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Cenk Gur: Dear friends, this is Kaan speaking. Thank you for joining us. I hope you are all well. Today, we will first walk you through our financial performance, underpinned by disciplined balance sheet management, strong fee momentum, resilient capital metrics and continued progress across our strategic priorities. Our earnings reflect not only the current operating environment, but also the structural strength of our business model. Building on this performance, we will share our guidance for the years ahead, shaped by a prudent assessment of the operating environment. Our focus remains on risk-adjusted returns, reflecting our commitment to sustainable profitability and prudent risk management. At the same time, we will frame these near-term priorities within our 3-year outlook, where we see clear opportunities to reinforce earnings durability, enhance efficiency and deepen customer penetration. Our direction remains centered on executing today while positioning the bank for consistent and profitable growth over the coming years. Dear friends, before moving on to our bank, I would like to briefly touch upon the operating environment. Global financial conditions and risk appetite are expected to remain favorable for emerging markets, supported by continued Fed rate cuts along with a tight spread and subdued commodity price environment. World growth remains resilient despite trade policy uncertainties driven by AI and technology investments and more supportive financial conditions. In Türkiye, domestic demand and economic activity continues to grow, albeit at a more moderate pace. Consumer inflation is on a gradual downward trend. Central Bank is expected to be attentive to inflation risk with cautious and measured rate cuts while macro prudential regulations are set to remain in place and fiscal consultation is underway. Against this backdrop, we expect the banking sector's profitability to continue in a gradually improving trend while asset quality deterioration is likely to proceed in a contained and orderly manner. Let's move on to our bank. On this slide, you can see how our core strengths have translated into tangible financial outcomes. Our strong capital position with 16.8% total capital and 13.6% Tier 1 actively enabled growth, providing the flexibility to manage the balance sheet with agility and dynamically allocated assets and liabilities across cycles. This disciplined approach is supported by prudent provisioning with further increase in our gross coverage to 3.7%. While growing, effective risk management has kept Stage 2 plus Stage 3 loans limited, below 11% of total loans, preserving earnings stability as we grow. At the same time, operational discipline is reflected in our leading 16% fee to OpEx performance. As a result, we continue to deliver strong market share gains in our priority segments, such as business banking loans, where we added 100 basis points in the second half of the year while maintaining our dominant positioning in general purpose loans with over 19% market share. Supported by our continued focus on our customer acquisition and deepening relationships, we have sustained strong momentum in fee income market share, reaching 17.8% by the end of 2025. All of this positions us to further scale a resilient earnings platform and unlock sustained long-term growth potential in the period ahead. Dear friends, Akbank has made solid progress against the 3-year targets we have shared with you on a regular basis. The achievements delivered to date are clear proof of what we are capable of executing going forward. This progress provides a strong and credible foundation for the next 3 years as we continue to build sustainable customer-driven revenue streams. Importantly, this 3-year period is not a destination, but a stepping stone, positioning us for an even stronger, more ambitious journey ahead. On this slide, we have summarized our road map. Dear friends, we are committed to further strengthen our innovation capabilities by developing differentiated offerings across the group that enhance our value proposition and support scalable AI-enabled operating models. Innovation will be accelerated by rapidly testing and scaling AI, blockchain and hyperpersonalization. We will leverage generative AI to provide proactive self-service recommendations across our channels and equip our frontline teams with tools to provide seamless services to our customers. We aim to expand integrated solutions together with our subsidiaries and broader ecosystem that will further deepen customer engagement and unlock new scalable growth opportunities in targeted areas. In parallel, we will continue to invest in future-ready talent to reinforce execution and sustain innovation momentum. Ongoing efficiency gains alongside deeper customer penetration reinforced by value chain network will remain key priorities across our franchise. Collectively, these factors will enable the consistent delivery of return on equity above inflation on a sustainable basis starting this year. Here, we outline our financial KPIs for the next 3 years, translating our strategic plan into measurable targets. The strong dynamism and motivation felt across the bank at every level continues to support execution and momentum. First, over the next 3 years in total business banking loans, we aim to increase our market share by another 300 basis points. We target to grow in cash as well as noncash loans in both Turkish lira and foreign currency. We already started to build the foundation last year by gaining 100 basis points market share in the segment during the second half of the year. Second, our ambition in consumer loans also continues. On top of last 3 years' market share gains of 440 basis points in consumer loans, we aim to gain further 100 basis points until 2028. Customer deposits will remain the primary source of funding for our growth, while demand deposits will continue to reinforce balance sheet strength. Accordingly, moving on to our third ambition, we aim to gain 200 basis points market share in Turkish lira demand deposits, building on top of the 240 basis points gained over the last 3 years. Fourth, after achieving over 100% of fee to OpEx ratio, our homework is to maintain full coverage of OpEx going forward. This will support us -- this will support us to reach our fifth ambition, which is a cost-income ratio below 35%. These targets will feed into our leadership positioning in capital while driving solid growth at the same time, delivering a return on equity above inflation starting this year. Having navigated multiple cycles, I have full confidence in our people's capabilities and execution. I would like to sincerely thank our teams for their outstanding dedication as well as our stakeholders for their continued trust and confidence. I will now pass it over to Ebru to walk you through our results and guidance. Following that, to Chair, and I will be happy to answer any questions you may have. Thank you. Ebru, over to Kamile Ebru GÜVENIR: Thank you, Kaan Bey. Moving further into the details. Our net income was up by 35% year-on-year to TRY 57.224 billion, resulting in an ROE of 21.5% and an ROA of 1.9% for the full year. During the same period, we achieved a solid revenue growth, up by 50% year-on-year to TRY 222.33 billion, thanks to robust fee income generation and NII building momentum in the second half of the year. Our quarterly net income was up by 30% to TRY 18.317 billion, leading for our quarterly ROE to show a sequential improvement to 24.9%, up from 21% in the third quarter. The quarterly ROE improvement was underpinned by our focus on deepening client relationships and strong cross-sell execution, which continued to fuel fee income while agile ALM and margin accretive growth has been reflected in our solid NII evolution. As we move ahead, our sustainable growth mindset, sound balance sheet and analytical capabilities will drive further NII enhancement and anticipated rate cut cycle, leading to an ROE above inflation starting this year. Moving on to the balance sheet. Last year, our TL loan growth reached 42%, surpassing our full year guidance of over 30% Foreign currency loan growth of 10% also came in well above our mid- to single-digit full year guidance. We strategically accelerated our loan growth in the second half, delivering strong market share gains in both foreign currency and TL business loans while supporting NII evolution. To put in numbers, we captured 80 basis point market share in foreign currency loans and 110 bps market share in TL business loans during this period among private banks. At the same time, we maintained our already solid position in consumer lending. This performance for sure, illustrates the effectiveness of our targeted growth strategy, laying a strong foundation for our 2028 targets while preserving risk return discipline. Moving on to securities. The share of securities in total assets remained stable around 23%, while the composition reflects our balanced approach, maximizing yields. We selectively increased foreign currency security exposure supported by timely buildup of NIM accretive Eurobond investments. Foreign currency securities grew by 35% year-on-year in dollar terms, lifting their share in total by 7 percentage points year-on-year to 34%. On the TL side, we are well positioned in long duration and higher-yielding fixed rate securities complemented by TLREF indexed bond portfolio with decent spread, providing potential for further book value growth through mark-to-market gains. As highlighted before, share of our CPI linkers has been strategically reduced by 31 percentage points since 2022, reflecting a deliberate shift in portfolio composition. Active yield-focused portfolio management has enabled timely repositioning of our securities and reinforces margin resilience going forward. On the funding side, our low TL LDR and strong deposit franchise have allowed us to optimize funding costs while selectively advancing growth. Our demand deposit share in total deposits increased by 5 percentage points year-on-year to 33%, supporting further margin improvement. Sticky and low-cost TL time deposit share in TL time deposit remains solid at 58%. Looking ahead, our well-structured balance sheet, combined with sound deposit mix provides a solid foundation for continued NIM enhancement. Let's move on to the P&L. As you know, our NIM had started to recover during the third quarter, thanks to improved funding dynamics. This trend was sustained during the fourth quarter, backed by disciplined balance sheet management. Our swap adjusted NIM expanded by 40 basis points quarter-on-quarter. On a CPI normalized basis, quarterly NIM performance was even stronger at 60 basis points. This is adjusted for the one-off valuation impact in the third quarter of the CPI. Looking forward, our unwavering focus on profitable growth and effective funding strategies will remain key drivers supporting the anticipated gradual NIM expansion throughout this year. Accordingly, the quarterly evolution will remain sensitive to both the pace of disinflation and also the magnitude of the rate cuts. Last year, our net fees recorded a robust growth of 64%, ending the year above our guidance of around 60%. The growth was broad-based across all business lines, reflecting strong customer engagement, continued innovation and diversified product portfolio. Sector-wide fees have benefited from the high interest rate environment. However, our diversified fee structure and growth in customer base positions us well to mitigate the cyclicality of the payment system fees in the lower interest rate environment. Cost increase remained well below -- actually well below our guidance and also was contained last year, while it was up on a year-on-year basis at 33%, while our guidance is at 40%. Having stabilized cost increase around inflation levels, we had the lowest OpEx base among all of our peers as of third quarter last year. And as you know, we're the first one to announce, so we will be keeping a close eye on this particular parameter. This is a reflection of our disciplined cost management and operational efficiency. However, our full year cost-to-income ratio remained around 50%, reflecting continued pressure on NII. As for this year, improving NII dynamics, along with resilient fee income base are expected to drive a gradual improvement in cost-income ratio toward low 40s. As Kaan Bey just shared, our mid- to long-term ambition remains unchanged with cost-income ratio targeted below 35% by 2028. Cost discipline embedded across our workforce and branch network alongside a targeted application of AI to enhance efficiency and scalability will all be instrumental in achieving our targets. On that note, let's now move on to our superior fee coverage of OpEx. Starting from an already high level, our broader operating footprint and deeper customer penetration alongside disciplined cost management translated into a stronger fee coverage. Our strong momentum in fees across all business lines led for our market share gain among private banks to advance by 1.4 percentage points to 17.8% last year. More importantly, the total market share gain in fees among private banks since end of 2022 has reached 3.9 percentage points. And at the same time, the fee to OpEx ratio has increased by 20 percentage points to 106% in just 1 year. With full coverage of OpEx now firmly in place, our aim is to sustain this level through this year and beyond. Let's move on to asset quality. Retail-led NPL inflows continue to be the persistent trend across the sector as a reflection of the macro environment. Despite this backdrop, our NPL market share among private banks has continued to decline, extending the trend observed since early 2025 with a further 150 basis point improvement in the last quarter. The share of Stage 2 plus Stage 3 loans remains contained at 10.8% of gross loans, underscoring the sound quality of our portfolio. Please also note that the restructured loans represents only 3.4% of the total loan portfolio. Meanwhile, our share in bankruptcy applications stands at less than 4%, which is well below our natural market share, mirroring disciplined underwriting and proactive risk management. Supported by prudent provisioning, our total provisions increased to nearly TRY 71 billion, reflecting the continued buildup of our reserve buffers. As a result, our coverage ratios remained solid with gross coverage at 3.7% and Stage 2 plus Stage 3 coverage at 28.1%, reinforcing balance sheet resilience. Excluding currency impact, net cost of credit ended the year at 214 basis points, slightly above our guidance, while NPL ratio was fully in line at 3.4%. So looking ahead, as we continue to grow, our disciplined risk framework supported by advanced analytics, AI-driven credit decisions in retail, together with the diligent tracking of our corporate and commercial loan portfolio, all position us well to preserve asset quality and contain potential cost of risk pressure for this year. Moving on to capital. Our total capital, Tier 1 and core equity Tier 1 ratios remain robust at 16.8%, 13.6% and 12.5%, excluding the regulatory forbearances. This reflects prudent capital allocation while driving profitable growth. As for sensitivity, 10% depreciation in TL results in around 30 basis point decrease in our capital ratios, while the impact diminishes for larger FX moves. Similarly, 10 basis point increase in TL interest rates would lead to an impact of approximately 10 basis points on our solvency ratios, demonstrating limited sensitivity and the strength of our capital. Overall, our strong capital buffers continue to anchor balance sheet resilience and support long-term profitable growth. Before moving on to Q&A, I'd like to share a few highlights regarding our nonfinancial performance. As highlighted in our ESG video at the beginning of this call, we continue to advance in our sustainable action plan with measurable results. As a result of our knowledge of dedication, we are happy to be among one of the few institutions globally to receive CDP's highest A rating in climate change, water security and forests, reinforcing our leadership in sustainability. And in this context, we are very excited and proud that COP 31 will be taking place in Türkiye this year. It reflects Türkiye's growing commitment to climate action and highlights the increasing importance of sustainable finance and climate risk management for our region. We will continue to support the transition to a low-carbon and inclusive economy in line with our long-term objectives. This slide highlights a snapshot of our 2025 financial performance, and we have shared throughout the whole presentation. But the last note, as we have shared, the main deviation was related to the pressure on net interest margin, and this was due to the tighter-than-expected monetary policy and the divergence between deposit costs and policy rate. And last but not least, our 2026 guidance. Looking forward, as said at the beginning of our presentation, we are committed to strengthen further our already robust positioning in consumer loans while accelerating market share gains in Turkish lira and foreign currency business loans, including noncash loans. Our focused growth and funding adaptability will sustain further NIM improvement this year. And accordingly, our net interest income will be supported by both volume growth and further improvement in margins through ongoing disinflation, obviously. And our resilient fee engine, combined with the cost discipline will continue to contribute to the full coverage of OpEx. Improving net interest margin or NII dynamics and resilient fee income base is expected to translate into a gradual improvement in cost-to-income ratio towards the low 40s. Asset quality will continue to be a priority area in the sector, while our disciplined risk framework will limit cost pressure, leading flattish cost of credit trend for this year. To sum up, our well-structured balance sheet, along with risk return focused growth is to support further NII enhancement in the anticipated rate cut cycle, leading to an ROA above inflation starting this year. Kamile Ebru GÜVENIR: This concludes our presentation, and we can now move on to the Q&A session. Please as always raise your hand or type your question in the Q&A box. And for those of us calling us by telephone please send your questions by email to investor.relations@akbank.com. The first question comes from David Taranto from Bank of America. David Taranto: The first one is about the growth. Historically, Akbank's market share was significantly higher. I remember back in 2007, 2008, it was close to 12%, but the bank deliberately gave away market share until 2020, at some point falling towards 7%. And in the last few years, you have reaccelerated the growth and regained market share across multiple segments. And that strategy is continuing according to the presentation. So my question is, what do you consider to be the natural market share for Akbank in the medium term? And b, assuming a normalized regulatory environment, i.e., relaxation of growth caps, when should we realistically expect Akbank to converge towards that natural market share? And second question is about the margins. Historical NIM averaged around 4% and your '26 outlook points to return towards these normalized levels. However, as rate cycle -- rate cut cycle progresses, one would expect NIM to temporarily exceed the cycle averages, even so macro prudential measures limit how far this can go. So what do you see as the main upside and downside risk to your NIM guidance for this year? And how do you expect deposit rates to move relative to the post rate given the constraints by the macro prudential framework? And finally, on costs, Akbank kept the cost growth relatively controlled versus sector in the past few years, but high inflation and the regulatory pressure still pushed the nominal cost base meaningfully higher. You point to medium-term cost income target of mid-30% levels. And I was wondering what are the key operational levers and time line to move towards that cost of risk levels. The reason why I'm asking is in a declining inflation environment, at some point, revenue growth is going to decelerate, not maybe for this year or perhaps next year, but eventually. So reducing cost income ratio could become a bit more challenging in this environment. So I would appreciate to hear your plans to limit the cost growth. And maybe one more thing, what are your macro expectations for '26, please? David, this is Turker. Thank you very much. Türker Tunali: I'll try to answer your questions. Please. But at the end of my answer, if I missed anything, please ask again. To start with the market share evolution, you're right, like in the past, like maybe like 15 years ago, we used to have like above 10% market share in the sector in some of the products. But as you may know, like in the last 10 years, there have been some periods where actually the state banks actually have acquired some market share from the private sector. So actually, that's why actually now we are seeing ourselves below 10% threshold. But definitely, as Ebru and Kaan Bey have shared, like we have like the ambition of growing the bank in the upcoming years as well. So therefore, like if we can achieve these market share gains as we have like put on to the table on the -- especially on the business lending side as well as further increasing our market positioning on the consumer side, I would assume that everything evolves as we're expecting, we should again see 10% levels, maybe not for all of the products because maybe we will deliberately grow the bank in some areas and maybe we will be more slower in some areas. It will -- the time will show this based on our macro expectations. But definitely, the aim of the bank is leveraging our superior capital and growing the bank and again, seeing that type of market share levels within the sector. With regards to our NIM trajectory, actually, -- for full year, as Ebru has shared, we are expecting like 4% of net interest margin, but we will be observing a gradual improvement in every quarter. So probably so we will be -- it's very likely that we will see the highest NIM towards the end of the year. That would, therefore, actually also support our NIM evolution for upcoming year. Maybe in long term, maybe, maybe, it's too early to talk about it. But in a normalized world, maybe with an inflation level of plus/minus 10%, let's say, that 4% is the normalized level, but definitely going into '26, we may expect a higher net interest margin. And as I just repeat, a gradual improvement in net interest margin. What may be the upside to this NIM trajectory, as we have shared at the very beginning of our presentation, our base case scenario for the macro outlook is like 22% to 25% year-end inflation with a policy rate of 28% to 31%, so with a really sizable real rate. And when we prepared our guidance, we were more on the more -- maybe on the conservative end, i.e., like maybe 24%, 25% year-end inflation with a policy rate of roughly maybe 31%. If this inflation trend evolves like better than this, like bringing the year-end inflation to the level of maybe low 20s or close to 20% and enabling a rate -- policy rate coming down to less than 28%, something like that, that will definitely bring an upside. But having said that, maybe also another thing, which will be also important to monitor, that was also one of your questions, like the deposit rates versus policy rates. As we've seen in the last probably 3, 4 months after the phasing out of the KKM scheme, because up until that time, when we had the KKM in the system, FX protected deposit scheme, the sector was -- it was easier for the sector to meet this TL deposit ratio requirement of the Central Bank. But once this KKM scheme has phased out, it became more challenging, and that's why actually, especially starting from fourth quarter, middle of fourth quarter or fourth quarter onwards, we've seen a divergence between the deposit rates and the policy rate. Maybe just to give you an example, at the beginning -- towards the end of the year and beginning of this year, like we've seen maximum deposit rates going up to 41% versus policy rate of 38%. That's why Central Bank has made a recalibration like a few weeks ago, like extending the reporting period for TL deposit ratio requirement and also like giving some buffers to manage the deposit rates. But frank -- to be frank with you, so far, there is still some gap, maybe not like 41%, but still we are observing rates like close to 40%. So still this divergence is to be observed in the market. So we'll see actually how it's going to evolve, whether we may see further calibration from Central Bank. This will be important factors to observe in the coming period. Maybe final remark with regard to your question on the OpEx. I think as Akbank, we've done a quite good job this year actually. When you look at '24 or '23, like OpEx growth was way above the inflation. So there was a divergence there were different factors to that. So inflation inertia, supply-demand issues globally, which was also creating USD inflation. But this year, actually, there was a normalization. So like low 30s of OpEx growth versus, again, 31% of inflation is I think it's really -- we delivered a strong performance that actually we were able to convert OpEx growth to the inflation. So it's -- again, our guidance for '26 is considering like an average inflation of like maybe high 20s for this year. So we will be again maintaining our cost discipline. And in the upcoming years, like with inflation going down, as you are -- as you have like -- I understand what you are -- how we are like assessing it. but the increase of revenues, revenues may go down, but not forget, currently, we are operating with growth caps. So there is really a huge growth potential. I would assume this volume growth will be absorbed maybe the high interest rates, et cetera, et cetera, or high spreads maybe for some time. Therefore, at least for Akbank, I can say the aim of the bank will be to fully cover its operation expenses with its fee income generation. And not forget it's really journey. We are always looking for efficiency areas in every aspect. So this will be -- we expect them also to be supportive in this low 30s of cost-income ratio ambition. Cenk Gur: Maybe, David, I would like to add something, maybe enhance the importance of the growth for Akbank, especially for 2026. You know that our strong capital base will continue to provide us strategic flexibility. And of course, we are going to in search of sustainable growth across the segments. But as you know, there are some segments and line of business that we would like to grow more, such as business loans, SMEs. So in the same time, when we look into our maybe quarter-on-quarter, the growth performances such as FX loan, Turkish lira loans, actually, we have the capacity to flexibly grow in a very smart way. So we are still on the -- finding new avenues to build up new platform and market share for FX loans. And we are going to be more on the infrastructure projects, multinationals, blue-chip companies. So -- but in the same time, of course, this is going to reflect our prudence and quality focus approach. So I would like to enhance what told before. Yes, we're going to grow. Kamile Ebru GÜVENIR: Thank you, David. Next question comes from Ashwath PT from Goldman Sachs. Ashwath PT: I have a few questions. The first being your guidance for FX loan growth of greater than 10%. Does that also reflect the recent updates to the macro prudential framework where I think the growth limit for the 8-week growth limit for foreign currencies has been reduced from 1% to 0.5%. The second question I have was around the ROE. You mentioned you expect 2026 to be high 20s. Would that be a natural expansion of NIM through the year, like you said earlier, to peak in probably in the second half of 2026. And would it be fair to say that's when you actually expect that the real ROE would actually turn positive towards the second half of the year? And more generally -- my third question would be more generally over a longer term where perhaps inflation does come down to the mid- to low 20s, perhaps next year or the year after. Where do you see the normalized level of NIMs and the normalized level of ROEs for the bank? Türker Tunali: Ash, this is Turker. This latest change of -- like on the FX loan growth cap side actually that was announced after we have actually prepared our guidance. But having said that, when we look at our fourth quarter performance only in the fourth quarter, we grew our FX loan book by 5%. it shows like the flexibility of the bank in tapping areas which are exempt from growth cap. Again, we will be looking at this picture in a similar manner. So therefore, actually, as of today, we don't see any downside risk to our guidance. With regard to NIM and ROE relationship, as actually, your thinking is right. We expect NIM to gradually improve, bringing us to a 4% NIM for full year. So that will definitely support our ROE evolution throughout the year as well. Like if we say what is real ROE, ROE above inflation, you're right, probably maybe not in the first quarter and second quarter, let's wait and see how also inflation evolves. But definitely, in the second half of the year, we should see that the ROE moves above CPI in the second half of the year. With regard to normalized level of net interest margin and ROE, like maybe it's not a short-term topic, but assuming like inflation goes down to plus/minus 10% levels in medium to long term, maybe as of today, we can use like roughly 4% of net interest margin as starting point to get a bit like plus/minus 20% ROE, meaning like maybe, let's say, real ROE, if you define ROE minus inflation as real ROE, then probably like 10% real ROE will be the ambition of the bank in the medium to long term. I hope that was clear. Kamile Ebru GÜVENIR: The next question comes from Simon. Simon. Simon Nellis: My question is around your fee growth guidance for this year of above 30%. So I guess that's nicely above your inflation expectations. I mean, given that inflation is falling, that there's some regulatory tightening on fees, I mean, how comfortable are you with that? And can you just unpack a bit how you expect to get to 30% plus growth on fees? Türker Tunali: Simon, actually, this is why we have guided this above 30%. This is already taking into consideration the expected tightening on the interchange commissions by Central Bank. By the way, they didn't do it in January. So 1 month is maybe -- actually 2 months are like now unchanged. So let's wait and see actually how it goes. Maybe a small item and very recently one of the regulatory changes was also like the fee cap on FX lending have been removed by the authority in the last week. That will be, to some extent, also supportive as well. That was also integrated into our guidance. But we feel comfortable. Simon Nellis: You feel comfortable still despite those headwinds. Kamile Ebru GÜVENIR: I think it's a result, obviously, of our significant market share gains over the last few years on customer acquisition. I mean that's probably going to be a supportive factor of the fee growth above the inflation expectation as well. We have some written questions. So maybe the first question I can ask from Mariana from William Blair. Could you please explain the increase in Stage 2 loans on a quarter-on-quarter basis regarding NPL inflows? Are you seeing inflows from other segments in additional to SME, retail, like addition to retail, SME, commercial? This is our first question. Türker Tunali: Mariana, First of all, maybe to start with like NPL inflows. Actually, when we say retail, actually, we mean actually consumer plus also SME. So that was also the case in the fourth quarter, mainly led by consumer, also some coming from SME. These were the areas where we have seen the majority of NPL inflows. So in the fourth quarter, no change compared to third quarter. With regard to this increase in Stage 2 loans, as we had also time to time also shared with the investor committee in the last quarter of the year, we are always revisiting our IFRS 9 model. And based on that calibration, like inflows because of the model, so rating deterioration in other words. So after our calibration, there has been some increase in Stage 2 loans -- but whereas our restructured loan book has stayed the same, like 3.4%, almost same like in the third quarter. So that was the main driver of this Stage 1 to Stage 2 composition change of roughly 2%. Kamile Ebru GÜVENIR: And regarding NPLs? Türker Tunali: Actually, as I said, this is mainly retail driven. Kamile Ebru GÜVENIR: So moving on to the next question. Capital levels and Basel IV impact, will you see A Tier 1s or Tier 2s to shore up capital [indiscernible]. Türker Tunali: Basel IV will be effective if no change, start in the second half of the year. And as of today, the impact for Akbank is quite limited, roughly like 20 basis points in Basel -- 20 basis points. With regard to our like wholesale funding strategy, you know our practice, we are always like looking for opportunities in the market. And as you know, again, this year, we have really evenly distributed redemption schedule. One of them is also the Tier 2, where we are, again, stick to our benchmark, the call option of our Tier 2. We will look actually at all products based on maturity profile and like cost. And based on that, we will decide which path to go. Kamile Ebru GÜVENIR: Yes. Maybe just to put these in numbers. As you probably know, this month in February, we have a $500 million Eurobond redemption. And then in July, we have a $500 million Tier 2 as sub debt. As Turker mentioned, we always try to go by market practice depending on obviously on BRSA approval. The more important issue for us is that we like to obviously diversify the products and also diversify the maturities and extend the maturities actually. And you probably have seen this in our latest also syndication loan where we have 3 different tranches, 1 year, 2 year and 3 years. So we will be doing the same for this year for also our syndicated loans as well and as well as for, obviously, our maturities on the other product side. And I don't see any other question here that hasn't been answered. So maybe we can move on to -- I mean I don't see anyone raising their hand as well. So maybe I can leave the floor to Kaan Bey for closing remarks. Cenk Gur: Thank you. Thank you, Ebru. Dear friends, thanks a lot again, especially for your continued interest and engagement. We are very happy with that. To conclude, we entered the period ahead with confidence in our strategy and our ability to deliver. Our guidance reflects a balanced outlook grounded in prudent assumptions, disciplined execution and a strong focus on sustainable profitability. With our solid capital position, as I mentioned earlier, our resilient balance sheet structure and diversified business model, we are well positioned to navigate the evolving macro environment while continuing to create long-term value for all stakeholders. Technology remains a key enabler of our strategy, supporting deeper customer engagement, operational efficiency and scalable growth. We will continue to invest selectively in digital capabilities and process transformation and of course, as well as our people at bankers. While maintaining a disciplined approach to risk and capital allocation. Dear friends, we look forward to meeting many of you in the coming period and continuing our dialogue in more detail. Thank you for joining us today. We appreciate your trust and continued engagement. Bye for now. Kamile Ebru GÜVENIR: And for those of you who have additional questions, please do feel free to reach out to Investor Relations team. We are always at your disposal and look forward to seeing all of you throughout the year. Bye-bye.
Jaime Marcos: [Interpreted] Good morning, everyone, and thank you very much for attending Unicaja's Q4 2025 Earnings Presentation. First of all, as we usually do, let me confirm that this morning, before the market opened, we published this presentation along with the rest of the usual financial information at the CNMV website and at our corporate website. Today, we are joined by our CEO, Isidro Rubiales; and our Chief Financial Officer, Pablo González. We have divided the presentation into 3 sections. Isidro will begin with the introduction, which includes a summary of the financial year, and a brief review of the first strategic -- first year of the strategic plan. Pablo will explain the financial earnings. And after which Isidro will return to the stage 2, conclude with some final remarks before opening the floor to your questions. We expect the presentation to last just over half an hour. After the presentation, we will take questions from analysts and investors who are following us by telephone on the original Spanish line. And then we will move on to the English [ channel ] line. So without further ado, I give the floor to Isidro. Isidro Gil: [Interpreted] Thank you very much, and good morning, everyone. It's a pleasure for me to be here again, sharing with all of you the main -- the key highlights of the 2025 earnings, which, as Jaime mentioned, is the first year of the strategic plan. And as you will see, we are making good progress, which is also a beginning to be reflected in the entity's financial performance. The strategic plan is designed for the long term. And many of the results and returns we expect to obtain will take time to be reflected. But it's true that some of these measures implemented are already allowing us to move in the right direction with some clear results in the first year of the plan. On Page 3, we show our usual summary of the highlights of the financial year. The first item that we would like to highlight is the significant recovery in business activity that we have achieved throughout 2025. Two years ago in the fiscal year 2023, performing loans fell by 9%, the following year. In fiscal year 2024, the decline was 4%. In 2025, despite not growing in the mortgage segment, which is Unicaja's largest book, we managed to reverse that trend and achieved 2% lending growth. This turning point, as we will see later, is partly as a result of the diversification strategy outlined in the strategic plan that we presented to you a year ago and which is gradually beginning to take shape. Proof of this is that loan approvals have grown by 40% compared to the previous year. Another aspect that reflects the greater commercial momentum is the evolution of mutual funds, which, as you will recall, was one of the strategic levers of the plan with balances rising by 23% during the year and a net subscription market share of 9%, which is higher than our structural share. This positive performance has also been reflected in profitability, with net profit for 2025, improving by 10% to EUR 632 million, thanks to the growth in gross margin and lower provisioning requirements. The increase in income boost the ROTE adjusted for excess capital of 12% and maintains efficiency slightly above 45%, below our target of 50%. I would also like to highlight the continuing improvement of the bank's asset quality, an aspect to which the market may be paying less and less attention, but which we have been managing exceptionally well internally. And as a result, their balances have become immaterial, but continued to improve quarter after quarter. NPAs fell by an additional 25% in 2025. And additionally, leaving the net nonperforming asset ratio at a symbolic 0.8%. Stock fell by 20% during the year, reducing NPLs ratio to 2.1% below the 2.8% reached by the sector in November 2025, the latest data available. NPL coverage also improved during the year, increasing from 68% to 77%. This positive development is also reflected in the P&L with a cost of risk below 26 basis points below initial guidance. Finally, I would also like to draw your attention to value generation. One of the most important aspects as it's the consequence of all the above. The CET1 ratio driven by earnings ended the year at 16%, 90 basis points higher above last year, which allows us to increase the percentage of the 2025 earnings, which -- that will be allocated to dividends from the initial 60% to 70%. This is a significant increase that will improve the dividend up to EUR 443 million, 29% higher than the previous year. And this is the highest dividend paid in Unicaja's history. On the following page, we show you how the year ended compared to the initial guidance we shared with you a year ago, we believe it summarizes the year's performance very well. We expected net interest income to be above EUR 1.4 billion, and it finally reached EUR 1,495 million, which is 7% above our initial guidance due to the implementation of loyalty plans with linked customers, we expected fees to remain flat, but they ultimately increased by 3%, driven by growth in investment, in mutual funds and insurance, two of the commercial pillars of our plan. Costs remain in line with expectations, rising 5% due to investments, hiring and the projects we are implementing to execute the strategic plan. The cost of risk was below our initial forecast as our provisions. Business volume also grew as expected. As a result of all the above, net income increased by 10% to EUR 632 million, no less than 26% higher than the initial target, which was EUR 500 million, which, as you know, we already exceeded in the previous quarter leaving the ROTE adjusted for excess capital at 12%, which is 200 basis points higher than the 10 initial -- 10% initially expected. As you can see, these pages summarizes very well the positive performance of the entity in the first year of the strategic plan, which we -- where we met all the guidelines we provided a year ago. And in some cases, we significantly improve on them. On the next page, as I mentioned earlier, we show how the positive evolution of the entity's financial position and results allow us to present a very important milestone. The Board of Directors has decided to update the dividend policy and increase the percentage of profits we want to distribute in the way of dividends going from 60% to 70%. This is a significant increase in the distribution of earnings to our shareholders, which together with the best earnings will mean the payment of dividends for 2025 of more than EUR 0.17 per share, well above the EUR 0.134 paid for 2024 and compared to around EUR 0.05 that we paid in 2022 or 2023. The total dividend will amount to EUR 443 million, 29% higher than the previous year. This is a significant increase, which as I said before, has been made possible by the positive performance of the results and the bank's comfortable solvency position. Now if we turn to Page 6, you will see some of the progress made on the strategic plan in the first year. Although we are in early days, we have gone -- begun to notice a significant change in the dynamics, thanks to the entire team's focus on the plan's initiatives. And we wanted to share some ones with -- that we are particularly excited about with you. In consumer lending, we aim to double arrangements by 2027. This year, we have already increased by 40%, maintaining our focus on working with existing customers and direct deposit income. With regard to new insurance premiums, we wanted to increase by 25% in 2027. In this first year, we have already increased by 17% and we continue to see room for improvement to achieve our goals. Another noteworthy aspect is the off-balance sheet weight on total customer resources, where we have increased to 27% in the year with a final target of 30%. We have launched products such as Unicaja Store and reached very important agreements with the management company that will help us to continue increasing and diversifying our income. In the corporate sector, we are very pleased with the improved performance of the business in the first year of the plan. We have turn around a business that was in decline in the book after falling 9% in 2024, has grown by almost 4% in 2025. To achieve this, we have attracted 70% more new customers with lending increased our own customer financing share by 5 percent points and increased the weight of the current assets from 11% to 14%. All of this driven by our focus on improving customer satisfaction with an NPS indicator, improving by 10 points in the corporate business since we launched the plan. Across the board, as you will see later, we are working hard to improve our commercial and operational tools using artificial intelligence. We are rolling out tools across the entire organization and loading use cases in different areas, such as sales, customer service, operations, et cetera with efficiency improvements in many cases, exceeding 50%. Finally, a very important part of our plan is to hire specialized and significant profiles for the bank in order to achieve our targets. In this first year, we have already achieved 65% of the talent acquisition that we have planned. In short, it has been an intense first year of the plan, where we're gradually beginning to reap the rewards of this implementation. As a result of these advances, on Page 8, we update our earnings expectations for the 3 years of the strategic plan a year ago, along with the annual earnings for 2024. We presented the main details of the plan in which we showed our intention to exceed EUR 500 million in net profit in each of the 3 financial years and an accumulated net profit of more than EUR 1.6 billion, which was 40% more than the [ EUR 1.17 billion ] achieved in the previous 3 financial years from 2022 to 2024. Today, following the positive performance in the first years of the plan's implementation, we're increasing this accumulated net profit earnings expectations by EUR 1 billion taken to EUR 1.9 billion, which is 70% higher than the accumulated net profit achieved during the previous 3 years. The interest margin, which we initially expected to exceed EUR 1.4 billion each year, is now expected to exceed EUR 1.5 billion. And net income, which I mentioned earlier, we initially expected to exceed EUR 500 million each year, is now expected to exceed the net income for 2025. This is EUR 632 million achieved last year. All of this will be accompanied by a cost-to-income levels that will remain below 50%. On Page 8, we provide an update on shareholder remuneration target of the plan. As you will recall, the objective is to allocate more than 85% of the earnings for the 3 financial years to shareholder remuneration. Initially, the idea was to allocate 60% through the ordinary dividend and the remaining 25% through what we call additional remuneration which could be in cash dividends or share buybacks with the intention of concentrating this additional remuneration in fiscal year 2026 and 2027. Following the updates of the dividend policy from 2025 onwards, we are increasing the structural remuneration from 60% to 70%. This reduces the percentage of additional remuneration for the period to 15% of accumulated earnings. As can be seen on the right in order to achieve the aforementioned objective, the additional remuneration will represent around 25% of the earnings for fiscal years 2026 and 2027. In other words, for the 3 years of the strategic plan, we will pay 70% of the net profit in dividends, and for 2026 and 2027, in addition to that 70%, will include an additional remuneration of 25% of the profit for those 2 years, which will be either paid in cash dividends or through share buybacks, something we will decide based on circumstances. Therefore, for 2026 financial year, if we pay part or all of the additional remuneration in dividends, we will make an additional payment in December, to which we will have to add the 2 usual dividends for 70% of the result, the first in September and the second in April of the following year once approved in the General Shareholders Meeting. As you can see, this would be the plan over the 3 years as a whole. Shareholder remuneration represents more than 85% of the accumulated net profit. Finally, and given its importance, I would like to take a moment to mention some areas in which we are making progress in the field of AI, which we show on Page 9. We are convinced that this technology will change the way we do business and banking, not in the future, but right now, that's why we consider it's an absolute priority. We are making progress in the use cases across all areas, including commercial operations, IT development with very encouraging results that drive commercial activity, improve efficiency and reduce the time required for many tasks. This is facilitated by a hybrid of modular architecture. This is adapted to both cloud on-premise environments with independent components that accelerate system and construction are ready to work with different types of models. We believe that innovation is essential to get the most of it, which is -- that's why we have created an AI hub with more than 50 multidisciplinary professionals. And we've launched joint chair with University of Granada to promote research and attract talent. In short, we are promoting the adoption of artificial intelligence throughout the organization, which is leading us to achieve efficiency improvements of over 50% in some areas. In short, as you have -- you will have seen in the 2025 financial year has been very positive. Progress in the implementation of the strategic plan has led to an improvement in commercial dynamics which, in turn, has boosted results by 26% above initial forecast, which together with our comfortable solvency position allows us, on the one hand, to increase the percentage of earnings that we'll allocate to dividends from initially 60% to 70% increasing the dividend by 29%, to EUR 443 million, the highest in our history. And on the other hand, it allows us to improve our future earnings expectations. So with that, I'll hand over to Pablo, who as usual, who will give you more details on the financial performance for 2025. Pablo, whenever you're ready. Pablo Gonzalez Martin: [Interpreted] Thank you, Isidro. Let us now continue with the business activity on Slide 10. As you can see, total customer funds rose by 3.5% in 2025. Private sector deposits increased by EUR 662 million or 1% with a continued shift in the product mix from term to demand deposits that rose to EUR 55 billion, up 3% year-on-year, which explains the lower cost of deposits that we shall discuss later. Our balance sheet performance remains very positive, posting an annual growth of 13.8% driven by mutual funds, which after reaching the market share of 9% of net subscriptions grew by 22.6%. That is in the north of EUR 3 billion. On the following slide, we disclosed the details of assets under management and insurance. On the left-hand side, you can see that assets under management rose by 14% over the last year. Funds in turn climbed by 23%. Note worthy is the significant increase in net fund subscriptions, as shown at the bottom, these subscriptions rose from 1 point EUR 1,767 million to just over EUR 2.8 billion, accounting for a 9% market share of net subscriptions according to Inverco. On the revenue side, as you can see on the right-hand side, these 2 lines of business rose by 9% in 2025, accounting for 18% of total revenue for the year. With regard to lending, during the 2025 financial year, total performing loan book rose by 1.9%, which is a very positive trend compared with the declines reported in recent years, as Isidro mentioned earlier. Broken down by business segment, corporates posted a very positive uptick and after rising 1.7% in the quarter, they reported annual increase of 3.7%. This is one of the most positive business aspects of the year. In fact, thanks to the implementation of certain measures under our strategic plan, we have reversed the negative trend that this segment has been experiencing in recent years. In the case of individuals, growth for the year was 0.6%. Because albeit, we barely reduced the mortgage book by 0.2%. We were able to offset this with a strong increase of more than 8% in consumer lending. Again, driven by the measures set out in the strategic plan, which aims to diversify revenue streams. In short, this trend points to progressive improvement over recent quarters which can be explained by greater diversification and better sales dynamics, together with a major increase in new production as shown on the following slide. All new lending book segments grew markedly by 40% over the year as a whole from just over EUR 7 billion to almost EUR 10 billion in 2025. Growth in corporate banking is particularly noteworthy with formalized balances rising by 46% over EUR 6 billion. Mortgages rose by 30% to over EUR 3 billion. This amount leaving the book flat for the year given the pace of repayments. It should be noted that this more conservative growth in the mortgage book is mainly due to the high level of competition in this segment, where prices are very tight. Finally, although in related times, their balances are less representative, I would like to highlight the increase in new consumer lending production, which rose by 40% to EUR 822 million. In short, this positive growth is in line with the business priorities set out in our plan. On the following slide, you can see how we continue to make progress on our strategic plans, sustainability commitments. This effort is being recognized by ESG rating agencies with 6 improvements having been granted in the latest reviews. Regarding environmental matters, noteworthy is an increase in the weight of Article 8 and 9 funds, which now account for 72%. We maintain and reinforce our strategy of financing ourselves through green bonds with high eligible collateral, while also advancing in the decarbonization of the portfolio, now targeted at 6 sectors representing 81% of our lending to the private sector already. We also like to highlight, Unicaja's social commitment, one of our identity hallmarks, which can be summarized in aspects such as customer proximity, commitment to financial education and support for vulnerable groups. A portion of proceeds is returned to society through more than EUR 175 million distributed in dividends to foundations in addition to EUR 371 million in taxes paid in 2025. We're also committed to our customers by accompanying them in their own transition to this. And we are promoting new functionalities and agreements with third parties as reflected in the growth of the sustainable business where both the portfolio and new production are growing significantly. Finally, we would like to highlight our commitment to our employees with a focus on creating an environment that prioritizes people, good governance, equality and professional development. We shall now continue with a review of the income statement in the next section. Starting with the quarter, net interest income grew by 0.8% and as the effect of loan repricing was offset by lower funding costs, both in retail and wholesale. Fee income improved by 4.1% over the quarter, bringing us to gross income of 1.3% higher than last quarter. Costs are rising due to the seasonality of the quarter. Overall, the quarterly margin before provisions rose by nearly 1%. Provisions as a whole rose sharply over the period, mainly because we have included a provision for restructuring costs in the amount of EUR 27 million. Our aim is to implement a new workforce renewable plan similar to the one we announced last year. For the year as a whole, profit rose 2.6%, reaching EUR 2.095 billion. Total operating costs increased 5.4%, in line with the previous year and the guidance. Overhead costs rose as a result of ongoing investments, while personnel expenses increased by 4.2% in excess of the percentage agreed in the collective agreement due to new hires and variable remuneration. The operating margin improved by 0.5%. Provisions fell by 25% during the year, mainly due to lower provisions for legal risks. All of the above, led to a pretax profit of EUR 902 million, which after taxes and minority interests, including EUR 26 million in sector-specific tax amounted to EUR 632 million, up 10.3% compared to the 2024 financial year. Let us now take a closer look at the income statement. Starting with net interest income on Slide 18, we show the evolution of customer net interest income. As you can see, it fell by 4 basis points over the quarter as the decline in credit yields was partially offset by lower deposit costs. This is the same trend as reported in previous quarters, but increasingly moderated as the downward trend in lending is becoming more limited, albeit we expect it to continue somewhat due to the annual evolution of the 12-month Euribor, which is still slightly below what it was a year ago. We also increasingly see less room for declining the cost of deposits, which continues to improve due to the mix effect rather than the price effect. In any case, as we always say for an institution such as Unicaja with far more deposits than loans, business performance is better reflected by the net interest margin on profitable assets. And this remains stable during the quarter, as you can see. The following slide shows details of the margins performance during the quarter, which improved by EUR 3 million or 0.8%. The lower return on loans mentioned above is offset by the lower cost of deposits and wholesale funding as well as by the higher generation of liquidity. This quarterly performance is similar to that reported in other quarters this year. But as mentioned above, it is becoming increasingly moderate. Moving on to fees. We can see that they continue to perform well in the quarter, growing by 4.1%, mainly due to higher income from value-added services such as mutual funds and insurance. Over the year as a whole fees rose by 2.8%. As we have mentioned in the past, fees for collections and payments, known as banking fees fell by 7% as a result of the implementation of customer loyalty programs. Although some of these fees, such as car fees are already showing positive growth in 2025. At any rate, this impact was more than offset by the positive performance of nonbanking fees. These fees, which had greater added value rose by 12% in 2025 driven by mutual funds and insurance, which as shown on the right-hand side, now account for 49% of the total, up from 45% in 2024 and 41% in 2023. Let us move on to the P&L account to show the rest of the income captions, which also show a positive trend in the financial year due to the changes introduced in the sector-specific tax, but also due to the fall in nonperforming assets and the growing contribution of investee companies. On the cost side, as mentioned above, personnel expenses increased during the year due to wage rises agreed with employee representatives, new hires and also as a result of higher variable remuneration in view of the institution's positive performance. As for overheads, the figures are accounted for by the necessary investments we are making largely for the implementation of the strategic plan. In any case, and despite this increase in costs over the year, efficiency remains at 45.5%, below the 50% target we have set in the plan. On the following page, we continue with provisions, which show another positive aspect of the financial year as they continue to improve. Total provisions fell from EUR 319 million to EUR 239 million. That is a decrease of 25%. The quarterly cost of risk was 27 basis points and the annual cost of risk was 26 basis points lower than initially expected. Other provisions include restructuring costs for workforce renewal in both 2024 and 2025, amounting to EUR 38 million in 2024 and EUR 27 million in 2025. Excluding this effect, they are in line with expectations, showing a downward trend. On the following slide, we show a summary from a profitability standpoint. On the left-hand side, you can see different profitability metrics, all of which demonstrate the positive evolution of Unicaja's results. The reported return on tangible equity without any adjustments increased to 10%. If adjusted for excess capital above a CET1 of 12.5%, which is a level similar to that of other listed Spanish institutions, shows an improvement of 12%. At the bottom, we show the same metric calculated on regulatory capital, which shows an improvement of 70% in 2025. On the right-hand side, you can also see the evolution of the tangible book value, which when adjusted for dividends, increased by 9% during the financial year. We now turn to credit quality. Another positive of recent quarters. The balance of nonperforming loans continued to decline. The quarterly decline was 4.3% and the annual decline was 20%, bringing the nonperforming loan ratio to a new low of 2.1%. At the same time, coverage of nonperforming loans continued to rise from 68% a year ago to 77% at present. If we now consider total nonperforming assets, or NPAs, we see that in net terms, they account for 0.8% due -- both to the significant 25% drop in their balances during the year and to the increase in coverage, which rose from 71% in 2024 to 77% at the end of 2025. Finally, I would like to review the bank's solvency and liquidity position with you. On Slide 28, we show both the quarterly and annual trends. In the quarter, the ratio fell to 16% due to 2 different factors. On the one hand, we have the impact of the dividend adjustment, which is slightly higher than the quarterly result. Since until September, we accrued a dividend of 60% of the result, which now becomes 70% for the financial year. Secondly, we have the impact of the growth in risk-weighted assets, which is mainly explained by operational risk and credit growth. Even so the CET1 ratio closed the financial year 2025 at 16%. Over the year as a whole, we generated 90 basis points of CET1. On the positive side, we have the generation of earnings, which net of dividends and AT1 coupons amounted to 55 basis points despite allocating 70% of earnings to dividends. In turn, we have another 77 basis points mainly from lower deductions and market valuation, including the impact of EDP, which amounts to 21 basis points for the year. On the negative side, we have the growth in risk-weighted assets, which, as we mentioned, are rising due to the impact of the update of operational risk and credit growth. On the following slide, we show the institution's position in relation to different requirements. The minimum required eligible liabilities or MREL ratio stands at 27%, growing slightly over the year with a greater weighting of subordinated instruments. On the right, you can see the buffers we have in relation to the main requirements, which, as you can see, remain quite comfortable. And at the bottom, we show the liquidity ratios, which continue to be among the highest in Europe with the LCR standing out and in 2025, about 300%. And finally, we show you the details of the debt portfolio, as you all know, in our case, this is relatively important because the low loan-to-deposit ratio translates into a high retail liquidity position, which we invest in this structural portfolio, mainly in the amortized cost portfolio. As you can see, the portfolio has hardly changed during the quarter with the balance duration and rate remaining fairly stable. That's all from me, Isidro, whenever you're ready, I give you the floor. Isidro Gil: [Interpreted] Thank you, Pablo. Continue on Page 32 with some information about what we expect to see in 2026, which you can imagine it will be fairly consistent with progressive improvements that we hope to see it materialize as a result of the implementation of the strategic plan. Starting off with the net interest income, we expect some growth and therefore, to end this financial year about the level reaching 2025, fees should continue to grow at a low single-digit rate, driven by value-added fees, mainly from funds and insurance costs. And we hope that the fees from the banking will contribute -- costs will continue to grow at around 5%, reflecting the investments we want to make to continue successfully executing our strategic plan. We expect the cost of risk to remain below 30 basis points. The business volume will be maintained its current pace with growth of around 3%. And finally, as a result of the above, we believe that the net income will continue to grow in 2026, exceeding the result achieved in 2025. And to conclude, allow me to share a few quick conclusions with you before opening the floor to questions. Today, we have presented excellent results for 2025, reaching a new historic high in both earnings and dividends. But as I also told you last year, we are not satisfied. We want to continue improving something we hope to do by executing our strategic plan, a plan that in its first year is already showing some of the returns we expect. From a business perspective, the 2025 financial year is a turning point as evidenced by the 2% growth in total loans with some strategic segments rising significantly, such as consumer and corporate loans. This change in trend has been supported by an incredible acceleration in the market of balance sheet resources, which grew by 40% driven by 23% growth in mutual funds, another of the strategic and priority products in our plan. All of this has led to a 3% improvement in turnover above the previous year's level. As we have mentioned, this turning point is driving results, which are up 10% to EUR 632 million, 26% above the initial guidance, representing an excellent 17% return on regulatory capital, improving by more than 100 basis points over the year. This positive performance together with our comfortable solvency position has enabled us to increase the percentage of profits allocated to dividend payments from 60% to 70% resulting in dividend for 2025 of EUR 442 million, 29% higher than the previous year. Finally, as we highlighted earlier, this excellent performance means we can improve our earnings expectations for the period 2025, 2027 by 19% from the previous EUR 1.6 billion to more than EUR 1.9 billion, of which 85% will be used to pay out our shareholders, while maintaining a comfortable financial position as we expect to meet these expectations with a CET1 ratio of over 14%. In short, 2025 is once again an excellent year that allows us to lay the foundations for further improvements in the future. Finally, I would like to thank all Unicaja employees for their unquestionable effort and performance in executing the strategic plan. Without their commitment and support as well as the shareholders and directors, these results would not have been possible. This concludes our presentation. And if you agree, we will now move on to the Q&A session. Jaime Marcos: [Interpreted] Thank you very much, Isidro. Thank you very much, Pablo. Let's move on to the Q&A session. Let's start with the telephone line in Spanish. Please introduce yourselves. And please limit it to 2 questions so that we can answer the highest number of investors possible. So operator, thank you. Operator: Ladies and gentlemen, we will start the Q&A session. [Operator Instructions] The first question is from Maks Mishyn from JB Capital. Go ahead. Maksym Mishyn: Two questions. One, it's about the restructuring costs. If you can give further detail on what these costs include. And secondly, if you expect have them in 2026. And the second question is on the guidance, on volumes. Can you give more detail on what you expect in terms of loans and deposits outside balance? That would be very useful. Isidro Gil: [Interpreted] Maks, thank you for your questions. With regards to the first question and referred to the provisions for restructuring, you know that last year, we did this exercise, these voluntary retirement plans or early retirement plans. We're not looking at saving costs, but improving capacities regarding the environments where we are. Right now, the idea is to run it this year, and we don't expect it to happen the following year in 2027. With regards to guidance and volumes apart from the 3% growth in line with what we've done in 2025, we do see a more balanced mix between the asset growth and the resources customer growth around 3% in both segments. Jaime Marcos: [Interpreted] Thank you, Isidro. Operator, please, the next question. Operator: The next question is from Francisco Riquel from Alantra. Francisco Riquel: I would like to ask from NII guidance. Could you talk about the rate scenarios that you have included in the guidance because 1,500 is very flat, and the volumes are growing and interest rates is what it is. And I think it's a very conservative -- if it's conservative, I don't know whether you can talk about the sensitivity in NII in terms of interest rates for year 1 and year 2 and what you have included in the plan vis-a-vis margins. And my second question is about the use -- how you're going to use excess capital. A year ago, you asked for flexibility to consider M&A opportunities in the first part of the year. We haven't seen anything in 2025. And my question is whether you can give us an update on your ambitions for M&A for the next -- for the rest of the plan and how are you going to use the capital excess? Isidro Gil: [Interpreted] Paco, I'm going to answer the first question with regards to the guidance as to whether it's prudent and what hypothesis we have used. With regards to the hypothesis, we've used the curve that we had at the end of November, which will had a Euribor of 2.35% at 12 months is to -- we're around 2.22% at 12 months, and the expectation is to go -- see a rise by the end of the year. The balance sensitivity and the ANI to interest rates at 12 months is quite low. And the volume growth impact is also low. It will be seen more in 2027 than in 2026. In 2023, we started to reduce the balance sensitivity and we have increased this for 2026. But I think that for 2027, the higher interest rates -- potential high interest rates will have a positive impact. And with regards to the volumes at around 3%, the deposit cost is very similar to this year's -- the deal of the credit investment is going down in the first quarter and will be flat in the second, and will start to go up in the third with the new production and with the repricing, which will have no negative impact which will make the margin behavior to follow that line. The first quarter will be a bit lower because you have the days effect and it will catch-up up until we see it above. How much above? Well, it depends on the deposit cost evolution and on the volumes evolution, if we are able to grow more in deposits. As we've seen this year in site deposits, this will improve a bit more, and it will depend on those variables. But it will be as from 2027, where you will see a more significant increase of margin. Pablo Gonzalez Martin: [Interpreted] Good morning, Paco. As for the excess in the use of capital, I believe that today, we have explained to you how we are going to carry out that payment in excess of 85%. We also said that we are going to analyze new opportunities and if capital is required, well, we will have to analyze its efficiency in 2025. Such opportunities did not arise. We didn't see any clear opportunity of an investment with a good return for our investors. But should that happen, well, we might consider using capital more efficiently. And that's all I can say in this respect. Jaime Marcos: [Interpreted] Thank you very much, Pablo, and Isidro. Operator, please next question. Operator: The next question is by Ignacio Ulargui from BNP Paribas. Please go ahead with the question. Ignacio Ulargui: I have 2 questions for you. The first question is concerned with the growth of deposits. How do you envisage this in 2026? You have shown an increase of 3% as for lending and customer funds, you have also reported some growth. Now how do you think deposits are going to behave in 2026 and in line with the excess of capital question, taking into account the increase of payouts, what capital generation do you envisage going forward and how much of that capital will come from DTAs? Isidro Gil: [Interpreted] Thank you for your question. As for the growth in deposits, the first question was already answered. We said that growth is expected to be at around 3%, taking into account the mix between assets and liabilities reaching was striking a balance. In 2025, we draw a distinction between balance sheet items and off balance sheet items. 2025 was an exceptional financial year. And even though we believe that this will continue to grow off the balance sheet. We believe that the mix is going to be more balanced, and we will continue to post growth. And we will continue to do so on the balance sheet. As for capital generation, concerning this question, next year, we are going to distribute 95% of the results. Therefore, the capital growth lever, as I said before, is going to contribute less than this year, where it stood at 70%, but DTA capacity will also be available whereby capital might be expected to grow over the years. So we expect capital to grow. No doubt that capital growth is going to be lower compared to 2025 due to the fact that the results generation will be paid out to our shareholders, almost as a total. Jaime Marcos: [Interpreted] Thank you very much Isidro. Next question please. Operator: The next question is by Carlos Peixoto from CaixaBank BPI. Carlos Peixoto: I have a question as to your forecast concerning fees and the growth of fees. Do you think that it's going to continue growing at rate of 3%, in line with the growth of volumes. I'm asking this in order to understand how these products are expected to before? And do you think that there is any room, what ever for fees to grow further in the next financial year? Pablo Gonzalez Martin: [Interpreted] Carlos, we couldn't really understand your question 100%, especially the last part. We believe that the fee guidance is quite conservative, taking into account the performance of funds that pushed fees up in 2025. Well, as for our expectations concerning fees, this is based on our aim to continue growing both on the balance sheet and off the balance sheet customer funds, as Isidro pointed out before, we believe that mutual funds will continue to grow steadily due to customer demand, but we believe that deposits on the balance sheet will also continue to grow even more than in the current financial year. You should take into account that there's plenty of competition on the liability side, and that's why we have these customer loyalty programs in place. Concerning payments, we already see some positive signs such as growing fees and significant card activity. We continue to grow. We continue to enhance transactionality with customers, and that is going to be offset by the different customer engagement or loyalty plans that we are going to continue to deploy to target more customers. So hence, we believe that we should expect this increase in fees. But in the case of mutual funds, we believe that, that growth is going to be even greater. Jaime Marcos: Thank you very much, Pablo. I believe that there are no further questions. So operator, we can now hand over to questions in English. Operator: [indiscernible] Cecilia from Barclays. Cecilia Romero Reyes: The first one is on the buyback specifically, what would be the likely timing from here and what milestones need to be met before you can execute the next program? Is there a regulatory or any other approvals needed at this point? And then the second one is on competition for both mortgage and deposit. On mortgages, how are you seeing the competitive intensity at the moment, at current pricing levels, what kind of economics are you targeting on new mortgage production? And how important is cross selling to make those returns work? Are you being pushed to accept lower margins to defend volumes? And on deposits, are you seeing any renewed pressure on deposit costs from competitors keeping attractive offers in the market for longer, to what extent are neo banks and only platforms influencing the competitive behavior on deposits? Isidro Gil: [Interpreted] Good morning, Cecilia. I think that in -- with regards to buyback, the buyback from what we've said that the additional remuneration is dependent upon the fact that whether we're going to do it on a cash dividend payout or on a buyback, but what's true is that the decision will be made at the end of December, whether it's cash dividend or within program of payback. We haven't made a decision. But in any case, we're not talking about significant volumes if we get to do it. And it will depend on the -- whether it makes sense to do it on cash or whether to do a buyback program. But in any case, we would be talking about material amounts for those buyback programs. The second question is related to competition in mortgages. The credit growth in -- the lending growth after having seen negative rates in segments like public administration, is the only segment where we haven't grown, and we've been flat. We've been flat in the mortgage segment, which is the most representative segment. And that's why we've been applying a policy based on 2 things: one, on having a good risk profile. And that's been a standard tradition and how we've granted credits and not going above a certain level of price. And so that's -- we've kept that flat over the year. The market that has so much pressure for lack of housing, it's having a big impact on competition, on prices. Our expectation is for this to improve -- key solution to improve the housing situation is somewhat complex because the housing is not covering the social demand for new housing. So we will continue with a similar strategy. We will still have the adequate risk profile. And we will continue to generate -- continue along the lines that we've been doing. The idea is to keep the market rationale with regards to -- reasonable with regards to price. And we will be more positive in prices or we will find a balance between the credit given or the ability to link the customer. I think that in that segment, we could be able to compete with price. But if we find -- if we find ourselves in a no way back, we could end up in a scenario that we went through in 2025. Unknown Executive: Cecilia was asking on the competition on deposits and one of the offers from other institutions. Isidro Gil: [Interpreted] The competition in deposits and how we see the evolution in the deposit cost. As you know, the Spanish market is very competitive with regards to national banks. We've had various specialized banks in attracting liabilities. I think that will be the case even getting higher. And with regards to the strategy and the evolution of fees, we will continue with the loyalty programs. We have developed banks for our customers. We have very competitive digital solutions which are far better than our competitors. In terms of neo banks we have attractive solutions for our customers. And we consider that we keep that level or even going -- will go up in deposits despite the existing competition that we expect. Operator: Next question is from Sofie Peterzens from Goldman Sachs. Sofie Caroline Peterzens: This is Sofie from Goldman Sachs. So my first question would be on capital. Do you expect any regulatory headwinds in 2026 or '27 and what are your thoughts on using SRTs? And then the second question, just going back to mortgage lending, one of your peers is guiding for 6% mortgage loan growth or lending growth in '24 to '27. Why do you only see 3% volume growth? How should we think about the upside risk for volumes to perform better than expected? Pablo Gonzalez Martin: [Interpreted] Thank you, Sofie. With regards to any regulatory impact for this year, we don't have other jurisdictions like the U.S., where they're talking about deregulation and talking about a reduction of the regulation. We don't think that we're not going to have any negative impact in the following years. I think that the period of increase of capital requirements has gone to a reasonable level and the solvency and the quality of financial institutions in Europe is strong enough to withstand the stress test -- stress scenarios that are analyzed, and we don't consider there's going to be any negative impact in that regard. And with regards to competition and the growth expectations in the mortgage world, as Isidro has said, we will continue along our lines in the way that we will conduct the most reasonable analysis possible. We will look for customers with high credit quality with linking ability, and will be adjusted in price so that the performance of the customer. I don't think that the market will grow by 6%. That's why we don't have such a higher growth in the credit. We think that the credit growth, despite that we come from significant deleverage starts to grow, it's still continuing and the nominal growth of the [ bps ] of the GDP. And we -- as Isidro said, we need more production, more new housing, which won't happen in 2026 because it should have happened in the previous years and this evolution will happen in a later stage if it happens. And we don't think that there's going to be mortgage growth -- mortgage sector growth of 6%, but for us, mortgages are fundamental products to link the product to provide global services to our customers, and we will put our stakes on it. And he was mentioning SRTs, that given the solvency position that we have is not something that we have on the desk in the short term in terms of the SRTs. We look at the different options to improve our capital position. And we also look at the SRT. But in the short term, we don't expect the conduct of any, given the capital position that we hold right now. Operator: The next question is by Borja Ramirez from Citi. Borja Ramirez Segura: This is Borja from Citi. I have 2. Firstly, I would like to ask on the deposit growth outlook. You mentioned about the digital channel. I would like to ask what portion of your new customers are from the digital channel? And also what percent of your deposit inflows would come from the digital channel? And then my second question would be, if you could provide any -- an update on your M&A strategy, please. Isidro Gil: [Interpreted] Borja, well, as far as digital channels is concerned, you should know that we are a bank with a territorial footprint, a strong territorial footprint with let's say, on-site banking mainly. I don't have the exact percentages for the digital channel. However, we are starting out from a lower base. But actually, we have observed a growth in terms of deposits as well as consumer loans, most of our production comes through the digital channel. We also have plenty of competition in digital channel. However, there was significant growth in 2025, and we expect that trend to continue to grow going forward. We continue to focus on a multichannel model. All channels are interconnected, whether we talk about branch offices and the digital channels as well as the contact centers, any contact point with customers, including the web page, et cetera, everything is intertwined. So we continue to have greater weight in the our brick-and-mortar network. However, we continue to grow in the digital channel little by little. Pablo Gonzalez Martin: [Interpreted] Let me add that we continue to grow in terms of the number of customers, the higher deposits through the digital channel, there has been a growth of 5% in 2025, and we expect that growth to continue in future years, as Isidro said, this is going to be important. In the case of deposits, again, we expect growth to be reported in the digital channel. The next question is concerned with the consolidation of the financial system. Let me reiterate what we already said in prior years, especially since we have embarked upon this new change and since we have set out a new strategic plan, we are now focused on carrying out our strategic plan. Our shareholders do not want us to lose focus over the strategic plan. And therefore, we believe that we will keep this project unchanged. The achievements over the past years, ratify our strategic vision and the fact that we want this to remain as an independent project. And this is what we have been reiterating again and again over the past years. Operator: The last question is by Hugo Cruz from KW. Please go ahead with your question. Hugo Moniz Marques Da Cruz: I have 2 questions. First, on the usage of excess capital. If you don't have M&A opportunities, could you do a one-off payment above 100% payout or is the 100% a limit where how far you could go with one-off distributions? And second, on loan pricing. I think you said repricing shouldn't have a negative effect on your NII, but I was wondering if you could give a little bit more detail product by product. So how does front-book pricing compared with back-book pricing for your mortgages, SMEs, corporates, consumer, if possible? Isidro Gil: [Interpreted] Thank you for your question. As for the excess of capital related question, as we mentioned during the presentation, we are near 100% for 2026 and 2027. We undertook that commitment back in the day when we presented our strategic plan. And this, of course, means that we have to fulfill our commitment in excess of 85% of the strategic plan. Now that the payout is going to be 70% for 2025, the payout for the next 2 years with stand at around 100%, as you have mentioned. But now we are fulfilling the commitment that we undertook when present in the strategic plan. For the time being, we do not intend to carry out any other payout other than the one that we announced today during the earnings presentation, Pablo. Pablo Gonzalez Martin: [Interpreted] Now as for the pricing impact related question across segments, as for mortgages set at a fixed rate, the value is below what we expect to attain. As for SMEs and corporates, we are already rallying in terms of the front-book compared to the back-book with some differences. However, even though there has already been some repricing, the repricing impact is to be found only in the mortgage book at a variable rate with a moderate impact during the first quarter with some tail effects in the following quarter. However, we believe that the loan yield is going to -- will remain steady as of the second quarter and will remain so also in the third quarter. We still have some long-lasting loans among corporates and the public sector set at low interest rates. As they mature, the loan yield might be expected to grow even though we expect a greater impact as of 2027 when significant improvement in margins is expected to take place. Jaime Marcos: [Interpreted] Thank you very much Isidro and Pablo. Thank you very much for attending this earnings presentation. Should you need additional information, please do not hesitate to contact our Investor Relations team, and we look forward to having you again attending this presentation for the next quarter. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Good day, and welcome to the PJT Partners Fourth Quarter 2025 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Sharon Pearson, Head of Investor Relations. Please go ahead, ma'am. Thank you very much. Good morning, and welcome to the PJT Partners Full Year and Fourth Quarter 2025 Earnings Conference Call. Sharon Pearson: I'm Sharon Pearson, Head of Investor Relations at PJT Partners. And joining me today are Paul Taubman, our Chairman and Chief Executive Officer, and Helen Meates, our Chief Financial Officer. Before I turn the call over to Paul, I want to point out that during the course of this conference call, we may make a number of forward-looking statements. These forward-looking statements are subject to various risks and uncertainties, and there are important factors that could cause actual outcomes to differ materially from those indicated in these statements. We believe that these factors are described in the Risk Factors section contained in PJT Partners' 2024 Form 10-Ks, which is available on our website at pjtpartners.com. I want to remind you that the company assumes no duty to update any forward-looking statements. And that the presentation we make today contains non-GAAP financial measures which we believe are meaningful in evaluating the company's performance. For detailed disclosures on these non-GAAP metrics, and their GAAP reconciliations, you should refer to the financial data contained within the press release we issued this morning, also available on our website. And with that, I'll turn the call over to Paul. Paul Taubman: Thank you, Sharon. Good morning, everyone, and thank you for joining us to review our fourth quarter and full year results. Across the board, our 2025 results were record-setting as we reported record revenues, record adjusted pretax income, and record adjusted EPS. This strong performance reflects our sustained investment in building the best advisory-focused firm possible. A firm distinguished by its best-in-class talent and its unwavering commitment to a culture of collaboration and teamwork. This firm-wide investment continued in 2025; we added senior talent across industries, capabilities, and geographies. For the year, firm-wide partner headcount increased 12% while total headcount increased 7%. We ended the year with record cash balances of $586 million after directing a record $384 million to share repurchases. Our capital priority remains first and foremost to invest in our firm and our people, and second, to return capital to shareholders and to do so principally through repurchases. After Helen takes you through our financial results, I will review our business performance and outlook in greater detail. Helen? Helen Meates: Thank you, Paul. Good morning. Beginning with revenues, the full year 2025 total revenues were $1.714 billion, up 15% year over year. As Paul mentioned, this was a record result for our firm. All of our businesses had record revenues, with strategic advisory the primary driver of revenue growth for the year. For the fourth quarter, total revenues were $535 million, up 12% year over year, also reflecting a record revenue quarter for our firm. The growth in the fourth quarter was primarily driven by growth in restructuring and PJT Park Hill. Turning to expenses, consistent with prior quarters, we presented the expenses with certain non-GAAP adjustments which are more fully described in our 8-Ks. First, adjusted compensation expense. Full year adjusted compensation expense was $1.15 billion, representing a compensation ratio of 67.1%, which compares to 69% for the full year 2024. Given the higher compensation accrual for the first nine months of the year, the resulting rate for the fourth quarter was 66.2%. We will provide guidance on our 2026 compensation estimate when we report our first quarter results. Turning to adjusted non-compensation expense, total adjusted non-compensation expense was $207 million for the full year 2025, up 12% year over year. The main drivers of the year-over-year increase were higher occupancy costs, driven by additional space in New York and London, and higher travel and business-related expenses. In the fourth quarter, total adjusted non-compensation expense was $54 million, up 16% year over year with the same drivers of year-over-year growth: higher occupancy costs and higher travel and related business-related expenses. As a percentage of revenues, our adjusted non-compensation expense was 12.1% for the full year 2025, and 10.1% for the fourth quarter. We expect our total non-compensation expense in 2026 to grow at a similar rate to 2025, and we will provide more guidance on our outlook for the year when we report our first quarter results. We reported adjusted pretax income of $357 million for the full year 2025 and $127 million for the fourth quarter. Our adjusted pretax margin was 20.8% for the full year, and 23.7% for the fourth quarter. The provision for taxes, as with prior quarters, we've presented our results as if all partnership units have been converted to shares and that all of our income was taxed at a corporate tax rate. The effective tax rate for the full year was 14.1%, as we realized a significant tax benefit from the delivery of vested shares. The 14.1% rate was below our previous estimate of 15.5%, primarily due to the final income allocations across state, local, and foreign entities. For 2026, our current estimate for the tax rate is in the high teens percentage, which is between the 2024 rate and the 2025 rate. We'll provide an updated estimate when we report first quarter results. Our adjusted if-converted earnings were $6.98 per share for the full year compared with $5.20 in 2024, and $2.55 for the fourth quarter compared with $1.90 for the fourth quarter of 2024. On the share count for the year ended 2025, our weighted average share count was 43.9 million shares, slightly down year over year. During the year, we repurchased approximately 2.4 million shares and share equivalents. As Paul mentioned, we spent a record $384 million on share repurchases. Paul Taubman: We are in receipt of exchange notices for an additional 850,000 partnership units, and subject to Board approval, we intend to exchange these units for cash. We view the partnership exchanges as an effective way to repurchase shares without impacting the float. Consistent with our capital priorities, we will continue to invest in the business while using excess cash to, over time, reduce our share count. On the balance sheet, we ended the year with a record $586 million in cash, cash equivalents, and short-term investments, and $632 million in net working capital. And we have no funded debt outstanding. Additionally, the Board has approved a quarterly dividend of $0.25 per share. Finally, a note on our revenue reporting. Going forward, we will report our revenue as a single line item and will no longer break out the advisory, placement, and other designations. In our earlier years as a public company, the placement fee line was a reasonable proxy for PJT Park Hill. Today, more than ten years on, with the expansion of our private capital solutions business and the growth in our corporate placement capabilities, that is no longer the case. Given our strategic priority of expanding and further integrating our broad advisory capabilities, these revenue designations do not reflect either how we manage our performance or how we measure our progress. As we have done in the past, we will continue to provide context around the key drivers of our performance. Back to Paul. Paul Taubman: Beginning with restructuring. Notwithstanding broadly favorable macroeconomic and capital market conditions, an increasing number of companies continue to grapple with overleveraged balance sheets, challenged business models, technological disruption, and changing consumer preferences and governmental policies. In this environment, demand for our liability management and restructuring advice remained elevated, and we delivered record Q4 and full-year results. Turning to PJT Park Hill. Relatively modest capital returns have further strained an already challenged primary fundraising environment, prompting GPs and LPs alike to pursue alternative liquidity options. While investor interest in secondary products continues to grow, driven by an increasingly appreciated return profile. Against this backdrop, global primary fundraising volumes declined for the fourth straight year, while client interest in private capital solutions and other structured products continued to build. In this push-pull environment, our PJT Park Hill business delivered its strongest quarter ever, enabling full-year results to exceed 2024's record results. Turning to strategic advisory. M&A activity increased sharply in 2025, with global announced volumes up significantly as strength in debt and equity markets, greater confidence regarding regulatory outcomes, as well as improved CEO confidence all served to make this the second-best year ever for announced M&A activity. Our 2025 Strategic Advisory results benefited from this favorable deal environment as well as the continued investment in and maturation of our advisory platform. 2025 strategic advisory revenues significantly outpaced 2024's record levels, with revenues in our Strategic Advisory business reaching record highs for both the fourth quarter and the year. As we look ahead, the broader capital markets M&A environment continues to be highly constructive for deal-making. The momentum in global M&A activity observed in 2025 is likely to carry over through 2026, with strength in debt and equity capital markets, greater confidence regarding regulatory outcomes, and increased CEO confidence all providing ballast. But as events of the last couple of weeks have shown, market sentiment can turn on a dime. Geopolitical risks, as well as debates surrounding the pace of AI development and capital deployment, and the economic returns associated with this investment, continue to loom large. How these factors evolve will play a central role in shaping the year ahead. As it relates to our firm, in PJT Park Hill, the strength in our private capital solutions business should more than offset any declines in primary fundraising. In restructuring and liability management, we continue to operate in a sustained period of elevated activity, and our best-in-class team remains well-positioned to capture additional market share. In Strategic Advisory, while we began 2026 with a pipeline of announced transactions comparable to year-ago levels, our pipeline of pre-announced transactions, measured both by number of mandates and revenue opportunity, is up meaningfully from a year ago and now stands near record levels. We are better positioned than ever before to capitalize on a favorable deal environment due to our expanded footprint, enhanced capabilities, and growing brand awareness. Given our differentiated mix of businesses and the growth opportunities before us in each of these businesses, our firm remains well-positioned to prosper in nearly any market environment. As before, we remain confident in our near, intermediate, and long-term growth prospects. And with that, we will now take your questions. Operator: We'll take our first question from Devin Ryan with Citizens Bank. Your line is open. Devin Ryan: Good morning, Paul. Good morning, Helen. How are you? Very well. Good morning. Want to start with restructuring. Obviously, I think a lot of interest in that business in the industry just as new firms are saying kind of slightly different things on kind of the outlook there. And so I'm curious if you can just give a little more color around the type of activity that you're seeing. Is it kind of amend and extend or kind of comprehensive liability management? Is there more in court? And then just expectations there as we go out, I know you don't have a crystal ball here, but in a world where your M&A activity is kind of normalizing and accelerating nicely, does restructuring maintain? Can it still grow? Or does the normal pattern of it kind of falling off a little bit kind of play out? I'm just curious how thinking about not necessarily the next couple of months, but probably the next twelve to eighteen months. Thanks. Paul Taubman: Sure. I think we've been remarkably consistent on this point. Which is we're in a multiyear period of elevated restructuring activity. There are lots of reasons for that. Some of which is the benchmarks and the mindset relate back to historically low interest rates. That were aberrational and we're dealing in a more normalized rate environment today than before. The second is we're dealing in a world that is speeding up, not slowing down. And the technological innovation is fueling our global economy, but at the same time, it's creating winners, and those winners are redefining who the losers are left behind companies are in what industries and which companies. And as a result, you can have a world where you have robust GDP growth, you have broad consensus that the macroeconomic environment is constructive but at the same time, have very concentrated stress in certain industries and with certain companies. And I think that suggests to us that this has legs and is going to continue to play out for a period of time. The reality is we haven't really hit a recessionary environment for an extended period of time. If we were to, then all this commentary sort of gets taken off the board and you're looking at a meaningful leg up. But if you just assume the current economic environment, we think you're going to continue to see robust liability management and restructuring. We have not seen any diminution in that activity. And if anything, we think we're starting to see the very early signs of that growing. In addition, we have every day the goal of broadening our footprint. Broadening our footprint with sponsors, broadening our footprint in industry groups, broadening our footprint geographically. And every day that we broaden that footprint gives us a greater addressable market in which to market those leading liability management and restructuring capabilities. And as we're able to reach a broader group and become relevant to a broader group, that gives us the prospect of continuing to grow our business at rates that may be greater than what the overall liability management or restructuring data suggests. Devin Ryan: That's great color, Paul. And then just for my follow-up, want to talk about the kind of platform maturation. You kind of mentioned that a couple of times. Obviously, tremendous growth in Strategic Advisory over the last year or really last decade, but the last handful of years, really, the business has been maturing. So and again, I appreciate you don't break out a segment P&L. Not how you run the firm. But can you help us get comfort around the ability to drive operating leverage off of those investments? Is there any proof points that you're seeing that And then just kind of order of magnitude of operating leverage as the business backdrop transitions to a stronger M&A environment to the extent it does. I don't know if there's a way to think about an algorithm of revenue versus expense growth or just how you would frame just given the growth you've had and then the maturation of some of that growth as well? Paul Taubman: Well, I don't think we've had a year to date where our strategic advisory partners writ large have been more productive than in 2025. So clearly, as you just look at the maturation and the progression of our firm, that continues to be up into the right. At the same time, that that me direct to up and to the right, but that doesn't mean that every quarter every year is precisely up into the right. And as an example, one factor is just the pace of investment. And we've made it very clear that when we find individuals who match our expectations for talent relationships, and personal integrity and ability to operate in a culture of teamwork and collaboration we're not going to be shy about onboarding those individuals. So some of these productivity measures get masked from time to time based on what's the rate and pace of investment. So that's why it's never a straight line. And also, the strategic advisory business is a long scale cycle business. So many times, you could be having real impact and effect. And from the KPIs one would look at, you're seeing increased productivity, even if the revenue lags. But I think we look back on 2025, and we're just a fundamentally different firm, and maybe the easiest way to see that is if you just look at our firm-wide revenue, and compare it to 2021, which was the peak year for M&A activity of all time, on that basis, we're up nearly 75% in firm revenues from 2021 to 2025. So just to give you some perspective as to how this continued investment is starting to gel, I think there's been real returns. But we're not satisfied with where we are because we have really high expectations and aspirations. But we're going to just continue to methodically get after all of the white space that we see across the board. Devin Ryan: Alright. Thank you, Devin. Operator: We'll take our next question from James Yaro with Goldman Sachs. Your line is open. Song Jiang: Hi, this is Song Jiang stepping in for James. Paul, 2025 was a mega cap M&A driven backdrop. So can do you think can this part of market continue at this pace or improve further in 2026? Paul Taubman: I certainly think we're we haven't tasted the full extent of how robust the M&A market can be. But when you have a year like 2025, where depending upon how one counts, volumes are up 35, 40, even even higher than 40%. And you're looking at the second highest revenue year, it becomes a difficult comparison. But I focus less on whether we're going to ring the bell and top tick last year I asked myself, are we in a multiyear period of elevated deal activity? And I think given the current macroeconomic backdrop, the regulatory posture this administration the desire in Europe to address certain issues in terms of industry consolidation and the like, which is perhaps been a a negative for the continent. When I think about the attractive capital markets backdrop, and a world that is speeding up and not slowing down, which means you either need to press your competitive advantage. And one of the ways to do that is with more scale and to use your capabilities to continue to build moats or you find yourself left behind and you need to think about the corporate structure that you have, or you're vulnerable to shareholder activism or you need to pair the mission and focus on areas where you have clear core competencies and advantages. All of that suggests that we should be in a multiyear period of elevated deal activity. It's easy to talk about inflection points or things are going to get better or things are going to get worse. But when you're dealing with quite attractive macro backdrop, the issue is just simply how long is it going to continue, and we think it has legs. But whether we're continuously hitting new highs that's much harder to call. Song Jiang: Thanks. Very helpful. Just a follow-up here. You delivered a meaningful step down in the comp ratio in the quarter. Can you please help us think through the outlook for the comp ratio from here? Thanks. Paul Taubman: Well, I think we've said a couple of years ago that when we were delivering our financial results that we thought that based on everything we had seen our compensation as a percentage of revenue had peaked. And it had peaked because we had maximal investment in a period of relatively low velocity M&A activity, and that confluence had caused that ratio to gap out in the short term but we expected that to continue to work its way down. And I think we're done working it down. The question is just simply the pace and rate of that. And that's in part going to be a function of how the markets develop. Over the next couple of years and how strong they are and how much operating leverage we get by revenue growth, but some of it's also going to be the pace of investment. Which is still very much TBD. And we'll report at the end of the first quarter when we deliver our Q1 results our best estimate for what that ratio should be for 2026. Operator: We'll take our next question from Brendan O'Brien with Wolfe Research. Your line is open. Brendan O'Brien: Good morning. Thanks for taking my questions. Was hoping you can help me with something because I'm struggling a little bit here. So hear you loud and clear that restructuring the outlook is pretty good. Paul Taubman: But Brendan O'Brien: when we look at the revenues here in the fourth quarter, know you guys flagged in the press release that restructuring was up, but the multiple on the Dealogic revenue was one of the lowest that we've seen in years. So side than what we've been seeing. Me, that suggests that the actual quarter was a little bit lighter on the restructuring. So number one, I'd love to hear you maybe speak to those I know restructuring is chunky, right? So like, that can happen quarter to quarter. But maybe help reconcile when you're thinking about restructuring, could you speak to maybe certain sectors and where you're seeing a lot of activity? There's a lot of out there around software. So curious about what you're seeing in your Paul Taubman: business there. Okay. I don't spend a lot of time looking at deal logic data. I just focus on the business that we do. And we are pretty clear in how we communicate to our investors. We had our record quarter in restructuring. Q4 was the best restructuring quarter we've ever had. The year was the best restructuring year we've ever had. And we continue to be constructive and optimistic about the future prospects for our franchise. There can't be any clearer than that. Those are the facts. Brendan O'Brien: Okay. And sectors? Paul Taubman: Were you busy in restructuring? Sectors. Look, we're really busy across the board, but I think there are areas. I think you look at challenged industries, of the healthcare complex, there's a lot of pain. Software is an area where will be elevated focus just given events and pressures coming from AI. We've talked consistently about the fact that AI is going to be a disruptor. The whole digitization and the consumption of media has created significant opportunities in media. There are issues in retail, which also come from online versus offline shopping and changing consumer behavior. I think it's broad-based. It's not narrow. Because in many industries, there are companies that are being left behind and their business models took on or suggested they could support a quantum of debt, that as the world moves forward, it's clear that, that was not the right capital structure and companies are increasingly trying to get ahead of these issues, and they're looking at where they're choke points might be in the future as far as covenants for significant maturities and they're using the creativity and deep capital markets and the ability to access public or private markets to come up with a better capital solution. So it's really quite broad-based. And our focus is not narrow. And that's another reason why I have greater confidence that this trend continues. If it was just a couple of very narrow verticals, there's always the risk that, that well runs dry. But that's not what we see. Brendan O'Brien: Got it. Got it. Yes. And look, thanks for that color, strength of the restructuring franchise. That you've built is clearly quite good. Maybe I'm going to try my question a different direction. I know you don't pay attention to deal logic, but we're stuck here using the data that we've got. So could you speak to Park Hill? I know you spoke to challenges in the fundraising environment. But there's also the GPU at secondaries business, which has been better. What did trends in Park Hill revenue trends in Park Hill look like? And was that maybe a little bit weaker just because the fundraising remains so challenging? Paul Taubman: I think most of my commentary throughout the year was that we expected the year to come close to or be proximate to the prior year's record performance. 2024 was a record for the Park Hills business. We ended up with a record fourth quarter. And as a result of a record fourth quarter, we created a new full-year record. Our 2025 results eclipsed 2024. I mean, we just step back for a moment, we generated over $500 million of revenues in the quarter. We've never done that before as a firm. Had a record quarter. We pierced $500 million by a significant amount. We had the best quarter ever in restructuring. Had the best quarter ever in strategic advisory. Had the best quarter ever in PJT Park Hill. And the reality is we're dealing with a fourth quarter a year ago we also had records. So we had very tough hurdles there, and we cleared them across the board. So all of the businesses are very well positioned. Going forward. I think as you look at the Park Hill business going forward, you're going to see private capital solutions, structured products and the like increasingly represent the bulk of the revenue opportunity. And that market, as I said in the outlook, is growing meaningfully faster for us than any potential diminution or flatness in the primary fundraising line, which makes us optimistic about the Park Hill business in 2026. So we're feeling pretty good about where we stand at the 2025. Moving into 2026. Brendan O'Brien: Right. Operator: Sure. Absolutely. We'll move next to Jim Mitchell with Seaport Global Securities. Your line is open. Jim Mitchell: Hey, good morning. Paul Taubman: Paul, Jim Mitchell: last you mentioned that M&A volumes are the second-best year ever. But when we look at sort of the number of deals down for the fourth year in a row last year, so very much a mega cap kind of environment. So I guess number one, are you seeing activity starting to broaden out to more the middle market? And down? And then secondly, for you specifically for PJT, I know you've been looking to build out your touch points with financial sponsors. So just any kind of update on how you're positioned for that maybe middle market recovery among financial sponsors? Thanks. Sure. Paul Taubman: So volumes are up meaningfully. Deal count down. Although if you really double click on that, a lot of the reduction in deal count is in the sub-billion dollar transaction. And that's not a place that we play as much in. So in some respects, that's not as broad-based as people might think because a lot of that reduction in deal count is at the much, much smaller level than it is in chunky three, five, $10 billion transactions. That would be the first point. I think the second point is if you look at the buying bench, in private equity in 2021, and then the painful come up as in 2023, when there were somewhere like nine rate hikes in 2023. You've got a very low velocity private equity environment. And I think what we're doing is we're getting back to equilibrium between capital expended and DPI. And we've talked about this. It's not always the easiest way to shift from a fundamental imbalance where all this capital has been called and relatively little of it is monetized. If you do that for a period of time, you create stresses and strains in the system. I think the industry has worked through a lot of it. They haven't worked through all of it. But I would expect that we will continue to see some increasing activity amongst private equity firms as they become more comfortable in monetizing investments at these valuations. And the more that they can monetize, I think that will make it easier for them to be more forward-leaning and commit more capital, and we'll get the ecosystem better linked between sort of capital and capital return. I don't think that it's going to be perfectly imbalanced, which is why we're so constructive on the Private Capital Solutions business. I think that's an arrow in one's quiver that's going to continue. For a considerable period of time. And as far as the private equity ecosystem and how we touch it and how we cover it, one way we touch it and cover it is through all the liability management exercises we do. And as we continue to broaden our sponsor coverage, it shouldn't be a surprise that some of that benefits our restructuring special situations liability management effort. I think the next is we have a leading private capital solutions business. The more developed that business is, the more opportunities we have to use those distinctive capabilities and also our distribution and our ability to raise new capital to further penetrate the middle market or sub-mega fund complexes and that's an area where PJT Park Hill is particularly strong. And has real deep relationships. And as we continue to build out our industry groups and strategic advisory become more relevant to more sponsored firms. Because of our industry expertise and our industry verticals better matching where there might be investor focus. So we're continuing that journey to further grow that business. But I've always believed it needs to start with best-in-class advice. It needs to start with best-in-class corporate access. And then from there, you have things of real relevance that resonate with your sponsored clients. Jim Mitchell: That's really helpful. Maybe a quick one for Helen. I appreciate not giving the full-year tax rate, yet, but can you give us any help on the first quarter given the likely quite positive benefit in the first quarter? Any way to think about what the tax rate could be in the first quarter? Helen Meates: Sure. When estimating the taxes, Jim, we look at it over the full year and smooth it over the full year when we do the adjusted effective tax rate. So when we do that, when I gave you the high teens, that anticipated that benefit from the will be early March. So Jim Mitchell: right. You smooth it out. Okay. Thanks for the time. Yeah. Okay. Thank you. Paul Taubman: Thanks, Operator: We'll take our next question from Mike Brown with UBS. Your line is open. Mike Brown: Great. Good morning, Paul and Helen. Paul Taubman: Good morning. So Mike Brown: Paul, I wanted to just double click on the Private Client Solutions opportunity here. You've on it a number of times on the call. Just start on the secondary side of the market. What are you expecting from kind of the GP and LP side in terms of the mix in 2026 compared to 2025? And then your positive views there, it sounds like it's kind of a secular growth. But maybe can you unpack a little bit about PJT's opportunity for market share? Opportunity. And then just on the primary side, if you could spend a minute there, we are seeing realizations picking up for the industry. So when could that return of capital start to translate to stronger fundraising on the primary side for Park Hill? Paul Taubman: Okay. Why don't we start there? I think that the primary industry across the board is challenged for a variety of reasons, right? One of which is increasingly asset allocators are allocating larger and larger percentages of their allocations to the largest fund complexes. And as a result, many of those have their capabilities in-house. So you're really dealing with the next level. That trend towards consolidating relationships and the like I don't expect to change. I think that's the first thing. I think the second is the performance across the industry has been a bit uneven. And I think the 2021 vintage may choose may turn out to be a less than flattering vintage when history is written. And as a result, there's also the risk that just the absolute allocations to the asset class sort of move away. At the same time, there's immense interest and opportunity in credit in credit products, in structured credit, and I think we're very well positioned there. There's also real opportunities in real estate. And I think that the dynamics today are more favorable than they've been for a considerable period of time. So it's not like one monolithic industry. It's the fact that there were going to be pockets of opportunity always. And in a world where it's more difficult to raise capital, clients are going to be more discerning about whether or not to employ a placement agent if they use a placement agent who to use. I think all of those trends work to our benefit. And the more we solidify those relationships, that puts us in a pole position for more of the opportunities and looks as it relates to private capital solutions. So I think those businesses are highly synergistic as they work together. And I do think that as an asset class, if you just look at how many new funds are being raised, in secondaries, I think, as I said in my prepared remarks, there is an increasing realization of the attractiveness of the secondary opportunity from an investment perspective. The absence of a J curve, the ability to invest alongside sponsors where there's continuity of management specific identification of the assets real track record of performance, and increasingly, those assets that are being presented to the marketplace are the highest quality assets. So I think that, that's going to have a reinforcing effect and that's going to invite more capital. The more capital there is, the ability to run a more competitive process with better price discovery where you have a multitude of providers of capital to choose from. So all of that, I think, is a positive for the industry. And we're very comfortable with our market position, in the sense that we have unique capabilities particularly the secondaries joined with our unique primary distribution. Capabilities. And we expect to gain share in that business as we look at going forward. Mike Brown: Great. Thanks, Paul, for all of that color there. Just wanted to follow-up on the restructuring side. So very positive outlook here for restructuring. That was clear. Paul Taubman: Just wanted to ask, you seeing any competition for talent in the restructuring business? You've obviously got premier franchise and leading share. But we did observe that a partner looks like they spun out and creating their own restructuring business and just Mike Brown: curious how you're thinking about Paul Taubman: the war for talent and that Mike Brown: restructuring side of the business. Thank you. Look, we're a talent-focused firm, so we're always focused on making sure that we have the best talent and we believe we have the best talent. We believe we have the best culture. And we believe we have tremendous opportunities ahead of us as we start to get at the white space that we have. And I think our franchise enjoys more white space than most anyone else. So we're very comfortable that it is a highly attractive destination. And we'd love nothing more than to continue to invest in our franchise and to add more talent if those opportunities rise. Thanks, Paul. We'll move next Operator: to Alex Bond with KBW. Your line is open. Alex Bond: Thanks. Good morning, everyone. Most of my Paul Taubman: questions have been asked already, but maybe a quick one for Helen just on non-comp side. I heard the guide for the year of roughly similar to the year-over-year increase to last year. But maybe if you could just help us think through what are going to be the main drivers there Alex Bond: of the higher nominal amount in 2026, that would be helpful. Helen Meates: Yes. So as I said, we'll give a more refined view in the first quarter. But if you think of the tailwinds going into 2026, we definitely should experience less occupancy growth. We've made some pretty significant investments in New York and London. So that growth should slow. And we're always going to get leverage out of some of our costs around IT infrastructure or some of the professional fees that we have relating to being a public company. So they would be the tailwinds. And I think the headwinds more people bring more travel, more market data, more IT and comm support. So I think against that, that's where we're going to see the growth and just trying to figure out how we manage that. I think it will be fair to say we've been very disciplined in how we manage our expenses. But there are some just activity-related expenses that are going to drive those non-comp up. Alex Bond: Got it. That makes sense. And that's helpful. I'll leave it there. Thank you, everyone. Thank you. Operator: Thank you. That concludes our question and answer period. I would now like to turn the call back over to Mr. Taubman for closing remarks. Paul Taubman: Just once again, we want to thank everyone for joining us this morning as we reported our full-year results. We're very excited to get on with 2026 and we look forward to reconvening to report our Q1 results in April. Thank you very much, and have a great day.
