加载中...
共找到 25,434 条相关资讯
Operator: Hello, everyone, and thank you for joining the Univest Financial Corporation Fourth Quarter 2025 Earnings Call. My name is Gabrielle, and I will be coordinating your call today. [Operator Instructions] I will now hand over to your host, Jeff Schweitzer, President, Chairman and CEO of Univest Financial Corporation. Please go ahead. Jeff Schweitzer: Thank you, Gabrielle, and good morning, and thank you to all of our listeners for joining us. Joining me on the call this morning is Mike Keim, our Chief Operating Officer and President of Univest Bank and Trust; and Brian Richardson, our Chief Financial Officer. Before we begin, I would like to remind everyone of the forward-looking statements disclaimer. Please be advised that during the course of this conference call, management may make forward-looking statements that express management's intentions, beliefs or expectations within the meaning of the federal securities laws. Univest's actual results may differ materially from those contemplated by these forward-looking statements. I will refer you to the forward-looking cautionary statements in our earnings release and in our SEC filings. Hopefully, everyone had a chance to review our earnings release from yesterday. If not, it can be found on our website at univest.net under the Investor Relations tab. We had a strong fourth quarter, reporting net income of $22.7 million or $0.79 per share, which was a 21.5% increase compared to earnings per share in Q4 of 2024, resulting in record earnings per share for Univest for the year of $3.13. While loan production remained solid throughout 2025, we were impacted in the first 3 quarters by early payoffs and paydowns. These pressures eased back to more normal levels in the fourth quarter. And as a result, we had solid loan growth during the fourth quarter as loan outstandings grew by $129.3 million. During the quarter, loans totaling $13.9 million related to a nonaccrual commercial loan relationship were paid off and a $449,000 recovery was recognized. This relationship had been placed on nonaccrual during the second quarter of 2025. As of December 31, 2025, a residential property related to this relationship remains in other real estate owned with a carrying value of $1.4 million. As a result of this payoff, our nonaccrual loans to total loans declined 20 basis points to 0.2% and our nonperforming assets to total assets declined 16 basis points during the quarter to 0.45%. Before I pass it over to Brian, I would like to thank the entire Univest family for the great work they do every day and for their continued efforts serving our customers, communities and each other. I will now turn it over to Brian for further discussion on our results. Brian Richardson: Thank you, Jeff, and I would also like to thank everyone for joining us today. We were very pleased to carry the momentum from the first 3 quarters into the fourth quarter and finish the year strong. I would now like to touch on 5 items from the earnings release. First, during the quarter, we saw a slight compression in our reported NIM due to increased excess liquidity resulting from our seasonal public fund build during the third quarter. Reported NIM of 3.10% decreased 7 basis points compared to 3.17% in the third quarter, while core NIM, which excludes excess liquidity, increased 4 basis points from the third quarter to 3.37%. As it relates to our loan and deposit activity, loans grew by $129.3 million during the quarter or 7.6% annualized. For the full year of 2025, loans grew by $88.2 million or 1.3%. During the quarter, deposits decreased by $130.8 million, which was primarily driven by a $198.8 million decrease in public funds, partially offset by an $84 million increase in consumer balances. For the full year of 2025, total deposits grew by $328.1 million or 4.9%. Third, during the quarter, we recorded a provision for credit losses of $3.1 million. Our coverage ratio was 1.28% at December 31, which was consistent with September 30. Net charge-offs for the quarter totaled $1.1 million or 7 basis points annualized. Fourth, noninterest expense increased $2.1 million or 4.1% compared to the fourth quarter of 2024. For the full year of 2025, expenses increased by $5 million or 2.5%. Lastly, during the fourth quarter, the corporation repurchased approximately 480,000 shares of common stock at an average cost of $32.17 per share, including brokerage fees and excise taxes. During 2025, we repurchased 1.1 million shares at an average cost of $30.75. This represents 3.9% of shares that were outstanding as of December 31, 2024. On December 10, 2025, we were pleased to announce that the Board of Directors of the corporation approved the repurchase of an additional 2 million shares. As of December 31, 2025, 2.3 million shares are available for repurchase under the share repurchase plan. As it relates to 2026, we are targeting repurchases of $10 million to $12 million per quarter. I believe the remainder of the earnings release was straightforward, and I would now like to focus on 5 items as it relates to 2026 guidance. First, for 2025, net interest income totaled $240.2 million. For 2026, we expect loan growth of approximately 2% to 3% and modest NIM expansion, resulting in net interest income growth of approximately 4% to 6%. This assumes a relatively stable environment with two 25 basis point rate decreases in 2026. However, modest Fed actions are not expected to have a material impact on our NII due to our overall ALM neutrality. Second, the provision for credit losses will continue to be driven by changes in economic forecast and the credit performance of the portfolio. At this time, we expect the provision for 2026 to be in the range of $11 million to $13 million. Third, 2025 noninterest income totaled $85.7 million when excluding $2.1 million of BOLI debt benefits. For 2026, we expect noninterest income growth of approximately 5% to 7% off the $85.7 million base. Fourth, we reported noninterest expense of $203 million for 2025. For 2026, we expect growth of approximately 3% to 5%. Lastly, as it relates to income taxes, we expect our effective tax rate to be in the range of 20% to 21% based off current statutory rates. That concludes my prepared remarks. We will be happy to answer any questions. Gabrielle, would you please begin the question-and-answer session? Operator: [Operator Instructions] Our first question is from Tim Switzer from KBW. Timothy Switzer: First question I have, thanks for all the color on the outlook here. But near term, what's kind of the seasonality for deposits in Q1? You mentioned the elevated funds at the end of the quarter. How should that move over, I guess, Q1 and Q2? And then the follow-on to that is like what's the impact to excess cash? And I think you still probably have more than what's going to flow out. Like is there any -- are there any plans right now to deploy some of that excess cash you have? Brian Richardson: Tim, this is Brian. I'll start out with that one. As it relates to public funds outflow, we expect $100 million to $150 million per quarter in the first and second quarter to flow out. And then you couple that with loan growth that you'd expect during that point in time. So it won't be fully deployed, say, as the time we get to the end of the second quarter, but we -- a significant portion of the excess liquidity at the end of the period will be deployed over that time period. Timothy Switzer: Got you. Okay. That's great. And how should we think about the NIM trajectory over the course of the year? If we only get, say, one more rate cut, like where do you think we're sitting at the end of the year compared to where we are now? Brian Richardson: Compared to where we are as of the fourth quarter, I'd expect it to be relatively in line to slightly up if you look over that full year time horizon. Now of course, just with the expansion that we saw in the first -- from the first quarters of 2025, you expect overall expansion on a full year basis in '26 compared to '25 but expect it to be flat to slightly up as we look through the quarters in '26. On a core basis, of course, you have volatility that comes in on a reported basis due to excess liquidity and the seasonality of that excess liquidity. Timothy Switzer: Okay. Okay. And what are you guys seeing in terms of deposit competition? There's been some talk over -- I mean, kind of started last quarter, but it's picking up this quarter of increasing competition, pricing getting a lot more difficult even with the recent Fed rate cuts. What are you guys seeing in your markets? What's been the customer reaction on your end? And what's your ability to keep lowering deposits? Mike Keim: So competition remains and has been. And to your point, in some regards, has increased slightly. From our customer perspective, we actually make sure we're in the range is what I would tell you is the better answer. Where we've been really successful and we had a lot of success last year is in CD retention. So we're not at the top of the market, but we're close enough that our customers continue to stay with us and move forward with us. And so that's how we manage it. There is a continued mix that we go through. You talked about our municipal deposits that you and Brian had some dialogue on just now. Those are a little bit more price sensitive. At the same time, we have an initiative to go on and get more operating accounts. So we're trying to change that mix. So we're working across the board. We need to be competitive. We just don't need to be at the top price to continue to grow our deposit price or book, excuse me. Timothy Switzer: Got you. Okay. And the last question I have is, can you review your ag farmland portfolio and like which products are in there? How granular is it? What kind of -- what is your underwriting and credit performance look like? And just with all the noise right now, like are there any areas of concern right now? Mike Keim: So our ag book is not an agribusiness book. It is smaller family farms that diversify across. They could be in dairy, crops, livestock, et cetera. almost all instances were secured by the real estate in conjunction with what else they might be doing. The average loan size is on a smaller range. And these -- the team that we have operating in Central Pennsylvania, which is the vast majority of our ag loans, not entirely all of them, but close to it, has been doing this for a number of years. Our leader of the ag business is actually a farmer himself. So we have a lot of long-standing understanding and history. We have a conservative underwriting approach. And most importantly, beyond that, we have a very diversified business that underlines all these ag loans. Unknown Executive: Tim, do you have anything else? Operator: I think Tim will have to dial back in to ask their follow-up question. Our next question is from Tyler Cacciator from Stephens. Tyler Cacciator: This is Tyler on for Matt Breese. My first question is just on the margin, and I appreciate the color there. We've just been hearing some discussions around spread compression. And I'm wondering if you guys have been seeing any of that. And then I would love to hear some more about incremental loan yields. Brian Richardson: This is Brian again. As we look at kind of new loan rates for the quarter, we definitely -- on the commercial side, we definitely saw some compression kind of on an absolute basis, moving in line with the Fed action, so down, call it, 40 to 50 basis points. So we haven't seen true spread compression, just overall new offering rate compression based on the interest rate environment. But things certainly remain competitive out there, and that holds true. Tyler Cacciator: Great. And then my next question is just on the loan growth going into next year. I heard you on the '26 guide. Just curious on what you guys are seeing as it relates to payoff and prepayment activity and kind of what you guys are expecting moving into '26. Mike Keim: Yes. So as Jeff referenced in his opening comments, the first 3 quarters of 2025, we see -- we saw elevated prepayment activity. That began to slow in the fourth quarter, which obviously helped for our net loan growth in the quarter. We're anticipating more of a fourth quarter like prepayment environment going forward. And when you look at our loan growth, the commercial book will grow and there's an offset on the mortgage side where we've historically or the last couple of years have put up a lot of on-balance sheet construction of perm onetime closed loans, which are running off, and we're going more on the agency-directed product for that. So when you look at our loan growth, to be much more heavily oriented towards the commercial side in comparative to the last couple of years with actually a decline on the residential mortgage side. Tyler Cacciator: Great. And then if I could just squeeze one more in on the expense side. It's a bit higher than what we're expecting this quarter, which I assume a lot of that to be fourth quarter seasonality stuff. If you could just talk about a good starting point for the first quarter. And yes, I heard you on the 3% to 5% expense growth, but maybe just touch on where we're starting at. Brian Richardson: Yes. So as we looked at kind of incentive accruals and the like, you have variable comp in the fourth quarter, which was a hit. That was an increase quarter-over-quarter by roughly $1.3 million. So when you kind of back that out as a starting point, I'd expect us to kind of be relatively down slightly from where we were in the fourth quarter. Operator: [Operator Instructions] Our next question is from Manuel Navas from Piper Sandler. Manuel Navas: Can I ask a broader picture question on -- is your buyback pace at all tied into movements in your balance sheet? And like if loan growth slows down, could that increase? Can you just talk to that kind of buyback acceleration? Brian Richardson: Sure, Manuel. This is Brian. We look to really what the limiter there or the guide on that is we're looking to not grow regulatory capital meaningfully from a ratio perspective. So it is a combination of earnings and balance sheet growth are the 2 things that play in that will drive us to toggle our repurchase activity up or down as a result of that. But really with the end goal being to not have expansion of our regulatory capital ratios. Manuel Navas: Okay. I appreciate that. And it seems like the provision that kind of stepped up in this quarter is kind of the right pace going forward. Even if loan growth settles down a little bit, can you just talk about that provision level that you have expected for next year versus the fourth quarter? Brian Richardson: Yes. So I mean if you look at it from a growth perspective with the guide we provided there, you'd expect for that to not generate as much provision on a run rate basis as to what we saw, but we did have 7 basis points of annualized charge-offs in the quarter. So as you look for that to just be something a little bit more normalized in that 12 to 13 basis point range, coupled with our growth, that's how we would get to the provision guide for the year. Manuel Navas: Okay. I appreciate that. And then deposit initiatives are key. Can you talk about the deposit pipeline and how those initiatives are progressing? And this is kind of for the commercial outreach. Just kind of talk about that a little bit more detail, please. Mike Keim: Sure. As you referenced, we continue to make good progress there. Let's start from the top here. We continue to work with our commercial lending team with every deal that we do and how we go out and seek even deposit-only customers. We continue to move forward with our small business initiative, which is more deposit-oriented than loan oriented. So driving forward to capture deposits from small businesses that sit and operate in our footprint. And then we have specific programs that are more tailored. We have a title company initiative that continues to gain momentum. We have a labor union initiative that we started 2 years ago and continues to gain momentum. And we're about to launch in a more formal way, an initiative to interact with law firms across the board. We did some tests in our newer markets in Western Pennsylvania and Maryland with regard to money market campaigns and seeing to an earlier question here, what is the sensitivity to the rate that we need to provide to grow and drive new acquisition of customers. So we continue to work across the board on all those initiatives. And then lastly, I talked about this a little bit before with regard to our municipal banking, our municipal deposits, government banking, continue to look to take that number of deposits, one, try and get a little bit more consistent. So there's not as much peak and valley during the quarters throughout the year. And then two, continue to try and incrementally increase the amount of operating accounts that we have, which will effectively lower our cost of funds and improve our NIM as we move forward. Operator: [Operator Instructions] We currently have no further questions. So I will hand back to Jeff for closing remarks. Jeff Schweitzer: Thank you, Gabrielle, and thank you, everybody, for joining us this morning on our call. We're excited about our results for 2025 and the record earnings that we had from an earnings per share perspective and the momentum that carries us into 2026 and look forward toward another successful year and talking to everybody at the end of Q1. Have a great day. Operator: Thank you. This concludes today's Univest Financial Corporation Fourth Quarter 2025 Earnings Call. Thank you for joining. You may now disconnect your lines.
Operator: Ladies and gentlemen, welcome to the Givaudan 2025 Full Year Results Conference Call and Live Webcast. I am Valentina, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Gilles Andrier, CEO of Givaudan. Please go ahead. Gilles Andrier: Thank you, Valentina. Dear, ladies and gentlemen, welcome to our 2025 full year-end results conference call. Actually, my first one was in 2006, which makes this one my 21st conference call as well as my last year-end conference call as CEO. Stewart Harris, our CFO, joins me today. All presentation documents are available on our website. So before moving into the performance discussion, let's take a moment to look at the leadership transition. So as announced end of last August, Christian Stammkoetter will succeed me as CEO as of March 1, 2026. But today, we also announced two changes to our Executive Committee team. The first one, Christina Yeo, will become Head of Business Solutions and IT, and that will be effective May 1, 2026. She succeeds Anne Tayac, who after more than 30 years at Givaudan, will retire. Fanny Iglesias will take over as Chief Legal and Compliance Officer, replacing our current Legal and Compliance Head, Roberto Garavagno, effective April 1, 2026. Roberto will also retire after close to 30 years. Fanny will join the Executive Committee as an additional member to the EC team. For sure, I would like to thank Anne Tayac and Roberto Garavagno for their many contributions in leadership over the many years. And I would like to turn to Slide 4. On the Board composition side, as announced late August 2025, we have Calvin Grieder, who will step down. And I will stand for election as Chairman at the upcoming AGM in March. All Board members except Tom Knutzen will stand for reelection. And furthermore, Ester Baiget, CEO of Novonesis, is proposed as a new member to the Board, bringing strong innovation and sustainability expertise. Now let's turn to the business performance review, starting on Slide 5. 2025 marks another year of very strong results. On top of record prior years and in a continuous volatile external environment, it also marks the successful completion of our 5-year strategic cycle, which started in 2021, for which we delivered on all financial and nonfinancial ambitions, confirming the strength and resilience of Givaudan's business model. Moving to Slide 6. I'd like to take you through the key financial highlights for 2025. So sales amounted to close to CHF 7.5 billion, representing an increase of 5.1% on a like-for-like basis and 0.8% in Swiss francs. This is a very solid result achieved against a very high comparable base of more than 12% growth in 2024. Growth was again achieved across all markets with sustained strong growth of 8% in high-growth markets. This means growing close to 4x the rate of the growth in mature markets. And as well, we grew with local and regional clients close as well to 4x faster than global. On a comparable basis, the EBITDA margin stood at 24.2%, slightly below 24.5% in 2024, yet still the second highest margin in the past 15 years. Net income reached CHF 1,071 million, corresponding to a net profit margin of 14.3% of sales. Finally, we generated a free cash flow of CHF 1,053 million, so basically more than CHF 1 billion, representing 14.1% of sales. This is the second consecutive year being above CHF 1 billion in free cash flow. Finally, the Board of Directors will propose a dividend of CHF 72 per share at the AGM on March 19, 2026, marking the 25th consecutive dividend increase for our shareholders since the spinoff of Givaudan. Stewart will provide more details on the operational performance shortly. On Slide 7, let's look in more detail at the divisional sales growth. The sales growth in 2025 was broad-based across markets, segments and customer groups against, again, very high comparables across the board. On a group level, we achieved a good like-for-like sales growth of 5.1% against the comparable of 12.3%. The growth was mainly volume driven with less than 1% contribution from real pricing or FX pricing. Our local and regional customers continue to be an important growth driver in both divisions. Like the prior year, we continue, as I said, to grow with them close to 4x the rate we grew with global. Today, L&R clients represent now 60% of our total sales. To put this performance into context, the past 5-year strategic cycle has been more volatile than any before, marked by the COVID-19, then the supply chain disruptions, which turned into inflation, in the background geopolitical tensions and macroeconomic challenges. We have managed, though, through this period particularly well, thanks to the strategic choices made and the natural hedges we have built in our business across -- I mean, natural hedges across geographies, customer groups and segments along with our strong execution capabilities. In this environment, our 5.1% like-for-like growth confirms the resilience and the structural strength of Givaudan, fully in line with our long-term growth algorithm. The nature of our business and the singularity of Givaudan allows to deliver consistent results year-on-year. This is why I always remind, and probably this is the last time I repeat it, but maybe I did not repeat it enough, CAGR is your best friend when judging Givaudan's performance as opposed to looking at the last quarter or a given year. If we look at the last 5 years, our CAGR was 6.8%, so not only consistent results but also significantly higher paces than the two last 5-year cycle. Fragrance & Beauty sales amounted to CHF 3,830 million, up 7.9% on a like-for-like basis on top of a 14% increase in prior year. I'd like to emphasize the strength and depth of our Fragrance & Beauty portfolio, which truly differentiates us from our peers. We have built a balanced and resilient business, combining scale and innovation across multiple categories. And we have invested in our future growth by expanding beyond our core and with our capabilities, from the development of Active Beauty over the past decade to our recent entry into makeup through b.kolor. This diversity gives us a unique competitive position to ensure sustainable growth. In Taste & Wellbeing, sales amounted to CHF 3,642 million, up 2.4% on a like-for-like basis, a solid achievement in a more volatile market against a very high comparison base of more than 10% for the full year of 2024. Our diversified geographic presence, broad customer base and balanced portfolio continue to provide this resilience and position us well to capture future opportunities as market conditions evolve. While our peers have not yet reported, looking at the 9-month sales comparisons to peers, we remain confident that our performance will once again be industry-leading. Let's take a closer look now at the geographic performance on Slide 8. High-growth markets grew by 8% and continued to be a key driver of our overall growth as they make up today 49% of total sales, almost on par with the mature markets. Our broad-based presence and the depth of our footprint in these markets provides resilience, with key markets such as the Middle East, China, India and Brazil which continued to grow at the high single to double-digit pace. Mature markets grew by 2.4%, very much in line with the historic average of the past 10 years. In 2025, this growth was supported by the resilience of both Europe and North America. This strong geographic balance once again demonstrates the strength and diversification of Givaudan's global footprint, enabling us to deliver consistent growth even in a complex environment. On Slide 9, we can have an even more granular look at the regional performance. Our largest region, EAME, delivered the highest growth in 2025 at 7% on top of a very strong prior year. This performance was driven by the continued strength of high-growth markets, particularly in the Middle East and Africa, which now represents around 27% of the EAME sales. We also saw solid contribution from mature markets including France and Iberia. In Asia Pacific, like-for-like sales growth reached 5% in 2025 with China, India and Japan contributing strongly, particularly in Fragrance & Beauty, whilst Southeast Asia was slightly negative in Taste & Wellbeing, though showing an improved momentum towards the end of the year. In Latin America, last year's like-for-like growth was driven by FX-related pricing in Argentina, but the underlying growth was also positive in the mid-single-digit range. In 2025, growth that we have in LatAm is 3.6%, which reflects the lower FX pricing and some specific challenges in Mexico, while Brazil continued to deliver strong underlying growth, confirming the region's solid fundamentals. North America sales grew by 2.6% on a like-for-like basis. The region remains more volatile, but as a large mature market, mid-single-digit growth is what one could typically expect. Towards the end of 2025, we also observed good brief inflows linked to MAHA, Make America Healthy Again, and reformulation trends, in particular around better-for-you snacks and hydration. Turning now on the divisional view on Slide 10, starting with Fragrance & Beauty. As mentioned, the division delivered continued strong growth of 7.9% on top of the 14% comparable last year. Fine Fragrances continued its record excellent growth at 18.3%, virtually matching last year's other record at 18.4%, a performance we should truly celebrate. Since the pre-COVID baseline of 2019, we more than doubled our Fine Fragrance business on a like-for-like basis. This sustained success reflects not only a healthy underlying market but, even more so, our own strength with a broad geographic exposure, particularly in the SAMEA region, which today is as large as North America and Latin America combined. And our strong relationships with local and regional customers, another key growth driver for Fine Fragrances. These strengths have allowed us to gain market share, reinforcing our leadership position in this segment. At the same time, I'd like to emphasize that the division's performance is broader based than just Fine Fragrances. Fine Fragrances represents 21% of our sales. So the strong continuous performance of the Fragrance & Beauty division is not just about Fine Fragrances. We have a strong core in Consumer Products, which represents close to 2/3 of the division, where we sustain very solid growth across all categories, building on a very strong prior year. Actually, the 5 years' average growth for Consumer Products has been 6.2%, and the combined Active Beauty plus Fragrance Ingredients, an average of 7% for the last 5 years. So this is actually close to the division's average. We have also deliberately strengthened our natural hedges and invested in our future growth capabilities by developing Active Beauty, a business reaching now CHF 300 million of sales, which have been built over the last 8 years and now expanding into another adjacent space of beauty, which are color cosmetics through the acquisition of b.kolor. The only soft area this year was Fragrance Ingredients, where sales declined due to an increased competition from Chinese players on a specific ingredient. However, these segments represent less than 10% of the Fragrance & Beauty sales. And with the portfolio strongly geared towards specialties, our exposure to market volatility is actually limited. Overall, Fragrance & Beauty continues to demonstrate strong broad-based performance, confirming its industry-leading position and the solid foundation for future growth. Turning now to Slide 11. Let's look at the Taste & Wellbeing division. The Taste & Wellbeing division delivered a solid growth of 2.4%, which was volume-led and achieved against a very high comparison base of more than 10% like-for-like growth in 2024. Europe showed great resilience with 2.6% like-for-like growth, while SAMEA continued its very strong momentum, growing 7.8% on top of the 21% growth in 2024. North America remained solid at 3% growth. And in Latin America, growth of 0.7% was temporarily impacted by a weaker performance in Mexico, as we also saw at the group level. In Asia Pacific, the division was broadly stable at minus 0.8% with continued good performance in key markets such as China and Japan. But we also saw a clear improvement in Southeast Asia towards the end of the year, where we were facing a particularly high comparison base and some specific challenges since the past year. Now from a product segment perspective, growth was broad-based across snacks, dairy and sweets. Overall, the Taste & Wellbeing division delivered a solid performance on the challenging conditions, further proving the resilience of our business model and positioning us well for future growth. While our peers have not yet reported, we remain very confident that our performance will once again be the industry-leading one. I will share a detailed review of the 2025 strategic cycle, including our key innovations and achievements against nonfinancial targets after Stewart has walked you through the operating performance. Stewart, over to you. Stewart Harris: Thank you very much, Gilles. I would like to add my warm welcome to all of the participants on the call. And on the following slides, I would like to give you an overview of the group's operating and financial performance as well as the operating performance of the two divisions. Please turn to Slide 13. As Gilles mentioned, group sales in 2025 increased to CHF 7.472 billion, an increase of 5.1% on a like-for-like basis and an increase of 0.8% in Swiss francs. The reported Swiss franc sales also includes the sales of Vollmens from the date of acquisition in September 2025 and the sales of Belle Aire Creations from the date of acquisition in December '25. The reported EBITDA was CHF 1,751 million compared to CHF 1,765 million in 2024, a decrease of 0.8%, mainly due to foreign exchange impacts. When measured in local currency, the EBITDA increased by 4.5%. On a comparable EBITDA basis, the underlying EBITDA margin was 24.2% compared to 24.5% in the prior year, a very strong result when considering the volatile external environment that we have been operating in, and maintaining the margin close to historically high levels. Driven by the solid operating profitability, the net income was CHF 1,071 million and the net income margin was 14.3% of sales. The group achieved a free cash flow of CHF 1,053 million or 14.1% of sales, surpassing CHF 1 billion of free cash flow generation for the second consecutive year. As a result of the strong cash generation and operating performance, the net debt-to-EBITDA improved further to 2.1x at the end of the year compared to 2.3x in December 2024. Please turn to Slide 14, which shows the overview of exchange rate developments in 2025. This slide shows the comparison of the exchange rates in '25 versus 2024. In the current year, as we've become used to, the Swiss franc has continued to strengthen against most of the major currencies in which the group operates with the corresponding impact on the reported results in Swiss francs. However, when one looks at the group margins, the foreign exchange impact is limited as a result of our operational and geographical balance, which continues to provide good natural hedges. And our EBITDA margin remains well protected against currency fluctuations. Please turn to Slide 15 for an overview of the operating performance of the group. The gross margin decreased from 44.1% in 2024 to 43.5% in '25, with the decrease resulting from the mechanical margin dilution related to higher input costs, including tariffs, as well as some impact from the softer market conditions in part of our Fragrance Ingredients business. With increased input costs, the company continued to successfully implement price increases in collaboration with its customers to fully offset these higher input costs including tariffs. On the EBITDA level, the EBITDA was CHF 1,751 million in 2025 compared to CHF 1,765 million in '24. As noted previously, the slight decrease is mainly due to foreign exchange rate impacts. And when measured in local currency, the EBITDA increased by 4.5%. The published EBITDA margin was 23.4% versus 23.8% in 2024. After adjustment for nonrecurring costs of CHF 39 million as well as CHF 17 million of expenses related to the Louisville accident, the comparable EBITDA margin was 24.2% compared to 24.5% in 2024, maintaining the margin at close to historically high levels and partially compensating for the decrease in the gross margin. On the following two slides, I will spend a few minutes on the operating performance of the two divisions. And if you turn to Slide 16, we will start with Fragrance & Beauty. The EBITDA of the division in 2025 was CHF 985 million, flat compared to 2024. However, when measured in local currency, the EBITDA of the Fragrance & Beauty division increased by 4.2%. The division incurred acquisition, restructuring and project-related costs of CHF 31 million compared to CHF 32 million in 2024, with those costs being mainly due to those incurred in relation to the ongoing competition authorities' investigations. The comparable EBITDA margin of the division was 26.5% in 2025 compared to 27.8% in 2024, with higher input costs, the Fragrance Ingredients impact and targeted investments in growth impacting slightly the EBITDA margin. The continued strength of the financial performance of Fragrance & Beauty illustrates their market-leading position across all areas of their business. If you would like to turn now to Page 17, I will take you through the operating performance of Taste & Wellbeing. The Taste & Wellbeing division recorded an EBITDA of CHF 766 million compared to CHF 780 million in the prior year, a decrease of 1.8%. However, again, this is mostly due to foreign exchange impacts. As when measured in local currency, the EBITDA increased by 4.8%. On a comparable basis, after restructuring costs of CHF 8 million as well as CHF 17 million of expenses related to the Louisville accident, the comparable EBITDA margin improved to 21.7% compared to 21.3% in 2024, showing continued positive sequential margin progression over the past 3 years. Please turn to Slide 18 on the net income of the group. The net income before tax was CHF 1,305 million in 2025 compared to CHF 1,313 million in 2024. The effective tax rate increased to 18% compared to 17% in 2024 as the OECD minimum tax project continues to be implemented. The net income was CHF 1,071 million in 2025 and the net income margin was 14.3% compared to 14.7% in 2024. Basic earnings per share were CHF 116.08 in 2025 compared to CHF 118.17 in 2024. Please now turn to Slide 19, which highlights the free cash flow performance. In 2025, the group generated for the second consecutive year over CHF 1 billion in free cash flow. Free cash flow was CHF 1,053 million or 14.1% of sales compared to 15.6% of sales in 2024. Total net investments were CHF 285 million in 2025, representing 3.8% of sales, a similar level to investments as in the prior year as the group continues to invest in its growth and also in capturing exciting opportunities in the digital space. Net working capital was 22% of sales in 2025 compared to 23.4% in 2024 with the group continuing to have a strong focus on the effective management of all aspects