measure. Andrew Lazar: Great. And then maybe just as a second one. I was curious to maybe explore the comments in the prepared remarks about the cereal category recently returning to its more historical down low single-digit pace from what had been more significant declines. Is it simply that it's a more affordable breakfast option at a time when we see more value-seeking behavior? Or do you think there's maybe a little bit something more enduring. Nicolas Catoggio: Now we say it as that. I mean, if you see, it is very recent. So there's a significant change in trajectory that happened in November, December, and that coincides with SNAP. So we see it as an outcome of changes in SNAP and trade down from other caters to cereal, not only cereal. Remember, we now have a significant presence in peanut butter. Peanut butter also improved in the same period. So for now, we see it as trade down. We need to see what happens in the next few months, a few more months to actually have the confidence that it's a change in the category. Operator: We'll turn now to Matt Smith with Stifel. Matthew Smith: The guidance raise after this first strong first quarter includes the higher unique benefit and higher normalized earnings from Foodservice business. But can you talk about your expectations for the rest of the business through the rest of the year relative to your initial expectations? Have you factored in some perhaps lower EBITDA contribution from PCB? Is that investment related? Or are things pretty similar to your initial expectations? Matt Mainer: Yes, Matt. I'd say the balance of the portfolio is pretty similar to our initial outlook. Obviously, we make adjustments in tweaks here and there when we think about the totality of the portfolio and our guidance, but there's nothing material I'd call out. Matthew Smith: And as a follow-up, on the stronger normalized Foodservice earnings base, you saw some nice volume growth both in overall eggs and the highest value-added eggs. Can you talk about some of the timing benefits in the quarter? And how you expect volumes to progress from here, especially in the higher value-added egg segment? Matt Mainer: Sure. So definitely, obviously, some favorability when you think about year-over-year relative to some impacts from Avian influenza last fiscal year and also in the current year, as we talked about and started in Q4, we were getting customer inventories reloaded, got that completed this quarter. So a couple of transitory benefits that fall away as we think about sequential movement into Q2. I think we see the balance of the year more in line with both from a mix standpoint and just overall a growth more in line with historical and how we think about the business, which is a 3% to 4% growth rate with a mix benefit getting us to our algorithm. Operator: We'll turn now to David Palmer with Evercore ISI. David Palmer: Question on the cereal category. I wonder how are you seeing the category today, competitor behavior and strategies and maybe reflect on your own spending. We obviously made a new hire with Greg, who will be coming on and maybe he'll have some impressions and thoughts about this, but a major competitor of Post has been investing heavily, some combination of price promotion, marketing, innovation and those investments may be hurting. It seems like it's hurting private label more than anything lately. You guys have done a good job of protecting profitability and arguably, we'll just have to see if the other guys spending is worth it, so to speak, in the long-term. But how do you reflect on this and what's going on? And how does that maybe shape your strategy going forward in cereal. Nicolas Catoggio: Our strategy. I think what you saw in the quarter -- in the first quarter was reduction in our promotional spend because we are adjusting our assortment in channels that are more promotional driven to increase our efficiency. And as we adjusted the assortment on shelf, we decided to promote less. It's just to our disruptions. Longer-term, we don't see a change in our strategy. I think we will continuously assess opportunities to invest. And if we see the return, we will go for it, but I don't see a material change in our strategy. David Palmer: Are you -- I mean 1 follow-up here is that competitor in addition to price, which may or may not make sense for the category long-term, if it seems like the premium brands are the ones that are winning, that competitor is also doing some stuff in protein, granola. Does even that sort of angle or is that an opportunity for you and even something that might shape your M&A aspirations in the category? And I'll pass it on. Nicolas Catoggio: I think we are also investing in the same areas. I think we are all doing that. I mean protein, fiber, granola. So you will see a lot more of that from us for sure. And some of that is actually coming to market now as we speak. On M&A, I think it's always the same. Robert Vitale: I would say that it hasn't really changed our M&A strategy. We continue to be opportunistic when we have the opportunity to be so. So we are not looking at a particular category or a map in a particular segment of our business. Operator: Now we'll hear from Tom Palmer with JPMorgan. Thomas Palmer: I wanted to start off just asking on clarity on the