Operator: Good morning, and welcome to the ADM Fourth Quarter 2025 Earnings Conference Call. All lines have been placed on a listen-only mode to prevent any background noise. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's call, Kate Walsh, Director of Investor Relations for ADM. Miss Walsh, you may begin. Kate Walsh: Welcome to the fourth quarter earnings conference call for ADM. Our prepared remarks today will be led by Juan Luciano, Chair of the Board and Chief Executive Officer, and Monish Patolawala, our Executive Vice President and Chief Financial Officer. Juan Luciano: We have prepared presentation slides to supplement our remarks on the call today, which are posted on the Investor Relations section of the ADM website and through the link to our webcast. Some of our comments and materials may constitute forward-looking statements that reflect management's current views and estimates of future economic circumstances, industry conditions, company performance, and financial results. These statements and materials are based on many assumptions and factors and are subject to numerous risks and uncertainties. ADM has provided additional information in its reports on file with the SEC concerning assumptions and factors that could cause actual results to differ materially from those in this presentation and the materials. Unless otherwise required by law, ADM assumes no obligation to update any forward-looking statements due to new information or future events. In addition, during today's call, we will refer to certain non-GAAP or adjusted financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are available in our earnings press release and presentation slides, which can be found in the Investor Relations section of the ADM website. With that, I will now turn the call over to Juan. Thank you, Kate. Juan Luciano: Hello, and welcome to all who have joined the call. Please turn to slide four, where we have outlined our performance highlights. Today, ADM reported fourth quarter adjusted earnings per share of $0.87 and full-year adjusted earnings per share of $3.43. Total segment operating profit was $821 million for the fourth quarter and $3.2 billion for the full year. Our trailing fourth quarter adjusted ROIC was 6.3%, and cash flow from operations before working capital changes was $2.7 billion for 2025. We also made good strides in managing our working capital, and, for example, we realized a $1.5 billion cash flow benefit from inventory reduction. I'll share a few highlights from across our business for the fourth quarter. Our AS and O team delivered record crush volumes in South America, our carbohydrate solutions team capitalized on SNO opportunities, and our nutrition team continued to improve execution across the board. And throughout our operating footprint, global teams improved manufacturing efficiencies. I am proud of the team's rigor around focused execution and capital discipline throughout the year. And in the fourth quarter, we paid our 376th consecutive quarterly dividend. Please turn to Slide five. We navigated the dynamic and difficult market during 2025. And as we steered through those headwinds, we intensified our focus on areas within our control and prepared our business to take full advantage of what is expected to become a more constructive operating environment going forward. Here is a recap of the significant progress we made during 2025. First, we executed more than 20 projects as part of portfolio optimization and simplification initiatives that are helping strengthen our business and support our core strategy going forward. Through this work, we achieved approximately $200 million of cost savings and announced the joint venture with Altek, which I'm pleased to report has commenced operations recently. Juan Luciano: Second, we addressed plant efficiency issues across our asset network and reduced our unplanned downtime. We restored operations at our Decatur East plant and achieved an important safety milestone by having the lowest injury rate in the company's history. Third, we reached an important decarbonization milestone. We connected our Columbus, Nebraska corn milling plant to Tallgrass dryblazer pipeline, extending our carbon capture and storage infrastructure beyond our Decatur operations. Fourth, we advanced Nutrishna's recovery, improved execution, and increased revenue. Fifth, we generated strong cash flow as we relentlessly focused on improving working capital. And as we announced last week, we reached the closure of government investigations of ADM related to the company's prior reporting regarding intersegment sales. We are pleased to put these matters behind the company. Please turn to slide six. Our operating environment throughout 2025 was challenging. And our team demonstrated impressive resilience as we strengthened the core of our business through portfolio optimization, disciplined capital allocation, tighter working capital execution, enhanced cost control, and lower transaction costs. This strengthening of our business not only allows us to continue to increase our dividend and return cash to shareholders, but it also affords us the ability to invest in future growth regardless of the commodity cycle. There are five key focus areas for our next wave of growth. We are leveraging our assets and expertise along with technology to build out our operations in enhanced nutrition, biotics, biosolutions, precision fermentation, and decarbonization. Each of these businesses has a different growth profile and timeline for value creation. But each complements what we're doing today and presents the potential for compelling enduring returns. For example, we are advancing innovations in enhanced nutrition for allergen-free pea protein, unlocking opportunities in specialized nutrition, such as ultra-high protein drinks, protein bars, and fortified snacks. On the natural flavor side, we have created patented technology for cleanseed flavors that are high-value ingredients for beverages. In natural colors, we have developed a breakthrough natural blue addressing one of the food and beverage industries' toughest challenges: producing a natural, stable, water-soluble, and safe blue pigment, which is exceptionally rare in nature. We're also developing next-generation functional ingredients and combining the benefits of biotics and botanicals. Across operations, we continue to invest in sidestream valorization as part of our ongoing efforts to optimize our production processes and add value to our byproducts. We also see a long multiyear run rate of growth projects connected to the work we're doing around large-scale decarbonization, including carbon sequestration. I now like to discuss the key market trends and company growth drivers for 2026 that support our outlook for a more constructive operating environment. The recent progress with China trade relations combined with the expectation of pending US biofuel policy clarity should support an increasingly constructive market environment throughout this year, particularly for our AS and O business. We expect positive economic opportunities for the industry and the American farmer to materialize, which should drive additional long-term investments throughout our business and the agriculture sector. Our outlook also assumes segment operating profit for Carbohydrate Solutions remained relatively flat, with lower starches and sweeteners volumes and pricing, offset by higher ethanol margins. And nutrition is expected to continue its trajectory of stronger organic growth and execution. Overall, there is much to look forward to in 2026 and beyond. Our current outlook for adjusted EPS in 2026 is a range between $3.60 and $4.25, which reflects growth over 2025 and appropriately captures the fluidity and timing on market response as global trade and biofuel policies continue to evolve. With that, let me hand it over to Monish to share a deeper dive into fourth quarter and full-year 2025 financials, as well as the assumptions underpinning our 2026 guidance. Monish Patolawala: Thank you, Juan. Please turn to Slide seven. 2025 was a dynamic year in the global trade and biofuel policy landscape, both of which impacted AS and O results. AS and O segment operating profit for the fourth quarter was $444 million, down 31% compared to the prior year quarter. For the full year, AS and O segment operating profit was $1.6 billion, 34% lower compared to 2024. In the Ag Services subsegment, operating profit was $174 million for the fourth quarter, representing a decrease of 31% compared to the prior year quarter. The decrease was driven primarily by lower export activity from North America combined with net negative timing impacts of $50 million compared to the prior year quarter. For the full year, Ag Services operating profit was down 11% compared to 2024, driven by lower North American exports and a challenged global trade environment. Throughout the year, farmer selling was limited by muted pricing, and combined with customers reducing the amount of inventory held, we experienced fewer trading opportunities. In the crushing subsegment, operating profit was $66 million, down 69% from the prior year quarter. While global crush volumes increased over the prior year quarter with crush volumes increasing 7% sequentially and 4% compared to the prior year quarter, weaker crush margins in North and South America pressured results. Additionally, there were net negative timing impacts of approximately $20 million compared to the prior year quarter. Further, there were approximately $20 million of reducing insurance proceeds related to the Decatur East claims versus the prior year quarter. For the full year, crushing operating profit was down 81% compared to 2024, with the main reason being a significantly weaker crush margin environment. Year over year, there were approximately $44 million of reduced insurance proceeds. In the refined products and other subsegment, operating profit was $119 million, down 2% compared to the prior quarter as positive timing impacts helped offset weaker food demand and lower biodiesel and refining margins. We have a net positive timing impact of approximately $72 million as compared to the prior year quarter. For the full year, RPO operating profit was 4% lower than 2024 due to the same food and fuel dynamics that pressured fourth quarter results. Equity earnings from our investment in Wilmar were $85 million for the quarter. Excluding specified items, it was up 49% compared to the prior year quarter. We typically record our share of Wilmar's financial results on a three-month lag basis, with the exception of material transactions or events that occurred during the intervening period that materially affect the financial position or results of operation. During the fourth quarter, we recorded a $254 million gain related to the transaction Wilmar closed, and I presented this as a specified item. For the full year 2025, equity from Wilmar, excluding specified items, was approximately 14% lower as compared to 2024. Turning now to Slide eight. For the fourth quarter, Carbohydrate Solutions segment operating profit was $299 million, down 6% compared to the prior year quarter. Similar to 2025, we saw the continued weakness in starches and sweeteners be largely offset by strength in ethanol margin. For the full year, Carb Solutions segment operating profit was $1.2 billion, down 12% compared to 2024. Further, there were approximately $33 million of reduced insurance proceeds related to the Decatur East and West claims versus the prior year quarter. For the fourth quarter, starches and sweeteners operating profit was $256 million, down 16% compared to the prior year quarter, in part due to a continuation of consumer buying trends experienced throughout 2025. We are seeing SNS softness being driven primarily by less consumption of packaged goods, and this impacted both volumes and margins. Additionally, in EMEA, SNS volumes and margins continue to be impacted by persistent high corn costs related to industry-wide crop quality issues that we have previously disclosed. Importantly, for this quarter, there were approximately $33 million of reduced insurance proceeds related to Decatur East and West claims compared to the prior year period. For the full year, SNS operating profit decreased by 21% as compared to 2024, with the decline primarily attributable to the ongoing trends impacting the fourth quarter. Year over year, there were approximately $75 million of reduced insurance proceeds. For the Vantage Corn Processors subsegment, operating profit for the fourth quarter was $43 million, up 187% from the prior year quarter. Ethanol industry margins remained stable through October and November before experiencing typical seasonal softening in December. Export and pricing strength continued to be supported primarily by mandated markets, which has kept inventory levels balanced. Overall, ethanol EBITDA margins per gallon for the quarter were approximately 33% higher compared to the prior year quarter. For the full year, VCP operating profit was up $119 million compared to 2024, driven by stronger demand and improving ethanol margin. Now turning to Slide nine. In the fourth quarter, Nutrition segment revenues were $1.8 billion, remaining relatively flat compared to the prior year quarter. Human nutrition revenue increased by 5%, while animal nutrition revenue decreased by 4% compared to the prior year quarter. Animal Nutrition revenue was impacted by previously disclosed portfolio Nutrition segment operating profit was $178 million for the fourth quarter, down 11% compared to the prior year quarter. As previously disclosed, insurance proceeds related to Decatur East in 2024 were $46 million as compared to zero proceeds received in 2025. Human Nutrition operating profit was $56 million, down 10% compared to the prior quarter, with the decline attributable to a reduction in insurance proceeds. Excluding the impact of insurance, the growth was largely attributable to strong North America flavor sales and recovery in specialty ingredients. For the full year, human nutrition operating profit was $319 million, down 2% when compared to 2024. Human Nutrition experienced significant operating profit growth led by flavors and the recovery of specialty ingredients. However, this growth was more than offset by the reduction of insurance proceeds. As previously disclosed, insurance proceeds related to Decatur East in 2024 were $1 million as compared to zero proceeds received in 2025. For animal nutrition, operating profit was $22 million for the quarter, down 15% compared to the prior year quarter as a result of localized volume softness and the impact of one-time items. For full year 2025, Animal Nutrition operating profit was $98 million, 66% higher than 2024, with the growth driven by improved margins as a result of focusing on higher-margin product lines combined with portfolio streamlining actions and cost optimization efforts. For 2025, corporate and other business costs increased by approximately 25% compared to 2024. For the full year, corporate and other business costs increased by approximately 19% compared to 2024. In both periods, the increase was primarily due to higher charges related to revaluation losses, including impairment, contingency, and restructuring charges. These losses were partially offset by lower interest expense, higher other income, and lower unallocated corporate function costs. Turning now to slide 10. For 2025, ADM generated cash flow from operations before working capital of approximately $2.7 billion, down by $600 million relative to 2024 as a result of low overall total segment operating profit. Restricted cash increased $1.2 billion to $4.5 billion, mainly driven by ADMIS. We continue to maintain a solid cash position, and we have made good progress in improving our working capital efficiency. As Juan mentioned, we realized a $1.5 billion cash flow benefit from inventory reduction as we sharpened our inventory management practices and improved demand forecasts. We continue to be very disciplined in the areas in which we invest. For 2025, we continue to be very prudent in our investments and invested $1.2 billion in capital expenditures. We also returned $987 million in dividends to shareholders throughout 2025, with Q4 being the 376th consecutive quarterly dividend. And finally, our leverage ratio at 12/31/2025 was 1.9 times, in line with our previously communicated year-end target ratio of approximately two times. Now turning to slide 11. We have provided further details on our 2026 outlook. Earlier today, as Juan mentioned, we provided our current outlook for 2026. We are providing an adjusted EPS range of $3.60 to $4.25 for the full year 2026 and view this range of outcomes as highly predicated on several key factors. First, the timing of when we receive US biofuel policy clarity. The earlier we receive policy clarity, the larger the opportunity to take advantage of what we expect will be an increasingly more constructive operating environment. Second, the size of the RVO requirement and the SRE offset. With the final mandate still under evaluation, visibility into the magnitude of improvement in the operating environment and the pace of industry adoption remains limited. Juan Luciano: Third, we expect robust ethanol export opportunities to continue, driven by mandated markets. We also expect domestic demand to strengthen with US biofuel policy clarity, and ethanol margin strength to be further supported by policy incentives. Strength in ethanol is expected to offset the continued softness in FNS projected from a continuation of the same consumer behavior trend we experienced in 2025. Fourth, we are expecting continued growth in nutrition driven by growth in flavors, continued recovery in specialty ingredients, and growth in health and wellness as global consumption of biotics increases and customers expand their range of applications. And in animal nutrition, we expect margin expansion to contribute to nutrition's operating profit growth as we focus on higher-margin products and see the benefits of our portfolio optimization actions materialize. As Juan mentioned, we have commenced operations of the joint venture with Altec. And while we don't expect it to have a material impact on Nutrition operating profit in 2026, we will see revenue decrease as a result of contributing those operations to an equity investor. Fifth, moving to corporate. We expect a portion of the segment operating profit growth discussed to be offset by higher expenses year over year that reflect continued investment in R&D and digital platforms. The impact of lower performance-based incentive compensation relative to 2025, an expected effective tax rate between 18-20%, and lower ADMI interest income due to a lower interest rate environment. We will also maintain a disciplined capital allocation policy, including a focus on solid cash flow generation while we continue to pursue cost savings. And we remain on track to achieve our targeted aggregate cost savings of $500 million to $750 million over three to five years, which we began in 2025. Additionally, for 2026, we expect to invest approximately $1.3 billion to $1.5 billion in capital expenditures. With regards to 2026, as previously disclosed, we expect crush margins in 2026 to be similar to 2025 as we have already booked a large portion of our first quarter business. As a reminder, we don't exclude mark-to-market from our estimates, so depending on how factors, including board crush and cash margins move, we could see positive or negative mark-to-mark timing impacts that differ from our current expectations. In Carb Solutions, we see similar trends to those we saw throughout 2025 relating to demand softness in starches and sweeteners, and we expect ethanol margins to be tempered by higher industry run rates. Nutrition is expected to show continued improvement over the prior period and sequentially, as we drive revenue growth and continue to see benefits from the recovery of special ingredients. This improvement is expected to be partially offset by the previously disclosed employee incentive compensation favorability in 2025. Our team is also continuing to monitor consumer behavior as it relates to our human nutrition business. To conclude, I want to thank our ADM colleagues for their focus, disciplined execution, and continued commitment to our long-term success. These efforts remain essential to navigating today's dynamic operating environment and delivering value for our shareholders. Back to you, Juan. Juan Luciano: Thanks, Monish. Let me wrap up by saying thank you to our colleagues for the solid strides made during 2025 with our strategic portfolio optimization and cost reduction initiatives. All of which are expected to strengthen our business and our cash flow for years to come. We're building out the next wave of long-term value creation, and specifically for 2026, we will be highly focused on optimizing our results in what we expect to be an increasingly constructive operating environment. With that, we'll take your questions now. Operator, please open the line. Operator: Thank you. If you would like to remove your question, please press star followed by 2. When preparing to ask your question, ensure to unmute yourself locally. The first question goes to Manav Gupta of UBS. Manav, please go ahead. Manav Gupta: Good morning. And first, really want to congratulate the entire team. I know Monish and his team particularly worked very hard with the SEC and DOJ. So glad that's all behind you. Very happy for you about that. My first question here is, sir, that, I know it's difficult to provide a guide with RVO not out there, and thanks for doing that. Trying to understand renewable diesel margins are already on the way to amend. RINs are also moving higher. And so when the RVO finally arrives, do you expect a material jump in the operating rates and processing rates of both biodiesel and renewable diesel facilities because then they would know exactly how much RINs they would have to meet, you know, how much the market would know how much RINs obligation would be. So if you could talk a little bit about that. Juan Luciano: Yes. Thank you, Manav. And, yes, we're very pleased to leave these investigations behind us with disclosure. Listen. It's been very difficult to give guidance because there are so many things that you described outside our control, and we don't feel comfortable in that regard. That's why our guidance is wide. What we are discussing here is the timing of all these coming to the P&L. We know it's positive. We know it's gonna come. So I think that when it's coming, it depends on when the government makes a decision and clarifies the policies. But also on how the market digests those policies and those get implemented. We're gonna see board crush. We're gonna see RINs. But at the end of the day, we need to see cash margins moving. And, don't forget that our business, which is a very large business, works in anticipation of the market. So we tend to sell every time we get into a quarter. We are sold maybe 60% or 70% into the following quarter. So if these things will be done at the '1, for us, it will be mostly July onwards, if you will, that we'll be able to realize that. So that's what creates the uncertainty. I think in not in a calendar year, this is extremely positive for the industry and certainly for ADM, pulling more vegetable oils into biofuels. That's gonna happen not only in The US, with the RBOs, but it's gonna happen in Brazil, hopefully, with B16 started either in March or in June. It's gonna happen also in other places around the world. So again, I think we try to be very balanced in saying, we see improvement based on the year over year on the things that we can control. We see some clarity in trading, and as we're gonna have some volumes from soybeans going to China that we didn't have in '25 materially. And then we see this RVO that's gonna help with the leg of the oil for the crash. Mill continues to be supported. And then we see growth in nutrition as we described. So we're very constructive about the future of our ADM. We also I also talked, Manav, a little bit about the long term. We have identified five platforms that are really very exciting that they're gonna come over the next five years at different timelines based on the difficulties or easiness of their implementation. So when you think about our self-improvement, plus all the policy coming our way, again, that is a matter of timing. Plus our growth prospects, we feel very strongly about the next few years for ADM. Manav Gupta: Thank you so much for the detailed response. I'll turn it over. Thanks. Juan Luciano: You're welcome. Operator: Next question goes to Ben Theurer of Barclays. Ben, please go ahead. Ben Theurer: Hi, good morning. Thank you very much for taking my question. Juan, if I could just follow-up same wishes on my side. Congrats on closing the case. Wanted to follow-up on the outlook piece and dig a little bit into nutrition and, like, kinda, like, tying it back to some of the commentary you've made in the past, pick a tree is being back up. Obviously, the fourth quarter probably wasn't as good as expected what you had initially. Like, kind of, like, tacked down for the nutrition segment. So as we move into '26, maybe can you give us an update on where you stand with, like, gaining these customers back on the fulfillment, everything that you first lost on Decatur East that you now need to, like, kinda, like, gain back. And maybe within the range of the guidance, associated, what are, like, kind of, like, the bull and the bear cases here as it relates to a, demand, and then b, the fulfillment of the demand from your side? Juan Luciano: Thank you, Ben. Listen. Let me start addressing a little bit the performance of nutrition, the true performance, because I think it is important that we provide clarity on the operating performance of the business. If you compare apples to apples, Q4 2025 versus Q4 2024. Q4 2024 has a significant piece of insurance proceeds into the nutrition P&L. So if you exclude that just to see the operating performance, we had a very strong quarter in flavors with OP up close to 60% or something. Ambiotics, up north of that. Driven mostly from Flavor North America, which has a very strong quarter. We did have a little bit of a softer quarter from a demand perspective in Europe. And we don't know if it just was timing or something because we've seen it recovered when we started the year in 2026. So we saw that coming back in January. As you said before, specialty ingredients continue with the Decatur East plant back online. But, of course, this plant was down for eighteen months, so we are doing some plant stabilization, some driving productivity. You bring it first back on safety per premises. So and then you try to do the optimization of the plan. So we're in that process. And at the same time, again, our customers move away after eighteen months of us not being able to supply fully. So as you said, we need to recover that, and we need to recover that prudently. But we would like to claim our share of the market back. So we are in that process. And I think that process is going well, but it's gonna take some time. Animal nutrition was a little bit soft with some pockets of softness, but also we have some one-off impacts. I think the trajectory overall of animals year over year has been positive, and we expect that to continue. So I would say when we look at 26, as the overall year, and I can't call it by quarter, but overall year, so we will have still strength in flavors for both geographies. We also have continued to grow in Asia Pacific in flavors, which we had a record year in 2025. We're gonna see a good demand in biotic and we're gonna continue with our margin improvement quest in animal nutrition. So that's where we see the business. So, yeah, we see growth for operating profit into the business in 2026 versus 2025. And just a tactical bend for you is as I've mentioned in my prepared remarks, when you're doing your modeling, we've you know, Ian, Ishmael, and team have done a great job with the Altec JV that has gone live. So just make sure that from a revenue perspective, you won't see the revenue, the profit for 2026 is pretty much where it was as this JV takes hold. So it's a part of what Juan mentioned, which is moving to higher segments or higher product mix in the animal nutrition. Operator: The next question goes to Heather Jones of Heather Jones Research. Please go ahead. Heather Jones: Good morning. Thanks for the question. Wanted to my question is on CRUSH, and I just it's a it's a big picture question. So I've I've followed you guys for over a decade, and just have been sort of puzzled by ADM's performance during '25. I particularly Q2, Q3, and Q4. Y'all's performance relative to public comps has been the the gap has been much wider than historically and has been to the downside. And my understanding is that your runtime issues have improved in '25 and that y'all done a better job on the operations execution side. So just wondering, is there a change in how you're hedging? Or just because, obviously, the the biggest influencer of your results over the next couple of years is gonna be RVO policy, and it's gonna affect crush most dramatically. And so I'm just trying to get a handle on how we should be modeling how ADM will benefit. So if you could just help me understand that disparity, it would it would it would be very much appreciated. Thank you. Juan Luciano: Yeah. Thank you for the question, Heather. Of course, we spend a lot of time in in app services and all seats, which is our largest business. I don't see anything clearly from a commercial perspective that has changed for us to justify what you described. I would say the main difference since I've been running this full so many years is our manufacturing costs have gone up. Not actually the performance, as you said, online time, I think, has has recovered, and that's going well. But our cost in terms of energy or manpower or contract and things like that, is higher than than it used to be, and we're working hard to reduce that. But that's probably something that I can point out, and as I said, we have good plans to do that. Things have become a little bit more expensive to build. We have a large footprint. A little bit more expensive to repair. And labor has been more expensive, especially in North America. I would say if you look at our the cost of our plants in the rest of the world versus North America, North America has become a little bit more expensive over the last few years. I would say post-COVID. I got the impression or not exact science that post-COVID rest of the world came back a little bit more to the pre-COVID, if you will, cost standards, while North America will still have a little bit more of that. And of course, it's not fat, but but we need to find that productivity improvements, and we have plans to accomplish that. If you don't mind, Juan, I'll add one more. Sorry. Heather, just as you think about the cost out of 500 to the seven that we've talked about, and we've started that work in 2025 as Juan mentioned, one of the big items in that unlock is manufacturing cost product. And that's what the team has plans to keep driving it. They're made progress in '25, and we'll continue to make progress in '26 and beyond. Operator: Thank you so much. The next question goes to Andrew Strelzik of BMO Capital Markets. Andrew, please go ahead. Andrew Strelzik: Great. Thank you for the question. Good morning. I wanted to go back to the guidance and, in particular, your assumptions on the higher end of the range. And appreciate some of the uncertainties around timing and magnitude related to RPO. But can you just share a little more specifically what you've assumed from a crush margin perspective? And maybe an improvement timing perspective on the high end of the range? And I guess what I'm really trying to get at is isolating kind of a post-RVO EPS run rate implied by your guidance at the high end versus kind of the first part of it? Thank you. Monish Patolawala: Yeah. Andrew, as Juan mentioned and as we've said in our prepared remarks, too, at the end of the day, this is all going to depend on two things. One is what happens with the RVO guidance. What is in the RVO guidance, what's the timing of the RVO guidance, and what's the adoption of the market range. So it's very hard to sit here right now and pinpoint exactly a number that says when and how much crush margins are going to be because it's dependent on so many factors. But what we have assumed in our higher end of the range, and that's basically where we're sitting right now, one is, of course, the timing of RVO and whether the adoption of RVO happens faster, and does the and crush margins go up because of that. We have also assumed that the strengthening of consumer demand strengthens, which is both for starches, sweeteners, overall packaged goods, nutrition, as well as demand for biofuels could definitely help us out. We have also, you know, talked about saying you know, how does RINs move up? So we'll have to watch how RINs move up. And Manav asked the same question and RINs. Board crush has moved up. Already based on some of the commentary out. So Bold crush has gone up. You can depending on the near, it's gone up nearly $40.50 cents for sorry, for December 2026. That's board crush. At the end of the day, it all has to translate back to cash margins. And so, therefore, that's something you have to just keep working through and watch. So when I look at the trends that are happening, these are all good early indicators. All early indicators that says we are going to have a constructive environment. But as Juan mentioned, we are being cautious and making sure that we are giving you both the high end and the low end of the range. Where at the low end of the range, we are focused more on what we control. It's better than where we ended 2025, continued progress on our cost out mission, continued to drive where we believe that sweet starches and sweetener softness gets offset by ethanol margins and policy benefits, continued execution in nutrition. So therefore, put altogether, Andrew, unfortunately, we are just giving you a wider range. Because it's all gonna depend on ultimately where demand is and then where crush margins go. As the quarters get more clearer and as guidance comes out, we'll be definitely there to update you all. Just last piece of housekeeping advice. As you know, we don't predict mark to market. Mark to market within the quarters could move depending on which markets we hedge, when we hedge it, as well as what prices turn out to be as of the end of the quarter. So please do factor that in from a timing perspective as you all think about. Andrew Strelzik: Great. Thank you very much. Operator: The next question goes to Pooran Sharma of Stephens Inc. Pooran, please go ahead. Pooran Sharma: Great. For the question. I wanted to ask about just the weaker starches and sweetener demand. We've been hearing concerns related to GLP one adoption, and that's been leading a lot of cons customers to move to spot rather than forward buying. But we've also been hearing just maybe tariff pressures causing producers to raise retail prices and that impacting demand. Just wanted to get a sense as to kind of what you're seeing and get your thoughts onto what's driving some of the softness here. Juan Luciano: Yeah. Thank you, Brian, for the question. Listen. I think it's a combination of everything. There are we go when we produce what we produce in sweeteners, we go to so many applications that touch many, many end uses products and also channels. I would say certainly, when people adopt GLP ones, we see the consumption drops a little bit as a family. That stabilizes, if you will, after six months. But also also shift a little bit what they consume, going more into proteins and maybe less savory snacks or sweet snacks. I think there is a consumer desire to move away from ultra-processed foods to a certain degree, at least initially, and I think we're seeing part of that. It is true that although inflation for food has dropped, the actual level of prices has not dropped for some of these products. And we have seen some of our customers trying different price points to test that elasticity. Prices remained a little bit high. And I think that when the consumer sees shakiness, if you will, in the labor market, they start to become more prudent about what they do, and they become more sensitive to price. So I think it's a combination of things. We are very blessed to have the ability to make many, many products from corn. And we are blessed to have a marketing team looking at industrial applications, you know, whether it's in mining or packaging or construction and cosmetics and others, and I think that has helped us to soften some of that. But the reality is, yeah, liquid sweeteners volumes are down. Maybe in the range of five to 7%. And we're fighting hard to offset that. Part of that offset for 2026, we think will come from 45Ds and ethanol margins and that will keep probably carb solutions the way we think about it. Relatively flat year over year. But you know, we have an intense focus on protecting that volume and shifting it to other applications that may not be exposed to the same trends. Pooran Sharma: Good. Thank you very much. Juan Luciano: Good work. Operator: The next question goes to Tom Palmer of JPMorgan. Tom, please go ahead. Tom Palmer: Good morning, and thanks for the question. I wanted to maybe just clarify a few guidance items quickly. Just first, I think in the past, you've given dollar amounts for corporate and then percentages for kind of expected tax rate. Apologies if I missed it. I don't think we got it today. And then on AS and O, we've a lot of discussion, I guess, on the crushing piece, but are RPO and Ag Services, any framing of kind of relative to what we saw in 2026, where they might trend? Thank you. Monish Patolawala: So just you'll have to remind me all your questions. But I'll try if my memory is right, Tom. One is tax rate. So adjusted ETR or expected ETR for '26 is between 18 to 20%. On corporate, as I've said, corporate will be higher on a year-over-year basis driven by a few facts. One is the improvement in SEG OP. Some of that, we are going to use to reinvest back in the business in R&D and digital. Number one. Number two, we will continue to see the impact of a lower incentive compensation in 2025. That won't repeat in 2026. And three is we're going to continue to drive cost out as we have committed to keep driving cost on corporate. So that's corporate. When you think about ag services and oilseeds, I think that was your third question. As we have said before, there's a wide range that could happen between ag service and oilseeds. Again, depends on RVO clarity. What we have done, Tom, is at the low end of the range, said that assuming there's a deferral of RVO policy or US policy, we see crush margins to be flat and then so that's factored into the low end of the range. As Juan also mentioned, from an ag services perspective, North American exports should be higher based on the policy clarity that we have got for especially with China where we should see higher volumes sold to China versus what we did in 2025. And then at the high end of the range, I already answered that question, on different things to think through. For the first quarter, I would say, again, crush margins based on the book that we already had, and we have publicly previously disclosed that too when Greg was on stage in another conference. We expect crush margins for Q1 to be very similar to Q4 in crush margin. For Q4, we have also disclosed, but just again, as you're building your model, those crush margins include a recovery of Decatur East insurance proceeds of approximately $30 million. I think it's 32 to be precise. In those crush margins. So, hopefully, I answered your questions, Tom. But if I missed something, let me know. Tom Palmer: Thanks so much. Just on the RPO piece. Thank you. Monish Patolawala: When you say on the oh, so what's Outlook? Again, listen. At the end of the day, you know, Juan's mentioned this on multiple calls and so has the team. I think, Tom, it's gonna come down to what is the demand for RPO. I think that's number one. And number two, once RVOs come through, there's going to be a time lag between how much you start seeing in crush margins, what RINs do, and therefore then how does it incentivize producers to start manufacturing product again as consumers? So as of right now, I think that's all in our range. And it's all going to come down to what are your policy turns out to be and what demand turns out. Tom Palmer: Okay. Thanks for all the detail. Operator: Next question goes to Salvator Tiano of Bank of America. Salvator, please go ahead. Salvator Tiano: Yes. Thank you very much. I want to go back to essentially what happens once the RVLs are out, but you know, taking a step back from explicit crush margins. So the high end of your guidance at four twenty-five is it fair to say that it implies kind of that starting in July, assuming, as you said, with a lag you'll see the benefits in July in the high end in the best-case scenario. Of perhaps $1.30 in EPS per quarter, is that kind of where the new earnings power is going? And obviously, if that is the case, does this mean that with no other change in your outlook, on a full-year run rate in 2027, we could see EPS in the low five? Is that kind of your big picture view here? Monish Patolawala: So, Salvator, again, I think it comes down to it right now. Very hard to predict exactly what that number turns out to be. As we have said, there are multiple factors at the high end. It's not just crush margins. Which is definitely one factor that should help. There's sooner we get the clarity and the more the demand is, as long as the cash margins are there, not just board crush, I think our team is ready to continue to execute, to crush, and hopefully take advantage of those margins. The other drivers in my high end of the range were also making sure customer demand or demand remains strong. That's the second. And then third, as Juan mentioned on sweeteners and starches, and bare ethanol margins. So there are multiple factors that have to go into play. To answer your question on the long run, you know, as Juan mentioned, there are five pillars that we think over the long run that should start helping us, and the company has taken 2025 to continue to be very prudent on cost. But also on cash and using that as a way to invest in these growth platforms. That can create value over the long term for ADM. How that timing works out between '25 and '26 and '27 by quarter sitting today, Salvator, it's unfair for us to be able to make that prediction because there's so many factors at play. But long term, as Juan mentioned, you know, ADM's ability to keep growing, keep creating value, keep returning value to shareholders, whether in the form of dividend, or in other forms, to remain a big keystone of our capital policy and our thesis to return value to shareholders. Salvator Tiano: Great. Thank you very much. Operator: Next question goes to Steven Haynes of Morgan Stanley. Steven, please go ahead. Steven Haynes: Hey, good morning, and thanks for taking my question. I wanted to come back to the CARB solutions guide for the year. And maybe if you could just help us think a little about bit about how your sweetener contracting season went or is progressing and, I guess, kind of within your guide, how much of that weakness is related to maybe margin versus volume? And then secondly, if you've included any kind of explicit uplift from 45 c or 45 q. If you're willing to quantify that, that would be helpful. Thank you. Juan Luciano: So, yes, Steven. Carve Solutions, the contract season went well. As I said, with some softness in volume that, at the end of the day, impacts margin. I can't quantify how much of this. As I told you before, we don't have these big cliffs of contracts anymore. So I think that, you know, it is a blend. But certainly versus other negotiations, it has been a little bit softer this year than others. With regards to 45 c, there are many to consider, of course, as to estimate the benefit. As you know, we need to think about the carbon intensity by plant. The prevailing wage issue, the amount of carbon we sequester during all these, the production volumes. And, of course, we need to see how the industry will react in terms of pricing to all these 45 z. We still don't have final guidance, but we know that this has cleared the White House Office of Budget. So we hope to hear from them soon. We think when we put in our estimate, we think that it could be a $100 million. But as I said, just to give you a flavor, there are many variables, so take that with a grain of salt. Steven Haynes: Understood. No. Thank you. Appreciate the color. Juan Luciano: Welcome. Operator: Your last question goes to Matthew Blair of TPH and Co. Matthew, please go ahead. Matthew Blair: Great. Thanks so much for sweeping me in here. You mentioned that you're expecting robust ethanol exports to continue in 2026. I think India already hit its 20% ethanol blend rate target. So could you talk about other markets where you see incremental opportunities for ethanol exports from The U.S? Then also, do you have any thoughts on the likelihood of E15 and if that does pass, you know, is there any sort of range or any sort of guide on the potential uplift to your carb solutions business? Thanks. Juan Luciano: Yeah. Thank you, Matthew. Listen. The US continues to be very competitive in ethanol in world markets, and I think it's certainly more competitive than Brazil. And there are many, many countries that with the need for more energy for all the AI that you see and all that, there is a strong desire of removing a little bit of the burden of transportation into the oil segment. So bringing biofuels is important for sustainability perspective, but also to enlarge the energy pool. So we're seeing countries, and anecdotally, it's like Vietnam is gonna launch some, but there are like, Japan is having in the forecast. So are many countries queuing to do that. The blending rate could go high. I always make give the anecdote that when I was living in Brazil, like, thirty years ago, we were already driving cars with 20 something percent ethanol. And they were, you know, American-made cars, if you will, by brand. So that can be done. So whether we can go E15 or not, it's a matter of the industry to align to that. To have only one pipeline and only one but but there are no issues to move into E15. So we think that eventually we're gonna get there. Again, timing is the key, and I'm not into forecasting timing. So we feel very good about that. It continues to be a very cheap oxygenate. I mean, oxygenates comparable to that trade for, like, maybe $2.90. And, you know, ethanol is what, like, a dollar 60 or like that. So it continues to be very competitive. So we're optimistic into that. We also have plans that will have the opportunity to provide low carbon intensity to that based on our carbon cap and sequestration. And I think that will bring other avenues for ethanol potentially soft and other things, not only here, but outside the world. So I think we are positive about that. I think it speaks a little bit because at times, you know, biofuels become less of an impact to us. At times, like now, becomes more important. It speaks a lot about the strength of our diversified model, that we are global and very diversified portfolio. That allows us to do things like invest for growth while we are able to increase the dividend, like we increased this year, even at times in which you can consider this almost like trough conditions from an industry perspective. So I think it shows the strength of our model that provides a very strong base during the tough times. And now you're all asking questions about what could be the upside, and we would like to ride to that upside. And all we can do is improve our facilities to be able to run fully when that time comes and being able to take full advantage of the market opportunities or the regulation opportunities that will be presented to us. So we've been very satisfied with how we handle the cash and the increase of dividends over the last two years. There were tough market conditions, and now we are ready to ride the upper side of the cycle, if you will. Operator: Great. Thank you, Matthew. We have no further questions. I'll hand back to Kate Walsh for any closing comments. Kate Walsh: Thank you all for joining the call today. We appreciate your continued interest and support of ADM. And wish you a great rest of your day. Operator: Thank you. This now concludes today's call. Thank you all for joining, and you may now disconnect your lines.
Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the MGIC Investment Corporation Fourth Quarter 2025 earnings call. At this time, all lines have been placed on mute to prevent any background noise. At the end of today's presentation, we will have a question and answer session. Anyone who requires to ask a question at this time, please press 11 on your telephone keypad. At this time, I would like to turn the conference over to Dianna Higgins, Head of Investor Relations. Please go ahead. Thank you, Howard. Dianna Higgins: Good morning, and welcome, everyone. Thank you for your interest in MGIC Investment Corporation. Joining me on today's call to discuss our results for the fourth quarter are Timothy James Mattke, Chief Executive Officer, and Nathaniel Howe Colson, Chief Financial Officer and Chief Risk Officer. Our press release, which contains MGIC Investment Corporation's fourth quarter financial results, was issued yesterday and is available on our website at mtg.mgic.com under Newsroom. It includes information about our quarterly results that we will reference during today's call as well as a reconciliation of non-GAAP financial measures to their most comparable GAAP measures. In addition, we posted a quarterly supplement on our website that provides details about our primary risk in force and other information you may find valuable. As a reminder, from time to time, we may post updates to our underwriting guidelines, additional presentations, or corrections to past materials on our website. Before we get started today, I want to remind everyone that during today's call, we may make forward-looking statements regarding our expectations for the future. Actual results could differ materially from those expressed in these forward-looking statements. Additional information about the factors that could cause actual results to differ materially from those discussed in today's call is included in our 8-Ks filed yesterday. If we make any forward-looking statements, we are not undertaking an obligation to update those statements in the future in light of subsequent events. No one should rely on the fact that such guidance or forward-looking statements are current at any time other than the time of this call or the issuance of our 8-K. With that, I now have the pleasure of turning the call over to Timothy James Mattke. Thank you, Dianna, and good morning, everyone. Timothy James Mattke: We delivered another quarter of solid financial results, closing 2025 strong, and entering the new year from a position of strength. This performance is a continuation of the sustained momentum we have built over the past several years. Our performance stems from being grounded in decades of experience across a wide range of market cycles, disciplined risk management, and a thoughtful, measured approach to the market. We pair our expertise with a customer-centric mindset, continually evolving to meet the changing needs of our customers and the broader market. Turning to a few financial highlights, in the quarter, we earned net income of $169 million, producing an annualized 13% return on equity. For the full year, we earned net income of $738 million, and a full-year return on equity was 14.3%. Our strong operating performance and robust balance sheet enabled us to grow book value per share to $23.47, 13% higher year over year. As I mentioned on last quarter's call, we are proud to have achieved a significant milestone in our company's history and the industry first during the year, surpassing $300 billion of insurance in force. We continue to grow insurance in force in the fourth quarter, ending the year with more than $303 billion, up 3% from a year ago. Annual persistency remained elevated and stable throughout 2025, ending the quarter at 85%, in line with our expectations at the start of the year. We wrote $17 billion of high-quality new insurance in the fourth quarter and $60 billion for the full year, an increase of 8% from the prior year. Consensus mortgage origination forecasts project the size of the MI market in 2026 will be relatively similar to 2025, with mortgage rates remaining elevated. Overall, we expect insurance in force to remain relatively flat in 2026. If mortgage rates were to decrease more in 2026 than currently predicted, we expect the size of the MI market would benefit due to increased refinance volume, but growth in insurance in force would be offset by lower persistency. Our focus remains on building and maintaining a strong, well-diversified insurance portfolio. The credit quality of our insurance portfolio remains solid, with an average credit score at origination of 748. Today, we have not seen a material change in the credit performance of our portfolio, and early payment defaults remain low, which we believe is a good indicator of near-term credit trends. As discussed throughout the year, financial strength and are the cornerstones of our capital management strategy, positioning us to perform well across a range of economic environments. As part of our strategy, we regularly evaluate capital levels of both the operating company and holding company, taking into account current and potential future environments to position ourselves for success. This approach has consistently served our stakeholders well. As part of this, we continue to bolster our reinsurance program through the use of forward commitment quota share agreements and excess of loss agreements executed in either the traditional reinsurance or capital markets. In addition to reducing loss volatility in stress scenarios, these agreements provide capital diversification and flexibility at attractive costs. We remained active in the reinsurance market in the fourth quarter and in January. In the fourth quarter, as previously announced, we further strengthened our reinsurance program with a $250 million excess of loss transaction covering our 2021 NIW and a 40% quota share transaction that covers most of our 2027 NIW. We also amended the terms of our quota share treaties covering our 2022 NIW, with most participants from the existing reinsurance panel, reducing the ongoing cost by approximately 40% beginning in 2026. In addition, in January, we completed our eighth insurance-linked note transaction, which provides $324 million of loss protection and covers certain policies written between January 2022 and March 2025. These reinsurance activities are aligned with our long-term strategy and reflect our consistent, disciplined approach to managing risk and capital. At the end of the fourth quarter, our reinsurance program reduced our PMIERs required by $2.8 billion, or approximately 47%. With that, let me turn it over to Nathaniel Howe Colson to provide more details on our financial results and capital management activities for the quarter. Thanks, Tim, and good morning. Nathaniel Howe Colson: As Tim mentioned, we had another quarter of solid financial results. We earned net income of 75¢ per diluted share, compared to 72¢ during the fourth quarter last year. For the full year, we earned net income of $3.14 per diluted share compared to $2.89 per diluted share last year. Our estimation of ultimate losses on prior delinquencies resulted in $31 million of favorable loss reserve development in the quarter. The favorable development was primarily driven by delinquency notices we received in 2024 and in 2025, as cure rates on recent new notices continue to exceed our expectations. New delinquency notices received in the quarter, we continue to apply the initial claim rate assumption of 7.5% consistent with recent periods. Our account-based delinquency rate increased three basis points from the prior year and 11 basis points in the quarter. The sequential increase was in line with our expectations and reflects normal seasonal patterns as well as the continued aging of our 2021 and 2022 book years as we have discussed on prior calls. The three basis point year-over-year increase was the slowest rate of increase since 2024, and we believe reflects the continued normalization of credit conditions that we have discussed throughout the year. Turning to our revenue, the in-force premium yield was 38 basis points in the quarter and remained relatively flat during the year, consistent with what we expected at the start of the year. Given expectations of a similar MI market to 2025, we expect the in-force premium yield to remain near 38 basis points again in 2026. Investment income totaled $62 million in the fourth quarter and again contributed meaningfully to revenue. The book yield on our investment portfolio was 4% at the end of the quarter. Investment income remained relatively flat sequentially and year over year, as both the book yield and the size of the investment portfolio have also remained relatively flat. During the quarter, reinvestment rates on the fixed income portfolio continued to exceed our book yield and remain relatively flat for the year. The unrealized loss position on our portfolio narrowed again this quarter by $16 million, primarily driven by lower interest rates. Underwriting and other expenses in the quarter were $46 million, down from $49 million in the fourth quarter last year. For the full year, expenses were $201 million, down $17 million from 2024 and within the $195 to $205 million range we shared throughout the year. We remain committed to disciplined expense management and ongoing operational efficiency across the organization. For 2026, we expect operating expenses to decline further to a range of $190 to $200 million due primarily to higher expected ceding commissions as we have recently renegotiated several ceding quota share reinsurance treaties instead of canceling those treaties. Turning to our capital management activities, consistent with our approach over the past several years, we prioritize prudent insurance in force growth over capital return. Over the past several years, market conditions have supported the growth of our insurance in force. Against that backdrop, our capital return activity reflects our robust capital position, continued strong credit performance, and financial results, and share price levels that we believe are attractive to generate long-term value for our shareholders. In the fourth quarter, we paid a quarterly common stock dividend of $33 million and repurchased 6.8 million shares of common stock for $189 million. For the full year, we returned $915 million to our shareholders through a combination of share repurchases and dividends, and reduced shares outstanding by 12%. This represents a 124% payout ratio of the year's net income, and our quarterly dividend increased by 15% in the third quarter, marking five consecutive years of dividend growth. In January, we repurchased an additional 2.7 million shares of common stock for a total of $73 million. In addition, in January, as previously announced, the board approved the quarterly common stock dividend of $0.15 per share payable on March 6. All of these actions were taken while continuing to strengthen our balance sheet and enhance flexibility during the year. We paid $800 million in dividends from MGIC to the holding company during the year, ending the year with $1 billion of liquidity at the holding company and an excess to PMIERs of $2.5 billion at the operating company. With that, let me turn it back over to Timothy James Mattke. Timothy James Mattke: Thanks, Nathan. As the founder of modern private mortgage insurance nearly seventy years ago, we strive to be the most trusted partner in the MI industry. We are proud of the critical role private MI plays in the housing finance system. We look forward to continuing to work with industry stakeholders, including the FHFA and the GSEs, to responsibly serve low down payment borrowers, expand the use of private MI, protect the taxpayers from mortgage credit risk, and help shape the future of the housing finance system. With that said, housing affordability remains a challenge for many prospective homebuyers. We continue to actively participate in industry discussions and support responsible policy changes that improve affordability. Passage of the working families tax cut restored the tax deductibility of MI premiums, providing meaningful tax relief to homeowners without increasing risk to the housing finance system. In addition, the cost of private mortgage insurance premiums represents a temporary expense, unlike other ongoing homeownership costs such as homeowners insurance and property taxes, which have risen significantly. Private mortgage insurance plays an important role in enabling low down payment borrowers to enter the market and achieve the American dream of homeownership sooner. In closing, we had a strong year, successfully executing our business strategies and returning meaningful capital to our shareholders. I am confident in our talented team, our position in the market, as well as our ability to continue executing and delivering on our business strategies in 2026 and beyond to create long-term value for all of our stakeholders. With that, Howard, let's take questions. Operator: At this time, please press 11 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press 11 again. Again, if you have a question or comment at this time, please press 11 on your telephone keypad. The first question or comment comes from the line of Bose Thomas George from KBW. Mr. George, your line is open. Bose Thomas George: Hey, guys. Good morning. Actually, first, I wanted to ask about any price competition or changes you are seeing in the industry. I mean, based on your comments, it sounds like, you know, premiums are very stable, but just wanted to confirm that. Timothy James Mattke: Yeah. I think, Bose, I mean, I think you know, we do not like to comment too much on industry pricing generally, but I think from our perspective, you know, we were able to sort of find the value where we wanted it this quarter, similar to what we have been seeing for the majority of the year. Without having, you know, major sort of adjustments in our premium, you know, in the quarter. So I think we feel good about that. Again, we focus on the returns ultimately and what we can get but felt pretty good stability there, you know, back looking back last quarter. Bose Thomas George: Okay. Great. Thanks. And then switching over to sort of stuff, you know, the market seems quite, you know, worked up about a potential reduction in FHA premiums. Have you seen anything from the FHA itself or from, you know, from the administration that suggests that that is a possibility? Timothy James Mattke: You know, I always view when it comes to affordability and sort of looking at different levers, I always view it as a possibility. I do not get the sense that it is viewed as any more possible or any more work being done specifically on it right now than sort of making sure they understand sort of the different levers that can be pulled. So again, it is really tough to sort of try to put odds on it other than I would say that I do not get the sense that there is any, you know, increasing sort of discussion of people we have talked with about it other than I think whenever you look at affordability, you know that certain constituencies will advocate for reducing the FHA premium. And that always creates external pressure, but have not seen anything just to believe that that is imminent, but that can change quickly in this world. Right? Bose Thomas George: Okay. Great. Thanks. Nathaniel Howe Colson: Thank you. Operator: Our next question or comment comes from the line of Terry Ma from Barclays. Mr. Ma, your line is open. Terry Ma: Hey. Yes. Sorry. I was muted. Good morning. Thank you. Hey. I was interested to see if you could provide kind of any color on kind of credit trends that you are seeing kind of by region or state. Nathaniel Howe Colson: Terry, it is Nathan. I will take that one. You know, we do look at the mix of new delinquencies that we are seeing on a monthly basis and really have not seen much in the way of movement on a geographic basis, whether it be state or even at the market level. You know, I think when we look at the mix of new notices from, you know, the first quarter, the second quarter, the third quarter compared to the fourth. You know, not seeing states that are really standing out one way or the other. I think there is always some noise, especially with the relatively low level of new notices that we have. You know, some of the jurisdictions have relatively small numbers, so it can be a little bit noisier. But as a kind of percent of the total, I am really not seeing areas that are standing out or areas of concern for us right now. Terry Ma: Got it. That is helpful. And then on the reserve release, Nicole, I appreciate the color and kind of makeup. Can you maybe just kind of remind us how that compares to the makeup or the drivers that are released? That you had in the last, you know, few quarters. I know not a great way to look at it, but at least the magnitude of the release was noticeably lower than what you saw last few quarters. Nathaniel Howe Colson: Yeah. Terry, it is Nathan again. I think the way that we have approached reserving and the way that then the reserve releases have kind of mechanically worked is unchanged. You know, we are always comparing our initial estimates to, you know, what we now think is our best estimate. You know, in our business, cures come earlier than claims. So early cures do not give you as much new information about ultimate losses. So, you know, from what we are seeing, a couple quarters ago, we would have seen reserve development coming out of notices that we had received two, three, four, five quarters before, and it kind of keeps moving forward as time advances. So I would say, you know, the quarters where development is coming from are different, but mostly because, you know, we are just further in time. So we had development say, on the notices from 2025, we would not have had that, you know, say, in Q2. But it would have been from the '24. You know, those notices that had been aged for two or three quarters. So and that is not a kind of a rule or anything for us. It is really looking at how many are curing, what is the monthly pace and quarterly pace at which they are curing? How closely are they following previously identified trends in cure activity? And really, where do we think it will ultimately play out and continue to be re-estimating down new notice quarters from our initial estimates of 7.5% you know, down into the lower single digits. Terry Ma: Got it. That is helpful. Thank you. Nathaniel Howe Colson: Thank you. Operator: Thank you. Our next question or comment comes from the line of Douglas Michael Harter from UBS. Mr. Harter, your line is now open. Douglas Michael Harter: Thanks. I guess along those lines of the last question, can you just talk about the composition of the NODs kind of what vintages those are coming from? And you know, kind of as we get to the newer vintages with less HPA, how you think that might impact yours? Nathaniel Howe Colson: Yeah, Doug. It is Nathan. I think on the cure side, you know, really have not seen a lot of divergence in cure activity based on vintage. I think, you know, perhaps the 2022 vintage is at the lower end of the range, as we would look at cure rates by vintage for delinquent loans, but still all within a, I would say, a pretty tight band, and much better than pre-COVID level. You know, the long-term cure rates are really what are driving the ultimate reduction and our ultimate loss expectations. So yeah, I think not seeing much on the cure rate side. On the delinquency emergence, you know, we have got a couple of tables and charts in the supplement. You know, one of them does look at delinquency rates over time by vintage. And you can see, you know, 2022 is running modestly higher than '21. Or twenty or even twenty nineteen, but the recent vintages are all tracking very close to that or inside of that. So again, I think this is all consistent in our mind with the normalization in credit conditions coming off of, you know, kind of early post-COVID conditions that just led to, you know, very, very low losses for those vintages. Douglas Michael Harter: Right. Appreciate that, Adam. Thank you. Operator: Our next question or comment comes from the line of Geoffrey Dunn from Compass. Mr. Dunn, your line is open. Geoffrey Dunn: Hey. How is your congrats on you. Execution and especially on the expense management side. When I look forward to next year, obviously, you know, you put out the $190 to $200 range. For underwriting and operating expenses. I would be curious, you know, especially looking at this environment, you know, are there any other levers that you could pull to kind of improve, you know, returns on capital at least in the near term? The environment is relatively tough when insurance enforces, you know, is barely growing or expected to be roughly flat. I am curious what are the levers you might have, you know, that you can pull to, you know, push some big rental margin at this point. Nathaniel Howe Colson: Yeah. It is Nathan. I will get started on the I think the biggest thing that we have done this year really, in anticipation of a normalization in credit conditions and the movement away from, you know, what has been close to zero losses for the last couple of years, is really getting the reinsurance program, you know, really bolstered with really attractive costs on our in-force book. But increasingly covering our future new business. You know, 2026 and 2027 NIW is now covered. And you know, when you think about return on capital, we often think about that as return on PMIERs capital. And, you know, the reinsurance at the cost that we are able to procure, it does provide us better returns on equity than we earn on a return on capital basis. And that is why I think capital management for us is so important, and it is not just the capital return side of it. It is also how we are constructing, you know, our capital balance sheet for our regulatory capital measures, our risk-based capital measures, rating agencies, and the like, and increasingly, you know, that has taken on, you know, an even heavier reinsurance lien partly because of the attractiveness of that market. And the tail risk protection that it provides. But, you know, partly because we do think that that is the best way to earn continued continue to earn kind of good risk-adjusted returns on equity. Geoffrey Dunn: That is very helpful. And then, yeah, maybe just partially addressed it. You know, obviously, during, you know, during the pickup in refinancing activity and kind of the expected continuation of that, you know, it is somewhat disproportionately impacting, you know, or should disproportionately impact your high WAC coupons that you have out there. I am curious, is there any is there a big divergence in the premium rates between you know, some of your lower WAC? Insurance in force versus you know, some of the more recent vintages that seem to be they are being more much more exposed to, you know, refinance activity at the moment. And, you know, should that impact your average premium rate? Throughout the year? Nathaniel Howe Colson: Yeah. It is an interesting question. I do not premium rates on average have been relatively flat for the last, you know, five or six years. You know? And you can see that in our in-force premium yields. The really low coupon books that we wrote in 2020 and 2021 had the much lower credit risk at origination characteristics, so all else equal, they would have had lower premium rates. There is a lot of refinance activity in those books. Whereas the more recent higher coupon books have been purchase dominated, you know, higher LTV. Still really good credit profile, especially from a credit score perspective, but I do not think that I think you know, it is less about maybe the vintage effect and more if we are already insuring a loan, if that refis into something that has a lower capital charge and lower kind of at origination credit characteristics, you know, all will get lower premium for that loan in a risk-based pricing market. Geoffrey Dunn: That is very helpful. I appreciate that, and I will jump back in queue. Nathaniel Howe Colson: Thank you. Operator: Thank you. Our next question or comment comes from the line of Mihir Bhatia from Bank of America. Your line is now open. Mihir Bhatia: Good morning. Thank you for taking my questions. The first one I wanted to ask was just about in-force premium yield. It declined a touch this quarter after being steady for most of '25. What drove that? Nathaniel Howe Colson: Yeah. Mihir, it is Nathan. You know, it was down a couple tenths of a basis point, and I think you know, that is just I think for us, you know, within the margin of flat, it does fluctuate a little bit. You know, we wrote more business in Q4 than we would have otherwise anticipated due to refinance activities that increases the ending in force, but it does not add to premium because we do not collect premium in the, you know, often in the first month. It is really, you know, starts in the second month. So I think you are dealing with, you know, some situations like that versus there being, you know, any substantive change in the mix of the in-force or the, you know, premium dollars on a direct basis were up. So I think it probably has more to do with the insurance in force dollars going up at the end such that the average is a little bit higher in the yield lower. But, again, those things often it will normalize over more than a quarter. Mihir Bhatia: Got it. And then the I guess, related, but in your prepared remarks, you talked about insurance in force staying flat even if the market ends up being a little bigger because you think you will have a maybe a giveback, if you will, on persistency. That did not happen this quarter. So I guess, just talk a little bit about that. Why do you think it would happen at least early on? In the early stages of, you know, a rate cut potentially or a larger market, like, just given that did not happen in the fourth quarter where you wrote more NIW, but persistency stayed pretty high? Timothy James Mattke: Yeah. I think, Mihir, it is Tim. I think it is all within sort of a range of outcomes. I think what we want to make sure that we are clear about is that when refi activity normally, it is normally going to be time. Refi that happens from MI into MI, and that there is going to be downward pressure on persistency. And so it just if there is more NIW volume, it does not just in order to sort of a total increase in insurance in force. Yeah, we did have a slight increase this quarter. Good call with an increase in sort of refi activity, pretty substantial increase for refi activity. There is a very, I would say, marginal sort of increase in our insurance in force, and so I think just trying to make sure they temper the expectations appropriate that even if interest rates fall and the majority of the pickup in volume is from refi activity, that that has downward pressure on persistency. Mihir Bhatia: Got it. And then maybe just I will just wrap with this one. Just in terms of credit trends from here, anything we should be keeping in mind as we think about default rate we look at twenty-six and twenty-seven? Just from an even from a vintage size perspective, are we through the peak years for the last vintages? Does vintage size maybe become a bit of a good guy for DQ rate from here given persistency is staying elevated? Just any thoughts there on this default rate? Thanks. Nathaniel Howe Colson: Yeah. Mihir, it is Nathan. I think that is possible. You know, our expectations now are for a pretty similarly sized market. And with, you know, home price appreciation being relatively modest, the dollar growth that we have enjoyed in certain years, even if the units were not growing as much. We do not think will be as strong. So it does feel like we are off of the lows, though, in terms of the new business that we wrote, say, in '23 or '24. And it also feels like there is maybe more upside risk to NIW than downside at this point given the refi volume we saw when rates, you know, went directionally lower but not, you know, that much lower just into the low sixes generated a lot of refi activity. So that could become that could definitely become something that is a benefit to the in-force delinquency rate. But I think as we are seeing it today, you know, the next couple of vintages are maybe modestly higher. So any impact like that would be relatively modest. Mihir Bhatia: Okay. Thank you for taking my questions. Operator: Thank you. I am showing no additional questions in the queue at this time. I am sorry. We do have a follow-up question from Mr. Bose Thomas George from KBW. Mr. George, your line is open. Bose Thomas George: Hey, guys. Thanks for the follow-up. Actually, for modeling the ceded premium number going forward, like, what is a good run rate for that? Just the impact on the premium. Nathaniel Howe Colson: I think many of the lines receive their premium, and we have this in our earnings release in the supplement. I think the challenging one to model is the profit commission on the quota share deals because as we have higher losses, we are seeding those losses to the quota share deals, but then earning less profit commission. So the answer to that question is quite a bit dependent on your expectations around future losses. And that is something that we have not given guidance on, and do not intend to going forward just because of the nature of our business and the potential variability there. But if it would be helpful to work through the mechanics of the profit commission, happy to follow-up offline too. Bose Thomas George: Okay. And just to understand, so the increase in the ceded premiums this quarter was a reflection of that was a chain reflection of a change in the profit commission? Is that right? Nathaniel Howe Colson: That is largely the case. You know, the profit commission was down $4 million sequentially. And that is really because we seeded additional losses under the quota share agreement. You know, from a net cost perspective, it does not have an impact. We are getting it back on the loss line. Okay. But it does impact the premium line. So and we do have the profit commission broken out separately. For each quarter, so you can see that. But it was down, like I said, about $4 million in the quarter. Bose Thomas George: Okay. Okay. Great. Thanks. Operator: Thank you. I am showing no additional questions in the queue at this time. I would like to turn the conference back over to management for any closing remarks. Timothy James Mattke: Thank you, Howard. I want to thank everyone for your interest in MGIC Investment Corporation. We will be participating in the UBS and BofA financial services conferences next week. I look forward to talking to all of you in the near future. Have a great rest of your week. Operator: Thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day. Speakers, standby.