of working capital. Please turn to Slide 20. Since Givaudan became a public company in 2000, the company has generated a cumulative CHF 13.9 billion of free cash flow. Including the proposed dividend for 2025, the 25th consecutive increase, Givaudan has returned over CHF 9 billion to shareholders in the form of dividends or share buybacks, clearly underlining the strong commitment of Givaudan to shareholder returns. The Board of Directors will propose to the Annual General Meeting of Shareholders a further increase of the dividend to CHF 72 per share from CHF 70 per share in 2024, an increase of 2.9%. Please turn to Slide 21 to look at the debt and leverage profile of the group. The group continues to have a well-balanced and stable debt profile as shown on this slide with interest rates, which have been locked in at attractive rates. At the end of 2025, the net debt was CHF 3.7 billion with a weighted average interest rate of 1.94% compared to 1.75% in 2024. The net debt-to-EBITDA ratio was 2.1x at the end of '25, representing continued improvement compared to the 2.3x of December 2024. The strong improvement in leverage over recent years is a result of our sustained focus on the balance sheet, whilst continuing to invest in the growth of our business and in shareholder returns. We are very pleased to enter the new strategic cycle with a strong balance sheet, which will support us in pursuing our strategic priorities both in the established business and also in M&A. This concludes my section of the presentation. I would like to thank you for your attention and hand it back to Gilles. Gilles Andrier: Thank you, Stewart. So this year also marks the successful completion of our 2025 strategic cycle, during which we have delivered on all our financial and nonfinancial ambitions. So let's have a look back at the last 5 years before we move into the next 5 years with our 2030 strategy and outlook for this year. So we have created value over the past 5 years by building on our commitment to grow with purpose. We have proven that strong financial performance can go hand-in-hand with responsible purposeful action. We have further built resilience, delivered innovation and created value that endures well beyond 2025. Let's have a look on our key achievements on Slide 24. The first one. We have strengthened our natural hedges. Our balance across geographies, customer segments and product categories has further strengthened. We have continued to focus on our core fragrance and flavors business while expanding decisively into adjacent spaces. Our exposure to high-growth markets has increased significantly. In absolute terms, these markets are now almost at par with mature markets, but they are growing faster. And importantly, we have further diversified our customer base. Local and regional customers now represent 60% of our sales, up from 46% just 4 years ago. And this shift has been a major growth driver to our resilience and growth overall. Second, we have obtained consistent industry-leading results. The strategic relevance of the before-mentioned choices is clearly reflected in our outperformance vis-a-vis the market and peers in general, seen not only in sustained growth but also in significantly higher margins and free cash flow generation compared to our peers. These results reaffirm our position as a market leader and the strength of our long-term approach. Third, we have leveraged M&A to support our strategy and expand our reach. We have made targeted acquisitions that strengthen our position in fast-growing segments and deepen relationships with local and regional champions. Fourth, we have realized a major digital transformation. We have built advanced digital capabilities across the business from customer engagement and market insights to operations, supply chain and innovation. Digitalization is embedded end-to-end, enabling smarter decisions, faster execution and more connected collaboration. This transformation is making us more agile, more efficient and fully future-ready. And finally, through all this progress, we have remained focused on our purpose-related commitments. Everything we do continues to be guided by our ambition to create for happier and healthier lives with love for nature at the heart of our business. Together, these achievements demonstrate not only just strong performance, but the power of a strategy that is balanced, forward-looking and deeply aligned with our purpose. On Slide 25, you can see the strong delivery against our 2025 financial targets. We have achieved an average like-for-like growth of 6.8% in the period '21 to '25, exceeding our target of 4% to 5% growth, a further increase compared to the previous 2 cycles. Also on the comparable EBITDA, with 22.9% average over the period, we have continued the steady increase cycle over cycle, further distancing our peers. And also against the ambitious free cash flow target of over 12%, which is, by the way, the highest in the industry, we delivered, again, over the last 5 years an average of 12.5%. To even better show the strength of the cycle in past year, let me give you some historic context on the following two slides. Let's look at our sales growth achievements over the last 3 strategic cycles. Our 5.1% like-for-like growth in 2025 is a very strong result. While some may see it's a slowdown compared to recent highs, it's essential to view it in context. The '21-'25 period was one of the most volatile in our history, which I personally experienced, shaped by COVID, destocking, supply chain disruptions, inflation and geopolitical tensions. Delivering solid growth through that environment is a clear sign of resilience. When we take a longer-term perspective, the picture becomes clear, Givaudan's growth has steadily increased across cycles. The '25 result is not a step down, but the continuation of our consistent upward path, proves that our strategy continues to deliver sustainable performance and of my usual saying, I will repeat it again, CAGR does matter. And there's another important point to highlight. Despite persistent headwinds from the strong Swiss franc, we have doubled the size of our business in absolute Swiss franc terms over the last 15 years. Both divisions, Fragrance & Beauty and Taste & Wellbeing, now contribute almost equally reflecting a well-balanced, resilient business model. So the key message is simple. Our '25 growth demonstrates the enduring strength of Givaudan, consistent, balanced and built for long-term success. Turning to profitability. This slide shows the steady improvement of our comparable EBITDA margin over the last 3 strategic cycles. For many years, both divisions delivered very similar margins. In the most recent cycle, the margins have, though, diverged slightly. Fragrance & Beauty saw significant improvement, supported by the exceptional growth and a more favorable raw material environment and benefits from the performance improvement program that we introduced in 2024. Taste & Wellbeing maintained solid margins in a more challenging context with more volume volatility and raw material inflation, partially compensated by recent improvement initiatives, as you see it from this chart when you look at the improving EBITDA margin of Taste & Wellbeing. Nevertheless, the operating strength of Taste & Wellbeing stands out clearly against peers with margins typically 300 to 500 basis points higher than the industry average. In absolute terms, the progress has been remarkable. Our comparable EBITDA in Swiss francs has more than doubled over the past 15 years. And while back in 2011, the entire group delivered CHF 790 million comparable EBITDA. Today, our Fragrance & Beauty division alone contributes to more than CHF 1 billion of EBITDA. We are proud that over the past 5 years, we made strong progress against our ambitious nonfinancial targets as well, fully aligned with our purpose, to create for happier, healthier lives with love for nature. Starting with our nature ambition. We reached a major milestone with the validation of our net zero targets by the Science Based Targets Initiative. Aligned with the SBTI net zero standard covering forest, land and agriculture emissions, our goal is to achieve a net zero greenhouse gas emissions across our value chain by 2045, a key step towards becoming climate positive. By the end of 2025 and compared to 2015 baseline, we achieved an absolute 50% reduction in Scope 1 and Scope 2 emissions, and we successfully stabilized Scope 3 emissions despite, obviously, the continued business volume growth that we have seen over the last 10 years. We also reached our goal to purchase 100% of electricity from renewable sources, 1 year ahead of plan in 2024. Turning to responsible sourcing. In 2020, only 20% of our natural ingredients were sourced according to our demanding responsible sourcing program called Sourcing for Good. At the end of 2025, that figure stands at 87%, showing an unwavering commitment to ethical and sustainable supply chains, protecting the biodiversity. Finally, under our people ambition, we've continued to advance diversity and inclusion. At the start of the cycle, 25% of senior leadership positions were held by women. Today, that number has risen to 34%, reflecting steady and meaningful progress towards a more inclusive organization. Together, this achievement demonstrates how we combine purpose with performance, creating growth that is responsible, resilient and built to last. Let's turn now to Slide 29, which highlights some of our key innovations from the past strategic cycle. Innovation, as you know, is the life blood of our business. This is what makes us relevant to our customers. It's what enables us to create unique, high-value solutions that drive consumers' preferences and shape the future of fragrance, beauty, health, wellness and nutrition segments. Each year, we invest close to 8% of our sales, which means CHF 600 million, in research and development. This is an industry level of investment and what sets it apart is our focus. While peers may spread similar amounts across multiple ingredients portfolios, we concentrate our R&D on two divisions. Our R&D efforts bring together science, creativity and technology, advancing in biotechnology, green chemistry and digitalization. To take some examples. In Taste & Wellbeing, we are developing natural and functional ingredients like our new range of natural colors and green banana powder that meet growing demand for healthier, more natural products. In Fragrance & Beauty, Evernityl is a great example of innovation rooted in sustainable biotechnology, a marine-active developed through an upcycling process that transforms ocean algae into a high-precision ingredient for healthier, youthful-looking skin. And there are many examples that I'll let you read on this slide. Finally, on the digital side, platforms like Myromi and Guardians of Memories show how we are connecting creativity with technology, bringing scent into immersive digital world. I'm sure all parents here know about Roblox, where Gen Z and Alpha spend much of their time. So yes, even there, we are shaping the future of scent experiences for the next generation of consumers. Together, these examples show how we transform insight into action, into products, tackle real customer challenges, embrace consumer preferences and make our business truly future-proof through innovation. Having looked back at our '25 strategy achievements, let's now focus ahead on our 2030 strategy and outlook. As outlined at the summer investor conference end of August at the Widder Hotel in Zurich, our 2030 strategy is about purposeful evolution, building on the strong foundation of our proven model, combining innovation, customer partnership and disciplined execution to deliver sustainable growth while preparing for what's next. We keep extending our customer reach to capture the fastest-growing opportunities. We continue to deepen our geographic presence, and we are expanding our categories and portfolios into high value-added adjacencies. How we will make it happen? By innovating for differentiating solutions that set us and our customers apart, by delivering value with excellence and agility, ensuring speed, quality and impact in everything we do and by caring for our people, nature and communities. Financially, we are setting ambitious new targets for the next 5-year cycle. We aim for a 4% to 6% like-for-like average sales growth, slightly higher than our previous 4% to 5% guidance in the past cycle. This confidence reflects the continued strength of our business, rooted in expanding base of local and regional customers and our growing exposure to high-growth markets, which will continue to be key growth drivers for the future. We also reaffirm our industry-leading ambition of achieving over 12% free cash flow as a percentage of sales, maintaining a disciplined focus on profitability and cash generation. And beyond financial, we remain fully committed to our purpose targets for 2030. Following our financial ambition, let's also remind ourselves on our purpose. Our purpose, creating for happier, healthier lives with love for nature. Let's imagine together, it's our lighthouse. It defines why we do, what we do and guides the choices we make every day, including acquisitions. Our purpose is fully integrated in our business strategy. With our 2025 strategy, we introduced for the first time a series of ambitious nonfinancial targets, reflecting our commitment to long-term value creation beyond the financial performance. We report our progress against these targets each year in our integrated report, covering both economic and ESG performance. As we developed our 2030 strategic framework, we reviewed and evolved hose targets to ensure they remain strongly connected to our business performance objectives and aligned with the changing external environment. Our purpose continues to anchor us, inspiring innovation, driving sustainable growth and creating a positive impact for people, nature and communities. Let me finish now with the 2026 outlook on Slide 34. We have successfully concluded the 2025 strategic cycle, confirming the strength and relevance of our current strategy. Building on this solid foundation, we are now initiating a new 5-year strategic cycle that will set the stage for sustainable growth and continued innovation. We remain confident in the strength of our portfolio and our leading market position across our businesses. Looking ahead into 2026, we expect to navigate a continuous volatile geopolitical landscape and uncertain market conditions. Nothing new. But our strong natural hedges across product segments, geographies and customer groups will continue to provide resilience. We anticipate only limited impact from input costs at the group level, meaning raw materials, while tariffs-related effects remain uncertain, but we will manage through pricing actions with our customers. In addition, we expect some ongoing nonrecurring costs in 2026 to reflect specific one-off items related to costs for the investigation and further performance optimization. With that, we are at the end of our 2025 full year results presentation, and I'd like to hand back to the operator for the instructions to open the Q&A session. We look, with Stewart, forward to taking your questions. Operator: [Operator Instructions] The first question comes from Celine Pannuti from JPMorgan. Celine Pannuti: First of all, Gilles, well, I wanted to give you my congratulations for those impressive achievements that you showed us just now as you have led Givaudan over the past 2 decades. And of course, I wish you much continued success as the new role of Chair of the company. I have not followed 21 years of Givaudan, but a few of those, and I hear you when you say CAGR is your best friend. So my first question, on trying to understand a bit how to look at 2026 in what you said is a volatile environment, and there's been as well volatility that you guys have experienced in the second half of the year. So if I look at CAGR in volume over the past, I think, 5 or even 10 years, it's around 3.5 to 4. Do you think that's a good proxy as we look into 2026? And how should we think about the pricing element in an environment where you mentioned limited cost inflation? And then my second question would be on gross margin bridge. I would like to understand a bit the moving parts for 2026. There seem to have been some tariff impact in the second half that hit gross margin as well as extra investment, and I would like to understand how this will phase out in '26 and whether there will be any offset. Gilles Andrier: Thank you, Celine, for your kind words and supporting Givaudan always for many years, analyzing accurately our company. I'll answer your question. So yes, CAGR is your best friend. But especially, what I mean is really when we look at the quarter, you can actually look at the CAGR of the same quarter for many years and in a given year. So that's basically what I mean. It's always helpful to look at the CAGR, looking and projecting the way forward. Now obviously, 2026, as you know, we don't commit on the number, on an actual number. We commit on the 5 years of the plan. What I can say though is basically looking ahead, so essentially, we have the Fragrance & Beauty, as you've seen for 2025 but also towards the end of the year, continues to be on a very good momentum. Probably, Taste & Wellbeing will take a few months to come back, given the softness of some of the multinationals, which are our clients and so forth. Though I would like to remind again because this is a read across, which sometimes people are a bit too fast at doing, looking at the results of a multinational and reading across is what it means for Givaudan. Today, 60% of our sales are with L&R, and nobody has any visibility on their growth because they are usually sort of companies which are not public. So that means the relative exposure to multinational is lower. So essentially, if we look at comparables on Taste & Wellbeing, they will continue to be a bit tough in the first half, but easing out in the second half, and that's true for the group as well. There is a 2 or 3 points difference between the 2 halves, if you really want to dissect quarters and half. But again, the perspective is for full year. We remain confident basically on one side to have a continued good performance on the Fragrance & Beauty and basically, good recovery on the Taste & Wellbeing on the back of lower comparables. That's maybe the way to look at and interpret my CAGR is your friend. And CAGR is your friend as long as you take 3 years, 2 years is not enough. Then I would like also to give because that's what we usually give. It's basically the tonality on how active our plants are in terms of innovation because that's also the leading indicator on how the year is going to turn out because, as you know, we have a certain amount of erosion of our business every year, which is compensated by new wins and so forth. So if we look at those, we feel very good about the amount of new wins that we have accumulated in '25, which will roll over in '26. So that's the first very good positive indicator on all sides of the business, two divisions. And the inflow that we have in terms of briefs and so forth going into '26 is also very good, which basically is a testament also to the way our clients view us, again, thanks to the strategic choices we made. So all of those things are positives going forward. So that's basically what I can say about the growth going forward. I will reiterate because maybe I was not so clear enough. When you look at the chart, when we talk about the volatility of the 5 years, again, this really stands out as a cycle. And I think people don't realize that. COVID was the baseline creating a ripple effect, where that has created a lot of yo-yos in our own growth year-on-year. And so this is probably going to normalize and reduce this volatility going forward. But as you see, the average is still 6.8%, which is again one of the best, if not the best average we have had. Then on the GPM -- sorry, on the pricing, so yes, there probably would be very mild pricing given the raw materials which are quite stable. And on the tariffs, well, it's going to depend on how it's going to evolve. But again, this is really -- the tariff pricing translation in ourselves is quite minimal, below the 1%. Let's see how it effects pricing. But again, I would like to reiterate something which is sometimes again misunderstood. Pricing, which is my legacy. Pricing is not a growth strategy. It's not a growth strategy like our clients would have a growth strategy and it's not a growth strategy like some of companies selling standard or commodities ingredients when the market goes up. Our pricing strategy is just to reflect the increased cost that we incur, whether they are raw mats, tariffs and whatever. And basically, one additional pricing is compensating one on the cost side. So 1 minus 1 equals 0. That means on the EBITDA level, it has no effect. On the margin side percent, it does because of the mechanical dilution. So I don't think we should look at pricing with such a myopic view because it doesn't drive real value growth. And then the GPM bridge, maybe Stewart? Stewart Harris: Yes, I can take that, Celine. So maybe we -- thanks for the question on the margin bridge. Maybe we back up to 2025 and then we take it forward from there. So I think the gross margin, as I mentioned, had come off about 43.5% versus 44.1%. And although we don't get gross margin information by the division, I think we have been clear that in this year, we had raw material inflation, which was more slanted towards Fragrance & Beauty than Taste & Wellbeing. And because of inventory cycles, the raw material effect tends to come through not evenly throughout the year, so a little bit more in second half. As Gilles mentioned, we've got also tariffs coming through more consistently in second half than first. So we've got the mechanical dilution of those two effects. And then both of us mentioned in our narrative that the margin of Fragrance & Beauty being slightly impacted by the competitive situation around some specific ingredients in the Fragrance Ingredients portfolio. So that's a little bit at a high level the kind of two topics, the margin bridge in '25 and the split between H1 and H2 because I know there's been some questions about that. Looking forward, we don't have a crystal ball particularly around tariffs. I think Gilles has mentioned on input costs, we see minimal impact, and we are relatively well covered at least for the first half. So we know relatively well where the input costs are going in H1. On tariffs, we need to see, of course. And as always, we will reflect any tariff impact with continuing pricing action with our clients. But that gives you a bit of a sense for, I think, what the key building blocks are of the margin bridge and how we would see that going forward. Celine Pannuti: And would you still expect an impact from the ingredients portfolio to last until we count that in the second half of the year? Stewart Harris: Yes, I think that's fair to assume that from the second half, we would see a more level playing field year-over-year in relation to the Fragrance Ingredients effect. Operator: The next question comes from Alex Sloane from Barclays. Alexander Sloane: The first one on Fragrance Ingredients. Do you think there's any risk that sustained deflation there could spill over to your larger fragrance compounding businesses or customer negotiations elsewhere? Or are you confident that the pressures can be fully contained? And I guess, do you think we're kind of near the peak of those pressures on Fragrance Ingredients? That would be the first one. And the second one on Taste & Wellbeing. I appreciate you don't manage it on a quarterly basis. There were some impacts that were temporary like Mexico. But obviously, like-for-like decline in Q4, not consistent with your medium-term aspirations for the business. Just thinking about how we get back there and the pathway. I mean, is it realistic to assume a pathway back to mid-single-digit growth for this business? Or do you think there could be any structural challenges to any specific end markets that could prevent that recovery? Gilles Andrier: Okay. Thank you for your question. So yes, so again, maybe it's worth explaining the Fragrance Ingredients business because, yes, Givaudan has a different strategy than maybe some of our peers or the ingredients industry at large. We have a long time ago, made a very conscious decision to, yes, make fragrance ingredients. We have chemical plants. So we are basically in-sourcing a number of chemical ingredients and the -- which most of them come out actually of our research. So it's a way to leverage innovation, to leverage research and to keep the IP on our ingredients and to make those ingredients so that they enrich the palette of our perfumers and then that gives a competitive advantage when you create a new compound, a new fragrances. So that's why fragrance -- researching new fragrance ingredients, making them is absolutely key and essential to be competitive on the fragrance side. So that means -- what does it mean? It means that by construction, we are -- we don't have a fragrance ingredient business just to have a fragrance ingredient business. It's basically because, obviously, when you find a new ingredient, you develop a new one, you have -- you need to be cost effective, and that means large volumes. So at some point, whenever we have what we call a captive fragrance ingredient, we decide to sell it to the outside market, and that turns into a third-party sales, which becomes the FIB. So you see it's not that we are looking to have a very large FIB business and then figure out how to use that internally. It's exactly the reverse. So that means that some of those ingredients at some point become attacked by pricing and so forth. So that's the case, one of which last year and clearly some Chinese competition, which dented a bit the performance on the FIB business, but this is not reflecting, I would say, the weakness of the portfolio because actually, we have a very large percentage of our FIB business, which are specialties, which are uniquely made and so forth. The second reason why though -- even though, despite this sort of weakness on one ingredient, we have seen a softness. Well, it's almost a bit ironic, but for me, it's a good signal because those ingredients are sold to competition. So the more we gain market share on the compound side, the less we do on the fragrance ingredients. So that's one way to look at it. That's why this weakness comes from the fact that maybe some of our clients in this industry are not growing as fast. So then back to your question on does it reflect a deflation environment? Not -- no, it doesn't because we said that raw materials have become -- have been stable. And therefore, it doesn't have, I would say, a read across or an effect on the compounds business where clients would ask for. So basically, that's what we can say. It's quite isolated. And again, it's a very different portfolio mix that we have vis-a-vis competitors. So that means we are less exposed to those -- to this volatile environment that you have in Ingredients. On Taste & Wellbeing, on the quarterly basis, essentially, again, back to the CAGR story. So actually, the average volume for Givaudan, if you take out price, is still strong over the last 5 years. But we can say about Taste & Wellbeing, so over the last 5 years, we actually grew 5.4%. So obviously, this is greater than the 4% we had from 2016 to 2020. So you see an acceleration. Yes, there was a bit more pricing, but volume continued to grow. If you go back to your question on the quarter, yes, we don't like to have a minus 1.1% quarter 4 in Taste & Wellbeing. But again, CAGR is your best friend. We were at plus 10% in 2024. And if I even -- if I look at '23, 3 years CAGR, we're actually in the mid of 5% to 6%. So that basically, again, CAGR is your best friend to understand Givaudan. So going forward, we remain confident on the core business on flavors. We see the strength that we have, and we remain confident that we can grow in Taste & Wellbeing. Obviously, a big reminder that it's pretty obvious. We don't have Fine Fragrances in Taste & Wellbeing. So even if Fine Fragrances accounts for 20% of the division, but when growing at 18% every year, it has a big influence, obviously, on the average. So we don't have something called Fine Flavors. I think that's it with the questions. Operator: The next question comes from Nicola Tang from BNP Paribas. Ming Tang: I just wanted to sort of reiterate Celine's best wishes to Gilles. In terms of questions, coming back on the topic of margins, I hear your comments on pricing -- or inputs and tariffs. Looking more specifically at the divisions, Taste & Wellbeing is still slightly below your sort of 22% to 25% EBITDA margin sweet spot. Do you expect to get that into the sweet spot range in 2026? And can you explain a little bit what some of the division-specific drivers are? And then a similar question on the Fragrance & Beauty side. I think you've been increasing targeted investments. So do you expect that to step up again in 2026? And can you explain a little bit some of the moving parts on margins for that division? And then I try a bit on Fine Fragrance. Could you give us any more detail in terms of regional performance? And any color in terms of your forward-looking indicators, so your briefing activity in your own pipeline for 2026. Gilles Andrier: Thank you, Nicola. Thank you for your kind words and questions. Okay. So basically, you want to get a bit more color in terms of the margin evolution between the two divisions. It's true that when you look at what we showed in terms of the average by division, the difference between the two divisions has increased because over the last cycle, you have 3 points of difference between the two divisions when it was 1 point of difference in the -- from '16 to 2020. I would say some reasons to that. Well, obviously, you have Fragrance, which has grown faster than Taste. So obviously, you have the operational leverage, which is probably the biggest EBITDA margin driver to explain the difference. The second point is, yes, the Fine Fragrance has a bit of mix effect, but let's not overstate it or overestimate it. Then I would say that in terms of evolution, what we are giving is a very clear target on the free cash flow, as you know, greater than 12%. And because we are very nice, we also gave a sort of a sweet spot brand with -- on the EBITDA margin, which is 22% to 25% EBITDA margin for the group without giving a specific target for the two divisions. Though what I can say is that on the Taste & Wellbeing division, you can see the climbing up the mountain from 20% in 2022 to 21.7% in '25. So we are making progress. We are making progress, and that will continue to be. So thanks to efforts on the product portfolio margin improvement that we have, some of the ingredients that we have outside taste, on colors or on preservatives or other segments. So this is in works, and we are continuing to deploy some efforts at doing that, thanks to Antoine and his team. I would say that efforts also on gaining efficiencies in the divisions, in operations. So I'm quite, let's say, confident and optimistic to continue the green line that you see on this chart, improving Taste & Wellbeing. We will not give a guidance for Taste & Wellbeing. But actually, the average for the last 15 years has been 21.5% more or less. So can we do better than this? Maybe. Can we be at the level of Fragrance & Beauty? Maybe not. On the other hand, it doesn't mean that Fragrance & Beauty, we'll stand down. There is no reason for this to happen going forward. And we remain confident that we can continue on a good profitable growth for Fragrance & Beauty as well. But again, bandwidth 22% to 25%, and you remember that we always commit on things that we can deliver. So Fine Fragrances, to give a bit of color on Fine Fragrances. So there are many ways to look at it. Today, we broke really something I would never have expected, I said it. SAMEA for Fine is bigger than North America and LatAm combined. So first, that gives you an idea about the breadth of the portfolio in Fine that we have. But the second element of color, which I think is important because I've seen too many read across, again, of results of some of the lead beauty clients that we have and translated that into projection on the Fine Fragrance business of Givaudan. Just to give you an idea, just rough numbers because I won't disclose them, but more or less, you have 1/3 of our Fine Fragrance business, which are driven by what we call prestige, which are really brands that you see in multinationals and the ones which are really visible and so forth. This has been growing for us mid-single digits, reflecting the market, but also gaining market share because we are doing very well with that. But that's only in a way 1/3. The other 1/3 has to do with specialty retail and direct selling, which is a business model itself that you see a lot in the U.S. and that you see a lot in LatAm. This part has also grown mid-single digit. The third-third, if I may say so, has to do all with local and regional clients across SAMEA, across LatAm, across Asia, plus what we call the Haute Parfumerie, the Parfumerie, the niche, where Givaudan is clearly a leader. Many of you who attend the December Fine Fragrance hosting in Kléber in Paris, you've seen some of the presentations, so you have Fragrance actually, which is growing close to 60%. So that gives you an idea that -- and that part nobody sees because no public reporting for many clients. And that's where also Givaudan is growing very strongly. So yes, maybe some of the multinational, the prices might -- is slowing down. But we have the other part, which is continuing to fuel our growth. So that is your perspective on how broad we are in Fine Fragrance both from a geographic standpoint as well as a channel standpoint and as well as the client standpoint. But I can tell you, the world is spending better and better. When you look at the whole young generation, Gen Z, Gen Alpha, multi-layering, increasing dosage levels. So that's why -- and we are doing much better than competition. So that gives you a long story about Fine Fragrances, but worth it given the numerous questions we get on Fine Fragrances. Operator: Ladies and gentlemen, that concludes our Q&A session. I would now like to turn the conference call over to Gilles Andrier for any closing remarks. Gilles Andrier: Okay. So that was our last question. Thank you. So closing remarks. Well, ladies and gentlemen, we are at the end of this results call. Before we close, allow me to take a brief personal moment because that's the only time I can do that and the last time probably. So after 21 years of engaging with you, analysts and investors, many of you since my beginnings actually, this will be my last results call as CEO. And I really want to sincerely thank you for the many insightful discussions, the challenging questions, but which have always been an inspiration to me to think differently, to think ahead, and above all, for the trust and the support and the enjoyment and fun I had you've shown to Givaudan over the years. It has been a privilege to share this journey with you, to see our company grow and evolve together with your continued interest and partnership. And I'm confident that under Christian's leadership, Givaudan's story will continue to be one of innovation, purpose and sustainable success, along with our more than 16,000 employees. Thank you again for your engagement and for being a part of this journey. Stewart Harris: Thank you. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Good morning, ladies and gentlemen, and welcome to the First Interstate BancSystem Inc. Fourth Quarter Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, January 29, 2026. I would now like to turn the conference over to Nancy Vermeulen. Please go ahead. Nancy Vermeulen: Thanks very much. Good morning, and thank you for joining us for our Fourth Quarter Earnings Conference Call. As we begin, please note that the information provided during this call will contain forward-looking statements, and actual results or outcomes might differ materially from those expressed by those statements. I'd like to direct all listeners to read the cautionary note regarding forward-looking statements contained in our most recent annual report on Form 10-K filed with the SEC and in our earnings release as well as the risk factors identified in the annual report and in our more recent periodic reports filed with the SEC. Relevant factors that could cause actual results to differ materially from any forward-looking statements are included in the earnings release and in our SEC filings. And the company does not undertake to update any of the forward-looking statements made today. A copy of our earnings release, which contains non-GAAP financial measures, is available on our website at fibk.com. Information regarding our use of non-GAAP financial measures may be found in the body of the earnings release, and a reconciliation to their most directly comparable GAAP financial measures is included at the end of the earnings release for your reference. And again, this quarter, along with our earnings release, we've published an updated investor presentation that has additional disclosures that we believe will be helpful. The presentation can be accessed on our Investor Relations website. And if you have not downloaded a copy yet, we encourage you to do so. Please also note that as we discuss our financials today, unless otherwise noted, all of the prior period comparisons will be with the third quarter of 2025. Joining us from management this morning are Jim Reuter, our Chief Executive Officer; David Della Camera, our Chief Financial Officer; and other members of our management team. And now, I'll turn the call over to Jim Reuter. Jim? James Reuter: Thank you, Nancy. And good morning, everyone, and thank you for joining us on our call today. Over the course of 2025, we made meaningful progress to improve core profitability, refocus capital investment and optimize our balance sheet through reorienting our footprint to geographies where we have brand density, strong market share and high potential for growth. We announced branch divestitures in Arizona, Kansas and Nebraska, outsourced our consumer credit card product and discontinued originations in indirect lending. We have intentionally allowed certain larger transactional loans to run off in favor a disciplined effort to grow full banking relationships. That includes deposits, loans and corresponding fee generating services. These strategic actions among others we have taken have generated capital for us over the past year. In August of 2025, we announced a share repurchase authorization and began executing under that plan repurchasing approximately 3.7 million shares through year-end for a total of approximately $118 million. Our Board has approved an incremental $150 million share repurchase authorization bringing the total authorization to $300 million to provide further capacity to continue executing under that plan. Additionally, our balance sheet remains strong and flexible. We reduced our other borrowed funds from $1.6 billion at the end of 2024 to 0 at the end of 2025. Throughout 2025, we maintained a proactive approach to credit, and we are now beginning to see favorable results in our reported credit quality. Following stabilization in the third quarter, credit quality metrics improved in the fourth quarter. Criticized loans decreased by $112.3 million or 9.6% in the fourth quarter and non-performing assets decreased by $47.3 million or 26%. Net charge-offs were elevated in the fourth quarter driven by one larger credit for which we had already set a specific reserve of $11.6 million. For the full year of 2025, net charge-offs were 24 basis points of average loans, which is in line with our long-term expectations. We also continued to execute on our ongoing branch network optimization, focusing our capital deployment in markets where we have existing density or high growth potential. We closed on the sale of our branches in Arizona and Kansas in the fourth quarter, exiting those states. Subsequent to that transaction, in October, we announced the sale of 11 branches in Nebraska, which we expect to close early in the second quarter of 2026, and we will consolidate four additional branches in Nebraska in February. The company will have 29 branches remaining in Nebraska after the pending sale in closures. We will also close the single branches we have in North Dakota and Minnesota in the first quarter, which will consolidate our footprint from 14 states to 10 contiguous states. To drive profitable organic growth, we have made a series of investments, including building out a new commercial banking team in Colorado, and we have new branch openings underway in the state of Montana. We have a new fully operational branch in Columbia Falls and another branch opening soon in Billings. We are also relocating one of our branches in Sheridan, Wyoming to a location that will better serve the needs of our customers in that market. The full optimization of our remaining 10 states is an ongoing effort as we perform state-to-state reviews. In the fourth quarter, we began a transformation of the banking organization. We are changing the organization from a layered, regional and market structure to a flatter model. Our new State Presidents represent high performers, a majority of which are from within bank and select external talent, bringing proven track records of expertise, energy and strong commitment to our institution. We believe the combination of the right internal and external talent will support our growth. Along with other talented leaders throughout the organization, these leaders will play a critical role in our drive to allocate our resources as efficiently as possible for profitable organic expansion, focusing on areas where we have density or potential for growth. This new, more streamlined chain of responsibility is designed to speed up our local decision-making processes and align the decision framework with our organic growth and return on capital discipline. We expect this redesign to be nearly complete in the first quarter, and we view it as a significant driver of our expectation for improved organic growth. Loan balances declined during the year due to a variety of factors, including intentional non-relationship loan run-off, branch transactions, indirect lending run-off and the outsourcing of our consumer credit card product. Additionally, as we have discussed in prior quarters, production was lower than initially estimated during the year. This is partially influenced by continued competition in the market, both on a spread and credit basis. With that said, we are optimistic that the recent actions we have taken, most specifically the banking organization redesign will drive increased activity. Our net interest margin also continued to improve in the fourth quarter as we saw more sequential improvement in the spread between loans and deposits, and we continue to reinvest lower yielding cash flows from our investment portfolio. Our FTE net interest margin, excluding purchase accounting accretion improved 4 basis points in the fourth quarter, increasing from 3.3% at the end of the prior quarter to 3.34% at year-end. That level represents a 26 basis point increase from the fourth quarter of 2024. Our organic growth focus, elevating best-in-class talent from within, while adding select external talent and serving our customers with what they typically expect from a large bank, but with a personal community-oriented purpose, is designed to create a competitive advantage for us over the long term. And with that, I will hand the call over to David to discuss our financial results in more detail. David? David Camera: Thanks, Jim. I'll start with our results for the quarter. The company reported net income of $108.8 million or $1.08 per diluted share in the fourth quarter compared to $71.4 million or $0.69 per diluted share in the third quarter. Net interest income decreased by $0.4 million compared to the prior quarter or 0.2% to $206.4 million. Net interest income decreased $7.9 million or 3.7% compared to the fourth quarter of 2024, primarily due to a reduction in earning assets and a reduction in the yield on earning assets. These effects on NII were partially offset by a decrease in interest expense on other borrowed funds. The closing of the Arizona and Kansas branch sale in early October, drove a decline in interest-earning assets in the fourth quarter of 2025. Yield on average loans decreased 1 basis point to 5.67%. Total deposit costs declined 5 basis points and total funding costs decreased 10 basis points, all compared to the third quarter. Our fully tax equivalent net interest margin was 3.38% for the fourth quarter compared to 3.36% during the third quarter and compared to 3.20% during the fourth quarter of 2024. Excluding purchase accounting accretion, the adjusted FTE net interest margin was 3.34%, an increase of 4 basis points from the prior quarter. Non-interest income was $106.6 million, an increase of $62.9 million from the prior quarter, driven by a gain on sale of $62.7 million associated with our divestiture from Arizona and Kansas. Non-interest expense was $166.7 million for the fourth quarter of 2025, an increase of $8.8 million from the prior quarter. This includes $2.3 million of costs associated with branch closures in Nebraska, North Dakota and Minnesota. Severance expense totaled $4.2 million during the quarter and was related primarily to the redesign of the banking organization and branch closures. Incentive accruals in the fourth quarter increased by $5.6 million compared to the prior quarter. Turning to credit. Net charge-offs increased by $19.8 million to $22.1 million, driven mainly by one credit for which we had an $11.6 million specific reserve. As Jim mentioned, for the full year of 2025, net charge-offs were 24 basis points of average loans. Total provision for credit losses was $7.1 million for the fourth quarter. Criticized loans decreased $112.3 million or 9.6%. Our total funded provision decreased to 1.26% of loans held for investment from 1.30% in the third quarter. Moving to the balance sheet. Loans decreased by $632.8 million in the fourth quarter, which included $62.8 million of continued amortization of the indirect portfolio and $72.5 million in loans moved to held for sale as a result of the Nebraska branch sale as well as larger loan payoffs, which included some criticized loans. Total deposits decreased $516.7 million to $22.1 billion as of December 31, 2025, driven by the sale of $641.6 million of deposits in the Arizona and Kansas transaction. Excluding sold deposits, deposits increased in the quarter. The ratio of loans held for investment to deposits was 68.8% at the end of the quarter compared to 70.1% at the end of the prior quarter and 77.5% at the end of December the prior year. We repurchased approximately 2.8 million shares in the fourth quarter, totaling approximately $90 million and repurchases since initiation of the program in August totaled approximately $118 million. Our regulatory capital ratios continued to improve in the fourth quarter, driven by a reduction in risk-weighted assets related to the Arizona and Kansas divestiture, the decline in loans and higher net income due mostly to the closing of the branch sale, partially offset by our deployment of capital through share repurchases. In the fourth quarter, we returned approximately $138 million of capital to shareholders, consisting of $90 million from the repurchase of shares and $48 million in dividends. Tangible common equity was approximately flat in the period, and tangible book value per share increased 2.9% in the fourth quarter to $22.40 per share. We continue to view share repurchases as our immediate capital allocation priority in addition to our ongoing focus on organic growth, which provides us the opportunity to drive EPS growth in excess of net income growth. We have increased our share repurchase authorization by $150 million to $300 million and roughly $180 million of capacity remains under the program. Finally, we declared a dividend of $0.47 per common share, which equates to a 5.7% annualized yield based on the average closing price of the company's common stock during the fourth quarter. Our common equity Tier 1 capital ratio ended the fourth quarter at 14.38%, an increase of 48 basis points from the prior quarter. Our leverage ratio was 9.61% at the end of the fourth quarter compared to 9.60% at the end of the prior quarter. Moving to our guidance. Our guidance includes the impact of the sale of 11 branches in Nebraska and the closure of 6 additional branches in Nebraska, North Dakota and Minnesota, while excluding the anticipated gain on sale related to the Nebraska branch sale. For reference, the North Dakota and Minnesota branches totaled roughly $30 million in combined deposits at the end of 2025. Starting with our balance sheet. We are including an assumption of low single-digit deposit growth for 2026 with normal seasonality. Turning to loans. Our guidance assumes an assumption of roughly flat to slightly lower total loans for 2026, excluding the continued run-off of our indirect portfolio, which will contribute an additional 1% to 2% in total loan decline. Our guidance has an underlying assumption that loans declined in the first half of the year while modestly growing in the back half. As we have outlined in our investor presentation, we anticipate an increased quantity of lower rate loan maturities over the next couple of years. This provides us a powerful reinvestment dynamic, and we believe it protects our net interest income dependent on a supportive rate environment. The pace of our NII expansion will be dependent upon our ability to renew and/or add new customer relationships to the bank. We are optimistic about our ability to see success here, and we'll continue to exercise discipline, ensuring that assets placed on our balance sheet are accretive to our return profile. We also continue to expect sequential improvement in our net interest margin given the expectation for improving spread between loans and deposits and due to the loan repricing dynamic and continued amortization of lower-yielding investment securities. To discuss timing in 2026 specifically, as we look to the first quarter due to fewer accrual days and the expectation for normal deposit seasonality in the first quarter, our guidance, as displayed includes an assumption that reported NII is approximately 3% lower in the first quarter than the fourth quarter level of 2025. Moving to expenses. We anticipate approximately flat to slightly lower expenses in 2026 compared to the reported full year 2025 level. We continue to exercise discipline across our controllable expenses to support reinvestment and growth initiatives. Our guidance assumes reinvestment into the business, such as the addition of relationship managers to our teams, the new branches we discussed previously and increasing our advertising expenditure as compared to 2025 levels. We also anticipate normalization in medical insurance expense in 2026, and our guidance includes an assumption that total 2026 expenses are about 1% higher due to this normalization. With that, I'll hand the call back to Jim. Jim? James Reuter: Thanks, David. And as we look to 2026, we are in a position of strength. Our strong balance sheet and capital position, disciplined approach to credit risk management, focused franchise and redesigned banking organization positions us for success as we continue to execute our client-first community banking strategy. And now, I would like to open up the call for questions. Operator: Thank you. [Operator Instructions] Your first question comes from Jeff Rulis with D.A. Davidson. Jeff Rulis: I wanted to check in on the -- just the loan balances. And Jim, just kind of bigger picture, I guess, if you exclude the branch sales, the indirect runoff, I think maybe the under toe of other runoff is maybe greater than maybe perceived kind of mid last year. It sounds as if that was sort of a production issue. And I know, Jim, one of the tenets of your approach is sort of motivating rallying that organic growth. Just to try to course correct on maybe the other runoff is that we've got the guide for this year, but I wanted to check in on maybe what you've seen in '25 versus kind of as we entered it from a production standpoint? James Reuter: Jeff, that's a good question. If you peel it back, a good portion of the decline in loan balances are related to payoffs of criticized loans, which we consider that to be good news. And/or you're right, there's some larger loans in there that were financed in the secondary market, but that was the intention of those loans when they were originally booked. I would put out or point out that even with the decline in loans, our deposits went up over $100 million, net of the sale of Arizona and Kansas. So I think that shows you that the loans leaving are not significant relationships with big deposits. We did see improved loan production in the month of December and some parts of the footprint. As I've talked to folks, we have some good pipeline activity. I also mentioned in the opening comments, the re-org of the banking organization, which I consider a very important catalyst for growth. It's a flatter org structure. We have, have more people in production roles, faster decisions and, frankly, a better client experience. We also added some new team members in Colorado, where we see a real good opportunity for growth. And with that said, I will tell you, Jeff, the adjustments to our credit culture in 2025 and the most recent reset of the banking org has in the short-term impact of new loan production. But from my past experience, it gives me confidence because the model we put in place, which combines disciplined credit management and a flatter and powered accountable leadership team has led to good organic growth. And when you combine that with our more focused franchise and brand density and growth markets, it gives me confidence in our ability to produce more in 2026. Jeff Rulis: Appreciate it. And David, just on the margin, maybe check it back in, I think there was a somewhat of an assumption of maybe approaching 3.5% or north of that by the end of '26. Could you -- it sounds like maybe Q1 we're treading water. I don't want to put words in your mouth. We got the NII guide. But the pace of margin expansion still left to go, at least for this year? Any commentary there? David Camera: Yes. Sure. Good morning, Jeff. So, a couple of comments there. I think we still see kind of north of 350 by year-end '26. So really no change there. The mix is a little bit different in the short run, given the change in loans, but trajectory, we still see the same way. We still think of it as sequential margin improvement every quarter. Our first quarter commentary on NII, that's really driven by as noted, the lower accrual days and also lower average balances quarter-over-quarter on the deposit side, so a little bit lower on the earning asset side. But on an underlying basis, we expect NIM to be higher in the first quarter than it is in the fourth quarter. Jeff Rulis: Okay. And David, the pace over the course of the year to get to that, I mean, a moderate increase in Q4, we shouldn't read into the fact that -- I guess, that would suggest greater expansion from the metric over the course of the year to get north of 3.5%. Is that fair? David Camera: Yes. So we're starting the 3.34x purchase accounting in the fourth quarter. So kind of in that 5-ish basis point range a quarter, we'll have -- obviously, it will be a little bit different each quarter, but something like that sequentially is how we're thinking about it. That's right. Operator: Your next question comes from Matthew Clark with Piper Sandler. Matthew Clark: Just a little more on the margin there. What kind of reinvestment rates are you getting on new loans and securities these days? David Camera: Yes, sure. So, on the security side, we talked last quarter, a 5-year plus 80% to 90%. That's come in a little bit in recent periods. So we think of that more in the 5-year plus 60% to 70% on that side. And then on the loan side, new production kind of in the low to mid-6s is kind of on a weighted average basis, it will of course be composition dependent. But somewhere in that range is what we're seeing. Matthew Clark: Okay. And on the buyback, you bought over 75% of the $150 million that you authorized in two quarters. You've got a new one now. CET1 up to 14.4%. And I think you've mentioned in the past that you don't want to run with capital in excess of peers. So, is it fair to assume that we'll see a similar cadence of buyback activity here this year? David Camera: Yes. I think like you mentioned, we said last quarter, we want to approach that peer median over time. And I think we mentioned capital will lag the balance sheet movements a little bit. So that will continue to happen. But as you noted, we've been meaningfully executing there, and we plan to continue executing. Of course, pace will be dependent on market conditions and things like that, but we absolutely intend to be -- continue to be active on that buyback. Matthew Clark: Okay. And then last one for me on criticized, down 10% this quarter. How much more improvement do you think you can make this year? Do you have any line of sight on kind of how much of a reduction we might see and the timing around that? James Reuter: Yes, Matt, that's a good question. Credit is a living, breathing part of a bank. Our proactive approach, I think you've seen for the last two quarters has stabilized that and trended it down. But for me to make absolute predictions, there's a lot of assumptions in that. But you can expect us to continue to make good progress. That's the best I can say on that. Operator: Your next question comes from Kelly Motta with KBW. Kelly Motta: Maybe turning it around to the expense side of things. Q4 was impacted by several different kind of noisy year-end items and some one-timers. Can you -- as we look to 1Q, with your guide kind of assuming flattish expenses year-over-year, wondering kind of what's a good jumping off point in 1Q? And then as we think ahead and kind of consider the glide path through the year, how should we be thinking about the cadence of expenses off of that and the puts and takes? David Camera: Yes, sure. So to your point, a number of moving parts, I think to specifically answer that, we think expense seasonality is actually relatively flat next year given some of the timing on taxes in the first quarter, offsetting kind of the normal merit and other increases as we go through the year. So, kind of the underlying assumption, if you were just to use the midpoint of the expense guide would kind of be that $159 million to $160 million range each quarter. Kelly Motta: Okay. That's really helpful. And then kind of with the loan outlook, like as was mentioned by another analyst, I think the balance is lower than maybe what we had expected. In terms of your guidance, for next year. Obviously, some of the reduction in loan balances is payoffs of criticized, which is good. Does your guidance contemplate additional room for payoffs? Or should that continue to occur, which would obviously help your credit, could there be downside to that loan number? David Camera: Sure. So I'll make a couple of comments on that. I think broadly, the short answer is, yes, we are assuming that we do see some larger payoffs within there. And again, I think our view is the first quarter, we see lower loans and then optimistic about some modest growth as we get into the back half of the year. But our underlying assumption does include we think we'll see some more larger payoffs within that. Operator: Your next call comes from Andrew Terrell with Stephens, Inc. Andrew, go ahead. Andrew Terrell: I wanted to follow up just on the criticized point. I think, Jim, you mentioned earlier, just a lot of the payoffs we've seen over the past year have been on criticized loans. But when I look at just criticized balances overall, I mean they're basically flat to where we started this year. They're still off relative to 2024 levels. I guess I'm curious what's driving kind of the refill in that bucket? And I guess, do you feel like you've worked through everything at this point and we should just see balances moderate from here? James Reuter: Yes, Andrew, that's a good question. So when I was talking about criticized going down, it's specific to this quarter, loans move from watch to criticized -- and I just want to reiterate what criticized is. I mean it's basically a loan, we feel good about the underlying collateral, the guarantors, different things, but it's missed some of its targets. And so, we're taking that proactive approach to managing credit, which I think you can see it produces good outcomes. So that's what you'll continue to see from us, Andrew, but there will be movement up and down. But if you look at the overall trajectory, it's going in the right direction. I'd also say new loans and renewals, we have a really good process in place with a loan committee. We're making fast, good decisions and everybody is on the same page. So kind of back to that loan production question that was asked by Jeff at the beginning of the call, that clear direction of what we want to do is given our bankers even more confidence as they're out talking to customers about what we can and can't do. But I feel good about our credit culture today. Andrew Terrell: Yes. And then, I wanted to ask more specifically on just -- I mean, it sounds like loans down a bit, in the first quarter. But you're optimistic about kind of back half. But then you also referenced just the level of competition, you mentioned credit rate-related competition, maybe some slower production from the team than kind of what you're expecting. So I'm just trying to figure out kind of what's driving the back half of the year optimism around production and kind of net growth increasing? James Reuter: What drives my confidence is I talked about the banking re-org and the structure we put in place. And we did a lot of things, Andrew, in 2025 to recalibrate and change our approach to the business. And I feel like those things are pretty much behind us, and we can go on the offense at this point in time. We are seeing increased competition on rates and terms and things. And I will tell you, we're not going to grow for the sake of growth. We're going to put on disciplined credits that are profitable because that's what will ultimately enhance long-term shareholder value. We're 20 years without a credit cycle. And so, I just think discipline matters and I would say that's where gray hairs and some years of experience probably are beneficial today. Andrew Terrell: Yes. And just one last one, just to confirm on the guidance, the expense guidance, $630 million, $645 million for the year that does incorporate -- any actions from sold or closed branches net of reinvestment? I just want to make sure that's an all-in guide. David Camera: That's correct, Andrew. All the figures displayed in the guidance assume that the Nebraska branch transaction closes early in the second quarter. Operator: Your next call comes from Jared Shaw with Barclays. Please go ahead. Jared David Shaw: Maybe just looking at the -- more specifically the markets that you do like versus the ones that you're exiting when you look at like Colorado, do you feel that you have the overall physical footprint you need there? Or is there an expectation that you could potentially reinvest some of the savings into adding a few locations? And then you talked about hiring some teams there. What's the -- what's sort of the outlook for continued hiring going forward? James Reuter: Yes, Jared, that's a good question. I'll speak to the overall franchise and footprint. When you look at Page 5 of our investor presentation, I think when you look at that map, it looks very logical, they're contiguous. And specifically -- and you also look on the bottom of that page, you'll see we're in markets that have better growth prospects than the national average. So, we feel good about the overall footprint. To Colorado specifically, we do have the branch network we need right now. And we've also built out a really strong team that I'm confident is the right team, and they're seeing good activity, and they're on the ground calling on customers, building relationships. We will look at some additional locations in Colorado as we will, throughout the rest of our footprint. I mentioned in the opening comments, a new location in Billings. And then we're actually -- the relocation of the branch in Sheraton is branch #1 for First Interstate Bank and we built a new facility with better visibility and to better meet our customers' needs. But Colorado continues to be an exciting opportunity for us, and I like our chances and like the team we have there. Jared David Shaw: And then just, sort of, sticking with the Colorado. As you look at growing there, are you -- is this going to be full relationships, sort of, at the beginning? Or are you going to be leading with loan growth and it's going to take a little while for deposit growth to backfill in your mind? James Reuter: As I've said from, I think, almost earnings call day 1, it will be focused on full relationships. But with that said, Jared, I know from experience that sometimes you make your first loan, you build the relationship and you deliver, you get some deposits and then over time through your consistent execution, you get the full relationship. So, I'm not naive to think that day 1, you get everything. So, it will be a mix of leading with some loans, but with the eye towards getting deposits and full relationships. Operator: Your next call comes from Timur Braziler with Wells Fargo. Timur Braziler: Can you give us a sense of the $3 billion of loan maturities and resets over the next 2 years? What portion of that $3 billion would you characterize as sort of non-relationship? James Reuter: Yes, Timur, I think we think about relationships a couple of ways. I mean, there's the loans that today we have the full relationship and then there's some where we have an opportunity to develop a full relationship. So everything is going to be situationally dependent. And as you look at those loans, the rate coming off there is some new production. And obviously, we'd want to deploy those into higher-yielding assets. But I think holistically, we have some downside protection to net interest income. And then of course, as we -- as we're optimistic about additional loan production, we're looking to replace that with market assets. But every loan that comes due gives us an opportunity to either expand or retain their relationship. Timur Braziler: Okay. And for those that you're looking to retain that have come up to date, just the competitive landscape for being able to keep those on your own balance sheet. I mean, are you getting a little bit of a home field advantage given that these are already your customers to begin with? Or do you feel as though it's kind of full fisticuffs and in terms of battling to keep these clients on board? James Reuter: Timur, it really depends. I will tell you that we had a few more in this last quarter that their intention from day 1 was to go to the secondary market. And so, that's going to be hard for us to compete with. But on a go-forward basis, like David said, our goal is to expand the relationship. And if we don't get that completely done with this loan, that doesn't preclude us from renewing it, because like I said in the earlier comment, sometimes you have to do a couple of things for a customer before they're like, okay, I want to bring everything over to you. Timur Braziler: Yes. Okay. And then just one more for me on credit. The charge-off wording still includes long-term charge-off guidance of 20 to 30 basis points. I'm just wondering what does this imply that there is maybe some more variability here in the near term? And just that in the context with the allowance ratio, we saw a little bit of release here as you had a specific credit kind of charged off. How do we think about those two components? David Camera: Yes, Timur. I think, a couple of things. So from an allowance coverage perspective, relatively similar quarter-over-quarter total funded ACL, but of course, an improvement in NPL coverage. So that ticked up during the quarter. And I think as we think about that coverage going forward, I think as we said before, it's kind of situationally dependent based on fact and circumstances of each quarter. As Jim said, we're optimistic for credit improvement. But each quarter, the committee and -- and internally, we look at facts and circumstances and determine what's appropriate at that time. Operator: Your next call comes from Tim Coffey with Janney. Timothy Coffey: Jim, a question for you on kind of what is a targeted long-term loan-to-deposit ratio? James Reuter: That's a good question. Obviously, we're lower than our peers right now. We like that flexibility. And I think that actually speaks to one of the strongest aspects of First Interstate, which is a low-cost granular deposit base. Long term, I don't really like to set a target. I can tell you it's north of where we are today, because I think to the extent we can find high-quality loans at the right price, that's our preference over investment securities. But we would like it higher than it is today. That's probably the best answer I can give you right now. Timothy Coffey: Okay. And then more near term, do you anticipate the exit loan deposit ratio in '26 will be higher than where it is right now? David Camera: So, I think just our underlying guidance says loans down slightly and deposits up slightly. So all else equal, we view it as slightly lower in the near term and then would just echo kind of Jim's comments on the longer term as we kind of look to grow the book. Timothy Coffey: Okay. And then a question about the fee income guide. What are some of the puts and takes in that? David Camera: So, I think, it implies some modest growth year-over-year, kind of puts and takes modest impact from the reduced branches, just lower associated customer activity there. I think longer term, we think there's opportunities in some of the underlying areas such as swap fees and things like that. But we're not assuming material acceleration in those type of items in 2026. As we kind of grow the full relationship banking, we're optimistic about areas like TM, long term, et cetera. So a couple of different areas that we're very focused on. Operator: One more question. We have a question from Jeff Rulis with D.A. Davidson. Jeff Rulis: Yes. Just maybe fair or unfair. I just wanted to check into initial thoughts on maybe '27 on three fronts. It seems like a lot of momentum would be building on the margin and the loan growth front. Just your thoughts on the trends as it rolls into '27 on those two areas. And then, you touched on the buyback. I know we're, if you got a flat balance sheet into growing capital, if you've got any commentary as you get into '27 on those trends would be helpful. David Camera: Sure, Jeff. I'll start on kind of the margin. I think given the cash flow profile, what's rolling off the balance sheet, we continue to think margins sequentially improved in '27. Obviously, that's a little bit with out, and it's going to depend on the rate curve at that time. But broadly, we would continue to expect improvement and the cash flow profile from loans is actually a little bit more favorable in '27 and then continued favorability in the investment cash flow profile based on what we see today. From a capital front, I think I'd just reiterate capital is always an ongoing conversation. I think we've demonstrated and we'll continue to demonstrate our approach there to enhance shareholder value. So we'll continue to look at that as time goes on and ensure we have the right capital stack to support the company. James Reuter: And Jeff, as to loan growth, David touched on this, that we show a slight decline in the first part of the year and then leveling off and picking up towards the end. So, our hope would be we'd be building on that in '27. But, if you have a crystal ball as to the economy and what it's going to look like in '27, I'd love you to send that over to me because that would give me more confidence of what to predict. You look at the job numbers. And while unemployment is somewhat stable, new jobs actually haven't been that great. And then yesterday, the Fed gave some mixed reviews, which they're good at doing these days and understandably so. But assuming what we project in '26 happens, we would expect to build on that into '27, Jeff. Jeff Rulis: Yes. Thanks, Jim. I know that was more bank specific understanding the macro swings. So thank you. Appreciate it. Operator: There are no further questions at this time. I will turn the call back over to Jim Reuter. James Reuter: Thank you, and thank you, everybody, for your questions today. And as always, we welcome calls from our investors and analysts. So, please reach out if you have any follow-up questions, and thank you for tuning into the call today, and have a great day. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.