cadence for the year over the EBITDA. It was mentioned kind of being more stable as we think about 2Q, 3Q and 4Q, but there also was a call out about some inventory timing benefits to think about in the second quarter for Foodservice. So is -- what's kind of the offset we should be thinking about in 2Q, maybe within other segments that might make it more balanced versus having that kind of one item providing a bit of strength? Matt Mainer: Sure. I think -- so there's -- when you think about refrigerated retail, Q1 is by far the highest quarter given the amount of holiday benefit we have there. We still have Easter, which is in early April. So that full benefit will lie in Q2, but there's definitely a step down just from seasonality in that business. That's probably the biggest offset. And then we typically across the portfolio of Foodservice is an exception given how hard we are running our plants. We usually have some holiday shutdown that will put a little negative pressure on Q2 just across the portfolio as we have the deleveraging impact is realized. But I'd say those are the 2 things that really offset that benefit, and it's -- we're not expecting a massive benefit for Foodservice. When you think about selling through that inventory, but it will be elevated relative to what we think in Q3 and Q4. Thomas Palmer: Okay. And then just on the RTD shakes plan, does your kind of key customers slower growth have any bearing on your plans to ramp it? And maybe an update on kind of how that ramp is going? Matt Mainer: Yes. Starting with the ramp. We continue to make progress on the actual volume output. I think we still admittedly have challenges around the cost and the efficiency of the production. So still not at our run rate. So I think we continue to work on that. I think we're trying our best, it's a $500 million business that's showing really nice strength and growth and don't want to overemphasize the shake business. So we're putting the right amount of attention there and trying to balance that, but we'll see how that plays out. I don't think there's really -- when we think about the category and the longer-term opportunity, I don't see any concerns there is more trying to get where we want to be in terms of our run rate and profitability and then we'll think about expansion after that. Operator: We'll turn now to Michael Lavery with Piper Sandler. Michael Lavery: To Foodservice and some of how to think about the normalized run rate. We've seen it drifting higher course and times that you could beat it quite easily. But maybe just help us understand some of what makes the increase sticky now? Is it primarily mix maybe how much conservatism would the $125 million or so a quarter have? And what drove the upside in 1Q? Matt Mainer: Yes. So again, I think it's -- I mean we're back to the value proposition of the business. So I think we feel good about that run rate and the stickiness of it. And as we think that's a run rate for this year, that's got some level of embedded growth in it. But as you think to next year, I think we feel good about our ability to grow off of that just because of the same dynamics of the business and what we're seeing in terms of our value proposition, helping operators take labor out of their system. Those are all in the right spot and make economic sense for operators. And there's still a nice runway when you think about converting folks from shell eggs over into value-added eggs. So really the same dynamics we've seen for quite a few years. We're just back to more normalized supply and demand dynamic. Michael Lavery: That's helpful. And just on PCB, price/mix was down a little bit more than it has been. Can you just point to what some of the key drivers are there and how to think about what the consumer dynamics are related to that? Nicolas Catoggio: We mentioned in the remarks, in cereal, our volume was a bit behind the category, driven by lower promotional spend. And that's essentially that's the gap. And some adjustments in assortment that take a bit of pounds out of our business. As we mentioned in the remarks, what we see as very positive our dollar market share was flat year-over-year, and that's what we want. And then in Pet, we -- our volume was a bit behind the category, mostly driven by Nutrish. And then the difference between consumption, measure and our shipments was also our private label business. We're lapping some distribution losses in our private level Pet business. Michael Lavery: So I may have said it wrong, I apologize. I thought a lot of volume color was pretty clear, but I was curious a little bit on the pricing piece because it looks like that was about a 2-point headwind -- was that pet driven primarily? Or where was the... Nicolas Catoggio: Thanks for the question. It is pet driven. It is -- we mentioned in the remarks, we tested price points mostly on Nutrish in select retailers. And those are the price points that we will target in the relaunch. So that is a headwind in terms of price mix. It is all pet. Matt Mainer: Were you talking about total EBITDA margin, John? Michael Lavery: This is Michael. No, I was talking about top line, the price mix and just trying to if that was a price test on Nutrish that pushed it down a little bit in first quarter and then that rolls out more