Operator: Good day, and thank you for standing by. Welcome to the fourth quarter 2025 Enterprise Products Partners L.P. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. 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 conference is being recorded. I would now like to hand the conference over to your speaker today, Libby Strait, Vice President of Investor Relations. Please go ahead. Libby Strait: Good morning, and welcome to the Enterprise Products Partners conference call to discuss fourth quarter 2025 earnings. Our speakers today will be Co-Chief Executive Officers of Enterprise's General Partner, Jim Teague and Randy Fowler. Other members of our senior management team are also in attendance for the call today. During this call, we will make forward-looking statements within the meaning of 21E of the Securities Exchange Act of 1934, based on the beliefs of the company as well as assumptions made by and information currently available to Enterprise's management team. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Please refer to our latest filings with the SEC for a list of factors that may cause actual results to differ materially from those in the forward-looking statements made during this call. With that, I'll turn it over to Jim. Jim Teague: Thank you, Libby. The headline for the fourth quarter is a record $2.7 billion of EBITDA, surpassing the previous record at $2.6 billion set in 2024. We brought on a number of assets in 2025, like 14 in mid-October, Mendon West in Orion mid-year, several gathering and treating projects in the Permian, and Neches River terminal ethane export train mid-year. Mid-year startup of diluent exports to Canada and finally, the NGL pipeline in December. All these assets performed well, but they also filled holes created by decline in our commodity-sensitive businesses and marketing spreads. Market reality shaped the year. Crude oil prices averaged about $12 a barrel lower than in 2024. That reduced many of the price spreads we benefited from over the prior three years. Our paying margins were weaker in 2025. A large ten-year LPG export contract originally signed at double-digit fees, which we contracted at market rates. RGP, PGP spreads were 14¢ a pound in 2024, but only 3¢ a pound in 2025, which is an extension of a reflection of the weakness in the housing market. During 2025, we renegotiated our RTP purchase agreements to a fixed fee structure, which makes our splitter business largely spread agnostic. Spreaders are now essentially inert. We are fully contracted on our ethane export terminals and all 20 processing trains that we will have online in the Permian by year-end. For ethane exports, typically ships must be built and receiving terminals constructed to ultimately ramp the full unit utilization. In our docks, with that being said, however, the ships seem to be coming earlier than the receiving. For processing, while production growth goes over time, the two trains we brought on in mid-year 2025 are virtually full today. Our LPG exports are highly contracted through the end of the decade, and we continue to see strong interest for additional long-term commitments. We expect modest growth in 2026 as these assets and the assets we are bringing on in 2026 continue to ramp. We expect to see double-digit growth in 2027 once these assets reach full utilization. Naysayers doubted by him in the beginning, but that is to be expected on your first. But here in Shin Oak is an integrated system has 1.2 million barrels to capacity, and are running at 80%. And the next sign is a UJI partner. And agreeing to expand Bahia to 1 million barrels per day, it's a win for both Enterprise and Exxon. Associated with the UJI are a dozen downstream agreements. On the export front, Enterprise continues to expand its NGL export franchise. In 2025, we loaded between 350 and 360 million barrels across 744 ships. That will only grow as we complete phase two of the Neches River terminal, the LPG expansion the Houston Ship Channel. By next year, we expect to be quoting near 1.5 million barrels a day of NGLs, or 550 million on an annual basis. Little history lesson. Been doing international business since 1983. And we built our LPG import tunnel. 1999, we expanded the facility to include export capabilities. Many of our customers have been with us for more than twenty years. They know us. They know how we don't let behave. They like how we operate. They are more than just customers. Relationships like that tend to be very sticky. We look we spend a lot of time with our customers around the world and domestically. For example, over the holidays, I was in Thailand meeting with three large petrochemical companies. Christian Nelly was in Europe in the fourth quarter, and we did feedback in March. On the crude team, Kerry Weaver was in Asia in October, and James Bany will be in Europe later this month. And GL's god bless Tyler Cott, and his travels. Tyler was in Asia in November. With stops in Korea and India, and will be in Europe this month. And then back to Asia in March. Finally, Tug and I will be in Japan next month. To visit several export customers. We're equally focused on our domestic customers, be they producers, petrochemicals, refiners, traders, or wholesale. We deliver roughly 25 million barrels a month ethane to US crackers. That's around 300 million barrels of beer. In total, we move over 14 million barrels per day of oil equivalent to our 50,000-mile pipeline network. Additionally, Enterprise looks at its storage hubs as a critical part of its infrastructure to support its customers. Cushing, Midland, Houston, and Mont Belvieu. These are all open access systems where our customers can trade freely without any concern of being held hostage. We are proud of our record $2.7 billion of EBITDA in the fourth quarter. But as investors look to the future, I would encourage you to look beyond the numbers. Enterprise's long-term success is driven by our culture, our teamwork, our creativity, and our laser focus on customer relationships. Those intangibles would give rise to the numbers you see each quarter. Randy Fowler: Thank you, Jim. Good morning, everyone. Starting with the income statement items. Net income attributable to common unitholders was $1.6 billion or 75¢ per common unit on a fully diluted basis for 2025. In the fourth quarter, our adjusted cash flow from operations, which is cash flow from operating activities before changes in working capital, grew 5% to $2.4 billion. This strong finish propelled us to a record $8.7 billion in adjusted cash flow from operations for the full year 2025. We declared a distribution of 55¢ per common unit for 2025, which is a 2.8% increase over the distribution declared for 2024. The distribution will be paid on February 13 to common unitholders of record as of the close of business on January 30. Partnership repurchased approximately $50 million of its common units in the fourth quarter bringing total repurchases in 2025 to approximately $300 million. Inclusive of these purchases, the partnership has utilized approximately 29% of its authorized $5 billion buyback program. In addition to buybacks, our distribution reinvestment plan and employee unit purchase plan purchased a combined 4.7 million common units on the open market for $150 million in 2025. This includes 1.2 million common units purchased on the open market for $37 million during 2025. For 2025, Enterprise will have returned $5 billion of capital to our equity investors comprised of approximately $4.47 billion or 94% in distributions to limited partners and $300 million through buybacks resulting in a payout ratio of adjusted cash flow from operations of 58%. Since our 1998 IPO, we have prioritized unitholder value by responsibly returning nearly $2 billion through distributions and buybacks, all while building one of the largest energy infrastructure networks in North America. Total capital investments were $1.3 billion in 2025, which included $1 billion for growth capital projects and $230 million of sustaining capital expenditures. For 2025, organic growth capital investments were $4.4 billion with about $100 million of expenditures slipping into 2026. We also had $620 million of sustaining capital expenditures. With the completion of major projects such as the Bahia natural gas liquid pipeline and the first phase of the Neches River terminal, we continue to believe our organic growth capital expenditures in the near term will return to our mid-cycle range. With that said, our commercial teams have had great success in completing major agreements with producers since our last earnings call. In November, we announced ExxonMobil's acquisition of an undivided joint interest in Bahia natural gas liquid pipeline and the related expansion of Bahia to 1 million barrels a day and a 92-mile extension to connect Exxon's Cowboy Processing Complex as well as Enterprise Plants in the Delaware Basin. In January, we executed agreements to provide a large producer in the Delaware Basin with integrated services including acid gas gathering and treating, natural gas processing, and NGL transportation and fractionation services. These long-term agreements support our building at 24-inch trunk line to extend the partnership's acid gas gathering system Northern Lea County. A fifth treater at our dark horse facility and a third acid gas injection well. In addition, we executed long-term agreements with Haynesville producers to an extension of our Haynesville natural gas gathering system along with downstream agreements to provide natural gas processing, treating, and transportation services on the Acadian system. We have also had success in executing agreements with petrochemical customers that support incremental extensions of our ethane, ethylene, and propylene pipeline systems. As a result of these successes, and visibility to potential projects, we expect growth capital expenditures for 2026 to be in the range of $2.5 billion to $2.9 billion netting to $1.9 billion to $2.3 billion after applying approximately $600 million in proceeds from asset sales already received earlier this year which represents the final installment from Exxon on the Bahia sale. The pace of some of these expenditures will depend on the cadence of producer activity. However, we believe we will be at the higher end of this range. Sustaining capital expenditures are expected to be approximately $580 million in 2026 which includes approximately $80 million for the turnaround of our octane enhancement facility that should be completed later this month. As Jim noted earlier, we expect modest adjusted EBITDA and cash flow growth in 2026, as assets completed in 2025 ramp in volume and as assets that are completed throughout 2026 begin operations. We expect this to ultimately lead to 10% area growth in adjusted EBITDA and cash flow in 2027 compared to 2026. Enterprises adjusted cash flow for 2025 was $3.1 billion and this adjusted free cash flow, that's our cash flow from operations less capital investments and acquisition. Subtracting distributions to limited partners results in 2025 discretionary free cash flow of a negative $1.6 billion. Based on our currently expected lower level of net capital investments, in 2026 which is comprised of capital expenditures plus acquisitions less proceeds from asset sales. In the net increase in distributions, we expect discretionary free cash flow has the potential to be in the $1 billion area in 2026. In terms of allocation of capital, we see cash distributions to partners growing commensurate with operational distributable cash flow per unit growth. In the near term, we expect for our discretionary free cash flow to be split between buybacks and retiring debt. In 2026, we currently expect this split would be approximately 50% to 60% in buybacks. Future growth in cash distributions to partners can also be further enhanced by the percent of common units we retired through buybacks. Our total debt principal outstanding was $34.7 billion as of 12/31/2025. Assuming the final maturity date of our hybrids, weighted average life of our debt portfolio is approximately seventeen years. Our weighted average cost of debt was 4.7% and approximately 98% of our debt was fixed rate. At December 31, our consolidated liquidity was approximately $5.2 billion including availability under our credit facilities and unrestricted cash. Adjusted EBITDA increased 4% to $2.7 billion for the fourth quarter compared to $2.6 billion for 2024. Adjusted EBITDA for 2025 reached a record high just shy of the $10 billion mark. We ended the year with a consolidated leverage ratio of 3.3x on a net basis after adjusting for, adjusting debt for the partial equity content of our hybrid debt and reduced by the partnership's unrestricted cash on hand. Our current leverage ratio reflects significant investment in large-scale projects that we recently brought into service in the midstream asset acquisition from Occidental where the debt is on the balance sheet, but the resultant annual adjusted EBITDA generation from these investments is yet to flow into our trailing twelve-month EBITDA figures. Our leverage target remains three times plus or minus a quarter turn or 2.75 times to 3.25 times. We believe our leverage will return to within our target range by 2026 when we have a full year of adjusted EBITDA from some of these projects. With that, Libby, we can open it up for questions. Libby Strait: Thank you, Randy. Operator, we are ready to open the call for questions. One one on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. We ask that you please limit yourselves to one question and one follow-up question. Our first question comes from the line of Spiro Dounis from Citi. Spiro Dounis: Thanks, operator. Good morning, everybody. Wanted to start with the 2026 and 2027 outlook comments. So you exited 2025 really strong. Just wonder if you guys maybe walk us through some of the puts and takes off this fourth quarter exit rate as you think about 2026 growth? Just trying to get a sense of what's ratable here and if you guys see yourself still landing in that 3% to 5% growth range. And on 2027, you mentioned double-digit growth. Just curious how you're thinking about the risk to achieving that level of growth. Maybe another way of asking, what commodity environment underwrites that level? Jim Teague: I think, Spiro, this is Jim. I think given that in my script I mentioned, we didn't have as many outsized spreads as we had the three previous years. I think this I think fourth quarter's weighted more ratable than not. Randy Fowler: Hi, Spiro. And just as a follow-up on the second part of your question, I think probably as as we mentioned, we're sort of looking at modest cash flow and EBITDA growth in 2026 compared to 2025. So probably at the lower end of that 3% to 5% range. Libby Strait: Thank you. One moment for our next question. Our next question comes from the line of Theresa Chen from Barclays. Theresa Chen: Good morning. Under comments related to the NGL export cadence, specifically on the phases of Neches River ramping up over time. Can you expand on the cadence and ramp up of earnings contribution from these expansions, how should we think about the ramp in steady state contribution as we move through 2026 and into 2027? Tyler Cott: Hey. Hey, Theresa. This is Tyler Cott. I'll speak to the volume, which should correlate to the earnings. So Neches River came online last year. As you know, the fourth quarter, we started to ramp volumes of ethane in earnest. That ramp will continue into the first several months of this year. I would say by the second quarter, our overall ethane export should be very near full utilization. At which time our second train in Neches River will come online. And that will have a ramp up profile over the next several months largely propane at first, but then shifting to mostly ethane. By around the end of next year. Libby Strait: Thank you. One moment for our next question. Our next question comes from the line of Michael Blum from Wells Fargo. Michael Blum: Thanks. Good morning, everyone. Wanted to ask, as you know, Waha price have been pretty volatile the last few months. You know, fourth quarter, price is really low, spreads were wide, then, of course, in win in January, we've had this winter storm. So Waha prices spike. So I wonder if you could just remind us how EPP is impacted by changes in Waha prices in in both directions. Todd Hanley: Yeah. This is Todd speaking. So as far as a low Waha price, we have gas transport capacity. So we benefit from a higher we call it west east or west to west to south spreads. We'll be able to monetize that and with respect to recent volatility on a higher gas price, we do have storage assets that can monetize that as well. So we benefit from volatility on both sides. Michael Blum: Great. Thanks for that. And then I'm wondering if you can just give us a little color on what you're producer customers are telling you in terms of their plans for 2026. And and how you see that translating into supply growth, especially in the Permian. Thanks. Natalie Gayden: This is Natalie Gayden. Our on the GNP side, our Midland volumes are outperforming the expectations, tracking pretty closely with last year's volume growth. So just to give you some color, well connects are at a record high this year of 590. And then in the Delaware, same kind of thing. The growth curve is steepening there, and we've got an estimated 500 wells turning to production this year. And and more next year. So we're definitely keeping our running shoes on. Thank you. Libby Strait: One moment for our next question. Our next question comes from the line of Jean Ann Salisbury from Bank of America. Jean Ann Salisbury: Hi. Good morning. I don't think you have a ton of exposure to the EMPs announced in the merger yesterday. But just as a more high level, I guess, theoretical question, can you give your thoughts of how much more negotiating power a large EMP would have over midstream contracts versus two small E and Ps And if there is more consolidation, if that if that is kind of a negative for midstream? Jim Teague: Well, you wanna try it? You want me to. Hi, Jean Ann. This is Jim. Hi, Jim. With the people we have, I don't think it makes a difference. Our folks are pretty good at at seeing value and doing win-win deals. With producers, whether that be large majors or large independents. Jean Ann Salisbury: Okay. Very clear. And then as a follow-up expect that did you expect any other answer, Jean Ann? Jim Teague: No. Not really. Not really. Jean Ann Salisbury: But I I appreciate it. And I I guess as a follow-up, do most of the Midland to ECHO crude pipeline contracts roll off in 2028 to 2029? I know that there have been some discussion of of blending and extending, so not sure if that should kinda be later at this point. Jay Bainey: Jean Ann, this is Jay Bainey. So for '28, we have our first contracts roll off. But over the really, the course of last year and the year prior, you know, we have done, not only new contracts fill that space, but blend and extend. So it's roughly about 20% see roll off in '28, but we'll be working on that this year or next. Jean Ann Salisbury: Great. Thank you. Libby Strait: Thank you. One moment for our next question. Our next question comes from the line of Jeremy Tonet from JPMorgan Securities LLC. Jeremy Tonet: Hi. Good morning. Good morning. Appreciate the color on the 10%, EBITDA step up '25 into '27 there. Just want to dive in a little bit more with regards to buybacks and the pace thereof. Is there any kind of formula that you think about or other methodology when when you think about the buybacks I think I recall if there's a billion of free cash flow, it might be 50-60% deployed towards buybacks. And so just kinda trying to figure out how that might, you know, work out over the course of the year. Randy Fowler: Yeah. Jeremy, know, when the prepared remarks, I'd pretty much you know, based on where we currently are, when we see 2026, with with free cash flow in the neighborhood of $1 billion. We really see that split where 55% to 60% of the buyback would be 50 to 60% 55 to 60% of the cash flow. Would be allocated towards the buybacks. And that would really be a you know, it would be some level of opportunistic and some level of programmatic purchases. Is the way we're currently thinking about it. Jeremy Tonet: Got it. Thank you for that. And maybe if we could just pick up on the freeze offs one more time. I wouldn't expect it to be the same type of uplift as Yuri as we saw in the past, but could we see the potential for sizable uplift as as you know, optimization opportunities might have been greater than what you typically see? Tug Hanley: Yeah. This is Tug. You know, I'll just say we saw production fall off similar to prior winter events. We're able to more than make it up by optimizing our system. But Yuri was a I would say, an exception to every winter storm, so I would not be expecting that. Jeremy Tonet: Got it. Thank you for that. Libby Strait: Thank you. One moment for our next question. Our next question comes from the line of John Mackay from Goldman Sachs. John Mackay: Hey, team. Thank you for the time. Jim, you spent a while talking through your kind of international customer base on the NGL side. Can you share a little bit more color for us on what you're hearing in terms of demand trends? And maybe how that compares to to this time last year? Tyler Cott: Hey, John. This is Tyler Cott. I would say overall, obviously, there's been a a lot of noise in the last several months in the international and export markets, but demand has proven to be pretty resilient. US LPG is finding its way into new markets. India Southeast Asia. Other places in Asia. So, demand has been pretty healthy, and and maybe the ultimate barometer for us is we still have a lot of interest our export capacity long term, both LPG and ethane. John Mackay: Got it. Thanks. And maybe just following up quickly, maybe just to clarify what Spiro asked. It sounds like some of the ramp on the new projects that came into service last year and this year is gonna pick more in in '27, I guess. But can you just walk us through, I guess, any incremental tailwind sorry, headwinds you're expecting for '26 versus '25 that might offset some of that some of that ramp? Jim Teague: Yes. Is that gonna let me take the first shot at it. Zach. Right. Right. 14 is full. Two processing plants are virtually full. With the ethane terminal y'all talked about would be full the end of the year. And LPG school, isn't it? The expansion, you're well on your way. Contracting that that time. That comes on the fourth quarter. John Mackay: Yes. Jim Teague: Did I answer it, Jose? Tyler Cott: I think you did. I don't headwinds. I don't don't commodity environment's not I'll just say, as I tell you, on the LPG contract, well on our way, we're you know, 85 to 90% contracted on that. Even on the expansion? Even on the expansion. John Mackay: Good. Jim Teague: That thing, we're fully Headlands are I don't know. $40 crude's a headwind. Randy Fowler: You you you know, the one the one other I guess, commodity sensitive business that we have is our octane enhancement business, but that's only 20,000 barrels a day. It seems like the you know, there was a big change from '24 to 2025 But, really, from '25 to '26, you don't see nearly that magnitude of of of change. So I I wouldn't look for too much of a headwind there. Jim Teague: No. I don't think there is at all. John Mackay: Alright, Tim. Appreciate the color. Thank you. Libby Strait: Thank you. One moment for our next question. Our next question comes from the line of Manav Gupta from UBS. Manav Gupta: Good morning. First, congrats on the beat and a strong quarter. Second, we look at your partnership with Exxon in in a very optimistic way, two giants coming together. And I'm trying to understand, are there more opportunities to collaborate with Exxon? They're obviously looking to get big into power generation with the carbon capture and sequestration. And you have the infrastructure to move carbon dioxide So can you talk a little bit more about your partnership with Exxon and and can it grow over time, and what are the opportunities over there? Thank you. Jim Teague: Yeah. We touch Exxon. In so many places. I can't count it. And we will continue to try to do more deals with Exxon. We like them. I don't think carbon capture will be in the portfolio. Manav Gupta: Thank you. Libby Strait: Thank you. One moment for our next question. Our next question comes from the line of Jason Gabelman from TD Cowen. Jason Gabelman: Yes. Hey, good morning. Thanks for taking my questions. I I noticed in the press release, you there was mention of sour gas treating capacity expansion and then, potential opportunity to expand activity on, the, acquisition from Oxy. And the question is really, does that kind of support you filling up your y grade pipelines out of the Permian Basin, to get over the 60% utilization on Avaya pipeline, or does that present upside to that number? Jim Teague: First of all, we said we were at 80% utilization. So we're pretty pretty close to getting to the 600 as we speak or the 1.2 million as we speak. Natalie, you wanna speak to the other? Natalie Gayden: I would just say that our GMP footprint is a stronghold on feeding the downstream pipeline. So any gas that we go win or packages of gas that we bring through the gathering and processing system, are good for that. So, yes, an expansion of pinion and and Oxyrock volumes eventually coming a big way in 2027 to us is good for the NGL portfolio. Jason Gabelman: Got it. And and sorry for misspeaking on that number. My my follow-up, if I could ask another is just on the opportunity on the propane side on your product pipelines. In the first quarter of the year given given the cold weather in the Northeast? Can you just talk about what you're seeing in that system moving, propane up the product pipelines? Thanks. Tyler Cott: Yeah. Jason, I'd say all of our our propane pipelines saw really strong demand ramping towards the end of the year, and January has been as strong potent as strong as January 2025, if not stronger? Jason Gabelman: Alright. Thanks. Libby Strait: Thank you. One moment for our next question. Our next question comes from the line of Ajay O'Donnell from Tudor, Pickering, Holt and Company. Ajay O'Donnell: Thanks for the time, everyone. I wanted to start on the natural gas segment. Looks like Q4 results saw a decent benefit from gas marketing there. I wanted to know, if you could talk about your intentions on how to manage that marketing space going forward. Particularly in the back half of the year and into 2027. As we start to see diffs around Waha narrow significantly. Tug Hanley: Yeah. This is Tug. With respect to that space, we do have an open position on our on our natural gas capacity. As far as managing space long term, if there's an opportunity to bundle the GMP deal, provide an integrated solution for one of our customers, we'll evaluate that and contract that at long term. And in the short term, we'll monetize that. With any short term opportunity or volatility. And I'll pass it to Natalie. Natalie Gayden: I don't have too much to add. Other than remember, our Midland contracts are are basically pop with few floors. So as that gas price strengthens, it's which has been kinda supported, I guess, you'll see the four Bcf or four and a Bcf that's coming online in this year. And a stronger Waha basis will get the benefit of that too. We've we've have as Ted mentioned, anytime we try to pair the rest of the position that we sorry. The capacity that we can sell, it's always paired with GMP. Ajay O'Donnell: Okay. Thanks for the color. One more. If I can sneak it in, just a clarifying question on this Haynesville Acadian expansion. Curious if you could just provide some more detail behind the project, like anything about the size. Also curious, like, you know, what type of customer is really driving that expansion? Are are these coming from public or or private producers? Thanks. Natalie Gayden: Hey. This is Natalie Gayden. That's an expansion of the gathering system. So increasing treating and and our reach I guess, could say, it's a mix of privates and publics. Ajay O'Donnell: K. Thank you. Libby Strait: Thank you. One moment for our next question. Our next question comes from the line of Julien Dumoulin Smith from Jefferies. Julien Dumoulin Smith: Hey, good morning team. Thank you guys very much. I appreciate it. Nice to be on here. Maybe to follow-up a little bit on the 2027 conversation just to talk to the texture of the 2027 CapEx guidance. You you had a few projects announcements this morning. Can you speak to how much of that initial f 'twenty seven CapEx is spoken for? Would new incremental project announcements represent incremental CapEx on that FY 27 range of two to two and a half? By chance? Randy Fowler: Yeah. This is Randy. You know, the the range that we threw out up to $2.9 billion, those are some that includes some projects that we've got eyesight on that we've not FID ed. And not announced. So I think we've got some leeway to fill up that $2.9 billion. But, again, as you heard on the call with some of the growth that we were seeing we're expecting to be at the top end of that range. For 2026. And for 2027, I think we're still in that range of 2 to 2.5. Right. Exactly. Excellent. And and and just clarifying '27 real quickly in terms of the EBITDA guidance itself, you're saying you expect double digit growth here, '26 versus '27, just to clarify here. Randy Fowler: Yeah. And and and just what are the if go for it. Yeah. Thank you for that. Yeah. The clarification is our current expectation is that we would see EBITDA growth in the neighborhood of 10/2027 over 2026. And again, from 2025 to 2026, really just modest growth. And probably one other thing I would clarify from an earlier question was Spiro. I think what Jim said, a lot of that there's a lot of ratability in our our fourth quarter, earnings just from a business standpoint. But I will remind you, fourth quarter and first quarter are seasonally stronger businesses. So don't straight line this. Julien Dumoulin Smith: Right. Absolutely. And then just just speaking of expansions, under here real quickly with the UJI with Exxon, can you talk a little bit about the opportunities there, especially if you think about volumes ultimately landing in the month? 27 CapEx or onwards. Justin Kleiderer: Yeah. This is Justin Kleiderer. Yeah. So we're off on the expansion. As backed by by Exxon. It is a UJI, so Exxon has rights to make connections on the origin. It front as they see fit as as Jim also alluded to, we we executed 12 downstream agreements that speaks to the overall breadth of our relationship, with Exxon. So it was a good transaction for Bahia and I think it brings Axon Enterprise closer together. We'll see where it goes from there. Julien Dumoulin Smith: Alright. Fair enough, guys. Best of luck. Talk soon. Libby Strait: Thank you. One moment for our next question. Our next question comes from the line of Keith Stanley from Wolfe Research. Keith Stanley: Hi, good morning and wanna revisit the, the 2027 commentary as well if I can, Randy. 10% growth would be over a billion dollars of EBITDA growth in just one year. I I was looking back. That'd be the fastest organic growth for the company, really, this decade. It sounds like a lot of that is from the LPG expansion and Neches River. But is there anything else you would highlight that's that's big and chunky, particularly in '27 And then separately, I just wanna make sure, Bahia, as it's a UJI, that's treated on a net basis. Right? So that's not consolidated in your EBITDA or anything like that. Randy Fowler: I'll tell you what. Why don't we handle your last question first? Daniel, you wanna take that? The boss. Yes. The UJI will be proportionately consolidated. So we will only report our our share of that. Investment. Keith Stanley: Got it. Randy Fowler: Yeah. And then Keith, back on your earlier question, really, I would say across the board, I mean, if you start with our NGL segment, you'll have a you know, we we've got another plant that will be coming up processing plant that will be coming up in the Delaware any first later in the first quarter, so you'll get a full year of benefit there. There's another processing plant that we're looking to bring on in the Midland Basin. At the end of this year that you would get a full year benefit from in 2027, with the OxyRock acquisition, that we made, you'll see, more benefit from it in 2027. And then, really, then all the if you think about then all the downstream that comes with that, and I and I'll and I'll go back. Trigger four. You would get a full benefit full year benefit of trigger four. Trigger five, you will come in and get benefit from there as well as the incremental expansions on the acid gas. And then just think about all of that flowing downstream through Bahia pipeline into the fractionators. And then into the distribution system and across the marine terminal. Tug Hanley: Yeah. This is something I want to add as well. We have a lot of higher fees kicking on our Acadian Haynesville system as well. Keith Stanley: That's helpful color. Thanks for that. Had a quick follow-up on the NGL marketing. So very strong quarter in Q4. You almost matched a year ago when you had those very wide export ARBs. What types of activities are driving strong NGL marketing in Q4, and and what are your expectations for '26? Do you see that as as an area of upside? Tug Hanley: We a we a lot this is Tug. We had a lot of storage opportunities. We had high utilization on our ethane export assets. You know, just it would be just a mixed bag of standard opportunities that present themselves, we always capture. Keith Stanley: K. Thank you. Libby Strait: Thank you. One moment for our next question. Our next question comes from the line of Brandon Bingham from Scotiabank. Brandon Bingham: Hi, good morning. Just one quick one here, and it might be a little early, but I'll take a shot either way. Just thinking back to that OxyGathering deal, do you see any potential for more of the same types of deals on the horizon given this recent M and A news in the upstream side? Or do you kind of see inorganic spend as maybe lower price priority now given the expected macro outlook this year? Jim Teague: This is Jim. I don't see as many girls on the dance floor as there used to be. Brandon Bingham: Okay. Libby Strait: Thank you. At this time, I would now like to turn the conference back over to Libby Strait for closing remarks. Libby Strait: Thank you to our participants for joining us today. That concludes our remarks. Have a good day. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and thank you for standing by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the New Jersey Resources Corporation Fiscal 2026 First Quarter Conference 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. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. I would now like to turn the call over to Adam Prior, Director of Investor Relations. Please go ahead. Adam Prior: Thank you. Welcome to New Jersey Resources Corporation fiscal 2025 fourth quarter and year-end Conference Call and Webcast. I'm joined here today by Stephen D. Westhoven, our President and CEO, Roberto Bel, our Senior Vice President and Chief Financial Officer, as well as other members of our senior management team. Certain statements in today's call contain estimates and other forward-looking statements within the meaning of the securities laws. We wish to caution listeners of this call that the current expectations, assumptions, and beliefs forming the basis of our forward-looking statements include many factors that are beyond our ability to control or estimate precisely. This could cause results to materially differ from our expectations as found on slide two. These items can also be found in the forward-looking statements section of yesterday's earnings release, furnished on Form 8-Ks and in our most recent Forms 10-Ks and 10-Q as filed with the SEC. We do not, by including this statement, assume any obligation to review or revise any particular forward-looking statement referenced herein in light of future events. We will also be referring to certain non-GAAP financial measures such as net financial earnings or NFE. We believe that NFE, net financial loss, utility gross margin, financial margin, adjusted funds from operations, and adjusted debt provide a more complete understanding of our financial performance. However, these non-GAAP measures are not intended to be a substitute for GAAP. Our non-GAAP financial measures are discussed more fully in Item seven of our 10-Ks. The slides for today's presentation are available on our website and were furnished on our Form 8-K filed yesterday. Stephen will start with this year's highlights in a business unit overview, beginning on slide five. Roberto will then review our financial results. Then we will open it up for your questions. With that said, I will turn the call over to our President and CEO, Stephen D. Westhoven. Please go ahead, Stephen. Stephen D. Westhoven: Thanks, Adam, and good morning, everyone. I hope you all had a chance to review our earnings materials, which include detailed disclosures on our growth prospects. I wanted to start by discussing a few highlights. We delivered excellent results in fiscal 2025, driven by strong execution and performance. For the fifth year in a row, we exceeded initial earnings guidance and long-term growth targets. After a successful 2025, there were a few key themes as we look ahead to fiscal 2026 and beyond. First, consistency and execution. We are guiding to NFEPS at $3.03 to $3.18 per share in fiscal 2026. The range is consistent with our long-term 7% to 9% growth rate, while leaving additional room for upside. Second, targeted capital deployment. We expect to invest roughly $5 billion over the next five years across the whole company, with roughly 60% allocated to our utility New Jersey Natural Gas. To put the $5 billion into context, this represents a 40% increase compared to the CapEx spent over the last five years. Third, a healthy balance sheet anchored in disciplined financial management. We expect credit metrics to remain strong with healthy cash flows, ample liquidity, and a balanced debt maturity profile that supports long-term stability. Importantly, NJR requires no block equity issuance to execute on its capital plan. On the next slide, we highlight a few of the key drivers at our business segments. To begin, New Jersey Natural Gas is positioned for high single-digit rate base growth through 2030. S and T is expected to more than double net financial earnings by 2027 driven by favorable recontracting of both Adelphia and Leaf River. And looking ahead, we recently filed with FERC a plan to increase working gas capacity by over 70% at Leaf River. And at Clean Energy Ventures, we expect to expand capacity by more than 50% over the next two years with a robust pipeline of safe harbored projects. In short, through a disciplined capital investment strategy, we have visibility to deliver sustainable growth well into the future, supported by a solid balance sheet. And we are able to achieve all this with minimal dilution to shareholders. Let me turn to a brief discussion of each business unit starting with the New Jersey Natural Gas on Slide seven. Our planned investments in New Jersey Natural Gas are expected to drive high single-digit rate base growth through 2030. New Jersey Natural Gas operates within a constructive utility framework and continues to make responsible investments in safety and reliability while prioritizing affordability for our customers. Natural gas is by far the cheapest option for customers to heat their homes. Energy efficiency programs such as Save Green further reduce usage and cost while aligning with environmental goals. For example, residential customers who fully participate in Save Green Whole Home offerings see a reduction of up to 30% in their energy usage, saving hundreds of dollars in utility costs every year. Moving to the next slide, Storage and Transportation is emerging as a key earnings growth driver for NJR. Over the next two years, we expect NFE to more than double at S and T. And this is largely driven by strong recontracting in both the Adelphia and Leaf River. These are fixed price contracts with quality and creditworthy counterparties. We recently reached a settlement in our first rate case at Adelphia, this constructive outcome enables recovery of the substantial investments and operational improvements made in recent years. While near-term earnings are set to double, we are actively pursuing organic growth opportunities for additional upside at Leaf River, which we outlined on the next slide. When we acquired Leaf River in 2019, it positioned NJR as a leading service provider in the Gulf Coast, one of the highest growing energy demand centers in the United States. In addition to the prime location, the long-term value of the asset was enhanced by expansion options beyond the three existing operating caverns. Since our purchase of the asset, market demand has strengthened. Throughout fiscal 2025, we conducted a number of nonbinding open seasons which confirmed a high level of commercial interest in capacity expansion. Following this favorable response, we filed a FERC application in October that included several complementary investments to increase Leaf River's working gas capacity by over 70%. They include the expansion in our existing caverns to a working gas capacity of 43 Bcf by 2028 and the development of an additional fourth cavern that will bring total capacity to 55 Bcf. Each phase of the investment is expected to be backed by long-term fee-based contracts. Building on our already strong NFE growth, this phased approach has an inherent speed to market advantage that positions NJR ahead of greenfield development options. To conclude, we see considerable upside in both the near and long term as S and T becomes a greater contributor to NJR's earnings profile. Moving to Clean Energy Ventures on Slide 10. We expect to grow in-service capacity by more than 50% over the next two years. Looking ahead, we have a strong project pipeline designed to maintain investment tax credits through strategic safe harboring. This positions CEV to deliver continued growth in high single-digit unlevered returns. So with that, I'll turn the call over to Roberto for a financial review. Roberto? Roberto Bel: Thanks, Stephen. Fiscal 2025 was an excellent year, with strong earnings growth, a solid balance sheet, and continued investment across our businesses. Slide 12 highlights a few fiscal 2025 accomplishments. New Jersey Natural Gas achieved a constructive outcome in its recent rate case and delivered record investments for Save Green. Clean Energy Ventures added record new capacity in fiscal 2025, placing 93 megawatts of new commercial solar capacity into service, expanding our portfolio to 479 megawatts. In addition, CEV secured investment options for years to come through effective safe harboring. In Storage and Transportation, Adelphia received approval for a settlement on its first rate case with Leaf River advancing expansion initiatives. Energy services achieved strong cash flow generation, and our home services business was named a Rinnai's top 20 pro partner for the ninth consecutive year. We also marked an important milestone, thirty consecutive years of dividend increases, restoring confidence in our long-term plan. On the next slide, we finished the year at the top end of our guidance range, which was raised earlier this year. With the year financial results ahead of expectations, roughly two-thirds of total NFEPS came from the utility, and when you exclude the net impact of the sale of our residential solar assets, that figure raises to over 70%, underscoring the stability of our earnings. Drivers of our performance include the completion of a rate case and a record year of Save Green investment. Additional drivers include approximately 30¢ per share from the sale of our initial solar portfolio, improved performance from our Storage and Transportation business, and solid winter results from energy services. Moving to a discussion of CapEx on slide 14, we deployed $850 million across our businesses, which I'll highlight in the next few slides. On slide 15, New Jersey Natural Gas represented approximately 64% of total CapEx, with investments directed towards strengthening core infrastructure, enhancing system safety and reliability, and supporting customer growth. Almost half of these investments are in recovery with minimal lag. As shown on slide 16, fiscal 2025 CapEx for CEV came in well above expectations, reflecting accelerated progress. Importantly, our capital deployment target is fully safe harbored, securing tax benefits for future capital expenditures. Building on this strong 2025, I wanted to shift our CapEx outlook on Slide 17. We are sharing a five-year CapEx outlook of $4.8 to $5.2 billion through fiscal 2030. This represents a 40% increase over the previous five years of capital spending across our businesses. We expect that more than 60% of our total projected CapEx will be dedicated to the utility, with CEV and S and T representing the balance. Together, these investments support our 7% to 9% long-term NFEPS growth target while maintaining a solid balance sheet as discussed in the next slide. Strong cash generation across our businesses translates to an adjusted FFO to adjusted debt ratio that's projected to remain at around 20% for the next five years with no block equity needed. Additionally, ample liquidity and a well-laddered debt maturity profile minimize near-term refinancing risk and preserve financial flexibility. And finally, we are initiating fiscal 2026 NFEPS guidance with a range of $3.03 to $3.18 per share. The range is consistent with our long-term 7% to 9% growth rate while leaving additional room for upside. The utility is expected to contribute approximately 70% of fiscal 2026 NFEPS, complemented by earnings growth from CEV and S and T and a baseline outlook for energy services. With that, I'll turn it back to Stephen for concluding remarks on slide 21. Stephen D. Westhoven: Thanks, Roberto. Over the last twenty-five years, we've delivered industry-leading returns reflecting both the quality of our utility investments and disciplined contributions from our non-utility businesses. While our infrastructure investments have been the foundation of this performance, energy services have complemented that strength, enhancing consolidated returns and providing flexibility to reinvest in our infrastructure businesses. To recap, fiscal 2025 was another year of solid execution, marking five consecutive years of exceeding initial earnings expectations. Our long-term growth remains anchored by our regulated utility, with clear visibility into capital spending at New Jersey Natural Gas. Storage and Transportation is set for accelerated growth with earnings expected to more than double in the near term before we even begin to factor in those capacity expansions we highlighted earlier. Over the next two years, Clean Energy Ventures expects a 50% increase in installed capacity, and our project pipeline is secured into the future through proactive safe harboring. NJR today stands as a balanced, diversified energy infrastructure company built for long-term stability and value creation. The outlook for fiscal 2026 and beyond is clear, well-funded, and utility-anchored. As we all know, New Jersey recently had a gubernatorial election. Electricity prices and affordability issues were front and center. We understand the challenge the state is facing today, and we look forward to working with the incoming governor to meet her call for swift deployment of clean energy solutions and to continue providing affordable natural gas service to families and businesses. And finally, a sincere thank you to all NJR employees for your dedication and hard work throughout the past year. Your commitment is the foundation for our continued success. So with that, let's open the line for questions. Operator: Ladies and gentlemen, I will now turn the call over to Adam Prior, Director of Investor Relations. Please go ahead. Adam Prior: Thank you, Kelvin. Well, for those of you on the call, I'm sure you noticed that we just ran through our fourth quarter script, which we read in November. And we want to give you an update for Q1. And so we're going to go through our presentation for that script now, and I'll turn it over to Stephen D. Westhoven. He'll go through our first quarter results, and Roberto Bel will follow with our financial results. And then we'll be happy to take your questions. And thank you for your patience. Stephen D. Westhoven: Yeah. Thanks, Adam. Yeah. Sorry, everybody. We'll run through the scripts now reflecting this quarter. So the natural gas industry just navigated an extraordinary weather event with record-setting demand. And once again, NJR's diversified businesses responded with extraordinary performance. I want to start today's call by acknowledging our team's execution during this prolonged period of extreme cold weather, which hasn't been seen in decades. And thanks to all of our employees for your collective efforts on behalf of our customers. Our assets were operated safely and successfully across our entire natural gas portfolio. Looking at this event and at recent major winter storms, we consistently demonstrate that our systems and our people are prepared, resilient, and able to execute under pressure. At New Jersey Natural Gas, these past few weeks highlighted how critical our lifeline services are to our customers. The utility kept homes and businesses warm and supported emergency providers without interruption. Our non-utility business held true to the same level of performance. Both Adelphia and Leaf River experienced high utilization and continuously delivered despite regional disruptions. And our energy services team once again expertly executed. Our strategically located assets generated significant value volatility created by the prolonged cold temperatures. And as a result of Energy Services' performance, we're able to increase our fiscal 2026 NFEPS guidance by $0.25 a share to a range of $3.28 to $3.43 per share. This represents the sixth consecutive year of raising guidance as a result of the strength of our complementary portfolio of businesses. As I started, this was an extraordinary weather event met with NJR's extraordinary performance. I'll turn now to look at how New Jersey Natural Gas took steps to protect customers against high natural gas prices during the recent cold weather. Over a seven-day stretch, New Jersey Natural Gas delivered the highest sendouts in its company's history. This demand underscores how all aspects of our local economy rely on natural gas, even more so under extreme conditions when our customers need us most. Sustained low temperatures likely result in higher gas use by our customers, which will have an impact on bills. With the supportive regulatory framework approved by the New Jersey Board of Public Utilities, New Jersey Natural Gas is proactive in helping to protect customers against these high-use increases. Each year, the utility purchases natural gas well in advance of the heating season when commodity prices are more likely to increase and spike during the winter weather events. As a matter of policy, a minimum of 75% of the upcoming winter season's projected gas needs are secured in advance. Going into this winter, New Jersey Natural Gas was over 87% hedged. This is impactful. Our average hedge price is approximately $2.20 per decatherm for gas in storage and LNG. And that compares to a Citygate pricing that traded in excess of $135 per decatherm during the event. This disciplined approach prioritizes affordability as it allows us to secure cost-effective supply to serve our customers. In addition, throughout the year, our energy efficiency programs, namely Save Green, help customers reduce usage and lower bills. More than 110,000 customers have taken part in our programs to date, and those utilizing our whole home offerings are realizing bill savings of roughly 30%. In addition to managing usage, we also provide support through financial assistance programs, equal payment plans, and proactive outreach. These efforts help connect customers with more than $16.5 million in energy assistance funding. Now let's turn to customer growth. Natural gas remains the cheapest option to heat homes and businesses, supporting New Jersey Natural Gas' strong customer growth rate. This growth also reflects favorable trends in new construction and conversions across our service territory. In our slide deck, we included a photo of the new housing development in Monmouth County that will add roughly 350 new customers once completed. It's a clear example of the meaningful customer-driven opportunity ahead. Now switching to a discussion of our Storage and Transportation business on slide eight. As we noted on our year-end earnings call, we expect to double NFE over the next two years at S and T. This is driven by strong recontracting in both the Adelphia and Leaf River. These are fixed price contracts with quality credit rating categories. During the first quarter, we filed a FERC application that includes several complementary businesses that would increase Leaf River's working capacity by more than 70% over the next few years. Today, we're announcing that we've already secured a long-term contract that covers the initial capacity expansion at our existing caverns. The remaining phases of the project will be supported by long-term fee-based contracts. We're currently active in the FERC process with likely authorization to decision coming by the end of the fiscal year. This is on track with our expectations, and we'll provide updates as the project progresses. Moving to Clean Energy Ventures on slide nine. We added approximately 10 megawatts of capacity during the quarter. Looking ahead, we expect to grow in-service capacity by more than 50% over the next two years. And our proactive safe harboring initiatives to preserve federal tax incentives further strengthen our leading position in the marketplace. In a region where energy affordability concerns are driven in large part by supply shortages, CEV's speed to market capability is a competitive advantage. Specifically, CEV is advancing significant wholesale PJM solar assets as PJM demand projects are trending upward. We expect these operating assets to continue to increase in value. At the same time, market shortages are opening up additional organic growth opportunities, including new technologies to optimize our existing interconnections. These technologies have the potential to unlock incremental value and add new supply to the grid at a time when New Jersey and PJM need it most. So with that, I'll turn the call over to Roberto for a financial review. Roberto Bel: Thanks, Stephen. I'll start with a brief walk for the quarter on slide 11. We reported NFE of $118.2 million or $1.17 per share for the quarter, reflecting disciplined execution and solid performance across our businesses. We saw a higher contribution from the utility in this period, largely due to new base rates being in place for the entire quarter in fiscal 2026. It was offset by a lower CEV contribution given the gain on the sale of our initial solar assets in the prior year period. Let's move to a discussion of our capital plan on the next slide. We deployed approximately $119 million across our businesses during the quarter. New Jersey Natural Gas represented approximately 70% of total CapEx for the period, with investments directed towards strengthening core infrastructure, enhancing system safety and reliability, and supporting continued customer growth. We're reaffirming our five-year CapEx outlook of $4.8 to $5.2 billion through fiscal 2030. We expect that more than 60% of our total projected CapEx will be dedicated to the utility, with CEV and S and T representing the balance. At CEV, our total deployment target is fully safe harbored, securing its future tax incentives. Together, these investments support our 7% to 9% long-term NFEPS growth targets while maintaining a solid balance sheet as discussed in the next slide. On slide 13, we highlight the strengths of our balance sheet. Strong cash generation across our businesses translates into an adjusted FFO to adjusted debt ratio that's projected to remain around 20% for the next five years. Energy service outperformance this quarter provides meaningful additional cash flow, enhances our ability to manage capital spending and maintain strong credit metrics, and reinforces that we have no need for block equity in the foreseeable future. Additionally, ample liquidity and a well-laddered debt maturity profile minimize near-term refinancing risk and preserve financial flexibility. And finally, as a result of the outperformance from energy service during the winter to date, we're raising our NFEPS guidance range by 25¢ to a higher range of $3.28 to $3.43 per share. We're also revising our expected segment NFEPS contribution percentages as a result of this outperformance. The utility will remain the majority of the company's NFEPS for fiscal 2026, with energy services' percentage rising as a result of capturing additional financial margin during this period. With that, I'll turn it back to Stephen for concluding remarks on slide 15. Stephen D. Westhoven: Thanks, Roberto. Last month, we issued NJR's fiscal 2025 Corporate Sustainability Report, which reflects our commitment to transparency with our stakeholders. The focus of this year's report is appropriately on affordability. The report brings greater detail around our energy efficiency and customer assistance efforts. Lower natural gas prices are effectively helping reduce overall household energy costs, an important factor when addressing affordability. As many of you know, New Jersey welcomed a new governor last month. Governor Sherrill moved quickly to outline her priorities, signing two executive orders aimed at addressing rising electric utility costs and New Jersey's broader energy supply challenges. These actions are consistent with what she emphasized during the campaign, focusing on affordability for customers. These discussions are an important issue for the state, and we look forward to continuing our dialogue and working with the new administration to help drive solutions forward while growing our business. To conclude, our long-term growth remains anchored by our regulated utility with clear visibility into capital spending at New Jersey Natural Gas. Our top priority is making sure our system operates reliably when it's needed most. Storage and Transportation is set for accelerated growth with earnings expected to more than double in the near term before we begin to factor in capacity expansions at Leaf River. Over the next two years, Clean Energy Ventures expects a 50% increase in installed capacity, and our project pipeline is secured into the future through proactive safe harboring. Overall, the momentum across all of our businesses reinforces our confidence in the path ahead. And finally, I want to thank everyone again, our NJR employees, for your dedication and hard work. So with that, let's open up the line for questions. Operator: Ladies and gentlemen, we will now begin the question and answer session. If you would like to withdraw your question, please press 1 again. Your first question comes from the line of Gabriel Moreen of Mizuho. Please go ahead. Gabriel Moreen: I guess the story was so good you have to tell it twice. So I wanted to start off on energy services. Clearly, outstanding performance here. It's supposed to be single-digit weather again up and down the Eastern Seaboard this upcoming weekend for a couple of days. Can you just talk about to the extent your revision here may capture weather events for the rest of the quarter or there's the potential for further upside should, you know, volatility continue to materialize? Stephen D. Westhoven: Yeah. Thanks, Gabriel. Thanks for the question. Yeah. Sorry about the double repeat there. Yeah. The energy services group and, you know, our guidance that we issued last night based on, you know, results to date or, you know, kind of our estimates through January. So, obviously, we've got a lot of fiscal year that's left. And, you know, not able to incorporate events that haven't happened yet. So, yeah, we'll see how those, you know, continue to play out. But, certainly, you know, January was obviously very constructive, you know, for our results here at NJR. Gabriel Moreen: Thanks, Stephen. And maybe if I can follow-up on S and T, you know, the capacity going from 43 to 55 just want to confirm you've got contracts for that portion of the expansion. And then also but maybe if you'd also speak to some of the blue sky opportunities around expanding beyond the 55? Are you getting reverse customer inquiries? Is there potential for that capacity growth to accelerate either in size or timeline? And then also, are the economics there? You talked last quarter about some of the economics behind your contract. And how that stepped up, but are those supportive now in your mind of full greenfield development around your Leaf River? Stephen D. Westhoven: Yeah. So, you know, the whole story at Leaf River, you know, we're doubling our earnings, and that's largely through, you know, contract upgrades at the Adelphia Gateway and Leaf River through 2027. The FERC filing, you know, shows compression expansion, existing cavern expansion, and then a fourth cavern expansion, which is what you're referring to from the, you know, approximate 43 to the 55, you know, Bcf. So what we have contracted for now and what we're talking about on today's call is that compression expansion and existing capacity expansion. That fourth cavern, we do not have contracts for yet. But as you can imagine, you know, the market has been very constructive. But we're still, you know, working through that. We held an open season and certainly, like I said, constructive to that point of expanding going forward. There is additional expansion, you know, both at Adelphia Gateway and Leaf River, but on what we've talked about here today. You know, we'll continue to work, you know, the markets and see what they're willing to pay for. Remember, if we get signed contracts, then those will essentially drive, you know, our investment at those facilities. So we'll back to back those. And as those come in, you know, we'll certainly share it, you know, with our investors. But, you know, good news today, and certainly the market and even recent conditions, you know, drive for the need for more storage and capacity in the Northeast, Southeast, you know, really all over the US. Operator: Thanks, Gabriel. Appreciate it. Your next question comes from the line of Elias Jossen of JPMorgan. Please go ahead. Elias Jossen: Hey. Good morning, everyone. Just wanted to start on the evolving regulatory backdrop. So how should we think about the Jersey affordability efforts that you highlighted in the release, particularly as it pertains to future rate case filings and the overall regulatory strategy at the utility? Stephen D. Westhoven: Thanks, Elias. Yeah. And, you know, affordability has always been important, you know, for us at NJR. You know, we talked in our narrative about, you know, the way that we hedge our gas, you know, driving energy efficiency, you know, reducing customer usage, in order to lower their bills, you know, energy assistance, you know, for those that need it. So that's not a new narrative for us. You know, we'll continue, you know, to drive that forward. Remember, you know, we completed a rate case which went into effect about fourteen months ago or so, fifteen months ago or so. So we don't have any pressing needs to jump into the regulatory process. You know, we're going to continue to, you know, work with the administration to take advantage of the opportunities that present themselves. You know, we do have capacity needs that are clearly stated, you know, in the state of New Jersey. We're going to work proactively with the administration to achieve our shared goals. So, you know, that's the way that we're looking at it. Elias Jossen: Awesome. But then, you know, maybe just pivoting more towards the second executive order, EEO2, and the opportunity set that it offers you at CEV. Can you just talk about the plan for that business moving forward, thinking about the backlog of installs that you guys have and the safe harboring? I know you're kind of substantially through that, but just the outlook for that segment and whether or not there's any impact from recent regulation or legislation? Stephen D. Westhoven: Yeah. It's encouraging. You know? Thanks for asking the question. You know? Permit reform, you know, ways to accelerate interconnects, ways to accelerate our ability to develop, you know, our safe harbored assets in the state of New Jersey are the quickest, you know, capacity that can be brought to market. So all those things are encouraging. You know, we're going to work with the administration. Yeah. They've got some work to do in order to effectuate all that. But, you know, those tailwinds are clearly in the making in order to develop more. And, you know, when we are able to, you know, some evidence that we're able to move forward, then we'll certainly share that with the investing community. Elias Jossen: Awesome. I'll be through it. Thanks. Operator: Your next question comes from the line of Jamieson Ward of Jefferies. Please go ahead. Jamieson Ward: Hi, guys. I actually got Jamieson Ward on here for Julian. How are you? Stephen D. Westhoven: Hello, Jamieson. Jamieson Ward: Hey. Great color that you've given on affordability, the executive orders. So I really appreciate that. As well on the fourth cavern heading to 55 Bcf, you mentioned not having contracts yet, but can you characterize the level of commercial interest you're seeing? Give us a sense of the expected capital intensity relative to the existing expansion. Maybe help us think about the timing of any associated earnings contribution kind of helps give clarity on the longer-term run, right, into 2029, 2030, and so on. Stephen D. Westhoven: Yeah. I think the open seasons that we've had to date have been, you know, constructive. You know, the things that we need to do are to be able to turn, you know, those open seasons and the pricing and the terms into an agreement that we can then, you know, turn it and build upon. You know, right now, the timing is perfect. You know, we're able to put in the compression. We can expand our existing facilities. You know, that, obviously, that put more brownfield expansion a little bit cheaper to come to market than a greenfield. But the pricing we're seeing, you know, gives us confidence that being able to, you know, develop this fourth cavern, you know, is certainly, you know, possible in the future, and we're working towards that. You know, as far as timelines go, you know, we've already said, you know, we're going to double earnings through 2027. Then, you know, we're working, you know, after we get our first certificate construction through the facility. So then you see, you know, the existing tower expansion and capacity, you know, come to market with that matching contract and, like, a 2028 time frame, and then fourth cavern expansion as this market develops. You know, like I said, you know, certainly recent events are supportive. Looks like, you know, 2029 time frame, you know, starting construction, obviously, sometime prior to that. So we'll have to, you know, see how that ends up playing out. But like I said, the open season's recent market, you know, volatility all points towards the need for more storage in that area and know that we're pursuing that aggressively. Jamieson Ward: That's great. Thank you very much. Another really strong start to the year, guys. Impressive. Thanks a lot. Back in the queue. Operator: Thanks, Jamieson. Your next question comes from the line of Christopher Ronald Ellinghaus of Siebert William Shang. Please go ahead. Christopher Ronald Ellinghaus: Hey, good morning, everybody. Another great quarter. Thanks. Stephen, can you talk about sort of what you're seeing in the solar pipeline outside of New Jersey and sort of given the EOs, you know, has that changed your thought process about sort of geographic diversity at this point? Stephen D. Westhoven: No. I mean, we're still moving forward. You know, we've got about, I guess, 50% of our forward-looking projects are outside the state of New Jersey. Percent obviously inside the state of New Jersey, you know, we're continuing to pursue projects that, you know, meet our rate of return and, you know, build in, you know, an area that it's friendly from a regulatory perspective. And there's a number of states that are around us that are friendly from a regulatory perspective. So, you know, we see those markets continuing. And remember, PJM's big. Right? And, you know, certainly, any power grid isn't independent from those adjacent to it. Got a capacity shortage in one. It usually means there's a capacity shortage in others. So, you know, this trend and the ability to quickly bring, you know, solar capacity to market, you know, more quickly than, you know, other forms, you know, nuclear, you know, some larger gas-fired generations and instances like that. Is important. So while these are constructive, you couple on, you know, the EO and potential permitting reform and things like that. You know, hopefully, we see some acceleration, you know, in the near future trying to solve this problem of being short capacity in the short term. Christopher Ronald Ellinghaus: Okay. As far as storage and transmission goes, the growth is great. Can you, outside of the Adelphia Gateway outcome, can you sort of give us any color vis-a-vis sort of the proportionality of the recontracting price improvement versus, say, the capacity? I think it's slide eight. You know, how do how should we think about the timing of the growth to the new target, you know, price versus volume? Stephen D. Westhoven: Yeah. I, you know, it's hard to kind of differentiate that, but I think it's, you know, pretty clear if you go back to what our historical earnings are. We're going to double our earnings from that segment by 2027. And, you know, in that is, you know, quite a bit of recontracting. You know? When purchasing Leaf River, you know, part of our investment that, you know, storage rates were going to go up, and you see that being executed. The Adelphia Gateway, you know, like a normal interstate pipeline going through rate cases, being able to, you know, raise rates to reflect capital that was invested on the pipeline in the future, you know, certainly being reflected as well. You know, I think, you know, this recent weather event continues to reinforce, you know, how short our region is. And we're already talking about that from an electric perspective, you know, for quite some time. So this infrastructure is very needed. The easiest way to expand infrastructure is to expand already existing infrastructure, which we have in both, you know, Southeast and Leaf River. The Adelphia Gateway in the Northeast. So we continue to look at ways to expand that as well in order to grow. So we've got our capital plans that are out there that'll give you what we're, you know, very certain we're going to be able to execute. And I think, you know, other factors like the ones I just mentioned are additive. So we're going to continue to work on those, and then we'll share those when they come to fruition. Christopher Ronald Ellinghaus: Okay. Great. Stephen, you sort of alluded to CEV having some technology opportunities for upside. Can you elaborate on that a little bit? Stephen D. Westhoven: Yes. We own, you know, a number of grid-connected facilities. You know, those interconnections are very valuable. Being able to use those at a much higher load factor through distributed generation, battery power, those all bring capacity to the grid. And you can bring capacity to the grid in that way, you know, very quickly. And, you know, being able to deploy quickly is exactly what the market needs. So now it's just a matter of how do we put together the regulatory constructs aligned with the economics of being able to make the investments to make all this work. But we think we've got a leg up because we have brownfield, you know, infrastructure. Right? Infrastructure that's already in place, the ability to expand without the need to build, you know, pure greenfield gives us that advantage, and it should make us some first mover in this space. So those are the things we're thinking about and certainly trying to drive forward. Again, all those things are outside of our plan, so that would be upside to our plan. So our plan shows exactly what we know is going to, you know, we're making the investments on, outside of the plan are the things that we're talking about here. You know, forward vision and what we're trying to drive as a management team to execute. Christopher Ronald Ellinghaus: That sort of suggests some storage opportunities, which are certainly high-ticket items. So, you know, that you sort of alluded to that possibility in terms of maybe some CapEx upside. Is that what your thought process is? Stephen D. Westhoven: Yeah. Yeah. Exactly it. Exactly it. Christopher Ronald Ellinghaus: Okay. One last question. Obviously, your hedging strategy has really paid off handsomely in the first quarter. You know, do regulators fully appreciate the benefit that you bring there? And or how do you sort of capitalize on that by, you know, reinforcing the value proposition that you bring with your hedging strategy? Stephen D. Westhoven: Yeah. I mean, the regulators were part of the construct in putting that together, so they certainly are aware of it. We talk about it and we file our BGSS that can be recognized. You know, certainly, they see, you know, our rates in the ground. You know, having an average price of storage of $2.27 when, you know, Citygate prices were over $100, you know, even if you look at some of the supplier pricing $30, $40, you know, dollars down in those areas. Being able to avoid those purchases, you know, has a, you know, just a huge benefit to our customers, not having to pay spot prices for that natural gas. So, yeah, they're certainly aware of it. You know, we talk about it, and, you know, those programs are in place for a reason. They work and mitigate, you know, cost to our customers longer term. Christopher Ronald Ellinghaus: Alright. Thanks. I appreciate it. Operator: Thank you. Your next question comes from the line of Travis Miller of Morningstar. Please go ahead. Travis Miller: Good morning, everyone. Thank you. Just a quick clarification on the guidance raise, the $0.25 was that all from what you're anticipating in Q2, or was there some of that in outperformance in Q1 relative to what you were expecting? Stephen D. Westhoven: So, Travis, you know, we looked at our book and we saw the performance in January and decided that it was significant enough to warrant a raise during this call. So, really, this is an estimate, you know, through January at this point. Travis Miller: Okay. Okay. Clear. And then in terms of CapEx for the contracted compression and existing expansion, when are we going to see that flow through? I'm assuming that's not in your CapEx guidance right now. So would we see that in the coming quarters? Stephen D. Westhoven: Yeah. It actually is in our CapEx guidance right now. So you'll see that on the schedule. There's an appendix schedule to what we posted last night. You can go through that. So that is part of our capital schedule right now. Travis Miller: Okay. For the Leaf River line? Stephen D. Westhoven: That's right. Travis Miller: 2027, I assume. Right? Stephen D. Westhoven: Yes. 2026 and 2027. Travis Miller: 2627, probably. Travis Miller: Okay. Okay. Okay. Makes sense. And then higher-level question, in New Jersey, politics, etcetera, would you be interested in rate base solar or rate base any kind of generation or energy other than natural gas distribution? Stephen D. Westhoven: Yeah. You know, we would certainly work with the administration and do, you know, anything to be able to, you know, lower cost, improve, you know, the amount of capacity within the state of New Jersey, you know, to lower, you know, cost to consumers. So there's a number of, you know, items that are on the table. You know, we're not part of any kind of rate-based generation discussions at this point, but if it made sense, had the right risk profile, and we were able to deploy capital, you know, in the energy infrastructure space, then certainly we would consider it. Travis Miller: Okay. Great. I appreciate the thoughts. Stephen D. Westhoven: Alright. Thanks, Travis. Operator: There are no further questions at this time. And with that, I will now turn the call back over to Adam Prior, Director of Investor Relations, for closing remarks. Please go ahead. Adam Prior: Thanks so much. I'd like to thank all of you for your patience and for joining us this morning. We appreciate your interest and investment in NJR, and have a good day and the rest of your week. Operator: Thank you so much. Ladies and gentlemen, this concludes today's call. We thank you for participating. You may now disconnect your lines.
Operator: Good morning, and welcome to the Healthpeak Properties, Inc. Fourth Quarter 2025 Conference Call. All participants will be in listen-only mode. During today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your touch-tone phone. To withdraw your question, please press star then 1. Please note this event is being recorded. I would now like to turn the conference over to Andrew Johns, Senior Vice President, Investor Relations. You may begin. Welcome. Andrew Johns: Today's conference call contains certain forward-looking statements. Although we believe expectations reflected in forward-looking statements are based on reasonable assumptions, statements are subject to risks and uncertainties that may cause actual results to differ materially from expectations. Discussion of risk and risk factors is included in our press release and detailed in our filings with the SEC. We do not undertake a duty to update any forward-looking statements. Certain non-GAAP financial measures we discussed on this call are exhibits of the 8-Ks we furnished to the SEC yesterday. We have reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. The exhibit is also available on our website at healthgate.com. I'll now turn the call over to our president and chief executive officer, Scott Brinker. Scott Brinker: Thanks, AJ, and welcome to Healthpeak's fourth quarter earnings call. Joining me for prepared remarks is our CFO, Kelvin Moses. First and most important, thank you to our entire team for battling through a historic life science environment. To finish 2025 with earnings in line with the midpoint of our original guidance range, and significant transaction activity that should drive future earnings growth. Couple of comments on our segments. 50% of our portfolio income. Kelvin will discuss our outstanding operating results in that segment, but I want to make some more general comments, including the benefits of the merger with Physicians Realty Trust. That merger created the best platform and portfolio in the outpatient sector, and positioned us to quickly and profitably internalize property management across our entire outpatient and life science portfolio. $70 million of synergies certainly helped offset the life science environment. The outpatient sector is benefiting from the ongoing shift in care delivery to lower-cost, more convenient outpatient settings. Policy changes from Washington also support demand, including CMS allowing more and more surgeries to be done in outpatient settings. And new supply continues to be very low given the cost of new construction. All of the above contribute to the favorable operating environment we spoke to when we announced the merger two and a half years ago. The private market is now recognizing this as well, which is driving down cap rates. We're taking advantage of that demand by selling fully stabilized less core outpatient assets at strong prices. Including $325 million in the fourth quarter at a low 6% cap rate. Turning to our lab segment. The operating environment over the past four years peaked in intensity in '25. Which is now fully impacting earnings. But in the last five months, we've seen continued improvement in capital raising and M&A. New deliveries will soon go to zero, and will remain at zero for several years. Certain life science buildings are pivoting to alternative uses, which helps address the supply overhang. All of the above points to early signs of an inflection point. Naturally, earnings will lag the underlying recovery because of the time to build a pipeline, sign leases, and build off the space before rent commences. The building blocks of a recovery are in place. Four years ago, we had the opposite view of the trajectory in the sector. And this team chose to cut off capital deployment in life science. Which at the time was by far our largest business segment. That decision combined with the merger and related synergies, has allowed us to grow the dividend and maintain earnings since 2022 when the downturn began. A significant accomplishment given the severity of the environment we've been up against. As the sector recovers, we now have opportunities to acquire properties that would have been untouchable in the past. And to do so at compelling basis. While others in the sector are retrenching, we're strengthening our portfolio and platform, including the recent gateway acquisition and hiring Dennis Sullivan to lead San Diego and Claire Brown to lead Boston. Our team was working hard over the New Year. In late December and early January, we closed the outpatient medical sales, and recycled that capital into a highly strategic 1.4 million square foot campus in South San Francisco. We see potential for significant upside as the sector recovers, as the campus has more than 500,000 square feet of vacancy in a prime location. We now own and control 210 acres in South San Francisco, which is roughly one-third of the land in the entire submarket. We own 6.5 million square feet of space at various sizes and price points, so we can provide unmatched solutions to current and future tenants. A recent report from a leading brokerage firm showed the Bay Area led all life science markets in the fourth quarter and full year 2025 in absorption and leasing activity, and has the largest volume of current tenant demand. That broker report is consistent with our own leasing activity and pipeline, and further supports the acquisition. Moving to senior housing. Our fourth quarter results were outstanding with 17% same-store growth. We point to three factors driving the growth. First are highly amenitized, full continuum campuses that resonate with seniors. Second, our asset management team collaborates with our operating partners to develop and execute property-specific business plans. And third, favorable supply and demand fundamentals. We expect all three factors to drive another year of strong growth in 2026. I want to comment on the Janus Living announcement from January 7. Our senior housing portfolio has been operating at a very high level, but was largely ignored inside Healthpeak given its relative scale. In addition, we have significant expertise and relationships in the sector, two valuable resources that were being underutilized. Over the past several quarters, with a singular focus on generating shareholder value, we worked alongside our board and advisers to review a range of strategic alternatives to the status quo. We chose to pursue the creation of a pure-play senior housing REIT. We believe the planned IPO is a unique and creative way to capture value in the near term through a higher multiple on our senior housing NOI and as a significant shareholder in Janus Living to participate in future value creation from internal and external growth. The transaction can be summarized as follows. Healthpeak intends to contribute its entire senior housing portfolio to Janus Living, in exchange for all the shares in the new company. Shares in the new company will be sold to the public in the IPO, which will dilute Healthpeak's ownership. Janus Living will own 100% of its properties in a RIDEA structure. Healthpeak will be the manager for Janus Living, with strong alignment given our ownership interest in the new company. Simply put, our economics will be driven by Janus Living's operating results and stock price. Since making the announcement in January, we closed on the purchase of our joint venture partner's 46.5% interest in a 3,400-unit senior housing portfolio for $314 million. We now have full control of those 19 communities. Over the next few months, we expect to transition 11 communities to Pegasus Senior Living and eight communities to CL Senior Living under highly aligned management contracts. We have long and successful relationships with the principles of each company. Both Pegasus and CL have successfully underwritten and executed operator transitions and they have strong track records in these regions. We have $360 million of additional relationship-driven acquisitions in our senior housing pipeline. These are newer vintage assets located in high-growth markets in Orlando and the Northern Suburbs of Atlanta. Both markets that we know very well. We expect the acquisitions will close in the first quarter and be contributed to Janus Living. We're excited to add Jonathan Hughes to our team as SVP of finance and investor relations. Jonathan knows the sector well and will lead our efforts with the street at Janus Living. While Andrew Johns will continue to lead that effort at Healthpeak. In terms of timing, we filed a confidential S-11 with the SEC in December. The SEC process will determine the ultimate timing of the IPO. But our current expectation is to close the offering in the first half of this year. I'll turn it to Kelvin to review our 2025 results and 2026 outlook. Kelvin Moses: Thank you, Scott. Before we get into the 2025 financial results, I want to briefly highlight one of our operational initiatives. We continue to make investments in technology, team, and process to deliver our investment management capabilities to a broader asset base. Even more efficiently than we have in the past. A component of the strategy is the acceleration of corporate automation which will streamline our internal workflows and deliver a best-in-class experience to our clients. We're excited to welcome Omkar Joshi, as our new head of enterprise innovation to lead us through this next chapter of our growth. Omkar previously held leadership roles in both healthcare and real estate at Palantir. Now turning to the results. For the fourth quarter, we reported FFO as adjusted of $0.47 per share, AFFO of $0.40 per share, and total portfolio same-store cash NOI growth of 3.9%. For the full year, we reported FFO as adjusted of $1.84 per share, AFFO of $1.69 per share, and total same-store cash NOI growth of 4%. Starting with outpatient medical, we continue to deliver sector-leading results. And for the year, we executed 4.9 million square feet of leasing including 1 million square feet of new leasing. This is the first time in company history that we have achieved this record milestone for new leasing. We also achieved cash releasing spreads of 5% on renewals, 79% tenant retention, and ended the year at 91% total occupancy. We also ended the year with same-store growth of 3.9% which was above the high end of our original guidance range. These results reinforce our leadership position in outpatient medical, highlight our focus on deepening relationships with leading health system partners, and demonstrate our ability to capitalize on strong sector fundamentals. Most importantly, this reflects a tremendous team effort and a fantastic outcome for our platform. Moving to lab. We ended the year with 1.5% same-store growth and total occupancy of 77%, inclusive of our recent Gateway Portfolio Acquisition in South San Francisco which depressed total occupancy by more than 150 basis points. For the full year, we completed nearly 1.5 million square feet of lease execution, including 562,000 square feet of new leasing. And positive 5% cash releasing spreads on renewals. Since year-end, we have an additional 100,000 square feet of leasing activity either or under LOI. And finally, senior housing. We ended the year with 12.6% same-store growth, which was meaningfully above the high end of our original guidance range and includes 16.7% growth in the fourth quarter. Our 15 life plan communities that comprise our same-store pool have delivered tremendous results over the last five years. Our entire senior housing portfolio is well-positioned to take advantage of healthy sector fundamentals. Congratulations to Patrick Chang, our entire senior housing team, and operating partners for achieving a record year in entrance fee sales. Highlighting excellence in execution, and underscoring the importance of aligning with the right operating partners to have the expertise to deliver leading results. Briefly on the balance sheet before moving on to guidance. We ended the year at 5.2 times net debt to adjusted EBITDA, and $2.4 billion of liquidity. We maintain focus on the strength of our balance sheet and prioritize this disciplined capital allocation to pursue strategic investments and fund portfolio growth. Now turning to 2026 guidance. We are forecasting FFOs adjusted to range from $1.70 to $1.74 per share. Our total same-store NOI growth is forecasted in the range of down 1% to up 1%. This assumes outpatient medical between 2% to 3%, lab down 5% to down 10%, and senior housing ranging from 8% to 12%. Our earnings guidance for 2026 reflects the life science environment over the past several years. The reduction in earnings is attributable to the loss of occupancy in lab which, as we have noted, has a lagging impact on earnings. This equates to 12¢ of earnings from the lost base rent, OpEx, and capital to release the space and includes the impact of a $68 million contractual purchase option exercised in Salt Lake City at an 11% cap rate. Strengthen our outpatient medical and senior housing segments, offset the impact of balance sheet refinancing at higher rates, the receipt of loan proceeds of $150 million in 2025 at an approximately 10% interest rate and drag from redevelopment and development. The leading indicators supporting each of our businesses give us a foundation to grow from an opportunity to capture demand as the life science sector recovers. Touching on sources and uses. We're off to a busy start to the year with transaction activity. So far in 2026, we've completed $464 million of acquisitions, including $314 million buyout of our joint venture partner in our senior housing rental portfolio, and the acquisition of the remaining South San Francisco Gateway Lab portfolio. We have an additional $360 million of senior housing investments under LOI or purchase agreement. To fund these transactions, we are well underway on our opportunistic capital recycling plan, including a billion dollars or more of asset sales, recapitalizations, and loan repayments in 2026. Given the strong private market for outpatient medical, we'll continue to take advantage of that demand as an attractive source of capital. And finally, we have approximately $1.1 billion of refinancing activity in 2026 including $650 million of senior unsecured notes maturing in July and an additional $440 million of secured mortgages maturing throughout the year, will either be refinanced or repaid. And finally, two housekeeping items related to Janus Living before we move into Q&A. With respect to our previously announced Janus Living IPO, the impact of the proposed formation and public offering are not reflected in our most recent supplemental materials or in our earnings guidance. We should note that we do not anticipate any meaningful impact on 2026 guidance from the transaction. And one last point on this, while we understand there will likely be many questions about the IPO, we are limited in what we can discuss specifically. We'll focus our answers on information that we have previously disclosed on the transaction and operational information that we provide in the normal course for our senior housing segment. Operator, with that, you can open the line for Q&A. Thank you. Operator: 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 keys. To withdraw your question, please press star then 1 so that everyone may have a chance to We ask the participants limit their questions to one and a related follow-up. If you have additional questions, please pre-queue. At this time, we will pause momentarily to assemble our roster. And our first question comes from the line of Nick Yulico with Scotiabank. Your line is open. Nicholas Yulico: Thanks. Good morning. I guess first question, perhaps for Scott. In terms of the gateway acquisition, can you just talk a little bit more about how you saw that as a complement to your existing portfolio in that market? How you're comfortable taking on more vacancy with the acquisition? Scott Brinker: Oh, hey, Nick. Good morning. Always first on the list. You must call in really early. It's all good. It gives you something to we we know what to expect. Nick is always first. Yeah. Gateway. No. It we're really excited about the gateway acquisition. We feel like decisions we've made over the past four years really positioned us to take advantage of these opportunities. It's a campus that never would have been available. At the peak. I mean, this is either the number one or number one a submarket in the whole country. We've got a huge footprint there already. This is complimentary. Really just gives Scott and Natalia and the team an additional 1.5 million feet of it's really opportunity, is the way we're about it, not so much vacancy. And we're using proceeds from our outpatient sales where there's a really deep market We're getting great prices, fully stabilized assets. They've had decent growth, but certainly not the type of potential growth that we see at this gateway. Campus. And and and we really view it as one enormous campus at this point. I mean, it's and a half million square feet. You can park your car once and walk through the whole thing. Mean, it's pretty impressive in terms of what we can provide to our current tenants and most important perspective tenants. We really are the market leader in South San Francisco. It had really a phenomenal four q, in terms of leases signed, a lot of tenants in the market. Doesn't mean that all that vacancy goes away within a year. The momentum is positive Love the team that we have on the ground, and, you know, we see kind of a breakeven year one yield with the opportunity to create some real growth over time at a basis that I think you know, in the five, ten years from now, people will look at and say, wow. That's an amazing buy at a time when there's really no one else at the table. So, yeah, we're pretty excited about it, Nick. Nicholas Yulico: Okay. Great. Thanks. And then, the second question is is on the lab segment, and I wanted to see if there's any way you can give us a preview of how to think about you know, occupancy, sort of total occupancy for lab, the cadence of that, throughout the year, And then, also, I think you you built in some cushion for some tenants where there may be a capital raise or not. So there's some contingency on that. If you could just sort of talk about that impact as well. Thanks. Scott Brinker: Yeah. Let's assume that the recent improvement in the capital markets and capital raising continues. We saw that commence around Labor Day in '25, and it's continued into the, first month of the the New Year. The conversations we have with bankers, capital markets desks, venture capitalists are are quite positive. So we are optimistic that that will continue. We do think total occupancy by year-end '26 should improve. From where we ended the year in 2025 just with the caveat that the leases in life science are are big. They're chunky. The average size is, like, 60,000 square feet. So you know, it can't jump around from quarter to quarter, but the pipeline is good. It's weighted more towards new leasing, which is a huge positive, and we don't have a ton of expirations this year. So it should be a good setup. To start growing occupancy again. But, again, it obviously depends on the capital markets can continue to be cooperative. Nicholas Yulico: Alright. Thanks, Scott. Operator: Our next question comes from the line of Farrell Grenot with Bank of America. Your line is open. Farrell Granath: Thank you. Good morning. This is Farrell Granat. I first also just wanted to dive in deeper with the lab leasing and just thinking about it going forward, I believe you made the commentary around a 100,000 of leasing activity under execution or LOI. You give us a little bit more background around that 100,000 seems a little bit lower than potential past LOIs that we've been seeing that you've stated on calls. Are you seeing a slowdown in incoming, or is it just year-end processes that now need to pick back up heading into '26? Scott Brinker: Hey, Farrell. It's Scott Bone. I I can I can take that one? Mean, I think when you look at where we are in the calendar year, you know, you you have the the holidays towards the end of the year, which are always a little bit slower, and you roll right into the JPMorgan conference. Which, you know, a lot of these companies you know, spend a lot of time preparing for. So it's it's typically a slower time time of the year. We do feel good with the pipeline with where it sits today. A little over one and a half million square feet. If you look at that compared to where we were last year, we're 50% you know, higher starting the year. So our our jumping off point going into '26 is much much improved from where we were a year ago. You know, I think what's important too on the pipeline as we look at it the the mix of that pipeline continues to shift towards new leasing. Versus being very heavy on the renewal side in nine, twelve months ago. Know? So we're I think it's a good indicator of where demand is broadening. Farrell Granath: Okay. Great. And and then also on the lab guidance, the negative five to negative 10% same-store NOI growth, Can you walk through a few of the underlying assumptions within that range? I understand that a chunk of that is coming from the 25 expirations, but then also looking forward to 26 what what elements are in that range that is building? Kelvin Moses: Yeah. Farrell, this is Kelvin. I'll take that one. I think what was probably most important from the fourth quarter results is that the disconnect between the occupancy decline and the NOI that we achieved for the quarter is probably important to note as you're looking into 2026 as you think about that five to 10% decline to same-store NOI. Occupancy today is in the high 77% area, We do have the opportunity over the course of the year to improve that As Scott and Scott just mentioned, But we're we're likely gonna see in the first quarter some incremental impact to NOI and earnings as a result of the lower occupancy at the end of the year. So that trajectory is not clear in the Q4 numbers, but will become a little bit more clear in the first quarter as that occupancy starts to set into income. Operator: Thank you very much. Next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets. Your line is open. Austin Wurschmidt: Hey. Good morning, everybody. Kelvin, I was hoping to better understand the impact that the lab occupancy loss are having on 2026 FFOA and if the $0.12 that you highlighted, is that specifically from the expirations that occurred in the fourth quarter of last year and tenants that didn't renew? Or are there additional move outs in that figure beyond maybe what was, you know, captured in the lease expiration schedule? Kelvin Moses: Yeah. So I I think it's a combination of things. We walk through the the component parts of that 12¢ impact. There's the Salt Lake City transaction that we mentioned that's a component of that. It's about a penny. From the $68 million sale at 11% cash cap rate. That's the component. There's also outside of the lab portfolio, our refinancing borrowing costs are just higher today. Than our in-place levels. So that's another reduction to our 2026 FFO We also received a $150 million of loan proceeds at a 10% interest rate. So that's offsetting the FFO performance, and that that 12p number that we're talking about. But, specifically, with respect to the lab occupancy, we did lose about 600 basis points of total occupancy for the year. And for each 100 basis points of total occupancy, that's about a penny to a penny and a half impact. On earnings. So that incorporates the base red reduction, the OpEx that we will absorb respect to the triple net and then some cost for releasing. So as we get into the first quarter again, 2026, you're looking at occupancy levels now that are more representative of where earnings are headed. So you'll start to see the income reduction in that first quarter and through the year. But, again, when we get to the end of the year, we hope that occupancy will start to tick back up again start to be able to capture earnings and and growth from there. Austin Wurschmidt: It and can you just you know, that was helpful. But can you just help me better understand what's driving the lag between, I guess, when he expiration occurs and the financial impact? Are these planned move outs where they've gone the month to month and you're still collecting you know, rental income? Or, you know, what what's driving that delay between, you know, what we're seeing, I guess, in the supplemental on you know, the operating metrics and then what actually flows through to the financials. Thank you. Scott Brinker: Yeah. I mean, part of it's also often you've got our our reported options. It's just that point in time. It's just literally December 31. So it can be a little misleading. And I get back to the point I made that our life science lease is tend to be pretty big. They're 60,000 feet. On average. So you did have a number of lease expirations in April where we got the rent for most or all of April, but then lost the occupancy. The very last day of the year. So that that's a material component And then when, we have an early termination, you know, we generally do have security deposits, letters of credit, In some cases, there are modest termination fees, all of the above. Can help cover up for a quarter or two the impact of an early termination, but it's really kind of that forward twelve to eighteen months where the full impact is is realized, and, of course, you're now putting capital into the building. So it's really a combination of all those things that that explains the lag in to the impact in earnings. You know, the same will be true on the way back up. As we sign leases and grow occupancy, it'll take a little bit of time for that to flow through earnings. So it it does go both ways. Right now, we're on the wrong of it, obviously. But we feel like the building blocks are there to get on the right side of it as we know, look towards 2027. Austin Wurschmidt: I appreciate the clarification there. And just lastly, I guess, the 1.5 million square feet, can you characterize the type of tenants looking for space? Are these large established biotech companies or more smaller kind of early stage type tenants that may have a greater sensitivity the capital markets backdrop. And that's all for me. Thanks for the time. Scott Brinker: Yeah. Hey, Austin. Scott Bone. I mean, I could take that. Think if you look the pipeline, it's it's a pretty good pretty good cross section of the industry. You know, we're from series a companies up through you know, established public biopharmas. You know? And some of that is new tenancy with it to that would be to our portfolio. Some of that is tenants you know, renewing some of those tenants expanding within the portfolio. So it it's a pretty it's a pretty wide range. In the in the pipeline today. Austin Wurschmidt: Thanks, Austin. Next question. Operator: Next question comes from the line of Rich Anderson with Cantor Fitzgerald. Your line is open. Rich Anderson: Thanks. Good morning, everyone. So back to gateway. And Scott, you you said in a to an earlier question, you know, five years from now, we'll look back. I don't think you're being scientific in saying that it's gonna take five years for that you know, that that campus to recover. But when you guys were thinking when you're underwriting this, what was the cadence of of the recovery at Gateway specifically, and how do you think that compares generally to life science overall? I mean, do you think it it moves quicker or slower for whatever reason versus the entirety of the life science continuum? Scott Brinker: Yeah. So, I mean, the the acquisition's breakeven. On day one, just to be clear. So the the upside probably gets captured over the next two to three years. Best guess, incrementally. So, yeah, the five years, ten years, obviously, I'm I'm not that wasn't intended to a comment about the lease up period. So Okay. I could clarify that if that was somehow misunderstood. Rich Anderson: No. No. Not at all. I figured that. Just wanted to it on record. Yeah. And so that okay. So to, you know, call it to two plus years to sort of recapture some of that vacancy. Or a a lot of that 500,000 square feet of vacancy. Is that about right? I mean, rough guess right now. Who knows? Scott Brinker: Yeah. I mean, it's not gonna go to a 100%, but yes. Yeah. Rich Anderson: Gotcha. Second question for me. Different topic for Kelvin. You got the 1.1 billion of refinancing activity for this year at a 4% rate. But then you look at your debt maturity schedule, you got a you got some chunkiness in the aftermath in twenty seven, twenty eight, twenty nine. Mostly at lower rates than the 4%. I'm wondering, is there a strategy around any of that, you know, pre preemptively for this year? Or do you let that ride out and see what what the day brings, you know, this time next year? For future debt expirations. Thanks. Kelvin Moses: Yeah. I think just like in years past, Rich, we'll be very opportunistic and access the market when we see the best pricing opportunity. The in-place rates are fairly attractive relative to This year, we'll focus on our maturities that are ahead of us. the new issue pricing. So we'll we'll continue to try to be opportunistic throughout the year. But there's no plan currently to accelerate some of our 2027 maturities into 2026. Rich Anderson: Okay. Thanks. Operator: Next question. Comes from the line of Seth Pergey with Citi. Your line is open. Nicholas Joseph: Thanks. It's Nick Joseph here with Seth. Just on the 2026 expirations for life science you know, what percentage of that do you know is moving out, and where are you on negotiations with the remainder? Kelvin Moses: Yeah. I can start there. This is Kelvin. So for 2026, we have about 450,000 square feet of exploration. And that'll be fully offset by commencements throughout the year. I think we did a great job of pulling forward some of our renewals into 2025 to to really pull that number down. As we head into 2026. And a substantial majority of our expert our explorations are actually in South San Francisco, our biggest where we have the deepest tenant relationships. So we feel good about being able to capture some of those renewals. But, Scott, maybe I'll kick it to you to add some more context. Scott Brinker: Yeah. No. I I think it's Kevin said. We we did address some of the twenty twenty six expirations already in 2025. So some of the ones we're working on they're later in the year or still, you know, still TBD, still probably a little bit too early to tell on some of the Nicholas Joseph: Thanks. That's helpful. And then just as as you've been going through the leasing process, have there been any changes to the pipeline in terms of converting to executed leasing and conversion timelines? Kelvin Moses: Yeah. I think you're still working through a process where, you know, it's different than it was in the peak when there was no space no space available. And people were making very quick decisions. You know, people are being boards and CEOs are being a little bit more cautious and taking the time to make sure that they you know, have the the the plans fully baked and the economics fully baked. So it is it the duration is still you know, longer than it used to be, but, you know, I think what we're seeing today is the the credibility of the pipeline is much stronger. And so much that you know, that we have more confidence in the the pipeline will transact versus if you go back to two years ago, was a lot of know, a lot of tire kicking. Versus deals that were actually gonna turn into transactions. Operator: Thank you. Next question comes from the line of Juan Sanabria with BMO Capital Markets. Your line is open. Juan Sanabria: Hi. Good morning. Just going back to the kind of the bridge from fourth quarter to first quarter. With regards to the annual the occupancy loss being back end loaded Can you comment on, like, on what that NOI bridge? Like, was there any can you quantify how much one timers there were in the fourth quarter that are going away and or what, like, the pro forma NOI is on the lap side just so we can have a clear or clean runway to start modeling for the full year? 26? Kelvin Moses: Yeah. This is Kelvin Juan. I I think maybe I'll start, and it's it's a lot to unpack. But you know, I think starting with total occupancy, at around 77%, we came down about 375 basis points. Sequentially And from an NOI perspective, that shift in NOI will be a lot more pronounced in the first quarter as we mentioned. If you think about our guide, between, you know, down 5% to down 10% for the segment, should give you some context for the decline that we'll expect in that first quarter from a same-store NOI perspective. As Scott mentioned, there were a number of other items that don't impact same-store as well that we got the benefit of in 2025 that you won't see in 2026. So there's incrementally more of an impact with respect to earnings. So if you look at from an earnings perspective, you know, our the midpoint of our guidance range at a dollar 72 if you take that over the the four quarters, it'll probably be a little bit higher in the first quarter, and the fourth quarter, and it'll be a little bit lower in the second and third quarters. Plus or minus a penny. As you think about it. But, hopefully, that gives you a little bit of direction in the trajectory that we're expecting. Juan Sanabria: Okay. Great. And then just a question on seniors housing. I know you guys kinda commented that you'd rather not get into specifics. But just curious, on the previous sovereign wealth JV how we should think about CapEx for that business and what kind of deferred CapEx there may be associated with that portfolio with your transitions upcoming. I'm not sure what kind of unit per year spend has been put into those assets, but just curious on how we should think about CapEx for that. That piece of the portfolio. Scott Brinker: Yeah. Hey, Juan. It it it's Scott. It's not that we don't wanna talk about it. We just have to focus our comments on Healthpeak just to be clear. So this is totally fair game. These are assets mostly in Houston. In Denver. So big markets. We think they've underperformed. Not be capital. There will be some normal transition. So that we have to put into the buildings, technology, signage, stuff like that, but it's not like there's some massive CapEx plan to revitalize these. We think this is more operational in nature, so we're glad to have full control of the assets. Again, and we've already moved decisively after that. Buyout to align ourselves with two groups that we've got a good track record with and we we have high confidence that they're gonna turn these around over the next two to three years. So there's significant opportunity in buildings, so we're excited to capture it. Operator: Thank you. Next question comes from the line of Wes Golladay with Baird. Your line is open. Wesley Golladay: Hey. Good morning, everyone. Can you unpack the lab watch list You know, how much has that list changed from a year ago? Obviously, flushed out a lot of the tenants in the last few quarters. And I guess maybe can you quantify the exposure to, call it, higher risk preclinical Phase I companies? Kelvin Moses: Hey, Wes. I'll start. This is Kelvin, and then I'll probably ask Scott to jump in as well. But I think if you start looking back at the capital markets activity over the last four months, we are certainly encouraged by the volume of activity both from an m and a perspective and equity capital markets perspective The IPO backlog is building, secondary equity offerings, have been far more prevalent than what we saw for the 2025 M and A activity is picking back up again. So there's a good amount of capital recycling again in the biotech sector, which is very important to see And as a result, our watch list has reduced considerably. As tenants have raised capital. So we're by that. That being said, in our portfolio, we're still monitoring tenants as we always do. It's just a part of this business. There's some folks that know, we expected to vacate in the fourth quarter that didn't. Could come out of our portfolio. So we're still keeping our eye on specific names. You know, we could be surprised to the upside as well where they, you know, continue to engage in BD discussions and engage in strategic discussions that could bring capital into their businesses. And allow them to continue beyond our expectations. So I don't know, Scott, if you have anything more. Scott Brinker: Yeah. I I think just from the in an industry perspective, too, which is fueling the capital markets, I mean, you know, that the interest rate cuts, you know, the three cuts last year, the two in the fourth quarter were were really helpful. For the industry in in from a policy perspective in DC. You know, they reached MFN deals with 14 companies Those deals had little to no impact on on share prices of those biopharma companies. So the the read through is the general impact on those deals is gonna be pretty minimal on biopharma, which is is, you know, helpful to understand and just get more more clarity there. And then you look to the FDA. The FDA approved 52 drugs last year. Which is right in line with the ten year average, a little bit below the five year average, but given all the chaos and change there, it it provides reassurance to the industry that the agency is still functioning. And hitting dates and processing approval. So we talked to our CEOs. I talked to 30 different CEOs at JPMorgan conference and asked the question to virtually all of them. You know, and the response was that the feedback they're receiving from the agency is normal and responsive. You know? And the FDA, again, if you look at this for the commissioner speaking, they're talking about process improvements and streamlining reviews and lowering costs, which are all changes helpful changes to the industry, which you know, again, isn't directly correlated to capital markets, but, you know, certainly helping the the sentiment behind the industry. And to go back to answer the first part of your question too, less than 10% of our ABR on the life on the lab side is is from preclinical. Pretty small. Wesley Golladay: Okay. Thank you for that. And then when you look at your leasing pipeline, is that starting to shift more towards some of the redevelopment and development properties? Scott Brinker: Yeah. You know, we we had a good quarter on the on the Devon side. We executed a 121,000 square feet of leases on our redevelopment properties in the quarter. Additionally, we we completed a 100,000 square feet of TIs and delivered space both at, you know, combined advantage and gateway in San Diego. So, you know, certainly, we have more credible activity again in ongoing discussion. On those development or redevelopment spaces today than we've had in a while. But nothing far enough to talk about in in in detail. Operator: Today. Wesley Golladay: Okay. Thank you. Operator: Next question comes from the line of Vikram Malhotra with Visible. Your line is open. Vikram Malhotra: Good morning. Thanks for taking the questions. I guess just to clarify, clarifications. So first of all, I guess, Kelvin, can you just confirm or clarify fourth quarter, I think you had between $02 or $0.04 of know, whether it was termination income or the benefit from the occupancy lag versus the income hit, etcetera. You know, like you mentioned, in terms of security deposits. So that's, like, the, you know, $12.13 cents. But how much of that is actually still flowing into one q? Because you mentioned one q FFO is likely higher. Before we still look full in before we see this the full impact It's because 3¢ is a lot in the quarter. I just wanna make sure we understand how much of that you know, 2 to 4 or 3¢ kind of percolates into one queue. Kelvin Moses: Yeah. And maybe just to to jump to first quarter FFO. It's probably down 3 pennies from where, you know, we ended the year. So 47¢ is something closer to 43. So, you know, maybe that helps give a little bit of context. I think the numbers that were benefiting the fourth quarter will naturally come out as we start in the first quarter. But, Vic, I I think that should give you some context in terms of Trajectory between Q4 to Q1. Just to get right to it. Vikram Malhotra: Okay. So there's there's some security deposit slash you know, term, you know, letters of credit that still benefit you in one q, and then they fully go away in two q onwards. Is that fair? Kelvin Moses: I think they largely go away in the fourth quarter, but you'll see the benefits that we got in the fourth quarter that were not related to vacates in our portfolio included some free rent burn off. So that benefit's coming in in the first quarter. as well. So there are other natural benefits escalation from leases in four q that started to provide some incremental earnings benefit you'll start to see in the first quarter as well. So not just those items that we're talking about around terminations and letters of credit, but you know, that should hopefully give you enough context relative to the year, how the first quarter will start. Vikram Malhotra: Okay. And then just on the life science occupancy build, just to maybe give us a bit more context, do you mind giving us kind of where occupancy is either portfolio wide or same store like leased versus, you know, economic today. And then just clarify again, I think you made a comment on expiration Like, what do you actually have baked in for renewal on the expirations in 2026? Kelvin Moses: Thanks. A lot of questions in there. What what was the first question, Vikram? Scott Brinker: I we didn't catch it. Vikram Malhotra: Just the, like, leads verse the leg. What's the leads versus occupied or like, economic versus lease rate? Like, what you've actually leased, which may not be, like, commenced which may have been leased but not commenced. So the difference there there's a difference between the two. So I think you had 77 ish total portfolio. We've got a couple 100 basis. Scott Brinker: Got a couple 100 basis points of leases that have been signed that haven't yet commenced that should start in '27. That probably offsets most of the nonrenewals. Although Scott already said, we don't have full clarity on the renewals. A lot of them are back end weighted, so I'll just repeat that. And I'll also repeat what I said earlier is we think total occupancy should increase from year end '25 to year end 2026. That is what is in our guidance. Vikram Malhotra: Okay. And that's the combination of your, like, you you hope it's a macro comment, but it's also based on kind of micro where you look at the pipeline today, and you can see a higher conversion rate perhaps than prior. Is that fair? Like, it's it's not just sort of a macro you need the macro to stay where it is, but you actually also see specific conversion. Scott Brinker: Yeah. It's certainly fair to say we're looking at the macro the submarket, the lease, I mean, from top to bottom that come in putting together our guidance. What's looking at all those components. Yes. That is fair to say. Vikram Malhotra: Thank you. Operator: Next question comes from the line of Mueller with JPMorgan. Your line is open. Michael Mueller: Yeah. Hi. Just a question for Sullivan. What's embedded you guys use for AFFO CapEx and capitalized interest for 2026? And most like CapEx split between the segments? Kelvin Moses: Yeah. Maybe we'll start. In our guidance, we had just over $500 million of CapEx in our plan. And that's a combination of redevelopment capital, the nonrecurring capital, development capital, So it it incorporates everything. The timing of that spend is, you know, naturally throughout the course of the year. Last year, we had about 600 million. This year, it's come down. A decent amount, and we'll be executing on that plan throughout the year. So the the amount I don't have it specifically in front of me just for the AFFO component of that, but, you know, I I think we're gonna be lighter on the capital spend this year than we were in 2025. Scott Brinker: Yeah. There there's no material change in AFFO, CapEx in '26 versus '25, Mike. So if you just look at the supplemental, in the disclosure there, that's that's a good run rate. For all three business segments. Michael Mueller: Got it. Okay. And what about capitalized interest? Kelvin Moses: Yeah. Cap interest is is flat. Actually, so no change to cap interest. Michael Mueller: K. Appreciate it. Thanks. Operator: Next question comes from the line of Omotayo Okusanya with Deutsche Bank. Your line is open. Omotayo Okusanya: Yes. Good morning, everyone. I wanted to go back to the gateway transaction I'm really kind of understanding it. Almost a little bit to Rich's know, question. Trying to understand exactly how you expect that to kind of ramp up over the next few years. And I guess I I I asked a question on the context of you know, you're kind of buying it at 60% occupied according to media reports. And also buying it from kind of two other well known, you know, players in the space. So it's like just kind of chosen the exactly, like, what are you seeing versus, like, they they kind of exiting and you're kind of doubling down and I'm trying to understand those dynamics a little bit and ultimately kind of, you know, you look at this investment three to five years down the road, how do you expect it to be performing? Scott Brinker: Yeah. Well, know, can't necessarily speak for others. I mean, they're in a joint venture. I think they made it public. They're looking to raise money. In 2026 to fund various things, development pipelines, etcetera. You know, we're in a much different situation. You know, we're we're being opportunistic, Balance sheet's in great shape. We don't have the big development pipelines. So we're in a position to opportunistically acquire assets with a lot of upside, but also good current yield. I think that's the right way to think about it. Low sixes going in. A lot of capital has already been put into these buildings. The future capital that we would need to invest is really good news capital tied to leasing. So that's a positive thing. If we're investing capital into these buildings, it means we signed a lease. And, you know, we see high single digit unlevered type return opportunity in this market. As it stabilizes. So that that's pretty compelling comparison to the things that we're selling. Omotayo Okusanya: That's actually very helpful context. And if I would just ask one more about you know, just, like, keep turning around Janice. I just I mean, it it it all your CCRC assets going to be going into this thing, or is it just senior housing stuff? And the scene and then the skilled nursing and the memory cares to kinda remain at at at the at health Scott Brinker: Yeah, Tyler. Let me clarify that. So when we complete the IPO, all of our senior housing assets whether entry fee or rental, would be contributed into Janus Living. So going forward, Healthpeak will not own any senior housing real estate. We'll just have an ownership interest in the stock of Janus Living. Omotayo Okusanya: Right. So the so the the the memory care and all the other stuff that's part of the CCRC is also going into Janet. Scott Brinker: That's right. Yeah. Those are campuses that you we can't break them up. That that's Not that one asset. They can't be broke broken up. Omotayo Okusanya: Gotcha. Alright. And I guess over time, you'll you'll kinda share more details about the external management contract and things like that. Right. Outside of what has already been made public. Kyle. So if you have a question about what's been made public, I'm happy to address that here. Thanks, sir. Alright. Sounds good. All the best. Thank you. Omotayo Okusanya: Thanks, Kyle. Operator: Next question comes from the line of Jim Kamrock with Evercore. Your line is open. James Kammert: Thank you. Good morning. With the gateway transaction behind you, what is the appetite just generically you still have some guidance in terms of $1 billion plus or minus of acquisitions in 'twenty six? What's your appetite for Opportunistic Lab now that you've already got gateway under your belt? Scott Brinker: Yeah. Hey, Jim. We've got $1 billion of acquisition and stock buyback. Built into our guidance. We've already closed or under contract to just over 800,000,000 between the Gateway transaction and the senior housing opportunities that you close here in the first quarter. So you're right. There's a little dry powder, you know, not significant, but we do have a pretty large pipeline of asset recycling whether outright sales, recaps, loan repayments. So there's at least the potential for that billion dollars to grow depending on whether we can recycle capital We're obviously not looking to issue equity. Our current stock price, but if we're, more in in selling assets or recapping assets, we we would have additional dry powder to look at opportunistic life science investments. There's a number that we're keeping our eye on, but certainly nothing that is ready to be disclosed or under contract. But it's fair to say that we'll be very disciplined in which assets and which submarkets we would pursue. That was the case even in the peak. We did not get overly aggressive. We stayed disciplined. Our entire portfolio is in the three core markets. That will continue. So anything we do, I think, would have a lot of crossover or similarities to what we just did in gateway. We're in a known submarket. A team that can execute, and what we feel is a real competitive advantage to drive lease up. James Kammert: Fair enough. Understood. And then here's something we haven't talked about. Are most of the synergies relating to the Physicians Realty on the outpatient medical side, are those synergies basically in run rate today or late twenty five, I guess, I should say, or should we sort of have some maybe a little further margin implications for the outpatient medical across '26? Scott Brinker: We've got another two or 3,000,000 of square feet that we could internalize property management over the next one to two years. So there's still a little bit of opportunity, but it it's not material. Most of that 70 plus million dollars of synergies are are basically included in our not only fourth quarter twenty five run rate, but our 2026 guidance as well, June. James Kammert: Okay. Thank you, guys. Next question comes from the line of John Pawlowski with Green Street. Your line is open. John Pawlowski: Hey, thanks for the time. My first question is on the operator transition of the assets held in the sovereign wealth JV. Do you expect occupancy declines in the near term as the new operators take over? And how long do you expect for the properties to reach more of a stabilized market type of occupancy level? Scott Brinker: Hey, John. Scott here. Hopefully, we can get those transitions done by April 1. At least the target. Teams are working hard. To do that, including the operators. So we appreciate their cooperation. There could be a small decline in occupancy, but I don't think it's material. We see significant upside, 50% plus NOI growth potential over the next two to three years in our view. Highly aligned management contracts and and operators that have a really good track record. With us and in these markets. So pretty optimistic about the upside, but, yeah, there could be a quarter or two of transition related occupancy loss, Joan. John Pawlowski: Okay. And then last question, maybe for Scott Bone. I wanna better understand the composition of tenants that have either signed leases or that are in your pipeline kinda the post Labor Day. Can you give me like rough ballpark, what proportion of tenants are more of the traditional wet lab users versus other perhaps AI or almost quasi traditional office users? Scott Brinker: Yeah. It's a it's a pretty good mix. We did have some office related users signed leases in the fourth quarter. We we did you know, one GMP manufacturing type space with an existing tenant of ours in a redevelopment project. And then several wet lab spaces. So pretty good mix. You know, we also signed one lease with a a group who, you know, we we announced it on on social media, but it's a actually, a a drone manufacturer would just raise $600 million at a I think it a $6 billion market cap. You know? So a wide variety of uses, and I think that underscores the ability within our buildings for to capitalize on the robust infrastructure that's in those buildings. And be able to play, you know, cast a wide net in our in our leasing. You know, and especially in in the Bay Area where we've seen a real convergence office demand increasing, you know, AI and AI adjacent. Both in office space, but also on the lab on the lab front as well. John Pawlowski: Maybe a follow on there. As as you see that convergence, what are the implications for the rents those tenants are paying? Are they are they decent all else equal, are they decently lower than the wet users going to pay? Scott Brinker: Yeah. I mean, you're just looking at a straight office space, which you know, we don't have all that much of. I mean, that's obviously gonna be a lower rent than a than a than a lapse rate. But, you know, each deal's different. You know, overall rents and economic or net effect is to tick down a little bit. But and we've seen a little bit more free rent in certain in certain deals in certain markets. But it's it's all, you know, specific. I mean, it depends on the space. It depends on the build out of the space. You know, we haven't able to to control the TIs quite well. If you look at our our second generation leasing and our renewal leasing that we're close to zero. And, you know, our our TIs on our new leasing ticked down as well. I think you so gotta look at a little bit more than just the face rate on these deals. It's the total economic package That's how we think about it. John Pawlowski: Okay. Thanks for the time. Operator: Our last question comes from the line of Jamie Feldman with Wells Fargo. Your line is open. James Feldman: Great. Thanks for taking the question. I'm pinch hitting for John Kilachowski here. So we appreciate all the guidance and all the moving pieces on 26 for the key line items As we think about know, how those move throughout the year, is it safe to assume that 26 is a bottom for FFO? Or do you think it can still be lower in 27? I know you I mean, I'm not really asking to give guidance, but how should we think about like, the key line items and how they how they progress throughout the year and what that means for 27? Scott Brinker: Oh, hey, Jamie. Yeah. So two-thirds of the portfolio is doing really well. Even if we're successful with the IPO, most of those, earnings will still flow through Healthpeak's financial statements. So there really isn't any impact from the IPO there, which is one reason we really liked it. As an as an alternative outcome for shareholders. The outpatient fundamentals are very strong. If anything, the growth outlook in '27 was even more favorable just given the leasing trajectory and occupancy trajectory, and we obviously see life science coming down. I mean, we said, throughout this call, we see occupancy increasing a bit. From year-end twenty five through year-end '26. That should be a positive. The variables are obviously what happens with interest rates, As Rich pointed out, we still have some refinancing to do over the coming years. But the the building blocks of the actual portfolio sure feel like '26 absolutely would be a bottom. James Feldman: Okay. Great. That super helpful. And then just how do you think about doing you know, an equity acquisition like you did versus some of the higher yielding mezz loan to own deals you had done in the past at higher yields. Like, why the transition to put so much capital into that type of investment versus more fixed income type stuff? Scott Brinker: Yeah. I mean, we only did two of the loans. Those are just unique situations in San Diego. About a year ago. We do like those. In terms of the risk profile versus the return. So if those are opportunities in '26, we continue to look at those. This was just a unique opportunity. To buy a campus we absolutely wanted to own from day one at a breakeven yield. The ability to capture a bunch of upside. It's just different dynamics. The the two loans we did, those buildings were essentially empty. So just a very different return profile where we thought the loan with a a a pathway to ownership was the right structure for those two particular deals. James Feldman: Okay. Alright. Great. Thank you for taking the question. Scott Brinker: Thanks, Jamie. Operator: This concludes our question and answer session. I would like to turn the conference back over to Scott Brinker for any closing remarks. Scott Brinker: Thanks for your time, everyone. Hopefully, we'll we'll see you tomorrow in Florida. Take care. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Siobhan: Good morning. My name is Siobhan, and I will be your conference call facilitator today. At this time, I would like to welcome you to The Marzetti Company's Fiscal Year 2026 Second Quarter Conference Call. Conducting today's call will be Dave Ciesinski, President and CEO, and Tom Pigott, CFO. All lines have been placed on mute to prevent any background noise. After the speakers have completed their prepared remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press 11 on your phone. And now to begin the conference call, here is Dale Ganobsik, Vice President of Corporate Finance and Investor Relations for The Marzetti Company. Dale Ganobsik: Good morning, everyone, and thank you for joining us today for The Marzetti Company's Fiscal Year 2026 second quarter conference call. Our discussion this morning may include forward-looking statements which are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, and the company undertakes no obligation to update these statements based upon subsequent events. A detailed discussion of these risks and uncertainties is contained in the company's filings with the SEC. Also note that the audio replay of this call will be archived and available on our website investors.marzetticompany.com later today. For today's call, Dave Ciesinski, our President and CEO, will begin with the business update and highlights for the quarter. Tom Pigott, our CFO, will then provide an overview of the financial results. Dave will then share some comments regarding our current strategy and outlook. At the conclusion of our prepared remarks, we'll be happy to respond to any of your questions. Once again, we appreciate your participation this morning. I'll now turn the call over to The Marzetti Company's President and CEO, Dave Ciesinski. Dave? David A. Ciesinski: Thanks, Dale, and good morning, everyone. It's a big day here for The Marzetti Company because in addition to reporting our Q2 results for fiscal year 2026, we are thrilled to announce that The Marzetti Company has entered into a definitive agreement to acquire Bachan's, the authentic, great-tasting, and rapidly growing Japanese American barbecue sauce brand. I will have more details to share on the acquisition later in the call, following the review of our second quarter results. In our fiscal second quarter, which ended December 31, consolidated net sales increased 1.7% to $518 million. Excluding non-core sales attributed to a temporary supply agreement or TSA, adjusted net sales increased one-tenth of 1% to $510 million. Gross profit grew 3.4% to a second quarter record $137 million. In our retail segment, the 1.1% decline in net sales compares to a strong prior year quarter of 6.3% and reflects softer demand during the timeframe of the US government shutdown. Retail segment sales highlights include continued growth from our category-leading New York bakery frozen garlic bread products and expanding distribution for our Texas Roadhouse dinner rolls. Sercana scanner data for the quarter ending December 31 showed solid performance for several of our core brands and licensed items, with overall scan sales of 2.3% for the thirteen-week period. In the frozen garlic bread category, our New York bakery brand grew sales 8.4%, adding 300 basis points of market share for a category-leading 44.6%. In the frozen dinner roll category, our Sister Schubert's brand and our licensed Texas Roadhouse brand combined to grow 7.1%, resulting in a market share increase of 40 basis points to a category-leading 60.8%. In the shelf-stable sauces and condiments category, sales of our licensed Chick-fil-A sauces grew 6.7%, resulting in 13 basis points of share growth. Chick-fil-A sauce has benefited from expanded distribution into the club channel that began during our fiscal fourth quarter, which ended June 30. In the produce dips category, sales of our Marzetti brand increased three-tenths of 1%, adding 130 basis points of market share for a category-leading 75.5%. In the foodservice segment, excluding the non-core TSA sales, adjusted net sales grew 1.6%, while volume measured in pounds shipped declined four-tenths of 1%. In addition to the benefits of inflationary pricing, the increase in foodservice segment sales reflects increased demand for several of our core national account customers and higher sales for branded foodservice products. During the period, we are pleased to report a 3.4% increase in gross profit to a second quarter record of $137 million, with reported gross margin up 40 basis points. Our focus on supply chain productivity, value engineering, and revenue management all remain core elements to further improve our margins and financial performance. I'll now turn the call over to Tom Pigott, our CFO, for his commentary on our second quarter results. Tom? Thomas K. Pigott: Thanks, Dave. Overall, the company delivered improved performance against a strong comparative period. In addition, investments were made to support future growth. Second quarter consolidated net sales increased by 1.7% to $518 million. Breaking down the revenue performance, net pricing was accretive by approximately 140 basis points. Core volume and product mix drove a 130 basis point decline. In addition, the company reported $8.2 million in sales, or 160 basis points of growth, that resulted from a temporary supply agreement with WynnWin Foods, the seller of the Atlanta-based manufacturing facility that we acquired last year. We entered into this agreement to facilitate the closing of the transaction. It's important to note that these temporary and non-core sales are expected to conclude during the quarter ended March 31, 2026. Consolidated gross profit increased by $4.5 million or 3.4% versus the prior year quarter to $137.3 million, and reported gross margin expanded by 40 basis points. The gross profit growth was driven by our productivity program, where we benefited from cost savings across a number of areas including procurement, manufacturing, value engineering, and distribution. In addition, our pricing actions offset the higher commodity costs we experienced during the quarter. Note that excluding the $8.2 million in sales from the temporary supply agreement, which did not contribute meaningfully to gross profit, adjusted gross margin expanded by 80 basis points. Selling, general, and administrative expenses grew by $3.3 million or 5.8%. The increase was primarily driven by higher marketing spend as we invested to support the continued growth of our retail brands and the expanded launch of Texas Roadhouse Rolls. Note that last year, SG&A expenses included acquisition-related costs of $1.6 million. During the quarter, the company recorded $1.7 million in restructuring and impairment charges. The charges are attributed to a non-cash impairment charge on manufacturing equipment in our foodservice segment as well as the planned closure of our sauce and dressing facility in Lopitas, California, that we previously announced. Consolidated reported operating income decreased by $500,000. The gross profit growth was offset by the higher investments we made in SG&A and the restructuring impairment costs. Excluding the restructuring impairment charges and the acquisition-related costs recorded in the prior year, adjusted operating income declined by $400,000. Our tax rate for the quarter was 22.6%, versus 22.5% in the prior year quarter. We estimate our tax rate for the remainder of the fiscal year '26 to be 23%. Second quarter diluted earnings per share increased $0.37 or 20.8% to $2.15. Note that in the prior year, we took a pension settlement charge of 39¢. In addition to the acquisition-related costs, which totaled $0.05. In the current year quarter, the restructuring impairment charges totaled $0.05 per share. With regard to capital expenditures, our payments for property additions totaled $17.7 million for the quarter. For fiscal 2026, we are forecasting total capital expenditures between $75 million and $85 million. We will continue to invest in both cost savings projects and other manufacturing improvements as well as the Atlanta facility we acquired last year. In addition to investing in our business, we also return funds to shareholders. Our quarterly cash dividend of $1 per share paid on December 31, represented a 5% increase from the prior year's amount. It marked sixty-three consecutive years of regular cash dividend increases. In addition to the $27.6 million paid in dividends, the company repurchased $20.1 million in common stock in the second quarter. Our financial position remains strong with a debt-free balance sheet and over $201 million in cash. And as Dave will discuss, we plan to take advantage of that strong position to invest for further growth with the acquisition of Bachan's. As we complete the first half of the year, we're pleased to report growth in net sales of 3.6% and adjusted net sales of 1.7%. Reported and adjusted gross margin reflected increases of thirty and eighty basis points, respectively. Reported operating income was up 2.2% while adjusted operating income increased 3.1%. In addition, operating cash flow grew by $30.6 million or 24%. To wrap up my commentary, our results demonstrate strong execution across a number of areas that drove solid top and bottom-line performance in a difficult operating environment. In addition, we returned funds to shareholders through our increased dividend and share repurchase. And also continued to make investments to support further growth and cost savings. I'll now turn it back over to Dave for his closing remarks. Thank you. David A. Ciesinski: Thanks, Tom. As we look ahead, The Marzetti Company will continue to leverage the combined strength of our team, our operating strategy, and our balance sheet in support of the three simple pillars of our growth plan. To one, accelerate core business growth. Two, to simplify our supply chain to reduce our cost and grow our margins. And three, to expand our core with focused M&A and strategic licensing. As an example of how we're executing against that third pillar, this morning, we announced that The Marzetti Company had entered into a definitive agreement to acquire Bachan's, the authentic, great-tasting, and rapidly growing Japanese American barbecue sauce brand. Bachan's has been built around a multigenerational family recipe passed down to its founder, Justin Gill, who has done an amazing job of developing the products and building this brand. We are extremely excited to add Bachan's to our portfolio. In the months ahead, we look forward to sharing with you our plans to leverage our industry-leading culinary and product development capabilities and working shoulder to shoulder with the Bachan's team to deliver long-term growth while maintaining the authenticity and quality that makes the Bachan's brand so special. This transaction reinforces Marzetti's position as a leader in sauces by adding a premium brand that is exceptionally well aligned with evolving consumer preferences for authentic, global flavors and better-for-you products. From 2022 to 2025, 48% driven by strong consumer demand and expanded distribution. We see meaningful opportunities to accelerate Bachan's next chapter of growth by leveraging Marzetti's culinary capability, retail relationships, and foodservice partnerships. Over time, we intend to broaden distribution, support continued product innovation, and thoughtfully extend the brand into new channels and adjacent categories. We also expect to capture substantial synergies as we carefully integrate Bachan's into our supply chain by leveraging our scale and expertise in making many of the world's most iconic and great-tasting sauces. The total consideration for the acquisition was approximately $400 million in cash. Overall, we expect this acquisition to be accretive to both top-line growth and gross margins beginning in year one. Looking ahead to the back half of our fiscal year, excluding any impact from the planned acquisition, we project retail sales will continue to benefit from our expanding licensing program led by Texas Roadhouse Dinner Rolls. In addition to investments in innovation and growth for our own brands. Note, with this year's earlier Easter holiday, we anticipate some retail segment sales will be pulled forward into our fiscal third quarter. In the Foodservice segment, we expect continued growth from select customers in our mix of national accounts. Like many of you, we continue to monitor factors, including US economic performance and consumer behavior, that may impact the demand for our products. With respect to our input cost in the aggregate, we anticipate a modest level of cost inflation that we plan to offset through contractual pricing and our cost savings program as we remain focused on continued margin improvement. In closing, I would like to thank the entire Marzetti company for all their hard work this past quarter and their ongoing commitment to grow our business. I would also like to convey to Justin Gill and the entire Bachan's team how excited we are about the opportunities to grow that lie ahead. This concludes our prepared remarks for today, and we'd be happy to answer any questions you may have. Operator? Siobhan: At this time, I would like to remind everyone in order to ask a question, please press 11 on your phone. Your first question comes from the line of Scott Marks from Jefferies. Your line is open. Scott Michael Marks: Hey, good morning. Thanks so much for taking our questions. First thing, good morning, Dave. How are you doing? Right? Just wanted to ask a little bit about top-line performance in the quarter. I think you called out on retail, obviously lapping a very strong quarter last year as well as some of the government shutdown impacts. Yeah. You know, as we think about maybe the go forward, should we expect that the impacts from those government shutdowns are fully behind us? Should we be thinking about any type of inventory rebuild coming into the pipeline in addition to some of those Easter shifts? Or any other dynamics that we should be thinking about with regard to the retail segment? David A. Ciesinski: Yeah. It's a great question. One that we've obviously watched carefully, and maybe I'll try to frame it in a little context for you. First, as you pointed out on the retail side of the business, we were going up against a strong comp last year where our volume was actually up 7.4%. Then you get sort of walked down from that as you highlighted, we saw a bit of a category slowdown between the thirteen-week period and the five-week period, across all Mulu and in our categories in particular. And importantly, Scott, as you pointed out, by the time we got back into December, we started to see those rates recover. As we then lift our focus to the go-forward period, we continue to believe that we're set up to deliver low single-digit volume growth against this business here. Scott Michael Marks: Got it. Appreciate the answer there. And then maybe just shifting over to the foodservice side, I think after last quarter, the commentary was pretty positive, you know, just around some of the initiatives within foodservice and being able to continue with some of the volume momentum. Obviously, volumes came in a little bit softer than folks were expecting. So just wondering if you can share with us maybe you know, what happened in the quarter? What was the reason for the organic volume declines? And then how are you thinking about the rest of the year for that foodservice segment? David A. Ciesinski: Yeah. Let's do the same thing. Let's kinda ladder up and set a little context for the industry, and then we'll bring it down specifically to our business. So at an overall industry level, I think the best way to categorize things is that essentially they're flat. We also saw a bit of a pullback in foodservice during the period of government shutdown. But there again, we saw an element of normalization. If you look at most of our large national accounts, we're continuing to win with those, AAA Domino's, Taco Bell, etcetera. I would say in those particular cases, you know, we were very satisfied with their performance and our performance. If you go back and you look at the script for probably the last couple of periods, we talked about the fact that we were going to be lapping a couple of limited-time offerings during this period that we thought were going to create a hole. I think that the setup that we used is we expected volume to be down a couple of points and for us to be able to get a little bit of pricing to get us closer to flat in the business. So it gets I think the way we were thinking about it then, it came in I would say, at or maybe even slightly better than we were expecting. Now let's come in maybe even a click deeper on what actually happened in the period. You know, first, I think it's we've continued to work and benefit from our partners that are doing well on a relative basis. And particularly, we had a number of specialty sauce promotions that were going on in the period either new items that were limited-time offerings or, in some cases, just core menu sauces that we've used that select foodservice partners have decided to promote in the period. So on this piece of the business, as you continue to shift your focus forward, I would argue that we're feeling a little bit more optimistic than we might have the last couple of quarters. You know, all eyes are on the consumer to see what happens, but you know, it's really hard to envision as we move now into calendar year '26, you know, short of a black swan, something changing materially on the downside. I think there are a couple of things that are working in our favor for everybody that services foodservice first. Gas prices are down year against year, which we know gives consumers discretionary spending that oftentimes comes back in away from home dining. The other thing that we're seeing here is like you, I think we're expecting income tax returns to be a little bit stronger this year than they were last year because of some of these changes. And those ordinarily hit around the time of President's weekend or so. So you put the fact that inflation remains relatively in check, gas prices seem to be moderating some. There's a case for slightly stronger income tax returns. I think the setup there for all of foodservice is at least for a flat scenario, if not for a modest improvement. And if past is prologue, what we see is that the winners continue to win in this environment. And I think this is where we'll continue to perform relatively well. So that would be kind of the view. Scott Michael Marks: Understood. Appreciate the thorough answer. We'll pass it on. David A. Ciesinski: Yes. Pleasure. Thanks, Scott. Siobhan: Thank you. Our next question comes from the line of Todd Brooks with Benchmark. Your line is now open. Todd Morrison Brooks: Hey. Great. Thanks for taking my call. First time. Wonder. Hey. Congratulations on the Bachan's acquisition. I was wondering, I know there'll be a plan for the synergies and everything that you'll look to be harvesting, but if you look at that business in '25, I think it was like, an $87 million business. But wondering what kind of the exit rate was. It looks like maybe there was some SKU expansion there was probably door expansion. As we think about maybe an exit quarterly run rate for Bachan's in Q4 2025? Is there anything you can share there? David A. Ciesinski: Yeah. So why don't I maybe step back and frame it if you allow me a little more broadly? But first of all, this is a business that we had been tracking in the industry for the better part of four years. It's a really amazing product and amazing brand. It's an authentic founder story. It's great tasting. Clean label, and what we love about this product, Todd, is that when you look at it, it significantly over indexes with millennials and Gen Z. So it does well with all of the various cohorts. But if you look at sort of the future of food consumption, and these are people that love their sauces, it does particularly well with those cohorts. And that, in conjunction with the fact that the brand has very broad shoulders, it plays in sauces, plays in marinades, plays in glazes, even plays in dips. We tested all of these items. It gave us reason to believe that this could be a very meaningful brand platform for us. And as we talk to Justin Gill, the founder of the business, and his team, really what we focused on was the fact that we believe we have best-in-industry culinary and product development capabilities. We can't develop everything. But when it comes to sauces, and dips and flavor systems, we believe that we really have top of the peer group capabilities. And I think that became part of a selling point for our partnership together. Now as you pointed out, the business did $87 million in sales strong growth rate. If you look at the history of the business, it grew principally through Costco, and then began to diversify into mass into, with Walmart, and into retail. So the mix of the business was growing a little bit faster this most recent year. In mass and in retail. The price point is premium, which gives it the ability to make it margin accretive. And as you might imagine, there is a synergy case here given that this is in sauces, and it's really our wheelhouse to be able to support this business. So overall, you bring it all together, authentic founder story, great tasting product, aligned with where consumers are going, GLP friendly, it really just made a lot of sense for us. So a very, very exciting item here. So I'm gonna give you a little inside baseball for those listening. We literally signed this last night. We had been following this business for four years. We had participated in the process. We've been diligencing it for months. But, literally, we signed last night. So relatively fresh news. And we'd like to come back to you with a more complete story for how we intend to grow the business and outline for you the synergy case and everything else. But suffice it to say, if you look at us, our history really started in dressing. And our most recent chapter of growth in sauces has come by way of brands that we've licensed. And we love those brands. That being said, we've always wanted brand platforms that we could own that we could also grow. So we could have multiple pathways to growth. Our legacy brands, Marzetti, Sister Schubert, and New York, these amazing highly relevant restaurant brands, but then over time, the right circumstances to add additional brands that we think are consumer relevant for the future that we could own and help grow. So for us, it really checks all of those boxes. Todd Morrison Brooks: That's amazing. And, one nonrelated follow-up, and I'll jump back in queue. Dave, if we think about the Texas Roadhouse dinner rolls, I think scanner data north of $20 million in the quarter. When you originally talked about the launch of the product, you thought this was next $100 million offering within the licensed branded portfolio. As we look towards the back half, how do you think about exit run rates for this business given the distribution continues to grow? And you've also talked about possible extensions with additional flavorings and things like that. Can you address that as well? And I'll jump back in queue. Thanks. David A. Ciesinski: Yeah. I'd be happy to, and thank you for asking. The business continues to maintain that same growth rate. If you look at it, you pointed out most recent period, we exited about 20%, $20 million run rate. Actually, the five-week was better than the thirteen-week. And I think there's still room for us to continue to dial in the merchandising on the shelf. And, a range of other things. Parasitically, yesterday, I was on the phone with the team at Texas Roadhouse, and we were talking about partnership and how mutually excited we are about the whole thing. And we are also talking about other items that are in the pipeline. So, you know, you get to the end of our fiscal year, I think there's most certainly a case that this thing could be working towards a retail $100 million run rate. And this is an amazing brand. It's really one of those away from home brands that really connects with consumers in a good economy and in a tough economy. And, we feel like we're uniquely suited to work with them in their iconic role platform to grow the business. Todd Morrison Brooks: That's great. Thanks, Dave. David A. Ciesinski: Thank you. Thanks, Todd. Siobhan: Thank you. Your next question comes from the line of Alton Stump from Loop Capital. Your line is now open. Alton Kemp Stump: Great. Thanks, guys. Excuse me for taking my questions this morning. As always, I guess, one is for Tom. I wanted to ask, you know, with the $21 million in share buybacks, obviously, it's not a big number with where your balance sheet's at, but believe it's the biggest number even on a full-year basis that you bought back in over a decade. So I guess, you know, anything to read from that as far as, you know, your appetite for, you know, buybacks going forward. Obviously, you just completed a, you know, sizable deal. So that probably, you know, has an impact. But just kinda what your thoughts are when it comes to buybacks. Thomas K. Pigott: Yeah. So great question. So, you know, obviously, with the stock trading off and with the rest of the sector, we felt opportunistically there was an opportunity to buy back. So we executed a limited number of buybacks during the quarter. Now, as you've mentioned, we were levering that balance sheet against the acquisition of Bachan's which, you know, as Dave articulated, will be tremendously positive for our financials over time. So I think at this time, it's safe to say we'll kinda go back to our attritional approach on buybacks. That said, on the dividend policy, we continue to expect to grow it consistent with our history even with this acquisition given the very strong cash position the company has developed over time. Alton Kemp Stump: Understood. Makes sense. You know? And, Dave and, you know, thanks for the color that you just signed this deal last night, so I'm sure there's gonna be some more information to come. You know, you know, on the opportunities as you kinda work through things. But I think you mentioned that it grew, you know, 48% annually, you know, during '22 to 2025. So clearly, in which is established in 2019, like I said, in release. So it's obviously a brand new brand. I would think that there's a ton of distribution opportunities. You know, like you mentioned that they've obviously, you know, had a lot of growth Costco and Walmart. So maybe just high-level color on kind of what you know, distribution, you know, upside potential could look like. David A. Ciesinski: Yeah. Well, our early thinking on things as we get to know the business is maybe, first of all, this is a very, very capable team, very cohesive team, and our intention is to keep the team together and really augment them with our resources to help them grow rather than to, you know, do anything other than that, really continue that momentum. As we think about how we intend to grow that, it's likely to come in three stages, where the first phase is going to be focused on really refining the distribution that they have in place. The second phase would come by driving new items that were in their pipeline and in our pipeline and really helping them execute those. And then the third phase would be extending them even more into broader adjacencies with new items. So this is a brand that plays most certainly well in the United States. We've seen it. And it's also a brand that we believe could play in a very meaningful way in Canada. If not other countries beyond. The last thing that I'll point to is if we look at this, one of the things that the business that really impressed us is when you look at the velocities of these items, the velocities are really remarkable. And the other thing that we saw that we really liked about it is the net promoter score. Which is, you know, that ratio of positive feedback to negative feedback. And the net promoter score on this brand was higher than virtually any other brand that we tested out there, including many of the most popular items that the industry has talked about most recently. Whether in sauces or even in other categories. So the setup here is very, very positive. Alton Kemp Stump: Interesting. Well, some great color. Thank you so much, Dave and Tom. I'll hop back in the queue. David A. Ciesinski: Thank you. Siobhan: Your next question comes from the line of Brian Holland from D. A. Davidson. Brian Holland: Yes, thanks. Good morning. Maybe just sticking along with the Bachan's acquisition. So when you make an acquisition like this, there's two factors to consider. The availability of, you know, a desirous asset. I'm talking about this from a timing perspective. So the availability of a desirous asset and the readiness of the acquirer to complete the acquisition. I think, Dave, as you and I have talked about, obviously, the market generally has some skepticism, spotty M&A track record. You know, historically, I think it's fairly straightforward here. You know, looking backwards, some of those acquisitions were taking big swings. They were focused on addressable market expansion, etcetera. Big swings at least from, you know, a new category standpoint, not necessarily size. This is right in your wheelhouse. So can you just kinda talk about why this less about the asset. We know about that. We can dig into it a second here. But why now is the right time for Marzetti to be able to execute and integrate this asset a way that it may not have been able to do five years ago. David A. Ciesinski: No. It's, you know, Brian, I'm really glad you asked that question, and you followed us long enough in closely enough I think really you know, appreciate the journey that we've been on. And I think I would maybe talk to several things. Over the course of the last handful of years, we've really begun to narrow our focus into building end-to-end capabilities in sauces, dressings, dips. Even when we think about our dough items, we think about the ability to stick flavor on top of those oftentimes. But focusing narrowly on sauces and dressings and dips, which is our core, this whole transformation has taken place in several steps. One has been going back and looking at our asset base to modernize those to make sure that we could move from slower, less efficient filling lines to highly efficient, scalable, manufacturing and filling lines. And that was played out with HorseCave. It was played out with some of the other smaller expansions. And it was also played out with the most recent acquisition that we did at College Park. As we worked our way through that, as you're aware, we looked at assets to buy, but the prices didn't make sense or the asset didn't make sense for what we were trying to achieve. And instead, we leaned into another inorganic growth pathway which for us has been licensing. And we've added, as you know, over that period of time, I'm guessing $400 million plus or so of profitable revenue by way of that licensing arm. You continue to move forward with that. We had an antiquated IT infrastructure system. We had a Cobalt-based system installed in 1994 that we tore out and replaced during COVID, and we went to really, end-to-end SAP S4HANA, all based in the cloud. All of with our data in one day in one data lake. So another element of modernization. So as we work to grow by way of organic activity and inorganic activity, with licensing, we've also worked in earnest to strengthen our capabilities so we could get to a point where we feel like we have industry-leading culinary and product development capabilities. Industry-leading manufacturing capabilities, and then industry-leading marketing and selling capabilities. So we're at a moment in time now where most of the infrastructure, let's call it, remediation and rebuilding, is behind us. Whether it's in the IT space or whether it's in the physical space. And it was a logical time with this experienced team to think about an acquisition. And this acquisition, like you said, was just really right down the wheelhouse. It has combination on the asset now of a great founder story, clean label, great tasting product, you know, I could go on and on. And the partner, you know, Justin Gill and the team that he has built, is really top flight. So you bring all that together it really made us feel like this was the time for us to think really hard about this. If we get it at the right price, to move forward, and we felt like this was the right price for us. Brian Holland: Appreciate it as always, the thoughtful answer. And then forgive me if you referenced this earlier in your remarks and I just missed it. But just curious on the integration, the cost synergy side. Supply chain, etcetera. Are you what can you offer immediately? I do these are they self-manufactured? Is this something you get to bring in-house? Obvious the excitement, enthusiasm around growth would Yeah. You know, maybe need more capacity at some point. Is that something that you can offer immediately, or will that require some capital investment in a meaningful way to allow for that future growth runway? David A. Ciesinski: Sure. So as it stands today, the business is co-packed 100%. And, obviously, that provides us with a pathway to integrate some of the manufacturing into our network. But this is one of those scenarios where we most certainly wanna go slow to go fast. We wanna make sure we understand the business. We wanna make sure we understand how to manufacture the business. They have a good co-pack partner that's out there right now. And the last thing we wanna do is to bugger this thing up. But as you think about over the longer arc of time, there is a strong case for synergies here throughout the supply chain, and then we talked about the gross synergy case as well. Brian Holland: Great. Thanks. I can leave it there. David A. Ciesinski: Thank you. Thanks, Brian. Siobhan: Thank you. And our last question comes from the line of Jim Salera of Stephens. Your line is now open. James Ronald Salera: Good morning. Thanks for taking my question. I wanted to dig in a little bit if I could on Bachan's potential co-man. I assume that you have the capabilities in place to make this in one of your existing facilities. Is there any way you can frame up the opportunity for you know, where the margins might come in, whether it's relative to your existing margins or if you have a specific number in mind? David A. Ciesinski: Yeah. So this is a very high-margin business. The product sells at a premium price point. Justifiably. And the existing margins are accretive to our existing retail segment at gross margin. So we're starting off with a premium product. And as we look at it, we have opportunities not only in terms of utilizing our capabilities in manufacturing, procurement, distribution, is another drill site for us. So this is gonna be immediately margin accretive to us at the gross margin level. With potential to add to that going forward. James Ronald Salera: And then I wonder if you have any detail on did they have any sales in foodservice right now? Because I know we've seen other brands do kind of collaborations with foodservice partners if they have a particularly unique or prominent sauce. Is that something that they know right now, or that's a possibility? David A. Ciesinski: No. It's a great question, and it's a great opportunity for us. Right now, they do a very limited amount with foodservice customers. And as we worked, you know, with them over the course of several meetings, we both felt like this is a really exciting opportunity where we obviously have great capabilities to help them work with national accounts. You know, ideally, if you can imagine a Bachan's barbecue sauce, a wing sauce of some sort, feels like a home run. So there's a range of opportunities there potentially with national accounts that we would like to investigate. And, also, just you know, opportunities up and down the street. This is a tabletop item that people also use to drizzle, particularly on bowls. So there is a real foodservice opportunity here and one of the things that I think that the team at Bachan's liked about us was our foodservice reach. James Ronald Salera: Perfect. Then if I could just sneak in one quick, near-term question. Just with all the moving pieces, for 3Q with Easter and pull forward, and then 3Q is also going up against a negative comp in the year ago. I think sales were down, like, 3%. In Q3 2025. Would it be reasonable to expect 3Q to be up kind of you know, if we're thinking kinda 2% for the year, that 3Q would be, like, three to 4%. And then 4Q would be you know, the balance of that to average two for the year. Just wanna make sure, you know, we're kinda getting the cadence right. As we think about modeling overall the calendar changes and then the year-over-year could lap. Thomas K. Pigott: Yeah. We have, for retail, we have low single-digit revenue growth for the second half. It actually is fairly even by quarter as forecasted today. And, certainly, you know, we do have while we have the Easter tailwind, we have some difficult new item launch comps and in the club. In Q3. In the club sector. So you know, I would model it fairly even by quarter. James Ronald Salera: Okay. Perfect. Thanks, guys. Forget the call. David A. Ciesinski: Thanks, Jim. Siobhan: If there are no further questions, we will now turn the call back to Mr. Ciesinski for his concluding comments. David A. Ciesinski: Well, thank you, operator, and thank you, everyone, for participating this morning. We look forward to sharing with you our third-quarter results in May and giving you more exciting information about the acquisition of Bachan's. Have a great rest of the day. Siobhan: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Regina: Morning. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Illinois Tool Works Inc. Fourth Quarter and Full Year Earnings Conference 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. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star 1 a second time. Question. And if needed, one follow-up question. Thank you. Erin Linehan, Vice President of Investor Relations, you may begin the conference. Erin Linnihan: Thank you, Regina. Good morning, and welcome to our Illinois Tool Works Inc. fourth quarter 2025 conference call. I'm joined by our President and CEO, Christopher O'Herlihy, and Senior Vice President and CFO, Michael Larsen. During today's call, we will discuss Illinois Tool Works Inc.'s fourth quarter and full year and provide guidance for full year 2026. Slide two is a reminder that this presentation contains forward-looking statements. Please refer to the company's 2024 Form 10-Ks and subsequent reports filed with the SEC for more detail about important risks that could cause actual results to differ materially from our expectations. Christopher O'Herlihy: This presentation uses certain non-GAAP measures, and a reconciliation of those measures to the most directly comparable GAAP measures is contained in the press release. Please turn to slide three, and it's now my pleasure to turn the call over to our president and CEO, Christopher O'Herlihy. Chris? Christopher O'Herlihy: Thank you, Erin, and good morning, everyone. As you saw in our press release this morning, Illinois Tool Works Inc. delivered a solid finish to the year. In the fourth quarter, we outperformed our underlying end markets with revenue growth of more than 4% and delivered a 7% increase in GAAP EPS to $2.72. Through disciplined operational execution, we expanded operating income and margins to record levels. Starting with the top line, organic growth of 1.3% marked our best quality performance of the year. Overall, Q4 demand improved, as reflected in higher than normal sequential improvement of 4% from Q3. In addition to market outperformance, the Illinois Tool Works Inc. team continued to execute at a high level, resulting in operating income of $1.1 billion, an increase of 5%. Segment margins were 27.7%, 120 basis points, with a 140 basis point contribution from enterprise initiatives. Looking back on a challenging external environment in 2025, the Illinois Tool Works Inc. team delivered another year of robust financial performance. We consistently outperformed our markets, solidly improved profitability, and made meaningful progress on our next phase key strategic priorities. Throughout the year, we remained laser-focused on building above-market organic growth fueled by customer-backed innovation or CBI into a defining Illinois Tool Works Inc. strength. We are pleased to have achieved 2.4% CBI-fueled revenue growth in 2025, a 40 basis point improvement, as we track toward our 2030 goal of 3% plus. Furthermore, I'm encouraged by a key leading indicator of CBI contribution, or patent filings, which increased by 9% last year following an 18% increase in 2024. Turning to guidance, we enter 2026 with solid momentum. Per our usual approach, our organic growth projection of 1% to 3% reflects current demand levels adjusted for seasonality. We are well-positioned to capitalize on any further improvement in the macro environment. Our EPS guidance midpoint of $11.20 represents 7% growth, and we expect operating margin expansion of about 100 basis points powered by enterprise initiatives. Our 2026 forecast ensures we remain firmly on track to deliver on our 2030 performance goals. In closing, I want to sincerely thank our global Illinois Tool Works Inc. colleagues for their unwavering dedication to serving our customers and executing our strategy with excellence each and every day. With that, I'll turn the call over to Michael to provide more detail on the quarter and our guidance for 2026. Michael? Michael Larsen: Thank you, Chris, and good morning, everyone. In Q4, the Illinois Tool Works Inc. team delivered a solid operational and financial finish to the year. Organic growth was 1.3%, foreign currency translation added 2.5%, and acquisitions contributed 0.3%, bringing total revenue growth to 4.1%. Notably, our 4% sequential revenue growth from Q3 to Q4 significantly outperformed our historical sequential average of 2%. On a geographic basis, North America grew about 2%, Asia Pacific was up 3%, while Europe declined 2%. On the bottom line, we achieved a fourth-quarter record operating margin of 26.5%, with enterprise initiatives contributing 140 basis points. As noted in our press release, segment operating margin was 27.7%, a 120 basis point increase with incremental margins of more than 50%. All seven segments expanded operating margins driven by enterprise initiatives which contributed between 80 and 210 basis points per segment. Free cash flow conversion to net income was 109% for the quarter. We repurchased $375 million of our shares, and our tax rate was 22.8%. Please turn to slide four. And as Chris mentioned, CBI is our most impactful driver for organic growth. We're pleased with our 2025 progress, reaching a 2.4% CBI contribution, a 40 basis points year-over-year improvement. We expect meaningful progress again in 2026 on this key strategic initiative as we track toward our longer-term goal. Now let's move to the fourth quarter segment results, starting with Automotive OEM, where revenue increased 6% and organic revenue increased 2%. On a regional basis, North America was up 2%, while Europe was down 1% and China grew 5%. For the full year 2025, this segment outperformed relevant builds, and we expect our typical 200 to 300 basis points of outperformance in 2026. Full-year margins are a prime example of Illinois Tool Works Inc.'s "do what we say" execution. In 2025, margins improved by 150 basis points to 21.1%, consistent with the goal established during our 2023 Investor Day. Driven by our culture of continuous improvement, we expect to further expand these margins in 2026. Turning to Slide five, Food Equipment delivered revenue growth of 4% with organic growth of 1% as equipment was flat, offset by 3% growth in service. By region, North America was flat, with institutional end markets up in the high single digits offset by restaurants, down also in the high single digits. Retail was a bright spot, up nearly 5%, and the international business grew 2% with Europe up 2%. Test and measurement and electronics had a solid quarter. Revenue up 6%, organic revenue up 2%. Test and measurement was up 3% and electronics was flat against the tough comparison year over year. Notably, we began to see a positive pickup in semiconductor and electronics activity with our semi-related businesses up mid-single digits in the quarter. Operating margins improved by 110 basis points to 28.1%. Moving on to slide six, Welding revenue grew 3% with organic growth of 2% in the fourth quarter. Equipment was up 4%, and while consumables were flat, filler metals were up in the high single digits. Regionally, North America was up 4%, while international declined 5% against the tough comparison of 9% last year. Notably, operating margin reached 33.3%, a 210 basis points improvement. Polymers and Fluids had a strong top-line quarter with 5% organic growth supported by new product launches, in automotive aftermarket, grew 5%. Polymers was up 4% and fluids grew 6%. On a geographic basis, North America was up 5%, and international grew 4%. Operating margin expanded 110 basis points to 29%. Turning to Slide seven, in Construction Products, organic growth was down 4%. Regionally, North America was down 4%, with residential renovation down 5%, while commercial construction was up 5%. Europe was down 5%, and Australia and New Zealand were flat. Despite the top-line challenge, the team successfully expanded margins by 100 basis points to 29%. Specialty Products revenue increased 4%, and organic revenue was up 1%. Equipment growth was particularly strong, up 12%, and consumables were down 2% in the quarter. North America was flat, and international grew 3%. Moving to slide eight and full-year 2025 results, our global teams continue to execute at a high level, enabling us to consistently outperform our end markets and expand margins to deliver solid financial results in a mixed macro environment. Throughout 2025, we maintained our focus on maximizing Illinois Tool Works Inc.'s growth and performance over the long term, as we invested close to $800 million in high-return internal projects to accelerate organic growth and sustain productivity in our highly profitable core businesses. At the same time, we increased our dividend for the sixty-second consecutive year and returned a total of $3.3 billion to shareholders. Moving to Slide nine and our guidance for full year 2026, Illinois Tool Works Inc. is well-positioned to deliver meaningful progress on both the top and bottom lines in 2026. For our usual process, our total revenue projection of 2% to 4% and organic growth projection of 1% to 3% is based on current levels of demand adjusted for typical seasonality. At Illinois Tool Works Inc., growth is high quality, meaning it is delivered at attractive incremental margins in the mid to high forties for 2026. In terms of overall profitability, we expect operating margin to improve by approximately 100 basis points to a range of 26.5% to 27.5%. This includes a 100 basis points contribution from our enterprise initiatives, which provides margin expansion that is largely independent of volume. We're projecting a GAAP EPS range of $11 to $11.20, representing 7% growth at the $11.20 midpoint. Regarding the cadence for the year, we expect the first half, second half EPS split of approximately 47/53%, consistent with 2025. Factoring in typical seasonality, Q1 EPS should contribute roughly 23% of the full-year total. Lastly, we expect free cash flow conversion to net income of greater than 100% and plan to buy back approximately $1.5 billion of our shares in 2026. Turning to our final slide, Slide 10, all seven segments are projecting high-quality organic growth based on current run rates adjusted for seasonality, and every segment is well-positioned to outperform its respective end markets again in 2026. Consistent with Illinois Tool Works Inc.'s continuous improvement, never satisfied mindset, all segments are also projecting margin improvement, supported by another year of solid contributions from our enterprise initiatives. In summary, all seven segments are heading into 2026 well-positioned to deliver solid organic growth with industry-leading profitability and incremental margin. With that, Erin, I'll turn it back to you. Erin Linnihan: Thank you, Michael. Regina, I think we're ready to open the queue for questions. Please. Regina: At this time, I would like to remind everyone to ask a question, press star then the number one on your telephone keypad. You'll have the opportunity to ask. Our first question will come from the line of Andrew Kaplowitz with Citigroup. Please go ahead. Andrew Kaplowitz: Good morning, everyone. Christopher O'Herlihy: Morning. Morning, Andy. Andrew Kaplowitz: Chris or Michael, so test and measurement within the segment looks like it did improve meaningfully in Q4. You called out the commentary in semicon. It's been improving for you again, which is good to hear. You've had a couple of maybe, I'll call it, head fakes in semicon. So you're seeing more definitive turn now? And are you seeing a bit more of an unlock of your CapEx businesses in general in terms of growth? Christopher O'Herlihy: Yeah. So, Andy, in general, as you said, test and measurement had a pretty solid quarter. You know, after what was a pretty challenging year, you might remember, you know, mid of the year, we had pretty much a CapEx freeze related to the China shipments for two quarters. And so we certainly saw improvement in bookings in general industrial here in Q4. As Michael mentioned, we also saw an improvement in demand for semi electronics. Just to context that, I mean, semi is about 15% of test and measurement. So just to give you a perspective. You know, I would say that the semi at this point, you know, it seems to be sustainable based on what we see right now. But you know, as you said, you know, we had an uptick in Q2, came back down in Q3, but we've seen a recovery in Q4. And I think this is a part of the market we've got very strong competitive advantages. Particularly as it relates to semi manufacturing testing equipment. So whatever happens, we're well-positioned. We're particularly well-positioned to take share as the end market continues to improve. Yeah. And I maybe just to add beyond that, Andy, you know, the general industrial orders are also improving in test and measurement. As well as you've seen the improvement in revenues and our growth rates on the equipment side in welding. So all of that suggests that we are certainly seeing, I would say, a little more than green shoots at this point. Meaningful improvement not just in sales, but also orders and backlog is looking pretty good at this point. And so we got some pretty good momentum going into 2026 as reflected in the guidance that we gave for those two segments. Andrew Kaplowitz: Yes, that's great to hear, guys. And then when we think about margin expansion across your businesses in 2026, I know you expect it in all segments. Normally, I would think we just model higher incrementals where you're modeling higher growth. But you, for instance, had really good margin performance in construction again in Q4. And there is, you know, there are metals inflation out there. So any more advice on how to think about margin performance across the segments? Christopher O'Herlihy: Yeah. I would just say I'll go back to kind of our prepared remarks there, Andy. We expect, based on bottoms-up planning with our segments, based on having a chance to review the enterprise initiative savings, the actual projects, for 2026, we expect every segment to improve their operating margins in 2026. And the biggest driver, I think you pointed out, will be the enterprise initiatives again. So about 100 basis points from initiatives. And then, you know, also, there is some positive operating leverage at incremental margins that at this point are quite a bit higher than what we put up historically, as I said, kind of in that mid to high forties. So maybe that's a way to think about the margin improvement for each one of the segments in 2026. Now I will say this. We do have three segments now that are above 30% and so maybe you'll see a little bit less of improvement in those segments relative to the ones like auto that have been putting up some meaningful operating margin improvement, test and measurement as well, that still have a ways to go to get to, you know, test and measurement to that high twenties, 30% level. And improved CBI is the other driver of increased margins. Yeah. As you know, as we've talked about, the CBI progress is really encouraging, obviously, not just as a contributor to growth, but all of these new products that are coming in are coming in at higher margin. And so that's really the key to unlocking margin improvement on a go-forward basis, particularly in places like automotive OEM. Andrew Kaplowitz: Appreciate all the color, guys. Thank you. Regina: Our next question will come from the line of Joseph Ritchie with Goldman Sachs. Please go ahead. Joseph Ritchie: Morning, Joe. Joseph Ritchie: Hey. Can we just can we touch on the price-cost dynamics? So I think in the slides you had mentioned that price-cost is expected to be positive in 2026. Can you elaborate on that a little bit? And then also, seeing that resin prices have continued to come down, at this point, you know, what percentage of your COGS is resin? Christopher O'Herlihy: Let me start with the first part. I think on price-cost, we've been talking about this for a while in terms of, you know, this having kind of normalized after the wave of tariff-related increases we saw last year. So at this point, we're back to kind of where we used to be around price-cost, which is slightly favorable for full year 2026. But not a big driver of the margin improvement. Really, the efforts, particularly the tariffs, have really been centered around not just price, but also supply chain and making sure we do everything we can to mitigate some of these increases so we don't have to pass them on to our customers. So that's maybe one way to think about price-cost. I'm not sure I have the resin number right in front of me. It's pretty small. I think here again, I'm not quite sure where you were going with the question, but to the extent that there are increases or decreases in resin cost, those will be reflected in pricing actions that are taken again at the division level where this is more of a meaningful driver of their material costs. Yeah. No. Appreciate the comments. Joseph Ritchie: Michael. I guess I was thinking back, like, back in the, I don't know, call it 2016 time frame when you guys saw some deflation in resin. And I remember it being, like, 10 to 15% of your COGS back then. Obviously, that's a long time ago. But there are areas like polyfluid, areas in, like, auto, like injection molding, and, like, you know, gas caps, like plastic fasteners where you guys did see a benefit. So I was just really trying to think back at that time frame where you had some deflation in your cost structure, but then you have these, like, longer-term contracts and, like, the auto business where you can get some pricing. So I was just trying to understand whether that was gonna be potentially a meaningful mover to the 2026 bridge. Christopher O'Herlihy: Yes. So, Joe, I'd say the longer-term dynamic, long-term contract dynamic is still there, but the percentage is less than considerably less than I think we've always sent to 15 back then, I would say. We should It's a lot less. Yeah. And we have a very small portion of our business in specialty products that index to resin costs. And automotive, you know, there typically aren't adjustments made, you know, on the way up or on the way down. As you're well aware. So not something that's on our radar here in a meaningful way. Just because it's not gonna be material to the overall performance of the company this year as we sit here today. So Okay. Great. Thank you. I'll get back in queue. Appreciate it. Thank you too. Regina: Our next question comes from the line of Julian Mitchell with Barclays. Please go ahead. Julian Mitchell: Hi. Good morning. Good morning. Maybe just wanted good morning. Maybe just wondered first off if you could flesh out any sense of kind of seasonality for this year, anything unusual or And maybe remind us what we should expect typically for the first quarter, please? Christopher O'Herlihy: Sure, Julian. So I'd say there's really nothing unusual going on this year. We expect the year to unfold in line with typical seasonality. It looks a lot like last year. In terms of the quarterly splits. We kinda laid out the first half, second half EPS split, forty-seven fifty-three. That's what we did last year. As you know, Q1 always starts out down a few points of sequential revenue drop from Q4 to Q1. Like last year, that's about $100 million in revenue. From Q4 2025 to Q1 2026. Margins also dropped a little bit in Q1. And we typically end up around 23% of the full-year EPS here in the first quarter. Now, I will say this, that every quarter and then in Q2, we see a pickup again in margins from Q1 to Q2. Revenues pick back up again. And every quarter, this year, if you model this on a run rate basis, you'll see pretty meaningful revenue growth on a year-over-year basis in line with the guidance that we're giving in that 2% to 4% revenue growth. Every quarter is projected to have margin improvement on a year-over-year basis, including in Q1, maybe a little bit more modest in Q1, and then it picks up as we go through the year in Q2, three, and four. Earnings per share grows in line with kind of the guidance range we're giving you here, which is 7% of the midpoint. And so that's kinda how it typically plays out. Free cash flow tends to improve as we go through the year. So that's maybe as much as I can give you here. Julian Mitchell: That's extremely helpful. Thank you, Michael. And maybe my follow-up, just to understand, you talked about CBI, I think, a 2.4% to sales in 2025. Christopher O'Herlihy: Yeah. Julian Mitchell: And that was 40 bps better than the prior year. Maybe sort of flesh out a little bit the progress there in 2026, what we should expect, and any thoughts on the product life cycle management side? Sorry. The product life simplification side. Thank you. Christopher O'Herlihy: Mhmm. Yeah. So on CBI, as you mentioned, Julian, strong momentum here in '25, encouraged the progress that we're making across the company and particularly encouraged, I think, by the strength increased strength of our pipeline of new products. And, you know, it's really one of the reasons we believe we're outperforming our end markets. A lot of successful product launches this year, across the company, I would say most particularly in welding, test and measurement, food equipment, automotive. Good progress, 40 basis points of improvement in 2025 with continued incremental improvement here in 2026. Well on the path to get to three plus by 2030. Particularly encouraged, I think, by patent filings. I mean, patent filings were up 18% in 2024. Up another 9% in 2025. And why that's particularly important because at Illinois Tool Works Inc., this is a really leading indicator of progress on CBI. We're often or our patent filings are more often than not protecting customer solutions. And so an increase in patent activity is often pretty well correlated with future revenue growth. So really encouraged by everything we're seeing, more progress in '20. It can be a bit lumpy. You know, you can get ups and downs on this, but the trajectory is certainly on its way up, and we're very, very confident at this point that the 3% plus target is well within our reach. And, you know, I would not make the I think PLS is a to me is a different kind of a conversation. I don't really see a correlation between them. The only overlap between PLS and CBI is that they're both focused on differentiation. PLS is about ensuring that we prune our own differentiation and CBI, of course, is pursuing differentiation in a product development context. But, you know, PLS for us in '26, we see as more of a maintenance level, you know, 30 to 50 basis points. That's lower than 2025. But it's very much a bottom-up number. It's really decided on at the divisional level we've said before, it's a fundamental part of 8020 front to back and the ongoing strategic review portfolio pruning that goes on in our divisions. And we have obviously a very highly developed methodology around this. We get a lot of benefit from PLS implementation. We do it. You know, we get benefit in terms of growth from the standpoint of strategic clarity. Ensuring that we're executing on our most important customers and products and then effectively deploying resources on the back of that. Of course, from a margin improvement standpoint, the cost savings from PLS are a meaningful contributor to the enterprise initiatives that we generate every year. And a lot of these projects have a payback of less than a year or so. I think I would not really connect them that much. They're both very active in the company. PLS a little lower this year but puts it all steam ahead on CBI. Yeah. So PLS a little bit lower year over year, and CBI contribution revenue a little bit higher. On a year-over-year basis. So that's what's supporting the top-line guidance that we're giving you today. Regina: Our next question will come from the line of Scott Davis with Melius Research. Please go ahead. Scott Davis: Hey, good morning, guys. Good morning, Scott. Congrats on turning the corner here on the top line. I have to ask, the buyback is great, but I have to ask because you didn't mention M&A at all in the prepared remarks. And is that kinda off the table for '26, or you didn't mention it just because it's more opportunistic? Christopher O'Herlihy: It's the latter, Scott. It's certainly on the table for, you know, for the right companies. So as we've often said, we're focused on high-quality acquisitions that really will extend our long-term growth potential. While being able to leverage the business model to improve margins and we review opportunities all the time on an ongoing basis. We're pretty selective given that we genuinely believe we have a compelling organic growth opportunity. We're also pretty active in terms of reviewing opportunities and to the extent that we find the right opportunities while acknowledging, I think, the challenging valuation trends that we're seeing right now then we will be appropriately aggressive in pursuing them. You know, we obviously did the MTS deal three or four years ago. It turned out to be a great acquisition, met all of our kind criteria. Similarly, the quarter just past, we had one bolt-on acquisition in the semi-manufacturing space. Which is all the high-quality growth attributes that we look for. And we're certainly very open to doing more deals like this, and I would say we're actively prospecting around these deals. But we gotta find them. When we find them, we will. Yeah. I would just add. I agree with that. And Chris said, I think it's not necessarily an easy time to be a disciplined acquirer and often the challenge is really around valuation. And we're not gonna do deals that don't make sense to Illinois Tool Works Inc., which means we're not gonna do deals where we can't generate a reasonable risk-adjusted rate of return for our shareholders. And so that's kind of been our long-term positioning here, and that part of it is not gonna change on the book forward basis. And we agree with you that the buyback is a great way to allocate surplus capital. To our shareholders. Also contributes frankly, a share 2% EPS growth on an annual basis. And so that will remain an active share repurchase program will remain an important part of our capital allocation strategy on a go-forward basis. That's a good answer. Guys, I don't wanna be a dead horse. The CBI stuff is pretty interesting, and what does it take to get to 3%? Is it spending more or getting more out of what you have? And the reason why I asked that question is that, you know, up 18% and even up 9% patents are that's pretty big growth. Do you have to spend more to get to that 3%? Kinda what's the gating factor of bridging that gap? Christopher O'Herlihy: Yeah. It's not spending more, Scott. I think we've been meaningfully investing in a very focused way now for a number of years. You know, to build up the muscle around this. And really what's moving the needle and is very much a similar approach to what we took on 8020 funds back, you know, ten years ago. And we saw the results that accrued from that. But really, it's about a much higher level of leadership time and focus. It's certainly continuing to invest and build capabilities we have been doing for the last four or five years. And on that basis, we've seen innovation contribution more than double over the last five years. The capability that Bill that we're doing is at the segment level, but also in our divisions. You know, we have lots of great innovation practice around the company, and as we've mentioned on prior calls, we really codify this into a very effective and innovation framework. And we launched that framework in 2024. Again, this is the exact approach that we took in 8020 front to back. All that's certainly taken root. We see it in the patent filings. We see it in the yield. And, you know, we're well on track here to do the 3% plus. But I think all the pieces are in place, and it's no question of just building momentum and ensuring we get that consistently high quality of practice in every part of the company, and that will get us to more than three for sure. Yeah. And I might just add, that we've added the CBI metric as one of the key elements in our incentive plans on a go-forward basis. So if you look at the long-term incentive plans here, at Illinois Tool Works Inc., and in addition to margins, returns, EPS growth, we've added or the board has added CBI yield just in alignment with the overall strategic importance of this metric and this initiative on a go-forward basis. Helpful. Interesting. Thank you, guys. Best of luck this year. Pass it on. Thank you. Thank you, sir. Regina: Our next question comes from the line of Tami Zakaria with JPMorgan. Please go ahead. Tami Zakaria: So the auto segment growth in China was, I think, about 5% I think granted bills were also slower in the fourth quarter in China. But anything else to call out there? And how are you thinking about growth in autos in China as you look into 2026? Christopher O'Herlihy: Yes. So we see strong growth in China in order in 2026 largely on the basis of or this satisfactory work that we've done on really penetrating the EV space. And, you know, electric vehicles for us are very much a source of innovation and growth, what we see from our customers. And we've been generally leveraging that EV growth through new product innovation. We made significant investments over the last number of years targeting and building up our presence in EV. You know, China still represents about 65% of worldwide EV bills, and we're growing very nicely there. We're in a very strong position with Chinese OEMs, which is now 70% of the market. So really well-positioned. We see the growth in China in auto as being very sustainable, really on the back of the work we've done on EV, in particular, around CBI related to EV. So I might just add Understood. Greg that, you know, China has been a great growth story for Illinois Tool Works Inc. over the years, you know, driven primarily by the auto OEM business, which, as you said, grew 5% in Q4, but 12% for the full year. And the expectation remains the same in terms of outgrowing builds in China fueled by CBI and content growth with the Chinese OEMs as Chris said. So we'd expect growth in China auto OEM in that mid to high single digits. I'd just make a comment overall on China. You know, up 9% for the full year. Again, strong growth in China, in the auto business, but also test and measurement up high single digits. Welding up mid-teens, and so the expectation for next for this year, '26, is that China, which is now about $1.2 billion, 8% of our revenues, will grow in the mid maybe even in the high single digits based on what we're seeing for 2026. And I might just add lastly that margins in China, as you know, are the same as everywhere else around the world, and that's said, we'll continue to invest in China. And repatriate cash efficiently to the US as we've done over many years. Tami Zakaria: That is fantastic to hear. Thank you. And staying on the same topic, thanks for all the color on China. How are you thinking about growth in the U.S. or Americas versus Europe as it relates to the 1% to 3% organic growth outlook for the year? Christopher O'Herlihy: Yeah. So I think one of the things that was certainly encouraging here in the fourth quarter was the organic growth rate in North America. You know, up, you know, 2% plus. And we expect about the same, you know, maybe a little bit better than that based on run rates in 2026? Certainly a little bit more challenging. We don't expect much improvement in Europe. And then Asia Pacific was up 6% last year, primarily China, and we expect, like you said, another kind of meaningful contribution from Asia Pacific and China in the mid-single-digit range. So North America really, I'd say, pretty encouraging. Europe stays about the same. And Asia Pacific up kind of in the mid-single digits. China up in the mid, maybe high single digits. And so that's how you get to that 1% to 3% organic growth. And like we said earlier, again, more contribution from CBI, less of a headwind, to top line. From PLS, and you get to that 1% to 3% organic, 2% to 4% revenue for the full year. Tami Zakaria: Great. Thank you. Christopher O'Herlihy: Sure. Regina: Our next question will come from the line of Jamie Cook with Truist Securities. Please go ahead. Jamie Cook: Hi. Good morning. Two questions. I guess just my first one, the sequential revenue growth in the quarter, the 4% relative to normally 2%. Just color around that. Do you think that's more Illinois Tool Works Inc. specific, i.e., CBI is getting more traction, or would you know, say it's probably more just industrial markets getting better with 50 last month? And then my second question, Michael, just on the incremental margins for 2026, obviously implied very strong, you said mid to high 40s. That's above your 35 to 40% medium-term target on okay organic growth. So I'm just wondering if there's an underappreciated, you know, margin story or incremental margins can be higher. Maybe it's CBI. But just trying to piece that above-average incremental margins versus your target on and a half percent organic growth? I don't know. It just seems. Yeah. Christopher O'Herlihy: Better than what I thought. Right? So yeah. It's just Thanks. Let me talk about incrementals for glad you asked, by the way. So, like, you know, I think historically, we've been in that 35 to 40% range. That's what our kind of our long-term TSR algorithm is based on 35 to 40. If you look at kinda what we've been putting up over the last few quarters with limited growth, frankly, starting to improve. And when we look at kind of the plan for 2026, that's where we get to the mid to high forties. We can't really think of a reason why this wouldn't be sustainable over the long term. I mean, we've done a lot of work around the portfolio. You know, over a decade of enterprise initiatives. So the margin profile, variable margin, gross margin, all of those things the quality of the portfolio has never been better than it is today. And then you add on top of that accelerating how contribution from new products that all are coming in at higher margins. And then maybe most importantly, as Chris said and I mentioned in my remarks, are doing all of this while we are investing in Illinois Tool Works Inc. to kinda maximize the long-term performance from a growth and profitability standpoint. So about $800 million this year in our organic growth initiatives in our kind of productivity initiatives, the enterprise initiatives. And so it's not like we're holding back on investments. All of this is happening these incrementals in the mid to high forties are happening while we're fully funding all the quality projects that we have available to us. Inside the company. I think that's anything else on the market? Yeah. No. I agree with everything Mike had said. I would just highlight, Jamie, this is one of the side benefits of PLS, Noah, is this you know, you do PLS for enough time. What happens is you get an improvement in the quality of the portfolio. PLS is effectively a portfolio pruning exercise. And so what's really driving these incrementals and the reason that fundamentally believe there are no sustainably in the mid-forties comes from, you know, improvement in the quality of our portfolio from, you know, many years of thoughtful PLS, coupled with a continuous improvement in the practice of the business model against that portfolio. So you got those two things working together, and that's ultimately why incrementals now shifted from what was mid-thirties to what we know the least mid-forties. Jamie Cook: Right. Christopher O'Herlihy: And then I think, Jamie, on your other question on the sequentials from Q3 to Q4. So it was pretty broad-based. Nothing really stood out, which suggests that this is really kinda maybe a little bit of tailwind from the markets after a long time. Years of headwinds. Jamie Cook: It was more pronounced. Christopher O'Herlihy: In the segments that have a higher contribution from CBI. That is true. We didn't talk about polymers and fluids, but high contribution from new products in the automotive aftermarket, but also in the fluids business that's the part of that business that's really centered around biopharma. And then in the performance polymers side, it was growth in China. Again, taking advantage of the EV growth that Chris talked about earlier. So test and measurement, also seeing a pickup here. Sequentially from Q3 to Q4. They typically do. Maybe a little bit more pronounced than usual, and I think that's part of the semi pickup that we talked about. We saw that start to come through not just in order activity, but also in actual sales. Here in the fourth quarter. So it feels pretty good. Good momentum going into 2026, and off to a pretty good start, so far. Regina: Thank you. Our next question comes from the line of Steven Fisher with UBS. Please go ahead. Steven Fisher: Thanks. Good morning. Christopher O'Herlihy: I take out 100 basis points of. Steven Fisher: Enterprise initiatives, it seems like the margins are maybe really only flattish. I'm curious why they wouldn't be higher with the positive organic growth and the high incrementals you're talking about, maybe the incrementals are a function of the enterprise initiatives, but why isn't the margins higher with that positive organic growth? Christopher O'Herlihy: Yeah. That's a good question, Steven. So I'd say let me just say it's hard to quibble with margins, I think, that are in that 26 to 27% range to begin with. But if you look at 2026, there's definitely some positive operating leverage given the midpoint of our revenue guidance here and that, you know, 3% range, 2% organic. We're getting about 100 basis points from the enterprise initiatives. Price cost is slightly favorable. And then what you're seeing is an offset. So these are which is primarily inflation in some of our employee-related costs. Wages, health and welfare benefits. And there's also some investment. Steven Fisher: That Chris talked about to really. Christopher O'Herlihy: Accelerate the organic growth rate inside the company and maintain high levels of productivity inside the company. So those are really we've talked about this category before. And so that's the offset to what we're giving you. And I might just say, you know, we're giving you a range on margins. Right? So 26 and a half, to 27 and a half, about 100 basis points of improvement. And if we get if a this short cycle demand recovery really materializes and we get organic growth rates moving up in our range here, at the incrementals we're talking about, you're absolutely right. We should expect to see higher margins in 2026. Steven Fisher: Super helpful. And then just maybe a clarification. Did I hear you say that commercial side of construction in North America was up in the quarter? And I guess if so, how surprised were you to see that? Were you already seeing that in your run rates at the start of the quarter? Or is that something that changed? And are you seeing that carry forward? I mean you do have a pretty big inflection in construction in '26. Christopher O'Herlihy: Yeah. I'd say it's a fairly small portion of our business in look at North America. You know, it's about 20% of our exposure or sales are into the commercial side of things. So they can be a little bit lumpy. There was some pickup in activity as you might expect, related to things like data centers, for example, which sounds very exciting. But keep in mind what I just said. This is a pretty small part of the company but certainly encouraging to see a pickup on the commercial side. Steven Fisher: While the. Christopher O'Herlihy: Residential side, you know, our most perhaps our most interest rate-sensitive business remains, you know, really kind of stuck in some pretty challenging end markets. Housing starts down in the mid-single digits. But perhaps, you know, 2026 could be the year this really turns around. On the residential side. That's not included in our guidance. That would but if it were to happen, we'd be really well-positioned to take advantage of that. The improvement drivers for '26 are more related to less PLS, and more CBI. Right? Steven Fisher: Okay. Perfect. Thank you. Regina: Our next question comes from the line of Sabrina Abrams with Bank of America. Please go ahead. Sabrina Abrams: Morning. Morning. Sabrina Abrams: I wanted to follow-up on something that I believe you said in. Regina: Response to Julian's question. If every quarter we have revenue growing 2% to 4%, I think the FX tailwind just. Sabrina Abrams: Based on the DXY, FX tailwind is pretty material in Q1, and then it tails off quite a bit in the remaining quarters of the year. So would it be fair to think that organic growth the organic portion of growth accelerates as we move through the year? And just try to think if that assumption is correct and what's underlying the assumption. Regina: Thank you. Steven Fisher: Yeah. I think there's definitely, as you point out, a little bit more currency tailwind here in the first quarter. Christopher O'Herlihy: You know, there is positive organic growth in Q1, but it's not as high as it is in Q3, and '4. So maybe that's a way to think about it. Sabrina Abrams: Thank you. And then don't think anyone asked on this segment, but polymers and fluids had a nice surprise to the at least relative to what I was modeling. And it seems that it was pretty broad-based across the aftermarket, auto aftermarket and the fluids and polymer side. Anything to call out there that you're from an end market demand standpoint that maybe trended differently versus expectation? Regina: So just any color there would be great. Thank you. Sabrina Abrams: And it seems that the guide for 1% to 3% year would be quite conservative given the run rate of what we saw in Q4. Christopher O'Herlihy: Yeah. So, Sabrina, we did actually talk about this a couple of minutes ago, but just real quick. So a big contribution from CBI new products in the automotive aftermarket, specifically in the car care business. If you're in the market for wiper blades, Wanax wiper blades, were up meaningfully here in the fourth quarter with the launch of a new wiper blade in that space. In China, specifically polymers, continues to gain share. On the automotive EV side of things up double digits. More than 10%. In the fourth quarter. And then the reagents business that's part of fluids which is really focused around biopharma was up more than 20%. And again, so what you're seeing is more CBI little less PLS, and we're expecting more of the same here as we go into 2026. Sabrina Abrams: Got it. I guess just as a quick follow-up then, just wanna understand why, guiding for deceleration from Q4 next year? Christopher O'Herlihy: Well, I'm not sure that's really the case. I mean, I think we're guiding one to three. If you look at the performance for the full year this year, in powers of fluids, a little bit different than the fourth quarter. And then obviously, we're not going to launch, you know, the same amount of new products every quarter. So maybe the fourth quarter was a little bit higher from a CBI standpoint than kind of the typical run rate. So maybe that's a way to think about it. Sabrina Abrams: Thank you. Regina: Our final question will come from the line of David Rasa with Evercore. Please go ahead. David Rasa: Hi. I wonder if you'd help us. We're all sort of dancing around the organic cadence. How is January playing out versus the 1% to 3% guide? It just feels like there's a lot of, you know, filler metals up high single digit. Semis up mid-single. It feels like you're off to a relatively strong start to the year based off those cyclical trends exiting. Am I misreading the first quarter organic is at the full year guide? Or even above it? Any color in January would be great. And the company inventory, it went down a little bit sequentially. Histor I mean, it moves it moves around a lot. I appreciate that. Yeah. It went down to where wasn't even up year over year more than sales. And to me, that could be a little tell if know, hey. But think things are picking up. You'd be building some inventory. Just trying to square all that together. Thank you. Christopher O'Herlihy: Yeah. Thanks, David. So I think just on the inventory, that's kind of the typical cadence. Inventory levels of inventory do come down towards the year-end. I can tell you there's nothing going on in terms of lowering inventory levels because we expect lower growth. I think, as a matter of fact, if you go back to kind of the middle of the year, we, in some cases, like test and measurement, Chris talked about with some of the tariffs, to mitigate the risk from a supply chain standpoint, we actually added inventory in a few segments to mitigate that risk. So nothing unusual really from an inventory standpoint. In the fourth quarter. You know, I'd say January is off to we're we are. I can say this, we're right on track to where we thought we were gonna be. I did say that our the revenue growth guide for this year, if you look at it on a quarterly basis, we will be up if things stay the way they are. And, obviously, with a pretty dynamic environment in that, you know, three to 4% range. The organic growth rate is slightly lower in the first quarter relative to Q2, Q3, Q4. That's typical seasonality. Based on what we know today. You know? So it's not gonna be three, 4% organic growth in the first quarter based on current run rate. But it will be positive organic growth. We have a little bit more tailwind from currency at the beginning of the year, just kinda how the comparisons work out. And so that's how you get to a revenue growth rate in Q1 that's maybe closer to the other quarters even though organic is lower. Does that make sense to you? David Rasa: Yeah. No. That's helpful. And semi, I know you said 15% of the business. Think it used to be a little bit bigger, but, obviously, it's been slower. That incremental margin I feel like historically when that starts moving the incrementals, like, to be for the t and m margins were better than I was modeling for the quarter. Is semi a big part of that incremental margin improvement? Or am I overstating the impact when semi No, that is correct. I mean, Christopher O'Herlihy: this is the positioning has always been we know this is a cyclical space. And when we are at the bottom of the cycle, we want to be profitable, very profitable. And when things are going well, orders are picking up, revenues are picking up, incrementals come through at above-average levels and above-average levels of profitability. So that is a that's a reasonable assumption. Now it's 15% of test and measurement. 3% of Illinois Tool Works Inc. So but it is a space, as you know, when these cycles start to pick up, you can see some really, you know, above-average, meaningful growth rates for a period of time. And it's too early to tell whether that's what's going on here, but if you look at fab utilization, you look at the order activity, you look at, you know, plus 5% at attractive margins in Q4, it's looking pretty promising as we just start 2026. We're one month in. I'll just caution that things can change quickly. In this environment, but we feel really good about where we're at. We feel confident in our guidance, and well-positioned to deliver some solid results here both operationally and financially. In 2026. David Rasa: Alright. Thank you for the time. Appreciate it. Christopher O'Herlihy: Sure. Thank you. Regina: And that concludes our question and answer session and our call today. Thank you all for joining. You may disconnect at this time.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to J&J Snack Foods First Quarter 2026 Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during this session, you would need to press star 11 on your telephone. You will then hear an automated message of that, and your hand is raised. And to withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Reed Anderson, with ICR. Please go ahead. Reed Anderson: Thank you, operator, and good morning, everyone. Thank you for joining the J&J Snack Foods Fiscal 2026 First Quarter Conference Call. Before getting started, let me take a minute to read the safe harbor language. This call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made on this call that do not relate to matters of historical facts should be considered forward-looking statements, including statements regarding management's plans, strategies, goals, expectations, and objectives as well as our anticipated financial performance. This includes, without limitation, our expectations with respect to the success of our cost savings initiatives and customer demand improvements in the sales channels in which we operate. These statements are neither promises nor guarantees and involve known and unknown risks, uncertainties, and other important factors that may cause results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Risk factors and other items discussed in our annual report on Form 10-K and other filings with the Securities and Exchange Commission could cause actual results to differ materially from those indicated by the forward-looking statements made on the call today. As such, forward-looking statements represent management's estimates as of the date of the call today, 02/03/2026. While we may elect to update forward-looking statements at some point in the future, we disclaim any obligation to do so even if subsequent events cause expectations to change. In addition, we may also reference certain non-GAAP measures on the call today, including adjusted EBITDA, adjusted operating income, or adjusted earnings per share, all of which are reconciled to the nearest GAAP measure on the company's earnings press release, which can be found in our Investor Relations section of our website. Joining me on the call today is Dan Fachner, our Chief Executive Officer, along with Shawn Munsell, our Chief Financial Officer. Following management's prepared remarks, we will open the call for a question and answer session. With that, I would like to turn the call over to Mr. Fachner. Please go ahead, Dan. Dan Fachner: Good morning. I'm pleased to report that our earnings recovery is underway and gaining momentum. We delivered adjusted EBITDA of $27 million on sales of $343.8 million in the first quarter, representing a 7% increase in adjusted EBITDA compared to the prior year. Results in the quarter included $1 million of unfavorable impact associated with product disposal costs. Our performance demonstrates the early benefits of Project Apollo transformation initiatives and our continued focus on operational excellence. Our first quarter results reflect meaningful progress on several fronts. Gross margin improved 200 basis points to 27.9% versus the prior year, driven by our early Apollo savings associated with plant consolidation and improved product mix. While net sales declined 5.2% to $343.8 million, most of the decline is attributed to our bakery business as we focus on higher margin opportunities. About $18 million of the revenue decline versus prior year was in that piece of business. Of this, about $13 million was related to SKU optimization efforts associated with Project Apollo. The remaining bakery sales decline included other lower margin products, which aligns with our portfolio optimization strategy. We expect portfolio optimization will represent an approximate 3% decline in sales in fiscal 2026. We also believe that sales in the quarter were impacted by the government shutdown and the pause in SNAP benefits. Looking at our syndicated retail data, we did see a dip in dollar sales in mid-November that coincided with the pause in SNAP benefits, with the largest impact in frozen novelties. Project Apollo is progressing as planned. Although we're still in the ramp-up phase and not yet at the full run rate, we realized over $3 million of net savings in Q1. With plant consolidation on track to be fully implemented during our fiscal second quarter, we remain confident in achieving $20 million of run rate operating income once all initiatives are activated. During the quarter, we completed our share repurchase authorization by purchasing $42 million of stock, demonstrating our confidence in the business and our commitment to returning cash to shareholders. Further, today, we announced a new $50 million repurchase authorization. Now I'll turn to commercial activities. We have solid momentum in our snack portfolio, and I'm especially encouraged by our pretzel performance in the quarter. In food service, pretzel sales were up an impressive 6.9%, reflecting the continued success of our Bavarian formulas. We also realized a 1.8% increase in food service share in the thirteen weeks ending December according to syndicated data. Growth in the quarter included new business with some of our large distribution customers. We also launched Bavarian Bytes and Twists at a major theater chain. Looking at our retail syndicated data, pretzel sales were up about 4% for the thirteen weeks ending December. We attribute the improving trends to the new formulation and packaging released last year. In frozen novelties, Dogsters continues to be the standout performer, with volume growing over 20% in the quarter with a new item launched late in Q1 and another launching in Q2. Retail partners have been positive regarding our innovation, and we continue to anticipate incremental distribution gains across regional and national customers in fiscal 2026. Dippin' Dots sales were up approximately 4% in the first quarter, fueled by retail growth, theater expansion, and amusement centers. At ICEE, we continue to pursue opportunities to expand at convenience and QSR. The rollout to a large Southwest convenience store operator is now complete, and the test with a major West Coast QSR operator continues to show encouraging results as the test market expands. Looking ahead, our innovation pipeline remains robust. During Q2, we'll be shipping several exciting new products, including two new releases of protein and whole grain pretzels, Luigi's mini pops with hydration and immunity benefits, Dippin' Dots sundae flavor extensions, and the launch of traditional Dippin' Dots for retail, a major growth milestone for that brand. While box office performance that aligns to our fiscal first quarter was disappointing, with an estimated decline to the prior year of about 10%, we remain optimistic about the theater performance for the balance of fiscal 2026. We saw improved theater trends in January, primarily from the success of the Avatar movie. The movie slate for the balance of the year includes some promising titles, including the Super Mario Galaxy movie, Minions 3, and Spider-Man: Brand New Day. I'll now turn the call over to Shawn to discuss the quarter results in more detail. Shawn Munsell: Thanks, Dan, and good morning, everyone. As Dan mentioned, we're pleased with our Q1 performance, which demonstrates early progress on our transformation initiatives. Foodservice segment net sales declined $19.7 million or 8.3% to $219.2 million, with $18 million of the decline attributed to our lower margin bakery business, largely reflecting steps we are taking to improve product mix. Handheld sales declined approximately $5 million in the quarter due to lower comparative volumes and contractual pricing true-up on lower costs of certain ingredients. Soft pretzel sales increased $3.6 million or about 6.9%, continuing the momentum from 2025. Retail segment net sales increased $1.2 million or 2.6% to $45.9 million, primarily driven by a $1.8 million increase in handheld volume as we lapped last year's capacity constraints from the facility fire. Sales within the remaining retail portfolio decreased about $600,000, primarily driven by lower frozen novelty sales as growth in Dogsters and Dippin' Dots was more than offset by decreases in other novelties. Frozen beverage net sales were materially flat at $78.7 million. Beverage sales were up modestly, whereas service and machine sales combined were down. Consolidated gross margin improved 200 basis points to 27.9%, primarily reflecting Apollo initiatives, including a reduction in lower margin sales. Results included product disposal expenses of approximately $1 million. Tariff-related costs were approximately $600,000 net of pricing offset. We do expect some tariff impact to subside over the course of fiscal 2026. Operating expenses increased to $95.4 million, which included $6.1 million in nonrecurring plant closure costs and other nonrecurring impacts. We expect additional nonrecurring transformation project costs of approximately $5 million in fiscal 2026. Selling and marketing expenses increased 9.9% or $2.8 million compared to the prior year quarter. Approximately 140 basis points of the increase was associated with higher commissions for retail vending sales, which is a growing component of our Dippin' Dots business. Investments to support our brands in preparation for a peak summer season accounted for roughly 250 basis points of the increase. Higher depreciation associated with customer equipment accounted for approximately 190 basis points of the increase, with almost half of that associated with growth in Dippin' Dots. We expect these investments to generate growth during the peak summer season. Distribution expenses declined $1.6 million or 3.9%, primarily due to lower volume. Distribution expenses were 11.1% of sales, as compared to 10.9% in the prior year. Administrative expenses were $20.4 million, an increase of 7.8% from the prior year. Approximately 300 basis points of the increase was related to nonrecurring restructuring charges and legal fees. Adjusted operating income was $8 million compared to $8.2 million in the prior year. Adjusted EBITDA increased 7% to $27 million versus $25.3 million last year. The effective tax rate was 27%. On a reported basis, earnings per diluted share was $0.05 compared to $0.26 last year, primarily reflecting the impact of one-time charges. On an adjusted basis, earnings per diluted share was $0.33, in line with last year. Our balance sheet remains strong with approximately $67 million in cash and no long-term debt. We had approximately $210 million of borrowing capacity under our revolving credit facility. During the quarter, we generated approximately $36 million in operating cash flow and invested $19 million in capital expenditures. As Dan mentioned, during the quarter, we completed our share repurchase authorization by buying back just over 158,000 shares for $42 million or an average price of about $91.60 per share. Including shares bought in fiscal 2025, we repurchased just over 525,000 shares for $50 million, or an average price of about $95 per share. That concludes our prepared remarks, and we are now ready to take your questions. Operator? Operator: Thank you. Please press 11 again. And our first question comes from Jon Andersen with William Blair. Your line is now open. Jon Andersen: Good morning. Thanks for the question. Good morning. I have one question on sales and then one on Project Apollo and cost outs. Beginning on sales, you mentioned that the SKU rat is now expected to kind of be a headwind of about three percentage points on a full-year basis. That makes sense, I understand, and is consistent with what you've talked about in terms of portfolio optimization work. But what I'm trying to kind of get to is how you're thinking about the full year, you know, in the context of that. I know you have kind of an underlying long-term objective of growing the business organically in the mid-single digits. But again, I think we have to net out the 300 bps related to this year. So and then I know there are some things that are building through the year as well in terms of commercial innovation, some new business wins. Are you looking for or expecting or budgeting, you know, to grow the business, headline sales on a full-year basis? And how might that kind of ramp from the number that you printed in Q1 work from here? Then I'll follow-up with a question on Project Apollo. Thanks. Dan Fachner: Great. Thank you, Jon. Yeah. Great question. And, you know, just to start off, we're really pleased with the way that the quarter has shaped up. It's really what we had talked about to begin with with Project Apollo and are very happy with the way that it is shaping up so far. The sales results in Q1 were just slightly softer than we anticipated, and that's due to the ramp-up of being able to consolidate those plants. You know, we have three of them that we consolidated. One is fully done at this point. One's kind of halfway there. We'll be done shortly, and then the final one will be done by the end of this quarter, which puts us at a full run rate. So Hey, Jon. Can you Excuse me. Jon, can you hear us? Jon Andersen: Yes. Dan Fachner: Okay. Good. We're sorry. We got a little interruption here. Apologize for that. So overall, we're happy with where the quarter landed, much like what we have talked about all along with you. As it looks towards long-term and where we might shake out for the year, like you talked about, we have a lot of great new business, great innovation coming on. And, yes, about 3% impacted by this SKU rationalization that was escalated during this quarter because of the speed in which we are able to consolidate those branches. We still look towards low single digits growth for the entire year, though. We think that we're in a good position with all the great things that we have going on to kind of land the plane there in that low single digits growth. Jon Andersen: Yeah. That's low single digits, Jon, on kind of the remaining portion of the portfolio. Dan Fachner: Got it. On the on the x SKU rat portion? Jon Andersen: Yeah. That's right. Yep. Okay. Fair point. Okay. And then you mentioned that Project Apollo, I think, delivered $3 million of cost savings in the quarter. I guess, the run rate you're looking to achieve once complete with phase one is $20 million. Yep. What else needs to happen to get to the $20 million annual run rate? And, you know, if you had to kind of, you know, point to a time frame this year, when you hit that stride, when do you think that that might be? Dan Fachner: Yes. We really believe that we'll be there here in the second quarter. The team has done a tremendous job getting us to this position. And we talked about that $20 million annual run rate, and we believe that we will be fully capable of doing that starting in Q2. Shawn Munsell: Yeah. And that's the so that's the plant consolidation component. So if you remember, Jon, $15 million of the $20 million is associated with plants. So we were closing in on the full run rate in Q1. Expect to hit it in Q2. A lot of the work has been done in terms of, you know, shutting down those plants, transferring inventory, you know, all of the closure and consolidation work. We expect that to be complete this quarter. The remaining $5 million, if you remember, that's a mix between, you know, distribution expense savings and G&A savings, and we expect to be on the run rate. We'll be ramping up in the third quarter of this fiscal year and then should be on the full run rate for that remaining $5 million by the fourth quarter. Jon Andersen: Okay. Super helpful. Maybe I squeeze if I could squeeze one more in. Know, I know that the commodity environment hasn't has not been a helper for you in recent years, and there have been certain, you know, pockets within your cost of goods basket, like eggs and cocoa. But, you know, can you give us an update on where things sit now? Are those less, you know, of a headwind moving forward? And how are you kind of thinking about just kind of inflation and also what you're doing overall from a portfolio perspective? And the impact on gross margin. You had a nice step up in Q1, 200 basis points. I'm wondering if we should be thinking about that kind of level of improvement year over year persisting as we move forward? And I know the plant consolidation is part of that. But there are probably other factors in there as well, portfolio mix, commodity costs, etcetera. Dan Fachner: Well, the plant consolidation and addition of some of the new business and our continued kind of mantra of margining up. So we're seeing some really nice things come through with all three of those things. Commodity pricing, I think, will be a little bit in our favor this year. You know, last year, we really struggled in this quarter and Q2 with some headwinds of like you talked about with cocoa and eggs. But overall, we believe this year that there's a good chance that that will kind of be in our favor. Shawn Munsell: Yeah. And one of the things that one other thing I meant to add too, Jon, is, you know, that the $1 million worth of product disposal costs that we incurred in the quarter, just to be clear, that was not adjusted out of our earnings. And so just think about the gross margin improvement in the context of that. You know, if not for, you know, product disposal, we would have picked up another you've had another million dollars going through gross profit in the quarter. Jon Andersen: Okay. And, Shawn, that's something that doesn't that that's done that's in the rearview mirror at this point that won't affect this group? Shawn Munsell: Yeah. That was just that was a one-time impact on some product that got on a spec. Jon Andersen: Okay. Great. Thank you very much. I'll get back in the queue. Thank you, Jon. Operator: Thank you. I am showing no further questions in the queue. I will now turn the call back to Dan for closing remarks. Dan Fachner: Thank you, operator. In closing, I want to emphasize that our Q1 results demonstrate that our transformation project has taken hold. The early benefits from Project Apollo combined with our continued pretzel growth and strong innovation pipeline position us well for fiscal 2026. With our strategic focus on higher margin opportunities and operational excellence, we're building momentum for sustainable growth. Our strong balance sheet provides flexibility to invest in growth opportunities while returning capital to shareholders. We remain confident in our ability to deliver the full benefits of Project Apollo and drive long-term value creation. Thank you for your continued support, and we look forward to updating you on our progress throughout fiscal 2026. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Fourth Quarter 2025 Hubbell Incorporated Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. How may I thank conference over to your first speaker today, Daniel Innamorato, Vice President of Investor Relations. Please go ahead. Daniel Innamorato: Thanks, Operator. Morning, everyone, and thank you for joining us. Earlier this morning, we issued a press release announcing our results for the fourth quarter and full year 2025. The press release and slides are posted at the Investors section of our website at hubbell.com. I'm joined today by our Chairman, President and CEO, Gerben Bakker, and our CFO, Joe Capazzoli. Please note our comments this morning may include statements related to the expected future results of our company. These are forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Please note the discussion of forward-looking statements in our press release and consider it incorporated by reference into this call. Additionally, comments may also include non-GAAP financial measures. Those measures are reconciled to the comparable GAAP measures, which are included in the press release and slides. Now let me turn the call over to Gerben. Gerben Bakker: Great. Good morning, and thank you for joining us to discuss Hubbell's fourth quarter and full year 2025 results. Hubbell delivered strong financial results in the fourth quarter, highlighted by 12% total sales growth, 140 basis points of adjusted operating margin expansion, 19% adjusted operating profit growth, and 15% adjusted earnings per share growth. Organic growth of 9% in the fourth quarter was driven by double-digit organic growth in our Electrical Solutions segment as well as our Grid Infrastructure businesses within the Utility Solutions segment. Our core utility and electrical markets remain strong as data center build-outs, load growth, and aging infrastructure resiliency investments generate robust project activity in front and behind the meter. Hubbell's portfolio of critical components and solutions is uniquely positioned at the intersection of grid modernization and electrification megatrends. Strong recent sales and order activity, along with continued execution on our strategy, positions us well to deliver on an attractive outlook in 2026 and beyond. Daniel Innamorato: Before I turn the call over to Joe to walk through our financial performance in more detail, I'd like to highlight a few key accomplishments in 2025. Starting with Electrical Solutions, we made significant progress in 2025 on our strategy to unify this segment to compete collectively. We generated above-market growth in attractive verticals with an integrated solutions-oriented service model for our customers, while simultaneously driving business simplification and operational efficiencies to expand margins. These efforts resulted in 7% organic growth and 14% adjusted operating profit growth for the full year. Additionally, full-year adjusted operating margins at HES reached 20% for the first time in history. In our Utility Solutions segment, while full-year organic growth was negatively impacted by metering and AMI markets, we delivered strong performance in the larger, higher-margin grid infrastructure businesses in our portfolio. Our leading positions in strong transmission and substation markets enabled double-digit growth for the full year, while distribution markets accelerated throughout 2025 as customer inventories normalized amid a healthy market backdrop. Over 80% of our HUS portfolio is aligned to electric T&D components and solutions, where our leading installed base and depth and breadth of product offering uniquely positions Hubbell to benefit from a highly visible long-term investment cycle. Importantly, we also continue to invest and allocate capital to high-return areas while further differentiating our unique service advantage with customers. Most notably, we closed on a high-growth and margin acquisition in DMC Power. Gerben Bakker: We invested in automation and expanded production capacity in high-growth areas, repositioned our sales force to gain share in attractive vertical markets, successfully launched new innovative solutions, and we continue to be recognized and awarded by our customers for industry-leading service levels. We plan to continue investing in each of these critical levers of our long-term strategy to drive ongoing growth and productivity benefits in 2026 and beyond. Hubbell's 2025 free cash flow margin of 15% and return on invested capital of 19% are strong evidence of the quality of our business model and of our ability to invest on behalf of our shareholders to generate strong returns both now and over the long term. Daniel Innamorato: Let me turn the call over right now to Joe to provide some more details on the financial results. Joe Capazzoli: Thank you, Gerben. I'm starting my comments on slide five. Hubbell's fourth-quarter financial performance was strong, with double-digit growth across sales, adjusted operating profit, and adjusted diluted earnings per share. Net sales of $1.493 billion in 2025 increased by 12% as compared to the prior year, driven by 9% organic growth and acquisitions contributing 3%. Both Electrical Solutions and Grid Infrastructure products within our Utility segment delivered double-digit organic growth in the fourth quarter, an acceleration versus prior quarters driven by incremental price realization and stronger demand in data center and utility T&D markets. This strength was partially offset by continued softness in grid automation, though declines in this business have moderated relative to prior quarters. From an operational standpoint, we generated $349 million of adjusted operating profit and expanded adjusted operating margins by 140 basis points in the fourth quarter, which combined with strong sales growth generated adjusted operating profit growth of 19%. While cost inflation accelerated in the fourth quarter as anticipated, our pricing and productivity actions have been successful in more than offsetting these costs. Our strong positions in attractive markets and our execution in proactively managing our cost structure drove positive price-cost productivity in the quarter. Adjusted diluted earnings per share were $4.73 in the fourth quarter, representing a 15% increase versus the prior year and were driven by strong operating profit growth partially offset by higher interest expense associated with the DMC Power acquisition and a higher year-over-year tax rate. Fourth-quarter free cash flow generation of $389 million was strong to close the year. On a full-year 2025 basis, we generated $875 million of free cash flow representing 90% conversion on adjusted net income, which was in line with our previous outlook. Our balance sheet remains strong with net debt to EBITDA of 1.3 times exiting the year, which positions us well to continue reinvesting in our business and deploying capital for shareholders at high rates of return as Gerben just highlighted. Turning to page six to review our performance by segment, Utility Solutions delivered a strong quarter with double-digit growth in sales and adjusted operating profit. Starting with the top line, Utility Solutions generated net sales in the fourth quarter of $936 million, which represents growth of 10% versus the prior year and includes organic growth of 7% and acquisitions contributing 4%. Grid infrastructure, which as a reminder represents approximately three-quarters of the segment sales, was up 12% organically. Grid infrastructure strength was broad-based, with strong growth across distribution, substation, and transmission markets. Utility customers continue to aggressively invest in new transmission and substation infrastructure to interconnect new sources of load and generation on the grid, while aging infrastructure trends drove solid hardening and resiliency activity in distribution markets against easier prior year comparisons. Outside of T&D markets, telecom and gas markets experienced solid growth in the quarter. Grid automation sales were down 8% in the quarter as solid growth in grid protections and controls was more than offset by weaker new project activity in meters and AMI. Operationally, HUS achieved $235 million of adjusted operating profit in the fourth quarter, representing 20% growth in adjusted operating profit versus the prior year with adjusted operating margins expanding 200 basis points year over year. Operating profit growth was primarily driven by strong volumes and infrastructure, favorable price-cost productivity, and acquisitions partially offset by volume declines within grid automation. Daniel Innamorato: Turning to page seven. Electrical Solution results were strong in the quarter, with double-digit growth in net sales and adjusted operating profit. For the fourth quarter, Electrical Solutions generated net sales of $557 million. Organic growth of 13% was driven by significant strength in data center markets and solid growth in light industrial markets, as well as strong price realization, partially offset by softer heavy industrial and nonresidential markets. Data center growth exceeded 60% in the quarter. Joe Capazzoli: In addition to healthy end market dynamics, our data center performance in the fourth quarter was bolstered by targeted capacity investments in our balance of systems components as well as strong project activity in our modular power distribution skid. Overall, our vertical market strategy and commercial alignment initiatives as well as new product introductions continue to drive outgrowth in key markets. Operationally, HES delivered $114 million of adjusted operating profit in the fourth quarter, representing 18% growth in adjusted operating profit versus the prior year with adjusted operating margins expanding 60 basis points year over year. Operating profit growth was primarily driven by strong volumes, and favorable price-cost productivity in the quarter, including attractive returns from our ongoing restructuring investments. Before I turn the call back over to Gerben to provide our full-year outlook, I'd like to highlight on Slide eight some recent investments we've made in our HES segment, which are generating increased output in high-growth areas as well as enhanced productivity across our manufacturing footprint. Our Burndy brand is a leader in electrical connectors and grounding products across a wide range of industrial end markets, including data center markets where Burndy has strong specified positions with major customers who value our leading product quality and service levels. With the significant demand inflection we've experienced in high-growth verticals like data center, we've had the opportunity to leverage capacity expansion investments to reconfigure our production workflows and drive productivity through automation. The example on the page highlights our recent investment in four specialized enclosed automation work cells for copper lug production, where we've been able to combine six manual production processes into single-flow automated lines for high-running SKUs, reducing factory processing time from days to minutes for certain product lines and reducing manufacturing complexity. The end result of these investments is that we were able to increase output to serve strong customer demand while also driving productivity through reductions in labor and factory floor space. Gerben Bakker: While this is one example of a major product line in one of our businesses, it demonstrates our ability to utilize CapEx investments to meet customer needs and drive both enhanced growth and margin expansion. This has been one of many critical components of our successful HES segment transformation strategy over the last several years, and we see further opportunity across both segments to invest in high-return growth and productivity initiatives within our factories. With that, I will turn the call back over to Gerben to provide our 2026 outlook. Great. Turning to page nine. We anticipate 5% to 7% organic growth across our portfolio in 2026. Similar to the preliminary view we provided in October, we anticipate broad-based strength across our largest businesses serving attractive utility T&D, data center, and light industrial end markets. Daniel Innamorato: In Utility Solutions, we anticipate 5% to 7% organic growth for the full year. Transmission and substation demand remains strong, and we expect our leading positions in these end markets to drive continued success in converting on high-visibility project pipelines as utility customers invest in grid interconnections. Utility distribution activity is healthy, driven by both routine maintenance and systematic upgrades to aging infrastructure in order for customers to meet key outage and performance metrics. Gerben Bakker: In grid automation, modernization initiatives targeted at delivering more insights and control capabilities in the field are expected to lead to continued strength in protection control solutions in 2026, more than offsetting a more modest outlook for meters and AMI markets. Daniel Innamorato: In Electrical Solutions, we anticipate 4% to 6% organic growth for the full year, and similar to 2025, we expect growth to be led by data center markets, which now represent more than 10% of segment sales and are expected to expand mid-teens. While we expect nonresidential and heavy industrial growth to be more muted, industrial reshoring and electrical mega project activities are expected to drive continued solid growth in light industrial and renewable markets. Looking across our portfolio, we expect a strong year of organic growth in 2026, and we believe our largest, highest-margin end markets are still early in a multiyear highly visible investment cycle, which will enable attractive growth for the next several years and beyond. Concluding our prepared remarks on Page 10, Joe Capazzoli: we are initiating our 2026 outlook this morning for 7% to 9% total sales growth, $19.15 to $19.85 of adjusted earnings per share, and approximately 90% free cash flow conversion on adjusted net income. At the midpoint of the range, this outlook anticipates approximately 10% year-over-year growth in adjusted operating profit driven primarily by strong organic growth and core operating leverage as well as wraparound contribution from the DMC Power acquisition. Operationally, we anticipate another year of margin expansion in 2026 as we are well-positioned to manage price and productivity to at least offset inflation, while also reaccelerating investment back into our business following a period of proactive cost management over the last couple of years. Our 2026 outlook is in line with our long-term financial framework, which we are confident will continue to deliver long-term value creation for our shareholders off of a strong multiyear base of performance. With that, let me turn the call over to questions and answers. 