Unknown Attendee: [Audio Gap] 2026. In a moment, I’ll hand over to József Váradi and Ian Malin. [Operator Instructions] With that, I’ll hand over to József. József Váradi: Thank you. Good morning, everyone. Thank you for coming. So this is our Q3 results. I would just like to set up the stage for the discussion today. Could you please move the slide? Yes. So we are up on passenger numbers by good 12% on the back of capacity increase ASK terms, 11%, slightly lower RASK than last year. But I think this is pretty much in line with what we guided to the market. EBITDA is up 12% and our cash improved to EUR 2 billion. Important to note that in the meantime, we have actually repaid the EUR 500 billion (sic) [ million ] outstanding bond. Net loss was improved to EUR 239 million by around EUR 100 million versus last year. So we’ve seen that these results are consistent with what we have told the market we would deliver. So no surprise. So with that regard, it’s a fairly benign report this time around. If you kind of dig into some of the attributes and driving factors, revenue growth came out as good 10%. Please take note of the fact that our stage length is down by about 5%. So obviously, this is somewhat affecting unit revenue performance. GTF engine recovery continues to unfold. So we are now grounding 33 aircraft versus 40 a year ago. As you know, the plan is to uplift the aircraft completely by the end of calendar year, 2027, and I think we are on track on that. As said, liquidity strengthened to EUR 2 billion, of which we repaid the EUR 500 million outstanding bond. I think there were market speculations what would happen to that bond, extended or not, but it is behind us now. The network reshuffling has been continued. As you know, Abu Dhabi got closed a while ago, and Vienna base we are closed in March, and we have transitioned significant capacity to Central Eastern and Europe, pretty much across the whole of Central and Eastern Europe. Reopening previous bases in Romania and opening other bases in Bratislava, Podgorica, Yerevan, or Warsaw-Modlin. A number of aircraft allocations have been announced in this period. Again, this is pretty much across the board in Central and Eastern Europe, but also in Western Europe, particularly in Italy. We are managing the fleet growth. We have not only managed the fleet growth, but we also moderated capacity going through the weaker second half of the financial year in the off-peak period. That’s why we ended up with lower utilization. But again, I think you need to consider it as kind of a transitionary period. This is an issue at the time we are going through, but productivity and utilization will ramp back up going into the next financial year. So summer capacity, I think we are fairly clear on that by now. We are seeing ASK growth of around 24% coming through, which will translate into around 30% seat growth. Again, you recall, we guided you on this, that while we are looking at medium-term growth rate of around 10%-12%, it still takes some time to get there, given the aircraft order and the GTF uplifting process. So the next period is still going to be high growth, and then we start moderating it down in the second half. As of the next financial year, fiscal ‘28, you’re actually going to be seeing the growth rate, what we were talking about. Accordingly, the fleet plan is adjusted for that. So again, high growth in the first half, in the summer, fiscal ‘27, and somewhat of a moderated growth, coming closer to the target in the second half of fiscal ‘27. And with that, I would hand over to Ian with regard to the numbers. Ian Malin: Thank you, József. Could you go to the next slide, please? So before I dive into the numbers, I just want to clarify one rumor going around. We do not have plans for scheduled service to the United States. We are -- we have applied for charter rights for the World Cup flights next year, potentially. The beauty of charter is that we have an aircraft that can do it in the form of the XLR. The competition does not, and we would only do a charter if the money makes sense. So you sell the flight in advance, you collect the cash in advance, you price it accordingly, and the profit’s locked in. So that’s not... That’s an example of us being opportunistic and looking at ways for us to diversify our revenue stream, but I would not expect there to be a material impact to the numbers based upon that. The application allows for you to select a checkbox for scheduled, and that checkbox was selected, but I think somebody’s taken that far out of proportion. So there’s no change to the business model other than opportunistic charter costs based upon the mission that that aircraft can fly. In terms of this slide now, so we generated a EUR 139 million loss this quarter, 42% better than last year. And that was driven by, as József already summarized, 11.1% more ASKs. I should also point out that from a seat capacity, seats grew 13.1%, giving us more units in terms of the seats to be able to sell. That means that we’re generating more sector productivity and that is driven by the lower stage length. That’s actually 1.8% decline this quarter, although we will see the stage length and the whole network come down as a result of the business densifying and fortifying into Europe. Ticket RASK was up 0.2%, but ancillary RASK was down for total RASK increase or decrease of 0.8%. That ancillary RASK reflects the shift in terms of the network, moving away from those longer stage length flights, where we were able to have a different profile of ancillary services. Ancillary remains an area of focus, and we will continue to look at ways for us to recover that decline that we saw this quarter. But overall, 0.8% lower RASK, better than I think what people were expecting. However, I will emphasize, not as good as what we would like, and we’re going to continue to focus both on ticket and ancillary RASK going forward. Load factor was marginally down, and that is driven by, again, I think to some extent, the seat capacity. So we have a bigger gauge aircraft, which means that, I think that a 0.5 percentage point down, given the growth is, is not anything to be concerned about. We’re certainly not, other than focusing on improving that. Which means that overall, the combination of RASK and ASKs generated just under EUR 1.3 billion in total revenue, up 10% year-on-year. EBITDA, I will emphasize, was, the EBITDA margin was the same as it was last year, 13.6%. So we were able to preserve EBITDA margin despite the growth and despite the changes coming through the business, and so that’s important to emphasize. However, we do see pressure on depreciation, which I’ll explain in the next slide when we get to the cost side of things. So overall, I would say that, you know, revenue came in probably better than expected, and costs came in probably better than expected as well. Although, like I said, what we were expecting was anticipated and certainly is still opportunities to improve. If I can go to the next slide, please. So in terms of the cost position, we were able to keep the ex-fuel CASK growth to 2.1%. That is in line with what we were communicating throughout the year. And full CASK was up 2.3%. The fuel line was driven by, to some extent, the fuel pricing, but also the cost of the emissions credits. We’re seeing some inflation in terms of the emission credits, which is putting some pressure on that, and we are, like everybody, receiving fewer free allowances, which means that we have to incur more cost there, although that impacts us less, given the baseline that we’re coming from. In terms of the rest of the cost structure, so I think staff costs in line so with ASK growth. And then the areas where we do need to focus on, and we are focusing on, are the ones that we’ve talked about, so maintenance and depreciation in airports. So maintenance has gone up, again, in line with expectations and for the reasons that we know about, which is that we are planning on retiring 18 current engine option A320ceo aircraft this year. That compares to 3 last year, so a 6 times increase. And when you return those aircraft, they come with event-related costs. The event is the return, and you have to comply with the lease return conditions. And the problem with that is that that requires maintenance capacity, and maintenance capacity is scarce due to all the supply chain channels, all the supply chain troubles happening in the industry. And maintenance has just simply been higher due to inflationary pressure. So we’re having more event-related costs at a higher cost base. However, the good news is that we are seeing that in the next 3 years, we will retire most of our CEOs, 18 this year, 19 next year, 16 in the following year, and with that, those event-related costs will reduce. Likewise, a portion of maintenance costs flow through depreciation, and we have 70% more aircraft in the sort of 8 years or older bucket in 2026 versus 2020. And so as a result, we’re attracting higher depreciation costs in the form of maintenance depreciation than we were if you want to look at us pre-COVID, which means that those costs will simply eliminate as those aircraft are returned, but it is a transition that we have to go through. So these costs, particularly in maintenance and depreciation, are high year-over-year, but they’re driven by specific symptoms or outcomes based upon symptoms that we knew that we were going to be experiencing. Airports and handling and en route, it’s a bucket of 3 lines there. Handling is actually – we’re starting to get a handle on it, but airports and en route still are elevated. En route is due to higher pricing around navigation charges that we see across our footprint. I think many airlines are frustrated with those costs. We certainly are. That’s a network design issue to some extent, that we will be factoring into our decision making. On airports, we did a deep analysis of the cost base from fiscal year ‘20 to where we are today, and we saw that post-COVID, when we were growing, we were able to keep airport costs under control. So certainly, we were seeing cost efficiency coming through there. But then when we were hit by the powder metal grounding and our growth went from 10% to 12% to 0%, we lost the benefit of the incentives that we had negotiated. We lost the benefit of the rebates that we were expecting to generate, and we’re now in the process of having to redeploy capacity in a way that we can get those back. And so the problem with that is that, we’ve said this a few times on these calls, it’s a timing issue. We have to demonstrate the growth, we have to deliver the growth, we have to commit to the growth, and we have to measure it, and that takes time. But that’s the gift that we have now with capacity growth coming back. Again, 11%, 10%-11% this quarter, roughly the same next quarter, and then next year we have quite a tool to deploy when it comes to that capacity. So yes, there’s going to be a lot of pressure with that capacity in terms of deploying it. We have some exciting ambitions and plans on how we’re going to do that, but we’re also going to use that capacity sensibly to make sure that we tackle those cost lines. In terms of the one-offs or the other income, as I like to call them, the one-offs. So we did see a higher sale-leaseback benefits this quarter. That was again anticipated. No surprises there, and we were able to keep disruption costs in line with where they were last year. We had a pretty reliable third quarter last year, and the same happened this year, and we were able to continue to improve our wet lease costs and to bring that down. So overall, I would say that the cost picture was in line, if not marginally better than expectations. But that’s exactly what we’re trying to do now, is just to deliver expectations, and we did that this quarter, we did it the prior quarter, and that’s the plan as we march through this transitory period. If you could go to the next slide, please, just to look at the cash profile. So again, things are in line with expectations. We were basically flat on free cash flow. We ended up the quarter with just under EUR 2 billion in cash, just a smidge, and EUR 1.98 billion. That’s up EUR 400 million versus the prior year. And our liquidity ratio, so the percentage of cash to last 12 months’ revenue, increased 5 percentage points to 34%, which is one of the highest in the industry. Now, that cash balance has of course, been reduced through the bond repayment that happened on January 19, as József said, and that was anticipated. We did, on the 23rd of December, renew the bond documentation, and so that program remains available to us, for the future. But at this point, we don’t see any requirement to raise debt, and therefore we won’t, but we have that option on hand. Our cash profile going forward is robust. We have the benefit of a earlier Easter in the beginning of April this year, which means that the cash volumes will start building as we enter into February and March. And with the growth coming in the summer period, that will deliver a large amount of unfilled revenue. So we expect to restore the cash that we expended on repaying the bond, relatively quickly to get back to a number north of EUR 2 billion, and that will then grow, depending on how we ultimately deploy that cash into fleet or other measures. In terms of the fleet, we are -- Actually, there’s a fleet slide. I’ll let Joe talk about the XLRs. So I think that’s it for me. I will also just take a moment to thank everybody from the analyst community. This is my last call as official CFO. I welcome my predecessor, my successor, Veronika Špaňárová, who joins on Monday, and I will, of course, be in the room with the team to make sure that she is set up for success, as is the company. So thank you, all. József Váradi: Thank you. Could you please move it to the, to the next slide? But maybe in the meantime, I would just want to thank Ian for the tremendous job that he’s done, contributing, in a, in a difficult, challenging period, in his intellectual capacity and professional capacity as CFO, but also playing a very good corporate citizenship in the company. I mean, we all, had to act like a team, you know, to face all these challenges arising from geopolitics, supply chain, et cetera. And I think now we are starting to see some, some sunshine, coming through, and hopefully, that you, will also be seeing it, and Ian has been instrumental to that, to the development. So thank you for that, Ian. Ian Malin: Thank you. József Váradi: So with regard to the fleet, I would like to kind of put fleet matters into a history perspective also, to give a bit of a forward-looking view on, on that. So historically speaking, the company has celebrated 2 major milestones, fairly recently. One was the 250th aircraft delivery, 250. I don’t know what it means, but it felt, a milestone, to us. And secondly, maybe more significantly, we celebrated the 500 millionth passenger, in aggregate since inception. Now, we looked at the 500 million passengers. So what is the meaning of, of that? And we figured something out. It took us 21 years to deliver 500 million passengers. Then, this is an absolute record in Europe and probably close to a world record as well. We didn’t look at the world, but we looked at Europe. And guess how many years it took for the second best in Europe to get to 500 million passengers and who that is? I help you, 34 years, and it’s called Ryanair. Okay? So when you think about the world in a bigger perspective than just an exporter, please recognize this, that we are at a pace which far exceeds everyone else’s pace ever in history in Europe. The second thing I would like to say is that you take a prospective view on the fleet. So imagine Wizz Air in 2 years from now. So that’s. I know this is more than a quarter, but this is not that much far out. In 2 years, we’re going to be effectively fully converted to A321s, which is by far the most productive aircraft you can imagine in the single-aisle aircraft community. And basically, we’re going to be converted into new technology, neo technology, and all the aircraft will fly, and nothing is going to be on the ground. And what kind of an efficiency that can create, and what kind of a competitive platform that would create for this? We are 2 years away from that. And in terms of kind of navigating ourselves through the next 3 years, you see that we revamped the aircraft delivery program. So effectively between fiscal ‘27 and fiscal ‘28, hardly any deliveries, new aircraft or there will be new aircraft deliveries, of course, but there is churn of the fleet. So, you know, most of it is going to be replenishment as opposed to net growth. So the growth will come through gauge, and uplifting the grounded aircraft and sector productivity. So basically, these are the 3 sources of growth, in that period. And you can see that if you look at the, the next 4-year CAGR forecast, effectively, we’re going to be growing the fleet by around 7%, but capacity will grow by 12%. So that’s kind of the level of efficiency that we will derive from the fleet program. I would also want to make a comment on the XLR, because I think there is a bit of a misconception on the XLR here. So first of all, our program is scaled down from 47 to 11 aircraft. Full stop. 6 of those have been delivered, 5 to be delivered in the next 8 months or so. Now, you take the XLR. We were saying that the XLR has to be long haul. It, it doesn’t have to be. So we looked at the unit economics of the A321neo, the A321XLR, and the A321ceo. The A321ceo is an inferior aircraft to the XLR in terms of unit economics. So if you operate the XLR as a normal A321neo operation, rotated on short, medium-haul flights, it delivers better economics than the A321ceo. A little inferior to the A321neo, of course, because of the weight penalty, but it’s fairly marginal. So we don’t have to force ourselves into long routes or unproductive almost long-haul operations. You simply just operate the XLR as an A321neo, and you get a lot of the economic benefits of that, and still far superior to the Boeing 737, and still far superior to the Airbus A320. But we are currently operating a few of those airplanes. So no stress about the XLR. So we don’t have to make stupid decisions just because we have an aircraft called XLR, and we have to push ourselves into long route. Now, of course, if you find appropriate commercial and financial opportunities to deploy and operate the XLR, as XLR, we will do that as we are doing it from London, Gatwick. We are flying Jeddah, Medina. Those routes, I think, exceed expectations significantly. But we don’t have to fly all the 11 XLRs and XLRs. We may end up flying only half of them. We will see, but we can be, you know, a lot more measured on financial expectations with that regard. So we feel good about the fleet plan. We think we are arriving to a shape on that that actually makes a lot of sense for the long-term ambitions of the business. Not in terms of, not only in terms of delivering growth, but also delivering financial performance through it. If you please move it to the next slide. So if you kind of put the puzzle together, what we are trying to do here, just to recap, so we have a number of strategic initiatives. We are moving. One, we have been addressing our weaknesses in terms of financial performance. We cease the Abu Dhabi-based operation, and we are ceasing the Vienna base operation as well in a few weeks from now. That basically addresses the structural issues we have been having in the network design. Secondly, we have reset the Airbus order book, as you can see. We’re seeing that this is deliverable, this makes financial sense, and it is executable, and makes a lot of sense with regard to enhancing our market positions, and delivering enhanced competitive advantages with regard to cost performance. XLR is reset, it’s resized, but also resold. As I said, XLR doesn’t have to be XLR necessarily. And the weight penalty actually is a lot less than alternative aircraft types what we are operating, or competitors are operating at the moment. We continue to reshape the network for the better, for more fortification of strengths, and exploiting opportunities in the business. As we speak, I think we are seeing market opportunities pretty much across the board, so they are not down to 1 or 2 areas, but we are seeing fairly consistent performance, fairly consistent improvements, and fairly consistent prospective opportunities for deploying more capacity. Then, of course, you can talk about Israel, you can talk about Ukraine, and you know that our discussions in Israel are ongoing. Time to time, it becomes very topical. Ukraine, we all know the situation. We will jump on Ukraine. We’re seeing that Ukraine is a significant opportunity, but I will have a slide on that just in a moment. Then we continue to unpark. We are 2 years away from uplifting the entire aircraft, so we are really coming down on the parked aircraft. No matter how you look at compensation, we are not in the business of compensation. Compensation is a good thing when it’s a force majeure on the business, but we should be able to better monetize the asset on hand when we fly, as opposed to when we ground and get compensated for that grounding. And as said, we continue to innovate our fleet, moving over to new technology. I would say that the Advantage engine is coming. So we are within a year from that. Please know that Advantage has 2 applications: 1, that new aircraft will be delivered with Advantage engine; 2, existing fleet can be retrofitted with Advantage, and can do probably 80% of the improvements on the technology. So actually, that’s a big deal, and it’s a big enhancer of economic performance coming through that technology. So next slide, please. So just want to give you an update on Ukraine. We don’t have a crystal ball. Personally, I think we are coming to an end, and the guys just need to find a way to finish it. But probably pressure is now building up on all sides sufficiently to get there. Nevertheless, we are ready. We are ready for Ukraine. We kind of phased our plans into 3 chapters, kind of the initial chapter being you know, the quick get back onto Ukraine as inbound carrier. I think we can activate that capacity imminently when the ceasefire is put in place and the system gets reopened. According to European constituents, it’s probably going to take around 6-8 weeks to reset Ukraine for purposes of air traffic control, mostly, before you can perform flights. And we will see how quick the ramp-up is going to be on the Ukrainian side. We’re going to be inducting capacity accordingly. But we have an initial plan to launch 30 inbound routes immediately when the system opens up, followed by another wave of expansions through base capacity. You recall, at the outbreak of the war, we had 2 operating bases in Ukraine, in Kyiv and Lviv. We would be reinstating those bases, and that would give us another layer of growth opportunities next to the inbound flights. Also, we could start flying outbound. We’re seeing that at that time, we would be ramping up to roughly around 5 million seat capacity. This is a combined of around 10 aircraft, based and flown inbound, in Ukraine, at year one. And then you kind of take a year 3 approach. We’re seeing that the business is going to go to around 30 aircraft, 15 million seat capacity, by further enhancing our route network, possibly opening up new bases in Ukraine. So that’s the plan. That plan is on the shelf and may be activated immediately when we have the opportunity to do so. So, you know, we used to be hometown airline to Ukraine. We will be hometown airline to Ukraine. We’re going to be first to go, and I know that there are other airlines with ambitions to go into Ukraine, so we don’t expect to be alone. But we are fully committed, and we have the plans. We have the aircraft. We still have ceo aircraft, actually, as a matter of fact, in Ukraine, so we have never left that country, that market, and we would need to put those aircraft also back into conditions to operate. Next slide, please. Ian Malin: That’s it. Q&A. Oh, sorry, go ahead. József Váradi: Yes. So, just to wrap it up, so with regard to fiscal ‘26 full year outlook, as guided before, we are expecting around 10% capacity increase. You know, the fiscal ‘27 is going to be a year when we’re going to be at high growth in the first half and moderate growth closer to the assumed new normalities going forward in the second half. Load factor is expected to be flat. RASK flat. CASK total CASK to be around flat to low single digit year-on-year. I think Ian explained the attributes to that. And net profit to be around breakeven, so we are putting it in the range of EUR -25 million to +25 million. These numbers are consistent with previous guidance and expectations, and of course, from here on, going into fiscal ‘27, as the business is going to be ramped up more, more productively, given the less exposure to grounding, stocking up the excess fleet, like coming out of Abu Dhabi, et cetera, which will be deployed by that time. We’re seeing that from there on, you should be starting seeing improvements on a structural basis. And with that, this is the end of the presentation, so questions, please. Unknown Attendee: [Operator Instructions]. James Hollins: It’s James Hollins at BNP Paribas. Ian, congratulations on your tenure and your new role, and thanks for everything. And on that note, I’ll start with a sustainably dull question on sale-leaseback and compensation. I was wondering, obviously, you’ve given full year ‘26 guidance. I’m wondering what you’ve included for fiscal Q4 for sale leasebacks and compensation income. And I know you prefer to fly aircraft than get compensation, but maybe a very broad figure, as we might look at it today, on how much the headwind is on the compensation line, fiscal ‘27 versus fiscal ‘26. And then probably for József, I know you’ve passionately said you’ll never do transatlantic, and I know you don’t want this question, but let’s assume you’re never going to do transatlantic as a schedule. But just on the charter side, I was wondering if you could run through sort of what interest you’re getting on the charters, what that would mean for capacity, I guess, based on the level of interest you’ve had, and whether, you know, 30% seat growth this summer slightly scares you, and maybe you’re thinking about any other ways of reducing that in terms of, you know, moving out on wet leasing out or chartering other aircraft. József Váradi: Let me start with the U.S. thing and capacity increase. I think you guys should think of very little when it comes to the U.S. matter. I think it is a good exposure communications-wise, but substantively looking at it, it is a low-profile matter to the air company. And maybe just for you to understand the history here, so about 2 months ago, we were asked by the Hungarian government to perform a charter to the U.S., taking the Hungarian government from Budapest to Washington. And Wizz Air UK performed that operation because Wizz Air UK is the entity of the group that actually is recognized for regulatory purposes, oversight purposes, by the U.S. FAA. Because Hungary and Malta, the 2 other airlines, are under EASA governance, but EASA is not recognized by the U.S. as a governance body because they only recognize the national authorities, not like a European authority. And we saw that, you know, these sort of matters may reoccur. You know, the World Cup is around the corner. In 2 years, Olympics in Los Angeles. So let’s just be ready for inquiries like this, should they come along. And, as opposed to kind of doing last-minute ad hoc chaos with permits, we just have it on hand, and we can activate when there is a need. But that doesn’t translate into anything structural in terms of ambition to fly regular charters even, or, you know, certainly not scheduled flights. I mean, this is really a simple regulatory contingency, what we are trying to secure. So please don’t think too much into this, because there isn’t anything to really think about it. And this is not going to move the dial on capacity, so this is not going to be 1 percentage points or 2 percentage points. It’s going to be totally different from that. But with regard to 30% seat growth, I think it depends how you look at it. I mean, of course, it’s a big number and, you know, it may be scary, although we said we would have a high growth in the first half of fiscal ‘27. But if you look at how that growth is sourced, it is actually not coming through excessive fleet deliveries. This is all coming through by eliminating some of the inefficiencies inherent in the system at the moment. So we are lifting aircraft. We are increasing sector productivity. So using the same assets on hand, which cost us at this point in time, and you put that into a better production, yes, it will increase the growth rate, but at the same time, that comes through efficiency measures. So this is not excessive fleet growth. I mean, the fleet is effectively not growing. Hardly any growth coming through the fleet. So I think as far as I’m concerned, this is a lots better way of delivering growth than by adding more aircraft to the system. It will put pressure on RASK, but at the same time, it also gives an upside to CASK because you increase utilization, you create more efficiency, more productivity in the system. And, you know, you look like a year or 2 ahead, it will create the opportunity for maturity of the new investments, of the new routes. But this new capacity is not going to be like brand-new capacity. We are not opening Uzbekistan. We are not opening Nigeria or anything like that. I mean, we are enhancing strongholds what we have already created. We are fortifying some of the best-performing markets. We are joining the dots. We are improving products by increasing frequencies on existing routes. Actually, that enables us to tap into, you know, higher quality demand, business traffic, on some occasions, et cetera. So I think this is a de-risked growth profile. So it’s a big number, but it is de-risked as much as it can be. Ian Malin: Okay, so in terms of Q4 sale-leaseback activity, look, I mean, these things are driven by availability of assets and the delivery of assets, and so we expect to take delivery of 8 aircraft this quarter. That may shift into one quarter or the next, depending on ultimately what happens. So, you probably have heard us say that we were at one point aspiring to have our XLRs down to 6 aircraft. We’re now at 11. So there was an opportunity with 5 of those aircraft, and ultimately, as Joe said, our job is to monetize and generate profits from these assets. And the transaction became less compelling from a disposal perspective than it did to not give the benefit away to somebody else. And so when we did this analysis in terms of the operational cost, especially when it comes to marginal routes within the network. When I say marginal routes, I mean, we all know that with this armada heading towards the Middle East from the United States, there’s been some airspace closures, and that has required us to reroute some of our flights around Egypt. And depending on what time of year, especially this time of year, you end up with tech stops. Tech stops are bad for cost. They drive more cost. They’re also bad from customer experience, which means that they dilute RASK. And so if you can deploy an XLR that still performs better than a ceo on a route that it can actually deliver on in terms of its mission, then you avoid that. And so that’s a very sensible utility of that asset. And so those are the things that we’re going to look at. Obviously, there’s some planning that needs to happen, and we don’t have unlimited XLRs, but we also don’t have too many of those routes. And so it’s an opportunity for us to bolster our reliability, which is an area of focus that I’m going to be bringing into the new job. To answer your question specifically, you know, 8 aircraft delivering, those will be a combination of mostly sale and leasebacks, some finance leases, like we’ve been doing. There’s also going to be an element of engines that we are taking and sale-leaseback at the same time. We’re not buying any incremental engines other than what we’re contracted to under the order book with Pratt & Whitney. So we’re keeping in line with our contractual commitments. And so really, we see that as part of our normal fleet evolution. So an element of sale-leasebacks will support the full year results as it has, but nothing out of the ordinary to what you would have been aware of through your discussions with my IR team and the regular engagement. When it comes to compensation headwinds going into fiscal year ‘27, well, I mean, you know, the good news is that we’re reducing the number of aircraft parked. We went from 35 to 33. The bad news is that we don’t get compensation for aircraft that aren’t parked. But that’s okay, because the good news is that those planes are flying. We’re not in the compensation business. So there will be a natural tapering down of compensation as the fleet unparks. The faster we unpark, the less compensation we get, the more we can return to flying. Yes, there’s a tension between where we are this year with the combination of unparking new deliveries and that fleet growth that we talked about. But ultimately, we’re focusing on that end of 2027 calendar year target. Again, it’s subject to Pratt & Whitney at the end of the day, which we are trying to influence, but we don’t control, and we’ll continue to focus on the core business. And that’s really, that’s really, that’s really what we are trying to convince ourselves and yourselves over the last quarter and the previous quarters, that just keep the head down, work hard at addressing the areas of the business that we’ve identified and deliver the results that we have told you to expect. József Váradi: May I just come back to the first half growth rate and the way that growth is delivered? Because I think this is important to understand, because we are really not talking about bringing capacity into the system from the outside to create that growth. We are saying that we are using predominantly existing capacity to deliver that growth, and that’s very different because I’m already getting a lot of costs observed, you know, in the system already. So I’m already paying for the aircraft. So I’m paying rent for the aircraft. I also pay, you know, for some maintenance of that aircraft. So I would say that probably, you know, 25% of the costs are already in the system I’m paying for. So effectively, you are getting this capacity, what you are uplifting from the ground, but only 75% of the cost, as opposed to when you are bringing in new aircraft, then you pay 100% of the cost. I think this needs to be taken into account. And then when you look at the other source of growth through sector productivity, it’s even better from our perspective, because I’m pretty much using the same crew, the same aircraft, the same maintenance profile, and I’m gaining more productivity through that. So this is almost like a free capacity cost-wise. Of course, I pay variable cost, but I mean, a lot of the costs will be saved. So this is a very low-cost growth compared to previous growth profiles, when actually growth was fueled by the intake of aircraft. That was the way to create capacity. But this time around, this is all pretty much within the system, within the existing parameters of the fleet. All right. Jaime Rowbotham: Jamie Rowbotham from Deutsche Bank. Two from me. First, just coming back to the Ukraine, József. Don’t know if you listened to Ryanair on Monday, but Michael O’Leary was talking about the airport charges in Ukraine. He seemed to be saying that the airports were stubbornly wanting to stick to tariff levels as published pre-war. Whereas they’d be looking for deep discounts on those tariffs to try and bring, you know, 5 million passengers back. If the tariffs stay as they are, maybe they’ll only look for 1 million. I just wondered where you guys stand on airport charges in Ukraine. And then the second one for Ian. Sorry to do this on your last appearance, Ian, but I just wanted to come back on James’s question about Q4 positives within the net other. I know compensation is a sensitive one, so I’ll leave that one alone. But on the sale and leasebacks, I hear you on the eight aircraft and some engines. I mean, it’s very difficult for anyone, I think, to establish what the quantum positive benefit might be from all those things in Q4. The way I would frame it is this, you know, you’ve just guided a very narrow range for net profit in the full year, EUR -25 million to +25 million. I think the sale and leaseback gains year to date are about EUR 90 million. I think you’re looking for as much again, if not more, maybe EUR 100 million in Q4 to deliver that sort of net profit outcome. Could you comment on that? Is that a sensible, you know, quantum for what you have in