broadly in the second half, should we expect a bigger -- should that price mix headwind likely grow over the rest of the back half especially? Nicolas Catoggio: We will -- as we relaunch the brand, we will hit those price points with a change in price pack architecture. So the price per pound should improve. Operator: We'll turn now to John Baumgartner with Mizuho Securities. John Baumgartner: I wanted to ask Rob about refrigerated retail. And specifically, what you're seeing thus far from the new private label business in the early days and maybe your expectations to expand that book of business going forward? Matt Mainer: So good early start for private label. I'd say playing out as we expected. We've got that in 2 customers, really 2 offerings, mashed potatoes and mac and cheese. We continue to see a nice pipeline of opportunities to expand that business. But for this year, it's providing definitely some growth on our dinner sides and I'd say, adding to price points similar to what we've seen in PCB having that alternative, especially in that category, we think will be really beneficial long-term and use some of the excess capacity we have across the network. So there's a leverage benefit as well. John Baumgartner: And then related to that, some of the past innovation for the side dishes product line has included vegetables and such. And given that we're now seeing some frozen entrees entering the market specifically for the GLP-1 crowd, I'm wondering how you think about any differently about how the side dishes portfolio can compete. I mean, are there potentially new lines that can appeal to different demographics or incorporate more protein with sausage, eggs, other parts of your portfolio? Are you thinking any differently about how that line competes going forward given changes in the consumer environment? Matt Mainer: Certainly, we're focused on protein and options to add protein to our sides and then also -- we've done some testing with [indiscernible], which is a different product for us a couple of years ago. We're starting to see some success there, albeit small within the club channel. But again, I think we are giving you some thought to adding some protein as well to those -- some of those dinner side dishes. Operator: We'll turn next to Scott Marks with Jefferies. Scott Marks: First, I wanted to ask about in the prepared remarks, you noted that in Foodservice, the Avian influenza driven pricing adders have ended. But given, I think, the magnitude of deflation we've seen in the egg market, how should we be thinking about pass-through of that within your Foodservice segment or potentially the Refrigerated Retail segment as well? Matt Mainer: Yes. So now that we've got inventory levels rebalanced, I would say, going forward, our supply is matched up with demand. So we become agnostic to egg prices and that it's, to your point, back to a pass-through model. So there is a pass-through that's basically on a 90-day lag. So there can be a little bit of timing, but we don't see over the course of the year, any significant volatility from that model historically. Scott Marks: Appreciate it. And then second question, almost related to what John asked about in terms of the GLP-1 friendly options. Earlier this year, we saw the U.S. refresh its dietary guidelines recommendations for what consumers should be eating. Wondering if that at all changes how you're thinking about the portfolio or any adjustments you think need to be made because of that? Robert Vitale: I think our portfolio is pretty well balanced with the guidelines. So we are obviously going to consider the nutrient but also the price from an M&A perspective. So I would say, once we get closer to where the values are, we have -- we'll have a position on how the pyramid implicates us. Operator: We'll turn now to Marc Torrente with Wells Fargo Securities. Marc Torrente: Going back to pet, the category itself, particularly dog has been softer. What do you think in terms of trends there? And what are your expectations for the category near-term? And then your own pet volumes were a bit better sequentially, some puts, takes in terms of private label losses versus integration labs. But underlying is starting to stabilize a little more. How are you thinking about recovery there through the year in terms of volumes? Nicolas Catoggio: On the category, we will probably -- we don't see any major changes in the recent trends. The recent trends, as you said, is dog has been softer compared to at the cat segment. And that is driven by some changes, whether it's urbanization and all those trends that are driving the cat segment. So we don't see material changes. In terms of our business, as you rightly said, it's sequentially getting better. A lot of that is, as we mentioned, Nutrish and gravy train improvements driven by price points that we tested and our expectation is as we relaunched those runs and it should help the brands that's our expectation. But as you said, it is -- it would give us confidence is that the business is sequentially getting better, volume is sequentially getting better. Marc Torrente: Okay. And then you called out the successful closure of 2 of your cereal facilities in the quarter. How should we think about the cost savings benefit flow through from those actions? And then given some of the normalization of the consumption trends, are there still other actions that you're considering for the segment? Nicolas Catoggio: I think we mentioned in prior quarters, the benefits from the plants that we shut down should mostly hit our P&L. Starting in Q3. So Q3 and Q4 will see the benefit. And then -- after that, we will have to be very selective in what we do. I mean we streamline our portfolio could be aligned here and there, but no plans. Operator: Thank you. With no further questions in queue, this will conclude today's Post Holdings First Quarter 2026 Earnings Conference Call and Webcast. Please disconnect your lines at this time, and have a wonderful day.