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 limit yourself to one question and a follow-up. And our first question comes from the line of Jeffrey Sprague of Vertical Research. Your line is now open. Jeffrey Sprague: Good morning, Jeff. Oops. Sorry about that. I was on mute. Good morning, everyone. There was a comment about orders in the prepared remarks. I'm sure that's contemplated in your revenue guide. Can you just give us a little bit more color on what you're seeing in orders, kind of the complexion across the business? And one of the things I am wondering about is just the strong load growth and CapEx you're seeing. Is that negatively impacting MRO activity kind of in the core legacy business? Or is that sort of chugging along at a normal rate? Gerben Bakker: Yep. Let me maybe start with a general comment on orders, Jeff. And certainly, the recent momentum has been strong. And as we talked on our last call, we started to see this inflection in our order book in, like, the September time frame and particularly in the areas of T&D and data center. You know, as a reminder, we are primarily a book-to-bill business. But in that, you know, the order strength over the fourth quarter really drove our organic sales growth. So it wasn't, you know, working through backlog or anything. This was reflected in the actual orders that we saw. And I mean, I would say even exiting the year, that was very positive, and we've even built a little bit of backlog at some of our businesses like the T&D business. That order momentum going into '26 has continued. So I would say this visibility together with what we know are favorable end markets provides us confidence for '26. Now, of course, you know, being a book and bill business, our visibility doesn't extend throughout the entire year. We do have a few businesses where we're fully filled with backlog. But the majority of the business being book and bill, you know, we need to see how the year unfolds with that. But I would say it's off to a good start ending the year and starting this year. And, you know, particular to your question of CapEx with OpEx, and that's a question related to, you know, our utility and infrastructure business. As you see those percent, there's clearly, you know, a very strong inflection in the CapEx. It's very hard to say because a lot of the materials that we supply, Jeff, are fungible to whether, you know, the same materials go into CapEx that go into OpEx as well. What we are seeing shorter term, there's a lot of investment right now going into generation. And I would say, you know, that too falls within the general budgets that we have. And, you know, our exposure, of course, is less in generation, but that said, you know, what we see in transmission and substation, what we see in distribution, it's certainly very supportive of our long-term framework and positive going into '26. And then just on meters and AMI, I thought we might be done talking about it declining in the third quarter, but, you know, we're still heading south. I see you don't have any real expectation of note through 2026. But, I mean, is there something else going on with that business? Or is it just that total lack of project activity? We know the backlogs are completed, but any other color there? Gerben Bakker: Yeah. It's a little bit what you said, Jeff. It's, and as we work through '25 and, you know, as we communicated, we're still working through that large project backlog and, you know, through a lot of '25. We actually consumed backlog as we did that. What we haven't seen return is a lot of those larger projects. So the business right now is more, you know, smaller project, more replacement product, is evidenced for us when we see the book to bill at one or close to one that we're kind of have stabilized that business off this lower base. You know, I'd say the good part with that is we're now working off of this lower base, and we do expect, you know, from here on, to modestly grow that business. Now, of course, if you compare that to last year where throughout the year that business declined, you know, we have some comps to lap here, you know, in the first quarter. But if you think about it sequentially from here, I would say it's really at the bottom. And for here, it should start to grow modestly. Jeffrey Sprague: Right. And maybe just one other quick one, if I could. Just kind of you're indicating maybe Q1, right, a little bit tougher. Are you suggesting Q1 would be sort of outside the recent normal of sort of 19% to 20% of the year? Gerben Bakker: Yeah. I think the interesting part on Q1 is a little bit the comps. I think for us, the better way always to look at this is year over year. And from that perspective, it will, you know, be a very strong quarter if you compare to, you know, how we started last year. But I think if you think about the year in total, it's a fairly normal year. So I think in the kind of things that the percentage that you're thinking about. Now, you know, the only thing I would say in percentage is to not use that as the sole factor because those things, as you will do your models, are very, very sensitive to a tenth of a percentage point. But you're in the right. There's really nothing specifically to highlight of '26 that as we think throughout the year. Great. Thank you very much. Appreciate it. Operator: Thank you. One moment for our next question. Our next question comes from the line of Julian Mitchell of Barclays. Your line is now open. Julian, your line is now open. Julian Mitchell: Good morning, Julian. Okay. Sorry about that. I think I was maybe muted. So, maybe, just to start off with, could you help us understand on the margin front, I think the guide is embedding maybe 50 basis points of operating margin expansion for the year for the total company. Maybe help us understand if that's correct. And how we should think about that sort of playing out through the year? And is it weighted to any one segment of the two? Joe Capazzoli: Yeah. Good morning, Julian. Yeah. I would say that you're thinking about that level of margin expansion is about right. Like Gerben had mentioned, thinking about the way that our 2020 is kind of taking shape in terms of a bit of a normal let's say, seasonal head and shoulders type shape. You know, from 1Q. We peak in 3Q, come back down in 4Q. That's still higher than one. I think that's a good way to think about it. Julian Mitchell: And, Julian, I would just I would say maybe just from a timing perspective, we anticipate investing roughly $15 million to $20 million of restructuring this year. I think you'll probably see that a little front-end loaded. Maybe you see a third of it come through in the first quarter. And I'd probably also highlight our tax rate tends to be a little higher in the first quarter as well. Julian Mitchell: I understand. And so just to sort of follow-up a little bit on that first quarter point. Should assume organic sales growth is sort of front-loaded a little bit because of comps. And then in light of what you just said on the sort of BTLs and so forth, are we thinking sort of first quarter is about 20% of the year's EPS, that type of typical cadence? Joe Capazzoli: Yeah. I think, Julian, we'll see a strong start to the year from an organic perspective. And Gerben highlighted that. So I think you'll see nice 1Q year-over-year growth. Julian Mitchell: Got it. And that sort of 20% share of the year for EPS is roughly sensible? Joe Capazzoli: Yeah. I would say on that, you know, be careful with using this percentage. As I said, to Jeff's earlier question, those tend to be very, very sensitive in tens of a percentage point if you do that math. I wouldn't use that as the sole determinant of a first quarter rather. Think about the moving parts. Julian Mitchell: Got it. Thank you. Operator: Thank you. One moment for our next question. Our next question comes from the line of Chris Snyder of Morgan Stanley. Your line is now open. Chris Snyder: Thank you. I wanted to follow-up on some of the margin commentary. So as you said, to Julian's question, maybe the guide calls for about 50 bps up in '26 at the midpoint. But, I mean, is it fair to think that Q1 would be well ahead of that level? I know it's always Q1 is always the lowest margin quarter of the year, but the comp a year ago just seems much easier in Q1, relative to Q2 to Q4. So just kind of any color on that. Joe Capazzoli: Yeah. I think we are anticipating, you know, solid margin expansion throughout the year, including the first quarter. And so I think, again, we're anticipating the momentum that we're carrying out of the fourth quarter positions us well to start the year. And maybe adding to that, and it was asking earlier question as well, the margin expansion we expect in not only the company, but in both segments. Thank you. I appreciate that. And then if I could just follow-up on price. I believe you guys pushed some incremental price during the quarter in Q4. So could you provide any color just on how price shook out in Q4? And then any expectations that that's, you know, underwriting the guide for '26? And if you could share anything around the wrap versus the incremental '26 action. That would be helpful. Thank you. Joe Capazzoli: Sure. So you're right to highlight that we did have some incremental price actions that were implemented in the fourth quarter. And I think we highlighted previously we were anticipating about three points of price for the full year. And that's consistent with what we saw come through. Certainly, that will have some wraparound impact. That will carry price into 2026. We'll also carry some cost inflation into 2026. And I think consistent with how we've been managing price-cost productivity, and again, consistent with our guide, we're anticipating neutral to positive on that front. Operator: Thank you. Thank you. One moment for our next question. Our next question comes from the line of Steve Tusa of JPMorgan and Chase. Your line is now open. Steve Tusa: Hey, guys. Good morning. Hey, Steve. How are you? Just on the flip side of that question, what let I know, you know, FIFO, kind of, changes things, but, like, what is your current assumption on raw materials prices? Are you guys just taking what the spots are today and then kinda running that through? Are you assuming some sort of average, some forecast? Like, what what are you assuming for kind of the underlying metals pricing, acknowledging it's not as big of a swing factor the near term as it used to be? Joe Capazzoli: Sure, Steve. Good morning. And, yeah, we're we've been watching and the materials, the metals prices, you know, very closely. And we did see some creep coming out of the fourth quarter with higher copper, aluminum, steel. And we're anticipating maybe more broadly, metals and other inflation, we're anticipating about mid-single digits for cost inflation in 2026. And our price actions and productivity is to address that level of cost inflation that we're expecting. Certainly, you know, we'll manage as the year progresses, but similar to levels of inflation that we addressed last year. I think that's how we're thinking about 2026. Steve Tusa: And is that inflation, based on what price level, like, at year end? Where we are today? Like, what does that inflation assume for the actual price levels? Joe Capazzoli: Yeah. It's in and around, you know, where we exited the year. Which again, you're kinda coming out of the fourth quarter. We saw some rise metals prices. That's kind of continued a little bit here in January. And we'll continue to keep our finger on the pulse with how they move and what we're doing on the price and productivity side. Okay. And then one last quick one on this on this first quarter question. Did you mean that like the 20% or whatever the guys talked about earlier, that that we're not that first quarter should be better than that? Or like, I I'm having trouble kinda reading the tea leaves whether you know, better than the 20% or a little bit less than the 20%. Of the year for one QPS? What we said, Steve, was we get off to a strong start from an organic growth and margin expansion perspective. I think, again, if you're looking at percentages the year, it can be very sensitive. So if you just look at how we exited '25 from a revenue perspective, that's good to think about seasonally. From a year-over-year margin perspective, we'd expect expansion. Right? So Yeah. I wouldn't necessarily be thinking about that number is higher. Steve Tusa: Okay. So okay. Thank you. Operator: Thank you. One moment for our next question. Our next question comes from the line of Joe O'Dea of Wells Fargo. Your line is now open. Joe O'Dea: Hi, good morning. Thanks for taking my questions. Can you talk a little bit about first half versus second half growth in grid infrastructure? And in particular, the transmission and substation side versus the electrical distribution side. And trying to get a little bit of color around electrical distribution comps, what you think kind of that underlying growth rate is in the back half of the year when the comps adjust? And then in addition, just what the backlog looks like on the transmission and substation side and visibility that you have into something like high single digit, low double digit throughout the year versus kind of stronger first half? Over second half? Gerben Bakker: Yeah. I would say if we think about those markets, clearly, you know, we're optimistic about the investments that are going. And I would say on the transmission and substation, that's been growing in these high single, low double digits for a while and that's how we continue to see that unfolding. You know, in distribution, you know, that was strengthening throughout last year. Right? That's why we said earlier in the year, we're still somewhat challenged with by that growth, but that we expected that to come, and we did see that come. So you think about that, it partially drives, of course, the better comp, easier comps earlier in the year to later in the year. But fundamentally, about these markets, you know, think about the substation and transmission in the kind of high single digits and distribution. Mid-single digits for '26 is the right way to be thinking about that. Okay. And then on free cash flow, it looks like maybe you shake out in a range of kind of $900 million to $1 billion for the year. Joe O'Dea: You know, just how you're thinking about the spend opportunity there, with respect to the M&A pipeline, appetite on share repo, just how we can think about your approach to some pretty good free cash generation? Joe Capazzoli: Sure, Joe. So we're yeah. You're right that we're thinking about $900 to $1 billion of free cash flow next year. And I think 2025 was a really good year of deploying capital to a combination of high-quality, you know, CapEx program. Our M&A was rather successful with three deals that roughly $950 million deployed. And we also layered in some share repurchase over the course of 2025. So with that level of cash flow we're anticipating next year, I think we would think about deploying in a similar fashion. To the extent that there's attractive bolt-on M&A that fits very complementary to our portfolio. And I think with that level of cash flow, we would probably think about supplementing with some more share repo as well. So I think going into the year, that's how we would think about it. The deal pipeline, maybe, Gerben, you can comment on that. But looks pretty good to start the year, but a lot still has to come together on the M&A front to be more specific. Gerben Bakker: Yep. Yep. And I think as we think about the return, CapEx continued to be highest return project followed by acquisitions. And I would say as far as acquisitions, that pipeline has bolt-ons in it. It has some larger deals in the timing. You know, as we always say, it's very, very hard to predict. But focused on the areas where we clearly have the right to play and right to win. So, you know, think about T&D markets, think about, you know, some of the core electrical markets. It's where we focused on. So you know, I feel good in our ability to continue to deploy capital, but we will remain very disciplined. And we see dividend and share repurchases as good alternatives in periods where that acquisition pipeline is perhaps or the execution on that pipeline is a little bit lower? Operator: Thank you. One moment for our next question. Our next question comes from the line of Nigel Coe of Wolfe Research. Your line is now open. Nigel Coe: Thanks. Good morning, everyone. Want to follow-up on Steve's question on the cost inflation side, 6% on COGS, I think, is the metric. If you just break that down, between, you know, sort of your the metals and raw materials, which I think is about 25% of your COGS, if I'm not mistaken, and then maybe components and then other COGS. I'm wondering, is that 6% a gross number, or would that be net of productivity? Joe Capazzoli: Yeah. You have the cost pie split about right. You know, half of the cost pool is materials, which includes metals and components. And about half of that cost pool is or a quarter is more on the metal side. So that's about right. The mid-single digits that we're anticipating for total inflation on our total cost pool is not net of productivity. Price and productivity would be outside of that to manage that mid-single digit cost pool. And, Nigel, I'd probably also highlight what we saw about a similar level of inflation, you know, total inflation in 2025. Mid-single digits. And, again, that was managed, you know, effectively with price and productivity levers throughout the year. Nigel Coe: Okay. Maybe my you know, as part of my follow-up, if I could maybe just clarify, is there additional price actions, you know, in the plan in the first quarter to address that? Does the wraparound price address that? But just a quick follow on really on the data center growth. I think you said mid-teens, which know, mid-teens isn't shabby, but certainly seems to be a bit below where the market's trending in '26. So just wondering you know, what gives you sort of informs the mid-teens view? Joe Capazzoli: So I'll start with the wraparound price. And yes. So we're anticipating wraparound price and modest incremental price to start the year. As we typically have first-quarter price increases roll through. And those are in motion and having conversations with customers. On the data center side, we highlighted 60% data center growth in the fourth quarter. I think that was roughly 40% growth for the full year in data center. And data center for us kind of discreetly, the way we describe that is more on the electrical side. And that's coming from two places primarily. One is our modular power distribution skid business. And that side of the business had a pretty heavy project load throughout 2025, which really drove a lot of those strong year-over-year growth rates from '25 versus '24. They're anticipated to continue a heavy project load in 2026. So those growth rates in '26 versus '25 will step down a little bit. And then we certainly have our connectors and grounding products, which also service data center and continue to grow nicely. So to start the year, we feel really good coming out of '25 on data center. And we're looking at that, you know, mid to high teens on our outlook for data center on the electrical side. Gerben Bakker: Yeah, maybe add. A good part of that business is short cycle, right? Think about Burndy Connector. So, you know, the visibility isn't out there that last year was a good year. And I would say it's a good example that we show where we're adding capital. We're expanding. And if that proves out to be conservative, we'll do better this year. But we'll serve that demand. Nigel Coe: Yep. Okay. Understood. Thanks. Operator: Thank you. One moment for our next question. Our next question comes from the line of Chad Dillard of Bernstein. Your line is now open. Chad Dillard: Hey, good morning, guys. I want to on your price cost through the year. So how do you expect that to trend? What's baked into your guidance? And then can you just remind us of the total tariff impact in '25 versus '26? And what is AEDPA versus February? Joe Capazzoli: Yeah. Price cost throughout 2026, it's a little hard to, you know, to kinda pinpoint or walk back quarter to quarter. We certainly anticipate as the year progresses, we'll see more inflation kind of settle in. And we would certainly anticipate between our price and productivity actions, they continue to ramp throughout the year. And so we're confident that we'll navigate that equation of managing price cost productivity to neutral or better throughout the year. And we don't anticipate a tremendous amount of lumpiness. Tariffs is a that's certainly, I think we said we said in the 2025, there's roughly we saw about $150 million worth of tariff and related, you know, cost. And over the 2025, we manage that number down a little lower than the $150 million level. And there really haven't been a whole lot of changes in tariff rates, you know, recently. Obviously, that can change at any point in time. Feel like we're managing that very effectively at the moment. And we're ready to react and respond if there's large changes in tariffs going forward. Chad Dillard: Gotcha. That's helpful. Tim, just a second question for you. It sounds like there's, you know, larger transmission projects that are in the wings over the next, like, couple of years. And you guys have talked about, I think, 85% of the polls to Hubbell. If we just, like, zoom in on, like, the transmission portion alone, what does that look like, and how should we think about the TAM opportunity problem? Gerben Bakker: Yeah. Certainly. I would say it's an area of strength. And if you look at our portfolio, I would say our portfolio is very similar, whether you're talking distribution or whether you're talking transmission and substation in the percentage of materials that we provide on it now. While we provide a very large percentage of the material, the cost tends to be low because of the nature of this component. And that speaks to the really, the strength of our portfolio where, you know, the quality of that and the service of that is extremely important. But it represents a lower percentage of the cost. So it's a really good position that price is not the first leading indicator there to compete rather some of these other ones. But these markets are very strong, and, you know, the visibility is further out on it. You're right to point out some of these projects go into, you know, '26, '27 NBO, the scale and scope of these both in length of a project of miles and in voltages of it. We very much participate in it. So our position is quite good in this market, and the markets are strong. So I'd say well-positioned. Operator: Thank you. One moment for our next question. Our next question comes from the line of Scott Graham of Seaport Research Partners. Your line is now open. Scott Graham: Hey. Good morning. Thanks for taking the question. On Aclara, I know that I think we generally stated earlier and, you know, the calls that, you know, there was supposed to be sort of a bottoming maybe in the fourth quarter and now it seems like, you know, maybe it's at the bottom going forward. I'm just wondering, was there business there that you walked away from perhaps, you know, repositioning it? And, you know, what is really the long-term portfolio fit here? Gerben Bakker: Yeah. Maybe I'd say there's not nothing specific to point out of business we walked away from, but what we have talked about in the past is that this business has traditionally served munis and coops really well. And, you know, a few years ago, we made a, you know, quite large investment in the technology to also be able to serve large IOU. And the technology is just a little bit different in those utilities. That proved to be, you know, harder. Both projects were being delayed during the COVID period of time, but even the adoption of that technology at large IOUs proved more difficult. So we did, you know, a pivot last year. We reshaped that business a little bit. We took a lot of cost out of that business to really continue to focus it on, you know, the market where we have a really strong position. And, you know, I think that business could do really well in that market that we're focused on. So that's really our focus for that business right now. You know, it's a quite small percentage of the overall utility business. If you look at it, it's about half of the grid automation business. And I would say the rest of the portfolio, the other half of that grid automation business as well as the grid infrastructure business, is very attractive margins and very attractive growth. So I'd look at this as, you know, a business that we expect to do better, that we expect the margin to improve from here going forward. It fits the portfolio. But that said, you know, we continue to look at our portfolio. It's what I said before. So at this point, though, that's the path that we're on for this business. Scott Graham: That's very helpful. Thank you. I very much appreciate that. You made a comment about a number of your divisions being, you know, early in a multiyear investment cycle. I obviously, I think we know most of those. But I wanted to maybe just focus on substation, which has been a great business for you for some time now. Is that one of the businesses where you think it's still early? And why? And if I may also say, how much of that business's growth has been sort of aided by data centers? If you could. Gerben Bakker: Yeah. Very, very attractive. Yeah. That's a great question. So the short of it is we're very well positioned. We've historically been well positioned. But if you look at some of our recent acquisitions, if you look at Systems Control, that's very much in that space. If you look at DMC that we just acquired, very much in that space. So we're growing our continue to grow our scale and scope of the products we offer in there. And I would say attractive area without data center but clearly aided by data centers right now as well. And so, you know, it's sometimes it's very specific. A data center will be, you know, putting up the infrastructure and then put the substation right next to it. And I would say those are very directly related. But utilities are investing a lot of this to just interconnect more power throughout the countries, and that requires a lot of substations. So it's very sometimes very hard to pinpoint is it specific or not today. So But the space is very attractive, Scott. Yes. And we're very well positioned in it. Scott Graham: Yeah. And the substations themselves, the infrastructure itself is pretty old still. Right? Gerben Bakker: Absolutely. Absolutely. Scott Graham: Thank you. Operator: Thank you. One moment for our next question. Our next question comes from the line of Tommy Moll of Stephens. Your line is now open. Tommy Moll: Good morning and thank you for taking my questions. Hey, Tommy. Morning, Tommy. It sounds like the market conditions for your electric distribution business are somewhat normal now. I think you mentioned channel inventories seem normalized. I'm curious for any more detail you can give us there just given some of the uncertainty we go back say, a year ago, and when we look at the mid-singles guide you provided for this year, should we think of that as an accurate reflection of the underlying demand, or is there a little bit of help from perhaps a restock? In that number? Thank you. Gerben Bakker: Yeah. I would say maybe start with the last one. It's an accurate reflection of the end demand. You know, clearly, last year, we still saw that destock and, you know, I'm glad to stop talking about destock because it, you know, it lasted way too long at first with, you know, distribution and with end customers. Not going homogeneous, different, you know, different parts of the region, different customers going at different rates there. But we're through there, and I think that the best indication that we saw that early in the year starting to reflect with orders. Then later in the year, we started to see it by actually shipping and the book to bill stay in at that level. So we really feel confident that we're through that. What we didn't see, though, is customers, both details and distributors over pivot that. So what didn't happen is that they actually ran those inventories way, way down too far down and that they had to restart our conversations with our customers are what were days they were targeting, how were they coming to get into those days, specifically in distribution, and there was not an overshoot to that. So I'd say indicative of demand, Tommy. Tommy Moll: Yep. Thank you, Gerben. Perhaps this is indeed the last quarter we'll have to address this topic. I hope so. A follow-up question for you on M&A. It sounds like the pipeline is still pretty full. There have been a number of pretty high-profile transactions in your space, several of which you've been involved in, where you've been able to acquire at pretty reasonable multiples despite some of the impressive growth in the out years. So I'm just curious from where you sit today, does it still feel like that's gonna be possible in the year ahead, or how would you characterize seller versus the buyer expectations here? Thank you. Gerben Bakker: Yeah. Yeah. I mean, what you point out, clearly, multiples have gone up over the last. I mean, we were buying companies not too long ago in the single-digit multiples, and that's clearly increased. But you're pointing out the correct the returns on those businesses are still very good for us because the growth rates have gone up. Those are more attractive businesses. We do really well with those. When there are businesses that what we call right down the fairway, the bolt-ons, even some of the larger ones, you know, the synergies that we can get out of those businesses, the complementary growth that we can out of it, it's, you know, we're very good buyers of those businesses and can generally get more out of them probably than the average or acquired because it scales with the rest of our portfolio. So, you know, any one deal, you know, depending on the competition for it could, of course, be an outlier. We do see the entire pipeline. I can tell you that even though we don't always own every business that goes through this process, it's not because, you know, we didn't see it coming. Right? There's different reasons at times where we don't end up owning businesses. But we're very active in it. And I would say kind of the multiples that you see, I would say, is about where we continue to see pricing right now. Not higher, not necessarily lower. Tommy Moll: Thank you, Gerben. I'll turn it back. Yeah. Operator: Thank you. One moment for our next question. Our next question comes from the line of Brett Linzey of Mizuho. Your line is now open. Brett Linzey: Hey, good morning. Just back to the outlook and specifically the non-res heavy industrial piece you're planning for continued softness this year. Exits rates appear to be pretty soft in Q4. How do we think about those markets in the context of the mega project momentum you noted in the prepared remarks? Are those just longer duration or, you know, any color would be great? Joe Capazzoli: Yeah. I think we've seen non-res and heavy industrial have both been flattish, you know, low growth for the last couple of years. And we're not really seeing tangible signs of meaningful acceleration there, which is kinda consistent with what you saw us lay out on our '26 revenue outlook. I think for us, we see mega projects really impacting our light industrial business. And light industrial and data center has been a source of strength over the last couple of years. So I think that's probably where we're seeing it more so is on the light industrial side. Cautious on non-res and heavy. And, again, when we start to see that come through more tangibly, I think we feel better about the outlook on those markets. Brett Linzey: All right. Understood. And then just one quick follow-up on the price cost productivity equation. So the payback on the $15 million to $20 million of restructuring is that contemplated within the netting? Or should we think of the associated savings as maybe some cushion as those paybacks convert through the year? Joe Capazzoli: Yeah. Those paybacks tend to convert through the year. And, you know, discreetly, start an action and they're typically two to three-year paybacks. They're quite attractive. And our history, the last several years, has been investing a similar amount, you know, $15 to $20 million a year. So we have some really nice momentum from all the initiatives that we have rolling. So think about them, like, in the year, they're kinda self-funding with from prior actions. We're investing for the future. Those future projects have two to three-year paybacks, and there'll be nice tailwinds for next, you know, for '27, '28, and beyond. And we see a horizon with really attractive ongoing R&R opportunities. It's tough to do a lot of them, you know, at a single time because they can be, you know, complicated. They can be, you know, there's some risk associated with them, but we've been managing them very thoughtfully, and that's contemplated in our Appreciate the detail. Operator: Thank you. One moment for our next question. And our next question comes from the line of Alexander Virgo of Evercore ISI. Your line is now open. Alexander Virgo: Yes, thanks very much. Good morning, gents. I wonder if you could just pick up a couple of small ones for me. DMC coming in, in 2026, I think you talked about it being in line with prior expectations. But I'm just wondering about the benefits of margin accretion from the deal versus cost to integrate and if you could give us any color on that? And then on HES, it looks like XDC, the business kind of built to a decent mid-single-digit exit to the year. The implication in the guide, I guess, is that that perhaps inverses somewhat in the back half. I'm just wondering if there's anything specific you're baking in there or if it's just a bit of caution on lack of visibility and whether there's anything that you got in there in terms of new product contribution to growth that can help offset that. Thanks very much. Joe Capazzoli: You know, first, I think. Yes. So on the I'll take the DMC margin. DMC was with us for basically a full quarter in the fourth quarter. Their sales and their margin was right in line with our expectations and what we had previously communicated. And our outlook contemplates $130 million of revenue and roughly 40% operating margins, which is net of integration costs. So no change in how we were thinking about DMC and communicating that coming out of the fourth quarter. To start the year. We're very excited about what DMC adds to the portfolio. On the HES side, with the fourth-quarter exit rate, that fourth quarter was pretty heavy with data center projects. And so we would anticipate, and we have good line of sight, to data center projects throughout the duration of 2026. And so I think what you would see on electrical is nice year-over-year growth rates as we progress through the year. And naturally, with such a strong '25, you'd see that year-over-year when we get out to '6, for electrical that that'll shrink a little bit because of that surge in 04/2025 dynamic. Alexander Virgo: Perfect. Thanks very much. Operator: Thank you. I'm showing no further questions at this time. I'll now turn it back to Daniel Innamorato for closing remarks. Daniel Innamorato: Great. Thanks, everybody, for joining us. We're on all day for calls. And follow-ups. Thank you. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good day, everyone, and welcome to the Graphic Packaging Holding Company fourth quarter and full year 2025 conference call. At this time, all participants are placed on a listen-only mode. We will open the floor for your questions and comments after the presentation. It is now my pleasure to hand the floor over to your host, Mark Connelly. Sir, the floor is yours. Mark Connelly: Good morning. We have with us today Robert Reebroek, President and Chief Executive Officer, and Charles Lischer, Senior Vice President and Interim Chief Financial Officer. Robert Reebroek: During this call, we will reference our fourth quarter and full year 2025 earnings available through this webcast and on our website at www.graphicpkg.com. Today's presentation will include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. Risks and uncertainties include, but are not limited to, the factors identified in today's press release and in our SEC filings. Now let me turn the call over to Robert. Robert Reebroek: Thank you, Mark. Good morning, everyone, and thank you for joining us today. Before we review our results, I would like to take a few minutes to introduce myself and share my perspective on the opportunities I see for Graphic Packaging. I will discuss my initial observations and key focus areas as we adjust our strategy to drive value for shareholders. I've spent more than 25 years leading global consumer brands and businesses, including leading a Fortune 500 division and serving as a public company CEO. I've lived and worked across North America, Europe, South America, and Australia. Over that time, I've held leadership roles at Procter & Gamble, PepsiCo, Kimberly-Clark, and Primo Brands, where I gained experience operating complex businesses with global manufacturing and supply chains and building consumer brands at scale. In several of these roles, I've been a customer of Graphic Packaging, and my teams worked closely with the Graphic Packaging team to design winning packaging solutions. Throughout my career, packaging design and procurement have been a major part of my work. In creating winning packaging, I worked directly with brand teams and retail, including design and technical specifications, sustainability, and manufacturing requirements and performance needs. Notably, I worked on three innovative packaging solutions that went on to receive patent protection. Packaging is a critical part of the consumer experience, and I am aware of how packaging influences consumer purchasing decisions at the shelf and how consumers interact with packaging at home. I understand how important packaging is to our customers across the consumer packaged goods, quick-service restaurant, and retail industries. And I'm acutely aware of the challenges and opportunities our customers face in a world of GLP-1 BAHA and the evolution of private label. I've also seen firsthand the exceptional quality of our packaging solutions and the impact they have on customers, brands, and consumers. I have a deep appreciation for the role we play not just in protecting products or reducing costs, but in shaping and enhancing brand perception, enabling sustainability goals, and delivering exceptional quality and reliability. That perspective is what attracted me to Graphic Packaging, and it will shape how I approach the business and manage towards the substantial opportunities we have ahead. Today, I will spend some time discussing how I am assessing the business, what excites me about the foundation we have, and where I see opportunities to significantly improve performance and create value for shareholders. Chuck will then walk you through our fourth quarter and full year results and our outlook. Graphic Packaging is a world-class company with leading positions across attractive end markets, strong relationships with many of the world's most respected consumer brands and retailers, and an industry-leading asset base that was built to provide a high level of integration and durable long-term competitive advantage. Our people, scale, and capabilities are significant strengths. We have an exceptional team and an industry-leading production footprint, including a network of about 100 packaging facilities and the two highest quality and most efficient recycled paperboard manufacturing facilities in North America, in Waco and Kalamazoo. Our superior innovation and technical capabilities are helping us build stronger, deeper customer relationships with leading CPGs, QSRs, and retailers. While our manufacturing footprint and customer relationships are strong, we recognize that there is significant work to do. The actions we are taking now and will take place in the next several months are focused on unlocking Graphic Packaging's full potential to drive stronger performance and value for all our stakeholders: our investors, communities, employees, customers, and suppliers. When I stepped into the CEO role at the beginning of the year, we initiated a comprehensive operational and business review, including the company's footprint, systems, and organization, selective portfolio assets, and financial performance. This review is underway now. I've already visited multiple facilities, including Waco, Macon, and Perry, spent meaningful time with our leadership team and the board, held a global town hall joined by several thousand of our employees, joined the leadership of select industry organizations, met with key customers, and spoken with several of our shareholders. These interactions with our most important stakeholders are informing our early actions. Recognizing the depth of talent in this organization and the need for continuity, we've taken steps to retain and attract top talents. We have also implemented select initial organizational and reporting changes to enhance transparency and accountability. We established a transformation office led by our new Chief Transformation Officer, who will work hand in hand with me to drive operational improvements, enhance productivity, and cost savings throughout the organization without disrupting customer service. We engaged external expertise to supplement our own resources as we evaluate opportunities to enhance profitability and drive growth and innovation. And we have initiated a comprehensive review of our organization structure and operations footprint and a selective portfolio review to ensure that our resources are focused where we can create the greatest value for our shareholders. Now that I have been in the role a little more than 30 days, I would like to share a few of my initial observations on the most meaningful opportunities within our control. One, the external environment remains challenged near term. Overcapacity in commodity bleached paperboard markets is putting pressure on finished packaging, and demand trends for consumer staples remain uneven as a result of affordability and macroeconomic uncertainty. While we expect these trends to improve, we also acknowledge that consumer purchasing patterns and the dynamics between brands and private label are evolving. We are not simply waiting for markets to recover. We are focused on what we can control where our resources have the best opportunities to create lasting value. Two, the combination of softer than expected market demand and the need to build inventory out of the Waco startup led to paperboard and finished goods inventory levels higher than what we currently require. In addition, we need to right-size our cost structure for the realities of the current macroeconomic environment. We are taking immediate steps to address these issues that we believe will enhance our profitability over time and drive free cash generation in 2026 and beyond. Three, we have the best and most efficient recycled paperboard manufacturing facilities in North America. However, our costs to complete these projects were higher than anticipated, driving the need to quickly capture the value these assets can generate. Four, we need to significantly reduce inventory and ensure that every spending decision brings an appropriate return. These steps should allow us to reduce our debt, which in turn would allow us to prioritize returning capital to our investors. Five, through the investments we have made, Graphic Packaging has strong and durable competitive advantages. However, I believe that there are select opportunities within the portfolio to better optimize our position over time and drive value creation for shareholders. And finally, we are a global leader in innovation, but we need to move more quickly from idea to commercialization. We are already working to more carefully align our innovation teams with our best market opportunities with both new and existing customers. This is a key source of differentiation for Graphic Packaging, and I believe that our innovation team is the best in the business. In sum, I see tremendous opportunity to create real value for shareholders by one, enhancing profitability through cost actions and operational efficiencies; two, reducing inventory and capital spending to drive significant free cash flow generation; three, driving disciplined organic growth with innovation and exceptional customer service; four, prioritizing our free cash flow to reduce our leverage and return capital to shareholders; and five, conducting a comprehensive business review. In 2026, we expect to generate adjusted free cash flow between $700 million and $800 million. There are, of course, one-time items in our 2026 and also in our 2027 adjusted free cash flow projections, particularly with respect to inventory reduction and cash taxes. As we look beyond that timeframe, we are targeting adjusted free cash flow of $700 million plus incremental EBITDA growth. Recognizing that our current adjusted EBITDA is substantially lower than it was projected to be when the company first established its Vision 2030 financial targets, when volume growth was expected to be positive. Restoring top-line growth and delivering stronger margins is central to our value creation plan and key to delivering on the free cash flow generation potential of this exceptional company. Achieving an investment-grade credit rating by 2030 remains a central element of our Vision 2030 commitments. Now let's take a minute to dive a little deeper into each of those objectives. Our EBITDA margins have come under pressure in recent years, driven by both the external pricing and demand environments and our own cost structure. I believe that there is meaningful opportunity to optimize our cost and better align with the current operating environment while protecting the operational capabilities and market positions that make Graphic Packaging an industry leader. This effort spans SG&A, manufacturing footprint and efficiency, support functions, and core processes, and includes extensive deployment of AI tools. As previously mentioned, I have established a transformation office to lead the effort to strengthen accountability, drive operational excellence, and enhance productivity and cost savings across our entire company without disrupting customer service. My goal is to simplify the organization, improve execution, and eliminate inefficiencies, ensuring we can return to profitable growth with a cost structure that supports both our near-term needs and our long-term objectives. Where it makes sense, we will also be adding additional talent and capabilities to drive stronger organic growth. I want to briefly address Waco and Kalamazoo. The Waco project is substantially complete and already producing top-quality recycled paperboard to service our packaging system needs. Waco and Kalamazoo are world-class assets, the highest quality and most efficient recycled paperboard manufacturing facilities in North America. While the Waco facility is large, its net impact on market capacity is quite small after we closed two of our older, higher-cost facilities and other producers closed capacity. Its impact on our cost of production, however, is substantial and creates a durable long-term competitive advantage. While the market has been weak, a return to more normal consumer demand should put us in a strong position to restore volume growth and help ensure that we can leverage our production cost advantage to drive the best possible returns from our world-class Waco and Kalamazoo assets. Total 2025 capital spend was $935 million, higher than the company's target. Total project spend for the Waco Greenfield facility, which is substantially complete, is currently estimated at $1.67 billion when we include capitalized interest of approximately $80 million. Spending through 2025 totaled $1.58 billion. A review of the root causes of the higher than originally planned capital expenditures on the Waco project is underway, and appropriate corrective actions will be taken to prevent similar events from occurring in the future. Capital spending is expected to drop by approximately $485 million in 2026, including the remaining spend to complete Waco, and will remain at or below 5% of sales in the next several years, even as we invest selectively in productivity and new capabilities. As we exit the period of heavy capital investments, our opportunity to drive free cash flow improves significantly. We expect to reduce capital spending to approximately $450 million in 2026 and are raising the bar for new capital spending project approvals. At the same time, we are working to reduce our inventory balance towards our 15% to 16% of sales goal from an elevated 20% level at year-end. Together with our ongoing cost actions, disciplined organic growth, and the continued ramp-up at Waco, we expect to generate $700 million to $800 million of free cash flow in 2026 as we benefit from ongoing inventory reductions and a tax legislation passed last year and are targeting adjusted free cash flow of $700 million plus incremental EBITDA growth in the years ahead. This will give us the flexibility to significantly reduce leverage, return capital, and reinvest in the business over time. Our growth strategy is customer-centric and market-backed. We are focused on disciplined organic growth, putting our resources into markets with the best long-term opportunities while reducing our exposure to markets where we see less opportunity. We are partnering with key consumer packaged goods companies, quick-service restaurants, and retailers to improve baseline volume growth, bring innovation to market faster, and in some cases, selectively move into new end markets. In recent calls with customers, a recurring theme is the need to drive volume growth to protect or regain market share. We are ready to help our customers meet these goals with our best-in-class packaging innovation, unmatched scale, and exceptional customer service. We aim to be more than a supplier. Our goal is to be a trusted strategic partner to our customers. As part of this renewed commercial and customer focus, we recently promoted Jean Francois Oche to Chief Commercial Officer. I see the value in his global role, and I am working with Jean Francois to ensure that we have the talent we need to drive sustainable growth. Innovation is one of Graphic Packaging's greatest competitive advantages, a strength that was built over decades in North America and enhanced by the acquisition of AR Packaging in Europe in 2021. Our global innovation team is helping us bring paperboard packaging into new markets, often through plastic or foam replacements. Innovation has been a part of why we have been able to retain volume in the markets we serve. Innovations like Pacesetter, Rangier, ProducePack, and VaporSeal are driving adoption in growing categories such as produce, fresh food, protein, household products, and wellness, delivering the more circular, more functional, and more convenient packaging solutions that Graphic Packaging is known for. My priority here is to accelerate the speed of commercialization and ensure that our resources are focused on the most promising opportunities. With a broad portfolio that spans every grocery aisle, both with brands and private label, as well as food service, prioritizing where we put our resources is essential to driving real value creation. We aim to be the first choice for our customers and believe that with our innovation, product quality, and exceptional customer service, we have the right to win in a more normalized macro environment. Finally, the key pillars of our capital allocation strategy are one, reducing our leverage; two, returning capital to shareholders; and three, identifying opportunities to optimize our footprint and portfolio over time. Today, our net leverage stands at 3.8 times. We are taking concrete steps to reduce debt and move towards our target of an investment-grade rating by 2030. Deleveraging is our highest near-term capital allocation priority. We expect to pay down approximately $500 million of debt in 2026, but with the impact that our inventory reduction actions will have on adjusted EBITDA, our leverage ratio is likely to remain elevated. A key priority, returning capital to shareholders remains. We remain committed to returning capital through dividends and opportunistic share repurchase and expect to increase share repurchase activity as leverage declines. Lastly, we will look for opportunities to optimize our footprint and our portfolio, ensuring that capital and management attention are focused on the areas where we have durable competitive advantage and attractive growth opportunity. The common thread across all of this is discipline. By improving execution and cash generation, we will create a much stronger balance sheet that will provide the flexibility to allocate capital in a way that creates long-term value for shareholders. With that context, I'll turn it over to Chuck to walk through our fourth quarter and full year results. Charles Lischer: Thank you, Robert. Turning to slide 13, I will begin with a summary of our fourth quarter and full year financial results. The fourth quarter, net sales were $2.1 billion, basically flat year over year, by volumes and pricing, which were both down slightly less than 1%. More than offset by a $40 million foreign exchange benefit. Adjusted EBITDA for the quarter was $311 million. As discussed in earlier quarters, the pressure on adjusted EBITDA reflects a combination of unusual competitive pricing and softer packaging volumes, which together reduced adjusted EBITDA by approximately $40 million versus the year-ago quarter. Commodity and other operating cost inflation were in a similar range, along with the negative performance as a result of the production curtailment decisions we made during the quarter to manage inventory. Foreign exchange was an $8 million tailwind. For the full year, net sales were $8.6 billion, down approximately 2%. Augusta divestiture accounted for $150 million, up $190 million decrease. Price was an approximately 1% headwind, and volumes were basically flat. While FX was a $57 million tailwind. For the full year, adjusted EBITDA was approximately $1.4 billion. Price and volume were a combined $174 million headwind, and net performance of $59 million was not enough to offset commodity input and operating cost inflation of approximately $150 million. That performance was lower than normal as a result of production curtailments decisions we made primarily in the fourth quarter. The Augusta divestiture reduced adjusted EBITDA by $30 million, and foreign exchange was a $13 million tailwind. Adjusted EPS for the full year was $1.80, and we ended the year with a net leverage of 3.8 times, reflecting the headwinds to EBITDA investments at Waco, and our decision to repurchase more than 2% of shares outstanding during 2025. Slide 14 lays out our current expectations for 2026. We expect net sales in the range of $8.4 billion to $8.6 billion, which assumes volumes in the range of down 1% to up 1%, including the benefit of innovation sales growth, which is expected to be approximately 2% of sales. That implies market volumes down approximately 2% at the midpoint, reflecting our expectation of continued inflationary pressure and ongoing affordability challenges in the consumer staples market. While we do not comment on future pricing expectations, our guidance assumes a similar level of competitive pressure and packaging pricing as we saw in the fourth quarter and includes the expected impact of recent third-party announcements. Taken together, these represent a $150 million headwind across 2026, at the midpoint of our guidance range. Adjusted EBITDA is expected to be in the range of $1.05 billion to $1.25 billion on a reported basis and $1.2 billion to $1.4 billion on a pro forma basis, excluding the temporary impact of production curtailments related to our actions to remove approximately $260 million of paperboard and finished goods inventory in 2026. Our adjusted EBITDA guidance range also assumes a restoration of incentive compensation programs. Roughly $100 million figure represents approximately 5% of Graphic Packaging's total compensation cost and impacts over 2,000 employees. Given performance that was below expectations in both 2024 and 2025, incentive compensation awards were well below plan 2024 and effectively zero in 2025. A return to more normal incentive compensation, assuming that we reach our performance targets, is important to employee retention and attracting top talent. Adjusted cash flow is expected to inflect sharply upward in 2026 to $700 million to $800 million. This improvement is driven primarily by three factors. First, a step down in capital spending to $450 million. We will be reviewing all significant planned spending to ensure that it delivers appropriate returns. Second, the net benefit of our inventory reduction actions as we optimize inventory to our current production footprint and adapt to market demand realities. And third, improved profitability through our renewed focus on disciplined organic growth, operational excellence, SG&A, and other cost reductions. I look forward to partnering with the new transformation office that Robert established to improve our processes and better leverage technology and AI to drive fixed cost removal, operating cost reductions, and productivity initiatives. Adjusted EPS is expected in the range of 75¢ to $1.15. While we do not generally provide quarterly guidance, we do want to highlight a few factors that are expected to affect the progression of sales and EBITDA in 2026. Normal sales seasonality is more pronounced in submarkets than others, but relatively modest overall. In general, we tend to book something in the range of 23% of full-year net sales in the first quarter and 26% in the third quarter, second quarter modestly higher than the fourth quarter. Adjusted EBITDA tends to follow that same pattern before discrete items. Scheduled maintenance at our paperboard manufacturing facilities will be heavier in the first half by approximately $15 million, mostly in the second quarter, and by about $10 million in the fourth quarter. There is no significant maintenance scheduled for the third quarter. The production curtailments to reduce inventory that Robert mentioned are expected to be heaviest in the first half, in the range of $45 million at the midpoint for the first quarter and roughly $40 million in the second quarter. Third-quarter curtailment activity is expected to be the lowest since it is generally our busiest quarter. The actions that we are taking to reduce SG&A and other costs and to make operational improvements are expected to be moderately more back-end weighted. And finally, recent severe weather across Central and Eastern United States impacted operations at several facilities. While we don't have a final tally, our best estimate of the impact on first-quarter adjusted EBITDA is in the range of $20 million to $30 million. Taken together, normal seasonality and these discrete items imply that first-quarter adjusted EBITDA will be in the range of $200 million to $240 million. We expect first-half adjusted EBITDA to be roughly 40% to 45% of full-year adjusted EBITDA. And while we expect our effective tax rate to be in the range of 25% for the full year, our first-quarter tax rate will likely be slightly higher than in subsequent quarters. Slide 15 walks through key drivers of the year-over-year adjusted EBITDA change and a bridge to our 2026 adjusted cash flow target of $700 million to $800 million. Starting from $1.4 billion adjusted EBITDA in 2025, there are several moving pieces worth highlighting. First, the incentive compensation that I mentioned earlier was not earned in 2025. Second, as noted earlier, price and volume outcomes are assumed to be negative overall, reflecting the consumer affordability challenge and unusual competitive pressure in packaging pricing, along with the impact of announced third-party price changes and bleached paperboard. Third, the items over which we have the most control and performance, including the benefits from Waco and SG&A reductions, partially offset by January weather and production impacts, at between $100 million and $170 million. These gains will be partially offset by the one-time production curtailment impact as we reduce inventory levels. The actions we are taking to reduce inventory will generate cash flow in 2026 that do not reflect our normalized earnings power. Taken together, these factors are expected to result in 2026 adjusted EBITDA of between $1.05 billion and $1.25 billion, or approximately $1.2 billion to $1.4 billion on a normalized basis. On the right side of the page, we provide a bridge from expected 2026 adjusted EBITDA to expected 2026 adjusted free cash flow. The largest contributor to the incremental free cash flow in 2026 is capital expenditures, which are expected to decline to approximately $450 million. Additional contributors to 2026 adjusted cash flow expectations include a net working capital release from inventory reduction and lower cash taxes as a result of the 2025 tax law change. Incentive compensation is non-cash in 2026, as it would be paid in 2027. Cash interest is expected to be in the range of $255 million to $275 million, and other working capital and cash items are expected to be a source of cash of approximately $5 million at the midpoint. As Robert mentioned, our highest near-term capital allocation priority is to reduce debt given our current leverage position. We expect to pay down approximately $500 million of debt in 2026, which would put us on the path to an investment-grade credit rating by 2030. We remain committed to returning capital through dividends and opportunistic share repurchase activity and expect to increase share repurchase activity as leverage declines. In summary, 2025 reflected a challenging operating environment, but it also represents the final year of heavy investment. We are taking actions to optimize the company, drive operational efficiencies, and reduce inventories. We are entering a period that we expect will be defined by strong free cash flow generation, significant balance sheet improvement, and disciplined growth. With that, I'll turn it back to Robert. Robert Reebroek: Thank you, Chuck. Graphic Packaging is a strong company with a world-class asset base, deep customer relationships, and leading positions across attractive end markets. Our mid to long-term shareholder value creation plan is clear. We will enhance profitability by optimizing our cost structure and driving greater operational efficiency. We will generate significant free cash flow through our actions to reduce inventory and reduce capital spending. We will focus on disciplined organic growth and deliver exceptional customer service. We will reduce debt on our path to investment grade and return capital to shareholders through our dividend and opportunistic stock repurchase. And after a thorough review, we will work to optimize our resources to ensure they are focused where we can create the greatest value for our shareholders. With that, operator, let's open it up for questions. Operator: Certainly. Everyone, at this time, we will be conducting a question and answer session. If you have any questions or comments, please press 1 on your phone at this time. We do ask that while posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality. We do ask that participants please ask one question and one follow-up, then reenter the queue. And once again, if you have any questions or comments, please press 1 on your phone. Your first question is coming from Matthew Roberts from Raymond James. Your line is live. Matthew Roberts: Hey, Robert, Chuck. Good morning. Robert, welcome, and congratulations on the role. So when you joined, Robert, the board noted your strong CPG background, and the timing, of course, coincided with Vision 2030. Those numbers are revised today. So ultimately, as you embark on that 90-day review or look to your longer-term targets alike, what makes your approach different than what has come before at Graphic Packaging? Would you say it's more operationally focused to reach free cash flow, or are commercial efforts more of a priority to ensure you're able to reach flat volumes in 2026? Robert Reebroek: Thanks, Matt. Thank you for welcoming me. Yeah. I do want to just recap a bit of my background. I did spend about 30 years in consumer brands as a customer of Graphic, not only in North America but also in Europe, South America, and Australia. So I bring a bit of a global perspective on the business, and I worked at Procter & Gamble, Kimberly-Clark, PepsiCo, and Primo. I have a background with complex businesses with global manufacturing and supply chains. And I have a lot of experience with packaging, design, procurements, and some prior experience, as you know, on tissue and towel manufacturing. And Brandy Millison tissue towel mill in Australia when I was running Kimberly-Clark, Australia. With regards to the approach, you know, I plan to focus on cost reduction, productivity, and operational excellence. We want to ensure we deliver a really good experience to our customers. I've had a number of calls with key customers over the last couple of weeks. Including yesterday, I spoke to two customers. These are customers across food service, beverages, and food, grocery. And, you know, they really need us to help them restore growth, and therefore we need to stay very close to that. I'll bring a more disciplined approach to CapEx going forward and focus on free cash flow generation to create value for our shareholders. So with regards to customer centricity, I do believe in a market-backed approach and really partnering with our customers. We'll do a bit of a review of our manufacturing footprint to understand where we can consolidate and drive productivity. We do have to define where we have the right to win, where we have competitive advantages, and focus the resources behind the core. We have to define what that core is. We have a lot of businesses that are around the world in different geographies that we have to understand better. And we'll do a selective, very selective review of the portfolio. Of course, you know, the mills are where the money is made. We will make sure that the mills and manufacturing facilities stay state-of-the-art and are fully utilized. Matthew Roberts: It's all very helpful. Thank you, Robert. I look forward to working with you and seeing the progress there. For my follow-up, could I ask about the inventory reduction? It goes from 15% of sales to or from 20% to 15%. I think that number implies about 200,000 tons. How are you able to balance that much coming out while Waco continues to ramp? And then given that inventory curtailment is a one-time benefit in '26, cash from the incentive comp also hits in '27. What other elements are needed to bridge to that $700 million figure again in 2027? Thank you all again for taking the questions. Robert Reebroek: Yeah. Just let me clarify the inventory reduction program. It'll primarily focus on recycled, bleached, and cub stock. We're also reducing some finished goods inventory where demand fell short of expectations. And in the bleached paperboard system, production and demand are in good balance. It's just really the inventory that's too high. And I want to emphasize that our customer service is a priority and will not be disrupted by inventory reduction action. Let me pass to Chuck for some of the financial details. Charles Lischer: Yeah. Hey, Matt. This is Chuck. So on the bridge to the 700, as you pointed out, a lot is going on in cash flow and EBITDA, which is why we provided the detailed bridges that we did. But before I talk all the way about post-2027, I want to just reiterate the confidence in 2026. We outlined the levers there. We see those levers. Have the confidence that we'll be able to pull those levers to hit the $700 million to $800 million range in 2026. 2027 will continue to benefit from the tax benefits. And there'll be additional inventory reduction. And then post-2027, there are some negatives and positives that happen. Some of the items that happened in 2026 are, of course, nonrecurring. But, for example, as the tax benefits end, then we have interest rates that are reducing. And as Robert pointed out earlier, we're going to be continuing to push on CapEx and other items in addition to normal EBITDA growth. So we can take you through the details more of that offline. Matthew Roberts: Excellent. Robert, Chuck, thank you all again. Operator: Thank you. Your next question is coming from Ghansham Panjabi from Baird. Your line is live. Ghansham Panjabi: Good morning, everybody, and best wishes to the two of you in your respective roles. You know, Robert, maybe just to start off with you, just given your background at the CPG level and, you know, your unique lens, if you will, how do you think this pricing dynamic situation in paperboard in the US will play out for the industry over the next couple of years? What can you do internally to sort of navigate through this period? Because it presumably, customers will be pretty opportunistic as it relates to substitution, etcetera, just given the, you know, change in the pricing dynamics. Robert Reebroek: Yes. Thanks, Ghansham. The two grades that matter most to us are recycled and unbleached. And both of those markets are in good balance. You know that we are very highly integrated as a company. And our smallest business is bleached paperboard, which is oversupplied with substantial new capacity that's come into the market. The demand outlook is trending down. So the current prices, we don't believe that bleached paperboard producers are earning a good return on capital. As I said, you know, we have very high integration in our bleach business, so our margins tend to be higher but are still a little bit below the cost of capital. You know, I think the bleach and the bleach markets are less integrated, so the economics are a little tougher, and the overcapacity is impacting the markets. And so that's where I am on that. Chuck, any thoughts from you? Charles Lischer: Yeah. I think you saw that in the AF&PA data that came out end of last week that I think you can see recycled and unbleached is generally aligned to demand and bleached. I think the weakness that you see there is consistent with what Robert talked about. So I think it's all as Robert laid out. Ghansham Panjabi: Okay. Thank you. And then, you know, Robert, do you kind of step back a bit, obviously, a lot going on this year and next, and so on. But, you know, if you look at the company's EBITDA margin profile, you know, 2023, 19.9% as your slide deck lays out, obviously, a huge deterioration that you're projecting over that time period through 2026. Is there anything structurally having changed in the industry that you cannot get back to the sort of high teens EBITDA margin threshold, or was 2023 just a unique situation? Robert Reebroek: We think that over the long run, we will be restoring our EBITDA margin to the higher teens level. As a result of restored demand, cost management, and productivity, so we're pretty confident that we will be managing that back towards that original Vision 2030 level. But it's too early to tell exactly where that's gonna land. Ghansham Panjabi: Thank you. Operator: Thank you. Your next question is coming from Arun Viswanathan from RBC Capital Markets. Your line is live. Arun Viswanathan: Great. Thanks for taking my question. And I guess I'll add my congratulations on the new roles as well. Yeah. I guess just kind of going along a similar line of questioning. Maybe we could get your perspective and insight on what you're hearing from your customers. Specifically, are they talking about SKU rationalization, changing packaging strategy? How are you hearing on how they're dealing with Maha and maybe other changes to consumer behavior? You know, obviously, we've seen some relatively lower volumes on the food side and food service. And are you hearing any kind of customer response to address that? Thanks. Robert Reebroek: Yes. Thanks, Arun. We do have very extensive conversations with our customers across food, beverage, grocery, various other industries, and food service. With regards to consumer packaged goods, customers are really highly focused on cost right now and driving rationalization in the number of packaging executions to reduce downtime and changeovers in the manufacturing process. So there is a need for simplification to drive better basically, COGS for their cost of goods, and our packaging complexity is part of the equation. So the more we can simplify our assortment, whether that's a specific execution in the beverage industry or in the food industry, the better. They also continue to focus on shared shelf and shared SKU. They want to gain volume share at retail. And a lot of the CPG companies, and some of them that I've spoken to, are reviewing their back price architecture to get the right price points with smaller portions and lower consumer price points. The other trend we see is that there's a lot of private label embracing innovation quickly, and they continue to gain momentum even in some categories that were historically insulated from private label growth. And customers really want packaging solutions now that reduce material usage, improve palletization, simplify the number of formats and complexity, but they also want very high-quality graphics that improve shelf appeal. So they're not willing to compromise on winning at the shelf, winning at the first moment of truth. There is another big trend, which is, you know, it starts in Europe, but it's coming to the US, is the single-use plastic reduction. That continues to be front and center of discussions with the large global players. The reduction of plastic in the US, specifically the reduction of foam, to improve the sustainability profile of our customers. Regards to food service, affordability has really created a challenge for the quick-service restaurants. And they need to innovate and stay competitive both in food and beverage and meal solutions. So they want to hit hot price, and they want to make sure that they're competitive across the board. Marketing and thematic promotions continue to be important. That's where we come in with our thematic packaging and our ability to react quickly to their orders. So we're starting to see some improvements with recent large-scale promotions, and I think the food service opportunity is substantial. And plastic and foam replacement will continue. So on Europe specifically, innovation is now a key driver there because of the regulatory changes against plastic. In North America, we're seeing that more and more consumers prefer paper cups over plastic and foam. Arun Viswanathan: Thanks for that comprehensive answer. I guess, just as a quick follow-up, back onto the SBS question. So, you know, I understand that it's a very small grade for you, but I guess our perception or my perception is that, you know, the oversupply is kind of also pressuring unbleached, and maybe customers are getting the option to switch into SBS because there's, you know, not much premium there. So how do you see that as well, and do you see that kind of oversupply in SBS continuing to weigh on other grades as well, or is it not really impactful? Thanks. Robert Reebroek: It's a well-known fact in the industry. There's overcapacity of bleach, and, you know, it is the most fragmented of the paperboard grades, as you know. And periods like this tend to resolve themselves usually through capacity rationalization, downtime, consolidation. But remember, we primarily sell finished packaging and have a high degree of integration. And we do see some price pressure in recycled packaging from bleach producers. They're looking for volume, but we haven't lost volume. And we have to be competitive with package price, and that can cause a little bit of margin pressure. And we also know that bleach packaging selling at the price of recycled long-term is not sustainable. It's more expensive to produce, and it doesn't earn the cost of capital returns. Now we're focused on driving volume where we have the right to win, and we control what we control. So we are focused on cost spending and exceptional customer service. So that's where we are at that. Operator: Thank you. Your next question is coming from Lewis Merrick from BNP Paribas. Your line is live. Lewis Merrick: Morning, Robert, Chuck, Mark. Thank you for taking my questions and congratulations on the appointment, Robert. Let me just go into portfolio review comments that you had in the deck and in your earnings statement. You just give us a sense or expand on the factors what you would consider as elements which would determine a core or non-core asset in your business today. But it could be quite a long list. Robert Reebroek: Very good question, Lewis. Thank you for the question. Thanks for welcoming. Okay. Great. Look. I'm a big believer in the focus on the core. As part of any company strategy. When you have a strong growing core, you win. And I think where we may have to provide a bit more perspective on all of the businesses we own around the globe, that may or may not be core to the operation. We're looking at an initial review of the business portfolio, the operations, and our global footprint. And we want to really focus on future growth and value creation and understand where we have the right to win. Let me give you an example of very obvious places which are part of our core. Our North America and Europe food and beverage business is obviously the biggest part of our company. No question that we have to play there. But there may be some smaller businesses that we have an opportunity to review. We want durable competitive advantage. And we want synergies. We want higher integration rates between our paperboard manufacturing and our conversion factories where we make the finished packaging. With regards to looking at everything, we are also going to look at zero-based budgeting, and particularly at CapEx. It's time to take a fresh look at all we do. We'll take a comprehensive look in the context of what is really a changing market. Consumer dynamics are changing. Certain packages are starting to accelerate. Others are starting to decline. Consumption patterns are evolving as well, and so we need to bring those consumer insights back into our company so that we can align our assets to future growth opportunities. Now it's very early days, no decisions have been made, and we'll keep you updated as appropriate. Lewis Merrick: Have you and the board had any thoughts as to whether you may look to revisit your dividend policy of $20.20 cents? Thank you. Charles Lischer: Dividend. So I think we are professionals. Oh, and I'll hop on dividend. So sorry. I didn't catch it for the first time. So on dividends, as we said in the prepared remarks, our clearest or most highest near-term priority is debt pay down. And so we are focused on debt pay down in the short term. But we have not committed to a dividend change this year yet. But over time, we would expect to have growing dividends as talked about in the prepared remarks. And increasing the return to shareholders. But clearly, the near-term priority is to pay down debt given our current leverage ratio. Lewis Merrick: Thank you. I'll send it over. Hope that's 20% actually with it. Thank you. Operator: Thank you. Your next question is coming from Mark Weintraub from Seaport Research Partners. Your line is live. Mark Weintraub: Thank you. Welcome both. Question, since you did mention that overcapacity in bleach board has been putting downward pressure on finished packaging pricing across your grades. I guess one of the questions I have is that if the trade journals show, for instance, CRB prices were to go down or something like that, if to some extent it's already been reflected that the pressures in the business because of overcapacity in SBS? Do you get hit a second time, or can you help us understand how the prices we might see in trade publications can affect what you end up realizing on a go-forward basis? Charles Lischer: Yeah. Hey, Mark. This is Chuck. I'll take that. So as you know, we've been seeking to convert many of our contracts over to a cost model. And so many of our contracts have made progress on that. So many of our contracts are no longer tied to published pricing. We do still have some contracts that are tied to published pricing. And our guide does not reflect any unpublished or unannounced changes in pricing. Mark Weintraub: Okay. And so just a follow-up. So if there are changes, is it modest because of the direct impact, modest because of the adjustments you've made in your contracts, or any help you can give? And I recognize if you're not comfortable, understood. But figured I'd ask. Charles Lischer: Yeah. There's several factors. There's timing as to when the price impact would be recognized based on our contracts, and then there's also, of course, offset by the ones that are already on the cost model. So it's there are a lot of moving parts and pieces there to give you specifics around it. Mark Weintraub: Okay. And just one other follow-up then. On Waco, I know originally you had outlined some relatively significant startup costs, I think $60 million or something like that. Could you just update us on what has happened and how you're reporting that, and it seems like you're just putting that in net productivity now. How should I be understanding that? Thank you. Charles Lischer: Yeah. So good news on that, given the strong startup of Waco, that our startup costs came in below, and we do not expect any longer startup costs to continue into 2026. So our startup costs came in at around $40 million in 2025. So lower than our original expectation. Given the strong startup. Importantly, though, we do put those costs below the line. And so that doesn't roll up into performance. It does roll up into the items that are below adjusted EBITDA. And so that information that was provided to you in the previous text was just information only, but that is something that, of course, impacts cash and came in stronger. And as I said, zero in 2026. Mark Weintraub: Okay. And just one clarification. So the Waco startup costs were excluded from the adjusted EBITDA number you gave us or included? Charles Lischer: They were excluded from adjusted EBITDA. Operator: Thank you. Our next question is coming from Gabe Hajde from Wells Fargo. Gabe Hajde: Hey. Good morning. Welcome. I had a question about seasonal working capital changes and then, obviously, the very concerted efforts to reduce inventory. Seems like a decent amount of that production will hit, and the reduced production will hit in the first half. But normally, you consume cash and working capital in the first quarter. And if I look at kind of what you gave us, you know, the 40% to 45% of EBITDA earned in the first half, it looks like leverage can, in fact, tick above closer to the mid-fours or higher. Can you talk about that a little bit? And then I have a follow-up. Thank you. Charles Lischer: Yeah. I think you've identified all the right trends. Historically, our cash flow is strongest in the fourth quarter, and that's how it played out in 2025. And we would expect it to play out that way in 2026 as well. I will say the impact in 2026 should be significantly moderated versus where it was in 2025. If you remember 2025, the heavy spend on Waco was through the first three quarters, and so you would have seen a much more negative impact or a heavier negative impact on free cash flow in 2025 than what we'll see in 2026. So it'll more follow the EBITDA, but it is still our cash flow has historically and always been back-end weighted as we build for the season through the summer and then harvest that cash in the back half. Gabe Hajde: Okay. Thank you. And then the 200,000 tons roughly of inventory this year, and obviously, you gave us $1 equivalent. I guess, Chuck, for 2027, can you give us a reference point? I think you talked about some moving parts to bridge to the $700 million of free cash flow. But will you still be sort of underproducing next year? And again, I appreciate it. It depends on demand. But and unlocking some inventory. And if so, do you have an order of magnitude as it sits right now? Charles Lischer: You know, we're not giving 2027 guidance down, so we'll give you the number. But as you hit on the key factors, I mean, we are committed to bringing inventory down to the target ranges that Robert gave, the 15% to 16% target. We would, of course, much prefer that to come out via demand, as you mentioned, than come out via downtime. But we are indeed committed to bringing it out. Operator: Thank you. We have reached our allotted time for Q&A. I'll now hand the conference back to Robert Reebroek for closing remarks. Please go ahead. Robert Reebroek: Thank you, operator. I appreciate you joining us on our earnings call today. I'm excited to be here leading this outstanding team at what is truly a pivotal time for our company. Graphic Packaging serves markets with attractive subsegments and solid secular trends. With the best-in-class assets and a highly talented team, we're a global leader in sustainable consumer packaging. And through the actions we're taking, we plan to grow our market share and further strengthen our industry-leading position. While I've had the opportunity to engage with several of you already, I look forward to connecting with others and to provide ongoing updates on the business and our progress against these priorities. Thank you for your interest in Graphic Packaging. Operator: Thank you. Everyone, this concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.
Operator: Welcome to the MPLX Fourth Quarter 2025 Earnings Call. My name is Julie, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Please note that this conference is being recorded. I will now turn the call over to Kristina Kazarian. Kristina, you may begin. Kristina Kazarian: Welcome to MPLX's fourth quarter 2025 earnings conference call. The slides that accompany the call today can be found on our website at mplx.com under the Investor tab. Joining me on the call today are Maryann Mannen, President and CEO, Carl Hagedorn, CFO, and other members of the executive team. We invite you to read the safe harbor statements on Slide two. We will be making forward-looking statements today. Actual results may differ. Factors that could cause actual results to differ are included there as well as our filings with the SEC. As a reminder, in 2025, MPLX divested non-core gathering and processing assets, which had a $23 million year-over-year impact on our adjusted EBITDA within our natural gas and NGL services segment. Additional details on the impact of this divestiture can be found on Page 11 in our earnings release. With that, I will turn the call over to Maryann. Maryann Mannen: Thanks, Kristina. Good morning, and thank you for joining our call. 2025 was a year of disciplined investment and strong returns. It was our fourth consecutive year achieving a mid-single-digit three-year adjusted EBITDA growth CAGR. Adjusted EBITDA reached just over $7 billion. The strength across our business gave us confidence to continue our history of returning meaningful capital to our unitholders. We increased our distribution by 12.5%, bringing total returns in 2025 to $4.4 billion. This decision reflects our commitment to return the value we create as we advance MPLX's growth strategy with our unitholders. Over the past year, we took meaningful steps to position MPLX for the next phase of growth. We deployed $5.5 billion to our natural gas and NGL value chains, primarily focused on the fastest-growing region in the country. We optimized our portfolio through divestitures of non-core assets, ensuring our future capital deployment is aligned with the strongest return opportunities as we build the infrastructure that will fuel tomorrow's energy needs. Together, these investments and portfolio actions create a more resilient and competitive MPLX, one that we believe can continue delivering growth capital to our unitholders while maintaining our strong track record of returning. Today, we announced our capital plan for 2026. We are planning to invest $2.4 billion as we execute on a robust pipeline of capital projects that support long-term structural growth. The long-term fundamentals for natural gas and NGL demand remain strong. In the U.S., natural gas demand is anticipated to grow over 15% through 2030, driven by the rapid expansion of LNG export capacity and rising power needs, particularly from data centers. We are also seeing higher gas-to-oil ratios across key shale basins as aging wells produce more associated gas per barrel of oil. This trend is increasing supplies of NGL-rich gas and under the strategic importance of our infrastructure in the Permian. Globally, petrochemical demand for ethane and propane are driving increased NGL exports, further reinforcing the strength of the long-term outlook. 90% of our growth capital will be directed towards our natural gas and NGL services segment, where we see some of the most compelling opportunities in the midstream sector. These projects are concentrated in the Permian and Marcellus, two of the most prolific and competitive basins in North America, and are expected to generate mid-teens returns when they come into service in 2028 and beyond. These investments reflect our confidence in the long-term fundamentals of the energy market and in MPLX's ability to continue capturing value as these opportunities unfold. Execution of our Permian NGL wellhead to water strategy continues to advance. We are integrating the sour gas treating operations we acquired last year into our existing gathering and processing footprint in the Delaware Basin. Titan treating complex construction continues and is progressing on time and on budget. By 2026, we expect to be treating more than 400 million cubic feet per day of sour gas. This sour gas complex enhances our treating and blending capabilities and provides an attractive solution for producers who are increasing activity in the low-cost sour gas window of the Delaware. Building on the downstream opportunities created by this platform, today, we announced Secretariat II, a new 300 million cubic feet per day processing plant. Expected to deliver mid-teens returns, the $320 million plant will be our eighth gas processing facility in the Delaware Basin and is expected online in 2028. Once in service, our total processing capacity in the basin will reach approximately 1.7 billion cubic feet per day. Further downstream, the Bengal pipeline expansion remains on schedule, with incremental capacity expected online in the fourth quarter of this year. Beyond BANGL, we are advancing construction of a 300,000 barrel per day of Gulf Coast fractionation capacity, as well as our 400,000 barrel per day LPG export terminal JV. Engineering and construction continue. We have secured key construction permits reflecting strong regulatory and stakeholder engagement. Site grading is near completion and is being executed with strong safety performance and responsible environmental stewardship. The LPG export terminal, expected online in 2028, will benefit from its advantaged proximity to open water, positioning us to serve growing global markets with greater efficiency. Elsewhere in the Permian, MPLX continues to invest in its integrated natural gas value chain. In November, MPLX, along with its JV partners, announced the expansion of the Eiger Express natural gas pipeline to 3.7 billion cubic feet per day. The expansion demonstrates the record demand for firm takeaway capacity we are seeing across the basin. Construction is also progressing on several long-haul JV pipeline systems. These investments are underpinned by commitments from the basin's leading producers and will enhance shippers' access to multiple premium markets along the Gulf Coast. In the Marcellus, our largest operating region, construction is advancing on the 300 million cubic feet per day Harmon Creek III gas processing and fractionation complex. Upon completion, expected in 2026, our Northeast processing capacity will reach 8.1 billion cubic feet per day and fractionation capacity of 800,000 barrels per day, positioning MPLX to serve growing Marcellus and Utica volumes. MPLX is also expanding its Marcellus gathering system to meet producer needs through a $450 million project, which will add compression support, well connections, and enhance MPLX's Majorsville gas processing complex. The project is expected to deliver mid-teens returns and enter service in 2028. Our capital deployment strategy positions MPLX for durable long-term growth. We are building the infrastructure system that will support rising North American future energy needs. From new treating and processing capacity to downstream fractionation, we plan to deliver on our commitment to create sustainable value for our unitholders. Now let me turn the call over to Carl to discuss our operational and financial results for the quarter. Carl Hagedorn: Thanks, Maryann. Slide eight outlines the fourth quarter operational and financial performance highlights for our Crude Oil and Products and Logistics segment. Segment adjusted EBITDA increased $52 million compared to 2024. The increase was primarily driven by a $37 million from a revised FERC tariff issued in November and higher rates, partially offset by higher planned project-related expenses. Pipeline volumes increased 1%, terminal volumes decreased 2% year over year. Moving to our Natural Gas and NGL Services segment on slide nine, segment adjusted EBITDA decreased $10 million compared to 2024. The divestiture of non-core gathering and processing assets and lower NGL prices more than offset growth from recently acquired assets and higher volumes. After considering the $23 million impact of divesting non-core gathering and processing assets, we actually grew 2.1% year over year for the fourth quarter. Gathered volumes increased 2% year over year, primarily due to production growth in the Utica. Processing volumes decreased 1% year over year, as increased production in the Marcellus was more than offset by the sale of non-core assets. Processing volumes in the Utica have increased 4% year over year as producers continue to target this liquids-rich acreage. Marcellus processing utilization was 97% for the quarter, nearing capacity as Harmon Creek III is positioned to come online on a just-in-time basis later this year. Total fractionation volumes decreased 2% year over year as higher ethane recoveries in the Marcellus and Utica were more than offset by the sale of the Rockies assets. Within our natural gas and NGL business, recent freezing conditions across the country have impacted crude oil and natural gas production. We have seen minimal impact to our assets, though some producer customers have experienced frozen well pads and equipment, impacting volumes at a few of our facilities in the Permian. Moving to our fourth quarter financial highlights on slide 10, adjusted EBITDA of $1.8 billion increased 2% from the prior year, while distributable cash flow of $1.4 billion decreased 4% over the same time frame, due to interest expense associated with incremental debt used to finance recent acquisitions and growth capital. During the quarter, MPLX returned $1.2 billion to unitholders in distributions and unit repurchases. MPLX ended the quarter with a cash balance of $2.1 billion and plans to utilize this cash in alignment with our capital allocation framework. MPLX maintains a solid balance sheet. Looking forward, in March, MPLX has $1.5 billion of 1.75% senior notes maturing, which we intend to refinance. We expect leverage to fall over time as our acquisitions reach full run rate and our organic growth projects are placed into service. Now let me hand it back to Maryann for some concluding thoughts. Maryann Mannen: Thanks, Carl. Through disciplined capital deployment, execution, and optimization of our integrated value chains, we have achieved a three-year adjusted EBITDA CAGR of 6.7%. The strong performance enabled us to increase our quarterly distribution by 12.5% for a consecutive year in 2025. We expect this level of distribution growth for two more years. MPLX enters 2026 in a position of strength. Over the past year, we made deliberate investments and portfolio decisions that sharpened our focus and expanded our capabilities. We deployed capital into some of the growing regions in the country, divested non-core assets, and built a more resilient competitive platform. In the second half of this year, we anticipate seeing contributions from the second Titan sour gas treatment plant, Harmon Creek III, the Bengal pipeline expansion, the Bay Runner pipeline, and the Blackcomb Pipeline. We expect growth in 2026 to exceed 2025, driven by increased throughput on existing assets and new assets being placed into service. As these assets ramp to full capacity, we anticipate they will also support mid-single-digit EBITDA growth in 2027 as well. We remain confident these investments will enhance our cash flows and enable us to continue returning meaningful capital to our shareholders. Now let me turn the call over to Kristina. Kristina Kazarian: Thanks, Maryann. As we open the call for your questions and as a courtesy to all participants, we ask that you limit yourself to one question and a follow-up. If time permits, we will be prompt for additional questions. Operator, please open the line for questions. Operator: Thank you. We will now begin the question and answer session. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers. Our first question comes from John Mackay with Goldman Sachs. Your line is open. John Mackay: Hey, good morning, team. Thank you for the time. Maryann, I wanted to pull together a couple of points you mentioned. Can you talk a little bit more about your confidence in that mid-teens return target for the project backlog? Particularly in the context of maybe lower growth in 2025 versus the mid-single-digit overall target going forward. And maybe particularly anything you can share around contract protections? Etcetera. Thank you. Maryann Mannen: Yes. Good morning, John. Thank you. And certainly, when we think about 2026 and frankly, when we think about any capital investment that we put to work, we continue to use our lens of strict capital discipline and ensure that we are delivering mid-teens returns and that those projects are also supportive of our mid-single-digit growth. As I mentioned, from a period or two ago, as we look at the growth going forward, it is unlikely that we are going to be able to be completely linear. We are putting capital to work that has EBITDA contribution that's coming online in later years. And then we are also adding in our organic M&A opportunities projects that come online in the short term in order to be able to deliver that as well. Let me give you a couple of examples of that. You think about BANGL, the incremental ownership comes online in 2026. Incremental EBITDA mentioned, Secretariat I ramping up through 2026. That will add incremental EBITDA again this year. We have got Bay Runner, as I mentioned, in Blackcomb in service in the fourth quarter contributing to that also. Moving on to the Marcellus, you have got Harmon Creek III also that will be online in the back half of the year. These are some significant projects, again, through that lens, mid-teens returns to support mid-single digits. So that gives us the confidence as we say that one year on year 25% to '26 we should see growth above what we saw in 2024 and 2025. We hope that you see that the 2026 capital outlook really signals compelling investment opportunities for us. Think the backdrop, particularly when you look at demand pool NGL nat gas is extremely supportive. And then frankly, when we look at 2026, exit rate for our sour gas project, we remain confident in our ability to deliver that EBITDA into 2027. And as I mentioned, Gulf Coast project on track for 2028 and beyond. John Mackay: I appreciate all that detail. Thank you. Maybe drilling in a bit more, it sounds like you have had some early success on commercializing some of the Northwind kind of synergy projects with Secretariat II. You just frame up for us kind of where that process stands? Is there more you can do on capturing some of those volumes coming off that system? Thanks. Maryann Mannen: Yes. Certainly, John. Thank you for the question. As you know, when we talk about the acquisition of Northwinders, we call it our Delaware Basin sour gas facility, we felt like it was a critical platform for future growth, particularly when you look at what we consider to be some of the best rock in the Permian and our ability to help producers with treating and processing that. We mentioned at that time that we thought when you looked at the processing contracts now, those had a much shorter duration versus the long-term average thirteen year on the treating side. But on the processing side, we said this could potentially be accelerating our growth as we were able to bring new assets online. To address those contract roll off on the processing side. I would also tell you that Secretariat II will also help us support our legacy volumes as well. So not only is it supportive of growth beyond the Northwinds platform, but also for our legacy growth. I am going to ask Greg to give you incremental color on the legacy side. Gregory Floerke: John, yes, we are really excited about we continue to be very excited about the sour gas system that we acquired. Is if we had I mentioned before that it wraps around our existing legacy system. Planned and build it. Part of the Titan II expansion, which we are on track on time and budget to have complete late in the year, allows us to meet our expectations for run rate in 2027 is as Maryann mentioned. But it also provides an opportunity to connect this system into our legacy system. So along with the Titan II project and the compression expansions and the pipelines that we are building to support that uptick in volume. We are also building connecting lines, one on the north end, one from the Titan facility over actually to Secretariat and to our Tornado complex and then a middle line. So we will be able to start offloading when those lines are complete and as Titan capacity ramps up. But we are also we see very robust growth continuing in the legacy portion of our system, some of it on the edge of the sour, some in the sweet, but still really robust activity from the drillers. So we upsized Secretariat II, it will be our first 300 million cubic feet per day plant and partly to account for the additional growth we have from both systems. John Mackay: Thanks for that. Appreciate it. Operator: Thank you. Our next question comes from Manav Gupta with UBS. Your line is open. Manav Gupta: Maryann, I just wanted to ask you, there is a little bit of bearish sentiment on LPG exports generally and fears of overcapacity. But, you know, in the last few days, you have had this India US deal and India is looking to buy a lot more energy from the US. And I think LPG exports could be a new growth opportunity in that direction. So if you could if you had time and if you could talk a little bit about the new opportunities that open for LPG exports, with this India US trade deal. Maryann Mannen: Yeah. Good morning, Manav, and thank you, you are absolutely right. You know, one of the reasons why we can to look at this opportunity, putting capital to work. We see strong demand for NGL and nat gas and there is a pool there, obviously, from the growth anticipated from LNG. And as you mentioned, I think the announcement or the conversations yesterday really are further supportive of the positions that we have and have had really for the last two last several quarters as we think about some of the capital that we have put to work. We think market dynamics for global LPG demand remain very strong. There is no doubt about that. And again, as I mentioned, I think the announcement or the conversation yesterday hard to predict, right? Early days there, but it is certainly, I think, supportive. And then when we look at our assets, we are pretty convinced about their capabilities. When they come online, 2028-2029. We believe will be full as we have shared with you before. We think we have got a good position when we look at export given our dock, given the partnership that we have and given the potential there for the long term. So we feel very good about that obviously, as we continue to book capital to work in that space. Manav Gupta: Perfect. My quick follow-up here is, look, when we look at organic growth capital, obviously, think you were at $2.4 billion for '26. You were close to $2 billion last year, but then you did deploy almost $3.03 and a half billion of growth capital through M&A. And I am trying to understand, would if there are right opportunities present themselves, would you be open to still bolt on M&A 2026? And the question I am trying to ask is, at the start of the call, you said dividend distribution growth can be 12% for the next couple of years. I am trying to understand with some good M&A, can that two years become three years or more, if you could help us understand that? Maryann Mannen: Yes, certainly Manav and thank you for the question. As you know, in similar as we set out this time last year, we put forth our capital plan and that capital plan is very specific to the organic projects that we have ongoing. You would think about our Gulf Coast frac and terminal, the capital on the Delaware Basin sour gas, we have got the Marcellus expansion that I mentioned, Secretariat. But we continue to look for M&A opportunities. We look through them through the lens of strict capital discipline. We ensure that they meet mid-teens returns and also that they are strategically aligned with one, our nat gas and NGL wellhead to water strategy they fit that strategy. So when I talk about the 12.5% being for the next two years, that meets all of the financial criteria that we have shared. That does not mean we do not have an intention of increasing the distribution beyond that. And as you say, it will depend on what that growth is. So as we find those M&A opportunities, we have a balance sheet that is quite strong we believe. And we would absolutely consider incremental opportunities. And frankly, as you have seen us do in the past, some that are easiest for us and fairly immediately accretive would be our JVs. When we look at take BANGL as an example, there are opportunities that would exist for us to continue to build out our ownership with the JVs that we currently have as a part of our portfolio. Hope that helps. Manav Gupta: Thank you so much. Maryann Mannen: You are welcome. Operator: Our next question comes from Theresa Chen with Barclays. Your line is open. Theresa Chen: Hi, Maryann. Maybe taking the opposite side of the M&A question. Looking at your portfolio optimization which has been fairly consistent through the years, would you say you are at in terms of pruning assets that are less strategic across your portfolio to free up capital to pursue additional organic and tuck-in M&A growth? Maryann Mannen: Yes. Good morning, Theresa. Thanks for the question. As you know, we continue to evaluate all of our assets. We say we want to ensure that we have the portfolio for today and the portfolio for the future. All of those basins today are cash flow positive. But we will always look through short term and long term and see whether or not there are owners of those assets similar as we think about what we just recently did with the Rockies. That have a different view on that growth profile. So that we can continue to invest in those opportunities in the Marcellus and in the Permian where we believe the most opportunity exists for us. So we will continue to do that, Theresa. Absolutely. Theresa Chen: Understood. And given recent consolidation by some of the upstream community, how do these trends affect your growth outlook for your supply push assets and recontracting strategy over time? Maryann Mannen: So I would tell you as we look at some of the recent announcements, certainly those customers have been and will continue to be an important part of our portfolio. Specifically when we look at recontracting. If you think about the one that was just announced yesterday. And again, it is an early read, but when we look through that in terms of the way that the transaction has been announced and it is structured, we do not see any immediate risk with contract renegotiation, etcetera, from a legal perspective. Absolutely no. Theresa Chen: Thank you. Operator: Welcome, Theresa. Thank you. Our next question comes from Keith Stanley with Wolfe Research. Your line is open. Keith Stanley: Sorry to beat a dead horse on the growth rate, but wanted to clarify on 2026. You said it is faster growth than 2025. But would you say it is an above-average growth year in 2026 or just faster than '25? And relatedly, is that 2026 growth expectation inclusive of the headwind from the Rockies asset sale? Maryann Mannen: So thank you for the question, Keith. Yes, it is inclusive of the headwind coming from the Rocky sale, absolutely. And my comment 24% to 25% growth is stronger than 24% to 25%. But I am not suggesting that it is completely outsized there. It is larger growth. Remember, we are starting from a $7 billion position. So growing that mid-single-digit, you know, is the range of $450 to $500 million depending on where you are in your mid-single-digit range. So it is 24 excuse me. 25 to 26 stronger than 24 to 25. I hope that helps, Keith. Keith Stanley: It does. Second question, I wanted to ask on the FERC index change for the next five-year period. So it is now a PPI minus 0.6%, I think. Should we think of that as a headwind for your outlook for the liquids business? Or would you say that new inflation adjustment level was expected and already baked into your plans and outlook? Shawn Lyon: Keith, this is Shawn. Thanks for the question. Although the FERC adder is negative, we did anticipate this and this is in our plan. So we do not expect it to impact our plan to grow our EBITDA mid-single digits. Let me show context also. If you just look at the COPAL segment that we are about 33% of the COPAL segment is tied to the FERC. And across all of MPLX, it is about 20%. So it gives you some context of how much that announcement by FERC and the effect with MPLX. Operator: Thank you. Our next question comes from Elvira Scotto with RBC Capital Markets. Your line is open. Elvira Scotto: Hey, good morning everyone. I was wondering if you can provide some additional commentary around the new growth projects in the Marcellus you are hearing from producer customers? And then how do you expect Harmon Creek III to ramp? Maryann Mannen: Yes, good morning. Thank you. So when we talk about Marcellus, first of all, I mentioned we have got capital this year and that project will come on come in service in a few years, right? It is not an immediate contribution in 2026. Mid-teens returns clearly producer customers if you think about the way that we stay connected to our producer customers and just in time, a pretty important project for the long term. It is a compressor station, 30 miles of pipeline, well connections, debottlenecking, and so important as we think about providing that egress for our producer customers. I am going to give the pass it to Greg and have Greg tell you a little bit more about that project. Gregory Floerke: We are really excited about the Harmon Creek III Project and also we are building a second full-size deethanizer as part of that project and some compression and pipe to help feed that. It is in our gathering system in Washington County, PA. If you look at the entire Marcellus, we were at 97% utilization this last quarter. So we are and that is a high utilization number, but you put it in context, sets close to 7 billion cubic feet a day that is going through that system. So it is our largest system. Nearly full. So it is a great story. When we need to expand and a producer wants to expand, right now, it typically means a new plant. Or at least major piping and compression to help try to fill whatever existing capacity is there. So we expect Harmon Creek III, which is tied into that system and has great residue takeaway and GL takeaway capability and the demand that is there. For that to take up that additional capacity will be will be ramped up and filled on our normal timeframe. Elvira Scotto: Okay, thanks. And then just wanted to switch over to capital allocation. Can you maybe talk a little bit about any comments around leverage and distribution coverage, kind of expectations in '26 and '27? And then just as you have become a much bigger company with a much bigger EBITDA base, and you have a lot of kind of organic growth opportunity. How should we think about sort of CapEx moving forward? Carl Hagedorn: Thank you. Appreciate that question. Let me start with the capital allocation. Excuse me. What I would tell you is when we think about capital allocation, our philosophy remains unchanged. So you think about the way we have lined that out historically, it has been first and foremost maintenance capital, then our distribution growth, then our growth capital, then our unit buybacks. So that last one always being the one that we would toggle. As we look forward to 2026 and 2027, even as we talked about, Maryann mentioned, 12.5% distributions over the couple of years, we model that out. We think about coverage. We do not see ourselves going on an annual basis below that comfort level of 1.3 times. We are obviously also very much watching our leverage and managing to a leverage number that I think we have historically said we are comfortable at that four point zero times. And as we look forward with our capital plans, as we sit today, we would not go above that four point times. Elvira Scotto: Great. And then just on the kind of CapEx how should we think about CapEx kind of going forward, the organic? Carl Hagedorn: Yes. It is a great question. And as we think about CapEx, we think about our growth, what we really have to as you said, the EBITDA number keeps getting larger. So as that number grows, the number of organic projects and or bolt-on M&A has to grow with that EBITDA number. If you continue to target a mid-teens return, right, we can do that math. We know that over time that number has to grow. So we are actively looking at that on a five-year really basis and beyond. And we are modeling that EBITDA in as we would see these projects come online. Elvira Scotto: Okay. Thank you. Operator: You are welcome. Thank you. At this time, I am showing no further questions. Maryann Mannen: All right. Thank you for your interest in MPLX today. Should you have more questions, or would you like clarifications on topics discussed this morning, please contact us. Our team will be available to take your calls. Thank you for joining us today. Operator: Thank you for your participation. Participants, you may disconnect at this time.