mind at the moment for those transactions and the benefit you get from them in Q4? Because without that, it’s very difficult for us to judge you on, on everything else. József Váradi: Okay, maybe I answer the Ukraine question. So look, I mean, we have been in negotiations with Ukraine and airports for a long time. I mean, probably for 2 years. Even he made it to Ukraine, so he was in Kyiv. He made it back as well, so that’s good. So I think we have been very engaged with Ukraine. And you know, competitors do whatever they want to do. We will do whatever, you know, we think we should do. We are committed to Ukraine. Seriously, you know, we’re seeing that, well, Wizz Air is going to be de facto national carrier of Ukraine. And we will manage the business accordingly. Of course, you negotiate, and you try to get the best deal out of the system. Personally, I don’t think Ukraine needs Ryanair. I mean, we’ll do it. Some others will do it. You know, those guys do whatever they want to do. We’ll be there. Ian Malin: Yes. In terms of the SLB, you’re right. There is going to be SLB activity. I mean, it’s unlikely that in this quarter, we’re going to see dramatic improvement to the maintenance and depreciation in airport lines. And so, yes, so I think in terms of math, there is going to be an element of SLBs that gets, that get us there. You know, we are 2 months away from the end of the year, so we have visibility as to how the year’s coming up. I mean, you know, like I said, we did have this XLR sort of pivot, and so how those ultimately get financed could end up impacting this year versus next year, but it’s a timing issue at the end of the day. They’re going to get financed, and we just have to execute on that. But ultimately, you know, the SLBs are part and parcel to the business, and so we will take them, and we will benefit from them. We may end up financing those XLRs instead of doing SLBs because financing them allows us the flexibility to terminate the deals sooner if we decide down the road we no longer need the XLRs, and we want to move them on to a different operator. And that then will impact the amount of gain that happens, but ultimately, the SLBs are certainly an element of the Q4 numbers. Harry Gowers: It’s Harry Gowers from JPMorgan. First question, if we could just go back on the capacity growth for summer, just in terms of what you can control. I mean, Joe, you mentioned before around that de-risked, kind of more mature capacity growth profile in the network. I mean, are there any other positive things you can do to help drive pricing when the growth is that high? And I guess, Ian, that will be something for you in your new role. And then, second question, if you could just talk about growth in the UK, actually, you know, where you’re putting aircraft and how you see the market dynamics in terms of supply versus demand at the moment for the UK? József Váradi: All right. So with regard to first half capacity growth, you know, one of the things what we are doing. So I would say that, you know, this capacity growth is delivered at a lot lower cost than otherwise, because it is all from within. So pretty much by activating existing capacity, which partly we are already paying for, certainly on certain cost items. But the second thing what we are doing is that, I think we are really enhancing the proposition, the product to the market, to tap into different consumer needs. So we’re going to be coming across a lot more segmented than before. I mean, densifying is significant. We are adding frequencies on certain routes. I mean, creating effectively a product for business travelers. I mean, you know, the business traveler has a deeper pocket. So through that, there is revenue enhancement coming through segmentations. So we’re seeing that, again, this is not just spreading the network and [Technical Difficulty] starting from [Technical Difficulty]. Some of these capacity deployments may actually be profit-enhancing, given the improvement on product quality and being able to reach high-spending customer segments. With regard to the UK, actually, we like the UK, believe it or not. And I just talked to someone yesterday, and she said that, you know, Christmas retail was disastrous in the UK. But this is not what we are seeing. What we are seeing is that we are seeing a continuously rising demand for our products. Actually, our performance is improving very significantly in the UK after cutting some of the fashionable capacity and resizing the business at Gatwick. Now we are really into growth mode in Luton. I think we are stabilizing our Gatwick performance. So the UK, as far as I’m concerned, is an investable market. The bigger issue we have in the UK is the strains on capacity, so our ability to grow on capacity due to the infrastructure constraints. So Luton is stuck at the moment. They have all sorts of reconstruction issues and passenger limits. Gatwick just is put into the right place in terms of capacity versus demand. But we are seeking opportunities to continue to grow our presence here and our market positions. We do a lot more inbound flying, for example, to tackle the overall slot issues at the airport. So as far as we are concerned, UK remains an investable market. Ian Malin: Yes, I think Joe covered it very well, but just the one point that I would emphasize is that while we’ve got this growth, we acknowledge that it’s there. We’ve also created extra growth by churning our network, which created growth inadvertently. So it’s not just new capacity, but it’s just redeploying capacity onto new within the network, which is effectively the same as growth. It creates immature capacity that we have to manage, and that’s something that we’re going to bring down. We did some analysis and some benchmarking, and in the last 12 months, we’ve churned our network 9 times more than the industry average. And so that causes all sorts of issues around the network in terms of what you can do. In terms of price stimulation, you have to lower your prices, but also, it creates havoc with regards to the costs. And so, for example, just looking at airports, you know, why would you incentivize Wizz to bring a new route on if they know that after the incentives expire, we’re going to disappear and move on, right? So we need to be sure that we’re creating a more stable, more reliable network. And reliability, you’ve seen come through the disruption line, like this summer, where we had a huge improvement, and it’s staying stable this year. And so reliability helps from a cost perspective. It helps, not just in the disruption cost, but in crew and on airports, and it also helps in a revenue perspective. So that’s one of the key pillars of our focus going forward. Alexander Irving: Alex Irving from Bernstein, 2 from me, please. I’ll start, again with the growth in summer 2026. You’re talking about 24% ASK, but think about the risk profile of that as it plays RASK. How does that break down into gauge frequency between existing airports and then new airports in the network? And then maybe related to that, how does that then interplay with your airport costs as we think about that development into this summer and beyond? Second question, really for a confirm or deny on this one. I’ve heard it suggested that there’s no more GTF compensation coming beyond the end of calendar 2026. Is that accurate, or as long as AOGs, you still get paid roughly a day rate per grounded engine, grounded plane? József Váradi: Okay, let me start with the GTF thing, because I’ve been involved into this, personally. I think there is a Pratt & Whitney line, and there is a Wizz Air matter. So the Pratt & Whitney line is that, they don’t want to extend, compensation on a blind basis to all airlines beyond 2026, but we managed to negotiate a different agreement. You recall last year, we confirmed more aircraft to be powered, by GTF. I mean, you can imagine that that discussion was leveraged. And, we are fully covered until end of 2027. So I think you can be totally relaxed with, with that regard. But indeed, the industry line is different from that. But Wizz Air is the single largest operator of Pratt & Whitney, and we have probably the most significant forward-looking commitment as well to Pratt & Whitney. So I think you should reasonably expect that we are treated a little differentiated versus the rest of the industry. So that’s GTF. With regard to the profile of growth, I mean, maybe you want to deep dive into it, but maybe my commentary would be that, I mean, of course, when you are growing that much, you are trying to take this leverage against the airport community. So we are looking at reshuffling some capacity according to airport deals. But at the same time, we also have to take note of certain facts. I mean, one fact is capacity scarcity is becoming a phenomenon in many places that are new. So if you look at Central and Eastern Europe, I remember when we started, no one was thinking about slots and capacity scarcity. Now you are seeing it in Bucharest, in Warsaw, in Budapest. So whether we like it or not, what it does, obviously, it puts pressure on charges and airport charges, because when you are scarce on capacity as an airport, why the hell, you know, should you discount that capacity, because it’s a high demand? So, you know, you have these controversies that you want to have your strongholds and fortified presence, and those airports might be constrained airports, and you have kind of minimal room to maneuver. But at the same time, you still have, given the high growth rate, what you are delivering, you know, some room to maneuver to shift capacity according to airport cost and airport deal. So you have this kind of duality we are managing. Maybe you want to comment on Ian, on the way of allocating the growth capacity. Ian Malin: Yes, look, I mean, you’ve seen from what we’ve put in this presentation, we are deploying capacity into our core markets where we have a cost advantage. And that’s deliberate because obviously, you know, we’re in the cost business. But if we can operate at a lower cost, then obviously that allows us to be more competitive on the fares. And as Joe said, some of those bigger airports where we have strongholds, we will continue to fortify so that we maintain leadership. But we are also seeing different flows. We have the equivalent of our sunbelt in Europe now, which is the sort of east-west across Spain to Italy, Spain, Greece, you know, those sorts of places. And so with the Italian presence that we have, where we have invested significantly recently, we are looking at flows that we hadn’t spotted before or hadn’t taken advantage of before, maybe. And likewise, to and from Central Eastern Europe. It’s not just the export of its Eastern Europeans to Europe, but also it’s bringing people from west to east. And our focus is really on identifying those opportunities where we can generate sufficient profitability year-round so that we are less impacted by the seasonality in Europe. And so in fact, all of our aircraft now for summer are fully deployed and on sale, barring one announcement next week. And that will give us the lead time to be able to work on accelerating, accelerating the maturity profile. We used to think that it took a year or so to get to profitability on a route, and then maybe by the second or third year, we would sort of have it be mature. That timeline doesn’t work for us anymore, and so we need to focus on this fortification, where we already have a market leadership, and then flex that market leadership in a way that we activate the base that knows what Wizz is. And then, as Joe said, expanding the Wizz franchise, so that we are more appealing to different types of passengers, and that will help offset the growth on the RASK pressure. József Váradi: I would add one more perspective to those, because I think we are kind of taking it almost like an isolated issue from context. But you have to look at the context. I mean, not many airlines in Europe are growing. So when you are talking about growth, yes, it may be high on us, but when you look at it from an industry perspective, this is still not outrageous. So this is not like the whole industry is growing like hell, and we are one of the craziest to do that. I mean, we are the one growing. Effectively, we are taking advantage of our positions that we are able to grow, while others are not able to grow because of fleet constraints or whatever they have. So, I don’t think that you should be ignoring that context. So yes, the 24% ASK is a big number, but we are pretty much the only one growing, and all others are kind of stuck with what they have at the moment, and I think that actually gives us a competitive advantage. Muneeba Kayani: Muneeba Kayani, Bank of America. So continuing on the kind of quest, cost questions for fiscal ‘27. Just you mentioned, if you could help us on some of those modeling. You said depreciation costs and maintenance costs would be higher. Any way you could help us quantify that? And then we’ve had the discussion around the productivity improvements from the higher ASK, but then these higher costs as well. So net, net, where are we landing up, you think, right now? A higher unit cost ex-fuel for fiscal ‘27, while RASK goes down. Is that how to think about it, big picture? I know you don’t have guidance at this point. Ian Malin: Yes. So, so you’re right. We’re not guiding, yet. We will, as we get, to the full year results. But in terms of maintenance, yes, there’s still going to be pressure on that just because of the 19 ceos that are returning next year, and those are event-driven costs. Depreciation is one of those areas where we will start to see the turn in this year, and it’s, and I would say that that’s probably likely to be flat, just because we are starting to have the exit of the more expensive depreciation aircraft as included, including this year’s retirements. However, that, that is, that benefit is being pushed up against the fact that the GTFs in their current durability profile require more frequent maintenance than anticipated. When you do more frequent maintenance intervals, you start to capture some of that depreciation that was historically backloaded sooner. You have the benefit of that, the new aircraft being less beneficial against the detriment of older aircraft. It’s a moving feast at this point and something that we’re analyzing. But I would say that the biggest headwind that we’re going to be seeing next year to CASK is going to be the change in one-offs, as you call them, or as I guess the accountants call them, which is on the sale leaseback gains. So we will not benefit as much next year on sale leasebacks as we did this year, and so that will create a headwind that the rest of the cost base is going to have to overcome. So when looking at total ex-fuel CASK, I think you’re going to start to see improvements. However, there’s going to be a headwind from the falloff of sale leaseback gains, which will offset sort of core cost improvements, and so that’s where it’s tricky. So we’re not guiding it on where CASK is going to be. Obviously, as we get through this year into fiscal year 2028, you’re going to start to see strong CASK improvements, but it’s still a transitional year, where it’s still too early to give you a view as to whether CASK will go down, up, flat, whatever the case may be. So we’re reserving the right on that for now. And in terms of RASK, yes, there’s going to be pressure on that, but I think that with some of the applications of these concepts that we just talked about in the last question, we’re less inclined to accept a stronger RASK. As strong as a RASK dilution is what you’re implying through your question. József Váradi: I think if you want to kind of net it all in, we are expecting margin improvement coming through the next financial year. I think the magnitude is yet to be confirmed and yet to be guided, but we’re seeing that all in, we should deliver better results in fiscal ‘27 than in fiscal ‘26. Conroy Gaynor: Conroy Gaynor from Bloomberg Intelligence. So first question, just on, on the fuel. How might you start to think about fuel going forward, just given SAF and certain environmental measures? Will there be perhaps a higher inflationary component within that, or is there now more volatile component that you have to think about? And how might that impact the way you communicate your outlook to us? And then the other 1 was on, on Saudi. Just to pick up on your comments about it essentially being a positive read across for, for entering other new markets. And some may say with Saudi, it’s a very unique market in terms of the types of traffic flows you get, including religious traffic flow. So, so what parts of it do you think actually do read across into other markets? József Váradi: Yes, maybe I take the Saudi. I don’t know, maybe nothing, to be honest. I mean, I agree with you that I think Saudi is a unique market. This religious traffic is a significant driver of what we are delivering on those routes, and the applicability of that may be none for anything else. And that’s why I’m saying that we should just be relaxed on the XLR, because if we find a way to operate the XLR as XLR with proper profitability, we’ll do that. If we don’t find it, we just operate the XLR as a normal A321. So I think that kind of takes the pressure off, from the organization to definitely deploy, these aircraft on long routes, and take the risk on financial performance. So we are not going to take risk on financial performance. Either we get ourselves convinced that this is a profitable flight pretty much from day 1, like what we are achieving in Saudi. If we are unable to define that, then we are not going to do it, and we just operate the aircraft as normal A321. So back to your first, I don’t know. I mean, maybe it’s applicable, maybe it’s not, but we are not under pressure to, to follow the Saudi route, if you, if you want to put it that way. Ian Malin: Look, fuel efficiency for us is extremely important because of the Wizz position of being one of the, if not the world’s most emissions-efficient airline out there. From a SAF perspective, you know, we comply with our purchase obligations, and we go through the same challenges as everybody else. Thankfully, because, you know, we are as efficient as we are, we don’t need to buy. We probably have to buy less than other people who have to consume more fuel, which is good. We continue to hold the investments in the 2 SAF production facilities or production concepts that we invested in. And those are moving forward, although we’re not going to see any meaningful benefit from that until the end of the decade in terms of, you know, having access to the offtake agreements. But that’s something that we’re promoting and excited about. But ultimately, you know, when it comes to our volatility, we’re smoothing that out through the hedging program that has been in place since the beginning of F ‘24. We follow that religiously and, without any speculation, and we have recently conducted a benchmark of our policy against the peer group, and we’ve made some enhancements to make sure that we are remaining competitive on that, and we’ll continue to follow that. And obviously, where things are right now, we are in a favorable fuel environment, and we’re locking that in. So the combination of prudence when it comes to risk management on the fuel and the FX portion of fuel, on top of the efficiency as we get rid of the inefficient aircraft and move towards these. And you can see that through the fuel unit cost when you benchmark it against Ryanair on a stage length adjusted basis, we are miles ahead. And I think that’s something that you need to factor in when looking at the overall aircraft ownership costs, is that if you aggregate aircraft maintenance and fuel and you compare it to the peer group, it actually looks far more compelling than if you just look at it on the raw numbers as presented. József Váradi: I think that’s really an important point. And, you know, when you look at the merit of the aircraft, you know, some people say that there is no such thing as good aircraft, there’s only cheap aircraft. That’s actually not true. So if you really take a more holistic view on the aircraft cost, and you include, you know, fuel burn, you include, you know, capital cost, ownership cost, you include maintenance cost, probably these are the things you should add up, and kind of compare, and then you understand the value of the aircraft. And, you know, we are getting cleaner and cleaner on the aircraft side. So all these aircraft are superior. They represent better value than alternative aircraft. They will be flying, as opposed to partially being grounded. So that kind of a value coming through the aircraft line, which is going to be a lot more visible and a lot more impactful on the performance of the business going forward. So I think it is important to understand, because this is the single biggest drag on the business at the moment. We don’t shine on the aircraft, and we should be shining on the aircraft because it’s a better aircraft than any of the other guys have. Conor Dwyer: Conor Dwyer from Citibank. First question was on maintenance. Obviously, a bit of a headwind this year, but into next year and the year after, still looks like quite a few redeliveries. I think it’s 25 and 14. Do you think as a result of that, that’s still going to be leading to kind of a lot of provisioning for maintenance in those years as well? And then the second question is kind of back to your comment around margins potentially being up next year. Broadly, from your comments, it seems like overall non-fuel unit costs, kind of the improvements in the underlying business being offset by sale and leaseback gains. I think a lot of models in the market are doing kind of unit revenue up slightly this coming year. But, you know, with capacity growth at 10% this year, unit revenue flat, there’s quite an acceleration into next year. I’m wondering, how can we think about that bridge of margins coming up? Is it, is it fuel? Is that a big component? Is it financing? Any help you can give on that would be super helpful. Ian Malin: Okay, I’ll take the first one on the maintenance provisioning. Yes, I think you were, those numbers you were referring to were probably calendar year numbers, and so I’ve only got them committed to memory in fiscal year. So it was 18 this fiscal year, 19 next fiscal year, 16 in F ‘28, and then I think we’re basically, you know, just a handful left. And so, yeah, those will come with elevated costs. Event-related costs is how I’m referring to them. And the challenge I think that we’ve faced so far is that we were competing. Our resources, internal and external, were competing with the challenges of powder metal and redeliveries and trying to keep the fleet flying and manage whatever we could. As every day goes by, we get better at managing the powder metal issue, and now we’re putting all of our attention on the end of lease side of things because of the huge pressure it’s putting on the maintenance line, while making sure that we have the base capacity available for the operating fleet. So I think we’ll get better at it, but there is going to be an inherent event-driven exceptional cost pressure coming through the next few years on maintenance that we will not be able to avoid. It is simply what is required in order to put these aircraft back into return conditions and to comply with the contracts. Otherwise, you pay a lot worse, which is lesser compensation, right? So you had the option to pay the lessor or cash, which they’d love to have, but at our scale and our rates in the maintenance ecosystem, it’s better for us to do the work. But of course, it impacts all sorts of things like availability of slots at the facilities. It takes down utilization because you have to obviously take the aircraft out of the fleet in order to allow for the time that the aircraft are maintained, and so that has those pressures. But that’s just part of the transition and the cleaning up of the business. But there’s going to be elevated maintenance costs and the associated maintenance depreciation that flows through the maintenance, through the depreciation line that comes with the exiting of the aircraft. If we didn’t have the new aircraft coming in, there’d be some opportunity to extend ceos, as our friend Andrew likes to write about, but unfortunately, that would just add more capacity at this point. And so we have to, we have to balance the trade-off of, you know, what -- but what even more growth would mean versus trying to migrate the older aircraft out and benefit from the harmonized efficiency of an A321-only fleet. József Váradi: So maybe on the margin, on the margin issue. So I can tell you that we actually have quite a number of markets where we are growing 20%+, and RASK is improving, going into positive territories. And we have a few markets where we are not really growing, and RASK is down. So obviously, what you do is that you address the underperforming parts of the business, and you explore the overperforming parts of the business. And I think the way we are allocating capacity through this growth period in the first half is trying to embark on that principle. As Ian said, yes, I mean, of course, high growth always gives you some kind of a containment on unit revenue improvement, but I think you have to look at it in context of competition. I mean, competition is pretty much benign. I mean, doing nothing. I mean, we are not really seeing any significant competitive activities pretty much anywhere in our markets. I mean, you know, we have been discussing Albania due to the other guys, that they’ve been very topical on Albania. But the fact of the matter is that we are 3 times the size of Ryanair in Tirana, and our financial performance is improving. So I mean, just because 1 guy is saying something, that doesn’t mean that there is anything close to the realities. I think they are starting, or they are stating ambitions as opposed to actual realities. So, you know, we actually feel very comfortable with the redesigned network, and the way we are allocating new capacity there against the competitive backdrop, against the strengths of the brand and awareness of the brand, what we have been achieving. So I don’t think that RASK is going to come through as a detrimental issue to the performance of the company in terms of margin. Now, we will have to see how exactly the cost line is going to play out, given all the issues, and we have still a few decisions we will have to make that would affect maintenance cost and, you know, when to amortize some of these maintenance lines. But we’re seeing, I said, that fiscal ‘27 is going to be an improvement on margin versus ‘26. Andrew Lobbenberg: It’s Andrew Lobbenberg from Barclays. Can I ask about the journey to diversifying your aircraft financing structure, which I think you spoke about previously, but doesn’t seem to get a lot of profile today? How hard is it to kick the habit of the SLB gains, I guess? And then in terms of competitive pressures, Joe, you just said that there, there’s no competitive threats around the network, despite Michael’s comments. Can you talk about the big Eastern European markets and, you know, what the trading trends are like in Poland, Hungary, Romania, I guess? József Váradi: All right. So let’s talk about the competition first. Well, our market share, as we speak, is up to 26%. That’s nearly a 2 percentage point improvement. And the other guys are flat or down slightly. So Andrew, the problem I’m having is that, I mean, this guy is talking a lot of rubbish, which are simply untrue. I know that the whole media nowadays is checking the facts on what Trump is saying. Maybe someone should be checking the facts of, you know, some of the other guys are saying. So this is simply not true. So we are gaining foothold in Central and Eastern Europe, you know, at the detriment of all others, including Ryanair. So when you look at Poland in particular, the Ryanair leadership gap has been closed to a large extent. They had double-digit margin points. I think we are kind of mid single digit now, given the capacity deployments in the country. Romania, we are 50% of the market in Romania, and our market share has been growing. So again, if you fact-checked the system, I mean, you know, kind of standstill on one side and significant growth on the other side. So if you just look at Poland, what we have done recently, pretty much to every operating base, we have a nice new aircraft. We opened up secondary airport in Warsaw, Warsaw-Modlin. If you look at what’s been happening in Romania, in the past year, we have been adding aircraft to almost every single base we have in Romania, and we opened up the secondary airport in Bucharest, Băneasa, Băneasa Airport. So, maybe we don’t bark like a dog, but we have been doing a lot in both of these markets in particular. And by the way, the other topical issue is Tirana, as in just very recently, we have been adding 2-3 aircraft to Tirana, enhancing our market leadership position. Again, we are 3 times the size of the other guys. So, Central and Eastern Europe has been going from strength to strength, as far as we are concerned, in terms of competitive dynamics. So, I mean, some of it, of course, is an investment into the future, but these investments tend to mature actually pretty fast and quite well. So, we feel very good about the competitive strength of Wizz Air in Central and Eastern Europe. And going beyond Central and Eastern Europe, you must have noticed that we have been quite active in Italy, announcing new aircraft deployments in Italy, Milan, not far out, Venice, Rome. Ian Malin: Catania. József Váradi: Catania. More to come next week. Actually, we are building a lot of strengths in Italy. We ended up sponsoring AS Roma, which we think is a step up in terms of stimulating brand awareness and reputation in the marketplace. So it is not just Central and Eastern Europe, but we are also picking up the pace in some of the other markets. Ian Malin: So in terms of the journey to diversify, so it is a journey. Not something that we feel that we need to immediately launch into, because to some extent, we’re already diversifying through the Jolcos that we do. And I think roughly 50 aircraft in our fleet are under some sort of ownership structure, whether it be Jolco or finance lease. But that’s what I think, Andrew, you’re referring to and what we’ve spoken about in the past, and certainly in material that I’ve put out there, is a more focused effort towards owned aircraft. And that is something that is certainly in our roadmap, and we plan on talking about that during the Capital Markets Day. The good news is that we have aligned on a date, internally, Joe and I, and we’ll be communicating that date through the investor relations team to you. And it’s-- we have plenty of time to plan for that, and that’s where we’re going to, we’re going to break it down in detail. The reason why we’re less compelled to jump into it now is 2 reasons. One is that basically, the next 12-15 months’ worth of aircraft are already committed into some sort of form of financing. And so even if I said, I want to do X-- I want to buy X aircraft today, I can’t, I can’t do anything for another 15 months anyway on that. And so, so we have some time, but also, I don’t think it’s appropriate when you talk about journey, right? We’re talking about consistency, stability, reliability, predictability, in terms of what we’re telling you we want to do and what we actually print when it comes to results. And so this quarter and the last 2 quarters have been deliberately, I would say, without fanfare. We just want to simply deliver on what we say. And if I start taking away things like, say, leasebacks, which, as we’ve discussed through the questions, this business does use as part of its profit structure, then it’s not going to deliver the consistency and the reliability that we’re so working so hard to bring, right? The biggest takeaway that I’ve seen from the conversations I’ve had with you today is that, you know, there’s still a surprise that we’re delivering on the consistency, and we want to make sure that, you know, we eliminate that surprise and simply deliver. So I’m trying to keep as much unchanged as possible so that we can focus on the pillars of our business, which is to be, you know, ruthless on cost, and reliable when it comes to operations, reliable when it comes to the commercial decisions that we make. So there is certainly a lot of work that’s gone into that, and that’s something that we discussed as recently as yesterday with our board. But it’s not something that we’re ready to go to market with because we think that we can do better in terms of just delivering on the expectations and making sure that we set the right expectations for the next quarter, so we can repeat what we’ve done in the last 2 quarters. Two quarters is not yet enough for a pattern. Operator: We’ll take our first online question from Jarrod Castle. Jarrod Castle: Yes, 2 for me as well. I mean, you mentioned commercial areas, yes, and, you know, I just wanted to get some color on what your thoughts would be, I guess, yes, and József on, you know, something like Starlink. We’ve obviously seen comments from Ryanair and easyJet today, so WiFi. And secondly, you know, maintenance shops, obviously, costs there, you, you know, are, are, are impacting you, and obviously, you know, a large competitor is rolling out, maintenance shops, so, thoughts there. And then just secondly, you know, your comments on costs for ‘27. I mean, I, I assume, you know, you’re talking more constant currency, but, you know, clearly the US dollar is coming under a lot of pressure. So, you know, any color that you want to share on that front? I mean, I can obviously see your dollar hedging, but you know, just some color there, how you see things. József Váradi: Maybe I just pick up the first one. So with regard to WiFi and onboard connectivity, I can tell you that personally, I have been looking at it for 15 years, probably 6 or 7 different iterations. And you have 2 challenges with that, 1 is that you need a technology that actually performs, and 2, you need the economic model that actually makes sense from a financial standpoint. One thing, what you have learned in this industry is that people will not pay for this. If you’re seeing they do, you are naive. It’s just not going to happen. So with regard to technology, I think Starlink’s is kind of the technology that delivers what you need. But it may not deliver the economic side of the equation because you may think that this is overcharged. And unless you find a sponsor, who is prepared to, pay for that, you know, for sure, you’re going to be ending up with the cost of, operating the system, with no visible benefit, on the revenue side because people won’t pay for it. So you have to get those 2 things right, to move forward with WiFi. I think we are, you know, very upbeat on the WiFi connectivity opportunity. I said, you know, I, I’ve been looking at it on a constant basis, pretty much. But you need to get the technology right. As the technology is coming, but you also need to get the economic model right on that. But with regard to maintenance shop, I mean, I would just like to draw your attention to a very major difference between maintaining Pratt & Whitney engines versus maintaining CFM engines. But first of all, when you think of aircraft maintenance, you know, 70%-80% of the cost of aircraft maintenance are associated with engines. So effectively, you are talking about engine maintenance when you think about it structurally. CFM doesn’t underwrite the product. So the CFM philosophy is that, you know, we are big enough, we created a market. It’s sufficient enough, take advantage of market airline. That’s not our business. Pratt & Whitney is totally different. Pratt & Whitney underwrites the product and effectively guarantees the infrastructure for maintaining the engines. So we are not as widely affected by market volatilities, when it comes to engine maintenance as the other guys. And I know that, you know, there is a huge inflation creeping through, labor in the maintenance space, all over. That’s a global phenomenon. So this is not down to 1 or 2 guys, but we are contractually protected, against the inflationary pressure. It doesn’t mean that we are totally isolated from that issue. So, we are not immune, but we are a lot more protected. So while you are seeing some other guys seeing 2x, 3x of maintenance cost creep, we are nowhere near to it. I mean, we are still talking about, I don’t know, you know, some fairly nominal inflationary rate flowing through the other system. So this is a major difference. So I think this should be a competitive advantage for us going forward. Unfortunately, that