Operator: Ladies and gentlemen, welcome to the Aperam Fourth Quarter 2025 Results Conference Call. I'm Lorenzo, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Sud Sivaji, CEO. Please go ahead, sir. Sudhakar Sivaji: Thank you very much for joining our conference call today. All our comments were contained in the podcast that we published this morning, which supports our quarterly financial reporting and where applicable, our disclosure of regulated information. We also save more time for your pertinent questions during this call. Good afternoon to everyone joining this call. Together with my colleague, Nicolas Changeur, we're looking forward to answering your questions. So let's start straight away with Q&A. Thank you. Operator, if you could open the lines. Operator: [Operator Instructions] The first question comes from the line of Gresser Tristan from BNP Paribas. Tristan Gresser: I have 2. The first, could you help us understand a bit the current situation in Europe if your order books are improving at the moment or not? Are more buyers of stainless steel turning domestic? Are buyers of stainless steel still importing like nothing has changed? You also flagged that inventory has decreased, but imports have surged in Q4. So I'm also trying to square that one out and see how much of an overhang there is on the market in Q1, Q2? That's my first question. Sudhakar Sivaji: Tristan, thanks. So the discussion about the market in Europe currently is that our order books are recovering from Q4, but it's purely a seasonal recovery. Q1 is typically Europe comes back from its Christmas holidays and there's a seasonal recovery. So we don't see anything special additional like we said in the podcast. So it's seasonality purely. The second question you had was are importers turning to domestic? No, we don't see that specific activity. Typical buying patterns, both apparent consumption and real consumption, which drives our production is at seasonal normal levels. In terms of the inventories being low, the distributor supply chain, the statistics were at the end of Q3. And as you mark correctly from our podcast, imports surge was there at the end of Q4, probably as some distributors were trying to cover for CBAM discussions. So this will have, like we said in our podcast as well, some overhang in H1, but it's, I believe, a temporary overhang because, as you know, of the three bodies of the European Commission, two, the INTA, which is the association and the European Council have both come out and said 1st of July is the start of the new quota period for the trade safeguard duties. So we do believe that, that window is closing. So it's an overhang because of these imports end of Q4, but this overhang probably is going to affect the first half of the year a bit. And that's the reason we gave the guidance we gave. Tristan Gresser: Okay. No, that's very clear. And just following up on that. I think in your prepared remarks, you talked about the impact of CBAM depending on the behaviors of importers, basically, if they decide to take the risk or not to use actual default value. To what you're seeing so far, given that CBAM has been implemented now for more than a month, are they taking the risk? Or how do you -- how would you see that behavior being at the moment from importers? Sudhakar Sivaji: At this point in time, we don't see anything abnormal, Tristan, but I'll also be very clear, like you just remarked, it's just 1 month in, right? So you cannot make a pattern out of what's happening in the first month, so to speak, right? So that's why we said we'll have to probably wait for 2, 3 months and see that if they are. But what is absolutely clear is that if they take the risk, sometimes it will look like in 2026, they don't have anything to pay, but that is just because of the plan that has been put in that all payments would be retroactive in 2027. So -- we know that there is a lot of noise out there, and that's the reason, Tim and I recorded a video separately as well, just to be very clear showing that the default values are the standard values. And if somebody has to go for a real value, they have to actually show and accredit themselves to nationally accredited authorities in Europe. Tristan Gresser: Okay. No, that's very clear. And my second question is on the nickel situation. What's your view on the situation in Indonesia? Do you think the rally in nickel prices can be sustained? And I think we've seen higher stainless steel prices in the region already in Indonesia, China. I mean if imports are still coming in, that should definitely help to have