Operator: At this time, I would like to welcome everyone to this Embla Medical Q4 and Annual Report for 2025 Conference Call. Today's call is being recorded. [Operator Instructions] I'll now turn the call over to your speakers. You may now begin. Sveinn Sölvason: Thank you very much, operator. Good morning, and welcome to the Embla Medical conference call where we will review the fourth quarter and full year results for 2025. I'm Sveinn Solvason, President and CEO of Embla Medical. Today, also joining me here is our Chief Financial Officer, Arna Sveinsdottir; and Embla Medical's Head of Investor Relations, Klaus Sindahl. The presentation should take approximately 20 minutes, after which there will be an opportunity to ask questions during a Q&A session. If you can please go to the next slide. 2025 was a year of meaningful progress for Embla Medical with several milestones as we continue to take steps on our journey to build a company that is focused on delivering products and services for individuals with a chronic as well as acute mobility need. The need for our solutions remains as strong as ever. And once again, our team delivered with focus and purpose. I want to take the opportunity to recap some of the key highlights on this slide. In September, we completed the majority investment in Streifeneder. The investment marks a key milestone for Embla Medical positioning us as a full range provider in the prosthetics market while strengthening our presence in key markets, especially private pay markets with less developed health care systems. In addition, Streifeneder will help us expand our reach and ultimately enable us to reach more patients that need our products. Innovation remains at the heart of our progress. In 2025, we introduced new impactful solutions, including 2 new bionic knees, Navii and Icon as well as the Odyssey iQ bionic support. We're also pleased to see that Fior & Gentz was awarded its first reimbursement code in the United States last summer for their microprocessor-controlled knee joint. Another meaningful milestone I also wanted to highlight is the opening of our first clinic in Ukraine. Establishing a presence in Ukraine during a very difficult time underscores our commitment to ensuring access to high-quality mobility care. In conjunction with the opening of our Kyiv clinic, we also announced a landmark partnership with the government of Iceland to launch the Iceland Support Mobility in Ukraine initiative. This initiative is a 3-year program designed to deliver high-quality prosthetic care and rehabilitation to Ukrainian entities. Lastly, I'm also proud that Embla Medical earned a place among the world's top 500 companies pairing strong growth with environmental responsibility. This was the second consecutive year Embla Medical was highlighted as one of the world's best companies in sustainable growth. If you please turn to the next slide for an overview of the key highlights for the fourth quarter and full year. In '25, we delivered solid organic sales growth with increasing underlying profitability as well as strong cash flow. For the full year, organic sales growth was 6%, driven by strong performance in prosthetics and neuro orthotics. Reported growth was 9% and growth in local currency was 7% for 2025, including contribution from the majority investment in Streifeneder, which was completed, as earlier mentioned, in September. Sales in the fourth quarter amounted to $257 million, representing 7% organic growth. Our reported growth was 14% for the quarter, including 5 percentage points contribution from FX and 3 points from M&A. Growth in the fourth quarter was solid, driven again by the Prosthetics and Neuro Orthotics segment as well as also now Patient Care, where sales picked up in quarter 4 with a strong finish to the year. The EBITDA margin came in at 20% for the full year, on par with '24. For the fourth quarter, the EBITDA margin was 19% compared to 21% in quarter 4 of '24, and Arna will elaborate on that later. We delivered strong cash flow in the quarter and full year as well, benefiting from solid operating results and lower CapEx compared to the same period in '24. During the fourth quarter, we continued the rollout of our ForMotion brand at several patient care facilities in the U.S. and Australia and we expect our global rebranding to complete in the first quarter this year. In Patient Care, we have implemented several initiatives during last year to enhance long-term growth and profitability in our Patient Care business, and I'll add a little bit more color on that also later. I also want to highlight progress in our R&D in the fourth quarter with 2 important product launches during the quarter, Pro-Flex LP Junior by Ossur is a new prosthetic ankle and foot designed for active young users, delivering enhanced durability and waterproof performance. In our power portfolio, we have updates for our Power Knee with functional improvements, enhancing both mobility and adoption of power solutions. Lastly, we have issued new guidance for 2026 of 5% to 8% organic sales growth and an EBITDA margin of 20% to 22%. And in line with our capital structure and capital allocation policy, a new share buyback program was initiated here in the beginning of January. Please turn to the next slide. In both EMEA and APAC regions, we had strong sales growth in the fourth quarter. Sales were very strong in the EMEA region with 12% growth, while APAC delivered 9%. Americas ended, however, flat following a good third quarter. And we'll cover the dynamics in each of our reporting segments on the following slide. If you turn to the next slide, please. Starting with Prosthetics and Neuro Orthotics, we delivered 9% organic sales growth for the quarter and 10% for the full year. In EMEA, we continued to see strong momentum in the quarter with good sales growth across all major markets driven by, yes, solid contribution from recently launched innovations. In addition, we see very encouraging and strong organic contribution in the quarter from the newly acquired Streifeneder. Growth in the Americas was moderate after a strong quarter 3 and somewhat below our expectations. The weaker performance in the fourth quarter is partly explained by a strong comparison with the same period in '24. Meanwhile, we remain encouraged with the progress as we saw strong sales growth, especially in our College Park portfolio driven by the Icon knee and the new Odyssey iQ. Lastly, solid growth in APAC, driven by Australia, while partly offset by more moderate growth in the rest of Asia. In Neuro Orthotics, the business continues to track in line with expectations following the expansion into new international markets in the last 12 to 18 months. Sales growth in the fourth quarter was, yes, very solid, driven by continued growth momentum in our existing German business and supported by good uptake in new markets such as Australia and France. If you turn to the next slide, please, on Bracing. Sales in Bracing and Supports were soft in the fourth quarter and for the full year with some regional variances. Sales performance in '25 continues to be impacted by shift in market dynamics and price sensitivity causing partial loss of business in addition to an overall increasing and a very competitive environment. Embla Medical has a very good position in the key bracing markets in both the U.S. and Europe, and we expect to grow in line with market here in '26, supported by focused initiatives as well as new product launches. If we go to the next slide, please. Sales in Patient Care picked up in quarter 4 with a strong finish to the year. In EMEA, we saw strong growth return across our key markets. Meanwhile, Americas ended down in the quarter due to partly a very strong comparable quarter in '24. Despite the declining sales in Americas, we see very encouraging signs and results of the work we're doing to get our Patient Care business back on track. Lastly, we saw a strong finish to the year in APAC, driven by very solid performance in Australia. As communicated in the third quarter of 2025, our Patient Care business has, over the last few quarters, experienced lower-than-expected growth, mainly in our biggest regions, both EMEA and Americas. The performance can partly be ascribed to some softness and timing or fluctuations in patient volumes, especially in the first quarters of the year, but also these internal change initiatives, including the brand change, systems integrations and other change initiatives that have had some disruption in -- or caused some disruption in our business temporarily. We have several initiatives that are being implemented in our Patient Care business with a heavy focus on performance management to strengthen the long-term growth and profitability of this important segment. It's our clear ambition to get the Patient Care business back on track and deliver in line with the structural growth we see elsewhere in the O&P industry. With this overview of our performance for the quarter and year, I would like to now hand it over to you, Arna, to go through the financials in more detail. Arna, please. Gudny Sveinsdottir: Yes. Thank you, Sveinn. If you can please turn to the next slide for an overview of our financials. In quarter 4, the gross profit margin was 62% compared to 63% in the comparable period 2024. The gross profit margin was positively impacted by strong sales in Prosthetics and Neuro Orthotics and efficiency gains in manufacturing, but offset by FX, tariffs and initiatives in Patient Care. For the full year, the gross profit margin was 62%, largely explained by the same items as for the quarter. OpEx grew organically 7% in the fourth quarter but excluding the initiatives in Patient Care, OpEx grew organic below sales growth, in line with continued focus on cost management on the SG&A side. Our EBITDA margin was 19% for the quarter compared to 21% in quarter 4 2024, while the margin was 20% in the full year and on par with 2024. While the EBITDA margin was positively impacted by strong sales growth and efficiency in manufacturing, it was negatively impacted by FX, tariffs and initiatives in Patient Care. The initiatives in Patient Care impacted both COGS and OpEx by approximately $2 million in the quarter and around $6 million in the full year. If you sum up the impact of the Patient Care initiatives, FX and tariffs, the total impact on EBITDA margin was around 3 percentage points in the quarter and 1.5 percentage points in the full year. I'm very pleased to see that we delivered strong net profit in the quarter, which grew 33% compared to the same period in '24. And our net profit for the full year grew 21% compared to '24. If you please turn to the next slide for the status on our cash flow and leverage. During the first quarter, CapEx was $8 million or 3% relative to sales. CapEx in 2025 returned to a normalized level around 3% to 4% following closure of facility expansion program carried out in '24 to support growth. Our free cash flow was strong during the quarter as we generated $42 million compared to $33 million for the same period last year. The strong cash flow benefited from solid operating results, positive effect from net working capital and normalized CapEx levels. For the full year '25, free cash flow amounted to $100 million or 11% of sales compared to $77 million or 9% of sales in 2024. On the balance sheet, our net interest-bearing debt to EBITDA corresponded to 2.4x at year-end and within the range of 2 to 3x. As we are within our target range, we continue with our share buyback program. And with this overview on our finances, I will hand over to Sveinn again for his closing remarks and comment around our guidance. Sveinn Sölvason: Thank you, Arna. If you please turn to the next slide. We delivered solid organic growth in 2025, in line with our guidance as well as our Growth27 financial ambition. This is a testament to our ability to execute on our targets and priorities despite an increasingly more uncertain geopolitical environment. For 2026, we are issuing new guidance. We expect organic sales growth to be in the range of 5% to 8%. In Prosthetics and Neuro Orthotics, we anticipate continued momentum across regions, supported by solid contributions from our Bionic portfolio and recently launched innovations in addition to upcoming launches in 2026. Some positive impact from the U.S. Medicare coverage expansion is also expected to contribute to sales supported by our existing portfolio of microprocessor controlled knee solutions. These solutions will, in the future, be complemented by a more dedicated K2 solution to better serve the less mobile users in the low active K2 patient population. In Neuro Orthotics, we expect to see contributions from the ongoing rollout of our Neuro Orthotics offering into new markets, leveraging our global commercial infrastructure and our promotion footprint. In Patient Care, we expect growth to gradually improve during '26 with the aim of eventually returning to consistent sales performance in line with the market. Growth in '26 is expected to be driven by volume growth and increased efficiency or productivity, supported by the initiatives implemented across our Patient Care business in the second half of 2025. Focus will be on enhancing our long-term growth profile and profitability of the business while benefiting from the structural growth in the OP industry that we serve in recent periods. Lastly, Bracing and Supports is expected to grow approximately in line with market growth. We expect solid growth in selected key regions supported by launches of new products, but also with continued competitive pressure in selected markets. For '26, our EBITDA margin is expected to be in the range of 20% to 22%. The EBITDA margin is expected to be positively impacted by solid sales performance, a favorable product mix from increased sales of our high-end solutions, continued efficiency gains in manufacturing and increasing profitability in Patient Care and also continued cost control in our SG&A structure. At current foreign exchange rates, keeping all other factors constant, the EBITDA margin is expected to be negatively impacted by about 30 basis points in '26 when compared to '25. With this overview, our presentation is now concluded, and we would like to open the call for questions. Operator, please move to the next slide and the Q&A can begin. Operator: [Operator Instructions] And our first question will be from Tobias Nissen from Danske Bank. Tobias Nissen: I have a few. Let's just start out with EMEA, very strong here with 12% organic growth for the quarter and quite the acceleration from the last few quarters. So can you talk more to what's actually the driver here for this growth acceleration and any standout countries or products? And can you say if there's any, you can say, one-offs that contribute to this solid growth here? That's my first question. Sveinn Sölvason: Tobias, thanks for your question. Yes, we've had consistent solid performance in our EMEA region across -- here in the quarter, across all business areas with the exception of bracing, which was flattish. This is a result of, yes, solid contribution, I would say, across all our major markets in the prosthetics and neuro side, where we have essentially our base business, our mechanical business across our prosthetic portfolio, both on the premium side as well as the, as you could say, the more value side with Streifeneder doing well. And we have also good development on our high-end bionic side, which drives that extra benefit on the mix side. Then there is -- we have been building our presence in -- also in Ukraine and selling more products there. If you remember, we stopped selling products to Russia a couple of years ago and Ukraine is starting to become a meaningful market for us. And then finally, on the Patient Care side, this was a quarter where we had good progress across all our European markets and are starting to see some impact of the initiatives we are doing to build a global patient care franchise. So I think that these are the highlights, Tobias. Tobias Nissen: Okay. That makes sense. Is the Ukraine you also opened the clinic you mentioned this is perhaps a little bit early, but how do you see momentum here? Is there any one-offs related to Ukraine in the quarter? Sveinn Sölvason: No one-offs, no as such. And this is not contributing yet. It's only cost at the moment as such, but we are starting to build the infrastructure to be able to serve what is an important market for us. We want to make sure we are there to deliver to a need for what we do well. But this is not -- there are no one-offs -- meaningful one-offs just maybe on the cost side, but nothing material. But I would say this is more something that will have meaningful impact, we believe, medium, long term. Tobias Nissen: That makes sense. And then just on Americas, it was a bit soft here with 0% organic growth. I know you mentioned some tough comps. But with Europe benefiting from these new innovations, why do we not see this in the numbers for Americas? I know Patient Care is a bit -- also a bit soft. But what is the market growth actually in Americas? And actually what is required to get Americas back to growing again? Sveinn Sölvason: The market in the Americas is healthy. And if we look at our reported growth in the Americas, that's a net result of our bracing business, Patient Care business and our prosthetics and neuro business. Well, starting with the bracing business, the environment in bracing in the U.S. has been tough, very competitive and some price erosion in some key categories. So we see a decline here in the fourth quarter. But going into '26, we have some -- especially some new products that will help us fight the erosion we see in some selected pockets. On the Patient Care side, that has been the main reason for our softness in the U.S. And there, we've talked about our initiative to build one business on the back of a portfolio of acquisitions, introducing a new brand, introducing new systems and processes to make sure we benefit from being a large integrated company in patient care, and that has caused some disruption. On the product side in Prosthetics and Neuro Orthotics, we are generating actually decent growth. However, a little bit below our expectation, but we're working hard on positioning us well here for 2026. So these are -- that's a little bit the big picture here. So the main kind of reason for the sluggish quarter 4 is the Patient Care side of the business. Tobias Nissen: Okay. That makes sense. You mentioned you are finished or expect to be finished with the promotion, you can say, rebranding in Q1 in Americas. Do we have to get on the other side of this before you see Patient Care starting to return to market growth? Or it is possible to get there before this? Sveinn Sölvason: What we are communicating is that we -- during the year, we will get back to at least market growth in Patient Care. Exact timing, I'm not going to comment on that, but we are gradually expect to be, let's say, in the mid-single-digit growth area. And it's -- maybe I'll use the opportunity to kind of refresh the context around Patient Care. I mean last 18 months have been a period where we have been taking the next step in our maturity journey as a patient care business or in our Patient Care business moving from a, you could say, a portfolio of acquired businesses with some limited integration into really building a global business. That includes the brand systems and processes such that we can gain benefit from being a real global player in patient care, and that has caused some disruption in our business, all these change initiatives. But as we get that behind us, we will grow in line -- at least in line with the market, and we're working hard on achieving that milestone. Tobias Nissen: Just a final one for me on tariffs. What was the impact here in Q4? And what are your assumptions going into '26 here in terms of headwind? Sveinn Sölvason: So I mean, the tariff impact here in the quarter was around $2 million and around sort of $5 million to $6 million in full year '25. And remember, sort of we didn't have a lot of tariffs in the beginning of '25. So the run -- so let's say, the full year impact for '26, keeping everything constant will be a little bit higher. Operator: The next question will be from the line of Sam England from Berenberg. Samuel England: Just a couple from me. So on the margin side, amongst other things, you had some impact from the Streifeneder acquisition in Q4. Can you comment on how the integration there is progressing and how the acquisition will impact margins as you head into 2026? And then the second one, on the U.S. rollout of NEURO HiTRONIC, can you provide some comments on how that's progressing after you got the new reimbursement code last quarter? And then more broadly, what your expectations are for the Neuro Orthotics business as we head into 2026? Sveinn Sölvason: Yes. Thanks, Sam. I appreciate your questions. On the Streifeneder piece, yes, it's slightly dilutive for our margins this business. But as we progress with the integration, we expect the dilution to be marginal in '26, only 10 plus -- 10 to 20 basis points in '26-ish. But the integration is going well. We are pleased with this investment, good performance here in quarter 4, and we're sort of continuing to advance and mature our approach to how we position the overall business to be a supplier across the whole spectrum, essentially both premium and value when it comes to prosthetic components. With regard to Neuro Orthotics, great milestone in '26 that we are eligible for the code, Medicare code. And we've done a lot of groundwork here in the latter half of '25 to prepare the business for growth here in '26. So we -- this will be part of our growth story here in '26. We have not provided any specific communication with regards to the impact, but we will start to see some traction here in the first half of 2026. Operator: The next question will be from Dominic Rose from Intron Health. Dominic Rose: I've got 2. My first question is about the guidance. The top end of your guidance is slightly above the trend growth in the market. What would you have to see to hit that top end? And just making sure whether there's any M&A impact included within that? Question two, when could the Ukrainian market become a material growth driver? And can you help to contextualize the potential size of that market? Sveinn Sölvason: Dominic, thanks for your questions. Yes, we've guided 5% to 8% organic growth, which is largely in line with kind of the our overall kind of growth ambition for the 5-year strategy we're executing on now. So what -- as always, when we start a new year, we built our guidance based on a set of assumptions, how we read the current trends in the business and what our plans are to drive sales growth. And what needs to happen for us to deliver in the upper end, we need another solid year in our Prosthetics and Neuro Orthotics business, similar to what we've done this year. We need to get Patient Care business delivering at least in line with market. And the earlier we get there, the better chance we have of delivering in the upper end of the range. And then we need to deliver in market in line with market growth in bracing. And this will position us in the upper end of the range. And sort of then -- yes, I hope that kind of gives a little bit of color. I mean where we do have the strongest structural growth drivers, that is in our neuro -- or our prosthetics and neuro business, where ultimately, it's about defending and growing our share in our mechanical range and driving the mix or driving more adoption of these high-end solutions. And that is what you need to follow the -- where you need to follow the progress on our ability to do that. That will determine largely where we'll end up in the range. Then on Ukraine, I'll be cautious here in terms of communicating. I think everybody knows the facts around the size of the amputee population in Ukraine. How the market will develop will depend on a lot of factors, how the development will be in the country itself and when the war will stop and how a system will develop around supporting amputees. These are all factors that will sort of that will ultimately impact how the market will develop. But I think just looking at the need there, it's a big need, and this will be a -- there's a lot of work for our industry to do as well as we can to support the amputee population with good solutions. But I'm cautious to provide any estimates to how the market will develop in terms of size. Operator: The next question will be from Jesper Ingildsen from Carnegie. Jesper Ingildsen: A couple of questions from my side. Just going back to the strong EMEA growth that you saw here in Q4, the 12% organic growth. As I understand, that's also helped by the way you treat acquisitions. Could you just maybe highlight how much the Streifeneder acquisition has contributed towards that growth? And then maybe just broadly in terms of '26, is anything to call out here in terms of basing, both in terms of top line growth, but also from a margin perspective. So I mean, obviously, you're calling out gradual improvement in Patient Care, but also bracing and support getting back on track to market growth. Like what is the timing there? And also from a cost perspective, anything to call out that could impact the margin? Sveinn Sölvason: Yes. Thanks, Jesper. I mean on the organic growth, yes, the way we include acquisitions in organic growth is basically we will just compare to the previous year, what Streifeneder did in quarter 4 last year and because that is essentially the -- ultimately the organic growth in the business in the portfolio that we own for the quarter. So this had a -- yes, I would say, a slight positive impact on the EMEA growth, but it's not a deciding factor. What the main theme there is, again, just solid performance across our core portfolio in Prosthetics and Neuro Orthotics as well as just our Patient Care business delivering a solid quarter. On your question with regards to bracing, yes, we -- our goal is to deliver bracing growth in line with market here -- here in the year. And like -- I mean, the macro picture in bracing is unchanged. There is pricing pressure, especially in the U.S. market, partly reimbursement related. But it's important to keep in mind that still these products that -- which account for the vast majority of our portfolio in bracing are fundamental products and standard of care in each and every major health care system. What will be different for us here in '26 versus '25 is that we have some important product launches in big categories that we expect to contribute and help us fight, let's say, the erosion we see still in some selected pockets. So that is -- that is where we are in bracing. It's a competitive marketplace, but our position is strong in the key markets we operate in bracing, and it's our goal to deliver at least in line with market. Operator: [Operator Instructions] The next question will be from Martin Brenoe from -- he just jumped up. So our next question will be from Yiwei Zhou from SEB. Yiwei Zhou: It's Yiwei from SEB. And also a couple of questions from my side. Firstly, maybe a question to Arna. You mentioned here the restructuring initiatives for Patient Care. And what -- when do you expect this to be complete during 2026? Gudny Sveinsdottir: So restructuring initiatives in Patient Care have more or less been done. We are now starting to focus on the performance management and the initiatives we are implementing and make them -- make sure that we deliver in 2026. As we said, it will gradually impact the year, but we do not expect any material initiatives in 2026 affecting our margins from Patient Care. Yiwei Zhou: Okay. Very clear. And then also a question on the EBITDA margin guidance. The range is a bit wider than usual for '26. And apart from the continued external headwinds, is there any internal variables you're seeing sort of uncertainties? Sveinn Sölvason: No. Well, I think it's fair to say that external environment is part of the overall picture, especially the tariff. Sorry, could you please mute your lines. Yiwei Zhou: Yes. Okay. Sveinn Sölvason: Yes, I think that is -- I think it's mainly because of just the external environment that we're operating in that we go in with a little bit broader range. I think it's important to keep in mind the big picture in margin. I mean we guided in the beginning of '25, we guided for 20% to 21% EBITDA margin. And kind of the main -- then always things change as we get into the year. Some things are better than what we anticipated, some things are not as good as we anticipated. Some -- I mean, we did anticipate that we would take a lot of costs through our P&L because of the work we're doing in Patient Care. That did not surprise us, even though it's maybe been a little bit higher than what we anticipated. But what we did not anticipate in the beginning of the year where there's the FX impact and also the tariffs. These are meaningful topics. And I think it's important to also understand that despite these, you could say, the tariffs that I mentioned earlier, which is probably $5 million to $6 million on a full year basis, the FX impact and the cost we pushed through in relation to the brand and system changes in patient care, we're growing or increasing our margins year-over-year. And I think that is a key message. And that also goes back to, again, our overall hypothesis in terms of what our financial ambitions are within that Growth '27 framework is to grow our top line faster than we did pre-COVID. And we've delivered consistently on that here in the first 3 years of this 5-year strategy period as well as also delivering on the margin piece. So yes, we're going into 2026 with a little bit broader range. And you could say perhaps the volatility on the tariff side and on the FX side is a big part of that going in a little bit broader. But our intention still remains the same to continue to grow our margin. Yiwei Zhou: Okay. But I just want to understand what needs to happen to get to the 22% EBITDA margin. I mean there's no sign that the FX headwind will be reversed and then the tariff is still there. Could you maybe comment also. Sveinn Sölvason: Yes. That will ultimately depends on our ability to grow the business and our ability to move forward, specifically our Patient Care plans to benefit from running a global platform around how we deliver mobility solutions, how we source the materials we use in our fabrication processes and how we're able to create an environment that is better for our clinical workforce that is every day doing an incredible job in seeing and serving patients. So all of the our efforts in Patient Care are essentially aimed at enabling more productivity such that we're able to see more patients and deliver more solutions. So this is the -- probably the biggest single topic with regards to our margin story this year, our ability to make progress on our Patient Care plans. Yiwei Zhou: Great. Very clear. And then the last question, maybe challenge a bit on the long-term growth target. I mean, initially, you provided was 5% to 7% organic growth at the latest Capital Market Day. And you recently sort of indicate you see the upside 5% to 8%, which is also what you are guiding for '26. I mean looking back '24 and '25, both you delivered only 6%, close to lower end of this range. I mean what -- I mean what make you confident to accelerate the growth in the coming years? I just want to get a feeling, I mean, how realistic is this 8% at the high end of the guidance range? Sveinn Sölvason: Yes. That's a fair question, Yiwei. And if you look at the -- going back to this Growth '27 period that we're now in, we delivered 9% in '23, which was though partly impacted by an inflationary environment that is different to what we see now, of course, 6% in '24 and then now again 6% in '25. And I think ultimately, our organic growth will be a result of our performance in -- or the weighted average of the growth in the 3 segments. What we've delivered here, especially in our legacy product business, Prosthetics and Neuro Orthotics is that we've delivered a very clear step-up in growth compared to historic. And that is again driven by just solid performance in our breadth and across the mechanical business and good execution on the Bionics side that drives that mix growth. Regarding our ability to deliver in the upper end of this 5% to 8% range, again, it will require still solid execution in Prosthetics and Neuro Orthotics and our ability to deliver more in line with the market on the patient care side. These are the biggest topics. Yes, bracing will have to be there as well, but that is a smaller part of our portfolio, around 14% of our overall sales, but still also to push into the upper end of the range, we need to do better than what we did in '25 in bracing. Operator: Our next question will be from the line of Martin Brenoe from Nordea. Martin Brenoe: Just have 3 quite simple questions. First of all, you mentioned Australia had quite decent growth, strong growth there. Just wondering whether there is any special ordering or any phasing we should be aware of? And to broaden that a little bit, is there any phasing we should be aware of when we are doing our model for Q1 in terms of any growth that could have happened in Q1 that was pulled a bit forward to Q4 2025? That's the first question. Sveinn Sölvason: Yes, Martin, thanks for your question. No, not as such. I mean we just had a we have a high-quality business in a favorable market in Australia, and we did exceptionally well across both our product and Patient Care business here in '25, and we are also in a position to have a good year in '26 in Australia. So no one-offs or anything like that here in the quarter. Martin Brenoe: That sounds very promising. And then my second question is on Fior & Gentz. Maybe just a quick status on -- if you look at that compared to your overall prosthetics business, how much does that account for? And how much in terms of the group growth do you expect it to contribute with? If you can provide just some color on Fior & Gentz contribution would be very helpful. Sveinn Sölvason: Martin, what I'll say there is I'll just point back to the announcement we did when we acquired the business in terms of its relative size. It is at that point in time, the business was roughly yes, $25-ish million and growing and the historical growth was around 14% organic growth. And what we've communicated since then is that we continue to deliver growth around that range. Now when it comes to contribution to overall growth, we -- we are, for example, starting from a low base in the U.S. And that will -- as we are able to gain some traction on especially the new reimbursement code for the knee brace, the Bionic knee brace that can and will impact our growth. So I hope this gives you a little bit of color. We don't report specifically on Fior & Gentz, but it's by all means delivering in line with our plans and also as we roll out to new markets and leverage our commercial infrastructure in other regions where there is good reimbursement for these types of solutions. Martin Brenoe: That's very clear. Sveinn, just a final question for me, and then I'll jump back in the line. It says in the report that you have in the future will launch a dedicated K2 MPK solution. Just wondering if you can specify in the future a little bit more to an analyst like me. Sveinn Sölvason: Thanks, Martin. I think there's no secret that we are working hard on complementing our strong Bionic grades with a product that is, you could say, specifically designed for low-active amputees. We do have a strong range. We have obviously the Navii, the Rheo and also the Icon from College Park. So we have a strong range that fits under the new reimbursement scheme also in the United States, and we believe that we are capturing our fair share of the uptake in the U.S. But we are working hard on a new low-active knee. It will not come to the market this year. But we will -- as we get closer, we will provide more guidance on time line. Operator: [Operator Instructions] As there appears to be no more questions in the queue, I'll hand it back to the speakers for any closing remarks. Sveinn Sölvason: Thank you very much, operator. Thank you, everyone, for dialing in today and listening and participating in our conference call. I encourage you to reach out to our Investor Relations team if you have any further questions. And with that, I'll close the call and wish you all a great day. Thank you very much.
Operator: Welcome to the presentation of Sartorius and Sartorius Stedim Biotech on the Preliminary Results 2025. Please note that the call is being recorded and streamed on Sartorius' website. Your participation in this implies your consent with this. A replay will be available shortly after the call. I would now like to turn the conference over to Petra Müller, Head of Investor Relations of Sartorius. Petra Muller: Thank you, operator. Hello, and a warm welcome from my side. I'm joined today by our CEO, Michael Grosse; by Florian Funck, our CFO; by René Fáber, Head of our Bioprocessing Division and CEO of Sartorius Stedim Biotech; and by Alexandra Gatzemeyer, Head of our Lab Products & Services division. As always, we will start with prepared remarks followed by the Q&A session. As the call is scheduled to 1 hour, please limit your question to 1 so that as many participants as possible can take part. Please note that management's comments during this call will include forward-looking statements that involve risks and uncertainties. For a discussion of risk factors, I encourage you to review the safe harbor statement contained in today's press release and presentation. With that, I'm pleased to hand over to Michael Grosse, CEO of Sartorius. Michael, please go ahead. Michael Grosse: Thank you very much, Petra, and a warm welcome also from my side, and thank you all for joining us today for our preliminary full year 2025 results. Before we begin, I would like to sincerely thank all of our colleagues across Sartorius for their commitment and dedication over the past year. Their passion, professionalism and strong focus on execution are clearly reflected in our results we are presenting today. I would also like to personally thank everyone who has made it such a smooth and rewarding experience for me to step into my role as a CEO, and particular thanks as well to my colleagues here, Alexandra, René and Florian from the executive team. It has been really a great journey up to now, fantastic work on the strategy and great things to come. And I don't want to miss out as well on saying thank you to the team here from Investor Relations, Communications and Finance because I think the workload over the last couple of weeks and days have been tremendous in order to get us all prepared and get our reporting in place. Thank you all for that. Now let me briefly summarize key messages that we would like to share with you today. First of all, 2025 was characterized by return to normal demand behavior for consumables and continued cautious investment activities by our core customers. Combined with an active operational management in a still challenging environment, we delivered improved operational and financial performance. Okay. All right, supported by the improvement -- improving demand trends, mainly on the consumable side and the operating leverage inherent in our model, Sartorius achieved considerable profitable growth. For the full year, we delivered results slightly ahead of our upgraded full year 2025 sales guidance. Profitability landed in the upper half of our initial guidance from April and exceeded our October EBITDA target, with a margin of 29.7%. This performance reflects growing volumes, operating leverage and strong execution. Now growth was once again driven by our recurring business across both divisions. In Bioprocess Solutions, strong double-digit growth in recurring revenue more than offset continued softness in equipment, which, however, stabilized over the year. In Lab Products & Services, performance improved gradually as expected. Growth in H2 was driven by recurring business, while instruments showed positive momentum also supported by product launches in bioanalytics. Our operating performance allowed us to further reduce our leverage ratio, underscoring our commitment to financial discipline and a strong balance sheet. Overall, in 2025, we laid a solid foundation for the year 2026. For the group, we expected sales growth of around 5% to 9% with an underlying EBITDA margin slightly above 30%. Let me now turn to actions we are taking to enable future growth. Let's talk about innovation and partnerships. We have made tangible progress in 2 key areas: innovation and the expansion of our resilient global R&D and production capacity. We launched several new solutions across both divisions. In Bioprocessing, we made progress in more sustainable product design with the launch of Sartopore Evo, a PFAS-free filtration solution, which addresses growing regulatory and customer expectations around the elimination of persistent substances while maintaining the high performance and reliability our customers require. We also launched the Sartocon cassettes, further strengthening our offering for efficient and scalable downstream processing, particularly for viral vector purification. Now on the equipment side, we introduced the Pionic Continuous bioprocessing platform developed with Sanofi, which faces high customer interest. This platform supports the industry's transition from traditional batch production to continuous processes, enabling faster, more efficient and more sustainable manufacturing workflows. And our teams advance our bioanalytical portfolio, including the only live-cell imaging system with confocal microscopy inside an incubator, a really important step forward for the work with complex 3D cell model. We further strengthened this area also through the acquisition of MATTEK, expanding our portfolio of advanced 3D cell models that more closely mimic human tissue, deliver more predictive and reproducible results and help reduce the need for animal testing. And we entered into a partnership with Nanotein Technologies, enhancing our capabilities in cell expansion and activation to support next-generation biologics. In parallel, we continue to invest in a resilient global manufacturing footprint. We completed the expansion of [ Aubagne ] and progressed with the expansion in Germany, as well as with the construction of our greenfield site in Songdo, South Korea, ensuring scalability, supply reliability and proximity to our customers. Taken together, these actions strengthen our ability to support customers as markets normalize and position for Sartorius for sustainable innovation-led growth over the coming years. With this, let's take a closer look into our numbers. Florian? Florian Funck: Yes. Thank you, Michael, and a warm welcome also from my side to everybody out there. I'm happy to take you through our numbers that's reflected, in my perspective, a consistently strong performance in the year 2025. So let's start with top line performance. Our sales revenue increased by 7.6% in constant currencies and 4.7% in reported currencies, reaching slightly more than EUR 3.5 billion. This positive development was driven by mid-teens growth in our recurring business in 2025, which represents, by far, the largest part of our business, as you know. Our nonrecurring business remains soft on a full year basis, but clearly stabilized in H2 and was above H1 in absolute numbers as respective. The difference between constant currency and reported growth was primarily driven by U.S. dollar weakness, which represents a headwind of almost 300 basis points to reported sales growth in fiscal year 2025. Our full year performance was also influenced by U.S. tariffs. The successful implementation of tariff surcharges contributed approximately 1 percentage point to sales revenue growth. Order intake developed strongly, growing faster than sales. And as a result, our 12-month rolling book-to-bill ratio remained consistently above 1 throughout the year '25, although as expected and also communicated in our last quarterly call, it declined slightly sequentially in Q4 due to a very strong prior year comparison. In absolute terms, order intake in Q4 was roughly on par with the exceptional strong Q4 2024. You remember that above EUR 1 billion figure that we posted there. And that was the quarter with the highest absolute order intake in 2025. And therefore, we entered 2026 on the back of a strong order book. Looking at our divisions in more detail. Bioprocess Solutions delivered another strong quarter, bringing full year sales revenue growth to 9.5% in constant currency. Growth was driven by mid-teens growth in consumables throughout the year, while equipment remained soft, as Michael already mentioned, but was clearly stabilizing with H2 '25 sales being double-digit percentage above H1 '25 sales. Lab Products & Services delivered a resilient performance in a challenging market environment. Sales were essentially flat at 0.2% in constant currencies plus, supported by solid momentum in consumer goods and services. The acquisition of MATTEK contributed slightly more than 1 percentage point to growth. Instrument sales were impacted by constrained CapEx spending in life science research and market. However, we are seeing encouraging signs of stabilization supported by positive momentum in bioanalytics in the second half, driven in part also by the launch of several updated instruments in that market space. Let me also quickly elaborate on our regional performance. EMEA sales performance remained robust with growth of almost 6% in 2025. As a reminder, the recovery in EMEA started earlier than in other regions and therefore, faces higher base effects compared to the Americas or APAC. The Americas outperformed, growing by 8.9%, like APAC, which also grew by 8.9%. In APAC, China continued to stabilize with early signs of improvement. Excluding China, the APAC region delivered low double-digit growth in the year 2025. Let's now turn to our profitability. In addition to robust growth momentum, we achieved a strong improvement in profitability over the past 12 months. Underlying EBITDA increased overproportionately by 11.2% to EUR 1.052 billion, with the margin expanding by 170 basis points to 29.7%. This margin improvement was driven by positive volume and product mix effect as well as economies of scale, further underpinned by cost discipline, more than offsetting FX and tariff-related headwinds of around 1 percentage point. Looking at the divisional profit distribution, profitability in our BPS division developed strongly. Underlying EBITDA increased by 15.2% to EUR 907 million, and the margin improved by 240 basis points to 31.7% based on the effect just mentioned also for the group. In LPS, margin declined year-on-year to 21.5%, roughly 50-50, reflecting an unfavorable product mix on the one hand side as well as FX and tariff-related impact on the other hand side. Now let's take a look at the performance below underlying EBITDA, where both net profit and cash flow developed well. The strong increase in underlying EBITDA of 11% translated into overproportionate growth and underlying net profit of 18% and reported net profit of 84%. As a result, underlying EPS also grew at a very strong 18%. Turning to cash-related items. Operating cash flow amounted to EUR 837 million, below the exceptionally strong prior year level of EUR 976 million, which was positively impacted by significant one-off inventory reduction measures in the year 2024. While business volume improved strongly in 2025, working capital remained largely unchanged. Going forward, we remain committed to keeping net working capital growth below our sales growth. Free cash flow amounted to EUR 390 million, reflecting the development of our operating cash flow. In addition, free cash flow is also reflecting the slightly increased CapEx spending from EUR 410 million to EUR 441 million. Accordingly, the CapEx ratio was 12.5%, which is exactly in line with our guidance throughout the year. To conclude our section on 2025 financials, let us now look at the development of the balance sheet-related key figures. We see a strong equity ratio of 39.8%. The increase versus year-end '24 is mainly due to some repayments on financial instruments using our strong cash position and therefore tightening the balance sheet total. Net debt remained largely unchanged, while gross debt has been reduced by EUR 277 million and despite payout of the acquisition of MATTEK in summer 2025 of EUR 70 million. The leverage ratio, defined as net debt to underlying EBITDA, improved as expected from 3.96x to 3.55x in 2025, despite the acquisition of MATTEK, which added approximately 0.1 turns to the ratio. So we are well underway on our planned deleveraging path. And as you can see in the title, we stay committed to our investment-grade rating. With that, I would like to hand back over to Michael. Michael Grosse: Thank you, Florian. So overall, we are very pleased with the strong performance Sartorius delivered in 2025, supported by improving demand trends, mainly on the consumable side. In addition, the results demonstrate the resilience of our business model and confirm the attractive long-term opportunities in the biopharma and life science markets. We will remain focused on disciplined execution, targeted investments in innovation and capacity and operational excellence. Looking at 2026, it is clear that our industry is back on track, but has not yet fully reached its long-term growth level, especially in terms of demand for equipment and instruments. Since the year is still young, we have deliberately set a broad guidance range to account for continued high macroeconomics and industry-specific volatility. The lower end of the range reflects the cautious scenario in which market conditions weaken. However, we currently expect market dynamics to continue normalizing and positive trends to continue. For 2026, we expect to continue our profitable growth trajectory with a continued positive development in the Bioprocess Solutions division and a recovery in the Lab Products & Services division. For the group, we expect sales growth in constant currencies of around 5% to 9%, including a positive effect from the market acquisition and U.S. tariff-related surcharges totaling approximately 1 percentage point. And for the underlying EBITDA margin, we expect an increase to slightly above 30% in which a technical margin dilution of around 50 basis points from tariff surcharges is already reflected. In Bioprocess Solutions, we anticipate sales growth of around 6% to 10%, mainly driven by the recurring business, while we expect equipment business to remain at least stable. The underlying EBITDA margin should be slightly above 32%. In Lab Products & Services, sales growth is expected at around 2% to 6%, including a growth contribution of 1.5 percentage points for MATTEK. This reflects the continued growth recurring business and an at least stable instrument business. We expect underlying EBITDA margin to be slightly below 21%, mainly influenced by deliberate investments in advanced cell models with additional headwinds from unfavorable mix, ForEx, and the dilutive effect of the existing tariffs. CapEx ratio should be around the prior year level as we will continue to invest selectively and with discipline in expanding our global research and manufacturing footprint. Net debt to underlying EBITDA should decrease to slightly above 3x at year-end. As usual, we will provide some additional information for modeling purpose. As you can see, with the Euro-U.S. rate of 1.2, there, we would be a headwind of around 2 percentage points on the reported versus constant currency growth in full year 2026. In Q1, the headwinds would be around 4 percentage points at Euro-U.S. rate of 1.2. Taken together, we are confident that Sartorius is well positioned to benefit from continued recovery. With that, I would now like to hand over to René, who will walk us through the financials of Sartorius Stedim Biotech in more detail. René, over to you. Rene Faber: Thank you very much, Michael. Also from my side, welcome, and thank you for joining us on the call today. In 2025, Sartorius Stedim Biotech achieved considerable profitable growth driven by improving demand, particularly for consumables and operating leverage. This allowed us not only to achieve our updated October 2025 guidance, but also to exceed our top line expectations. Overall, we are very pleased with the results and would like to sincerely thank our all colleagues across the Sartorius Stedim Biotech for their commitment, dedication and really hard work in making 2025 a success. Looking at the numbers. Sales for the Sartorius Stedim Biotech Group increased by 9.6% in constant currencies, reaching nearly EUR 3 billion. Growth in reported currencies was 6.7%, primarily due to the weaker U.S. dollar, which represented a headwind of almost 300 basis points. The successful implementation of tariff surcharges contributed approximately 1% of sales revenue. Our high-margin recurring consumables business remained very strong, delivering mid-teens growth more than offsetting the soft but increasingly stabilizing equipment business. Order intake grew faster than sales, keeping our 12-month rolling book-to-bill ratio consistently above 1, while the ratio declined slightly sequentially in Q4, as Florian explained, due to a very strong prior year comparison. Q4 order intake was roughly on par with the exception of Q4 2024, making it the highest absolute order intake quarter in 2025. We therefore entered 2026 with a strong order book. Underlying EBITDA increased by 17% to EUR 914 million, driven by volume, product mix and economies of scale. Consequently, the underlying EBITDA margin improved significantly to 30.8%, an increase of 2.8 percentage points compared to the previous year. Looking at the top line performance from a regional perspective, EMEA made a solid momentum, delivering 7.3% growth. This robust performance came despite a higher comparison base resulting from an earlier recovery cycle. The Americas grew by almost 12% followed by Asia Pacific growing almost 11%. In APAC, China stabilized and was only slightly dilutive to the overall growth. Excluding China, the growth the region delivered was in the low double-digit range for 2025. I'm also quite pleased with the more recent development in China beyond stabilization as the year progress, we are now seeing really early signs of recovery. Looking at the net profit and cash flow, underlying EBITDA growth of the strong 17% translated into an overproportional increase in underlying net profit of 26.7% to EUR 428 million and reported net profit of nearly 52% to EUR 266 million. Underlying EPS rose by 26% to EUR 4.4. Operating cash flow remained solid at EUR 692 million, although below the high level recorded in the prior year, which was positively influenced by the pulling of inventory that Florian already touched upon. Free cash flow stood at EUR 295 million, and the CapEx as a percentage of sales came in at 13.3%. A quick look at our balance sheet metrics. Our equity ratio improved to 51.7% in the end of 2025 with the increase being driven by some repayment of financial liabilities and therefore, tightening the balance sheet total. Net debt decreased by EUR 18 million versus year-end 2024 and gross debt reduction. Deleveraging is progressing as planned with the net debt to underlying EBITDA ratio improving to 2.38 by the end of 2025. So we are very well on track on our deleveraging path. Now before we move into the Q&A, let me also quickly elaborate on our full year guidance for the Sartorius Stedim Biotech Group. As mentioned earlier, we are very pleased with the strong performance of Sartorius Stedim Biotech has delivered across all key financial dimensions. The 2025 results demonstrate the resilience of our business model and confirm the attractive long-term opportunity in biopharma market. We will remain focused on disciplined execution, targeted investments and innovation and capacity and operational excellence. Looking in 2026, same is true for Sartorius Stedim Biotech and for Sartorius AG when it comes to the overall environment and industry trends. Therefore, we also have deliberately set a broad guidance range with the lower end of the range reflecting a cautious scenario in which market conditions weaken. However, we currently expect market dynamics to continue normalizing and positive trends to continue. We expect to stay on our profitable growth path and for 2026 sales revenue growth in the range of around 6% to 10% in constant currencies, including a 1 percentage point contribution from the U.S. tariff surcharges. Growth will be mainly driven by the recurring business, but against high costs, while the equipment business should remain at least stable. The underlying EBITDA margin should increase to slightly above 31%, in which a technical margin dilution of around 50 basis points from tariff surcharges is reflected. Our CapEx ratio is expected to stay around previous year level at around 13%, reflecting our ongoing investments into research and resilient production footprint. Our commitment to deleveraging remains unchanged. We anticipate the leverage ratio, the net debt to underlying EBITDA to decrease to slightly above 2 at year-end. Our modeling assumptions, Michael already explained, expected headwind from FX on Sartorius AG level, same is true for Sartorius Stedim Biotech. With this, I will hand over to the operator to begin our Q&A session. Operator: [Operator Instructions] The first question comes from Subbu Nambi from Guggenheim. Subhalaxmi Nambi: What does your guidance assume in terms of U.S. onshoring build-outs in 2026? What could drive upside to these expectations? Michael Grosse: Yes. So I'll take that. Subbu, thanks for the question. I mean, right now, as we've been seeing that there is a lot of plans, some of them really committed, some of them still a bit on the horizon. As we see as well the lead times for order particularly on the equipment on a larger system side for greenfield or for larger expansions, we think that the impact from large -- from relevant reshoring activities will most likely not contribute with revenue in 2026. So we've not baked anything of that in our current expectation and assumptions. This would rather be for the year 2027 and beyond where this may have a larger impact. However, we are very closely connected, of course, with all our customers, supporting them on their plans, discussing opportunities as we move forward. It goes up from this, of course, very short near-term activities on brownfields and expansions of existing capacity. Subhalaxmi Nambi: Perfect. And a quick follow-up. How did equipment orders for BPS and LPS, respectively, trend for the quarter for Q4? And are you starting to see any early signs of recovery? You spoke about comparison and orders, but I was just trying to figure out what about equipment orders separately for LPS and BPS. Rene Faber: Thank you for the question. Although we are not giving further information on that very detailed level. But what I can tell you is, on the one hand side, we have been talking about H2 sales being much stronger than H1 sales. And the same holds true when we look at order intake where the order intake in H2 was also well within double digits above H1, which, of course, then speaks to the quality of the order book and therefore, our cautiously optimistic outlook then also into '26. Operator: Next question comes from Richard Vosser from JPMorgan. Richard Vosser: One question, please. So you talked about market conditions not fully back to normal for equipment. So just a little bit of elaboration on changes of customer sentiment here. You've talked a little bit just now about equipment orders suggesting improvement. So just thinking about, first, your confidence in the stabilization of equipment revenues, what's underpinning that in '26? But also, when do you think equipment could move more back to normal levels? We've seen that happen for consumables in '25. What's your thinking there? Rene Faber: Yes. Thank you for the question. I'll take it. Let me first get back to 2025. You will remember when we talked about stabilization of equipment like in Q3, we said for H2 '25, we expect to be in revenues for -- with equipment at least on the levels of H1, maybe slightly above. And you could hear from Florian that H2 came out as stronger, so confirmed the stabilization stronger compared to the H1. So I think that's a clear kind of confirmation of our view and expectations and visibility and the discussions with our customers that the equipment is stabilizing. And now looking, of course, into the 2026, we continue to see the positive discussions and have positive discussions with customers. They are tangible projects, sizable projects on the horizon. The order book is healthy as we mentioned in the -- a few minutes ago. So as Florian [indiscernible], cautiously optimistic looking into the 2026. We believe that the portfolio we have is well positioned to help customers quickly adjust their capacity, single-use technologies are designed to make -- to do -- to provide flexibility. So yes, we're very encouraged about the current -- the sentiment as well as the -- our position and discussions we had with our clients. Michael Grosse: I would like to expand even that from Rene's perspective, I think the similar situation is true as well for LPS division on the basis of equally, I would say, strong development interest levels in needs and opportunities, particularly on the biolytical instrument side, as well a trend that we see in the second half of the year, particularly in Q4, coming and resulting into a good level of contribution in both sales and order intake. And again, so same sentiment for us. But again, I think it will take, for sure, the full quarter Q1 for us to have simply better visibility, better understanding the continuation of the order intake trade in order to have a better view whether this requires further refinement of our perspective for the full year at that point in time. Operator: The next question comes from Doug [indiscernible] from Schenkel. Douglas Schenkel: It's Douglas Schenkel from Wolfe. I'm going to try to do 3 really quickly. One, I just want to confirm, based on your responses to the earlier questions that your 2026 guidance does not currently assume an improvement in bioprocessing equipment demand. So that's the first one. The second, can you please bridge to your margin guidance for the year? Specifically, what would be helpful is, what's the impact of foreign exchange, tariffs and operating efficiencies as you incorporate those into your guidance? And then third, [Technical Difficulty] many companies in your peer group have taken a more conservative approach to guidance than had been the norm given market challenges over the past several years and given ongoing policy uncertainty. With that in mind and also recognizing that this is issuance as CEO, how would you describe your initial guidance philosophy? Florian Funck: So maybe I start to give a little bit more perspective on the margin guidance here. So what we know as of now, of course, is roughly the impact of the tariff on the year 2026, which is to be around 50 basis points. What we do not know is the full FX impact. The weaker the U.S. dollar the higher this impact might be, although we think we are in a good position to a certain extent also to compensate certain headwinds on the FX side in the margin. The, let's say, broad improvement in margin that we are seeing, if we are taking out tariff and FX impact, is definitely a 3-digit basis point number, so above 100 basis points and should be driven to a majority from ongoing operational leverage that we've seen. Michael Grosse: Yes. Maybe to add to Florian's point there just because you may have really in mind as well our fantastic margin contribution that we delivered in 2025. And of course, there are other effects that I think are relevant in my mind to keep in mind there. Of course, on the operating leverage, since we are now already throughout the last year on a different level, the effect of this is, of course, diminishing to a point. Keep as well in mind that when it gets to our activities that we launched in the year even before on our cost reduction programs that the main effect there as well was visible, particularly in 2024 and 2025, still continues in 2026, but less so. So with this and as well a bit of the question mark, how much of the equipment will be there in the year 2026. If that is a higher degree of recovery, of course, the margin mix, the mix effect that we have seen in 2025 was probably as well a bit more favorable compared to 2024 than it may be in 2026 compared to 2025. Then you talked as well a bit about the guidance philosophy. Yes, I think we try to express that in our wording already. On the one hand side, it's early in the year. We felt like, okay, we're feeling confident enough in order to quantify our guidance. But given the fact that it's early in the year, given the still the level of uncertainty that we have there in terms of macroeconomical and geopolitical aspects, as you mentioned, I think we want to as well, therefore, be prepared for this and the lack of full visibility for the full year on the basis of order intake and the book and the market trends, we felt the philosophy is indeed that we have decided for a wide range with the 4 percentage points we have there. We don't feel that we are neither over aggressive nor over conservative with what we put out there. However, we feel that we will not celebrate if we achieve only a 6% growth for 2026. That's equally clear. At the same time, the level where we will land on versus the mid or even beyond the midpoint is so much dependent now on what will happen. So I think we will be in a better position after the first quarter to give more clarity as the year progresses. And that is why I think the philosophy remains, I would say, remains balanced, remains balanced. Operator: The next question comes from Harry Sephton from UBS. Harry Sephton: [Technical Difficulty] consumables. So we're seeing a more comfortable high single-digit to low double-digit growth across the big players in the industry on the consumable side. Based on your guidance, that you're expecting to be more in line with market growth. So what do you see in terms of potential upside or downside risk to market share in the near term on the consumable side? Rene Faber: Yes, I take it. So a question on consumables. As you will know, the consumables is very much -- the majority represents the majority of our revenues for the -- I'm talking for the Bioprocess division. You will know that most of that recurring revenues, consumables revenues are linked to commercial manufacturing and consumption of our customers of the products in making commercial drugs, adding late-stage clinical material production, it comes to around 80% of the consumables revenue are linked to that late-stage plus commercial manufacturing. So -- and that's more or less kind of also gives you an idea about what dictates the growth of consumables. Looking forward, it's very much about the volumes, manufacturing volumes of our customers. We can do little about that, of course. But then once new drugs are being approved or enter these late-stage clinical phases, yes, that drives additional volumes for these consumables. So looking forward, I think we have been working consistently over the years with the teams in all regions to make sure we are early with customers and place these consumables spec in, validate when the decisions are made and validations are done and also working hardly with customers to convert wherever possible in an ongoing and existing processes towards our products. The highlight of that was, of course, during the pandemic where mainly due to our ability to supply and the customers, we gained market shares and kept or we were able also to protect roughly 1/3 of this gain moving forward. So we are, I think, on a very healthy and successful track record to drive that above market -- above drug volume growth of our consumable revenues. Of course, as we mentioned in presenting our 2025 results, we have seen a strong mid-teens growth of our consumables in 2025. So comps are higher now looking in 2026, but we are very confident that these fundamentals and the volumes driving the growth of consumables are there are intact and are positive about the outlook in '26 and beyond. Operator: The next question comes from James Quigley from Goldman Sachs. James Quigley: I've got one on China, please. So you said in the slide and in the comments that China is starting to show some encouraging signs of growth. I think some of your peers at a recent conference still sounded a bit muted on China growth. So what are you seeing here in the region that's driving those encouraging comments from you across the BPS and the LPS divisions? Michael Grosse: So I mean I can get started a little bit. I mean, highlighting perspective again, I think China has really a few years back that I think we've seen a really difficult market environment with as well, very strong level of guided preference with regard to local players and for local production. We feel now that a little bit this notion of rebaselining the market has come to an end. We feel now that we are able to, right now, keep market shares in China and benefit from probably the still modest level of the growth that the China market demonstrates. At the same time, there's, of course, a lot of innovation activities that we are part of and want to equally, I think, being asked by customers to be part of the rollout of out-licensing and bringing some of their pipeline development into other regions and markets. Our expectation for the market, however, overall is still a rather flattish or rather very modest level of degree of growth expectation given as well the prior year performance that we've seen. So we don't see and we don't expect naturally a big turnaround of that momentum. It's still probably there to come later. At the same time, there's a big overhang and a high capacity buildup on the equipment side. So particularly on the equipment side, we feel as well that China will, in the year 2026, be a rather muted market. But on consumables, we think will be part of the game. And yes, as we said, we are -- we have modest expectations here on the market. Operator: The next question comes from Charles Pitman-King from Barclays. Charles Pitman: A quick question, please, on just the guidance again. Just trying to relate the kind of 2 separate statements of the low end of your guidance range, reflecting kind of deteriorating market outlook. But also your commentary around the strong order book and equipment being at least stable. Can you confirm, therefore, that the low end of your guidance range reflects equipment being stable, supported by your existing backlog and other market deteriorations impacting consumables? And then just a quick clarification on margins. Just wondering why you're only providing a kind of bottom end of that range. And is it the implication that at the top end of the range, you have rising equipment, which will offset the margin such that your only confident to provide at the bottom end of the range? I'm just trying to -- yes, just thinking about how you're setting this out. Michael Grosse: So first part, yes, I mean... Unknown Executive: Charles, you broke up a little here technically. That's why we are a little puzzled. Could you repeat the first part of the question? Charles Pitman: Sorry. My question relates to trying to triangulate the 2 guidance commentary, one being that your sales could be at the low end of the range upon worsening market conditions, but did you separately expect equipment to be at least stable? I'm just wanting to confirm that your order book means that you have this confidence in your equipment being at least stable, and that in the scenario where you hit the low end of the range, that's driven by consumable deterioration more so than any downside to your equipment outlook? Michael Grosse: Okay. So I mean, yes, I mean, again, I think on the lower end of our guidance as we try to express, we see some level of, I would say, market situation overall. So we would see that there is no impact, no positive contribution there from the equipment and possibly as well a slight deterioration even on the consumable side. We see the total mix. It depends on how you see the 2 elements of that coming together. But as we say, I mean, if we see the momentum that we've seen right now based on, as you said, the order intake generated in equipment, and at least, stable situation plus the continuation of the current trajectory of the consumables that would be slightly above the bottom part of the guidance. So we would assume some level of deterioration of that condition. Then I think the other question was on the margin. Florian Funck: Yes. While we have not given a range for the margin, we have said that we want to reach slightly above. So this is in a way open to one side. Now let's assume we would be on the lower end of our guidance range. The 5% for the group, we would definitely aim to see margin improvement against prior year, but we might not fully reach that. So the margin corridor that we are indicating to was slightly above -- the 30% was more towards the midpoint of the guidance. If we then come to the upper part of the guidance corridor on top line, of course, there's way more potential on the back of more operational leverage. Operator: The next question comes from Charlie Haywood from Bank of America. Charlie Haywood: Charlie Haywood, Bank of America. I have 2. So first one in '26, is it fair to expect typical seasonality on the bioprocessing side? So I think you've previously commented to 4Q, 1Q, 2Q, 3Q. Or given equipment phasing and what looks like a strong fourth quarter for those orders and a 6- to 12-month order book, might that distort to possibly fueling a stronger second half? And then the second question is just a bit more on midterm. Now that you spent a bit of time in the business. You previously sort of commented to Merck's 9% to 10% market outlook not far from your thinking. I guess how are you currently seeing the bioprocess midterm market growth in the end markets there? Michael Grosse: Thanks for the question. So I think we can maybe kick off a little bit on the basis. I think, as you know, we don't really break down and guide on the basis of quarterly perspective. So I think in this case, we would like to leave a little bit the breadth of the way of how we look at the year to come in more the total perspective. So we will not provide any specifics as we see the quarters moving forward. Again, I think it is probably more in the nature of the business. If you think about -- and it's probably a similar pattern that we've seen during the last year, given the lead times of equipment orders, particularly we now see that, okay, we generated the order intake in the second half of the year, Q4. So things now with the lead time, 6 to 12 months on the Bioprocess side, of course, then we would expect sales realization in all these orders to rather hit the second half of the year than the first half of the year. So that's natural by the lead time of those orders. Yes. Then in terms of the market. Yes, I think we hold to that. I mean we basically took a look at the market. We'll get back a little bit more interesting insight on the market analysis that we've done for the capital market that we will provide and bring up in March. However, as we said, we think that the assumption there for the market to be around a 9% growth, I think, is something that's very much in line with our views and with our analysis. Again, depending a little bit also on the specific market segment and then the exposure to the market segments. But that corridor is well in line with our analysis that we've done. And that is well what we believe that in our minds, we will measure us against from a mid- and long-term perspective. Operator: The next question comes from James Vane-Tempest from Jefferies. James Vane-Tempest: Just on LPS, actually. You mentioned in the presentation that the rolling book-to-bill is now more than 1, but now you specifically stated in both divisions. So I was just kind of curious whether the LPS book-to-bill turned in Q4 to be above 1? And if so, where you're seeing accelerating orders from either certain customer or product groups? And then related to LPS, I mean the guidance that you've given is marked the fourth year of margin decline in a row. I know we're going to hit more in March. But conceptually, how realistic is it from here to get back to levels seen a few years ago? And what would it take to get there? Michael Grosse: Okay. So the first part of the question was about the book-to-bill. Sorry, do you want to take that? Florian Funck: Exactly. James, as you know, we would not like to go specifically into that. But let me put it that way. We were quite pleased with what we have seen than in Q4. Let us leave it on that level. Michael Grosse: And then one was related to profitability. James Vane-Tempest: LPS margins, yes, in terms of the fourth year of decline and just thinking about what it would take to get back to where it was? Florian Funck: Yes. I think this is a question that we should discuss more in detail around the Capital Markets Day, if you don't mind. James Vane-Tempest: Okay. No, that's fine. One quick follow-up, if I can. And that is just about the business flow within BPS. Historically, you've kind of alluded to consumables equipment normalized being 75%, 25% approximately. And I know at 9 months, I think you sort of said it was around 85%, 15%. So just as an approximation, I was just kind of curious where that sort of number for the full year. Michael Grosse: Okay. Just maybe a short point of clarification. So I think, let's say, the numbers you're referring to on the 75%-25% would be on the group level. If we look at BPS, I think we see the rough proportion over the last half year, we've more talk about 80%-20% on that ratio. And again, I think, yes, that is where we see the current state. We don't necessarily believe as well, given the discussion earlier that, that will be as well roughly the level that we will see as we continue into the year 2026 now. Operator: The next question comes from Charles Weston from RBC Europe. Charles Weston: You've talked about Europe being ahead or EMEA being ahead in terms of the recovery curve. Does that also mean it's ahead in terms of the equipment order recovery curve? So have you got sort of proof of those orders turning into -- that interest turning into orders and revenue in Europe? And just a clarification question. You said you have good discussions with your customers to understand their CapEx plans. Can you give us any insight into whether the big investments that they're making is more about them shifting CapEx from other parts of the world into the U.S. or whether they are genuinely adding additional capacity into the U.S. over and above what they would be normally planning? Michael Grosse: No, thanks for the question. On EMEA, I think the situation is not that we see any difference here. Yes, the recovery overall happened earlier there, but we cannot now say that we have data that suggests on the equipment recovery that EMEA is ahead of the other regions. So that's not really the case. Florian Funck: Yes, and the discussions we have with customers on the equipment, they are mostly not today related to the onshoring or reshoring in terms of tangible projects, investments, either replacing old instruments or adding capacities. The discussions are with -- around onshoring, it's more about understanding really what is relevant of the -- what has been published from the headlines from our customers, what is of relevance for us, of course, you will see a lot of R&D investment being included in these headlines. You will see also investment in classical pharma facilities, final field drug product facility, so all less relevant for us. So trying to understand what's really in for Sartorius, and then also trying to understand really what the timing will be and when the discussions about the equipment, the providers will start. So this is more about where the onshoring discussions are today. So the very tangible projects are still less related to that topic. Operator: Next question comes from Odysseas Manesiotis from BNP Paribas. Odysseas Manesiotis: First, to better understand the growth deceleration in Q4. I have EMEA around 4% CER for Stedim. Could you give us a feeling of how that's different between equipment and consumables or just whether that's the growth we should be expecting for the region as the new normal? And secondly, in order to have a better feeling of the conservative business embedded in your guide, is it fair to say that your book-to-bill for the entirety of the year was pretty much close to your pre-pandemic average of around 1.05? And last quick one, biotech funding has been -- has been quite strong. What's the usual lag that you see between a biotech funding recovery and a pickup in your order intake? Florian Funck: So let me maybe start with the growth regarding BPS recurring versus nonrecurring in H2 because I think really looking only at 1 quarter doesn't make sense in looking at the matter, it's already really short term. But just to give you a feeling, the growth that we've seen in the nonrecurring business was very similar to the growth that we've seen also in the consumable business in H2. So this is also a reason besides the effects that we've seen in the order intake while we are taking that confident stance towards 2026. When it comes to book-to-bill, we are not communicating on the level of book-to-bill. Sorry. Operator: [Operator Instructions] The next question comes from Thibault Boutherin from Morgan Stanley. Thibault Boutherin: Just to come back -- can you hear me? Michael Grosse: Yes. It's okay. Thibault Boutherin: Just to come back on the topic of onshoring and the last CapEx plan that has been announced. There is a question that comes back often from investors, which is, is there a risk that because we see CapEx being skewed towards the U.S. in the next few years to see an imbalance between you and your competitors? So I think the idea from some investors is maybe U.S. peers would be better positioned to benefit from CapEx being skewed to the U.S. So just wanted to know if you could comment on your competitivity in the U.S., the market share relative to other regions and give an answer of how a shift of investments to the U.S. in terms of equipment and CapEx for biopharma would impact you? Rene Faber: Yes. So I'll take that question. Look, the -- in our industry, and I think it's been always the case, still is the case. The main decision criteria is the technology and the performance. Their customers don't make really compromises when it comes to how they equip their facilities, if it's for preclinical small scale manufacturing or even commercial. So I think there we -- and this is where we really see ourselves being ahead with a lot of focus on innovation. So I think for us, the positioning to benefit and participate in the potential onshoring wave is very strong. We have a facility to assemble equipment in the U.S., in the Boston area, in Marlboro, as well to be close to customers in case of the factor acceptance that and so on for more complex equipment. So I think, yes, we are ready to take all the opportunities, the feedback from customers is strong, so positive about the outlook here. Operator: Next question comes from Oliver Metzger from ODDO BHF. Oliver Metzger: It's one more structural question on equipment. So we know from the past, normally, equipment and consumables should grow at a similar rate over the cycle. So we now see consumable demand healthy for a while, while equipment is at least lagging behind. Can you comment about the reasons for this reluctancy? Is it more like still an overhang from, let's say, the time during the pandemic or post the pandemic? Or could it be that there is a more structural change as higher quality consumables might have increased the efficiency of the tighter of a production process and therefore, some structural lower or slower demand for equipment might be the case for a quite longer period of time before we see more expansion or new manufacturing facilities? So that's, to say, upgrades and lower expansion. Rene Faber: Yes. Thank you for the question. I try to kind of give you more color to think about why this reluctancy to invest, you addressed or you asked how much of that is coming with kind of a post-pandemic would call macroeconomic cash-driven impact or development. I think that's very much more on that side, plus the overcapacities, which have been built during the pandemic in some areas versus how you call it kind of a structural change in a way that by technologies improving, it would require less of this equipment. Actually here, over years and decades, we have seen exactly the opposite. The better the technology gets, the more of it will be used, especially in single-use manufacturing, the [ cake ] of what you can address with single use increases or grows, the better the technology, the higher the titers, the better the yields are. So I think that's very much a positive ongoing trend with this improvement. So again, back to your question, I think it's very much on the cash post-pandemic macroeconomic impacts rather than any different structural technology-related. Operator: The next question comes from Falko Friedrichs from Deutsche Bank. Falko Friedrichs: My question is on the LPS margin. When do you expect these investments in Advanced Cell Models to begin contributing positively to the margin of the segment again? And then just a very quick housekeeping one. Is a 27% tax rate a fair assumption again for the Sartorius Group in 2026? Florian Funck: Yes. Let me start with the housekeeping question. We currently think that the 27% is still okay for the year '26. And on the margin, as I said, it's connected a lot, of course, to our engagement in Advanced Cell Models, which is an emerging business, but should not be impacting on a sales side very soon, but rather we are building up for the more long-term perspective, more to elaborate on at our Capital Markets Day. Operator: Next question comes from Harry Gillis from Berenberg. Harry Gillis: I have one clarification regarding an earlier question on guidance. I'm sorry, I didn't quite catch that. Does the 6% guidance at the low end of your for BPS growth, does that assume a further decline in equipment sales, sorry? Or does your expectation for at least stable equipment hold here and it's deterioration in growth in consumables? And secondly, could I just ask you. Do you expect your CapEx ratio to remain stable at around 12.5% into '26? How should we think about that over the midterm as some of your larger projects start to roll off? Florian Funck: Should I start with the last question on the CapEx rate. So of course, you are asking more the midterm perspective, but I think we have always quite consistently communicated that we are -- we should see from the year '27 onwards, an overall reduction in our CapEx ratio. '26 is, therefore, the last year, where especially also driven by our expansion projects in Korea. We are seeing elevated levels of our CapEx ratio to then come down afterwards, more on the Capital Markets Day. Rene Faber: Then again, on the guidance, just to repeat, we said at least flat, so we are not considering any decrease in equipment revenues for 2026 in our guidance. Operator: Next question comes from Shubhangi Gupta from HSBC. Shubhangi Gupta: So just a clarification for your guidance or the upper end of your sales growth, does it assume recovery in equipment sales? And if yes, what is the time line? And how should we think about the phasing of growth in 2026, given H2 have tough comps, especially from strong growth in consumables? Florian Funck: Yes. Again, so now the question is about the upper range of the guidance. Here, as we said, of course, in that case, we would expect the contribution of both consumables, continued healthy growth as knowing and considering the higher comps coming from this -- from 2025 as well as at least a moderate growth in equipment revenues. So that's kind of our current thinking. And again, very positive what we have seen so far, the order book, the trends we see. So quite confident we are heading there. But as Michael said in the introduction, still early in the year and more to come with our Q1 results. Michael Grosse: Yes. Give us a bit more time on that, please. So on that. However, I think just to add on, I mean, as we said at the other stage, given a bit as well if we think that one of the contributing or deciding factors towards the upper end, it will indeed be a more strong recovery and growth contribution as well from the equipment instrument side. Again, on the lead times that are there, of course, assumption is probably fair to say that this is something that happens rather later in the year than earlier. So it's something that we would expect to rather beyond Q1 to happen, if it happens in the degree that we may hope for, but we don't know. Shubhangi Gupta: And just a quick follow-up, can you comment... Petra Muller: I'm sorry, Shubhangi, but we have 3 more people in the queue. I'm sorry, we have to head on because we are over time already. Sorry about that. Happy to take your question afterwards. Operator: The next question comes from Anna Snopkowski from KeyBanc. Anna Snopkowski: This is Anna on for Paul Knight. I just was wondering, you mentioned on your last call, you were having some early conversations with small CDMO customers. How has this progressed in the quarter? And are those early conversations around equipment broad-based or concentrated in any customer group or certain types of equipment like those that help your customers reduce costs? Florian Funck: Yes. Thank you for the question. So yes, absolutely, that was a kind of an ongoing development we have seen in 2025. Towards the second half, we've seen the smaller CDMOs also becoming more and more active. We've seen them, their pipelines filling, their projects coming and discussion started, and it's both really about -- its equipment and consumables. So preparing for delivering on the project, it's all about getting ready to make the batches, preparing to get an order in consumables to be -- to have them on -- to build inventories as well as where needed, add equipment to prepare the capacity as well. So that's been the development we've seen with them, and it didn't change so far. So also kind of contributes to our positive outlook. Operator: The next question comes from Naresh Chouhan from Intron Health. Naresh Chouhan: Just on BPS. When you talk about double-digit consumable growth, can I confirm that this is more like low teens if we exclude China, just to give us a sense of where underlying demand is in Western market and the kind of state of the Western market recovery? Florian Funck: Yes. So consumables kind of, yes, low teens is a fair assumption in a positive outlook, right? And yes, that's how we are looking forward, not only '26 but ahead as well. Yes, so you're right. Operator: The last question comes from Delphine Le Louet from Bernstein. Delphine Le Louet: Yes. I'm sorry because I really don't understand the guidance regarding LPS when it comes to the margin. And so I know when you're trying to push back about the CMD and probably you're right, but that makes me think, is there anything and especially when we look at the Q4, where we had the margin gain versus the Q3, is there anything more structural that you're planning? And this is a new way where probably we should think about the division in the future, meaning a complete reorg internally of the LPS division that could justify not having any execution gain coming over the sales growth even at the midpoint of 4%, which is quite nice for that division, by the way. So any more clarity on that? How should we think about that margin in the context of back to growth and a scenario, which is not that bad at the end? Florian Funck: So Delphine, maybe I'll start, and then Michael, especially to add on, on that. But first of all, we definitely think that the LPS business is a 20% plus margin business going forward. On the other hand side, on the current position that we are at, at a margin of 21.5%, knowing that the tariff impact overall in the group is roughly 50 basis points in 2026, knowing that there are unknown on the FX side and knowing that we are ramping up our investment through the P&L into ACM, we thought it is appropriate to guide then for the year '26 with a slightly below 21%. Michael Grosse: Yes. And over and above what Florian said, of course, we want to give you an incentive to join the Capital Markets Day here, very clearly, any strategic type of consideration about how we see the business, the divisions as we move forward. You're welcome in March to our Capital Markets Day. Operator: There are no more questions from the phone. I would now like to turn the conference back over to Petra Muller, Head of Investor Relations. Petra Muller: Yes. Thank you very much, Valentina. This concludes today's call. Please reach out to the Investor Relations team in case of any open questions. We thank you for joining us and wish you a pleasant rest of the day. Take care and see you next time. Thank you. Goodbye. Michael Grosse: Thank you. Bye-bye, all. Many thanks. Operator: You may now disconnect.