competitive advantage at the moment is tainted because of the powder metal groundings, etc. But once we are clean, I think our ability to manage maintenance costs against market volatility will turn into a competitive benefit for Wizz. Ian Malin: So, Jarrod, with regards to the benefits of the US dollar, I mean, absolutely, you know, [ 1.20 ] is something that makes us excited. We benefit in the form of obviously our rent. Most of our rent is paid in dollars for the aircraft, although we do have a good proportion of rent that we’ve originally put in place in euro. The new aircraft that are delivering, they get swapped into euro rents through our latest evolution in our risk management, through our balance sheet hedging or our lease liability hedging. And in fact, there’s a request today for 4 more deliveries to be swapped in, so we’ll get the benefit of that. In terms of the rest of our cost structure, it’s we’re less exposed to dollars than most airlines because we’ve been looking to contract in euro as much as possible to create a natural hedge. So for example, a lot of our maintenance we’re able to do in euros because we don’t perform maintenance too much outside of Europe. It’s mostly in Europe. So, but there is a heavy element of dollars still in this business, and so that will help us. The funny thing about this journey to ownership is that when you buy an aircraft, you establish a future residual value number. The appraisal is done in dollars because that’s what the purchase of the aircraft is done in. And so you set some residual value number, and then you depreciate down to it over the period of time. But as the US dollar weakens, actually your depreciation grows because you’re now depreciating to a lower US dollar amount, which means you have to take more. So there’s a risk there that we have to manage, but I think that there’s ways we can deal with that through our risk management program. So overall, there’s a benefit there, but it’s not something that, Jarrod, I would be able to quantify at this point. In terms of the commercial other areas, I mean, I think Joe summarized the WiFi side. Of course, we’re in discussions with Starlink. We understand the costs of it, but we’re not prepared to incur the CASK that comes with that without somebody helping us offset that, because it would simply go against, you know, the ultimate strategy that we’re pursuing. And maybe I’ll just take the opportunity just to fill you in on some of the key themes that I’m going to be focusing on going forward. Basically, got 4 that I really just want you to hear now so that we can start to follow up on them. One is that we have to be, and we will be ruthless on the cost gap, okay? That’s something that you can see is there, and that’s something that I want to eliminate, and the way that we need to do that is by way of productivity. So productivity means fleet utilization and crew utilization, and so making sure that we can be as productive with that. That is core to the model, especially with the kind of aircraft that we operate, and so that’s the first pillar. The second is that we’re growing, and we need to grow better. So how we grow is critical, so we need to grow better. That is, you know, establishing those fortress positions, deploying capacity into core markets where we have a cost advantage. The third is reliability, right? Everyone associates reliability with the cost benefit, so you have lower disruption costs, but you also end up with, like I said earlier, in terms of lower crew costs. But also reliability is a RASK lever. The more reliable you are, the more confident the customer and the consumer is going to be in purchasing tickets with Wizz. And the more customers we can identify, the higher we can charge in terms of supply and demand. And the last is that we need to expand the Wizz franchise, right? Everyone associates Wizz with a certain customer profile. One of the things that Mike and I have been talking about a lot is tailoring the schedule for the specific customer segment, capture the high flyers, the high-value flyers, without sacrificing utilization. Establishing route quality metrics to align with customer needs and pushing ancillaries. And so we, you know, things like what we’re looking at, like, Wizz Class, for example. Pushing things like that, but ring-fencing them so that we keep the ULCC model. So trying those things, squeezing more out of our flights that may have lower load factors by looking at products like that, but keeping the ULCC model, so ring-fencing them. So that’s those are the 4 areas: ruthless on cost, grow better, reliability, and expanding the Wizz franchise. That’s extremely important to us, and that’s the direction we’ll be taking this business going forward. Operator: [Operator Instructions] There are no further questions on the webinar. I’ll now hand over to management for closing remarks. József Váradi: Well, thank you. I mean, I think I would just like to close it with, with the notion of, you know, I think we are on the path to, reset this business. We don’t want to cause any new surprises. I think we’ve got enough of those, in the past few years. We are still in transition, so please don’t expect, you know, performance taking us to the moon yet. But, you know, we are not far away now from a vision, when, you know, the operating model is going to be back into where it used to be. We’re going to be clean, of many of these issues we continue to carry, like groundings. Fleet transition is going to be completed in 2 years. So, I think we are moving along the track and we are projecting performance alongside our expectations, what we were trying to reset with you previously. Thank you. Operator: Thank you for joining today’s call. We’re no longer live. Have a nice day.
Mary-Ann Chang: Good morning and good afternoon to all our listeners. Welcome to Scancell's results call for the 6 months ended 31st of October 2025. My name is Mary-Ann Chang, Investor Relations. And with us presenting today, we have our CEO, Phil L’Huillier; and our CFO, Sath Nirmalananthan. After the presentation, we'll conduct a Q&A session for which you may submit written questions at any point during the webcast. Before we start, a few housekeeping items. This call is being recorded. [Operator Instructions] Please note, today's discussion will include forward-looking statements, which are based on current expectations and assumptions. Actual results may differ materially, and we encourage you to review our filings for more information on risks and uncertainties. With that, I'll now turn the call over to our CEO, Phil L’Huillier, to get us started. Over to you, Phil. Phillip L'Huillier: Thank you, Mary-Ann. Hello, everybody. Thank you for joining this Scancell update. Both myself and Sath will present this update to you this afternoon. This is our disclaimer. Here's a summary slide of the highlights for the interim period that we're summarizing. iSCIB1+ as a novel DNA active immunotherapy has shown and is showing best-in-class potential. It has the potential to redefine the standard of care in first-line unresectable melanoma, a really terrible condition. This is a significant unmet need and a large market opportunity, blockbuster opportunity as pharma calls it. And we're now at the stage of being registrational ready to move this product forward into a Phase III registrational study. iSCIB1+ has demonstrated progression-free survival of 74% at 16 months. That's a 24% delta over historic studies and real-world data that exists from recent studies. And it has the potential to really double standard of care progression-free survival as the study continues to read out with no potentiating toxicities. We have a strong clinical data package, a translational package also. And these packages illustrate to us that we understand well how our drug is working, and we understand mechanistically what's going on. And we understand why we're seeing long durable responses because we're seeing development of memory T cell responses in our patients and those T cell responses correlate to clinical response. This product and the platform that iSCIB1+ comes from ImmunoBody is really now a differentiated therapy. The platform is validated in the clinic with the recent data and the endorsement from the FDA earlier in the week. It overcomes some of the predecessor challenges that existed with these types of technologies. And we have clinical monotherapy efficacy data as well, which highlights the potential to move into earlier settings in melanoma, what we call neoadjuvant adjuvant setting. We're putting in place the commercial building blocks in parallel with advancing forward the development of the Phase III program. And we have a strong patent protection through to 2041 for the product. So the commercial proposition is really very positive. It's a large market opportunity, and we have protection in that market for a long period of time. Those that follow us closely will have seen we announced this week clearance from the FDA for our Phase III study. That was a very positive interaction we had with the FDA, and I'm delighted that we've got that clearance. There's really nothing standing in our way to move this forward in partnership or alone into the clinic and on our time line and on our plan, as we'll show you, we see the possibility to take this to commercialization in the second half of 2029. We've had a strong focus over the last couple of quarters on the lead program, the ImmunoBody platform and iSCIB1+, but we shouldn't forget the additional assets that make up our pipeline. Modi-1 is in the clinic in 2 studies in head and neck and renal cancer. And we also have the GlyMab's portfolio of antibodies at the preclinical stage, and we continue to progress forward those 2 parts of our pipeline. We also continue and have had good active conversations over the last quarter, evaluating partnering and financing options. As I've said previously, we deploy a two-pronged strategy, build to go it alone whilst be opportunistic for partnering, and we continue to work both of those fronts as we move forward to find the path to take our lead program into the clinic. This slide shows you our pipeline. That's a little more extended than some of the earlier versions we've had. You can see on the top there, the 2 clinical platforms, the ImmunoBody platform with the SCIB product, but also the modified platform with the Modi-1 product. And as I just mentioned, iSCIB1+, we selected that during the year to go forward into development for quite a number of really important reasons. And it's that product we want to take forward into the Phase III later in 2026. As I touched on alongside that, Modi-1 continues in the clinic in the 2 indications, head and neck and renal, and that program is progressing positively. We, of course, have 2 partnered assets, as you can see on the slide, further down here with Genmab. Two antibodies heading towards the clinic under Genmab's development. And those -- both of those programs are on track and an important validation of what we're doing in the antibody space, but also they are potential upsides for us, as Sath will come to. And then in-house, we have 2 programs that we're talking publicly about in the antibody portfolio, GlyMab Therapeutics, one in small cell lung cancer, SC134 and SC27 that could be used in various cancers. We are moving forward those 2 products also. Let me come back to iSCIB1+. It has the potential to redefine the standard of care. This slide shows you the market opportunity and the market potential here. On the left, we lay out some of the indicators of the substantial unmet need that still exists in advanced melanoma. It is the fifth largest cancer. Unfortunately, there are a lot of patients die from this disease and a lot of patients that receive current therapies, but relapse or are resistant and need something else pretty quickly. 5-year survival for late-stage melanoma is very, very low. Only 1/4 of the patients are still alive at 5 years. So a substantial unmet need. And I think we have a product here that will really make a dent in that unmet need. In the middle of the slide here, you can see the patient journey, but also the therapies that are being used or being evaluated as the patient progresses through the stages of melanoma. As you can probably see from this slide, we are down here in the blue box in the frontline advanced melanoma. That's where we're working at the moment. That's where the bulk of our data from the Phase II study comes from, and that's the focus of the Phase III. We know from our estimates of the market opportunity that, that market alone could be as much as $3 billion. On top of that, from our monotherapy data and from other work we've done, we know we also could go up to earlier disease, what we call the neoadjuvant or adjuvant therapy. And that's a real possibility to build out the value proposition in the future for the company. And that market opportunity is even more substantial in the range of $6 billion to $9 billion. So we're very much in blockbuster territory here. Over on the right hand of the slide, you can see the approved therapies. And below that, you can see the U.S. market and how the U.S. market is split for different types of therapies. The important takeaway from this slide -- this part of the slide is that 63% of patients in the U.S. receive still today the combination of ipilimumab and an anti-PD-1, most often nivolumab. And that's the combination of checkpoints that we are working with and that we'll add our iSCIB1+ onto in the Phase III. So even in the U.S., it is the dominant marketplace, let alone in the rest of the world. So a substantial market opportunity, and we have the potential to really create a new standard of care for advanced melanoma. This slide lays out the building blocks that we have put in place and we continue to build on to move forward towards a commercialization. We now have a product that we know is beneficial in the clinic and has an excellent safety profile. We have a protection, an IP protection out to 2041, a really long patent life here. The manufacturing is in place. It is a simple process off the shelf and it's scalable, and we have a long-term stability and the FDA have given us a good tick for our manufacturing process. We have in place a commercial agreement for a needle-free delivery device. This is our partnership with Pharmajet. That partnership includes development where we are at the moment, but also commercialization. We have had really good interaction with the regulators. The FDA clearance is, of course, the highlight this week of those, but we also have conversations going on with MHRA here in the U.K. and EMA in Europe. And then finally, we start to put our eyes on what does commercialization look like, how will we think about partnering and moving forward in a seamless way through registration and into commercialization. We have optionality there, and we start to really think about what that looks like. According to our study plan that we've laid out, we could be into commercialization in the second half of 2029. Just a reminder or an introduction for some of you, if you're new to us, of our iSCIB1+ product. It's a DNA ImmunoBody. It has a very novel mechanism of action. And you can see here that this is the product that's manufactured. It's a DNA molecule, a plasma DNA, we call it, delivered to patients with the needle-free device that I mentioned. It's in fact, a shot into each thigh and a shot into each arm, very quick, very convenient, pain-free for the patient. Scancell has developed 2 generations of this product over the last few years, a first gen that targets a restricted patient population and a second-gen product that targets a much broader patient population. And some of the learnings from the antibody work, as Lindy would say to you, have been applied to the second-generation product to improve its binding. So it's even better than the first-generation product. But importantly, it targets a much broader patient population. And our Phase II data told us which patients it works in. But also, we know it binds and it works better than the first-generation product. The product has epitopes to 2 proteins that come from melanoma from the production of melanin in the skin, epitopes to GP100 and TRP-2. Why are these relevant? Well, these were isolated from patients that have spontaneously recovered from melanoma. So that means the immune system sees them. But also from our translational work, our T cell work, we know that in most patients that they create an immune response to both of those proteins. And that's really important when you start to treat patients with this product because it makes it harder for the cancer to overcome the therapy and become resistant to the therapy because the T cells are working against both those products. So it's 2 shots rather than 1 to protect the patient, and that's really, really important. Our mechanism is a very novel one. The DNA molecule goes direct into muscle cells and is taken up, but it also alongside that, binds a receptor on immune cells, activated immune cells, dendritic cells, they call to stimulate a very potent T cell response. And that's an important part of the way it works and why we see such positive responses. I touched on before that we have some monotherapy activity from an early study that the company did. And monotherapy activity is really important in the pharma discussions that we have, but also that's doing the study in that setting helps us think about that earlier setting of the neoadjuvant adjuvant disease setting. But for now, we're developing the product in combination with the checkpoints. And that's what we want to take forward into the clinic in Phase III. There's quite a lot on this slide, but we've created this slide to illustrate why our iSCIB1+ and our ImmunoBody platform is differentiated from other therapies that have come before, but also why we believe in it for melanoma. So firstly, there is compelling science. Lindy and the team really developed a very compelling product with a very novel mechanism that when you compare it to predecessor products, it's overcome many of the weaknesses that were there. And basically, by creating these very strong high avidity T cells and targeting the 2 proteins, GP100 and TRP-2, we have overcome many of the challenges that led to products not progressing forward in earlier decades. This is also a nonpersonalized approach. It's scalable. It's cost effective. It's easy to manufacture, fast to patients and straightforward to deliver the patients. We have very good clinical validation now. I showed you the PFS data at the beginning. But I think the other thing to take on board now is we have a much better understanding of how to use the immune system to attack a cancer. And the combination of our therapy with the checkpoints is really an important part of success of our product, but products like this going forward. And that's learning over the last decades of testing different immunotherapies on the immune system. We've got the FDA clearance to move forward. We've also identified from our Phase II studies, a biomarker that we can use to enrich for responders as we go into the Phase III. This derisks that development. And then I've touched on the commercial opportunity, a substantial first commercial opportunity and even more substantial one to follow on in the neoadjuvant adjuvant, the resectable disease setting, and we have very good regulatory support to move forward with the study and to seek commercial approval second half of 2029, if the data stacks up in a positive way. This is the PFS curve. This is the data that I just mentioned at the beginning, iSCIB1+ showing you a progression-free survival at 16 months of 74%. You can see here when we overlay it with earlier older studies, that in this case, at 11.5 months, ipi and nivo alone show a median PFS that means 50% at 11.5 months. So we've got this big delta of 24%. Now let me just try to put that into a context for you. In the study that led to this -- the combination of ipi/nivo being -- becoming a blockbuster, at the same stage, the ipi/nivo combination was only 6% better than nivo alone. We are at 24%. So this is why we get excited about what we've got in front of us. Look at the difference in that delta. Now I have to caution that the ipi/nivo nivo comparison is from a single controlled study. And what I've done here is to compare across 2 studies. There's a bit of license there, but if you look at that delta, we're very excited about what's happening. And then -- so that's the clinical parameter. Clinical success is based on that progression-free survival. The commercial success really comes down to we make a difference to the overall survival. And at the moment, with the SCIB1 product, because we went into the clinic earlier, we've started to get data there, and we've got a 16% improvement for SCIB1 compared to that red line that I showed you. So the commercial proposition is also starting to build positively. And just to give you a comparison, some of you might have seen that Moderna published some data, 5-year follow-up recently. In their data, the risk of death was reduced in that study, and that's what they publicized. When I do that same calculation based on our data, we're actually at a similar order of magnitude. So we're tracking very well with the Moderna data that is published. But of course, remember, we're off the shelf. We don't have the high-cost logistics and the other challenges with our product. So I'm excited about this data as it builds both, as I say, for PFS, that's about the clinical impact, but also overall survival, that's about the commercial impact potential going forward. This is the indicative plan for the registrational study. It's a simple 2-arm study, as we call it. The control arm is the standard of care now, the ipi and nivo, and we put a placebo into that. And then the treatment arm is the ipi/nivo with our product, iSCIB1+ added on to that. The study will have about 230 patients per arm. So a substantial study that will be carried out across the U.K., Europe, the U.S., Australia and maybe some other locations. So a substantial study for us. And we have an initial readout as we go through the study, and that will be a registrational readout. But we also want to follow the patients for a longer period of time to do a post in-market follow-up on the survival of the patients. Down the bottom here, we've got a number of factors that we stratify the patients coming into the study for. So that means we just balance each side of the study with patients of particular types so that it's a balanced study. This is the design that the FDA have seen and -- let me just comment on how do we think about risk mitigation in a study like this. There is still risk there. That's the nature of what we do. But we believe we can really mitigate and are mitigating risk in the study design. First of all, we did a fairly substantial Phase II translational or exploratory study with 140 patients in it. It was designed to determine the parameters, the key parameters for the Phase III study, and it was successful. We've been able to identify those parameters. We use some of those parameters to give us a statistical model to design the Phase III study, but we've used a conservative delta on that design. So we feel comfortable about the delta that we're using for that design. We've also built in a piece that we call an adaptive design. So if we get through towards the end of the study and we see we, for example, might not quite have enough patients in there, then we've built in the ability to add some more patients to make sure we hit the end goal. And also then we've looked very hard at our patient characteristics. We often compare our data with that historic standard of care, as I was showing you earlier. Okay. So then you ask the question, how do our patient characteristics look compared to those patients from that study, CheckMate 067, but also alongside real-world studies that have been recently conducted. And we know our patient profiles are very similar. So in other words, we've not inadvertently or on purpose selected patients that are one type or another, and they are not directly comparable with those older studies. They are very, very comparable. And then as I've showed you previously, we've also looked at subgroups of patients where the benefit of particularly the checkpoints is less because of a particular condition of the patients. And we know when you add iSCIB1+ on top, that adds a benefit in all of those, I call them poor prognosis subgroups. So we've done a detailed analysis of our patient characteristics and feel really comfortable we're comparing like with like, and therefore, that helps us mitigate the risk going forward. In terms of market risk mitigation, it's worth recognizing that we have that study in metastatic disease, but we have the possibility of doing the neoadjuvant study also. And the neoadjuvant study is derisked because we've seen monotherapy activity in that setting previously. Of course, investor risk is also mitigated, I have to say, by the other components of our portfolio, the Modi program, but also the GlyMab's part of the portfolio. So I feel really comfortable that we have a design. It's been endorsed by the FDA, and we've really thought through how do we mitigate risk here to be successful in the outcome. Here's a summary of the regulatory conversations. Massive tick here on Monday or Friday, but Monday when we announced that we've got IND clearance. Getting IND clearance for a Phase III registrational study is a pretty rare beast, but it's an even rare beast as a U.K. biotech company. I'm really proud of what we did there. What it means in breakdown is the FDA have said, we accept your proposal for the dose and how you deliver the dose Scancell. We accept and we agree with the design of the study, the stats plan, the endpoints and all of those things. Your manufacturing process is satisfactory for this late stage of study. And then on other information and other studies, preclinical, nonclinical, other sorts of studies, they agreed that we had satisfied all of those criteria. They've granted us a safe to proceed and IND is open, and they've granted that with a surrogate primary endpoint. That's effectively granting us an accelerated approval in the one swipe of the pen. So it's a really big outcome for us and a really exciting time for us. As I touched on earlier, we progressed forward with the MHRA and EMA and other regulatory bodies because it will be a global study. Now with the IND under our belt, we are also moving forward with a breakthrough designation application and other regulatory applications and the CTA is near completion. CTA's clinical trial agreement, the next step down underneath the IND clearance that you need to move forward a study. So really strong progress on the regulatory front. This slide comes back -- this slide and the next slide are really where we start to think about what's the longer term look like, now with a validated ImmunoBody platform? We're able to start to think about what's beyond iSCIB1+ in advanced melanoma. So perhaps for the first time down the bottom of this slide, we've started to think about how else could we use this platform. And there are a lot of possibilities here. So this makes the market opportunity and the value potential of the company even more substantial going forward. I think we've probably shown SCIB2 before with the NY-ESO antigen. There are a number of others now we are in concept stage, I'll say, thinking about. I'm not going to disclose those antigens. We're in a world in the biotech industry where things get copied very quickly these days. And then if you look more broadly across the Scancell portfolio, my last slide, I think, but just to say to you, we have the iSCIB1+ program in melanoma, and there's multiple ways we can move that forward in multiple indications in the future this product could be taken into. But the ImmunoBody platform, iSCIB1+ -- iSCIBx has the potential to go into quite a number of other therapy areas. So a lot of potential in that platform. But on top of that, there's the Modi program, which is applicable to a broad range of solid tumors, and that has its own potential and is making good progress. And then, of course, there's the antibody portfolio where there are a number of products at various stages of preclinical development. So as a company, the potential currently is substantial, I think, but the future is even larger for us. Let me finish there and hand over to Sath to walk you through the financials. Sathijeevan Nirmalananthan: Thank you, Phil. I'm pleased to give you the key highlights from the interim financial results for the 6 months ended 31st of October 2025 before updating you on some key upcoming milestones this year. Starting with revenues. Whilst there were no revenues in the period, as previously highlighted, there is potential for near-term milestones from our partnered assets with Genmab. Development of those antibodies remain in progress. And based on recent updates from the company late last year, we anticipate further milestones this year. As a reminder, there are up to $630 million in further milestone payments with low single-digit royalties and commercial sales on each antibody license with Genmab. Research and development expenses were $6.2 million in the period. Research and development costs predominantly reflect our in-house clinical, manufacturing and research costs, where the majority of the spend is discretionary in nature. The reduction in the expense from the prior period primarily reflects lower manufacturing costs. We made additional investment in iSCIB1+ manufacturing in the prior period to ensure readiness for future stages of development. We have a robust, scalable manufacturing process for iSCIB1+ with a high-quality formulation and long-term stability. It has allowed us to move seamlessly through regulatory approval for late-stage development, the recent IND clearance being a mark of the team's diligent preparation and execution on this front. Administrative expenses were GBP 2.7 million with continued focus on cost control. The increase primarily noncash share-based payments following the last set of leadership appointments and share issues. This leaves our operating loss at GBP 8.9 million. We record a profit on finance and other income of GBP 2.1 million and recorded tax credit of GBP 1.1 million, resulting in a net loss for the year of GBP 5.7 million. Our cash of GBP 8.6 million at the end of October 2025 was enhanced by the timing receipt of the R&D tax credit of GBP 3 million. This leaves our cash runway in line with previous guidance as the second half of 2026 beyond key development milestones and with runway for ongoing partnering and finance discussions. We do have upside on this runway, too, namely the development milestones for SC129 anticipated this calendar year. Furthermore, the discretional nature of our spend allows us to take decisions if needed. We have good investor support too and remain confident of our near-term runway as we evaluate the right way to develop all of our assets. Next slide, please. Here are the key milestones for Scancell. We've made really strong progress over the last 18 months with solid execution from the team behind the scenes and on time, too. For iSCIB1+, we have already delivered U.S. IND clearance and we'll pursue U.S. Fast Track status on the back of this. Fast Track status has multiple benefits, including regular interactions with the U.S. FDA, which will favorably impact time lines and costs. In parallel, we are pursuing regulatory clearances in the U.K. and Europe, and we have already received some positive feedback in discussions so far. We continue to build our capabilities to execute development in-house while we assess the right way to finance the next stages of development. And on that, the recent IND clearance represents an important development milestone. It strengthens our development plans and discussions. And off the back, we are actively evaluating our options to ensure the right way forward with timely development and shareholder value in mind. In addition to the lead asset, we expect to report data on Modi-1 in the first half of this year, following which we will assess the right development path for that asset. Further, Genmab milestones, as I previously highlighted, are expected in the next -- in this calendar year. And finally, GlyMab Therapeutics, we continue our partnering and strategic discussions with the preclinical portfolio of antibodies targeting these novel glycans. This includes the most progressed antibody, SC134 for small cell lung cancer with -- which has a novel co-dosing approach, which we're quite excited about. We're also focusing on further antibody discovery in this space, too. So lots of upcoming milestones, and we remain confident of our ability to develop these assets and realize their true potential. Thank you for listening. I will now turn over to the operator for questions. Operator: [Operator Instructions] We'll take our first question from Julie Simmonds with Panmure Liberum. Julie Simmonds: Congratulations on all the good progress over the last few months. Initially, I was just wondering about -- you're talking about the sort of stratification of the patients in the iSCIB1+ Phase III. I was just wondering whether you have any idea whether you're expecting to see any geographical variation in that when you start bringing geography into the patient recruitment? Phillip L'Huillier: Julie, I'll take that one. Thank you for that question. We've looked very, very closely at the HLA types across geographical locations. So understand those details, which, as you know, our product works on that basis. And in the territories that I mentioned that we will go into in the Phase III study, I think we understand the patients from that perspective and don't anticipate major differences. Julie Simmonds: Excellent. That should simplify that. And then I was thinking you're currently applying for breakthrough designation for iSCIB1+ as well. From a sort of practical perspective, at what point do you think that might be likely to be received? And what difference does it make for you whilst the trial is ongoing? Phillip L'Huillier: It's a relatively fast process. It's kind of probably a 2- or 3-month process. So we should have an outcome on that fairly quickly. I'm a hostage to fortune now, but it's a relatively quick process. And what it means, as Sath mentioned, is that we'll be able to have more regular and ongoing dialogue with the FDA. And that's important as we go forward. You will have seen it over the last 18 months, the changing regulatory landscape out there with the FDA, but also elsewhere. So being able to have an active dialogue is important in this process as we move through this study. And I have to say the conversations to date that we've had over the last quarter with the FDA have been really collaborative and really positive. So I'm very pleased where we are with our interaction. But these other designations will help us have further interaction as we move through the Phase III study. Julie Simmonds: Excellent. And then just on the GlyMab program, you talked about a co-dosing approach for your sort of lead one there. Can you tell us a little bit more about that? Phillip L'Huillier: Yes. We have shared a little bit of data. I think I shared a little bit of data to tantalize everybody at the AGM on that, and we've now filed a patent over that approach. But Lindy and the team have identified an approach that uses a co-formulation of a code antibody and a T cell engager in combination and that has shown much greater efficacy. And also in at least our laboratory studies shows reduced toxicity. So what we could have in our hands here is a generally applicable approach to improve both the efficacy of this type of product, but also reduce the toxicity. And you'll know, Julie, that CRS toxicity is a feature of T cell engagers. So we're excited about this product and this new development and potentially have a best-in-class in small cell lung cancer on the back of this co-dosing approach. Operator: Our next question comes from the line of Edward Sham with Singer Capital Markets. Edward Sham: Congratulations on another great update. So I think my -- I've got 2 questions really. So congratulations on the IND clearance. And I'm just thinking whether that will change the quality of conversations you're having with potential partners for the Phase III? Phillip L'Huillier: Yes. Good question. Yes, absolutely. I think it's an important catalyst for both the conversations we're having with pharma and mid-caps, the strategics, but also with investors. And in both cases, it illustrates, I think, not only the quality of the product, but the quality of the data. And as Sath