those Asian prices at a higher level. Yes. Any help there to understand the situation would be great. Sudhakar Sivaji: So yes, the prices in Asia have gone up by the raw material price go up. So it's primarily a shift up compared to raw material prices, right? So I think that development is completely independent of what we have said trade defense led because in that case, there is a reduction of imports in H2. So it should be an add-on, so to speak, rather than one replacing the other. Operator: The next question comes from the line of Dominic O'Kane from JPMorgan. Dominic O'Kane: So I have 2 questions. The first question just moves on from the nickel question. Could you maybe just give us a sense of how the moves that we're seeing in the nickel price could impact your bridge over the next 1 to 2 quarters? I assume you are fully hedged for the next quarter, but can you just maybe give us some context around your exposure to the nickel price moves? Nicolas Changeur: Yes. So in fact, the -- so Nicolas Changeur speaking, good afternoon. So nickel have a moderate impact on our pricing. As you know, we are using scrap, and so the relative move of the nickel are very limited. We are mainly using nickel only in our prime nickel and so LME-related nickel with our fuel alloys business where we are fully hedged. Dominic O'Kane: And my second question is just around capacity utilization. So in a market where we may start to see demand in Europe coming back, can you just maybe give us a sense of what your capacity utilization currently is and if you have spare capacity that you could bring back into the market relatively quickly? Sudhakar Sivaji: Yes. So Dominic, absolutely. So first thing, our current utilization, depending on the player was between 65% and 75%. And typically, we've said the safeguard measures, which is different from what you asked in terms of underlying demand picking up. The safeguard measure, we had guided to from 7% to 10%, there should be a utilization lift just by the replacement of imports, which will now be reduced, right? So in our case, at Aperam, we have capacities available. As you know, we run electric arc furnaces, which can be switched on and off 3 times a day, and we have sufficient downstream capacity as well to match this utilization increase of 7% to 10%. Operator: The next question comes from the line of Maxime Kogge from ODDO. Maxime Kogge: So first question is again on nickel. Sorry for that. But I mean, you're explaining to us that nickel does not really have any impact on the stainless business given that you procure most of your nickel needs from scrap. But if I look at the alloy surcharges that you published and, you and your peers, we see a big increase actually in February. So I guess that's still related to nickel. Is there anything I'm missing there? Nicolas Changeur: Yes. But the business that is related to the this alloy is very limited, in fact, in Europe. So the impact is small. Sudhakar Sivaji: Maxime, we published the prices because there's still 1 or 2 customers who buy based on the alloy surcharge discussion, right? But as you know, in Europe, we moved to a fixed price discussion in 2019, and we have not looked back at all because the dumping of imports into Europe has contributed that we have all moved to a fixed price policy to compete with them. Maxime Kogge: So those alloy surcharges are not really that relevant. Fair enough. So regarding Brazil, there has been some announcements last week about higher duties for certain product categories. It affects stainless and electrical, so where duties are supposed to rise from 12.6%, I think, to 25%. So what's your take on that? And can you expect a positive impact in the coming quarters? Nicolas Changeur: Yes. We expect a positive impact. And we evaluate this impact at mid-single-digit EBITDA per quarter. As you know, we are already booked for Q1 and beginning of Q2. So basically, we see this picking up end of Q2 and beginning of Q3. Maxime Kogge: And you expect those duties to remain in place permanently because at this stage, you're only valid for 1 year, if I'm right. Sudhakar Sivaji: They said that they're going to review this for a year, but we remain confident if the dumping from Asian countries continues, the Brazilian government has been very keen on ensuring that there is a fair trade policy in Brazil. So we look at it for the next year, as you have said, but this is something which we will work together all the time, just we do. Maxime Kogge: Okay. And last one is on your guidance for recycling and renewables on the one hand, and alloys and specialties on the other hand. So there was traditionally an EUR 80 million to EUR 85 million guidance for R&R. Is this figure still achievable despite the miss that we saw last year? Should we expect the first contribution there from the diversification activities like bio-oil, biochar? And regarding A&S, so there was a EUR 100 million EBITDA guidance. You add to that the EUR 60 million contribution from Universal. And then there are the first synergies flowing in of around EUR 9 million. So does this figure add up to lead to something above EUR 160 million? Nicolas Changeur: Yes. So basically, we expect this to be pretty much in line. There is a ramp-up over the year of 2026 with the alloys