Operator: Welcome to the presentation of Sartorius and Sartorius Stedim Biotech on the Preliminary Results 2025. Please note that the call is being recorded and streamed on Sartorius' website. Your participation in this implies your consent with this. A replay will be available shortly after the call. I would now like to turn the conference over to Petra Müller, Head of Investor Relations of Sartorius. Petra Muller: Thank you, operator. Hello, and a warm welcome from my side. I'm joined today by our CEO, Michael Grosse; by Florian Funck, our CFO; by René Fáber, Head of our Bioprocessing Division and CEO of Sartorius Stedim Biotech; and by Alexandra Gatzemeyer, Head of our Lab Products & Services division. As always, we will start with prepared remarks followed by the Q&A session. As the call is scheduled to 1 hour, please limit your question to 1 so that as many participants as possible can take part. Please note that management's comments during this call will include forward-looking statements that involve risks and uncertainties. For a discussion of risk factors, I encourage you to review the safe harbor statement contained in today's press release and presentation. With that, I'm pleased to hand over to Michael Grosse, CEO of Sartorius. Michael, please go ahead. Michael Grosse: Thank you very much, Petra, and a warm welcome also from my side, and thank you all for joining us today for our preliminary full year 2025 results. Before we begin, I would like to sincerely thank all of our colleagues across Sartorius for their commitment and dedication over the past year. Their passion, professionalism and strong focus on execution are clearly reflected in our results we are presenting today. I would also like to personally thank everyone who has made it such a smooth and rewarding experience for me to step into my role as a CEO, and particular thanks as well to my colleagues here, Alexandra, René and Florian from the executive team. It has been really a great journey up to now, fantastic work on the strategy and great things to come. And I don't want to miss out as well on saying thank you to the team here from Investor Relations, Communications and Finance because I think the workload over the last couple of weeks and days have been tremendous in order to get us all prepared and get our reporting in place. Thank you all for that. Now let me briefly summarize key messages that we would like to share with you today. First of all, 2025 was characterized by return to normal demand behavior for consumables and continued cautious investment activities by our core customers. Combined with an active operational management in a still challenging environment, we delivered improved operational and financial performance. Okay. All right, supported by the improvement -- improving demand trends, mainly on the consumable side and the operating leverage inherent in our model, Sartorius achieved considerable profitable growth. For the full year, we delivered results slightly ahead of our upgraded full year 2025 sales guidance. Profitability landed in the upper half of our initial guidance from April and exceeded our October EBITDA target, with a margin of 29.7%. This performance reflects growing volumes, operating leverage and strong execution. Now growth was once again driven by our recurring business across both divisions. In Bioprocess Solutions, strong double-digit growth in recurring revenue more than offset continued softness in equipment, which, however, stabilized over the year. In Lab Products & Services, performance improved gradually as expected. Growth in H2 was driven by recurring business, while instruments showed positive momentum also supported by product launches in bioanalytics. Our operating performance allowed us to further reduce our leverage ratio, underscoring our commitment to financial discipline and a strong balance sheet. Overall, in 2025, we laid a solid foundation for the year 2026. For the group, we expected sales growth of around 5% to 9% with an underlying EBITDA margin slightly above 30%. Let me now turn to actions we are taking to enable future growth. Let's talk about innovation and partnerships. We have made tangible progress in 2 key areas: innovation and the expansion of our resilient global R&D and production capacity. We launched several new solutions across both divisions. In Bioprocessing, we made progress in more sustainable product design with the launch of Sartopore Evo, a PFAS-free filtration solution, which addresses growing regulatory and customer expectations around the elimination of persistent substances while maintaining the high performance and reliability our customers require. We also launched the Sartocon cassettes, further strengthening our offering for efficient and scalable downstream processing, particularly for viral vector purification. Now on the equipment side, we introduced the Pionic Continuous bioprocessing platform developed with Sanofi, which faces high customer interest. This platform supports the industry's transition from traditional batch production to continuous processes, enabling faster, more efficient and more sustainable manufacturing workflows. And our teams advance our bioanalytical portfolio, including the only live-cell imaging system with confocal microscopy inside an incubator, a really important step forward for the work with complex 3D cell model. We further strengthened this area also through the acquisition of MATTEK, expanding our portfolio of advanced 3D cell models that more closely mimic human tissue, deliver more predictive and reproducible results and help reduce the need for animal testing. And we entered into a partnership with Nanotein Technologies, enhancing our capabilities in cell expansion and activation to support next-generation biologics. In parallel, we continue to invest in a resilient global manufacturing footprint. We completed the expansion of [ Aubagne ] and progressed with the expansion in Germany, as well as with the construction of our greenfield site in Songdo, South Korea, ensuring scalability, supply reliability and proximity to our customers. Taken together, these actions strengthen our ability to support customers as markets normalize and position for Sartorius for sustainable innovation-led growth over the coming years. With this, let's take a closer look into our numbers. Florian? Florian Funck: Yes. Thank you, Michael, and a warm welcome also from my side to everybody out there. I'm happy to take you through our numbers that's reflected, in my perspective, a consistently strong performance in the year 2025. So let's start with top line performance. Our sales revenue increased by 7.6% in constant currencies and 4.7% in reported currencies, reaching slightly more than EUR 3.5 billion. This positive development was driven by mid-teens growth in our recurring business in 2025, which represents, by far, the largest part of our business, as you know. Our nonrecurring business remains soft on a full year basis, but clearly stabilized in H2 and was above H1 in absolute numbers as respective. The difference between constant currency and reported growth was primarily driven by U.S. dollar weakness, which represents a headwind of almost 300 basis points to reported sales growth in fiscal year 2025. Our full year performance was also influenced by U.S. tariffs. The successful implementation of tariff surcharges contributed approximately 1 percentage point to sales revenue growth. Order intake developed strongly, growing faster than sales. And as a result, our 12-month rolling book-to-bill ratio remained consistently above 1 throughout the year '25, although as expected and also communicated in our last quarterly call, it declined slightly sequentially in Q4 due to a very strong prior year comparison. In absolute terms, order intake in Q4 was roughly on par with the exceptional strong Q4 2024. You remember that above EUR 1 billion figure that we posted there. And that was the quarter with the highest absolute order intake in 2025. And therefore, we entered 2026 on the back of a strong order book. Looking at our divisions in more detail. Bioprocess Solutions delivered another strong quarter, bringing full year sales revenue growth to 9.5% in constant currency. Growth was driven by mid-teens growth in consumables throughout the year, while equipment remained soft, as Michael already mentioned, but was clearly stabilizing with H2 '25 sales being double-digit percentage above H1 '25 sales. Lab Products & Services delivered a resilient performance in a challenging market environment. Sales were essentially flat at 0.2% in constant currencies plus, supported by solid momentum in consumer goods and services. The acquisition of MATTEK contributed slightly more than 1 percentage point to growth. Instrument sales were impacted by constrained CapEx spending in life science research and market. However, we are seeing encouraging signs of stabilization supported by positive momentum in bioanalytics in the second half, driven in part also by the launch of several updated instruments in that market space. Let me also quickly elaborate on our regional performance. EMEA sales performance remained robust with growth of almost 6% in 2025. As a reminder, the recovery in EMEA started earlier than in other regions and therefore, faces higher base effects compared to the Americas or APAC. The Americas outperformed, growing by 8.9%, like APAC, which also grew by 8.9%. In APAC, China continued to stabilize with early signs of improvement. Excluding China, the APAC region delivered low double-digit growth in the year 2025. Let's now turn to our profitability. In addition to robust growth momentum, we achieved a strong improvement in profitability over the past 12 months. Underlying EBITDA increased overproportionately by 11.2% to EUR 1.052 billion, with the margin expanding by 170 basis points to 29.7%. This margin improvement was driven by positive volume and product mix effect as well as economies of scale, further underpinned by cost discipline, more than offsetting FX and tariff-related headwinds of around 1 percentage point. Looking at the divisional profit distribution, profitability in our BPS division developed strongly. Underlying EBITDA increased by 15.2% to EUR 907 million, and the margin improved by 240 basis points to 31.7% based on the effect just mentioned also for the group. In LPS, margin declined year-on-year to 21.5%, roughly 50-50, reflecting an unfavorable product mix on the one hand side as well as FX and tariff-related impact on the other hand side. Now let's take a look at the performance below underlying EBITDA, where both net profit and cash flow developed well. The strong increase in underlying EBITDA of 11% translated into overproportionate growth and underlying net profit of 18% and reported net profit of 84%. As a result, underlying EPS also grew at a very strong 18%. Turning to cash-related items. Operating cash flow amounted to EUR 837 million, below the exceptionally strong prior year level of EUR 976 million, which was positively impacted by significant one-off inventory reduction measures in the year 2024. While business volume improved strongly in 2025, working capital remained largely unchanged. Going forward, we remain committed to keeping net working capital growth below our sales growth. Free cash flow amounted to EUR 390 million, reflecting the development of our operating cash flow. In addition, free cash flow is also reflecting the slightly increased CapEx spending from EUR 410 million to EUR 441 million. Accordingly, the CapEx ratio was 12.5%, which is exactly in line with our guidance throughout the year. To conclude our section on 2025 financials, let us now look at the development of the balance sheet-related key figures. We see a strong equity ratio of 39.8%. The increase versus year-end '24 is mainly due to some repayments on financial instruments using our strong cash position and therefore tightening the balance sheet total. Net debt remained largely unchanged, while gross debt has been reduced by EUR 277 million and despite payout of the acquisition of MATTEK in summer 2025 of EUR 70 million. The leverage ratio, defined as net debt to underlying EBITDA, improved as expected from 3.96x to 3.55x in 2025, despite the acquisition of MATTEK, which added approximately 0.1 turns to the ratio. So we are well underway on our planned deleveraging path. And as you can see in the title, we stay committed to our investment-grade rating. With that, I would like to hand back over to Michael. Michael Grosse: Thank you, Florian. So overall, we are very pleased with the strong performance Sartorius delivered in 2025, supported by improving demand trends, mainly on the consumable side. In addition, the results demonstrate the resilience of our business model and confirm the attractive long-term opportunities in the biopharma and life science markets. We will remain focused on disciplined execution, targeted investments in innovation and capacity and operational excellence. Looking at 2026, it is clear that our industry is back on track, but has not yet fully reached its long-term growth level, especially in terms of demand for equipment and instruments. Since the year is still young, we have deliberately set a broad guidance range to account for continued high macroeconomics and industry-specific volatility. The lower end of the range reflects the cautious scenario in which market conditions weaken. However, we currently expect market dynamics to continue normalizing and positive trends to continue. For 2026, we expect to continue our profitable growth trajectory with a continued positive development in the Bioprocess Solutions division and a recovery in the Lab Products & Services division. For the group, we expect sales growth in constant currencies of around 5% to 9%, including a positive effect from the market acquisition and U.S. tariff-related surcharges totaling approximately 1 percentage point. And for the underlying EBITDA margin, we expect an increase to slightly above 30% in which a technical margin dilution of around 50 basis points from tariff surcharges is already reflected. In Bioprocess Solutions, we anticipate sales growth of around 6% to 10%, mainly driven by the recurring business, while we expect equipment business to remain at least stable. The underlying EBITDA margin should be slightly above 32%. In Lab Products & Services, sales growth is expected at around 2% to 6%, including a growth contribution of 1.5 percentage points for MATTEK. This reflects the continued growth recurring business and an at least stable instrument business. We expect underlying EBITDA margin to be slightly below 21%, mainly influenced by deliberate investments in advanced cell models with additional headwinds from unfavorable mix, ForEx, and the dilutive effect of the existing tariffs. CapEx ratio should be around the prior year level as we will continue to invest selectively and with discipline in expanding our global research and manufacturing footprint. Net debt to underlying EBITDA should decrease to slightly above 3x at year-end. As usual, we will provide some additional information for modeling purpose. As you can see, with the Euro-U.S. rate of 1.2, there, we would be a headwind of around 2 percentage points on the reported versus constant currency growth in full year 2026. In Q1, the headwinds would be around 4 percentage points at Euro-U.S. rate of 1.2. Taken together, we are confident that Sartorius is well positioned to benefit from continued recovery. With that, I would now like to hand over to René, who will walk us through the financials of Sartorius Stedim Biotech in more detail. René, over to you. Rene Faber: Thank you very much, Michael. Also from my side, welcome, and thank you for joining us on the call today. In 2025, Sartorius Stedim Biotech achieved considerable profitable growth driven by improving demand, particularly for consumables and operating leverage. This allowed us not only to achieve our updated October 2025 guidance, but also to exceed our top line expectations. Overall, we are very pleased with the results and would like to sincerely thank our all colleagues across the Sartorius Stedim Biotech for their commitment, dedication and really hard work in making 2025 a success. Looking at the numbers. Sales for the Sartorius Stedim Biotech Group increased by 9.6% in constant currencies, reaching nearly EUR 3 billion. Growth in reported currencies was 6.7%, primarily due to the weaker U.S. dollar, which represented a headwind of almost 300 basis points. The successful implementation of tariff surcharges contributed approximately 1% of sales revenue. Our high-margin recurring consumables business remained very strong, delivering mid-teens growth more than offsetting the soft but increasingly stabilizing equipment business. Order intake grew faster than sales, keeping our 12-month rolling book-to-bill ratio consistently above 1, while the ratio declined slightly sequentially in Q4, as Florian explained, due to a very strong prior year comparison. Q4 order intake was roughly on par with the exception of Q4 2024, making it the highest absolute order intake quarter in 2025. We therefore entered 2026 with a strong order book. Underlying EBITDA increased by 17% to EUR 914 million, driven by volume, product mix and economies of scale. Consequently, the underlying EBITDA margin improved significantly to 30.8%, an increase of 2.8 percentage points compared to the previous year. Looking at the top line performance from a regional perspective, EMEA made a solid momentum, delivering 7.3% growth. This robust performance came despite a higher comparison base resulting from an earlier recovery cycle. The Americas grew by almost 12% followed by Asia Pacific growing almost 11%. In APAC, China stabilized and was only slightly dilutive to the overall growth. Excluding China, the growth the region delivered was in the low double-digit range for 2025. I'm also quite pleased with the more recent development in China beyond stabilization as the year progress, we are now seeing really early signs of recovery. Looking at the net profit and cash flow, underlying EBITDA growth of the strong 17% translated into an overproportional increase in underlying net profit of 26.7% to EUR 428 million and reported net profit of nearly 52% to EUR 266 million. Underlying EPS rose by 26% to EUR 4.4. Operating cash flow remained solid at EUR 692 million, although below the high level recorded in the prior year, which was positively influenced by the pulling of inventory that Florian already touched upon. Free cash flow stood at EUR 295 million, and the CapEx as a percentage of sales came in at 13.3%. A quick look at our balance sheet metrics. Our equity ratio improved to 51.7% in the end of 2025 with the increase being driven by some repayment of financial liabilities and therefore, tightening the balance sheet total. Net debt decreased by EUR 18 million versus year-end 2024 and gross debt reduction. Deleveraging is progressing as planned with the net debt to underlying EBITDA ratio improving to 2.38 by the end of 2025. So we are very well on track on our deleveraging path. Now before we move into the Q&A, let me also quickly elaborate on our full year guidance for the Sartorius Stedim Biotech Group. As mentioned earlier, we are very pleased with the strong performance of Sartorius Stedim Biotech has delivered across all key financial dimensions. The 2025 results demonstrate the resilience of our business model and confirm the attractive long-term opportunity in biopharma market. We will remain focused on disciplined execution, targeted investments and innovation and capacity and operational excellence. Looking in 2026, same is true for Sartorius Stedim Biotech and for Sartorius AG when it comes to the overall environment and industry trends. Therefore, we also have deliberately set a broad guidance range with the lower end of the range reflecting a cautious scenario in which market conditions weaken. However, we currently expect market dynamics to continue normalizing and positive trends to continue. We expect to stay on our profitable growth path and for 2026 sales revenue growth in the range of around 6% to 10% in constant currencies, including a 1 percentage point contribution from the U.S. tariff surcharges. Growth will be mainly driven by the recurring business, but against high costs, while the equipment business should remain at least stable. The underlying EBITDA margin should increase to slightly above 31%, in which a technical margin dilution of around 50 basis points from tariff surcharges is reflected. Our CapEx ratio is expected to stay around previous year level at around 13%, reflecting our ongoing investments into research and resilient production footprint. Our commitment to deleveraging remains unchanged. We anticipate the leverage ratio, the net debt to underlying EBITDA to decrease to slightly above 2 at year-end. Our modeling assumptions, Michael already explained, expected headwind from FX on Sartorius AG level, same is true for Sartorius Stedim Biotech. With this, I will hand over to the operator to begin our Q&A session. Operator: [Operator Instructions] The first question comes from Subbu Nambi from Guggenheim. Subhalaxmi Nambi: What does your guidance assume in terms of U.S. onshoring build-outs in 2026? What could drive upside to these expectations? Michael Grosse: Yes. So I'll take that. Subbu, thanks for the question. I mean, right now, as we've been seeing that there is a lot of plans, some of them really committed, some of them still a bit on the horizon. As we see as well the lead times for order particularly on the equipment on a larger system side for greenfield or for larger expansions, we think that the impact from large -- from relevant reshoring activities will most likely not contribute with revenue in 2026. So we've not baked anything of that in our current expectation and assumptions. This would rather be for the year 2027 and beyond where this may have a larger impact. However, we are very closely connected, of course, with all our customers, supporting them on their plans, discussing opportunities as we move forward. It goes up from this, of course, very short near-term activities on brownfields and expansions of existing capacity. Subhalaxmi Nambi: Perfect. And a quick follow-up. How did equipment orders for BPS and LPS, respectively, trend for the quarter for Q4? And are you starting to see any early signs of recovery? You spoke about comparison and orders, but I was just trying to figure out what about equipment orders separately for LPS and BPS. Rene Faber: Thank you for the question. Although we are not giving further information on that very detailed level. But what I can tell you is, on the one hand side, we have been talking about H2 sales being much stronger than H1 sales. And the same holds true when we look at order intake where the order intake in H2 was also well within double digits above H1, which, of course, then speaks to the quality of the order book and therefore, our cautiously optimistic outlook then also into '26. Operator: Next question comes from Richard Vosser from JPMorgan. Richard Vosser: One question, please. So you talked about market conditions not fully back to normal for equipment. So just a little bit of elaboration on changes of customer sentiment here. You've talked a little bit just now about equipment orders suggesting improvement. So just thinking about, first, your confidence in the stabilization of equipment revenues, what's underpinning that in '26? But also, when do you think equipment could move more back to normal levels? We've seen that happen for consumables in '25. What's your thinking there? Rene Faber: Yes. Thank you for the question. I'll take it. Let me first get back to 2025. You will remember when we talked about stabilization of equipment like in Q3, we said for H2 '25, we expect to be in revenues for -- with equipment at least on the levels of H1, maybe slightly above. And you could hear from Florian that H2 came out as stronger, so confirmed the stabilization stronger compared to the H1. So I think that's a clear kind of confirmation of our view and expectations and visibility and the discussions with our customers that the equipment is stabilizing. And now looking, of course, into the 2026, we continue to see the positive discussions and have positive discussions with customers. They are tangible projects, sizable projects on the horizon. The order book is healthy as we mentioned in the -- a few minutes ago. So as Florian [indiscernible], cautiously optimistic looking into the 2026. We believe that the portfolio we have is well positioned to help customers quickly adjust their capacity, single-use technologies are designed to make -- to do -- to provide flexibility. So yes, we're very encouraged about the current -- the sentiment as well as the -- our position and discussions we had with our clients. Michael Grosse: I would like to expand even that from Rene's perspective, I think the similar situation is true as well for LPS division on the basis of equally, I would say, strong development interest levels in needs and opportunities, particularly on the biolytical instrument side, as well a trend that we see in the second half of the year, particularly in Q4, coming and resulting into a good level of contribution in both sales and order intake. And again, so same sentiment for us. But again, I think it will take, for sure, the full quarter Q1 for us to have simply better visibility, better understanding the continuation of the order intake trade in order to have a better view whether this requires further refinement of our perspective for the full year at that point in time. Operator: The next question comes from Doug [indiscernible] from Schenkel. Douglas Schenkel: It's Douglas Schenkel from Wolfe. I'm going to try to do 3 really quickly. One, I just want to confirm, based on your responses to the earlier questions that your 2026 guidance does not currently assume an improvement in bioprocessing equipment demand. So that's the first one. The second, can you please bridge to your margin guidance for the year? Specifically, what would be helpful is, what's the impact of foreign exchange, tariffs and operating efficiencies as you incorporate those into your guidance? And then third, [Technical Difficulty] many companies in your peer group have taken a more conservative approach to guidance than had been the norm given market challenges over the past several years and given ongoing policy uncertainty. With that in mind and also recognizing that this is issuance as CEO, how would you describe your initial guidance philosophy? Florian Funck: So maybe I start to give a little bit more perspective on the margin guidance here. So what we know as of now, of course, is roughly the impact of the tariff on the year 2026, which is to be around 50 basis points. What we do not know is the full FX impact. The weaker the U.S. dollar the higher this impact might be, although we think we are in a good position to a certain extent also to compensate certain headwinds on the FX side in the margin. The, let's say, broad improvement in margin that we are seeing, if we are taking out tariff and FX impact, is definitely a 3-digit basis point number, so above 100 basis points and should be driven to a majority from ongoing operational leverage that we've seen. Michael Grosse: Yes. Maybe to add to Florian's point there just because you may have really in mind as well our fantastic margin contribution that we delivered in 2025. And of course, there are other effects that I think are relevant in my mind to keep in mind there. Of course, on the operating leverage, since we are now already throughout the last year on a different level, the effect of this is, of course, diminishing to a point. Keep as well in mind that when it gets to our activities that we launched in the year even before on our cost reduction programs that the main effect there as well was visible, particularly in 2024 and 2025, still continues in 2026, but less so. So with this and as well a bit of the question mark, how much of the equipment will be there in the year 2026. If that is a higher degree of recovery, of course, the margin mix, the mix effect that we have seen in 2025 was probably as well a bit more favorable compared to 2024 than it may be in 2026 compared to 2025. Then you talked as well a bit about the guidance philosophy. Yes, I think we try to express that in our wording already. On the one hand side, it's early in the year. We felt like, okay, we're feeling confident enough in order to quantify our guidance. But given the fact that it's early in the year, given the still the level of uncertainty that we have there in terms of macroeconomical and geopolitical aspects, as you mentioned, I think we want to as well, therefore, be prepared for this and the lack of full visibility for the full year on the basis of order intake and the book and the market trends, we felt the philosophy is indeed that we have decided for a wide range with the 4 percentage points we have there. We don't feel that we are neither over aggressive nor over conservative with what we put out there. However, we feel that we will not celebrate if we achieve only a 6% growth for 2026. That's equally clear. At the same time, the level where we will land on versus the mid or even beyond the midpoint is so much dependent now on what will happen. So I think we will be in a better position after the first quarter to give more clarity as the year progresses. And that is why I think the philosophy remains, I would say, remains balanced, remains balanced. Operator: The next question comes from Harry Sephton from UBS. Harry Sephton: [Technical Difficulty] consumables. So we're seeing a more comfortable high single-digit to low double-digit growth across the big players in the industry on the consumable side. Based on your guidance, that you're expecting to be more in line with market growth. So what do you see in terms of potential upside or downside risk to market share in the near term on the consumable side? Rene Faber: Yes, I take it. So a question on consumables. As you will know, the consumables is very much -- the majority represents the majority of our revenues for the -- I'm talking for the Bioprocess division. You will know that most of that recurring revenues, consumables revenues are linked to commercial manufacturing and consumption of our customers of the products in making commercial drugs, adding late-stage clinical material production, it comes to around 80% of the consumables revenue are linked to that late-stage plus commercial manufacturing. So -- and that's more or less kind of also gives you an idea about what dictates the growth of consumables. Looking forward, it's very much about the volumes, manufacturing volumes of our customers. We can do little about that, of course. But then once new drugs are being approved or enter these late-stage clinical phases, yes, that drives additional volumes for these consumables. So looking forward, I think we have been working consistently over the years with the teams in all regions to make sure we are early with customers and place these consumables spec in, validate when the decisions are made and validations are done and also working hardly with customers to convert wherever possible in an ongoing and existing processes towards our products. The highlight of that was, of course, during the pandemic where mainly due to our ability to supply and the customers, we gained market shares and kept or we were able also to protect roughly 1/3 of this gain moving forward. So we are, I think, on a very healthy and successful track record to drive that above market -- above drug volume growth of our consumable revenues. Of course, as we mentioned in presenting our 2025 results, we have seen a strong mid-teens growth of our consumables in 2025. So comps are higher now looking in 2026, but we are very confident that these fundamentals and the volumes driving the growth of consumables are there are intact and are positive about the outlook in '26 and beyond. Operator: The next question comes from James Quigley from Goldman Sachs. James Quigley: I've got one on China, please. So you said in the slide and in the comments that China is starting to show some encouraging signs of growth. I think some of your peers at a recent conference still sounded a bit muted on China growth. So what are you seeing here in the region that's driving those encouraging comments from you across the BPS and the LPS divisions? Michael Grosse: So I mean I can get started a little bit. I mean, highlighting perspective again, I think China has really a few years back that I think we've seen a really difficult market environment with as well, very strong level of guided preference with regard to local players and for local production. We feel now that a little bit this notion of rebaselining the market has come to an end. We feel now that we are able to, right now, keep market shares in China and benefit from probably the still modest level of the growth that the China market demonstrates. At the same time, there's, of course, a lot of innovation activities that we are part of and want to equally, I think, being asked by customers to be part of the rollout of out-licensing and bringing some of their pipeline development into other regions and markets. Our expectation for the market, however, overall is still a rather flattish or rather very modest level of degree of growth expectation given as well the prior year performance that we've seen. So we don't see and we don't expect naturally a big turnaround of that momentum. It's still probably there to come later. At the same time, there's a big overhang and a high capacity buildup on the equipment side. So particularly on the equipment side, we feel as well that China will, in the year 2026, be a rather muted market. But on consumables, we think will be part of the game. And yes, as we said, we are -- we have modest expectations here on the market. Operator: The next question comes from Charles Pitman-King from Barclays. Charles Pitman: A quick question, please, on just the guidance again. Just trying to relate the kind of 2 separate statements of the low end of your guidance range, reflecting kind of deteriorating market outlook. But also your commentary around the strong order book and equipment being at least stable. Can you confirm, therefore, that the low end of your guidance range reflects equipment being stable, supported by your existing backlog and other market deteriorations impacting consumables? And then just a quick clarification on margins. Just wondering why you're only providing a kind of bottom end of that range. And is it the implication that at the top end of the range, you have rising equipment, which will offset the margin such that your only confident to provide at the bottom end of the range? I'm just trying to -- yes, just thinking about how you're setting this out. Michael Grosse: So first part, yes, I mean... Unknown Executive: Charles, you broke up a little here technically. That's why we are a little puzzled. Could you repeat the first part of the question? Charles Pitman: Sorry. My question relates to trying to triangulate the 2 guidance commentary, one being that your sales could be at the low end of the range upon worsening market conditions, but did you separately expect equipment to be at least stable? I'm just wanting to confirm that your order book means that you have this confidence in your equipment being at least stable, and that in the scenario where you hit the low end of the range, that's driven by consumable deterioration more so than any downside to your equipment outlook? Michael Grosse: Okay. So I mean, yes, I mean, again, I think on the lower end of our guidance as we try to express, we see some level of, I would say, market situation overall. So we would see that there is no impact, no positive contribution there from the equipment and possibly as well a slight deterioration even on the consumable side. We see the total mix. It depends on how you see the 2 elements of that coming together. But as we say, I mean, if we see the momentum that we've seen right now based on, as you said, the order intake generated in equipment, and at least, stable situation plus the continuation of the current trajectory of the consumables that would be slightly above the bottom part of the guidance. So we would assume some level of deterioration of that condition. Then I think the other question was on the margin. Florian Funck: Yes. While we have not given a range for the margin, we have said that we want to reach slightly above. So this is in a way open to one side. Now let's assume we would be on the lower end of our guidance range. The 5% for the group, we would definitely aim to see margin improvement against prior year, but we might not fully reach that. So the margin corridor that we are indicating to was slightly above -- the 30% was more towards the midpoint of the guidance. If we then come to the upper part of the guidance corridor on top line, of course, there's way more potential on the back of more operational leverage. Operator: The next question comes from Charlie Haywood from Bank of America. Charlie Haywood: Charlie Haywood, Bank of America. I have 2. So first one in '26, is it fair to expect typical seasonality on the bioprocessing side? So I think you've previously commented to 4Q, 1Q, 2Q, 3Q. Or given equipment phasing and what looks like a strong fourth quarter for those orders and a 6- to 12-month order book, might that distort to possibly fueling a stronger second half? And then the second question is just a bit more on midterm. Now that you spent a bit of time in the business. You previously sort of commented to Merck's 9% to 10% market outlook not far from your thinking. I guess how are you currently seeing the bioprocess midterm market growth in the end markets there? Michael Grosse: Thanks for the question. So I think we can maybe kick off a little bit on the basis. I think, as you know, we don't really break down and guide on the basis of quarterly perspective. So I think in this case, we would like to leave a little bit the breadth of the way of how we look at the year to come in more the total perspective. So we will not provide any specifics as we see the quarters moving forward. Again, I think it is probably more in the nature of the business. If you think about -- and it's probably a similar pattern that we've seen during the last year, given the lead times of equipment orders, particularly we now see that, okay, we generated the order intake in the second half of the year, Q4. So things now with the lead time, 6 to 12 months on the Bioprocess side, of course, then we would expect sales realization in all these orders to rather hit the second half of the year than the first half of the year. So that's natural by the lead time of those orders. Yes. Then in terms of the market. Yes, I think we hold to that. I mean we basically took a look at the market. We'll get back a little bit more interesting insight on the market analysis that we've done for the capital market that we will provide and bring up in March. However, as we said, we think that the assumption there for the market to be around a 9% growth, I think, is something that's very much in line with our views and with our analysis. Again, depending a little bit also on the specific market segment and then the exposure to the market segments. But that corridor is well in line with our analysis that we've done. And that is well what we believe that in our minds, we will measure us against from a mid- and long-term perspective. Operator: The next question comes from James Vane-Tempest from Jefferies. James Vane-Tempest: Just on LPS, actually. You mentioned in the presentation that the rolling book-to-bill is now more than 1, but now you specifically stated in both divisions. So I was just kind of curious whether the LPS book-to-bill turned in Q4 to be above 1? And if so, where you're seeing accelerating orders from either certain customer or product groups? And then related to LPS, I mean the guidance that you've given is marked the fourth year of margin decline in a row. I know we're going to hit more in March. But conceptually, how realistic is it from here to get back to levels seen a few years ago? And what would it take to get there? Michael Grosse: Okay. So the first part of the question was about the book-to-bill. Sorry, do you want to take that? Florian Funck: Exactly. James, as you know, we would not like to go specifically into that. But let me put it that way. We were quite pleased with what we have seen than in Q4. Let us leave it on that level. Michael Grosse: And then one was related to profitability. James Vane-Tempest: LPS margins, yes, in terms of the fourth year of decline and just thinking about what it would take to get back to where it was? Florian Funck: Yes. I think this is a question that we should discuss more in detail around the Capital Markets Day, if you don't mind. James Vane-Tempest: Okay. No, that's fine. One quick follow-up, if I can. And that is just about the business flow within BPS. Historically, you've kind of alluded to consumables equipment normalized being 75%, 25% approximately. And I know at 9 months, I think you sort of said it was around 85%, 15%. So just as an approximation, I was just kind of curious where that sort of number for the full year. Michael Grosse: Okay. Just maybe a short point of clarification. So I think, let's say, the numbers you're referring to on the 75%-25% would be on the group level. If we look at BPS, I think we see the rough proportion over the last half year, we've more talk about 80%-20% on that ratio. And again, I think, yes, that is where we see the current state. We don't necessarily believe as well, given the discussion earlier that, that will be as well roughly the level that we will see as we continue into the year 2026 now. Operator: The next question comes from Charles Weston from RBC Europe. Charles Weston: You've talked about Europe being ahead or EMEA being ahead in terms of the recovery curve. Does that also mean it's ahead in terms of the equipment order recovery curve? So have you got sort of proof of those orders turning into -- that interest turning into orders and revenue in Europe? And just a clarification question. You said you have good discussions with your customers to understand their CapEx plans. Can you give us any insight into whether the big investments that they're making is more about them shifting CapEx from other parts of the world into the U.S. or whether they are genuinely adding additional capacity into the U.S. over and above what they would be normally planning? Michael Grosse: No, thanks for the question. On EMEA, I think the situation is not that we see any difference here. Yes, the recovery overall happened earlier there, but we cannot now say that we have data that suggests on the equipment recovery that EMEA is ahead of the other regions. So that's not really the case. Florian Funck: Yes, and the discussions we have with customers on the equipment, they are mostly not today related to the onshoring or reshoring in terms of tangible projects, investments, either replacing old instruments or adding capacities. The discussions are with -- around onshoring, it's more about understanding really what is relevant of the -- what has been published from the headlines from our customers, what is of relevance for us, of course, you will see a lot of R&D investment being included in these headlines. You will see also investment in classical pharma facilities, final field drug product facility, so all less relevant for us. So trying to understand what's really in for Sartorius, and then also trying to understand really what the timing will be and when the discussions about the equipment, the providers will start. So this is more about where the onshoring discussions are today. So the very tangible projects are still less related to that topic. Operator: Next question comes from Odysseas Manesiotis from BNP Paribas. Odysseas Manesiotis: First, to better understand the growth deceleration in Q4. I have EMEA around 4% CER for Stedim. Could you give us a feeling of how that's different between equipment and consumables or just whether that's the growth we should be expecting for the region as the new normal? And secondly, in order to have a better feeling of the conservative business embedded in your guide, is it fair to say that your book-to-bill for the entirety of the year was pretty much close to your pre-pandemic average of around 1.05? And last quick one, biotech funding has been -- has been quite strong. What's the usual lag that you see between a biotech funding recovery and a pickup in your order intake? Florian Funck: So let me maybe start with the growth regarding BPS recurring versus nonrecurring in H2 because I think really looking only at 1 quarter doesn't make sense in looking at the matter, it's already really short term. But just to give you a feeling, the growth that we've seen in the nonrecurring business was very similar to the growth that we've seen also in the consumable business in H2. So this is also a reason besides the effects that we've seen in the order intake while we are taking that confident stance towards 2026. When it comes to book-to-bill, we are not communicating on the level of book-to-bill. Sorry. Operator: [Operator Instructions] The next question comes from Thibault Boutherin from Morgan Stanley. Thibault Boutherin: Just to come back -- can you hear me? Michael Grosse: Yes. It's okay. Thibault Boutherin: Just to come back on the topic of onshoring and the last CapEx plan that has been announced. There is a question that comes back often from investors, which is, is there a risk that because we see CapEx being skewed towards the U.S. in the next few years to see an imbalance between you and your competitors? So I think the idea from some investors is maybe U.S. peers would be better positioned to benefit from CapEx being skewed to the U.S. So just wanted to know if you could comment on your competitivity in the U.S., the market share relative to other regions and give an answer of how a shift of investments to the U.S. in terms of equipment and CapEx for biopharma would impact you? Rene Faber: Yes. So I'll take that question. Look, the -- in our industry, and I think it's been always the case, still is the case. The main decision criteria is the technology and the performance. Their customers don't make really compromises when it comes to how they equip their facilities, if it's for preclinical small scale manufacturing or even commercial. So I think there we -- and this is where we really see ourselves being ahead with a lot of focus on innovation. So I think for us, the positioning to benefit and participate in the potential onshoring wave is very strong. We have a facility to assemble equipment in the U.S., in the Boston area, in Marlboro, as well to be close to customers in case of the factor acceptance that and so on for more complex equipment. So I think, yes, we are ready to take all the opportunities, the feedback from customers is strong, so positive about the outlook here. Operator: Next question comes from Oliver Metzger from ODDO BHF. Oliver Metzger: It's one more structural question on equipment. So we know from the past, normally, equipment and consumables should grow at a similar rate over the cycle. So we now see consumable demand healthy for a while, while equipment is at least lagging behind. Can you comment about the reasons for this reluctancy? Is it more like still an overhang from, let's say, the time during the pandemic or post the pandemic? Or could it be that there is a more structural change as higher quality consumables might have increased the efficiency of the tighter of a production process and therefore, some structural lower or slower demand for equipment might be the case for a quite longer period of time before we see more expansion or new manufacturing facilities? So that's, to say, upgrades and lower expansion. Rene Faber: Yes. Thank you for the question. I try to kind of give you more color to think about why this reluctancy to invest, you addressed or you asked how much of that is coming with kind of a post-pandemic would call macroeconomic cash-driven impact or development. I think that's very much more on that side, plus the overcapacities, which have been built during the pandemic in some areas versus how you call it kind of a structural change in a way that by technologies improving, it would require less of this equipment. Actually here, over years and decades, we have seen exactly the opposite. The better the technology gets, the more of it will be used, especially in single-use manufacturing, the [ cake ] of what you can address with single use increases or grows, the better the technology, the higher the titers, the better the yields are. So I think that's very much a positive ongoing trend with this improvement. So again, back to your question, I think it's very much on the cash post-pandemic macroeconomic impacts rather than any different structural technology-related. Operator: The next question comes from Falko Friedrichs from Deutsche Bank. Falko Friedrichs: My question is on the LPS margin. When do you expect these investments in Advanced Cell Models to begin contributing positively to the margin of the segment again? And then just a very quick housekeeping one. Is a 27% tax rate a fair assumption again for the Sartorius Group in 2026? Florian Funck: Yes. Let me start with the housekeeping question. We currently think that the 27% is still okay for the year '26. And on the margin, as I said, it's connected a lot, of course, to our engagement in Advanced Cell Models, which is an emerging business, but should not be impacting on a sales side very soon, but rather we are building up for the more long-term perspective, more to elaborate on at our Capital Markets Day. Operator: Next question comes from Harry Gillis from Berenberg. Harry Gillis: I have one clarification regarding an earlier question on guidance. I'm sorry, I didn't quite catch that. Does the 6% guidance at the low end of your for BPS growth, does that assume a further decline in equipment sales, sorry? Or does your expectation for at least stable equipment hold here and it's deterioration in growth in consumables? And secondly, could I just ask you. Do you expect your CapEx ratio to remain stable at around 12.5% into '26? How should we think about that over the midterm as some of your larger projects start to roll off? Florian Funck: Should I start with the last question on the CapEx rate. So of course, you are asking more the midterm perspective, but I think we have always quite consistently communicated that we are -- we should see from the year '27 onwards, an overall reduction in our CapEx ratio. '26 is, therefore, the last year, where especially also driven by our expansion projects in Korea. We are seeing elevated levels of our CapEx ratio to then come down afterwards, more on the Capital Markets Day. Rene Faber: Then again, on the guidance, just to repeat, we said at least flat, so we are not considering any decrease in equipment revenues for 2026 in our guidance. Operator: Next question comes from Shubhangi Gupta from HSBC. Shubhangi Gupta: So just a clarification for your guidance or the upper end of your sales growth, does it assume recovery in equipment sales? And if yes, what is the time line? And how should we think about the phasing of growth in 2026, given H2 have tough comps, especially from strong growth in consumables? Florian Funck: Yes. Again, so now the question is about the upper range of the guidance. Here, as we said, of course, in that case, we would expect the contribution of both consumables, continued healthy growth as knowing and considering the higher comps coming from this -- from 2025 as well as at least a moderate growth in equipment revenues. So that's kind of our current thinking. And again, very positive what we have seen so far, the order book, the trends we see. So quite confident we are heading there. But as Michael said in the introduction, still early in the year and more to come with our Q1 results. Michael Grosse: Yes. Give us a bit more time on that, please. So on that. However, I think just to add on, I mean, as we said at the other stage, given a bit as well if we think that one of the contributing or deciding factors towards the upper end, it will indeed be a more strong recovery and growth contribution as well from the equipment instrument side. Again, on the lead times that are there, of course, assumption is probably fair to say that this is something that happens rather later in the year than earlier. So it's something that we would expect to rather beyond Q1 to happen, if it happens in the degree that we may hope for, but we don't know. Shubhangi Gupta: And just a quick follow-up, can you comment... Petra Muller: I'm sorry, Shubhangi, but we have 3 more people in the queue. I'm sorry, we have to head on because we are over time already. Sorry about that. Happy to take your question afterwards. Operator: The next question comes from Anna Snopkowski from KeyBanc. Anna Snopkowski: This is Anna on for Paul Knight. I just was wondering, you mentioned on your last call, you were having some early conversations with small CDMO customers. How has this progressed in the quarter? And are those early conversations around equipment broad-based or concentrated in any customer group or certain types of equipment like those that help your customers reduce costs? Florian Funck: Yes. Thank you for the question. So yes, absolutely, that was a kind of an ongoing development we have seen in 2025. Towards the second half, we've seen the smaller CDMOs also becoming more and more active. We've seen them, their pipelines filling, their projects coming and discussion started, and it's both really about -- its equipment and consumables. So preparing for delivering on the project, it's all about getting ready to make the batches, preparing to get an order in consumables to be -- to have them on -- to build inventories as well as where needed, add equipment to prepare the capacity as well. So that's been the development we've seen with them, and it didn't change so far. So also kind of contributes to our positive outlook. Operator: The next question comes from Naresh Chouhan from Intron Health. Naresh Chouhan: Just on BPS. When you talk about double-digit consumable growth, can I confirm that this is more like low teens if we exclude China, just to give us a sense of where underlying demand is in Western market and the kind of state of the Western market recovery? Florian Funck: Yes. So consumables kind of, yes, low teens is a fair assumption in a positive outlook, right? And yes, that's how we are looking forward, not only '26 but ahead as well. Yes, so you're right. Operator: The last question comes from Delphine Le Louet from Bernstein. Delphine Le Louet: Yes. I'm sorry because I really don't understand the guidance regarding LPS when it comes to the margin. And so I know when you're trying to push back about the CMD and probably you're right, but that makes me think, is there anything and especially when we look at the Q4, where we had the margin gain versus the Q3, is there anything more structural that you're planning? And this is a new way where probably we should think about the division in the future, meaning a complete reorg internally of the LPS division that could justify not having any execution gain coming over the sales growth even at the midpoint of 4%, which is quite nice for that division, by the way. So any more clarity on that? How should we think about that margin in the context of back to growth and a scenario, which is not that bad at the end? Florian Funck: So Delphine, maybe I'll start, and then Michael, especially to add on, on that. But first of all, we definitely think that the LPS business is a 20% plus margin business going forward. On the other hand side, on the current position that we are at, at a margin of 21.5%, knowing that the tariff impact overall in the group is roughly 50 basis points in 2026, knowing that there are unknown on the FX side and knowing that we are ramping up our investment through the P&L into ACM, we thought it is appropriate to guide then for the year '26 with a slightly below 21%. Michael Grosse: Yes. And over and above what Florian said, of course, we want to give you an incentive to join the Capital Markets Day here, very clearly, any strategic type of consideration about how we see the business, the divisions as we move forward. You're welcome in March to our Capital Markets Day. Operator: There are no more questions from the phone. I would now like to turn the conference back over to Petra Muller, Head of Investor Relations. Petra Muller: Yes. Thank you very much, Valentina. This concludes today's call. Please reach out to the Investor Relations team in case of any open questions. We thank you for joining us and wish you a pleasant rest of the day. Take care and see you next time. Thank you. Goodbye. Michael Grosse: Thank you. Bye-bye, all. Many thanks. Operator: You may now disconnect.
Operator: Welcome to the presentation of Sartorius and Sartorius Stedim Biotech on the Preliminary Results 2025. Please note that the call is being recorded and streamed on Sartorius' website. Your participation in this implies your consent with this. A replay will be available shortly after the call. I would now like to turn the conference over to Petra Müller, Head of Investor Relations of Sartorius. Petra Muller: Thank you, operator. Hello, and a warm welcome from my side. I'm joined today by our CEO, Michael Grosse; by Florian Funck, our CFO; by René Fáber, Head of our Bioprocessing Division and CEO of Sartorius Stedim Biotech; and by Alexandra Gatzemeyer, Head of our Lab Products & Services division. As always, we will start with prepared remarks followed by the Q&A session. As the call is scheduled to 1 hour, please limit your question to 1 so that as many participants as possible can take part. Please note that management's comments during this call will include forward-looking statements that involve risks and uncertainties. For a discussion of risk factors, I encourage you to review the safe harbor statement contained in today's press release and presentation. With that, I'm pleased to hand over to Michael Grosse, CEO of Sartorius. Michael, please go ahead. Michael Grosse: Thank you very much, Petra, and a warm welcome also from my side, and thank you all for joining us today for our preliminary full year 2025 results. Before we begin, I would like to sincerely thank all of our colleagues across Sartorius for their commitment and dedication over the past year. Their passion, professionalism and strong focus on execution are clearly reflected in our results we are presenting today. I would also like to personally thank everyone who has made it such a smooth and rewarding experience for me to step into my role as a CEO, and particular thanks as well to my colleagues here, Alexandra, René and Florian from the executive team. It has been really a great journey up to now, fantastic work on the strategy and great things to come. And I don't want to miss out as well on saying thank you to the team here from Investor Relations, Communications and Finance because I think the workload over the last couple of weeks and days have been tremendous in order to get us all prepared and get our reporting in place. Thank you all for that. Now let me briefly summarize key messages that we would like to share with you today. First of all, 2025 was characterized by return to normal demand behavior for consumables and continued cautious investment activities by our core customers. Combined with an active operational management in a still challenging environment, we delivered improved operational and financial performance. Okay. All right, supported by the improvement -- improving demand trends, mainly on the consumable side and the operating leverage inherent in our model, Sartorius achieved considerable profitable growth. For the full year, we delivered results slightly ahead of our upgraded full year 2025 sales guidance. Profitability landed in the upper half of our initial guidance from April and exceeded our October EBITDA target, with a margin of 29.7%. This performance reflects growing volumes, operating leverage and strong execution. Now growth was once again driven by our recurring business across both divisions. In Bioprocess Solutions, strong double-digit growth in recurring revenue more than offset continued softness in equipment, which, however, stabilized over the year. In Lab Products & Services, performance improved gradually as expected. Growth in H2 was driven by recurring business, while instruments showed positive momentum also supported by product launches in bioanalytics. Our operating performance allowed us to further reduce our leverage ratio, underscoring our commitment to financial discipline and a strong balance sheet. Overall, in 2025, we laid a solid foundation for the year 2026. For the group, we expected sales growth of around 5% to 9% with an underlying EBITDA margin slightly above 30%. Let me now turn to actions we are taking to enable future growth. Let's talk about innovation and partnerships. We have made tangible progress in 2 key areas: innovation and the expansion of our resilient global R&D and production capacity. We launched several new solutions across both divisions. In Bioprocessing, we made progress in more sustainable product design with the launch of Sartopore Evo, a PFAS-free filtration solution, which addresses growing regulatory and customer expectations around the elimination of persistent substances while maintaining the high performance and reliability our customers require. We also launched the Sartocon cassettes, further strengthening our offering for efficient and scalable downstream processing, particularly for viral vector purification. Now on the equipment side, we introduced the Pionic Continuous bioprocessing platform developed with Sanofi, which faces high customer interest. This platform supports the industry's transition from traditional batch production to continuous processes, enabling faster, more efficient and more sustainable manufacturing workflows. And our teams advance our bioanalytical portfolio, including the only live-cell imaging system with confocal microscopy inside an incubator, a really important step forward for the work with complex 3D cell model. We further strengthened this area also through the acquisition of MATTEK, expanding our portfolio of advanced 3D cell models that more closely mimic human tissue, deliver more predictive and reproducible results and help reduce the need for animal testing. And we entered into a partnership with Nanotein Technologies, enhancing our capabilities in cell expansion and activation to support next-generation biologics. In parallel, we continue to invest in a resilient global manufacturing footprint. We completed the expansion of [ Aubagne ] and progressed with the expansion in Germany, as well as with the construction of our greenfield site in Songdo, South Korea, ensuring scalability, supply reliability and proximity to our customers. Taken together, these actions strengthen our ability to support customers as markets normalize and position for Sartorius for sustainable innovation-led growth over the coming years. With this, let's take a closer look into our numbers. Florian? Florian Funck: Yes. Thank you, Michael, and a warm welcome also from my side to everybody out there. I'm happy to take you through our numbers that's reflected, in my perspective, a consistently strong performance in the year 2025. So let's start with top line performance. Our sales revenue increased by 7.6% in constant currencies and 4.7% in reported currencies, reaching slightly more than EUR 3.5 billion. This positive development was driven by mid-teens growth in our recurring business in 2025, which represents, by far, the largest part of our business, as you know. Our nonrecurring business remains soft on a full year basis, but clearly stabilized in H2 and was above H1 in absolute numbers as respective. The difference between constant currency and reported growth was primarily driven by U.S. dollar weakness, which represents a headwind of almost 300 basis points to reported sales growth in fiscal year 2025. Our full year performance was also influenced by U.S. tariffs. The successful implementation of tariff surcharges contributed approximately 1 percentage point to sales revenue growth. Order intake developed strongly, growing faster than sales. And as a result, our 12-month rolling book-to-bill ratio remained consistently above 1 throughout the year '25, although as expected and also communicated in our last quarterly call, it declined slightly sequentially in Q4 due to a very strong prior year comparison. In absolute terms, order intake in Q4 was roughly on par with the exceptional strong Q4 2024. You remember that above EUR 1 billion figure that we posted there. And that was the quarter with the highest absolute order intake in 2025. And therefore, we entered 2026 on the back of a strong order book. Looking at our divisions in more detail. Bioprocess Solutions delivered another strong quarter, bringing full year sales revenue growth to 9.5% in constant currency. Growth was driven by mid-teens growth in consumables throughout the year, while equipment remained soft, as Michael already mentioned, but was clearly stabilizing with H2 '25 sales being double-digit percentage above H1 '25 sales. Lab Products & Services delivered a resilient performance in a challenging market environment. Sales were essentially flat at 0.2% in constant currencies plus, supported by solid momentum in consumer goods and services. The acquisition of MATTEK contributed slightly more than 1 percentage point to growth. Instrument sales were impacted by constrained CapEx spending in life science research and market. However, we are seeing encouraging signs of stabilization supported by positive momentum in bioanalytics in the second half, driven in part also by the launch of several updated instruments in that market space. Let me also quickly elaborate on our regional performance. EMEA sales performance remained robust with growth of almost 6% in 2025. As a reminder, the recovery in EMEA started earlier than in other regions and therefore, faces higher base effects compared to the Americas or APAC. The Americas outperformed, growing by 8.9%, like APAC, which also grew by 8.9%. In APAC, China continued to stabilize with early signs of improvement. Excluding China, the APAC region delivered low double-digit growth in the year 2025. Let's now turn to our profitability. In addition to robust growth momentum, we achieved a strong improvement in profitability over the past 12 months. Underlying EBITDA increased overproportionately by 11.2% to EUR 1.052 billion, with the margin expanding by 170 basis points to 29.7%. This margin improvement was driven by positive volume and product mix effect as well as economies of scale, further underpinned by cost discipline, more than offsetting FX and tariff-related headwinds of around 1 percentage point. Looking at the divisional profit distribution, profitability in our BPS division developed strongly. Underlying EBITDA increased by 15.2% to EUR 907 million, and the margin improved by 240 basis points to 31.7% based on the effect just mentioned also for the group. In LPS, margin declined year-on-year to 21.5%, roughly 50-50, reflecting an unfavorable product mix on the one hand side as well as FX and tariff-related impact on the other hand side. Now let's take a look at the performance below underlying EBITDA, where both net profit and cash flow developed well. The strong increase in underlying EBITDA of 11% translated into overproportionate growth and underlying net profit of 18% and reported net profit of 84%. As a result, underlying EPS also grew at a very strong 18%. Turning to cash-related items. Operating cash flow amounted to EUR 837 million, below the exceptionally strong prior year level of EUR 976 million, which was positively impacted by significant one-off inventory reduction measures in the year 2024. While business volume improved strongly in 2025, working capital remained largely unchanged. Going forward, we remain committed to keeping net working capital growth below our sales growth. Free cash flow amounted to EUR 390 million, reflecting the development of our operating cash flow. In addition, free cash flow is also reflecting the slightly increased CapEx spending from EUR 410 million to EUR 441 million. Accordingly, the CapEx ratio was 12.5%, which is exactly in line with our guidance throughout the year. To conclude our section on 2025 financials, let us now look at the development of the balance sheet-related key figures. We see a strong equity ratio of 39.8%. The increase versus year-end '24 is mainly due to some repayments on financial instruments using our strong cash position and therefore tightening the balance sheet total. Net debt remained largely unchanged, while gross debt has been reduced by EUR 277 million and despite payout of the acquisition of MATTEK in summer 2025 of EUR 70 million. The leverage ratio, defined as net debt to underlying EBITDA, improved as expected from 3.96x to 3.55x in 2025, despite the acquisition of MATTEK, which added approximately 0.1 turns to the ratio. So we are well underway on our planned deleveraging path. And as you can see in the title, we stay committed to our investment-grade rating. With that, I would like to hand back over to Michael. Michael Grosse: Thank you, Florian. So overall, we are very pleased with the strong performance Sartorius delivered in 2025, supported by improving demand trends, mainly on the consumable side. In addition, the results demonstrate the resilience of our business model and confirm the attractive long-term opportunities in the biopharma and life science markets. We will remain focused on disciplined execution, targeted investments in innovation and capacity and operational excellence. Looking at 2026, it is clear that our industry is back on track, but has not yet fully reached its long-term growth level, especially in terms of demand for equipment and instruments. Since the year is still young, we have deliberately set a broad guidance range to account for continued high macroeconomics and industry-specific volatility. The lower end of the range reflects the cautious scenario in which market conditions weaken. However, we currently expect market dynamics to continue normalizing and positive trends to continue. For 2026, we expect to continue our profitable growth trajectory with a continued positive development in the Bioprocess Solutions division and a recovery in the Lab Products & Services division. For the group, we expect sales growth in constant currencies of around 5% to 9%, including a positive effect from the market acquisition and U.S. tariff-related surcharges totaling approximately 1 percentage point. And for the underlying EBITDA margin, we expect an increase to slightly above 30% in which a technical margin dilution of around 50 basis points from tariff surcharges is already reflected. In Bioprocess Solutions, we anticipate sales growth of around 6% to 10%, mainly driven by the recurring business, while we expect equipment business to remain at least stable. The underlying EBITDA margin should be slightly above 32%. In Lab Products & Services, sales growth is expected at around 2% to 6%, including a growth contribution of 1.5 percentage points for MATTEK. This reflects the continued growth recurring business and an at least stable instrument business. We expect underlying EBITDA margin to be slightly below 21%, mainly influenced by deliberate investments in advanced cell models with additional headwinds from unfavorable mix, ForEx, and the dilutive effect of the existing tariffs. CapEx ratio should be around the prior year level as we will continue to invest selectively and with discipline in expanding our global research and manufacturing footprint. Net debt to underlying EBITDA should decrease to slightly above 3x at year-end. As usual, we will provide some additional information for modeling purpose. As you can see, with the Euro-U.S. rate of 1.2, there, we would be a headwind of around 2 percentage points on the reported versus constant currency growth in full year 2026. In Q1, the headwinds would be around 4 percentage points at Euro-U.S. rate of 1.2. Taken together, we are confident that Sartorius is well positioned to benefit from continued recovery. With that, I would now like to hand over to René, who will walk us through the financials of Sartorius Stedim Biotech in more detail. René, over to you. Rene Faber: Thank you very much, Michael. Also from my side, welcome, and thank you for joining us on the call today. In 2025, Sartorius Stedim Biotech achieved considerable profitable growth driven by improving demand, particularly for consumables and operating leverage. This allowed us not only to achieve our updated October 2025 guidance, but also to exceed our top line expectations. Overall, we are very pleased with the results and would like to sincerely thank our all colleagues across the Sartorius Stedim Biotech for their commitment, dedication and really hard work in making 2025 a success. Looking at the numbers. Sales for the Sartorius Stedim Biotech Group increased by 9.6% in constant currencies, reaching nearly EUR 3 billion. Growth in reported currencies was 6.7%, primarily due to the weaker U.S. dollar, which represented a headwind of almost 300 basis points. The successful implementation of tariff surcharges contributed approximately 1% of sales revenue. Our high-margin recurring consumables business remained very strong, delivering mid-teens growth more than offsetting the soft but increasingly stabilizing equipment business. Order intake grew faster than sales, keeping our 12-month rolling book-to-bill ratio consistently above 1, while the ratio declined slightly sequentially in Q4, as Florian explained, due to a very strong prior year comparison. Q4 order intake was roughly on par with the exception of Q4 2024, making it the highest absolute order intake quarter in 2025. We therefore entered 2026 with a strong order book. Underlying EBITDA increased by 17% to EUR 914 million, driven by volume, product mix and economies of scale. Consequently, the underlying EBITDA margin improved significantly to 30.8%, an increase of 2.8 percentage points compared to the previous year. Looking at the top line performance from a regional perspective, EMEA made a solid momentum, delivering 7.3% growth. This robust performance came despite a higher comparison base resulting from an earlier recovery cycle. The Americas grew by almost 12% followed by Asia Pacific growing almost 11%. In APAC, China stabilized and was only slightly dilutive to the overall growth. Excluding China, the growth the region delivered was in the low double-digit range for 2025. I'm also quite pleased with the more recent development in China beyond stabilization as the year progress, we are now seeing really early signs of recovery. Looking at the net profit and cash flow, underlying EBITDA growth of the strong 17% translated into an overproportional increase in underlying net profit of 26.7% to EUR 428 million and reported net profit of nearly 52% to EUR 266 million. Underlying EPS rose by 26% to EUR 4.4. Operating cash flow remained solid at EUR 692 million, although below the high level recorded in the prior year, which was positively influenced by the pulling of inventory that Florian already touched upon. Free cash flow stood at EUR 295 million, and the CapEx as a percentage of sales came in at 13.3%. A quick look at our balance sheet metrics. Our equity ratio improved to 51.7% in the end of 2025 with the increase being driven by some repayment of financial liabilities and therefore, tightening the balance sheet total. Net debt decreased by EUR 18 million versus year-end 2024 and gross debt reduction. Deleveraging is progressing as planned with the net debt to underlying EBITDA ratio improving to 2.38 by the end of 2025. So we are very well on track on our deleveraging path. Now before we move into the Q&A, let me also quickly elaborate on our full year guidance for the Sartorius Stedim Biotech Group. As mentioned earlier, we are very pleased with the strong performance of Sartorius Stedim Biotech has delivered across all key financial dimensions. The 2025 results demonstrate the resilience of our business model and confirm the attractive long-term opportunity in biopharma market. We will remain focused on disciplined execution, targeted investments and innovation and capacity and operational excellence. Looking in 2026, same is true for Sartorius Stedim Biotech and for Sartorius AG when it comes to the overall environment and industry trends. Therefore, we also have deliberately set a broad guidance range with the lower end of the range reflecting a cautious scenario in which market conditions weaken. However, we currently expect market dynamics to continue normalizing and positive trends to continue. We expect to stay on our profitable growth path and for 2026 sales revenue growth in the range of around 6% to 10% in constant currencies, including a 1 percentage point contribution from the U.S. tariff surcharges. Growth will be mainly driven by the recurring business, but against high costs, while the equipment business should remain at least stable. The underlying EBITDA margin should increase to slightly above 31%, in which a technical margin dilution of around 50 basis points from tariff surcharges is reflected. Our CapEx ratio is expected to stay around previous year level at around 13%, reflecting our ongoing investments into research and resilient production footprint. Our commitment to deleveraging remains unchanged. We anticipate the leverage ratio, the net debt to underlying EBITDA to decrease to slightly above 2 at year-end. Our modeling assumptions, Michael already explained, expected headwind from FX on Sartorius AG level, same is true for Sartorius Stedim Biotech. With this, I will hand over to the operator to begin our Q&A session. Operator: [Operator Instructions] The first question comes from Subbu Nambi from Guggenheim. Subhalaxmi Nambi: What does your guidance assume in terms of U.S. onshoring build-outs in 2026? What could drive upside to these expectations? Michael Grosse: Yes. So I'll take that. Subbu, thanks for the question. I mean, right now, as we've been seeing that there is a lot of plans, some of them really committed, some of them still a bit on the horizon. As we see as well the lead times for order particularly on the equipment on a larger system side for greenfield or for larger expansions, we think that the impact from large -- from relevant reshoring activities will most likely not contribute with revenue in 2026. So we've not baked anything of that in our current expectation and assumptions. This would rather be for the year 2027 and beyond where this may have a larger impact. However, we are very closely connected, of course, with all our customers, supporting them on their plans, discussing opportunities as we move forward. It goes up from this, of course, very short near-term activities on brownfields and expansions of existing capacity. Subhalaxmi Nambi: Perfect. And a quick follow-up. How did equipment orders for BPS and LPS, respectively, trend for the quarter for Q4? And are you starting to see any early signs of recovery? You spoke about comparison and orders, but I was just trying to figure out what about equipment orders separately for LPS and BPS. Rene Faber: Thank you for the question. Although we are not giving further information on that very detailed level. But what I can tell you is, on the one hand side, we have been talking about H2 sales being much stronger than H1 sales. And the same holds true when we look at order intake where the order intake in H2 was also well within double digits above H1, which, of course, then speaks to the quality of the order book and therefore, our cautiously optimistic outlook then also into '26. Operator: Next question comes from Richard Vosser from JPMorgan. Richard Vosser: One question, please. So you talked about market conditions not fully back to normal for equipment. So just a little bit of elaboration on changes of customer sentiment here. You've talked a little bit just now about equipment orders suggesting improvement. So just thinking about, first, your confidence in the stabilization of equipment revenues, what's underpinning that in '26? But also, when do you think equipment could move more back to normal levels? We've seen that happen for consumables in '25. What's your thinking there? Rene Faber: Yes. Thank you for the question. I'll take it. Let me first get back to 2025. You will remember when we talked about stabilization of equipment like in Q3, we said for H2 '25, we expect to be in revenues for -- with equipment at least on the levels of H1, maybe slightly above. And you could hear from Florian that H2 came out as stronger, so confirmed the stabilization stronger compared to the H1. So I think that's a clear kind of confirmation of our view and expectations and visibility and the discussions with our customers that the equipment is stabilizing. And now looking, of course, into the 2026, we continue to see the positive discussions and have positive discussions with customers. They are tangible projects, sizable projects on the horizon. The order book is healthy as we mentioned in the -- a few minutes ago. So as Florian [indiscernible], cautiously optimistic looking into the 2026. We believe that the portfolio we have is well positioned to help customers quickly adjust their capacity, single-use technologies are designed to make -- to do -- to provide flexibility. So yes, we're very encouraged about the current -- the sentiment as well as the -- our position and discussions we had with our clients. Michael Grosse: I would like to expand even that from Rene's perspective, I think the similar situation is true as well for LPS division on the basis of equally, I would say, strong development interest levels in needs and opportunities, particularly on the biolytical instrument side, as well a trend that we see in the second half of the year, particularly in Q4, coming and resulting into a good level of contribution in both sales and order intake. And again, so same sentiment for us. But again, I think it will take, for sure, the full quarter Q1 for us to have simply better visibility, better understanding the continuation of the order intake trade in order to have a better view whether this requires further refinement of our perspective for the full year at that point in time. Operator: The next question comes from Doug [indiscernible] from Schenkel. Douglas Schenkel: It's Douglas Schenkel from Wolfe. I'm going to try to do 3 really quickly. One, I just want to confirm, based on your responses to the earlier questions that your 2026 guidance does not currently assume an improvement in bioprocessing equipment demand. So that's the first one. The second, can you please bridge to your margin guidance for the year? Specifically, what would be helpful is, what's the impact of foreign exchange, tariffs and operating efficiencies as you incorporate those into your guidance? And then third, [Technical Difficulty] many companies in your peer group have taken a more conservative approach to guidance than had been the norm given market challenges over the past several years and given ongoing policy uncertainty. With that in mind and also recognizing that this is issuance as CEO, how would you describe your initial guidance philosophy? Florian Funck: So maybe I start to give a little bit more perspective on the margin guidance here. So what we know as of now, of course, is roughly the impact of the tariff on the year 2026, which is to be around 50 basis points. What we do not know is the full FX impact. The weaker the U.S. dollar the higher this impact might be, although we think we are in a good position to a certain extent also to compensate certain headwinds on the FX side in the margin. The, let's say, broad improvement in margin that we are seeing, if we are taking out tariff and FX impact, is definitely a 3-digit basis point number, so above 100 basis points and should be driven to a majority from ongoing operational leverage that we've seen. Michael Grosse: Yes. Maybe to add to Florian's point there just because you may have really in mind as well our fantastic margin contribution that we delivered in 2025. And of course, there are other effects that I think are relevant in my mind to keep in mind there. Of course, on the operating leverage, since we are now already throughout the last year on a different level, the effect of this is, of course, diminishing to a point. Keep as well in mind that when it gets to our activities that we launched in the year even before on our cost reduction programs that the main effect there as well was visible, particularly in 2024 and 2025, still continues in 2026, but less so. So with this and as well a bit of the question mark, how much of the equipment will be there in the year 2026. If that is a higher degree of recovery, of course, the margin mix, the mix effect that we have seen in 2025 was probably as well a bit more favorable compared to 2024 than it may be in 2026 compared to 2025. Then you talked as well a bit about the guidance philosophy. Yes, I think we try to express that in our wording already. On the one hand side, it's early in the year. We felt like, okay, we're feeling confident enough in order to quantify our guidance. But given the fact that it's early in the year, given the still the level of uncertainty that we have there in terms of macroeconomical and geopolitical aspects, as you mentioned, I think we want to as well, therefore, be prepared for this and the lack of full visibility for the full year on the basis of order intake and the book and the market trends, we felt the philosophy is indeed that we have decided for a wide range with the 4 percentage points we have there. We don't feel that we are neither over aggressive nor over conservative with what we put out there. However, we feel that we will not celebrate if we achieve only a 6% growth for 2026. That's equally clear. At the same time, the level where we will land on versus the mid or even beyond the midpoint is so much dependent now on what will happen. So I think we will be in a better position after the first quarter to give more clarity as the year progresses. And that is why I think the philosophy remains, I would say, remains balanced, remains balanced. Operator: The next question comes from Harry Sephton from UBS. Harry Sephton: [Technical Difficulty] consumables. So we're seeing a more comfortable high single-digit to low double-digit growth across the big players in the industry on the consumable side. Based on your guidance, that you're expecting to be more in line with market growth. So what do you see in terms of potential upside or downside risk to market share in the near term on the consumable side? Rene Faber: Yes, I take it. So a question on consumables. As you will know, the consumables is very much -- the majority represents the majority of our revenues for the -- I'm talking for the Bioprocess division. You will know that most of that recurring revenues, consumables revenues are linked to commercial manufacturing and consumption of our customers of the products in making commercial drugs, adding late-stage clinical material production, it comes to around 80% of the consumables revenue are linked to that late-stage plus commercial manufacturing. So -- and that's more or less kind of also gives you an idea about what dictates the growth of consumables. Looking forward, it's very much about the volumes, manufacturing volumes of our customers. We can do little about that, of course. But then once new drugs are being approved or enter these late-stage clinical phases, yes, that drives additional volumes for these consumables. So looking forward, I think we have been working consistently over the years with the teams in all regions to make sure we are early with customers and place these consumables spec in, validate when the decisions are made and validations are done and also working hardly with customers to convert wherever possible in an ongoing and existing processes towards our products. The highlight of that was, of course, during the pandemic where mainly due to our ability to supply and the customers, we gained market shares and kept or we were able also to protect roughly 1/3 of this gain moving forward. So we are, I think, on a very healthy and successful track record to drive that above market -- above drug volume growth of our consumable revenues. Of course, as we mentioned in presenting our 2025 results, we have seen a strong mid-teens growth of our consumables in 2025. So comps are higher now looking in 2026, but we are very confident that these fundamentals and the volumes driving the growth of consumables are there are intact and are positive about the outlook in '26 and beyond. Operator: The next question comes from James Quigley from Goldman Sachs. James Quigley: I've got one on China, please. So you said in the slide and in the comments that China is starting to show some encouraging signs of growth. I think some of your peers at a recent conference still sounded a bit muted on China growth. So what are you seeing here in the region that's driving those encouraging comments from you across the BPS and the LPS divisions? Michael Grosse: So I mean I can get started a little bit. I mean, highlighting perspective again, I think China has really a few years back that I think we've seen a really difficult market environment with as well, very strong level of guided preference with regard to local players and for local production. We feel now that a little bit this notion of rebaselining the market has come to an end. We feel now that we are able to, right now, keep market shares in China and benefit from probably the still modest level of the growth that the China market demonstrates. At the same time, there's, of course, a lot of innovation activities that we are part of and want to equally, I think, being asked by customers to be part of the rollout of out-licensing and bringing some of their pipeline development into other regions and markets. Our expectation for the market, however, overall is still a rather flattish or rather very modest level of degree of growth expectation given as well the prior year performance that we've seen. So we don't see and we don't expect naturally a big turnaround of that momentum. It's still probably there to come later. At the same time, there's a big overhang and a high capacity buildup on the equipment side. So particularly on the equipment side, we feel as well that China will, in the year 2026, be a rather muted market. But on consumables, we think will be part of the game. And yes, as we said, we are -- we have modest expectations here on the market. Operator: The next question comes from Charles Pitman-King from Barclays. Charles Pitman: A quick question, please, on just the guidance again. Just trying to relate the kind of 2 separate statements of the low end of your guidance range, reflecting kind of deteriorating market outlook. But also your commentary around the strong order book and equipment being at least stable. Can you confirm, therefore, that the low end of your guidance range reflects equipment being stable, supported by your existing backlog and other market deteriorations impacting consumables? And then just a quick clarification on margins. Just wondering why you're only providing a kind of bottom end of that range. And is it the implication that at the top end of the range, you have rising equipment, which will offset the margin such that your only confident to provide at the bottom end of the range? I'm just trying to -- yes, just thinking about how you're setting this out. Michael Grosse: So first part, yes, I mean... Unknown Executive: Charles, you broke up a little here technically. That's why we are a little puzzled. Could you repeat the first part of the question? Charles Pitman: Sorry. My question relates to trying to triangulate the 2 guidance commentary, one being that your sales could be at the low end of the range upon worsening market conditions, but did you separately expect equipment to be at least stable? I'm just wanting to confirm that your order book means that you have this confidence in your equipment being at least stable, and that in the scenario where you hit the low end of the range, that's driven by consumable deterioration more so than any downside to your equipment outlook? Michael Grosse: Okay. So I mean, yes, I mean, again, I think on the lower end of our guidance as we try to express, we see some level of, I would say, market situation overall. So we would see that there is no impact, no positive contribution there from the equipment and possibly as well a slight deterioration even on the consumable side. We see the total mix. It depends on how you see the 2 elements of that coming together. But as we say, I mean, if we see the momentum that we've seen right now based on, as you said, the order intake generated in equipment, and at least, stable situation plus the continuation of the current trajectory of the consumables that would be slightly above the bottom part of the guidance. So we would assume some level of deterioration of that condition. Then I think the other question was on the margin. Florian Funck: Yes. While we have not given a range for the margin, we have said that we want to reach slightly above. So this is in a way open to one side. Now let's assume we would be on the lower end of our guidance range. The 5% for the group, we would definitely aim to see margin improvement against prior year, but we might not fully reach that. So the margin corridor that we are indicating to was slightly above -- the 30% was more towards the midpoint of the guidance. If we then come to the upper part of the guidance corridor on top line, of course, there's way more potential on the back of more operational leverage. Operator: The next question comes from Charlie Haywood from Bank of America. Charlie Haywood: Charlie Haywood, Bank of America. I have 2. So first one in '26, is it fair to expect typical seasonality on the bioprocessing side? So I think you've previously commented to 4Q, 1Q, 2Q, 3Q. Or given equipment phasing and what looks like a strong fourth quarter for those orders and a 6- to 12-month order book, might that distort to possibly fueling a stronger second half? And then the second question is just a bit more on midterm. Now that you spent a bit of time in the business. You previously sort of commented to Merck's 9% to 10% market outlook not far from your thinking. I guess how are you currently seeing the bioprocess midterm market growth in the end markets there? Michael Grosse: Thanks for the question. So I think we can maybe kick off a little bit on the basis. I think, as you know, we don't really break down and guide on the basis of quarterly perspective. So I think in this case, we would like to leave a little bit the breadth of the way of how we look at the year to come in more the total perspective. So we will not provide any specifics as we see the quarters moving forward. Again, I think it is probably more in the nature of the business. If you think about -- and it's probably a similar pattern that we've seen during the last year, given the lead times of equipment orders, particularly we now see that, okay, we generated the order intake in the second half of the year, Q4. So things now with the lead time, 6 to 12 months on the Bioprocess side, of course, then we would expect sales realization in all these orders to rather hit the second half of the year than the first half of the year. So that's natural by the lead time of those orders. Yes. Then in terms of the market. Yes, I think we hold to that. I mean we basically took a look at the market. We'll get back a little bit more interesting insight on the market analysis that we've done for the capital market that we will provide and bring up in March. However, as we said, we think that the assumption there for the market to be around a 9% growth, I think, is something that's very much in line with our views and with our analysis. Again, depending a little bit also on the specific market segment and then the exposure to the market segments. But that corridor is well in line with our analysis that we've done. And that is well what we believe that in our minds, we will measure us against from a mid- and long-term perspective. Operator: The next question comes from James Vane-Tempest from Jefferies. James Vane-Tempest: Just on LPS, actually. You mentioned in the presentation that the rolling book-to-bill is now more than 1, but now you specifically stated in both divisions. So I was just kind of curious whether the LPS book-to-bill turned in Q4 to be above 1? And if so, where you're seeing accelerating orders from either certain customer or product groups? And then related to LPS, I mean the guidance that you've given is marked the fourth year of margin decline in a row. I know we're going to hit more in March. But conceptually, how realistic is it from here to get back to levels seen a few years ago? And what would it take to get there? Michael Grosse: Okay. So the first part of the question was about the book-to-bill. Sorry, do you want to take that? Florian Funck: Exactly. James, as you know, we would not like to go specifically into that. But let me put it that way. We were quite pleased with what we have seen than in Q4. Let us leave it on that level. Michael Grosse: And then one was related to profitability. James Vane-Tempest: LPS margins, yes, in terms of the fourth year of decline and just thinking about what it would take to get back to where it was? Florian Funck: Yes. I think this is a question that we should discuss more in detail around the Capital Markets Day, if you don't mind. James Vane-Tempest: Okay. No, that's fine. One quick follow-up, if I can. And that is just about the business flow within BPS. Historically, you've kind of alluded to consumables equipment normalized being 75%, 25% approximately. And I know at 9 months, I think you sort of said it was around 85%, 15%. So just as an approximation, I was just kind of curious where that sort of number for the full year. Michael Grosse: Okay. Just maybe a short point of clarification. So I think, let's say, the numbers you're referring to on the 75%-25% would be on the group level. If we look at BPS, I think we see the rough proportion over the last half year, we've more talk about 80%-20% on that ratio. And again, I think, yes, that is where we see the current state. We don't necessarily believe as well, given the discussion earlier that, that will be as well roughly the level that we will see as we continue into the year 2026 now. Operator: The next question comes from Charles Weston from RBC Europe. Charles Weston: You've talked about Europe being ahead or EMEA being ahead in terms of the recovery curve. Does that also mean it's ahead in terms of the equipment order recovery curve? So have you got sort of proof of those orders turning into -- that interest turning into orders and revenue in Europe? And just a clarification question. You said you have good discussions with your customers to understand their CapEx plans. Can you give us any insight into whether the big investments that they're making is more about them shifting CapEx from other parts of the world into the U.S. or whether they are genuinely adding additional capacity into the U.S. over and above what they would be normally planning? Michael Grosse: No, thanks for the question. On EMEA, I think the situation is not that we see any difference here. Yes, the recovery overall happened earlier there, but we cannot now say that we have data that suggests on the equipment recovery that EMEA is ahead of the other regions. So that's not really the case. Florian Funck: Yes, and the discussions we have with customers on the equipment, they are mostly not today related to the onshoring or reshoring in terms of tangible projects, investments, either replacing old instruments or adding capacities. The discussions are with -- around onshoring, it's more about understanding really what is relevant of the -- what has been published from the headlines from our customers, what is of relevance for us, of course, you will see a lot of R&D investment being included in these headlines. You will see also investment in classical pharma facilities, final field drug product facility, so all less relevant for us. So trying to understand what's really in for Sartorius, and then also trying to understand really what the timing will be and when the discussions about the equipment, the providers will start. So this is more about where the onshoring discussions are today. So the very tangible projects are still less related to that topic. Operator: Next question comes from Odysseas Manesiotis from BNP Paribas. Odysseas Manesiotis: First, to better understand the growth deceleration in Q4. I have EMEA around 4% CER for Stedim. Could you give us a feeling of how that's different between equipment and consumables or just whether that's the growth we should be expecting for the region as the new normal? And secondly, in order to have a better feeling of the conservative business embedded in your guide, is it fair to say that your book-to-bill for the entirety of the year was pretty much close to your pre-pandemic average of around 1.05? And last quick one, biotech funding has been -- has been quite strong. What's the usual lag that you see between a biotech funding recovery and a pickup in your order intake? Florian Funck: So let me maybe start with the growth regarding BPS recurring versus nonrecurring in H2 because I think really looking only at 1 quarter doesn't make sense in looking at the matter, it's already really short term. But just to give you a feeling, the growth that we've seen in the nonrecurring business was very similar to the growth that we've seen also in the consumable business in H2. So this is also a reason besides the effects that we've seen in the order intake while we are taking that confident stance towards 2026. When it comes to book-to-bill, we are not communicating on the level of book-to-bill. Sorry. Operator: [Operator Instructions] The next question comes from Thibault Boutherin from Morgan Stanley. Thibault Boutherin: Just to come back -- can you hear me? Michael Grosse: Yes. It's okay. Thibault Boutherin: Just to come back on the topic of onshoring and the last CapEx plan that has been announced. There is a question that comes back often from investors, which is, is there a risk that because we see CapEx being skewed towards the U.S. in the next few years to see an imbalance between you and your competitors? So I think the idea from some investors is maybe U.S. peers would be better positioned to benefit from CapEx being skewed to the U.S. So just wanted to know if you could comment on your competitivity in the U.S., the market share relative to other regions and give an answer of how a shift of investments to the U.S. in terms of equipment and CapEx for biopharma would impact you? Rene Faber: Yes. So I'll take that question. Look, the -- in our industry, and I think it's been always the case, still is the case. The main decision criteria is the technology and the performance. Their customers don't make really compromises when it comes to how they equip their facilities, if it's for preclinical small scale manufacturing or even commercial. So I think there we -- and this is where we really see ourselves being ahead with a lot of focus on innovation. So I think for us, the positioning to benefit and participate in the potential onshoring wave is very strong. We have a facility to assemble equipment in the U.S., in the Boston area, in Marlboro, as well to be close to customers in case of the factor acceptance that and so on for more complex equipment. So I think, yes, we are ready to take all the opportunities, the feedback from customers is strong, so positive about the outlook here. Operator: Next question comes from Oliver Metzger from ODDO BHF. Oliver Metzger: It's one more structural question on equipment. So we know from the past, normally, equipment and consumables should grow at a similar rate over the cycle. So we now see consumable demand healthy for a while, while equipment is at least lagging behind. Can you comment about the reasons for this reluctancy? Is it more like still an overhang from, let's say, the time during the pandemic or post the pandemic? Or could it be that there is a more structural change as higher quality consumables might have increased the efficiency of the tighter of a production process and therefore, some structural lower or slower demand for equipment might be the case for a quite longer period of time before we see more expansion or new manufacturing facilities? So that's, to say, upgrades and lower expansion. Rene Faber: Yes. Thank you for the question. I try to kind of give you more color to think about why this reluctancy to invest, you addressed or you asked how much of that is coming with kind of a post-pandemic would call macroeconomic cash-driven impact or development. I think that's very much more on that side, plus the overcapacities, which have been built during the pandemic in some areas versus how you call it kind of a structural change in a way that by technologies improving, it would require less of this equipment. Actually here, over years and decades, we have seen exactly the opposite. The better the technology gets, the more of it will be used, especially in single-use manufacturing, the [ cake ] of what you can address with single use increases or grows, the better the technology, the higher the titers, the better the yields are. So I think that's very much a positive ongoing trend with this improvement. So again, back to your question, I think it's very much on the cash post-pandemic macroeconomic impacts rather than any different structural technology-related. Operator: The next question comes from Falko Friedrichs from Deutsche Bank. Falko Friedrichs: My question is on the LPS margin. When do you expect these investments in Advanced Cell Models to begin contributing positively to the margin of the segment again? And then just a very quick housekeeping one. Is a 27% tax rate a fair assumption again for the Sartorius Group in 2026? Florian Funck: Yes. Let me start with the housekeeping question. We currently think that the 27% is still okay for the year '26. And on the margin, as I said, it's connected a lot, of course, to our engagement in Advanced Cell Models, which is an emerging business, but should not be impacting on a sales side very soon, but rather we are building up for the more long-term perspective, more to elaborate on at our Capital Markets Day. Operator: Next question comes from Harry Gillis from Berenberg. Harry Gillis: I have one clarification regarding an earlier question on guidance. I'm sorry, I didn't quite catch that. Does the 6% guidance at the low end of your for BPS growth, does that assume a further decline in equipment sales, sorry? Or does your expectation for at least stable equipment hold here and it's deterioration in growth in consumables? And secondly, could I just ask you. Do you expect your CapEx ratio to remain stable at around 12.5% into '26? How should we think about that over the midterm as some of your larger projects start to roll off? Florian Funck: Should I start with the last question on the CapEx rate. So of course, you are asking more the midterm perspective, but I think we have always quite consistently communicated that we are -- we should see from the year '27 onwards, an overall reduction in our CapEx ratio. '26 is, therefore, the last year, where especially also driven by our expansion projects in Korea. We are seeing elevated levels of our CapEx ratio to then come down afterwards, more on the Capital Markets Day. Rene Faber: Then again, on the guidance, just to repeat, we said at least flat, so we are not considering any decrease in equipment revenues for 2026 in our guidance. Operator: Next question comes from Shubhangi Gupta from HSBC. Shubhangi Gupta: So just a clarification for your guidance or the upper end of your sales growth, does it assume recovery in equipment sales? And if yes, what is the time line? And how should we think about the phasing of growth in 2026, given H2 have tough comps, especially from strong growth in consumables? Florian Funck: Yes. Again, so now the question is about the upper range of the guidance. Here, as we said, of course, in that case, we would expect the contribution of both consumables, continued healthy growth as knowing and considering the higher comps coming from this -- from 2025 as well as at least a moderate growth in equipment revenues. So that's kind of our current thinking. And again, very positive what we have seen so far, the order book, the trends we see. So quite confident we are heading there. But as Michael said in the introduction, still early in the year and more to come with our Q1 results. Michael Grosse: Yes. Give us a bit more time on that, please. So on that. However, I think just to add on, I mean, as we said at the other stage, given a bit as well if we think that one of the contributing or deciding factors towards the upper end, it will indeed be a more strong recovery and growth contribution as well from the equipment instrument side. Again, on the lead times that are there, of course, assumption is probably fair to say that this is something that happens rather later in the year than earlier. So it's something that we would expect to rather beyond Q1 to happen, if it happens in the degree that we may hope for, but we don't know. Shubhangi Gupta: And just a quick follow-up, can you comment... Petra Muller: I'm sorry, Shubhangi, but we have 3 more people in the queue. I'm sorry, we have to head on because we are over time already. Sorry about that. Happy to take your question afterwards. Operator: The next question comes from Anna Snopkowski from KeyBanc. Anna Snopkowski: This is Anna on for Paul Knight. I just was wondering, you mentioned on your last call, you were having some early conversations with small CDMO customers. How has this progressed in the quarter? And are those early conversations around equipment broad-based or concentrated in any customer group or certain types of equipment like those that help your customers reduce costs? Florian Funck: Yes. Thank you for the question. So yes, absolutely, that was a kind of an ongoing development we have seen in 2025. Towards the second half, we've seen the smaller CDMOs also becoming more and more active. We've seen them, their pipelines filling, their projects coming and discussion started, and it's both really about -- its equipment and consumables. So preparing for delivering on the project, it's all about getting ready to make the batches, preparing to get an order in consumables to be -- to have them on -- to build inventories as well as where needed, add equipment to prepare the capacity as well. So that's been the development we've seen with them, and it didn't change so far. So also kind of contributes to our positive outlook. Operator: The next question comes from Naresh Chouhan from Intron Health. Naresh Chouhan: Just on BPS. When you talk about double-digit consumable growth, can I confirm that this is more like low teens if we exclude China, just to give us a sense of where underlying demand is in Western market and the kind of state of the Western market recovery? Florian Funck: Yes. So consumables kind of, yes, low teens is a fair assumption in a positive outlook, right? And yes, that's how we are looking forward, not only '26 but ahead as well. Yes, so you're right. Operator: The last question comes from Delphine Le Louet from Bernstein. Delphine Le Louet: Yes. I'm sorry because I really don't understand the guidance regarding LPS when it comes to the margin. And so I know when you're trying to push back about the CMD and probably you're right, but that makes me think, is there anything and especially when we look at the Q4, where we had the margin gain versus the Q3, is there anything more structural that you're planning? And this is a new way where probably we should think about the division in the future, meaning a complete reorg internally of the LPS division that could justify not having any execution gain coming over the sales growth even at the midpoint of 4%, which is quite nice for that division, by the way. So any more clarity on that? How should we think about that margin in the context of back to growth and a scenario, which is not that bad at the end? Florian Funck: So Delphine, maybe I'll start, and then Michael, especially to add on, on that. But first of all, we definitely think that the LPS business is a 20% plus margin business going forward. On the other hand side, on the current position that we are at, at a margin of 21.5%, knowing that the tariff impact overall in the group is roughly 50 basis points in 2026, knowing that there are unknown on the FX side and knowing that we are ramping up our investment through the P&L into ACM, we thought it is appropriate to guide then for the year '26 with a slightly below 21%. Michael Grosse: Yes. And over and above what Florian said, of course, we want to give you an incentive to join the Capital Markets Day here, very clearly, any strategic type of consideration about how we see the business, the divisions as we move forward. You're welcome in March to our Capital Markets Day. Operator: There are no more questions from the phone. I would now like to turn the conference back over to Petra Muller, Head of Investor Relations. Petra Muller: Yes. Thank you very much, Valentina. This concludes today's call. Please reach out to the Investor Relations team in case of any open questions. We thank you for joining us and wish you a pleasant rest of the day. Take care and see you next time. Thank you. Goodbye. Michael Grosse: Thank you. Bye-bye, all. Many thanks. Operator: You may now disconnect.