touched on, the quality of the team that executed this, we're executing with pace and with precision. So it makes a difference to all of those conversations, and it is, I think, a key catalyst for the next stage. Edward Sham: That's really helpful. And then just my next question, just really on as you wait for the funding for the Phase III, what preparation activities can you continue to progress? So for example, the CTA? Sathijeevan Nirmalananthan: Yes, absolutely. I'll take that one, Ed. Absolutely. We've got a decent runway, and we've got things planned that allows us to move as quickly as possible into Phase III development. The team are working diligently just to make sure that we're prepared and well planned as possible, subject to financing, of course, but we are making good steps so that we can start the study and build capabilities this year and start the study this year. Operator: As there are no further questions on the conference line, we will now address the written questions submitted via the webcast page. I will hand over to Mary-Ann Chang, Investor Relations to read this out. Mary-Ann Chang: Thank you. So we have a follow-up for you, Sath. This is from Frank Gregory at Trinity Delta. I have read and heard about your plans to explore partnering arrangement, but I guess this is directed to Sath as he used to be an analyst in former life. Why are you not thinking of going it alone more proactively? The scope data is very solid, and you can identify the patients likely to respond. We reckon the study around 500 patients. So the risks are containable and the funding doable. The arithmetic is quite compelling, go it alone until the interim data in and retained with so much more of the value. So Sath, those are his words. Over to you. Sathijeevan Nirmalananthan: Thank you, Frank. Thanks. It is an option, as Phil has highlighted, that we will actively consider. We are pursuing a dual track process. But Frank is right. The market potential, as we've highlighted, this has blockbuster potential. And so when we do the financial modeling and when we think about the value that this has, we have that go alone strategy firmly in our sight too, and it provides a nice proxy for conversations that we have on the partnering side. But it is something that we are actively evaluating. And the market potential and the sums that we have in mind for further development would make it compelling if we did decide to go alone as well. Mary-Ann Chang: Okay. So it's related to that, a similar question on financing, but from a different angle. So if we could just continue Sath. With your cash runway to H2 2026, could you please provide more commentary on options being explored, in particular, how you think about dilution risk? Sathijeevan Nirmalananthan: Sure. I think it's definitely something very topical. But as I want to give a strong confidence on our runway. We feel very confident with the assets and the milestones and the pipeline that we have. And we have optionality. We've got multiple assets and multiple ways to raise funds as well. We are in active conversations on the partnering side. And one of those is thinking about how to drive shareholder value, too. So when we think about the individual assets and how we can drive value and drive development of iSCIB1+ forward, we continuously evaluate what it means for shareholder value too. So that is something that we will take into consideration when we pick a path forward. Phillip L'Huillier: It's perhaps worth adding there, Sath. If you read between the lines with Frank's question, when he does the numbers on the potential upside of going it alone, it's less about, I think, dilution risk and more about retain value and grow value by going it alone. Sathijeevan Nirmalananthan: That's very true as well. I think the long-term potential, even if we did go alone, will definitely drive shareholder value. This is a blockbuster market, and we've got multiple assets. So a very good point, the long-term potential, whichever way we go, there's huge value to be gained here. Mary-Ann Chang: So going back to the data, Phil, there's a question about the chart that you showed. Forgive me if I missed it. Could you please explain why the PFS chart on Slide 10 is flat for iSCIB1+ versus standard of care? If you could just give a little bit more explanation there, please. Phillip L'Huillier: Well, that's a nice question. Thank you. It's flat because no patients are relapsing. So it's flat because all of the patients that are still on therapy are still getting a benefit from the therapy. So it just adds to our duration of response that these patients are on therapy, responding and remaining on therapy. It's very positive, unusual, too, but very positive for us. Mary-Ann Chang: Yes. And then related to that, another shareholder has asked looking out, could the results improve from here? So can you give a sort of an indication of should that -- where could that line be going? I think is the question. Phillip L'Huillier: Could the results improve even further? Yes, if you look at that PFS curve we were just talking about and it's flat, and you can see that as it's flat and the other red line is going down and down and down. So if our curve continues to stay flat or near flat, then the delta continues to grow. So it could become even more a greater delta. Mary-Ann Chang: Yes. Right. So the delta is the key to watch. Very good. Okay. We have another question on the Phase III trial. I understand the registration trial is to read out second half of 2029. Will there be any or even many updates during the trial? Or do we have to wait until the end, Michael Hart? Phillip L'Huillier: That's a very good question. By the nature of the design as a double-blinded study, as we call it, it means there are not data updates as you go through the study, like has been possible with, say, the Phase II study, where we do get data updates and we can share those. We won't even as a company, see results going through the Phase III study. It's double blinded. So that means we and the patients and the clinicians don't see the results as it progresses. And that's an important feature of the study because that feeds into the statistical power you have to analyze the results at the end. So it is a study that we take on board and then we execute that study. Where there will be readouts as we progress through that is things like our recruitment rate, our recruitment success because that then impacts on the time line. So I think that's the sort of milestones we will monitor is our recruitment, our execution of the study. I should also say there will be news flow also coming out of the company over this period of time from other components of the pipeline. If we start a neoadjuvant study, there will be news related to that study. That won't be a double-blinded closed study. So there will still be a lot of news coming from the company, but that Phase III registrational study is blinded for statistical reasons and for patient reasons. Mary-Ann Chang: Good. Question on SCIB1+ -- sorry, SCIB1 was granted FDA orphan drug status in the U.S. Does that automatically transfer to iSCIB1+? Or would you have to apply again for iSCIB1+? And if so, will it still meet qualification criteria given the expanded patient population? Phillip L'Huillier: That's a good question about orphan drug status. I'm not totally sure about the process of changing over from one product to the other. I think it possibly is a new application. But perhaps what's more important here is an orphan drug designation relates to a defined and small patient population. So whereas SCIB1 could get it because it just treated the A2 patients, about 30% of melanoma patients. Because iSCIB1+ works in 80% of the patient population, I think it's probably too big to get orphan drug designation. It's a good problem to have. We've got a large commercial opportunity now, which we may not get orphan drug designation for. But what's more important now is accelerated approval and breakthrough to move us forward to registration. Mary-Ann Chang: Good. Looking at the rest of the portfolio, there's a question if you can give more of an update on the rest of the portfolio. You've given some update, but any more detail you can add for either of the 2, Modi-1 or GlyMab? And in particular with GlyMab, there's a question on the progress in setting up the subsidiary status. Phillip L'Huillier: Yes, yes. Okay. Let me, first of all, take Modi-1 there from the modified platform. As we touched on through the presentation, it's in -- Modi-1 is in a Phase II program in the U.K. in head and neck and renal cell carcinoma kidney cancer. That study progresses well. We are progressing towards full recruitment, in fact, in that study. So recruitment has progressed nicely. We continue to follow up and monitor the patients. We're now looking for a PFS readout, which will happen over this quarter, this half year. And then that could well be a driver subject to that data to a potential licensing opportunity and non-diluting financing for the company. That's certainly how Sath and I think about the opportunity. So we're excited about the program and about the progress of the product, but we don't have sufficiently mature data yet to talk about it either here or quite yet to talk about it with pharma companies about working with us to take it forward. The second part of the portfolio and the second part of the question was around GlyMab Therapeutics. We have gone through the process of setting up the subsidiary entity, and we've done a lot of work around conversations with pharma, strategics as well as investors to join us in the journey to make a wholly owned subsidiary and then bring investment on to progress that portfolio forward. The -- we've had a lot of conversations, and we continue to have further conversations there, and it's something that we continue to progress to move both the portfolio forward, but also move forward the concept of creating the GlyMab Therapeutics entity and then putting in place the management and investment to move forward the portfolio. Mary-Ann Chang: All right. We have one more question that just came in. In today's RNS, you mentioned partnering the broader ImmunoBody platform. Could you explain a little more about this, please? Phillip L'Huillier: Yes. You will have seen as we went through the slides that what we've got in our hands now is a validated platform that really is very effective to treat late-stage cancers. And I wouldn't call it quite plug and play, but in fact, we are exploring at a concept stage, how else do we move this platform forward and what else can we apply it to. And there is possibility, I think, now because of the validation from the iSCIB1+ and the scope study to contemplate other products being developed with this platform. And those even at an early stage may tickle the fancy of pharma companies to come on board and collaborate with us in disease areas where they are focused. Mary-Ann Chang: Very good. Going back to -- Miles Dixon has come back. He asked about the Kaplan-Meier curve. And he's asking on this, just how unusual is it to have a completely flat curve for 10-plus weeks in these patients? What is the end number? Phillip L'Huillier: How unusual is it to have a completely flat curve? That's a hard one for me to answer. You do -- I have seen in many other studies, curves like we see here where there's a rapid decline initially because of comorbidities of patients at the early stage and then the curves typically flatten out, maybe not absolutely flat, but flatten out as they progress over time. So it's not unusual. In the context of a long-term study here, we need to be -- remember that what we're talking about here is we have 16 months data. So it's a short snapshot of data that we're looking at, at the moment relative to long-term benefit for patients over 3, 4, 5 years. But I am really delighted to see that once a patient goes on to therapy and responds, that response is very, very durable. Mary-Ann Chang: Very good. Good. We have one final question asking about liquidity. And given the conservative nature, the question says of U.K. fund managers, have you looked at a stock rotation on the U.S. market to broaden the shareholder base? Sathijeevan Nirmalananthan: Yes, we have. It is something that we've evaluated and I'd be quietly confident of our capabilities to be able to dual list, and it's something that we will continue to consider with development and access to capital in the U.S. and liquidity in mind. So I think the potential of a NASDAQ listing for pretty much all biotech is there for everyone to see. And it's something that we have actively considered and we have the capabilities to deliver. And if the time is right, we will definitely look to pursue that at the right stage in terms of a dual listing. But we're evaluating all our options at this stage, and we'll keep investors updated as we make decisions. Mary-Ann Chang: Very good. There are no further questions. So I'll hand back to Phil L’Huillier for closing remarks. Phillip L'Huillier: Good. Thank you, Mary-Ann. Today, my closing remark goes to acknowledge the team that put together the IND application. You'll remember those that follow us that during midyear or at the end of the summer, we said we're pivoting, going forward with the intramuscular approach, and we needed to get on with regulatory submission and planning for a study. A team put together 104 documents and submitted this to the FDA just before Christmas. They took a breath and waited over the Christmas, New Year period and into January to see how many questions would come back from the FDA on our 104 documents. There were, in fact, no questions back from the FDA. The FDA read all of that material and endorsed what we proposed as our study, back the data, back the manufacturing. It was a Herculean effort. I'm really proud of the team that did this, and it's now moved Scancell to a pretty special place for any company, let alone a U.K. biotech company. So my last word goes to the team in Scancell and our advisers that have got us the IND in pretty damn quick time. Thank you, everyone, for listening.
Operator: Welcome to the Liberty Energy Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Anjali Voria, Vice President of Investor Relations. Please go ahead. Anjali Voria: Thank you, Dave. Good morning, and welcome to the Liberty Energy Fourth Quarter 2025 and Full Year 2025 Earnings Conference Call. Joining us on the call are Ron Gusek, Chief Executive Officer; and Michael Stock, Chief Financial Officer. Before we begin, I would like to remind all participants that some of our comments today may include forward-looking statements reflecting the company's view about future prospects, revenues, expenses or profits. These matters involve risks and uncertainties that could cause actual results to differ materially from our forward-looking statements. These statements reflect the company's beliefs based on current conditions that are subject to certain risks and uncertainties that are detailed in our earnings release and other public filings. Our comments today also include non-GAAP financial and operational measures. These non-GAAP measures, including EBITDA, adjusted EBITDA, adjusted net income, adjusted net income per diluted share, adjusted pretax return on capital employed and cash return on capital invested are not a substitute for GAAP measures and may not be comparable to similar measures of other companies. A reconciliation of net income to EBITDA and adjusted EBITDA, net income to adjusted net income and adjusted net income per diluted share and the calculation of adjusted pretax return on capital employed and cash return on capital invested as discussed on the call are available on our Investor Relations website. I will now turn the call over to Ron. Ron Gusek: Good morning, everyone. And thank you for joining us to discuss our full year and fourth quarter 2025 operational and financial results. Liberty's strong fourth quarter results capped a year marked by heightened oil market uncertainty and softer industry completions activity. Our team's focus on technological innovation and strong operational execution drove superior performance and a resilient CROCI of 13% in a volatile year. We delivered revenue of $4 billion, adjusted EBITDA of $634 million and a return of capital of $77 million from cash dividends and early year share buybacks, all while investing for growth and long-term value creation. We strengthened our customer relationships by expanding our simulfrac offering with strategic dedicated customers and delivered meaningful efficiencies, leveraging Liberty developed AI-driven asset optimization software and our digiTechnologies transition, we reduced total maintenance cost per unit of work by approximately 14%. Concurrently, we built the LPI execution platform for earnings growth with strategic partnerships and targeted investments. We have been strong commercial traction, capitalizing on the revolutionary transformation of power supply and delivering that is redefining the energy landscape. We are at the forefront of a seismic shift in how data centers and other large loads are sourcing power. On-site generation has emerged as the preferred long-term energy strategy for large consumers of power due to evolving in grid dynamics and market pressures. Our robust power execution platform is built upon 15 years of industry-leading experience in the design manufactured, engineering and operation of complex industrial scale assets, leveraging our broad North American geographic footprint, expansive supply chain and AI-enhanced operations and maintenance systems. Our comprehensive power solution is designed to address our customers' top priorities, rapid, scalable deployment with uninterrupted operations and predictable power costs. LPI's Power-as-a-Service offering underpinned by the Forte generation platform, Tempo power quality management system and our midstream services delivers resilience, economic efficiency and operational flexibility. Our core solution could further unlock power cost advantages through grid integration while also transforming our customers into active contributors to grid reliability for local communities. LPI's distributed power solutions are a strategic cornerstone of resilient future-proof energy planning for our customers. Earlier this year, we announced an agreement with Vantage Data Centers to develop and deliver at least 1 gigawatt of utility-scale high-efficiency power solutions, supporting the energization of Vantage data center projects for hyperscale end users. The agreement is anchored by a firm reservation of 400 megawatts delivered during 2027 with a contracted payment structure that aligns with the expected returns under an ESA with end users. This agreement creates a collaborative framework to accelerate the deployment of power solutions for Vantage's Data Centers, preserving flexible execution to meet customer needs across a broad portfolio of data center sites. We also entered into a power reservation and preliminary ESA with another leading data center developer for a 330-megawatt data center expansion in Texas. The project is currently expected to begin operations in 2 phases, with the first half online in Q4 2027 and the second half in Q2 2028. The agreement defines the economic terms of the expected ESA as well as the construction schedule, cost recovery and termination payment provisions in the event the final agreement is not executed. Our project portfolio is both deep and diverse, which reflects the breadth of the LPI distributed power solution. We are working with clients that want a pure behind-the-meter solution for the life of their project, clients that want to interconnect the project to the grid as soon as possible and all flavors in between. LPI is one of the only companies that can scale effectively between 100 megawatts to multi-gigawatt power plants and have the geographic footprint to own and operate generation across North America. Our projects will be developed using LPI's Forte modular standardized construction approach, designed to derisk project execution and will include the Tempo power quality system to manage the high-amplitude, cyclical load variations of AI workloads. These customers could also benefit from the core solution with a potential grid integration, optimizing power costs and providing access to grid attributes that they value. As we enter the new year, Liberty's premier completions business and rapidly scaling power infrastructure platform position the company to lead through market cycles and capitalize on power growth potential. During 2025, we strengthened our core oil field service operations while aggressively expanding our reach into the growing power market. U.S. power demand is rising at the fastest pace in decades. The convergence of AI-driven data center expansion, the onshoring of domestic manufacturing and increasing industrial electrification has created structural demand growth for power. Under investment in grid infrastructure, transmission constraints and evolving commercial realities and utility reforms, driven in part by public concerns have catalyzed broader market recognition of the inherent strategic value of distributed power solutions. Against this backdrop, data center demand for power is projected to grow threefold by 2030 and already long interconnection queues continue to lengthen, highlighting the urgent need for flexible, scalable capacity to meet rapidly evolving energy requirements. LPI is well positioned to support this call, providing power consumers with predictable long-term power prices. Our platform is designed to be economically competitive with today's grid prices at our targeted returns and is increasingly advantaged as grid power prices rise overtime. Within North American oil and gas markets, conditions have now stabilized after a protracted period of softening activity as the industry has largely adjusted to last year's OPEC+ supply concerns, and tariff-related volatility. Fourth quarter completions activity defied normal seasonal sequential declines, surpassing expectations. Completions demand is projected to hold firm in 2026. North American producers are responding to global oil and gas dynamics with flat oil production targets and modest growth in gas-directed activity. Global oil markets are currently balancing a structural oil surplus, elevated geopolitical risk and an OPEC+ production pause, keeping oil prices largely range bound. Natural gas markets are supported by significant expansion in LNG export capacity and multiyear growth in power consumption. Industry fundamentals are expected to improve over time as supply side dynamics gradually rebalance with completions demand. Recent pricing pressures on completion services, combined with the slowdown in activity have driven an acceleration in equipment cannibalization and attrition, while underinvestment in next generation technology has limited the replacement of lost capacity. As the market recalibrated at the start of the year, fewer crews are available to meet any incremental completions demand. E&Ps remain focused on harnessing efficiency gains and engineering solutions to lower the total cost per unit of energy, driving the bar higher for technologically superior services and operational success to achieve these results. Few service providers are positioned to meet the increasing demand for multi-frac jobs, 24-hour continuous operations and AI-optimized automation and real-time operational transparency that enhances completions execution and data-driven decision-making. This ongoing flight to quality is fundamentally reinforcing Liberty's market leadership as producers rely on our total service platform, seamlessly aligning our integrated services to deliver a superior service and drive relative outperformance. This quarter, we launched Atlas and Atlas IQ, a unified technology platform that transforms real-time data into actionable insights, enabling faster decision-making and improved operational efficiency for both our customers and Liberty's operations. Atlas is a cloud-based completions data platform that automatically deploys with every Liberty crew, delivering subsecond operational equipment and performance data without requiring additional customer infrastructure. By consolidating live and historical field data, documents and automated reporting into a single secure portal, Atlas gives customers immediate visibility into their operations. Atlas IQ extends this capability with an AI-powered assistant that enables natural language queries across operational data and technical knowledge,, delivering fast context-aware insights while keeping all data private within Liberty's environment. Together, these platforms enhance data visualization, improved decision-making and enable both Liberty teams and customers to respond more effectively in a dynamic operating environment. Liberty has evolved from a premier North American completions company into a diversified energy technology and power infrastructure platform. We invested in our technology and culture, while growing our oilfield market share and developing LPI. This proactive stance has left us well positioned to capitalize on the dual tailwinds of a potential completions inflection and the generational surge in U.S. power demand. Our differentiated power execution platform and a robust pipeline of power projects position us to capture structural growth in power demand. We now plan to deploy approximately 3 gigawatts of power projects by 2029 to deliver sustained long-duration earnings and high returns for our investors. Our first quarter is expected to reflect the full realization of pricing headwinds and winter weather disruption to drive lower sequential revenue and adjusted EBITDA. While the precise timing of a broader oil market recovery remains uncertain, we are anticipating stabilization in completions markets, significant demand for our digiTechnologies platform at improved economics and a powerful growth engine with AI and cloud data center power demand. We are focused on driving value creation, prioritizing long-term returns with our industry-leading completions business and our Power growth platform. Our success is fueled by the combination of cutting-edge technology, a dedicated workforce and strategic partners across the energy ecosystem, powering innovation today to shape the future of the industry. I will now turn the call over to Michael to discuss our financial results and outlook. Michael Stock: Good morning, everyone. I'd like to begin by first echoing Ron's sentiments. Congratulations to the entire Liberty team for navigating such a volatile year with strong results. We drove this achievement by delivering operational and safety records quarter after quarter, leveraging our vertical integration to deliver superior service and capture a larger part of our customers' spend and advancing our industry-leading AI enhanced digital solutions to not only optimize our performance but also provide customers with enhanced visibility into our operations. New technologies and AI-driven software development are making a fundamental difference in driving margin enhancement and differentiating our service offering to customers. As we look ahead, we're using the full resources of the Liberty platform to drive success in our distributed power solutions business. LPI's durable competitive advantages are built upon our differential culture and exceptional people and are structured to deliver strong cash returns from disciplined organic investments in technology and equipment over the long term. Our most recent announcements with 2 leading data center developers represent important milestones in our journey. These contracts reflect the strength of our strategy of investing in differential technology and assets that provide sustainable long-term commercial advantages. Engineering sophisticated power quality systems to meet complex and evolving load requirements and unlocking price optimization through opportunities through grid participation. Over the next 3 years, we have a variety of projects within our pipeline that we expect to execute with underpinning our goal of monetizing 3 gigawatts of power by 2029. These projects are expected to carry the same economics we have discussed in the past, approximating a high teens unlevered returns profile with long duration ESAs. Let's turn to our earnings results. For the full year, revenue was $4 billion compared to $4.3 billion in 2024. Net income totaled $148 million, and adjusted net income was $25 million, excluding $123 million of tax-effected gains on investments. Fully diluted net income per share was $0.89. Adjusted net income per fully diluted share was $0.15, and full year adjusted EBITDA was $634 million compared to $922 million in the prior year. In the fourth quarter of 2025, revenue was $1 billion, representing a sequential increase of 10% driven by activity levels that meaningfully exceeded the industry. Fourth quarter net income of $14 million compared to $43 million in the prior quarter, adjusted net income of $8 million compared to a loss of $10 million in the prior quarter and excludes $6 million of tax-affected gains on investments. Fully diluted net income per share in the fourth quarter was $0.08 compared to $0.26 in the prior quarter, and adjusted net income per diluted share was $0.05 compared to a loss of $0.06 in the prior quarter. Fourth quarter adjusted EBITDA was $158 million, increasing from $128 million in the prior quarter. General and administrative expenses totaled $65 million in the fourth quarter, compared to $58 million in the prior quarter and included noncash stock-based compensation of $6 million. Excluding stock-based compensation, G&A increased $6 million primarily due to higher variable compensation costs associated with better-than-expected full year financial results. Other than expense items totaling $3 million for the quarter, inclusive of $7 million of gains on investments, offset by interest expense approximately $10 million. Fourth quarter tax expense was $3 million, approximately 20% pretax income. We expect the tax expense rate in 2026 to be approximately 25% of pretax income and do not expect to pay material cash taxes in the year. We ended the year with a cash balance of $28 million and net debt of $219 million. Net debt increased by $49 million from the prior year. In 2025, cash flows were used to fund capital expenditures, $53 million in cash dividends and $24 million in share buybacks. Total liquidity at the end of the year, including availability under the credit facility, was $281 million. Net capital expenditures and long-term deposits were $203 million in the fourth quarter and $571 million for the full year, which included investments in digiFleets, capitalized maintenance spending, LPI infrastructure, power generation and other projects. Fourth quarter capital expenditures included $79 million in deposits for long lead time power generation equipment. In 2025, we returned $77 million to shareholders primarily through quarterly cash dividends and modest share repurchases in the first quarter. We also invested $15 million in acquisitions and monetized $151 million of investments. Looking forward in 2029, we anticipate revenue will be approximately flat year-over-year, as we expect higher fleet utilization will be offset by industry-driven pricing headwinds. We anticipate increased development and overhead costs for the expansion of our LPI, distributed power solutions business of approximately $15 million to $20 million. Together, these will drive lower adjusted EBITDA year-over-year. Over time, we expect frac fleet supply attrition as demand will tighten markets, driving an opportunity for price improvement. We also anticipate strong contribution from the distributed power solutions projects in the coming years. Our completions capital expenditure moderated in 2026 to approximately $250 million, including $175 million in maintenance capital expenditures. The remaining related to the approximately 3 to 4 digiFleets we intend to build. We continue to see strong demand for our digi offering and investment is further underscored by superior economic profile from lower maintenance costs related to other fleet technologies. Looking at our Power business, we expect to take delivery of approximately 500 megawatts of power generation equipment to 2026. Our capital expenditures are expected to be split between approximately $275 million to $350 million in long lead time deposits and approximately $450 million to $550 million of project-related expenditures. The latter of which are expected to be funded by project financing as we discussed on our last earnings call. The LPI distributed power solutions business inherently carries a longer duration time horizon with multiyear execution cycle for projects and long-duration earnings profile. We have a diverse portfolio of projects in our pipeline and an execution plan that position us to reach 3 gigawatts deployed plants by 2029. These opportunities are at different stages of the development cycle from early planning and design to near-term ESA execution. The technical solutions we've engineered and the strong partnerships across developers, hyperscalers and OEMs position us well to achieve these targets. Our capital is focused on investments to create lasting competitive advantages. We continue to reinforce our leadership in completions while building a differentiated power business with diverse end markets, less cyclicality in targeting strong long-term returns. By combining advanced technology, strong partnerships and advantaged assets, we are creating an enduring business for decades to come and aiming to be the partner of choice for all of our customers. We are excited for the years ahead. I will now turn it back to the operator for Q&A, after which Ron will have some closing comments at the end of the call. Operator: [Operator Instructions] our first question comes from Stephen Gengaro with Stifel. Stephen Gengaro: 2 questions for me. I think first, Ron, Last quarter, you talked about the pipeline of opportunities and how it has significantly strengthened over the prior 3-month period. Can you talk a little bit, I mean, given your comments about expanding the 3 gigawatts and what you're seeing in the market commercially right now? Ron Gusek: Yes. I'll add some comments and maybe Michael will have some to add on after me. But I would say, we seen a continued trend in what we saw over even the middle months of last year, which was this idea that rather than co-located behind-the-meter power being a bridge idea, a transition towards co-located behind-the-meter power representing the best solution for long-term power provision at a data center site. They've recognized that not only does it check the boxes you continue to hear about like speed to market and concerns around grid stability and public concerns around the -- what it's going to mean for the price of power, but also from a commercial standpoint, recognize that if you're looking for surety of power price over the long term, we have the best ability to provide that with a co-located behind-the-meter solution. And then we can, of course, layer on top of that, the potential attributes that come with any grid interaction should that be of interest to them. So we have that commercial strategy available to them. to leverage the grid to the extent it makes sense. As that snowball has continued to roll down hill and get bigger and bigger and bigger, the interest in having partners like Liberty alongside you for power provision has just gotten greater and greater and greater. What you've seen then as a result of that is some real urgency to lock up power to have surety of that supply, and you've seen that in these 2 most recent agreements we've announced, first with Vantage and then with this subsequent data center fabricator that they wanted to be able to guarantee to their end use customer. We have the power. We can show that to you. We know where it's coming from and we've got it locked up with a reliable partner. That continues to gain momentum. And as a result, the gigawatts we had talked about can -- I would say, continue to get firmer and firmer and firmer and the opportunity set has gotten larger and larger and larger. Michael, anything to add there? Michael Stock: No, I'd say -- I just would reiterate what Ron said. I mean for the large tech companies, their business growth and what is going to change the world is driven off the surety of being able to expand their data center volume and AI growth. And the key about that is having surety of when you can bring these billions of capital to bear and organizing that supply chain. As you've seen with sort of the investments from the Big 6 go deep into their supply chain. And the key -- one of the key factors of that is surety