business. So -- but overall, we expect by the end of the year to be basically at this level. In particular, as you know, oil and gas has been a little bit under pressure. There is also Boeing that is ramping back during 2026. So your numbers are fully right by the end of the year. Maxime Kogge: And for R&R also? Sudhakar Sivaji: R&R is at stable levels, Maxime. So alloy should reach that run rate, which you said, like Nicolas, for the last quarter, and that's our view currently, looking at oil and gas and Boeing. And R&R is at the stable numbers you have mentioned. Operator: The next question comes from the line of Inigo Castellanos from Kepler Cheuvreux. Íñigo Egusquiza: So I have three on my side. The first one is a clarification on the CapEx. You mentioned CapEx for 2026 is going to be around EUR 200 million. And then in the presentation and during your podcast, you are talking about some additional site upgrade CapEx of EUR 160 million over 3 years, if I am right. So can you explain a bit, I guess, that this EUR 160 million in 3 years is included in the EUR 200 million figure for 2026? And can we assume that this is going to be, I mean, EUR 200 million in the following years as well? This is the first question. Nicolas Changeur: Yes. So the EUR 160 million are absolutely integrated in the EUR 200 million. As you know, our continuity CapEx is around, let's say, EUR 150 million. So after you have those EUR 160 million over the next 3 years. So plus/minus in 2027, 2028, you can count around a similar level of CapEx if there are no new growth opportunities. Íñigo Egusquiza: My second question is on the outlook, you are giving for Q1 2026. You have mentioned in the press release that EBITDA in Q1 would be higher than in Q4, but also during the podcast, you gave some more indications regarding EUR 100 million quarterly run rate EBITDA in the first semester, but I understood slowing in Q1 and accelerating in Q2. Can you please elaborate a bit on that sequential number? And also in addition to this, how do you see the consensus EBITDA number for 2026, which according to Bloomberg is around EUR 520 million EBITDA? Sudhakar Sivaji: So Inigo, on the question, Q1, I think we have given a consensus it will be higher. But we also said that it's -- we are confident enough based on our Leadership Journey contributions to give that for the first half of the year, it will be $100 million run rate. And we said it will happen in 2 steps. So I think it gives you clearly kind of an indication how these 2 steps happen because we said we'll start slowly and we actually ramp up in the second quarter. So I think that gives enough guidance on how you plot these numbers from one quarter to another. On your question for the annual year, see, unfortunately, we have just discussed that. There are so many variables also on H2 and our order books, as you know, are typically 2.5 months long. Compared to other players in the industry, you have to consider that Aperam's stainless business in Europe's order book is considerably shorter because we run our own distribution division. As a result, we would like to give outlook only for Q1, right? The fact that we are doing for Q2 this time is primarily because we know that seasonally, Brazil will come back, and we know the contribution of our Leadership Journey, and that's the reason we are giving some color on Q2. Sorry about not being able to guide for the year. Íñigo Egusquiza: No problem. Thank you. Very clear answer to the question. And just a final question on my side. On the European Union trade defense protection measures, you are mentioning again that you expect the application to start July 2026. I don't know if you can elaborate a bit where do we stand? Why is taking, I would say, longer than expected, although you were pointing to that July as the application date. But where do we stand? Are we expecting for any European Union Parliament meeting to take a final decision? Any color would be much appreciated. Sudhakar Sivaji: First of all, thank you Inigo, for acknowledging that from the beginning, we've always said it's going to be most probably 1st of July. And our message hasn't changed. This application has to pass through 3 bodies. One is the European Council, the other one is the INTA and the third one is the European Parliament. And this is a process. Each of them make their own proposal, and they have to start a process to discuss among themselves to come to a common proposal. The good news is that everything is proceeding on plan for a 1st of July introduction, meaning the European Council and the INTA have made their proposal and have started discussions. And we expect around the third week of February for the European Parliament also to start this discussion and see what their version of the proposal could be. And after that, it is going to take them time to talk among themselves. It is important to remember this whole process has been triggered because the previous safeguards expire on the 30th of June. So legally, the European Commission always pointed out that the earliest it could start -- sorry, the latest it could start is 1st of July, and now I think they are going to respect that deadline. Operator: [Operator Instructions] the next question comes from the line of Adahna Ekoku from Morgan Stanley. Adahna