Cyril Meilland: Hello. Good morning, all. I'm Cyril Meilland, the Head of Investor Relations at Amundi, and it's a real pleasure to welcome you today in the not so sunny London for a presentation of our full year and fourth quarter results. We are here in our London office, and this is a hybrid event. So we will have people in the room and people online via Zoom. We shall have a presentation by our CEO, who is here with me, Valerie Baudson; and our Deputy CEO, Nicolas Calcoen. Presentation will last for about 30 minutes. And as usual, it will be followed by a Q&A session for as long as it takes. So ask any questions. The questions can be asked obviously in the room as well as online. [Operator Instructions] And unfortunately, before we get started, a very short disclaimer. Throughout the presentation, we will make some forward-looking statements and mention forecasts. We call your attention to the fact that Amundi's actual results may differ from these statements. Some of the factors that may cause the results to differ materially are listed in our universal registration documents. And Amundi assumes no duty and does not undertake to update any forward-looking statements. And after this task, I leave the floor to Valerie. Thank you. Valérie Baudson: Well, thank you, Cyril, and good morning, everyone, in the room behind the screen. We are very pleased to present our Q4 and full year 2025 results, which reflect both our record activity and the core elements of our Invest for the Future 2028 plan. So I will take you through some key highlights before Nicolas, as usual, looks at our activity and financial results in more detail. First, our assets under management have now reached almost EUR 2.4 trillion, so up 6%. This is thanks to record total 2025 net inflows of EUR 88 billion from both passive and active management activities. In terms of clients, this performance was driven by positive inflows across retail, institutional and our JVs. Retail inflows predominantly came from our very fast-growing third-party distribution business. And on the institutional side, medium- to long-term asset collection tripled in 2025 with some major mandate wins in Europe and the Gulf in Q4. Our activity drove strong financial results with adjusted pretax income up 12% for the quarter and 6% for the year, while adjusted EPS reached EUR 6.58. This performance and our strong financial position allow us to propose a 2025 dividend of EUR 4.25. This represents a payout that is EUR 100 million above our 65% target. And we are also delivering on our commitment to return excess capital to shareholders from the 2025 strategic cycle. So today, we are announcing a EUR 500 million share buyback, which starts tomorrow. So combined, the dividend and share buyback will return close to EUR 1.4 billion to investors, around 10% of our current market cap. And more than half of these figures will go to minority shareholders. So all in all, we enjoyed success across all our strategic growth areas in our Invest for the Future plan, making 2025 a strong start to our 2028 plan period. So let's take a closer look at some of the key activities. Clients first, starting with retirement, which is, as you remember, one of the key strategic priorities in our new plan. We have established a dedicated business line to package our offer and capture new opportunities. And following from the people's pensions in the U.K., we secured another major mandate at the end of the year. Amundi is one of just 3 asset managers selected for Ireland's new auto enrollment pension scheme, which will serve the majority of the Irish workforce. Assets for this scheme are expected to reach EUR 20 billion in the next 10 years. Our other major strategic client priority, you remember, is digital distribution. We saw EUR 10 billion in net new assets from digital players in 2025, almost half of our full year retail flows. New mandates included the retirement offer launched with Moneybox, an award-winning digital wealth management platform in the U.K. This partnership brings together Moneybox client-led product design with Amundi's global multi-asset and ETF expertise, creating 3 new Moneybox blended funds. Now geographies next, starting with Asia. We continue to deliver strong growth powered by our direct presence and our successful JVs. Asian net inflows were EUR 33 billion for the year. Over 40% came from our direct distribution business with contributions well diversified by country and client type. And on the JV side, India and Korea were the main contributors and China showed a good momentum as well. Now closer to home, Europe continues to offer significant growth potential for Amundi and increasing our market share in Northern Europe is, as you remember, another strategic priority. Our 2025 activity reflects this with EUR 40 billion in net inflows from this region, including EUR 29 billion from the U.K. Germany contributed EUR 8 billion in net inflows with EUR 5 billion from digital platforms. And as part of our new strategy, we will also reinforce our presence and build on strong client activity in new high potential regions. The Middle East is one of these. And in addition to strong business momentum, we also signed a new strategic partnership with First Abu Dhabi Bank to target Gulf investors at the end of 2025. This partnership combines Amundi's wide coverage of investment solutions and asset classes with First Abu Dhabi Bank regional insights and presence. Solutions next, where innovation is key to future growth. So let's start with active management, where we saw good investment performance as we continue to widen and strengthen our offer. We launched 3 new UCITS funds in key strategies: global equity, U.S. large caps and U.S. mid-caps. These funds fulfilled via our Victory Capital partnership are the first from investment platforms outside of the former Amundi U.S. brand pioneer, demonstrating the clear potential to extend our range as promised. We have also launched in 2025, the first tokenized share for one of our money market funds. The fund is now easily accessible via standard distribution networks and/or the tokenized shares. This first class of tokenized shares is just the beginning, and we will gradually test and add new features to our offering based on specific business cases. Smart Solutions, our another commercially successful innovation, well suited to the current environment. These solutions enable institutional investors to optimize their excess cash by capturing their premiums offered by top-tier issuers for their funding while maintaining low volatility and high liquidity. Assets under management for these funds reached more than EUR 41 billion in '25, representing additional inflows of EUR 20 billion. And this includes EUR 3 billion -- additional EUR 3 billion from a European public institution in Q4. Now ETFs next, where we are further strengthening our position as the second largest provider in Europe and the #1 European provider, both in terms of assets under management and inflows. ETFs assets under management reached EUR 342 billion, up 27% year-on-year. In Q4, we achieved record quarterly inflows of EUR 18 billion and EUR 46 billion for the year. We are, by far, the #1 collector of European equity ETF inflows. This leadership is driven by our diversified offer, which includes products like [ Euro ] Stoxx Europe 600, the largest selling European equity ETF on the market. But innovation is also key to capturing ETF growth. So new products, including macro thematics like defense and strategic autonomy collected EUR 5 billion in '25. Innovation is also key to adapt and grow our responsible investment offer. In July, we launched a new global green bond fund tailored for Zurich's Life Insurance clients seeking diversified access to Green bonds. And in December, we launched a Euro biodiversity credit fund available to both institutional and retail clients in more than 10 countries. This fund allows investors to participate in the preservation of natural capital through a euro credit allocation. So in summary, a period of strong innovation across our investment solutions that is supporting, of course, our growth trajectory. Finally, I would like to highlight Amundi Technology. We are now a recognized technology provider covering the entire savings value chain and operating at scale in 15 markets. Revenues reached EUR 116 million in 2025, up 45% year-on-year, thanks to 10 new client wins, which also saw us enter 2 new markets, Denmark and Singapore. We talked about some of the great 2025 client wins at the Capital Market Day, including AJ Bell in the U.K. Since then, leading Dutch assets and wealth manager, Van Lanschot Kempen has selected our ALTO investment platform. We also signed Bankdata, a technology services consortium made up of 7 Danish banks that serve 1/3 of the country's population. Bankdata selected Amundi's ALTO wealth and Distribution solution to introduce comprehensive portfolio analytics and reporting into its ecosystem and obviously, for the clients of these banks. We also recently launched our new Data-as-a-Service offer, leveraging our robust architecture, our data provider connectivity and our market expertise. We are now onboarding our first client, a leading global insurer in Asia. So our tech business is continuing to deliver growth while also serving as a key strategic enabler for the wider Amundi Group. It strengthens our investment solutions, creates durable long-term relationships and is a key differentiator for Amundi among European asset managers. So that's all for me for now. Let me hand over to Nicolas to take you through our Q4 and '25 activity and financial results in more detail. And I will be back, of course, for some closing remarks ahead of the Q&A. Nicolas Calcoen: Thank you, Valerie, and good morning, everyone. I will now comment on our activity and the financial results. Starting with our assets under management, which reached EUR 2.38 trillion at the end of December. This is again a new record for Amundi. Assets were up by 6% over the year. Almost 2/3 of the growth is coming from net inflows at EUR 88 billion of 4% of AUM, and the rest come from a positive market and ForEx effect of EUR 62 billion despite the depreciation of the U.S. dollar and the Indian rupee. On the fourth quarter, our assets rose by 2.7% with similar trends. Moving now to our net inflows. As I said, they amounted to EUR 88 billion. They are sharply up versus 2024, which already showed a strong increase compared to the previous year. In other words, we have enjoyed strong business momentum in the past 3 years. Furthermore, this business momentum was driven mostly by medium- to long-term assets from our 2 client segments, retail and institutional. Long-term net inflows indeed more than doubled at EUR 81 billion for all these clients. Long-term flows were positive in both active and passive management. Passive management was very successful at EUR 76 billion, including the EUR 46 billion in ETFs, as Valerie highlighted. And active management gathered EUR 13 billion, almost double the net flows of the previous year. Fixed income was again the main driver, but growth also came from the return to positive net flows of active multi-asset management. Conversely, treasury products posted net outflows largely related to the ECB rate cuts and a slightly more risk on approach by our institutional clients. Turning to our joint ventures. They collected EUR 20 billion. I will come back later on with more detail. And finally, the U.S. distribution of Victory Capital for the share we own in this partner posted net outflows of EUR 1.4 billion. However, the strategies managed by Victory Capital that Amundi distributes to its clients in Europe and Asia gathered EUR 800 million despite a lower appetite for U.S. strategies last year. I will not comment in detail on the fourth quarter because it is, in fact, very much in line with the full year trends with some acceleration in areas like long-term assets in general, in particular, ETF, but also active management. Coming to performance. Our investment management teams delivered sustained performance in 2025 as illustrated on the slide. Close to 3/4 of our open-ended funds were in the first and second quarter over 1 year, 3 years and 5 years and 233 Amundi funds are rated 4 or 5 star by Morningstar. The investment performance is particularly good for fixed income and multi-asset flagships. For example, in multi-assets, global -- multi-asset on its more conservative versions, global multi-asset conservative ranked in the top 5 and 10 percentile of the category. On the fixed income side, global aggregate, our main flagship outperformed its benchmark by more than 300 basis points on our Euro subordinated strategy by more than 600 basis points. And beyond this particular highlights, I think the main message from this slide remains sustained consistency at a high level of investment performance. Looking next at our client segments, starting with retail. Retail flow was positive at EUR 22 billion over the full year. These flows remain driven by third-party distributors, which continued to post very healthy inflows of EUR 33 billion with EUR 27 billion in ETF and positive flows in active management. Flows are also very diversified by region. In Europe, first with EUR 23 billion with a high level of activity, in particular in Northern Europe, in U.K., in Germany, in Netherlands, but also in Spain and Italy. Asia continued its healthy momentum with EUR 6 billion of net flows. And in addition, we gathered material flows from high potential regions like the Middle East, Canada and Mexico in line with the strategy -- our strategy to conquer these new markets. Beyond third-party distribution, our Chinese joint venture with Bank of China also enjoys strong momentum with EUR 2 billion gathered year-to-date. And turning now to our international partner networks. The net outflows totaled EUR 14 billion, as you can see. They are fully attributable to UniCredit, where outflows totaled EUR 16 billion in the full year, of which EUR 4 billion in the last quarter. Finally, the French partner networks in France are showing positive net inflows of EUR 1 billion. The fourth quarter net inflows in this segment are entirely due to treasury products, in particular due to corporate clients of these networks, where the long-term assets are positive. Moving to the institutional segments now. In '25, net inflows were EUR 48 billion with a strong performance in long-term assets at EUR 61 billion, triple the level of '24. Passive management accounting for large share EUR 44 billion, of which almost half coming from the mandate won with people's pension. But we also gathered close to EUR 20 billion from active management for the most part in the Smart Solutions Valerie highlighted. If you look at by subsegments, institutional and sovereign posted record levels, thanks to a series of mandate wins in Europe and the Middle East, with in particular sovereign funds, central banks or stable relative entities. Employee and savings and retirement business that we presented more in depth last quarter posted a high level of long-term inflows once again. And finally, Credit Agricole and Societe Gennerale, the long-term inflows of EUR 17 billion benefited from the renewed interest in euro contracts in France. The short one maybe on the outflows from treasury products. They originated, as I indicated, from the rate cuts implemented by the central banks and the resulting share for our clients for better yields. An illustration once again of the success -- of this is the success of the Smart Solutions we mentioned. Again, I will not comment in detail on the fourth quarter. As you can see, the trends are very similar to the one we saw for the full year with EUR 13 billion in total. Finally, our Asian joint ventures posted net inflows of EUR 20 billion over the full year with good performance in all countries. South Korea posted EUR 6 billion, mostly in long-term assets, and we saw some outflows in the last quarter, which are purely seasonal and linked to treasury products. China with ABC continued its recovery with EUR 2 billion inflows over the year. And our Indian joint ventures posted more than EUR 10 billion of inflows. The decrease compared to '24 is partially explained by the decline in the Indian rupee versus euro. And for the rest, it was driven by lower inflows from institutional clients in a less favorable markets. However, net inflows into savings plans in retail continue to grow in a very healthy manner. Moving now to our net results. You are now very familiar with the pro forma restatement that we made to 2024 quarters to make the series comparable after the clubbing -- the closing, sorry, of our partnership with Victory. So I will not detail them again, but you have, of course, all the details in the appendix of the slide deck and in the press release. All my comments will refer to adjusted data and year-on-year variations refer to '22 pro forma figures -- '24, sorry, pro forma figures. So let's start with the review of our fourth quarter and in particular, on revenues. As you can see, total revenues were just shy of EUR 900 million in this quarter. They were up by more than 8%, thanks to a healthy growth in all business-related fees in asset management and technology. First, net management revenues were up by 7% compared to the last quarter of '24, of which 4% for management fees, thanks to our strong asset gathering in the past 12 months. And performance fees were very elevated, thanks to the performance delivered by our teams across a large range of expertise. Technology revenues were up by 37% at EUR 35 million. This reflects both healthy growth in license revenues and a high level of billed revenues, thanks to the launch of new client projects. Finally, a short word about our financial income. It's stable compared to the end of '24, but this reflects contrasting elements. On one hand, the decrease in euro short-term rates resulted in a material drop of the return we get from our voluntary placement of our cash. However, on the other hand, this was offset by better mark-to-market valuation and carried interest from our private asset investments. Turning now to our cost at EUR 450 million. They were up on the quarter by 6%, more than 2 points below the top line growth in the context of very healthy business development. This good cost control over our cost was achieved, thanks to our continued efficiency efforts, including the first savings from the cost optimization plan we announced in the second quarter of last year. This allowed us to continue our investment in our strategic priorities to nurture our future growth. And approximately 1/3 of the year-on-year cost growth originate from investment, in particular from technology. As a consequence of this large jaws effect, the adjusted cost-income ratio was 50%, 51.5% to be precise on this quarter. Finally, our adjusted pretax income topped EUR 500 million for the first time in a quarter at EUR 519 million to be precise. It was up by 12%, thanks to, again, the healthy growth in operating profit, up by 11% and the acceleration from our associates up by 21%. It's further contribution from our Asian joint ventures, which was up by 20%, driven mainly by our Indian joint venture. And despite the decline in the rupee and the contribution from Victory Capital, which was up by 19%, reaching EUR 35 million, thanks to the synergies and again, despite the currency headwind. The adjusted net income was EUR 376 million, almost the same level as in the fourth quarter '24 despite the exceptional items in the tax charge. First, of course, the tax surcharge in France, which represented around EUR 11 million in this quarter. And second, the resulting tax on an exceptional dividend we received from our Indian JVs, which represented a cost of EUR 12 million, sorry. This exceptional dividend was paid out in preparation of the IPO of SBI FM, which is, as you know, scheduled for the first half of this year. And we received indeed EUR 130 million as exceptional dividend. But as the joint venture is consolidated according to the equity method, this dividend does not contribute to our results, but only to our cash position. Finally, let's get a look to our financial performance for the full year. The trends, as you can see, are very similar to those of the first quarter. The pretax income rose by 6% to an all-time high of almost EUR 1.9 billion, EUR 1,858 million to be precise. And this growth was driven by an equivalent growth in revenues, 6%, driven by business-related fees, of which 4% for management fees, which represent 2/3 of this growth, 20% growth for performance fees to EUR 173 million, and 40% of growth for technology revenues reaching EUR 116 million, including a full year of aixigo. But organic growth and technology again remained very solid, excluding aixigo, 30% of growth in revenues. Our revenue margin, asset management revenue margin, of course, was 15.9 basis points pro forma again of the deconsolidation of Amundi U.S, like in the first half of '25, but down by 50 basis points from full year '24. We already commented on this decrease in the previous month -- previous quarters. It is entirely due to the strong growth we have enjoyed in the Institutional claimant segment, in passive management and as well as in active fixed income. So both the clients and the project mix have therefore weighted on our margins, but the growth has been profitable on a bottom line basis, of course. Finally, on the revenue side, contrary to business-related revenues, net financial income was down by 5% due to the rate cuts by the ECB and partially offset by the positive mark-to-market as for the last quarter. On the cost side, costs were controlled, again, 6% growth, in line with revenues, reflecting again the investment we made in our growth drivers. And more than half of the cost growth is related to an increase in investment in particular, again in technology. As a result of this good cost control, our operational efficiency remained best-in-class with an adjusted cost income ratio of -- sorry, 52.1% for the full year. This good operating performance for our fully controlled business was complemented once again by strong contribution from our associates. Our Asian joint ventures contributed EUR 135 million or 10% of our net result and up also by 10% despite again the currency headwind in India. And the contribution from Victory Capital was EUR 95 million for the first -- for the last 9 months only, up by 12% over the profit contribution of Amundi U.S. over the same period in '24. As a consequence, excluding the tax surcharge in France that totaled EUR 74 million, our adjusted net income would have been over EUR 1.4 billion. And including the tax surcharge, it was EUR 1,354 million, and the earnings per share was EUR 6.58. This good level of profitability only strengthened again our financial position, as you can see on this new slide. We are probably the traditional asset manager with the largest tangible equity base globally. Indeed, it reached EUR 4.9 billion at the end of '25, up by 10% over a year. As Valerie announced, the strong balance sheet allow us to propose to the general assembly next June, a dividend per share of EUR 4.25. This represents a payout of 74%, EUR 1 billion over what it would have been if we had applied the minimum 65% target. This decision is part of our disciplined capital management. If we can move to the next slide. Our final surplus capital at the end of December '25, the end of our previous plan and before distribution on ICG was EUR 1.4 billion. We will appropriate this amount for 3 purposes in line with our commitments. First, M&A. The acquisition of our stake in ICG is likely to use EUR 700 million to EUR 800 million for the final 9.9% share we target. Second, the ordinary dividend, the EUR 100 million above the minimum payout I just mentioned. And third, additional capital return. The Board has indeed decided on a final amount for share buyback of EUR 500 million, well above the minimum EUR 300 million we had committed at our Capital Market Day in November. This will represent an earning accretion of around 3% at the current share price. And this share buyback will start tomorrow and is likely to span over a full year given the share liquidity and the regulatory constraints applicable to such an operation. It's worth noting that if we combine the total ordinary dividend for '25 around EUR 900 million and the share buyback, we will return to our shareholders this year just shy of EUR 1.4 billion, almost 10% of our current market capitalization. One last word regarding our partnership with ICG and the equity stake we are in the process of building. As you know, we have acquired via a structured transaction 4.64% in ICG on November 19, the day after our Capital Market Day. So we own the shares with full voting rights. However, the structured transaction is still in the process of being unwound. The next milestone is for us to get the mandatory approval from various authorities. We should obtain them in the course of the second or third quarter. And by that time, we will be allowed to appoint a director to the Board of ICG and to start equity accounting for our stake, the 4.64% I mentioned. This will also allow ICG to start issuing new nonvoting shares to us for a total economic interest of 5.3%, taking our final stake to the target 9.9%. They will do so while at the same time, buy back an equivalent amount of ordinary shares on the market and canceling them to avoid dilution. This process is expected to last several months, depending, of course, on ICG share liquidity. And it should be completed early '27, at which point, we shall equity account for the full amount. I hope this clarifies the process. Of course, ICG will be integrated on our reporting as an associate in a similar way to Victory, and Cyril and the team at your disposal for the detail. I will now hand back to Valerie for concluding remarks before we take your questions. Thank you very much for your attention. Valérie Baudson: So thank you, Nicolas. 2025 has been a solid start to our new strategic plan period. We saw higher activity across our strategic growth areas, which supported our strong results. In terms of strategic initiatives, as Nicolas outlined, we are now building our stake in ICG. Our wider partnership has kicked off, and we have already seen some very promising and fruitful cooperation. We are both excited by the significant long-term value it will generate, both in terms of enriching our investment solutions and delivering return on investment for Amundi. We are already working on the funds we are planning to launch with ICG and expect to offer them to our wealth investors soon in H2. And finally, with our proposed EUR 900 million dividend and our EUR 500 million share buyback, we are delivering shareholder returns of more than EUR 1.4 billion, fully demonstrating our disciplined capital management approach. And with that, Cyril, I think it's back to you for the Q&A. Cyril Meilland: Thank you, Valerie and Nicolas. Many questions. We'll start from the room. [Operator Instructions] Let's start with the front row, Arnaud. Arnaud Giblat: Three questions, please... Unknown Executive: To make sure that we can hear [indiscernible]. Is it okay? Arnaud Giblat: Three questions. Firstly, can I ask about ALTO? So a big step-up in Q4. You did say that there was a lot of build for new clients going on. I'm just wondering, how we should be thinking about the coming quarters. Does that build continue -- the revenues from build continue into the future quarters? Or does it step back down to recurring revenues in Q1? My second question is on SocGen. So the contract you announced was renegotiated, I think, in the press release, no material impact because I think Societe Generale as a percentage of the total group has been diluted. I'm just wondering if you could give us a bit more specifics. Has the conditions in terms of share of flows changed with that renegotiation? Has the headline rates changed as part of that negotiation? And my third question is on the Irish DC pension. I think during the presentation; you mentioned EUR 20 billion flow potential over 10 years. Just wondering, how that splits across the 3 partners and what sort of products, the fee rates? I mean, any more details you can disclose that could be helpful. Valérie Baudson: I will let you on SocGen and I answer on ALTO and the Irish into enrollment. On ALTO, Arnaud, as mentioned, new clients -- I mean, in tech, you have the build part when you win the client and that you have to build the project and then you have the recurring fees. So obviously, everything built means more recurring fees for the future. But of course, according to the number of clients you won in the quarter, you can have some plus or minus. So this last quarter was a very good one because new clients. By definition, the sale process in the technology area is a long one. So we are working today on clients that we hope will be onboarded in 2026, but I am unable to tell you today what will be the exact figures for 2026. What I'm absolutely comfortable and happy about is the fact that we are onboarding more and more clients, which means that we are building more and more recurring revenues, which do not depend on the markets or on the geopolitics or whatever for the future and which are reinforcing our position. And we -- another point which is really important with ALTO is that we deliver growth and new clients, both on ALTO investment or investment platform and on ALTO Wealth. So the 2 lines of -- main lines of products and clients are really up and running. And last but not least, we managed to open new countries because when you get your first client in one country, it means that people around look at it and it's also a source of growth for the future. Regarding the Irish to enrollment by which -- you know that this is a brand-new scheme in Ireland. And by definition, there is no history on which we can count. But we shared is that, that might represent EUR 20 billion, of course, shared between the 3 players. So for the time, it's really just starting. We are thrilled -- I mean, we wanted to focus on that one. It will not change the P&L of Amundi in 2026. It's a very long-term mandate, but we were thrilled about it because it's recognition of the capacities and the expertise of Amundi in the retirement area. And as we are absolutely certain that the move from DB to DC both in Europe and in Asia will go ongoing. The more we are recognized as a strong player in this area, the better it will deliver growth for the future. Nicolas Calcoen: And regarding the Societe Generale deal, so as you know, we don't disclose the specifics on our agreement. What I can tell you is that it confirms our position as a privileged provider of asset management with our funds or mandates for the -- our clients and for that networks, and it should not have any material impact on our P&L going forward. Cyril Meilland: Okay. Next question from Nick. Nicholas Herman: Nicholas Herman from Citi. Three questions as well, please. Firstly, is there any update you can give us on the SBI JV IPO, please? I guess, presumably, can you confirm if you're still on track for an IPO in the first half of this year? Any update on the process would be helpful. Secondly, on passive inflows. Did I hear you correctly that you brought in EUR 5 billion from new passive product launches during the year, it's about 10% of your passive inflows. I guess could you just talk about the competitive environment within passive because it looks like you've been taking a lot better share recently. But I guess also as part of that, and I know you don't disclose your passive fee margins. But I guess with such strong demand for funds like Core Stoxx 600, is it fair to assume that the margins on your passive inflows have been dilutive to your blended passive fee margins? And then finally, just a technical one on the buyback. Just curious why you decided to upsize the buyback already 2.5 months after announcing the buyback of at least EUR 300 million. And I guess also part of that... Valérie Baudson: Why we increased... Nicholas Herman: [indiscernible] it before, I think when you announced it, at least EUR 300 million and now 2.5 months later you're saying EUR 500 million. So why stay? And what is it that drives the variance of the cost of the ICG stake between EUR 700 million and EUR 800 million because I understand that you've structured the transaction to kind of limit the variability. Is that an incorrect understanding? If you could clarify that please. Valérie Baudson: Okay. We're going to clarify. On the -- so on the SBI IPO, very simple. The process is on track. And as of today, but we're still only in January, we expect the IPO to happen by the end of the semester by the end of June. But 6 months to go, an IPO is not an easy process. So -- but for the time being, everything is on track. Second topic on the passive side, I don't know if we have -- if you want to share any figures. I mean, honestly, regarding your question around the Core Stoxx 600, I think what is remarkable here is that Europe attracted by definition, a lot of flows this year for good reasons, of course, the performance of the index, but also the fact that the dollar decreased a lot, as you know. And for all these reasons, investors have diversified their position and all over Europe and Asia and especially diversified their position in investing into Europe. So it's great news that our Core Stoxx 600 attracted so many flows. And I think it's the sort of evidence and recognition that Amundi is the largest ETF provider in Europe with the largest and widest range. Honestly, on the margins for me, it's -- I'm going to let Nicolas look at it or answer if any, but I haven't seen anything significant. Nicolas Calcoen: No, nothing significant. And what's important to see is that we have inflows on, I would say, very vanilla products, but we are also innovating and margins on more innovative products tend to be higher. So... Valérie Baudson: Yes, because at the same time, so we stress the Eurostoxx 600, but we launched a lot of EFT, thematic fund, [indiscernible], strategy [indiscernible], which have attracted a lot of flows as well. As you know, we launched our first active ETFs with by definition, higher margin. We also launched, as you remember, at the end of the year, our ETF as a platform service, which is another way to increase the revenues of Amundi. I remind you, we offer our ETF platform, both to active asset managers who don't have one and who want to list their expertise on the market, and we act as a service provider, but we also sell this platform to distributors who want to distribute ETFs, can be passive or active under their own brand name. So all this is a sort of, I would say, virtuous circle on the ETF space. And on your last question, I'm going to try to do it to make it very simple. On the share buyback, when we announced you this share buyback and said minimum EUR 300 million, it's because in early November, by definition, we did not have the figures at the end of the year. What we committed was to give you back the excess capital at the end of the 2025 plan. And when we add -- when we look at the end of 2025 and when we add the price of ICG, the dividend we are proposing to the -- we propose to the Board and the excess capital, the difference is the EUR 500 million. So we are committing to our promise. Nicolas Calcoen: On ICG, the reason why there's no precise number is as you have understood, there are 2 operations, one which is already done, and which is structured operation. But there's a second operation, which will be issuance of shares in the months or quarters to come by ICG to us, and they will buy back on the market. And we don't know at which price it will be done, and they are still probably something like a year before the end of the operation. Valérie Baudson: So we will know... Nicolas Calcoen: So we don't know exactly the price at which we will buy the full stake. Cyril Meilland: Okay. Thank you. Next question from Tom. Thomas Mills: It's Tom Mills from Jefferies. I don't think you guys mentioned in your presentation about Fund Channel. I was just interested in how that business is developing. I guess we've seen some consolidation in the B2B fund services space in the last month or so. Just curious as to how you see that development in terms of your own competitive positioning. Is that something you object to from an antitrust perspective? Just curious on your thoughts. Valérie Baudson: First of all, we saw a very nice development on Fund Channel. I'm going to Nicolas or [indiscernible] to give the exact figures, but we won new clients, and the company is growing at the pace we were expecting budget-wise. And second, there was a very -- I'm not sure we discussed about that already. There has been a very important development this year within Fund Channel, we launched a specific money market platform, which is super attractive for all our corporate clients. So it will be an additional source of growth for us in the future. So we are still totally committed to Fund Channel and are very happy to remain and to be a strong competitor on that market. For us, it's both a source of growth and also a very important way to go on delivering a good service to all our clients and to help them manage their open architecture. Thomas Mills: [indiscernible] just a combination of... Cyril Meilland: Maybe we should use, mic, I think, for online... Thomas Mills: Just the combination that we've seen elsewhere in the market, Deutsche Borse and all funds, is that something that you guys are fine with? Is there any some antitrust objection that you might have to that combination? Valérie Baudson: We never comment on the transactions of our competitors. I cannot -- only comment about the fact that we are very happy to have Fund Channel, and we are totally committed to go on having it growing and confident. Nicolas Calcoen: Assets under distribution are EUR 660 billion, which is above the target we had set to the previous plan at the end of December. Cyril Meilland: Jacques-Henri and then we will answer it with online questions from Claire. Jacques-Henri Gaulard: Jacques-Henri Gaulard from Kepler Cheuvreux. I did something fun this morning. I didn't restate the Q4 2025. And when you don't do that, when you don't restate, you realize that imagine you don't have revenues as a reference from the U.S. You have the UniCredit outflow. So it's not exactly a great condition. But despite that, your earnings pre associates remain flat, pretty much stable, which is quite incredible. The whole point being the resilience of the rest of the business versus that is quite big. Then you're also going to buy back 600 million of share, maybe more, you never know if we have an IPO. So when are you raising your EPS target for '28? Valérie Baudson: First, we take the good part of your comment. Jacques-Henri, thank you so much. And I'm very happy that you see through your spreadsheet, the reality behind Amundi, which is the incredible resilience, which is linked to something real, the huge diversification of our client base, our expertise of our services, et cetera, which makes us strong and growing day after day. And as I told you during the medium-term plan, I'm very confident that for the 2028 plan, and I will -- and today even more. We have no plan to change the target. We were very clear by telling you that the earnings per share target was a floor on which we committed, and we stick to the strategy as of today. Cyril Meilland: Thank you. We move, as I said, to online questions. So I open the mic of Pierre Chedeville. Pierre, you should be able to unmute your mic and speak. Unknown Analyst: Jacques-Henri, asked the same question as me -- as I wanted to ask, but I wanted to ask, when are you going to lower your cost income ratio target? Valérie Baudson: Same answer. Same answer [indiscernible] question... Unknown Analyst: More or less the same question. So more or less the same answer. Other question regarding your digital development, I was wondering if you had any target related to Credit Agricole ambitions in this area. You know that Credit Agricole wants to develop strongly on the savings side with BforBank Bank and also in Germany, particularly with Credit [indiscernible]. And I wanted to know what is exactly the cooperation you are setting up with them, if you have any target there, it could be interesting. A precision regarding the tax. Can we imagine that in 2026, now that we have the budget voted, we will see more or less the same tax impact in 2026. roughly, I would say, a tax rate around 31%, something like that. Is it reasonable to see that or not? And maybe just to clarify regarding share buyback. As far as I understand, you said in your business plan that you were focusing on external growth, you privilege external growth. So I mean that if you are about to make over share buybacks operation, you will wait for the end of the plan? Or I'm not clear on that. Valérie Baudson: Thank you. Nicolas, I'm going to take the Credit Agricole, and I would be letting on somebody to other one. On Credit Agricole, of course, I mean, by definition, Credit Agricole is an essential, okay, has always been an essential client of Amundi, and we are totally committed to all their growth prospects and thrilled that they are investing outside of Europe in the savings area. So we are working on that topic to answer very transparently this question. We are working on that topic with them, of course, as we would with any other clients, but of course, on that topic. But also not only on this one, we are -- it would be very long to explain, but we are delivering every year new solutions. For instance, we just launched last year incredibly successful new DPM solution within the Credit Agricole networks, which is growing very fast. So we have plenty of new solutions that we launch on a recurring basis, both with [ Credit ] Regional and with LCL. We have been working a lot with BforBank already. This is not new for us. It's been a long relationship, and we are in the process of helping [indiscernible] in development in Germany right now. So no specific figures to give you and to release, but you can be assured that we are helping them, of course. On the tax, Nicolas? Nicolas Calcoen: On the tax, indeed, as you have noticed in France, the tax bill has been -- the budget bill has been adopted or in the process to be formally adopted. It does include the same tax surcharge mechanism as last year with the same rule, the same way. So basically, it will have the same impact for Amundi, meaning tax surcharge, which should be around, let's say, EUR 70 million to EUR 75 million. By the way, accounted the same way as last year. It's based both on '25 and '26 results. So it will be accounted -- let's say, 60% will be -- around 60% will be accounted on the first quarter and the rest will be accounted progressively in the 3 following quarters. And indeed, I would say, excluding our tax -- this tax surcharge, our tax -- average blended tax rate is, let's say, around globally for Amundi around 25% -- 25%, 26%. And this tax surcharge added close to 5% to this tax rate. And the last question -- yes, was regarding share buyback. So let me reclarify the share buyback we are announcing the EUR 500 million is the implementation of fact of the commitment we took in the previous plan and the commitment was to use the excess capital to do M&A or to return it by the end of the plan. So that we are fulfilling our commitment. Going forward, our approach has been, I think, developed during our last medium-term plan Capital Day. We continue to prioritize external growth for the use of excess capital. But at the same time, we don't want to accumulate capital on the balance sheet. So at the end of the day, we return the flexibility to return excess capital that wouldn't be used to the shareholders, but at the time in a way that will be determined during the course of the plan. Cyril Meilland: Thank you. We will take our next question from Hubert in the room. Hubert Lam: It's Hubert Lam from Bank of America. Just 3 questions. Firstly, for ICG, I think you mentioned the first product is going to be launched in the second half of this year. Could you remind us again, like is it a private credit product, private credit or/and public credit product? Also who you can distribute it to geographies and maybe even what your outlook in terms of flows for that? Second question is, I saw that the French networks had a good inflows into medium, long-term in Q4. So wondering if you see this as a turning point, just any dynamics around that? And lastly, just a follow-up on the ALTO question earlier. Q4, we saw a step up. I think in the presentation, you mentioned 40% of it was due to project revenues. I'm wondering, how much of that was maybe a one-off? Or is this something that could be sustained in the near term, at least? Valérie Baudson: On the cost side or on the revenue side? Hubert Lam: The revenue, sorry. Valérie Baudson: Can you repeat the last one, sorry? Hubert Lam: Yes, questions on ALTO. Valérie Baudson: On ALTO, sorry. Okay. Hubert Lam: I think it was EUR 35 million in the quarter. I think you mentioned 40% of it was due to project revenues or something like... Nicolas Calcoen: 40%. Hubert Lam: 40% margin [indiscernible]. Is that a one-off, or is that seasonal one-off? I'm just wondering how would you think about this number? Valérie Baudson: It's probably higher than what would be the average. Nicolas Calcoen: Exactly. Valérie Baudson: If I had to give an answer, but it will depend on all the new clients we will get next year. But it's probably -- I mean, let's say it's a bit higher. On ICG, so yes, we will launch our first 2 new common solutions. So we are in the process of building the SCA and package the solution in the new regulated format we have in Europe, as you know. We expect all this to be ready during H2, probably after summer. We're working hard to make it very efficient and quick and in an excellent collaboration and good project mode. The 2 first solutions will be one on private credit and the other one on secondaries. And we're already preparing what will be the future. But at least these 2 are in the pipeline, and we will -- it will be under regulated European format. So obviously, distributed in Europe and in some Asian countries, which allow it. On the second question was on [indiscernible] Nicolas? Nicolas Calcoen: French network. Valérie Baudson: I mean, french network, sorry. French networks part of the flows we saw is linked to the dynamic of the life insurance in France, which is, as you know, dynamic and which also explains, by the way, the very good figures we have on the insurance side for the euro contracts on the institutional side in our figures. And part of it is a share of the new solutions I was mentioning. Typically, the very nice growth rate on our new DPM solutions is part of what you see in Q4. Cyril Meilland: We take next question from Zoom. So Michael, I'm opening your mic. Unknown Analyst: Can you hear me? Cyril Meilland: Yes, we can. Unknown Analyst: I have 3 questions, please. First, I think you indicated UniCredit channels saw about EUR 16 billion of outflows in 2025. Should we expect a similar number next year? And can you confirm whether any of the distribution -- if they are paying a penalty fee related to your distribution contract? That's number one. And number two, we saw really strong performance fees in the quarter, and yet you still showed pretty good cost discipline. I was just wondering how much of the Q4 cost base was performance fee related, i.e., incremental compensation based on that? And then finally, in terms of the share buyback, is this a buyback that will include your parent company? Or is the shares are going to be bought back from minority shareholders? Valérie Baudson: Good. I take UniCredit, I'll let you take the two other ones, Nicolas. So UniCredit, nothing new since the medium-term plan you attended. You know our partnership present in July '27, at which point it might not be renewed. We committed on targets to you which we will deliver whatever happens with UniCredit. We are obviously fully committed to service as we always done the networks and their clients. The difference is that we give you the exact flows and assets on a quarterly basis to give you full transparency of it. So I remind them, minus EUR 16 billion with EUR 4 billion at the end -- for the last quarter. Obviously, I'm not going to speculate on what will happen in '26. What I can tell you is that UniCredit represents today EUR 86 billion of assets under management. Group-wise, among which EUR 66 billion in Italy. And that means EUR 86 billion out of EUR 2,380 billion, as you know, and EUR 86 billion is less than what we raised this year overall. I just wanted to remind the global picture on that front. Otherwise, nothing more. Nicolas Calcoen: On the second question regarding performance fees and potentially associated costs, there are no costs directly associated to performance fees as to any kind of revenues, by the way. Just a reminder, we have a variable remuneration policy, which is to basically, I would say, allocate something between 14% and 20% of the pre-variable remuneration gross operating income to variable remuneration, but it's appreciated globally, no direct cost associated to any particular kind of revenues in particular performance fees. And the last question regarding -- yes, it was a share buyback. So Credit Agricole informed us that they will not participate in the share buyback. So it will be bought on the market. Unknown Analyst: [indiscernible]? Valérie Baudson: We never comment on our [indiscernible] on our partners and clients. Cyril Meilland: Thank you. Next question from Sharath. Sharath Ramanathan: Sharath Kumar from Deutsche Bank. I have 3 questions, 2 on India and one on digital flows. Firstly, on the India flows, I would say still not very encouraging. Do you think yesterday's tariff deal with the U.S. and Sunday's budget announcement could be the catalyst for the flow's recovery in India? So what is the outlook on the near-term flows? The second one, sticking with India. From my calculations, assuming that we get a $14 billion IPO value for the SBI on the basis of what we hear from the press, I calculate capital gains of, say, $300 million, $350 million for the 3.7% stake that you would sell. So what do you intend to do with the proceeds? Would it go into the M&A pool? Or do you -- are you thinking about a special dividend? And finally, on digital flows, how do you characterize the nature of flows? What does it do to your group margins? I imagine it would be accretive, but if you could clarify, that would be helpful. Valérie Baudson: On the digital flow... Sharath Ramanathan: On the digital flows -- so what sort of products are we getting at? And what sort of margins compared to the group margins? Valérie Baudson: Okay. On the first question about [indiscernible]. Sorry, SBI flows first before speaking about the IPO. Honestly, exactly as Nicolas explained it, we saw this year that the Indian rupee was down 15%, which clearly explained a material part of the decrease in flows in euros over the period. And the slowdown was driven by institutional clients, which were, I would say, less enthusiastic in this environment. What is very positive and essential for us is the fact that on the retail side and on the rise of the individual savings plans, which is incredible source of growth for the future of this company. They have remained very dynamic. So the strong fundamentals are completely here, despite the fact that the rupee was really down this year. So I am fully and totally confident in the future and the growth outlook of SBI MF just because this is a market which is still so -- which has such a low penetration compared to the penetration of the asset management industry, we can see in the U.S., in Europe and even in a lot of other Asian countries that the growth is going to be huge. Second, regarding the transaction, of course, we -- it's much too early to give both the valuation and value for Amundi. And it's also too early to say whether it will depend on the decision of the Board when it will be done. We will discuss this topic later. And on the digital flows, what is obvious is that distributing savings digitally means using a lot of ETF, and it is the reason why Amundi is so successful in -- it's one of the reasons why Amundi is so successful in this new market, which is the digital distribution of savings. It is not the only reason. It's also because it's a very different way of working with digital distributors than with traditional banks and that we really were able to adapt to everything in terms of marketing, in terms of technology, in terms of speed of answering, et cetera, et cetera. But at least it does explain. So of course, a big bulk of this distribution is and will be done through ETF. But as I explained to you very often, the cost of production of an ETF is much, much, much lower than the cost of production of active management. And at the end of the day, selling ETFs for Amundi is very profitable and exponentially profitable. Sharath Ramanathan: Just a follow-up. Just on the India flows on the AUM mix, do you have -- what is it between Retail and Institutional segment? Valérie Baudson: I'm going to ask my CFO friends in the room to give you the exact figure. Can we come back to you later on the call. Cyril Meilland: We'll definitely get back to you, Sharath. I think there was a question from Michael. Michael Sanderson: Mike Sanderson, Barclays. Just a couple, please. First of all, the ICG product launch timings, you've obviously laid out the time line in relation to the corporate governance and the ownership piece. Are they directly linked? Does the regulatory piece have to come through before you can launch the product? Or are you happy to go separately? And then secondly, you saw some strong institutional flows through Q4 that you particularly noted. And I'm just interested, first of all, the scale of them and whether there's any sort of margin dilution, particular margin dilution when you're talking sovereign wealth and central banks? And secondly, I suppose, the pipeline in those areas, how that's looking into the next year? Valérie Baudson: On ICG, the answer is no. There is absolutely no relationship between these regulatory approvals, which are really linked to the accounting topic that Nicolas was explaining and the partnerships. We already started the raising, and we will be delivering it whatever the regulatory and financial process. On the second point, Nicolas? Nicolas Calcoen: So no particular dilution. We had indeed a strong activity on the last quarter. And as for any of our business, the margins we can -- we get depend very much on the type of strategies we propose and not that much on the type of clients. So... Valérie Baudson: If I have to give you an idea, I think the institutional share of our business this year was particularly exceptional, but it will depend on our clients in 2026. So -- and once again, we are thrilled to see so many big institutional clients, especially in the retirement area, willing to work with Amundi. Cyril Meilland: We do not seem to have any questions from the Zoom video conference. Any questions left from the room? No. Okay. Thank you. I think that's done. Thank you very much. Obviously, we're at your disposal for any follow-up. Annabelle, Thomas and myself and looking forward to our next encounters at the very last Q1 results, which will be announced on the 29th of April, if I remember well. Thank you. Valérie Baudson: Thank you so much. Nicolas Calcoen: Thank you.
Operator: Good day, and thank you for standing by. Welcome to the Patria Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Andre Medina from Patria Shareholder Relations. Please go ahead. Andre Medina: Thank you. Good morning, everyone, and welcome to Patria's Fourth Quarter and Full Year 2025 Earnings Call. Speaking today on the call are our Chief Executive Officer, Alex Saigh; and our Chief Financial Officer, Ana Russo; and our Chief Economist, Luis Fernando Lopes, for the Q&A session. This morning, we issued a press release and earnings presentation detailing our results for the quarter, which you can find posted in the Investor Relations section of our website on Form 6-K filed within the Securities and Exchange Commission. This call is being webcast, and a replay will be available. Before we begin, I'd like to remind everyone that today's call may include forward-looking statements, which are uncertain, do not guarantee future performance and undue reliance should not be placed on them. Patria assumes no obligation and does not intend to update any such forward-looking statements. Such statements are based on current management expectations and involve risks, including those discussed in the Risk Factors section of our latest Form 20-F annual report. Also note that no statements on this call constitute an offer to sell or a solicitation of an offer to purchase an interest in any Patria fund. As a foreign private issuer, Patria reports financial results using International Financial Reporting Standards, or IFRS, as opposed to U.S. GAAP. Additionally, we would like to remind everyone that we will refer to certain non-IFRS measures, which we believe are relevant in assessing the financial performance of the business, but which should not be considered in isolation from or as a substitute for measures prepared in accordance with IFRS. Reconciliation of these measures to the most comparable IFRS measures are included in our earnings presentation. Now I'll turn the call over to Alex. Alexandre Teixeira de Assumpção Saigh: Thank you, Andre. Good morning, everyone, and thank you for joining us today. We are very excited to report our fourth quarter results, a capstone to a very successful 2025, which highlights how as we enter 2026, Patria is in a strong position to achieve and hopefully exceed the 3-year fundraising and FRE fee-related earnings objectives in addition to other important KPIs we set for ourselves at our Investor Day in December 2024. Highlights of the quarter and 2025 include organic fundraising of $1.7 billion in the quarter and a record $7.7 billion for the full year, sharply surpassed our previously upwardly revised full year target of $6 billion by more than $1 billion. We generated $203 million of fee-related earnings in 2025, up 19% year-over-year, achieving our objective of $200 million plus for the year. Distributable earnings per share reached $1.27 in 2025, driven by the strong fee-related earnings growth in addition to $19.6 million of performance-related earnings in the fourth quarter. We announced back on November 26, 2025, the acquisition of 51% of the Brazilian private credit manager, Solis, which closed on January 2. Solis, with approximately $3.5 billion of fee-earning AUM as of the third quarter 2025, substantially expands our capabilities and scale in the rapidly growing private credit market in Brazil. Pro forma for the acquisition, our credit vertical fee-earning AUM is approximately $12.1 billion. We also announced on December 11, 2025, the acquisition of several REITs real estate investment trusts from the Brazilian real estate manager, RBR, which closed yesterday and is expected to add approximately $1.3 billion of permanent capital real estate investment trust assets in Brazil. We are now the largest manager of listed REITs in Brazil with a pro forma fee-earning AUM of approximately $5.7 billion, a market in which we believe scale provides significant competitive advantages. Also just yesterday, we announced an agreement to acquire WP Global Partners, a U.S.-based lower middle market private equity solutions manager with $1.8 billion of fee-earning AUM as of the third quarter 2025, which will enhance our global capabilities in our global private markets solutions business. Pro forma for the acquisition, our GPMS Global Private Markets Solutions fee-earning AUM is approximately $13.6 billion. Our total fee-earning AUM of $41 billion as of the fourth quarter 2025 rose 5% sequentially and 24% year-over-year. Pro forma for the announced acquisitions, our fee-earning AUM at year-end is approximately $47.4 billion, putting us in a strong position to achieve our year-end 2027 target of $70 billion. We are also pleased to share that our energy trading platform, Tria, which has experienced strong growth since its launch in 2024 and contributed with $4 million to our 2025 distributable earnings signed a definite agreement with Raizen to acquire its energy trading arm, Raizen Power. Upon completion of the transaction, Tria is expected to become one of the largest independent energy trading companies in Brazil. Finally, adding to our current approved share buyback program of 3 million shares, of which we have already acquired 1.5 million in the third quarter 2025, our Board just approved an additional 3 million share buyback program. On top, further illustrating Patria Partners' alignment with our business, of which we already own approximately 60% and our belief in Patria's unique position to continue its growth path, we, Patria's Partners through our holding company, PHL, are happy to announce our intention to purchase up to 2.5 million PAX shares. Summing it all up, we can now purchase up to 7 million shares to return capital to our shareholders. Now let's take a closer look into the quarter and the year, starting with fundraising. The $1.7 billion of capital we raised in the fourth quarter 2025 and the $7.7 billion we raised for the full year do not include any acquisition and were driven by continued demand for our infrastructure, credit, real estate and GPMS strategies. Our fundraising in 2025 exceeded the initial $6 billion target we set back at our Investor Day in December 2024. As well as the revised target of $6.6 billion we set in the third quarter of 2025. While we are leaving our 2026 and 2027 fundraising targets at $7 billion and $8 billion unchanged for now, our success in leveraging the investments we have been making in our platforms and distribution capabilities increases our confidence in our ability to meet and hopefully exceed our targets. Now turning to the fundraising performance of specific asset classes As the leading infrastructure investor in Latin America, we continue to see increased global interest in this fast-growing asset class as we raised approximately $2.3 billion for our infrastructure strategies in 2025, led by the final closing of our Infrastructure Development Fund V and various fee-paying SMAs and co-investment vehicles. This was approximately 5x what we raised for infrastructure in 2024, and we see no letup in demand for these strategies from both global investors as exemplified by the recently announced $2 billion data center projects led by one of our drawdown funds in partnership with ByteDance and increasingly local investors. Next, GPMS raised almost $2 billion in 2025, continuing to highlight the strong support from our clients and our success in integrating this business into our platform. The recently announced agreement to acquire WP Global Partners with approximately $1.8 billion of fee-earning AUM, we expect will further strengthen investor demand for our solutions strategies over time as it enhances our investment capabilities in the United States. Credit also had another strong year, fundraising a record $1.8 billion of capital, handily surpassing the $1.4 billion raised in 2024, which was itself a record. Continued strong investment performance, combined with the addition of Solis and its robust private credit capabilities further enhances the capital raising prospects of our credit platform. On that note, let me give a little more color on how we see the private credit opportunity in Brazil. The total Brazilian credit market reached $1.7 trillion in 2024, with $800 billion estimated to represent the addressable market opportunity for asset-backed nonbank private credit, of which around $200 billion is already currently served through private credit vehicles, mainly CLOs. CLOs, which AUM in Brazil exceeded $150 billion as of September 2025, have been the fastest-growing asset management strategy in the country, having grown at a 30% plus CAGR compounded annual growth rate since 2019. This growth is supported by multiple structural drivers, including, but not limited to, favorable regulation, banking disintermediation, tax incentives and broader financial deepening and growing interest in the CLO structure amongst investors. With the acquisition of a majority stake in Solis, Patria significantly enhances its capabilities and scale in this very attractive market. Finally, even within a high interest rate environment, we see building momentum in our real estate business. Our real estate strategies raised over $520 million in the fourth quarter of 2025, including over $260 million through a follow-on offering in our Brazilian logistics REITs and over $180 million in our funds in Colombia. As the largest manager of REITs assets in Brazil and one of the largest in Colombia with over $8 billion of pro forma permanent capital fee earning AUM, -- we believe our substantial scale in this business is a significant competitive advantage when it comes to attracting investor capital, and we are excited with the opportunities this business has to offer heading into 2026. Of course, fundraising alone does not drive growth in fee-earning AUM and management fees. And we are proud to report that redemptions decreased by approximately 25% in 2025 versus 2024, a clear reflection of our strong investment performance across our verticals. Our ability to grow our fee-earning AUM is further enhanced by the stickiness of our asset base, given that approximately 90% is in vehicles with no or limited redemptions, including 22% or $9.1 billion of fee-earning AUM in permanent capital vehicles. Our strong fundraising, coupled with low redemption rates and a sticky asset base is translating into solid net organic growth as we generated approximately $2.4 billion of organic net inflows into fee-earning AUM in 2025, representing an organic growth rate of about 7%. We see additional room for our organic growth rates to increase further in the years ahead as we plan to grow our base of attractive products in sticky structures. In addition, with over 50% of our management fees charged on NAV or market value, our strong investment performance continues to be an important growth driver, contributing approximately $3 billion to our fee-earning AUM. Combined organic net inflows and the positive impact of investment performance added over $5.3 billion to our fee-earning AUM in 2025. The impact of FX throughout the year was also positive, adding $2 billion to our fee-paying asset base. Finally, the acquisition of the Brazilian REITs discussed during our last earnings call and concluded in the second quarter of 2025 contributed with $600 million. Summing it all together, our fee-earning AUM in the fourth quarter of 2025 reached $40.8 billion, up 24% or $7.9 billion year-over-year. Pro forma for recently announced acquisitions, our fee-earning AUM is now at $47.4 billion. It is also important to highlight that as we expand our business, a large portion of the capital we raise will only flow into fee-earning AUM as capital is deployed. Our fourth quarter 2025 pending fee-earning AUM totaled about $2.9 billion, further highlighting our future fee-earning AUM and management fee growth potential. Our fee-earning AUM growth is also reflected in the diversification of our business. Pro forma for recent acquisitions, our fee-earning AUM base is well diversified across our asset classes with 29% in GPMS, 26% in credit, 19% in real estate, 12% in private equity, 9% in infrastructure and 6% in public equities. Patria today has over 35 investment strategies with more than 100 products with no single product representing more than 8% of our pro forma fee-earning AUM. Our largest fund, which is a corporate credit LatAm high-yield fund has approximately $3.8 billion in AUM and has delivered an impressive 13.1% net compounded annualized return since inception in 2022 and as of the fourth quarter 2025. Our corporate credit LatAm high-yield strategy more broadly, which started back in 2000, currently has an aggregate AUM of over $5 billion. And as of the fourth quarter 2025 has outperformed its benchmark for every single period, 1 year, 3 years, 5 years and since inception. with since inception, net compounded annualized return of 11.1%, exceeding the benchmark by more than 360 basis points. In terms of geography, approximately 1/3 of our assets are invested in Brazil, 1/3 in other Latin American countries and 1/3 in developed markets across Europe and the United States. With regards to our investor base, our sources of capital are also diversified across geographies with approximately 27% of our AUM coming from Europe and the Middle East, 31% from Latin America, excluding Brazil, 16% from North America, 18% from Brazil and 9% from the Asia Pacific region. Looking at our foreign exchange exposure, over 60% of our fee-earning AUM is denominated in a diversified basket of hard currencies, mainly the U.S. dollar and not exposed to soft currency fluctuations. Finally, as I mentioned before, approximately 90% of our pro forma fee earnings AUM is in vehicles with no or limited redemptions, including 22% or $9.1 billion of fee-earning AUM in permanent capital vehicles. These points further highlight the quality of our fee-paying asset base and the predictability and long duration of our management fees. Finally, we're also expanding the number of flagship drawdown funds into new strategies and asset classes, including infrastructure development, infrastructure credit, private equity buyouts, growth equity, venture capital, private credit, real estate development, secondaries, co-investment vehicles, among others. All of these products will be eligible to generate performance fees, highlighting the potential for even greater diversification of our performance fee earnings stream. Now our strong fee-earning AUM growth is translating into robust growth in fee-related earnings. In the fourth quarter of 2025, we reported fee-related earnings of $64.2 million, representing 30% sequential and 17% year-over-year growth, also supported by our margin expansion of 5% versus the third quarter 2025 and 5% versus 1 year ago, reflecting our success in integrating acquisitions and the growing scale of our business. For the full year, fee-related earnings reached $202.5 million, up 19% and in line with our guidance. On a per share basis, fee-related earnings of $0.41 in the fourth quarter 2025 rose 30% sequentially and 14% year-over-year. Full year fee-related earnings per share was $1.28, a 15% year-over-year increase. Given our strong fundraising momentum and fee-earning AUM growth outlook, we remain confident in meeting our 2026 fee-related earnings targets of $225 million to $245 million or $1.42 to $1.54 per share, in addition to our target of $260 million to $290 million or $1.60 to $1.80 per share. As a reminder, our fee-related earnings targets are inclusive of already announced and prospective M&A. We reported $78.5 million of distributable earnings in the fourth quarter and $200.9 million for the full year. On a per share basis, this was $0.50 and $1.27, respectively. In addition to the very strong fee-related earnings growth we highlighted earlier, distributable earnings also benefited from multiple monetization events in our Infrastructure Fund III as we announced last quarter, our share count for the fourth quarter 2025 remained at 158 million shares. In connection with performance-related earnings, I think it is important to address the decrease in our net accrued performance fees primarily due to private equity buyout Fund V falling out of carry. As this particular fund's performance is close to its hurdle rate and given its European carry structure, foreign exchange and the price of public holdings can drive private equity buyout Fund V in and out of carry frequently. However, as we look more deeply into our business, we are optimistic in our ability to generate future performance fees as we believe we remain on track to deliver our performance-related earnings target range of $120 million to $140 million from the fourth quarter 2024 to the end of 2027. We have already realized $62 million of performance-related earnings against our target and Infrastructure Fund III, which is generating cash carry and had approximately $19 million of net accrued carry remaining as of year-end is expected to generate performance fees in 2026. Private Equity buyout Fund VI, which is a 2019 vintage and has over $210 million of net accrued carry is fully invested and entering its monetization phase. We have several newer strategies in growth and venture that have performed well. And while still early days, already have about $7 million of net accrued carry, a balance that we would expect to grow over the coming years. For both private equity and infrastructure, an increasing proportion of our growing co-investment assets are carry eligible, which has the potential to generate performance fees on a deal-by-deal basis. In addition, as I mentioned, we have an expanding range of drawdown funds across our asset classes eligible to generate performance fees. To summarize, I want to reinforce that we believe that we are on track to deliver on our performance-related earnings target range of $120 million to $140 million from the fourth quarter 2024 to the end of 2027. With $62 million already realized, approximately $20 million expected in 2026, mainly from our Infrastructure Development Fund III and the remaining balance expected to be realized in 2027 from multiple funds. Before I conclude, a quick note on macro. From our perspective, the macro events, both globally and within the region favor the drivers of our business. These long-term drivers such as the financial deepening across Latin America, deregulation and pension reforms in large economies in the region, increased allocations to alternatives, robust demand for infrastructure investing, potentially lower interest rates on the back of declining inflation and better fiscal prospects, a consequence of more market-friendly governments being elected in the region continue to drive demand from both local and global investors. If anything, the current geopolitical scenario, coupled with a weaker U.S. dollar and attractive on-the-ground trends are fueling increased interest in Latin America from a broadening range of investors. Incidentally, that is what capital markets showed in 2025 and also year-to-date with the region outperforming in many asset classes. With that as a backdrop, we think it is important for investors to keep in mind that we have close to 40 years of investing experience navigating the various economic and political cycles in the region. This experience, combined with the greater diversification and resilience of our business, in our view, make us uniquely positioned to capitalize on both the increased investor interest in the region and the wide range of investment opportunities we see. Again, we are excited about the fundraising and fee-related earnings momentum we have been building, momentum which is supported by our increasing scale and capabilities across an expanding range of strategies. We believe our long-term opportunity and outlook remain bright, and none of this would be possible without the dedication and capabilities of our team members. for which I am very proud and grateful. On a final note, I want to comment on organizational and structural changes we have announced in recent months. First, I'd like to thank our CFO, Chief Financial Officer, Ana Russo. Ana approached me about a year ago with her plan to step down from her current corporate role as Patria's CFO to focus the next stage of her career on advisory and nonexecutive roles and projects. We are sorry to see Ana leave and want to thank her for all her hard work and contribution in the past several years. but we are glad that we will continue our relationship in several fronts as, for example, with her current position as Board member of Patria-Moneda Asset Management in Chile. I wish Ana the best of luck as she charts a new career path. Following an extensive review process, we announced that Raphael Denadai, currently Patria's partner and CFO of Portfolio Management with over 25 years of experience, will assume the role of Patria's CFO effective in April 2026. Ana, who will remain in her position until then, will provide more color on the transition in her prepared remarks. In addition, as we announced back in December 2025, to further strengthen our corporate structure in order to drive operational excellence and better support Patria's strategic execution at scale. Patria recently created the role of Global Chief Operating Officer and was pleased to introduce Nikitas Psyllakis as our new Global COO. Nikitas joins Patria from DWS Group, bringing over 20 years of extensive global experience in financial services, having led strategic planning, operational transformation and regulatory initiatives. With that, I would like to once again welcome Nikitas and Raphael to their new roles. Now let me turn the call over to Ana to review our financial results in more detail. Thank you, Ana. Ana Russo: Thank you, Alex, for the kind words, and good morning, everyone. Indeed, it's quite rewarding to close out 2025 with $7.7 billion of organic fundraising, exceeding by a large margin, our previously upwardly revised full year target of $6.6 billion by more than $1 billion. We expect the strong fundraising momentum and fee-earning AUM growth for 2025 to continue as we enter the second year of our current 3-year plan and are even more confident of our ability to achieve our objectives for 2026 and 2027. Before I review our financials in more detail, I would like to take a moment to speak about my transition from the CFO role. Stepping down as Patria's CFO is a deeply personal decision driven by my desire to dedicate the next stage of my career to advisory and nonexecutive positions, areas where I believe I can contribute to a different organization given my diverse background. I will continue serving as a Board member of Patria-Moneda Asset Management in Chile and remain fully committed to Patria as a CFO through the end of April. Over the next few months, my focus will be on delivering all 2025 annual reports and regulatory obligations, supporting our new auditor, KPMG, as they complete their first annual audit and most importantly, ensuring a smooth and effective transition to Raphael Denadai. I'm extremely proud of how Patria has evolved during my 3.5-year tenure as CFO, and I'm confident that my colleague, Raphael, will do an excellent job and supported by a strong and committed team. Let's review our fourth quarter and full year 2025 results in more detail. Our full year organic fundraising of $7.7 billion was an important step to deliver our cumulative 3-year plan of $21 billion of total fundraising that we communicated at our 2024 Investor Day. Our success this year demonstrates that the strategic investments we made across our investment platforms, products and distribution capabilities are paying off. We entered 2026 with greater visibility and unwavering confidence in our ability and our path to achieve our objectives for this year and next. Our FEAUM rose 24% year-over-year and 5% sequentially to $40.8 billion. The strong year-over-year growth reflects mainly the combination of solid organic net inflows of $2.4 billion and the positive contribution from our strong investment performance in addition to a positive FX impact and the acquisition of several Brazilian REITs concluded in the second quarter of 2025. As Alex mentioned, our fee-earning AUM growth continues to highlight our expanding fundraising capabilities and deployment opportunities, coupled with the stickiness and resilience of our asset base. Pending fee-earning AUM of $2.9 billion, combined with our fundraising goals, the 22% of fee-earning AUM that are in permanent capital vehicles, the almost 35% of fee-earning AUM in drawdown funds with an average life of 6 years and an overall stickiness of our asset base, altogether highlight our ongoing ability to generate net organic FEAUM growth over time. Total fee revenue in the fourth quarter reached $101 million, up 8% year-over-year and about 19% sequentially. For the full year, total fee revenue reached $344 million, an increase of 14% versus 1 year ago. Our management fee rate averaged 92 basis points over the trailing 4 quarters. As reviewed at our December 9, 2024 Investor Day, we are steadily diversifying our business and introducing new investment strategies and product structures, which are key drivers of our growth. Consequently, our management fee rate will continue to evolve, and we expect our fee rate to trend towards approximately 90 basis points over the coming quarters, but with the potential to vary depending on the mix. Looking into our expense lines, operating expenses, which include personnel and G&A expenses, totaled approximately $36.1 million in the quarter, up 5% sequentially and down 4% year-over-year. We remain focused on controlling expenses and capturing operating efficiencies even as we continue to reinvest in the business. For the full year, operating expenses totaled $141.6 million, up 8% versus 2024, mainly driven by new acquisitions and salary increase inflation adjustment, partially offset by realized operating efficiencies. As we look ahead to 2026, excluding the impact of acquisitions, total expenses in the fourth quarter are a good starting point as we enter the new year. Putting it all together, Patria delivered fee-related earnings of $64.3 million in the quarter, up 17% versus prior year and 30% sequentially with an FRE margin that rose approximately 5 percentage points versus Q4 '24 and sequentially to 63.6%. We remind everyone that the fourth quarter is often our strongest quarter in terms of FRE margin, driven by the recognition of most of our high-margin incentive fees from our credit and public equity portfolio, which totaled $11.3 million in the quarter. For the full year 2025, we generated $202.5 million of fee-related earnings, up 19% year-over-year, in line with our guidance. As Alex mentioned, we continue to expect to generate $225 million to $245 million of FRE in 2026, and we remain confident that we are on path to deliver on our 2027 FRE target of $260 million to $290 million with an FRE margin objective of 58% to 60%. While our recent M&A may exert some short-term pressures of FRE margins, our expanding scale and ability to realize operating efficiencies keep us confident that we can meet our FRE margin objectives for 2026 and 2027 of 58% to 60%. As noted on our last call, in Q4 2025, we had multiple monetization events in our Infrastructure Fund III, which generated $19.6 million of performance-related earnings in the fourth quarter. We continue to expect Infrastructure III, which had approximately $19 million of net accrued performance fees at the quarter end to continue its realization through 2026. Our total net accrued performance fee decreased from $402 million in the third quarter '25 to $249 million in the fourth quarter of 2025, mainly driven by private equity Fund V falling out of carry, driven by the price of public listed companies and FX. For reference purpose, if we consider the FX rate and the price of the public holdings by end of January, net accrued performance fees for Fund V would have been around $40 million. As we look more deeply into our business and as detailed by Alex, we are optimistic about our ability to generate future performance fees from multiple funds. Next, our net financial and other income and expenses in fourth quarter '25 totaled a positive $1.8 million versus Q4 '24, mainly due to lower average debt and higher contribution from Tria, our energy trading platform. Sequentially, net financial income and other expenses were up of $0.8 million versus third quarter '25, mainly reflecting a lower contribution from Tria. While it can vary sharply quarter-to-quarter, it's worth noting that in 2025, Tria contributed approximately $4 million to Patria, and we are very excited regarding the long-term potential of this business and hope to share more updates on the development of this business over the course of 2026. At the end of the quarter, net debt totaled approximately $105 million, slightly below the $108 million for the third quarter '25 as we did not have any meaningful M&A payments in the quarter. Our net debt to FRE ratio of 0.5 was well below our long-term guidance of 1x. Deferred M&A-related cash payments through 2028 currently total approximately $110 million, excluding potential earn-outs. As highlighted in previous earnings call, during third quarter, we entered a total return swap or TRS with a financial institution through which 1.5 million shares were purchased on our behalf. We expect to settle the TRS by Q3 2026, at which point the share will be transferred to Patria and subsequently retired. I would like to take the opportunity to recap our capital management strategy based on our strong cash generation and conversion of distributable earnings. First, we increased our dividend by $0.05 per share for 2026, resulting in an expected dividend payment of $100 million. Second, we will target around 3 million shares repurchase to offset dilution from stock-based compensation and any M&A transaction settled in shares. For this purpose, we may again consider the use of total return swaps, which have proven to be a cost-effective capital management tool. With regard to current M&A, we expect funding to come primarily from cash. Also, as of December 31, our 2026 deferring contingent payment totals approximately $100 million, of which about 80% is expected to be paid in cash. To highlight our ample ability to fund our growth and maintain a healthy dividend, let's look at a simple math. Based on the midpoint of our 2026 FRE guidance and expected PRE, we estimate our cash generation in 2026 will be approximately $220 million. So detracting our dividend, payment of TRS and the current deferred and contingent payments noted before, we still leave us with the capacity to fund CapEx and additional M&A when considering our cash generation and our total unused debt capacity of over $100 million. Of note, our total current net debt capacity is about $235 million or onetime FRE compared to the $105 million at year-end, which is very conservative as industry standards. All the above underscores the strength of our financial position to support growth initiatives and maintain strategic optionality for our shareholders. Our effective tax rate in the fourth quarter '25 was 4.2%, excluding performance fees, which is usually crystallized in the tax favorable jurisdiction, the effective rate was 5.6%, which represents 120 basis point improvement versus Q4 '24 on a comparable basis. The reduction was mainly driven by tax credits on our U.K. entities. On a full year basis, excluding performance fees, the effective tax rate reached 6.3% with 180 basis points lower than 2024. Looking ahead, we continue to expect our annual tax rate to average around 10% -- in the fourth quarter, we generated $78.5 million of distributable earnings or $0.50 per share. For the full year, distributable earnings were $200.9 million or $1.27 per share, representing a 6% year-over-year growth from $189.2 million in 2024 with a strong FRE growth more than offsetting lower performance-related earnings and the higher share count. While FRE and DE are important financial metrics, I would like to give you some additional color on line items that impact our net income. In 2025, net income totaled $85.6 million, which is up 19% versus $71.9 million in 2024. The increase of $13.6 million is mainly driven by distributable earnings growth and lower deferred contingent consideration, partially offset by higher than originally anticipated equity-based compensation, reflecting better performance, lower employee turnover and expansion of the program. We plan to give more color on the equity-based comp and other line items during our first quarter call. We finished the quarter with 158 million shares, unchanged from the prior quarter. We did not repurchase any share in the quarter and continue to expect the share count to average between 158 million and 160 million from 2025 to 2027, inclusive of our additional share repurchase. In 2025, the Board approved a share repurchase program of up to 3 million shares, of which we have utilized $1.5 million through the TRS. At our recent Board meeting, we received the approval for an additional 3 million shares to be added to the program. Finally, we declared a dividend of $0.15 per share for the fourth quarter. We remind everyone that we have updated our fixed dividend policy from $0.60 in 2025 to $0.65 per share for 2026, an increase of 8%. Overall, we are truly encouraged by our fourth quarter results and with the momentum we are building as we continue to diversify and improve the resilience of our business. We believe we are firmly on track to achieve the various targets we have shared with you, and we are excited by the growth opportunity ahead. Thank you, everybody, for dialing in, and we are now ready to answer your questions. Operator: [Operator Instructions] And our first incomes from Craig Siegenthaler of Bank of America. Craig Siegenthaler: So first question is on private equity valuation process. We've had some recent inbound on the topic, so I thought we could kind of clean it up here. Private Equity Funds IV and V, they're both pre-2016 vintage funds. They both have a significant amount of unrealized value. So I was wondering if you could talk about your internal valuation process, how it works and also how those valuations are validated by third parties. Alexandre Teixeira de Assumpção Saigh: Okay. Thank you very much, Craig. Thanks for your question. On the valuation process, we -- in summary, we use industry practice, industry common valuation process for our private equity drawdown funds and our infrastructure fund funds, all of our drawdown funds, we -- once a year, we have an independent appraiser to value the funds. We normally use a recognized independent appraiser that does the valuation with year-end numbers, in this case, end of 2025. This independent appraiser works with the management teams of the respective portfolio company, going through a whole understanding of the business, understanding of the next 3 to 5 years and future prospects of the business and more of a technical discounted cash flow model as it is common in the industry for these kinds of valuations. And then this valuation, of course, is compared with multiples and compared with industry multiples, peers, if there are no comparable listed peers, whatever. So it's, of course, the main methodology is a discounted cash flow. And of course, the end result is compared with peers, valuations, listed, nonlisted M&A transactions, et cetera, et cetera. As it is what I'm saying, it's completely normal for these kind of valuations in the industry. And what we do is actually we then -- they give us a range and then we value within the range, we actually mark the companies one by one. That's what we do. And during the year, we don't really do much. We just actually have the valuation during the year, quarter-by-quarter be adjusted by the cost of capital of that specific business and adjust the valuation if something major happens like we sell part of the business or we merge or whatever or something really went -- goes wrong, like COVID or something like that or whatever. But if there was no major changes, I don't -- we really don't like and we are advised not really to keep changing the valuation of the business. If nothing major happens with that specific business during the year, we just then adjust the valuation by, again, the cost of capital until we go through that process, all that process again at the end of the subsequent year. So again, we have been doing this for -- since inception, right? Our first private equity fund was back in '97. It's going to be 30 years, not 29 years as of now. We know that because it's going to be -- this year is going to be our annual meeting with investors #29, and we do 1 a year. So it's now 29 years ago, we did our first one. And we've been doing this kind of valuation for the businesses since then. We check with the industry practices now and again, and the industry practices continue to be more or less what I just mentioned. But it's different, and I think there's sometimes confusion when we -- if we -- when we -- about charging management fees and performance fees, et cetera. Now we do not charge management fees on NAV for the drawdown funds. So the valuation is an indicative value because it doesn't mean much for our revenues. It doesn't mean anything for our revenues because we charge on costs. So if we did invest $100 in that business and that business now is valued at $150 or $50, we continue charging on $100 until we sell the business. So the valuation does not affect our management fees. Number two, we do not run performance fees, unrealized performance fees through our P&L. So if we have more performance fee, more unrealized performance fees or less unrealized performance fees, all the numbers that you just heard me say about our 2025 financials and Ana Russo say about our 2025 financials does not affect any little bit, okay? It's no effect whatsoever because we do not run our performance fees through our P&L. Our team, our employees are not incentivized by unrealized performance fees. They do not receive a bonus on unrealized performance fees. So if the valuation is 1, 2, 3 or 4, 10 or 0, their bonus is exactly the same. We only run the performance fees through our P&L. We only recognize performance fees if they are paid, if they are paid, cash in the bank. And then we recognize as revenues and then we calculate the bonuses of our employees, and we pay a couple of quarters later. So there's even a negative working capital here, the firm versus the employees on paying performance fees. Now we don't anticipate any performance fees as bonus before we actually get the cash, okay? And we get the money in the bank account. So we do actually give the number of unrealized performance fees as an off-balance sheet number, not completely off balance sheet, is unrealized. And as you probably saw for the December 2025 numbers, we have around $250 million of unrealized performance fees. And we gave the guidance that we're going to -- we should generate around $120 million to $140 million of performance fees from the last quarter of 2024, all the way to the end of 2027. We already realized $60 million plus. We have another $60 million to go, $60 million. And there's a -- I think the most -- the highest probability fund that will generate performance fees continues to be Infrastructure Fund III for 2026. We just gave the guidance that we think we're going to generate another $20 million for 2026. And there are so many other strategies that today we have in our menu of products that generate performance fees, venture capital, growth equity, private debt, opportunistic real estate, blah, blah, blah, blah, blah, all of them should then generate more fees that we should actually make us hit the target by the end of 2027. So this is what we do. Again, it's industry practice. We try to be as conservative as possible, but we get a valuation range from the appraiser we normally don't -- of course, we talk to the operator about the valuation process. But what we do is like we try to put in the middle of the range, and that's how we use -- that's the exercise of how we actually mark our companies. I think it's -- again, it's -- this is -- again, you are -- you know the industry very well. And sometimes you might compare the valuation of a company with another company that you might know well in another industry, in another country, in another situation, one company is doing better, the other company is doing worse, one company is this, one company is that, one company has more debt, less debt. It's very hard sometimes for you to compare one single asset with another single asset. Of course, it's hard for us to also be able to have individual opinions because we follow the valuation of the independent appraiser, okay? So this is what we do. And yes, our Private Equity Fund IV, as you know, has been underperforming. And now we have Private Equity Fund V also not generating performance fees. So 2 funds that as of the end of 2025, we don't expect performance fees coming from these 2 funds. And this is also already reflected in all of our numbers. So when we gave our projections guidance for '25, '26, '27, the end of 2024, we had a PC stay with '25, '26, '27 projections. As you can see from that presentation, we had asset class by asset class projection. And you can see that we were conservative in capital raising for private equity, given that private equity Fund IV and V are underperforming. And we were more optimistic and realistic about fundraising for the other asset classes. So -- and if you look at how much money we raised in 2025, $7.7 billion, surpassing by 30% our initial guidance of $6 billion, 30% more than our initial guidance is a substantial increase in which asset classes in credit, in real estate and in GPMS, Global Private Market Solutions. So we were not expecting to raise in 2025 more money for the private equity asset class vertical. We were expecting to raise from other asset classes. Not only we did, we surpassed in total by 30% our initial guidance. We gave a guidance for 2026 of $7 billion organic fundraising and 2027 for $8 billion, and we raised $7.7 billion in 2025. So I think we're in a strong position to continue delivering the guidance and hopefully even exceeding. So I hope I answered your questions there. Craig Siegenthaler: I do have a follow-up also on private equity. But if you look at the MSCI Brazil Index of listed public equities, Brazil has been very strong. As you know, it's returned 55% over the last 12 months, outperforming the S&P 500 in the U.S. by about 40%. Interest rates are expected to decline in Brazil. All this should benefit public equities, private equities, your realization pipeline. So can you talk about the prospects for both IPOs and strategic exits in private equity in 2026? And I assume exits to other private equity firms are still quite limited at this moment given the lack of competition in Brazil, too. Alexandre Teixeira de Assumpção Saigh: Yes. Thank you very much. Yes, I think normally, I'm generalizing again here, sorry to generalize listed traded securities do anticipate trends. And in this case, I think the upward trend that you just mentioned, we did see through the 2025 numbers of listed securities. And the MSCI is one of them. As you mentioned, appreciating substantially in 2025 in local currency and in U.S. dollars. Of course, the U.S. dollar has weakened against some of the local currencies. So that's helped the U.S. dollar also base return. That normally translates into private securities with time. It is not from Monday to Tuesday, but the whole enthusiasm with the region and investors start buying assets which they can and the listed ones are the ones that they have more access because they're listed, of course. And the private assets come in due time. And that's exactly what we're seeing. And a lot of exits from both our infrastructure and private equity funds programmed, infrastructure coming first. Basically, all of the assets of our Infrastructure Fund II were sold already. All of the assets of our Infrastructure III sold most of the assets in Infrastructure Fund III. So we're getting into the mode of beginning to realize the investments of Infrastructure Fund IV. Same in private equity, I think focusing in selling the assets of Private Equity Fund IV and V. Private Equity Fund IV, as we do invest -- we did invest mostly in health care, it was affected also by COVID, but companies they are recovering. And Private Equity Fund V, we have invested also in health care also investing in other sectors and Private Equity Fund VI and VII, I fully invested, 7 being invested now should begin to come into realization. Also, we have the growth equity funds, which are also private equity. Now we just mentioned about the private equity buyout funds, but we have private equity growth funds. Private equity growth Fund #1, which is a single asset fund, which was managed by [ Kamado Ping ], the asset manager that we did partner with acquire a couple of years ago, is a company in the pet care space that is doing extremely well, and that's a prospect for a sale and IPO as well. We also see private Active Growth Fund #2 with already 2 realizations, partial realization, full realization of an education company was the full realization. And we see other prospects coming along of more realizations this year and in 2026. And we also see our private active venture fund with significant and important realizations in '25 and other realizations coming into 2026. One of the notorious realizations that we did of our private equity venture fund #3 was a company called Avenue, which is basically a brokerage house targeted for Brazilians willing to open a cash account or a bank account in U.S. dollars. And it was acquired by Itau. It was a very, very, very good deal for us. So not only is the private equity buyout strategies that are posed to generate performance fees, our private equity growth funds, our private equity venture funds, our infrastructure development funds, our real estate opportunistic funds that we have in Colombia that is also right for realizations, our real estate opportunistic funds in Chile that also are right for realizations and will generate performance fees in the future. And now with other funds like private debt that we raised private debt LatAm #1, also fully invested, short duration, should generate performance fees in the future, and we are currently in the road raising private debt #2. So again, I think we're excited about the prospects, but boil everything down, we're expecting $60 million of performance fees over the next 2 years, $20 million should come from Infrastructure Fund III. Our presentation shows that we have an inventory as of December 2025 of approximately $250 million of performance fees. So $60 million out of $250 million is close to 20%, 20-something percent. So if we realize 20-something percent of that $49 million, $250 million of performance fees that we showed as of now in our December 2025 numbers, we should then be able to hit the guidance that we gave for the next 2 years. Of course, no major caveats. Performance fees depends on so many things. It depends on the macro situation. It depends on the political situation. So I'm just saying there's no macro caveat here. I think when I look into management fees, the preservability and predictability of our management fees, given that 22% of fee-paying AUM is now permanent capital structures, and we have long-dated drawdown funds, 90% of our funds are in drawdown funds or permanent capital. I can say with more confidence that our predictability of our management fees and therefore, our FRE is more visible. Everything that I said about performance fees is a big question mark because things can happen and companies can perform better or worse. The macro situation can get better or worse. The U.S. dollar can get -- can strengthen and weaken. So therefore, we have a low hit ratio. And I'm putting this major caveat that we might generate it, but we might not as well, given there are performance fees, not management fees that are already being driven by permanent capital or drawdown funds in nature, okay? Operator: And our next question comes from Lindsey Shema of Goldman Sachs. Lindsey Marie Shema: Just wondering, you maintained your 2026 fundraising guidance. And because of that, it does imply slightly lower fundraising in 2026. So because of that, I just want to understand, do you see any risks to fundraising? Are you maybe a little bit less optimistic? And what are really those reasons for maintaining the fundraising guidance where they are? And then on the flip side, if there's kind of any upside risk to that guidance? And then on that note, if you could just mention how much of your fundraising is coming from your own fund of funds and how that plays into your fundraising? Alexandre Teixeira de Assumpção Saigh: Lindsey, thanks for the question, and thanks for participating in the call. No, we're just being conservative, to be honest. I think it's -- we're not -- we had a guidance. We gave a 3-year plan. We want to hit the 3-year plan. And the 3-year plan that we did give out December of '24 was to raise organically $21 billion. So it would be $6 billion in 2025, which we did $7.7 billion, actual $7.7 billion versus $6 billion, the guidance and $7 billion for 2026, $8 billion for 2027. So $6 billion plus $7 billion plus the $8 billion, $21 billion, our organic fundraising to hit the $70 billion of fee-earning AUM by the end of 2027, having started in the end of 2024 at around $35 billion. So we would double fee-earning AUM, which is 25% increase per year. And -- we are extremely positive about our fundraising momentum. And -- but we wanted to keep that as a $7 billion and $8 billion guidance. Nothing that really worries about that. On the contrary, we see a good momentum. But we didn't see any reason for us to upsize this guidance given that it's $21 billion for the 3 years. I think we're in a good momentum to deliver the 3-year plan. But having said that, let us go through the first 1 or 2 quarters of 2026, and we're going to be in the mid of the $21 billion target. And if we feel even more confident we'll come out with a new number. Hopefully, I cannot guarantee. Hopefully, it's going to be on the positive side, but that's it. It was more for conservative reasons than any other reason. On the second part of your question that our fund of funds do not really fund of funds, to be honest. And I think private equity and infrastructure, if that's what you're referring to, we don't see any of our -- we don't have any fund of funds investing in our buyout private equity funds, growth private equity funds, venture private equity funds. We don't have any fund -- our fund of funds investing in our development infrastructure funds. We do not -- we don't have that fund of funds investing in our own funds that I can -- I don't know -- Marco, any comments there? I don't think we have anything, right? Marco DIppolito: My only comment here and good afternoon, everyone. My only comment here is, as Alex said, we don't have a fund of fund. We do manage a listed trust that has actually funded one of our secondary funds. The amount is $75 million. Again, a very small amount relative to the overall fundraising for last year. Just to remind, this is a vehicle that has an independent Board. It's a listed trust listed in the London Stock Exchange. Therefore, decisions are subject to an independent Board. Alexandre Teixeira de Assumpção Saigh: Okay. Any subsequent questions, Lindsey? Did we manage to answer your questions? Lindsey Marie Shema: Yes. Thank you, Marco. It was the listed vehicle that I was asking about there. And then maybe just some further color on fundraising. Are you still seeing international interest in Latin America region? I know Brazil has been kind of a hot topic right now. What regions are you really seeing the most interest from? And where do you expect that incremental fundraising to come from? Alexandre Teixeira de Assumpção Saigh: Yes. No, thank you, Lindsey. No, yes, I think we have the -- I have been saying that, I think, over the last earnings -- several earnings calls that we have been geographically overperforming LatAm, overperforming Asia, Middle East. We're kind of performing at expectations in Europe. and we are underperforming the U.S. So I've been saying that for several earnings calls. That hasn't really changed much throughout the whole year 2025. We have been, again, overperforming LatAm. In general, we have been overperforming, right, 7.7% versus the guidance of 6%, 30% more. Where is it coming from? Overperforming Asia Pacific, overperforming Middle East, overperforming LatAm, in line with our expectations in Europe, underperforming the U.S. And asset class-wise, overperforming credit, overperforming GPMS, overperforming infrastructure, in line with real estate and in line with private equity. And as I mentioned, our expectations for private equity were low, but were in line with our expectations. We see these geopolitical shifts in the world benefiting LatAm. We see interest from Asia Pacific, Middle East and LatAm itself. I think some of that interest in LatAm has to do with geopolitical shifts in some of the investors in these regions allocating more to LatAm versus other parts of the world. And I think LatAm is extremely well positioned to benefit from these trends given the solid democracies with solid institutional frameworks, solid regulatory framework with -- if you look at the kind of balanced fiscal budgets relative to other countries in the world, of course, you can see that -- you can say the 1% or 2% there or here is that. But if you compare to other countries in the world in a somewhat better situation. We see also a region of the world with a high percentage of renewable energy being driving manufacturing. We have commodities, soft and hard commodities in the region. We have -- the region has the second largest deposit of rare earth in the world is in the region, a region that is also rich in oil and gas and also in protein and other commodities. So it's a region that actually was, in my view, underrated for so many years. And now I think it's getting its place under the sun. -- optimistic about continuing to see even more resources coming to the region in the near future. Operator: Our next question comes from Ricardo Buchpiguel of BTG Pactual. Ricardo Buchpiguel: Can you please provide more color on the nature of the process related to the around $100 million in litigation liabilities Patria has and also comment about the chances of having to pay some of this value? And how are the key steps on the main litigations on this bulk of $100 million? Alexandre Teixeira de Assumpção Saigh: All right. Ana, do you want to help me with this answer? I think specifically the litigation liability, please? Ana Russo: Thank you, Ricardo, for the question. I was also making sure that this -- the $100 million as is posted in our -- I think in our financial statement and also 20-F, it just so that is not in our balance sheet, as you know, because we just consider an accrue if there is a possibility for considering that is losing. So you -- as part of our information, you're going to see that more than 80% of this litigation, we already it's going to went away in our next reports and basically as we already in the past already included in all the statements that are very -- it was not possible -- it was not a remote, but it was probable. So we actually won and this more than 85% is going to go away in our next reports, okay? So we will see in our next reports. Ricardo Buchpiguel: That's clear. And a follow-up question. We saw that there was an increase in transaction costs related to M&A understand that Pat has been reaccelerating the M&A agenda and some announcements were made this year. So my question is if we should see -- should expect this level of transaction costs of around like $20 million, $25 million per quarter in the following quarters. Alexandre Teixeira de Assumpção Saigh: Yes. I think -- well, I can take that from a macro view and then I can answer specific about the numbers. Just again, just to go through this litigation process again. So we won a specific litigation there, Ricardo, where around approximately 85% of the number of $100 million will come out of our numbers as of beginning of 2026, okay? So that's 85% out of the $100 million there. On transaction costs, I think we did say, I think, to the market that we would have a hiatus in our acquisitions during 2025 in order to be able to show our capability to integrate the businesses that we have acquired and fundraise for the businesses that we did acquire, which I think we were spot on with the $7.7 billion that we raised does not include any acquisitions because we did not do any acquisitions during 2025. And we raised money for businesses that we had acquired in the past like our credit business, our GPMS business, et cetera, and our real estate business as well. So happy that, that happened. We had 1 year of hiatus. In addition, we also mentioned that as we do integrate these acquisitions will bring our FRE margins again to 58% to 60%. Now our FRE margin was close to 59% for 2025, so right in the middle of the 58%, 60% number that we gave. And compared to 2024, our margins increased from around 56% to around 59% because of the integration of the businesses that we acquired in 2024 or earlier than that, okay? We also mentioned that as of the end of 2025, we would like to continue our acquisitions in very strategically placed. We also gave the guidance in December 2024 that we would fundraise $21 billion organically, as I mentioned here in Vinay's answer, but also do $18 billion of fee-paying AUM acquisitions. In order to reach the $70 billion of fee-paying AUM by 2027. So we will come back with the acquisitions programs as we did with the acquisition of this private debt platform, private credit platform in Brazil, plus some real estate investment trust in Brazil as well. Plus recently, we announced the signing of a global private market solution business in the United States called WP. So yes, I think we will come back. And I think what is the guideline is the $18 billion. If you add these 3 acquisitions is around 7.5 -- so we see that -- or we give us a guidance that we should try to buy another $10 billion of fee-paying AUM by the end of 2027. So that's -- it's the same guidance as we gave in the end of 2024. The $18 billion, I'm just subtracting what we have already acquired, around 8 billion. So we have another $10 billion to go by the end of 2027. I hope I answered your question. Ricardo Buchpiguel: No, that's clear. And given that the pace of M&A should continue in line with the strategy here, should we expect still this transaction cost that impacts the accounting net profit and excluded from distributable earnings, should it continue to be around like $20 million, $25 million? Alexandre Teixeira de Assumpção Saigh: Yes. Sorry, that's right. Ana, if you can comment on the number itself, please. I'm sorry. I forgot the second part of your answer. Ana Russo: Ricardo, as you know, this line of transaction costs, including all our nonrecurring expenses, which is directly related to our M&As and also restructuring costs, as you know. The quarter specifically was accelerated because of those M&A agenda, as Alexandre mentioned, the closing of those 2 of Solis and RBR and signing of WP. And specifically in this quarter is a higher than usual, the quarter specifically because of the impact of those transactions and some of the specific agreements that hit or cost that hit the fourth quarter. So when we look in a quarterly basis, is -- I would say this is on the high end. So -- it's too high to consider that all quarters is going to be around $20 million. But we are -- as we have no new M&As, when we talk about total year, we can expect to have a slightly lower next year, but not in a quarterly basis, $20 million is more on the high side because of those events happening in the same quarter. I think I don't know if I answer your question. Ricardo Buchpiguel: That's very clear. So mainly when you are closing M&A, we should see small well. That's very clear. Operator: And our next question comes from Nicolas Vaysselier of BNP Paribas. Nicolas Vaysselier: I would like to bring the discussion back to the flagship PE and infrastructure funds. I acknowledge this is not the bulk of your fundraising targets for the next few years. Still, I would like to have a bit of color from your side. I mean you've managed to raise the success of funds in what was a difficult environment -- macro environment for the LatAm region. And I was wondering if you could tell us more about the changes in the LP base you might have had from PE Fund IV to PE Fund V and same thing on the infra and particularly the sort of free-up rates you've managed to achieve from your LPs? Alexandre Teixeira de Assumpção Saigh: Nicolas, thanks for your question. Well, we have seen, in general, I think if we go back to our earlier funds and today, a shift from endowments and family offices to institutional investors. And so if you look at the absolute value of the dollars that we raised more and more for these funds that you mentioned, the drawdown funds, private equity funds and infrastructure funds drawdown, private equity buyout, private equity growth and infrastructure development, which no value add, we see more and more institutional investors composing the absolute value of the fundraising. You have a big number of family offices, but in absolute value, they are contributing less and because the institutional investors come with sizable checks, not sizable checks. So that has been the trend in most of our drawdown funds, those that you just mentioned specifically, the trends are similar to ones that I described. Re-up rates, they go from 40% to 60% re-up rates. I think the latest fund that we are raising drawdown is our secondaries opportunity fund #5. We have re-up rates above 50%. So that's the latest one. So to give you no fresh news on that. And if you go back to the funds that you mentioned, even though you mentioned private equity buyout #4, but it's a 10-year-old fund. To be honest, I forget now what is the re-up rate versus private equity buyout #3 because it's 10, 12 years ago. But the latest funds, it's around the 40%, 60%, which I have in mind number, Nicolas. I can get back to you offline on the re-up rates of private equity buyout #4, which I forget given that it's not a 10-year-old fund. But the last ones that I see infrastructure development fund #5 that we closed in 2025. That's the range, 40% to 60% re-ups. -- secondary opportunistic opportunity fund #5. We see around 50% re-up rates. So that's more or less between the 40% and 60% for the more recent funds that I have fresher in my memory. But I can go offline and look for you for the older funds, okay, if you don't mind. Operator: And our next question comes from Carlos Gomez-Lopez of HSBC. Carlos Gomez-Lopez: So first, I want to congratulate Ana I think for a very good present very good job and luck in your next endeavor. Specifically on Page 21, you give us a very good breakdown about shares outstanding and the increase in the first quarter of '25. We understand this is related to particular transactions M&A. What do we expect for the share count in the next, let's say, 2 or 3 years? Where should we expect to be dilution to shareholders -- and second, when you look at the EPS evolution on Page 2 -- and I realize that the earnings is not everything, but you have had 126 in '23, 24 in '24, 127 '25. What -- again, what is the evolution that we should expect in the coming years. Alexandre Teixeira de Assumpção Saigh: Carlos, thank you for your question. I'll ask Ana to help me here and answer specifically on the numbers that you just mentioned. In general, we gave a guideline in our December 2024 3-year plan tax Day that we will have a share count of around 158 million to 160 million shares for the '25, '26 and '27 period. We have finished 2025 with 158 million shares, and we project 2026 to '27 for the share count to stay within that range, around 160 million shares, around 160 million shares. Again, a guideline that we gave in the end of 2024 for the '25, '26 and '27 period. And we have -- also we gave as a guideline, our FRE for 2026 for this year is $225 million to $245 million with a midrange, of course, of $235 million. And for 2027, $260 million to $290 million with a midrange to $275 million. So then we use these numbers and we use the share count that I gave you and to calculate the FRE per share. And Ana, do you have the specific numbers there that you can help me, please for FRE per share for '26 and '27? Ana Russo: Sorry, I was on mute. Yes. I think just to understand what Carlos, what you're saying. So -- when we look into our FRE per share -- sorry, we have 108 on the FRE when we talk -- I'm sorry, -- you were talking about FRE per share. I'm sorry that we couldn't hear you. Carlos Gomez-Lopez: No, no. Actually, your answer has been on FRE per share, and I understand that it is the main metrics that you use. But I was looking at distributable earnings, which ultimately is the measure for shareholders. Alexandre Teixeira de Assumpção Saigh: To be honest, it's very hard to listen exactly to what you were asking. I think there was a noise in the background. So I understood FRE, but you're saying DE. So I'm sorry about that, Carlos. Carlos Gomez-Lopez: No, no, my fault. I hope it's better now. Alexandre Teixeira de Assumpção Saigh: No, no, I'm sorry. We were not listening very well to your question. So on the DE side, what we do is the following. We give an FRE number, which is the one that I just gave you, $225 million to $245 million for 2026, $260 million to $190 million for 2027. We also give them a share count number, which is 158 million shares to 160 million shares for '26 and '27. And we also give a performance-related earnings number. We do not give a per year number because it's very hard, as I was, I think, answering one of the questions here today to pinpoint exactly which quarter, which year that performance fees is going to be generated. So we gave a 3-year guidance. The 3-year guidance was $120 million to $140 million of performance fees. As of the end of 2025, we generated approximately $60 million, $62 million of performance fees. So for 2026 and 2027, there's $60 million to $80 million to go. okay? And we -- it's very hard again to predict exactly what quarter or even 1 year. So that's why we gave a 3-year guidance. We are 1 year into the guidance. We have another 2 years to go. If we take into the low end of the range, which is now $60 million to go of performance fees, we predict that Infrastructure Fund III is the one that will probably generate the highest probability to generate performance fees. And we estimate that there is a non unrealized performance fees in that fund of $20 million. So that's $20 million out of the $60 million. And the other $40 million should come from other funds that we have several funds that are maturing to generate performance fees in several different asset classes. So we don't give specific DE per share on a quarter-by-quarter basis or year-by-year basis because of this nature of our performance fees. if I managed to answer your question. Carlos Gomez-Lopez: No, you have answered that question. And last one, do you expect the tax rate, which is down again about 5% or so to stay in those levels? Alexandre Teixeira de Assumpção Saigh: Our guidance on tax is around 10% tax rate. That's our guidance. We're currently been able to have a lower tax rate several different reasons. One specifically for 2025 is because we had a tax credit in the U.K. But we don't see that as a recurring tax credit for 2026, 2027. So we should, as we move into 2026, 2027 to see approximately a 10% tax rate. And Ana, do you want to comment on that as well, please? Ana Russo: Yes. Our tax rate, there are 2 impacts when you look into our tax rate is also the size of the performance also impact our effective tax rate because some of the revenue sometimes comes from jurisdiction which have a favorable tax rate. So you also have to take that into consideration when compared year-over-year. But when we look into over time, and as Alexandre mentioned, and I mentioned in my remarks, is actually this year was actually had a favorable impact of a credit on the U.K. And therefore, we foresee for the next 3 years that at the end of the 3-year period, it would reach approximately 10%. So it's going to increase over time to reach approximately 10% as we increase revenue and income in jurisdictions and pay more tax as we -- as our mix of M&A that enters and also our revenue. So this has been our guidance and we're looking to our plan. Operator: Our next question comes from Fernanda Sayao of JPMorgan. Fernanda Sayão: You've been growing very aggressively on the real estate business. Could you elaborate a little bit more on the strategy here? And how dependent do you think that lower rates is to grow this business? Alexandre Teixeira de Assumpção Saigh: Thank you, Fernanda. Thanks for your question. And well, we are extremely excited with our real estate business in general, not only in Brazil, but in LatAm. And we are the largest real estate investment trust manager in Brazil as of now and scale in this asset class does matter. Yes, I think it's -- we've been successfully fundraising and there are several ways that we can fundraise. It is an asset class in general that is interest rate dependent. Yes, it is in general. We see that as interest rates do raise, you have a slower pace of fundraising as interest rates start showing a trend of decreasing, which is the case of Brazil, which is -- we saw that in Chile last year, we see the fundraising increasing, increasing. So it is dependent. Interest rates -- when interest rates increased in Brazil, using Brazil as an example, fundraising then the pace of fundraising decreased and vice versa now, we see that the Brazilian Central Bank will most probably reduce interest rates in Brazil this year as the yield curve also shows that. And our fundraising pace, at least in Brazil should increase. It should be better fundraising environment for our Brazilian real estate investment trusts. In addition, Fernanda, what we also see that given the size of our funds in Brazil, -- we -- a lot of investors look to us. And of course, we are talking also proactively with investors in exchanging their assets for shares of the fund. So it's an asset exchange. If you have a portfolio of real estate and you want to exit that portfolio, maybe you don't want to sell the whole real estate 100%, you can actually get shares of the fund and you can sell 10% now, 20% then because we have large funds that do have a sizable and very reasonable daily liquidity. It's also very interesting for families when they do inheritance planning. You have one real estate or a portfolio of real estate and you have 2 or 3 sons or daughters, you don't have to sell the whole thing and you don't have to give real estate divided by 3, you can give shares of a fund. which for inheritance purposes and planning is very, very intelligent. So we see a lot of not only institutional investors looking for our funds as a liquidity path, exchanging their portfolio with shares of our funds. We also see families and family offices looking for our funds in order to have better family inheritance planning. So all of that together, I think we see that 2026 should be a better year in Brazil for fundraising for the real estate investment trust versus '25. '25 was already a good year, and we already started doing this exchange of assets for shares of the fund. But I think we see even more so in 2026. So yes, I think we're excited about that asset class, and I think that adds to our enthusiasm with fundraising for 2026, Fernanda. I hope I answered your question. Operator: I'm showing no further questions at this time. I'd like to turn it back to Alex Saigh for any closing remarks. Alexandre Teixeira de Assumpção Saigh: Great. Thank you very much for your patience and keeping on with us for long 1.5 hour here and your support is very much appreciated. I hope to see all of you in person during the year. I think there are several conferences that you already invited, and thank you very much for the invitation. And here we go. Hope to continue delivering as we are extremely confident in our numbers, and we start the year with a very strong momentum. And hopefully, that momentum is going to translate into even better fundraising that we gave the guidance and also fee earnings AUM and revenues, et cetera. Thanks a lot. Have a good day. Bye-bye. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.