Ekoku: I've got one left. On the normalized EBITDA guidance, so this is EUR 700 million to EUR 800 million. I believe previously, this was EUR 800 million before Universal. So could you just run through what's changed here? And if you could go through the kind of key building blocks of this bridge, that would be really helpful. Sudhakar Sivaji: Adahna, sure. I think let's start with EUR 350 million for 2025. And then when we add the EUR 150 million new Leadership Journey guidance we have given, without any trade defense and CBAM support, this EUR 150 million includes the EUR 500 million just on Aperam's own first. Secondly, the synergies of Universal were included -- are included in the EUR 150 million as well. So this is something to keep in mind, right? From EUR 500 million, you see that we have announced new investments, and we do expect another EUR 50 million additional EBITDA improvement from the investments we have announced. But this should happen ramping up in 2028, but the full effect in 2029 visible, so to speak. So it's post Leadership Journey 5. And the delta then from the EUR 550 million to the EUR 750 million is basically utilization improvement in Europe plus support from trade defense measures. What you are seeing now as a range from $700 million to $800 million to the previous $800 million is the difference is basically if CBAM is going to be immediately effective or is there going to be a ramp-up. That is the delta of the $50 million to $75 million that you look. Is that bridge clear? Or should I? Adahna Ekoku: No, that was very clear. Thank you. Operator: The next question comes from the line of Tommaso Castello from Jefferies. Tommaso Castello: I have 2 left. The first one is on Brazil, which obviously performed better than last year at EUR 75 million EBITDA. Should we consider that as a normalized run rate also for 2026 onwards? Nicolas Changeur: Yes, it will be a normalized low cycle for Brazil for next year, yes. Tommaso Castello: Okay, and then the last one... Sudhakar Sivaji: I'm sorry, just keep in mind that in 2024, it was exceptionally low because we had a hot strip mill investment. And as a result, there were for the first half of the year, losses in EBITDA. So the EUR 75 million is at the low end of the cycle, like Nicolas said. Tommaso Castello: Yes, yes, definitely. Thanks for that. And then the last one. I know it's probably hard to estimate. But, for example, carbon steel, we have some estimates on the potential impact of the new trade measures, basically cutting around 10 million tons of steel being imported -- from being imported into Europe. Now the stainless steel market is obvious smaller, but I was wondering if you had any estimates on how much the new trade measure could impact in terms of percentage of, yes, the volumes basically being shipped to Europe. Sudhakar Sivaji: So this is what we said earlier also, which was that we expect a 7% to 10% jump in utilization. So depending on what you take the stainless market and demand at, that gives you an estimate of the number. So it's a 7% to 10% jump in utilization. Operator: The next question comes from the line of [indiscernible] Capital. Unknown Analyst: Hi, can you hear me? Sudhakar Sivaji: Yes, Lucian, loud and clear. Unknown Analyst: Sud, and congrats on the results. Just going back to the Adahna's question. So if the normalized EBITDA was previously the target was EUR 800 million. You've got Universal on top, which should kind of add, say, EUR 90 million to EUR 100 million, so you get to EUR 900 million. So why is that now actually stepping back to EUR 700 million to EUR 800 million, especially considering safeguard measures that are going to be coming in, which should obviously be a further boost on top of that previous range? Sudhakar Sivaji: Absolutely. So Adrian, I think we have to understand in the past, when we have discussed, we said that the margin in Europe in 2025, for example, thanks to imports -- or rather no thanks to imports and the dumping is EUR 300 per tonne below the previous average, right? And our assumption, and that's the reason I split out what we can do on our own. And if you say the entire EUR 300 per tonne on the margin comes back, then we are back to that EUR 800 discussion. That is the reason I say EUR 500 million on our own, EUR 50 million due to the investments announced, it's EUR 550 million, and then it's up to trade defense measures in CBAM. So the delta to the previous EUR 800 million you're looking for is our 2025 margin being EUR 300 per tonne below compared to previous averages. And I think this is the official discussion we've had before as well, that the low cycle has been EUR 300. How much of this recovered? So it's not a change in the results. It's basically when we say EUR 500 million on our own because of the different business model, EUR 50 million due to the additional investments, and then based on CBAM and trade defense, are we going to recover the entire EUR 300 million or part of it is the delta to the number. Unknown Analyst: Got it. So yes, you're just setting the floor lower, which is good. And hopefully, there's upside to that. Sudhakar Sivaji: Exactly. So if you say that, that entire EUR 300 million is coming and additional trade defense, but those are theoretical discussions, and we wanted to just be clear what our performance and what is expected from the market. Operator: The next question comes from the line of Bastian Synagowitz from Deutsche Bank. Bastian Synagowitz: A few quick ones maybe. Just getting back to the European market. So I guess just coming back to the point you said, so you're saying that you're not seeing any abnormal demand or nothing extraordinary in your order book. But then I guess when we look at the quarter drawdown, it has come down significantly in the first couple of weeks of '26 as it should do as a result of CBAM. So just curious, do you read this as well as customers are currently really heavily absorbing their inventory? Is this what's currently happening? That's my first question. Sudhakar Sivaji: Look, customers are drawing down on the inventory not because of the regular inventory being drawn down because in Q4, as you know, there's been a significant surge. So there's a lot of inventory in the system. Bastian Synagowitz: Okay. But these are your reads as well that if you -- I guess, if quota drawdown is lower, demand doesn't really show up in your order book extraordinary, then it must be a much more significant drawdown of that extra inventory, right? Of the market share from quotas, yes. Sudhakar Sivaji: Sorry, you are correct. But fundamentally, there's 2 comments to that. One is the fact that realistically speaking, based on 2 weeks, you cannot estimate the entire quarter drawdown discussion. I hope you understand. And the second thing is that, yes, with the deliberate intention of consuming those inventories in this quarter is why importers have brought in all these inventories in Q4. So we do see that demand drawdown happening from inventories. Bastian Synagowitz: And just also getting back on CBAM. So I'm wondering where do you see the average CO2 footprint in the current import mix, the way you judge it versus particularly also the most efficient -- CO2-efficient sources of supply, which you now have on the import side. I'm pretty sure you've done the math. So maybe you could give us your views on how you see the battlefield there at the moment and how it has been impacted by CBAM. Sudhakar Sivaji: The battlefield is exactly as it's been defined by the commission's default values. If you look at it, the commission's default values on carbon dioxide emissions from different countries are basically at the levels which we expected them to be. The one thing is, of course, is there some circumvention because some of these countries probably using metal from Indonesia, that is something I'm sure that the commission will continue to monitor. But the default values basically set the exact map of how we see the different carbon footprints of the different countries are. Bastian Synagowitz: And then maybe a very last question on the next chapter of your Leadership Journey and I guess, the new investments, which from my understanding, are mostly tech to Europe. And Europe for the last couple of years obviously has not been a great ROI place as maybe -- as it comes to the different options. So are these investments still under the condition that, I guess, everything is really panning out the way we hope it to pan out? Or are there basically no regret moves and you will go ahead with those independently from whatever is happening? Sudhakar Sivaji: I would say that fundamentally, you have to look at it in 2 different directions. One is that 2/3 of these investments are diversification into specialties in alloys and stainless specialties. And another 1/3 is into automation and putting in new lines with higher productivity and higher efficiency. So if you look at it in -- if the demand picks up and the cycle comes back, these lines will be used or the one with higher productivity will be used to serve the upside structurally. If the demand goes in low cycle, we are a cyclical business, primarily in stainless, then we have the most efficient lines running, and you do know that we have a track record of variabilizing our costs depending on the demand. So that's the reason. So in a sense, yes, these are measures which are required because we want to move primarily into specialties in stainless and alloys. But at the same time, we take the opportunity to put in modern lines. See one primary principle of this, and we've mentioned this in the podcast is that we want to push the technology to make sure we are best-in-class and do not fall pray to the same thing which some other industries in Europe have fallen pray to. We want to be out there competing with the most modern lines being built in Asia and to take productivity gains in low cycles and upsides in high cycles. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Sud Sivaji for any closing remarks. Sudhakar Sivaji: So thank you for joining the call, everyone, and it was a pleasure answering your questions. As you know, Nicola and I, with the Investor Relations team will be on the road over the next couple of weeks, meeting a lot of you. You know, for us, a very eventful and exciting year has just begun, and we look forward to talking to all of you in 2026. As we say in Dusseldorf, have a fantastic carnival season, and we hope to talk to you soon. Thank you. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your line. Goodbye.