of power and surety of time when that compute can come online because there is a long supply chain that they have to organize to make sure that happens. And we provide that security and that is valuable to the Big 6. Stephen Gengaro: And then the follow-up was just -- I know that your initial investments are in recip -- recips. And when you think about the expansion to 3 gigawatts and maybe also like what -- does the customer have a preference. So how do you -- do you see your mix evolving into the customers care? Or are they just really focused on securing power? Ron Gusek: I would say a couple of things to that, Stephen. First of all, we can absolutely achieve that 3 gigawatts entirely with recip in our supply chain today. We've got line of sight to that as we sit here right now. So absolutely confident we could do that. To the extent it made sense to have turbines as a part of that mix for a particular project. That's absolutely a possibility as well. If you think specific to the technology, and this is something we've certainly talked about in the past. The value of recips is really inherent in a couple of factors. Number one, efficiency of capital deployment. When you think about the plus [ N+ equation ] for achieving the sort of reliability that data center providers desire on their site, that's very efficiently achieved with a modular approach using gas recips. Layered on top of that is the heat rate or efficiency of that asset, and we've talked about that as well. If you think about the platform of gas recips that we're going to use the -- first of all, the high-speed smaller, more modular engines, 2.5 and 4.3 megawatts, but then layered on top of that, these larger medium-speed assets. You're talking about an asset that has a -- particularly in the case of the medium-speed engines, a heat rate that's competitive with many of the earlier generation combined cycle plants think '90s through 2010 time frame in a simple cycle environment and under challenging operating conditions, not far off of even modern combined cycle plants today. So you have a very, very efficient asset in terms of converting natural gas into electricity, meaning a very, very competitive power price, not just today, but tomorrow and well into the future. So I think from that standpoint, operators recognize the value that gas recip brings to the table. Again, not to say there won't be turbines in our world down the road. But at this point in time, I would say our focus remains gas recip as the technology of choice for deployment. Michael Stock: And I think that is recognized by our customers, Stephen. The construct to the gas recip, which probably a year ago was more unfamiliar to the power teams that were being built inside the Big 6. Now there is a lot of familiarity about the efficiency of the N+ equation and the inherent benefits of the execution and the ability of putting those to work. And I think that is a key factor. If you think about the fact that we will use 1/3 less fuel than a simple cycle turbine. Just when you -- we think about the emissions profile, it is significant. So therefore, we believe that we have a -- we are having the right technical solution for our clients. Very like when we built -- started building and electrifying our digital assets, digiFrac assets. We did this -- we did -- we looked at all of the technologies, we're technology-agnostic company, and we are a team that is based around an engineering -- excellent engineering leadership that focuses on what is the right solution, not the easy button. Operator: The next question comes from Keith MacKey with RBC Capital Markets. Keith MacKey: Just wondering if you can comment on the delivery of equipments, where you are in the process there with respect to delivery packaging and ultimately, what underpins your confidence in being able to meet the time lines for the upcoming deals that you've got to commit to? Michael Stock: Yes, Keith, I'll take a lot of that. In reality, we've spent a lot of the last 6 months developing -- expanding our deep relationships with our supply chain. And when you think about it, we always had very, very strong relationships in the high-speed arena with the Jenbacher and Caterpillar, and we've expanded those relationships to all of the large medium-speed engine manufacturers. And we have been -- we spent some time in Europe. We spent a lot of time on their factories, their factory floors with their production planning and have shored up the delivery schedules out as far as through the end of '29 in some cases, for the ability to execute on these long lead projects for our customers. When you think about it, these projects are going to start with initial implementations and it is much more capital efficient, cost-efficient and better to expand a data center -- in an existing current data center than it is to build greenfield. So as we build these initial campuses, those campuses will continue to expand right through the 2030S to hit the compute levels that are being demanded by our ultimate end users. Keith MacKey: Okay. And just 1 more question, if I could. So 3 gigawatts by 2029. Can you just comment on will that likely be more deals with multiple customers? Or the existing deals you've announced will likely have some potential add-on capacity through time? Ron Gusek: It will be a combination of both of those, Keith. We certainly expect that with our current customers, those will be growing opportunities together as we continue you to expand those, not only starting initial facilities, but additional facilities beyond that. And certainly, we expect to add additional customers in that mix as well. We've got ongoing conversations with a number of different partners in that space. So expect to have a number of legs on that stool, ultimately down the road. Operator: And the next question comes from Marc Bianchi with TD Cowen. Marc Bianchi: I guess maybe, Michael, this is probably 1 for you. So if I heard you right, it sounded like you talked about $1 billion worth of spending for 2026 and maybe half of that is covered by project finance. Do you anticipate the other half to be funded through free cash flow? And maybe you could talk a little bit more precisely about how you're thinking about EBITDA for '26? Michael Stock: So Marc, the -- while I talked -- I split the spending into a long lead time deposits and specific project spending that we funded by project finance. Those long lead time deposits are really for long-lead ton generation that as soon as that generation is assigned to a project, that will then move into the project financing roll. That is all being sourced, package, manufactured engineered through our Liberty Advanced Equipment Technologies group, which is a registered manufacturer and purchasing company. That will eventually be sold to the project companies and then there will be project financing -- structural funding at the project level that will support that spend. So you see, I would expect to see those deposits that I've talked about for the year '26 actually move into project financing runs within the majority of that within that year. So there will be a movement between those 2 categories. But I wanted to give you kind of a split on that. So there will be more project finance capability that is given by those numbers. The rest of the spending, we believe that we will easily handle with very, very fortress-like balance sheet that we have now and our ability to fund that through free cash flow and debt availability. Marc Bianchi: Okay. And how should we think about the level of EBITDA? I mean, I think if I sort of read back what I heard, revenue is flat in '26, higher utilization, offset by pricing, EBITDA down, but just any steer on sort of the magnitude there? Things were quite strong in 4Q, so you're starting from a nice level? Michael Stock: Right. Yes, I think 4Q was an anomaly. We had the visibility, we had almost the opposite effect of the seasonal swing. We had, I think, what was some people finishing our programs that they had may be delayed from the beginning part of the year due to economic uncertainty and geopolitical worries. So that was -- I think I would look at somewhat of that bounce up in Q4 as a bit of an anomaly. And so yes, so the EBITDA will be down, which is, as you would imagine is, but virtually all driven by the completions [ business ], as EBITDA will start to kick in for the power business in a significant way in '27. Ron Gusek: Marc, I would say just -- I'll just add a little more color to that and maybe a few things to keep in your mind about this year. I would say we probably got pricing off low to mid-single digits as rough order of magnitude to give you some sense of how that will impact us on the EBITDA line. And then I would also keep in mind that whether we've also had a pretty meaningful weather event already this year. We -- over the course of this past weekend prioritize safety for our crews and the subcontractors that work with us out in the field. Obviously, road conditions very, very challenging in Texas and Louisiana. And as a result, through close communication with our customers, made appropriate decisions around activity levels out in the field, that probably impacted close to 2/3 of our capacity. The majority of the equipment operating in Texas and Louisiana, over a period of maybe as long as 5 days. Probably a bit early to tell exactly what the true impact of that is going to be, but it was a meaningful event for sure. Operator: Next question comes from Jeff LeBlanc with TPH. Jeffrey LeBlanc: I believe in the past, you've mentioned that LPI intends to help their hyperscaler partners secure the fuel source. And I want to make sure this is still the case. And if so, has there been a greater urgency from your partners on securing these agreements as demand continues to increase. Does it make the LPI platform more attractive to your customers? Ron Gusek: Jeff, I think you described it perfectly. Certainly, just like in our completions business, we aim to building an LPI a business that really is a full-service business, power-as-a-service from beginning to end. And so that includes, of course, the midstream side of things. We've got a very capable team under Richard Bradsby that is absolutely capable of going out and making arrangements for interconnect pipeline. We can interact on behalf of the customer with respect to natural gas and the supply of that. We're not going to take on any risk in that regard. But we absolutely have the capability and expertise to play a significant role in that. And I would say, it's one of the things that makes us a very, very valuable partner in this space is not only that midstream capability, but all of the other pieces of the puzzle we bring to the table. I think you've heard from us that we've been very thoughtful around the construction of that business and the capabilities that we have built within it beyond the midstream side of things, the commercial interaction with the grid, the packaging capabilities, the engineering solutions around power quality services, all of these things are assets that we think differentiate us from somebody who might be able to bring generation to the table. Operator: And the next question comes from Josh Silverstein with UBS. Joshua Silverstein: So you mentioned that you have confidence in getting the 3 gigawatts delivered -- or sorry, deployed in 2029. Can you just talk about how this additional 2 gigawatts may change from a cost regular -- relative to the first gigawatt? Or is there additional cost because of the tightness in the market or similar economics to what you were paying before? Ron Gusek: No, I would say you wouldn't -- you shouldn't expect meaningful change in economics at all. One of the great things about having strong partners on the supply chain side, a strong relationship with those counterparties that we're doing business with is that those relationships don't change. And we are not -- we're not finding ourselves in a position where the wins of the market are impacting our ability to procure the equipment we need at costs in line with our expectations. And so we've suggested in the past about $1 million a megawatt of the generation as a nice round number. And then maybe $1.5 million, $1.6 million, depending on complexity of the load case for all-in with balance of plant. And at this point in time, I would tell you that our expectations around those costs have not changed. Joshua Silverstein: Got it. And then when you're having discussions with data centers or other operators, are they still interested in signing these 10-, 15-year agreements? Or is there some sort of out that they're trying to get and maybe 5- to 10-year window, assuming that there's going to be an improvement in grid connectivity then? Ron Gusek: No, definitely not. I would say, if anything, the pendulum swinging the other way with more openness to the idea of distributed, co- located, behind the meter power is the right long-term answer. I think we've been able to demonstrate and the market has recognized over the last 12 months that this solution is the better long-term solution for a whole host of reasons, reliability, economics, the commercial optionality that the grid brings, addressing public concerns around cost of energy and the list goes on. So I would say that the willingness to enter into a 15-year ESA with a distributed power generation company like Liberty is absolutely getting greater and greater and greater. My guess is that you're going to see how we think about power systems evolve over the coming years with the recognition that distributed power is going to play a much, much bigger role in our world, that we're going to build these data centers, as Michael alluded to, they will continue to expand. But that in the event the grid arrives, we are not going to be there as backup but actually is the primary supply for the data center and then additional resilience for the grid. I think we can bring a story to the community that says we are a benefit to that community and their cost of power over the long term, not a detriment as a presence there. Michael Stock: Let me give us just a little bit of color to Ron's comments there as well, I think you have to remember the underlying economics that drive everything in the industry. We are bringing a solution to bear that provides power at grid parity now. That grid parity has a much lower -- that power has a much lower inflationary component because the vast majority of the variable cost is related to natural gas. And the estimation of the inflation rate of gas over the next years 15 years compared to the estimation of grid power prices over the next 15 years are very, very different. Gas prices will range -- relatively range-bound. Grid power prices, everybody expects to increase significantly because we are rebuilding a 50-year-old transmission system, and that is going to be passed along either directly to the large loads or as part of a general upgrade to the system. So we are grid parity now with -- and 5, 10, 15 years from now, we're going to be significantly lower than the grid price, right? Now we can, with our Coras system and the team that we're building there that we have built there provide you integration with grid, if there are other attributes that you wish to take advantage of or the ability to actually bring your sort of peak power price down by taking where there is oscillations where there is cheap power available, we're providing you a machine heat [ rate ] guarantee, and we will never go above this power price. But if the power price in certain parts of the day or certain seasons, where it's very sunny in the winds blowing all the time, and therefore, there's a little bit of excess kind of that renewable power. We can buy that power when we are grid integrated and bring down your costs significantly below the grid on average pricing. So we have a solution that works economically for the next 15 years, and that is what's driving our customers. They are incredibly, incredibly financially focused business people, and we bring them an economically winning solution. Operator: And the next question comes from Derek Podhaizer with Piper Sandler. Derek Podhaizer: Just wanted to get your take on the supply side for power generation assets. Obviously, it feels like every day, we're hearing a number of OEMs entering this recip and turbine space, talk about converting and repurposing older jet engines to power data centers. So obviously, this creates a bit of an oversupply concern that's emerging in the market. but it really sounds like you're creating this integrated power services infrastructure solution to defend this moat. Just could you help us understand a bit more about -- we hear about all the supply potentially coming into the market, but what makes it different for you guys in building that moat and why you really should -- we shouldn't have any concerns as far as this excess or flood of supply or the perception of that supply coming into the market? Ron Gusek: Thanks for the question, Derek. Of course, it's not as straightforward as just bringing supply to the table. If you think about the complexity of the load and the other components that have to be brought to bear to be successful in the power generation space, particularly for a data center. It's a lot more than showing up with a used turbine repurposed to run generation. I think we have talked about all the components that we have built into the LPI platform. And I think a real testament to the success we've had there and the belief that people have in that are these recent deals that we have announced. Vantage has vetted the LPI platform, the capabilities we bring to the table that range from the midstream capabilities, the packaging and supply chain capabilities, our power quality systems and the technology that we will deploy there. And with respect to that technology, the specificity of that with regards to the type of load that we are going to be addressing the grid interaction capabilities that Michael just spent some time talking about and our commercial optionality there. As you bring -- as you think about that entire portfolio of services really our LPI Power-as-a-Service platform, that stands far apart from somebody who could bring a gray market turbine to the table and some generation attached to that. As a result, I think we remain extremely confident in our space in the market and our ability to continue to grow this business despite the fact that you're going to see abundant supply there. I'd argue that's beneficial maybe from a time line standpoint that will potentially enable us to get these projects across the finish line quicker rather than worrying about a stretched out supply chain, that maybe adds a little bit of flexibility there. But in terms of displacing LPI and our place in that market, absolutely not. Michael Stock: Yes. I think the only thing that it will do, when you think by the time you take a gray market turbine and refurbish it to 0 hours, you're really not talking much difference in total costs, from the brand new version of it. And then obviously, that -- all that does is actually speed up the supply time line from the delays of expanding the turbine factories themselves. So that really just changes that. And the only thing that they will do with our partners and our ability to put generation into multiple sources of generation into our power solutions group will just enable us to speed our growth rather than slow it down. Derek Podhaizer: Right. No, that makes sense. That's is very helpful color. And I mean, clearly, recreating the integrated solutions that you've done in frac, in the power side and the position that you've been able to build with frac. So it's exciting to see. I guess on the follow-up side, sticking with the [ Power 3 ]. Maybe just talk about M&A, not necessarily from buying power generation assets. But as far as supporting Forte, Tempo, Coras, this is -- these are the clear pillars to your integration strategy. What could we potentially see from Liberty, whether it's bolt-on tuck-in to support the build-out of this integrated solution? Michael Stock: I think I'll take this as well. As you know, we're organic builders, right? That is our focus. We will develop partnerships where we've got very, very close partnerships. But very much along as we've built the frac business, look to us to add technology or things over time that make sense that really that increase our vertical stack and increase our technological heft. So as we add things like that, those are the key things that will be small additions where they bring and they expand and they fit nicely within the puzzle that we have built. Ron Gusek: We've always been thoughtful about making sure we understand the things that are -- have significant implications in terms of our ability to execute. So if you think about on the oilfield services side, we recognize that in the transition of natural gas, we had to control the CNG supply that when we transition to an electric fleet, we wanted to control power generation, that we've recognized we had to have some manufacturing capability in-house, that it made sense to have some sand production capabilities to support our business. We find those things that are key inputs critical to our success. And those are the things you should expect us to focus on to the extent those show themselves on the power generation side. Michael Stock: Key long lead items that you can make sure that you have access that allows you to derisk execution are also valuable to us. Operator: And the next question comes from Dan Kutz with Morgan Stanley. Daniel Kutz: Ron, I just wanted to put a finer point on the pricing comment that you shared earlier, I think you said that, frac was down maybe in the low single digit, mid-single-digit range. And I was just wondering if you could share what the time frame was for that comment, whether it was kind of like a year-over-year or expected in 1Q or kind of cumulative in 4Q through 1Q, just so we can think about how much of those kind of pricing decrementals we should flow through our estimates for 2026? Ron Gusek: Dan, I think you want to think about that as really relative to the second half of '25. The pricing that we're going to see in '26 is really a reflection of RFP season, that's taking place against a second half '25 backdrop as we're going through that. In some cases, in Q3, some of that stretching out into Q4. But that's really the time frame against which you want to measure that going forward. Daniel Kutz: Understood. And then -- go ahead. Ron Gusek: No, sorry, go ahead. Daniel Kutz: And then maybe just on the improved utilization comment in 2026. I guess just ballpark, should we think about normal incrementals on the higher utilization? And maybe if you could kind of unpack some of the good drivers in a little bit more detail, whether it's just fleet demand resilience versus further increases in horsepower per fleet from more final frac and continuous frac? Or if a big factor is the kind of like the quality that you flagged and the associated Liberty market share gains? Ron Gusek: Yes, that's a very good question. And to your point, there is a lot to -- there are a lot of pieces of the puzzle there that are moving, in some cases, counter to one another, in some cases, supportive of one another. I would say that in terms of utilization, it's probably fair to think about that from a normal incremental standpoint. But there are some puts and takes to that. We continue to be asked for that drive towards continuous pumping. And so that remains a very specific goal for some of our customers, and we are working hard alongside of them to plot a path to accomplishing that outcome. As you noted, intensity continues to climb and fleets continue to get larger. As you think about an environment, I'll can out the Western Haynesville as an example. That will be the deepest, highest-pressure work we do, I think, anywhere in North America and will require the largest amount of horsepower on any given location that we would have any place. So as we continue to see people -- operators trend into those sorts of environments. Our fleets are going to continue to get bigger. The amount of intensity on the well site going to continue to climb. Alongside of that, we'll continue to push for that 24-hour a day, 7-day a week pumping environment that will be offset to the extent we can manage it by efficiencies that we gain in our operations through the use of AI. We've alluded to some of the savings that have come through the implementation of our software platform, but that's meant from a maintenance standpoint. And in parallel with that, the deployment of the digiTechnologies and the impact -- the positive impact that they have had from an operations standpoint. So there's a lot of things moving there, and as a result, probably makes it a little difficult to get to exactly the puts and takes, but you're thinking about all of the right variables in the math. Operator: And the next question comes from Eddie Kim with Barclays. Edward Kim: I just wanted to ask about the end markets for your power generation equipment. In the past, you've talked about commercial and industrial and potentially even deploying equipment for Permian micro grids. But at this point in time, is it fair to say the vast majority of the 2 gigawatts incremental 2 gigawatts you plan to deploy by 2029 are likely all -- most, if not all, going to be deployed for data center operators? Or just curious on your thoughts on the end markets for your power gen equipment. Ron Gusek: I would certainly say, Eddie, that relative to my comments on this call last year, where I said I thought we'd probably be primarily C&I opportunities, maybe some oil field electrification as the largest slice of the pie ultimately growing into data centers. The reverse is true today. Certainly, the large percentage of the assets that we will deploy projects that we will take on will be in the data center space. But we are absolutely still pursuing a number of C&I opportunities. There still continues to be this desire to electrify operations in the oilfield and we are at the table for a number of those conversations as well. So I don't want to suggest that those have gone away by any stretch of the imagination. But to your point, they will represent the smaller piece of the pie relative to the data center opportunities in front of us. Edward Kim: Understood. Understood. That makes sense. And then shifting over to pricing. In the past, you've talked about for some kind of the longer-term opportunities, like, say, 10 or 15 years maybe a 5, 6 year payback on the upfront cost of the equipment was appropriate. Is that still your expectation? Or have your thoughts on pricing and payback changed at all? Ron Gusek: No, no changes there at all. I think we still believe that a 5 to 6 year payback is very, very reasonable that we should expect unlevered returns in the high teens. So no changes from what we've guided to in the past. Operator: And the next question comes from Caitlin Donohue with Goldman Sachs. Caitlin Donohue: Can you provide some color on what you're seeing in the market in terms of different size megawatt units as a packaging solution for your customers. I know we've been seeing some of these units come in at 2.5 and 5.5 megawatt units, but there's the possibility of 10 megawatt units coming into the market over time. What is the customer interest in this? And how do you see Liberty potentially offering this over the longer term? Ron Gusek: You're going to see a mix of both of those technologies in our world for sure. We absolutely have a good amount of the smaller high-speed gas engines, the 2.5 and 4.3-megawatt assets that will be a part of our world. The wonderful advantage to those assets is that as a high-speed asset, they're very, very responsive to load dynamics and so they can play a very, very important role in a complex load use situation. They also remove a lot of the EPC risk on location, in that we prepackage those assets. So they come into the Liberty Advanced Equipment Technologies group. We're packaging those up. And that results in relatively minimal construction required on location. They show up in a container. We do a little bit of interconnection work with the central control facility, some plumbing and wiring and whatnot, and you have a power plant ready to go. You transition to that larger medium-speed asset in the 10 to 12 megawatt range. You get some inherent advantages there in that. You have a large, stable platform, a lot of rotating inertia there and incredible efficiencies. You're talking about an asset with a heat rate that's probably sub-7,000, not exactly in line with modern combined cycle but very, very close to modern combined cycle for a fraction of the cost. And so to the point Michael was making earlier around the economics of our power generation, effectively the efficiency of the conversion from natural gas into electricity and the reduced emissions footprint that comes with that efficient conversion. These large assets play an important role in that. You can expect to see on these larger installations, I think the gigawatt type scale campuses, power hauls, 200-megawatt blocks of these large medium-speed engines that are going to be a key piece of that. Depending on the end use case potentially paired with some amount of smaller high-speed engines and then, of course, our power quality system to go along with that to deliver that load. But both of those technologies critical to the path forward, and you're going to see both of them play a very, very important role in Liberty's supply chain and execution going forward. Caitlin Donohue: That makes sense. And then just 1 last quick one on, in terms of that 3 gigawatt number deployment by 2029, is there a cadence that we should be looking for in terms of that deployment over the next few years? Or can we expect it to be a little bit more lumpy as contracts or signed over time? Michael Stock: Yes. As far as -- contracts are signed over time, but it will accelerate from now through to the end of '28 with the and service. That's the way you should think about it. The contract -- you'll hear the contract amounts when the contract announcements are made, but really, that will be defined by the accelerating speed of our supply chain and then our ability to install those in the field. Obviously, when we talk about that 3 gigawatts by 2029, given the time frame of our shipments arriving, you take you take ownership in Europe, you've got to ship them to the U.S., you've got to move them to side. We will have -- it's not like we are stopping in 2029. So 2029 will continue to accelerate beyond there. We've just had our '29 announcement. Operator: I will now turn it back to Ron for closing remarks. Ron Gusek: I received an unexpected letter this past Friday. It was from a woman named Nancy, and it came to me through a bit of mistaken identity. As it turns out, the local utility provider where Nancy lives in Massachusetts is also called Liberty and she was writing to the CEO of Liberty to express her concerns with the cost of heating their home. We've since sent the letter off to the correct Liberty with the hope that they will address her concerns. But in her letter, she raises an important issue that I want to close with today. Nancy wrote that she and her husband are in their 70s and living on social security, she went on to say that last month, their gas bill was $226, of which $68 was the gas and $158 was the delivery charge. This month's bill was $319, of which $102 was the gas and $217 was the delivery charge. She pointed out that the delivery charge is more than 2x the cost of the gas and wanted to know why. One in 3 American households today experiences energy poverty or the inability to access sufficient amounts of electricity and other energy sources due to financial constraints. And yet, States like Massachusetts continue to settle their residents with additional financial burden in the pursuit of net zero targets and other similar energy initiatives, a program called Mass Save in this case which is an integral part of the state's plan to become carbon neutral by 2050. The cost of this program is carried by the rate payers, people like Nancy and her husband through a fee added on to their cost of delivery for natural gas. People in Massachusetts have seen their gas bills climb by as much as 20% or out $60 this month in Nancy's case directly because of this program. Net zero policies raise energy costs for American families and businesses, threaten the reliability of our energy system and undermine energy and national security. They have also achieved precious little in reducing global greenhouse gas emissions. The fact is that energy matters. It's what keeps people alive on weekends like this past one, putting families in a position where they are forced to choose between a comfortable or even safe indoor temperature and putting food on the table is simply unacceptable. And state mandates like Mass Save are only amplifying this issue. Liberty turns 15 this year. I am incredibly proud of the Liberty team for the significant contributions we've made over those years to enable and advance, the shale revolution, a step change in U.S. energy supply that ensures abundant, affordable, reliable energy for families like Nancy and her husband. I am equally energized by the opportunities ahead to carry on this important work, continuing to grow our core oilfield service this business while also expanding our new and growing LPI business to provide the necessary power for growing data center demand, helping ensure American families also have abundant, affordable and reliable electricity to meet their daily needs without hardship. Thank you, everyone, for joining us today. Operator: This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Per Brilioth: Okay. Welcome, everyone our Q4 call, the VNV Global Q4 call. So welcome to this call. I'm Per. I'm joined by Bjorn and Dennis, my colleagues, who'll walk you through the results, what's going on in the portfolio, touch upon a few of the holdings. And there is -- so we'll walk through the presentation and then there will be Q&A afterwards. We -- so if you want to ask a question, please use the Zoom Q&A sort of function. This is the same as we've done in previous calls. So I think it's self-explanatory. So let's kick things off. And first numbers. I pass the microphone to my colleague, Bjorn. Björn von Sivers: Thank you, Per. If you can move to the next slide, we'll start with that. So as per year-end 2025, VNV Global's NAV stood that $547 million or roughly $4.25 per share, down 5.9% in USD during the quarter. In SEK terms, NAV is SEK 5 billion or roughly SEK 39.1 per share, down 8% over the quarter. For the 12 months period, NAV in USD terms is down 4.2% and down close to 20% in SEK terms. If you come to the next slide, Per, we go into sort of the simplified balance sheet here. And so we have a total investment portfolio that amounts to $589 million, consisting of investments of $537 million and cash and cash equivalents of $51 million. Borrowings at year-end '25 totaled $46.6 million following the partial redemption of the outstanding bond earlier in the quarter. We continue to trade at a material discount to NAV as per share close yesterday, January 28, at 19.9%. We're trading at sort of implied 49% discount NAV. During this quarter, we've continued to repurchase shares that we started in Q3. And as per year-end, company holds close to 2.4 million common shares, representing approximately 1.8% of the outstanding common shares. And the fair value change during the quarter is a per usual, primarily driven by the movements across the largest holdings in the portfolio. And if we move to the next slide, I'll quickly just go through the main drivers here before we jump in to a more broader view of latest developments and the key portfolio holdings. So starting from the top, we have BlaBlaCar, which has -- this quarter is valued at $164 million for our stake based on the same sort of model as per previous quarter, down 11% or roughly $20 million in the quarter, primarily driven by lower peer multiples. Second, we have Voi valued at $127 million for VNV's stake, down roughly 7% or $10 million during the quarter. Numan, third largest holding valued base -- still valued based on the latest transaction at $37 million, so flat over the quarter. HousingAnywhere also valued at $37 million based on EV sales model, relatively flat during the quarter. And then sort of final 6 of the largest holding Breadfast also valued based on the latest transaction in the company. We also have a Bokadirekt at model-based valuation, which is relatively flat during the quarter. All in all, these 6 companies represent close to SEK 30 per share in aggregate or 80% of the NAV. Finally sort of just a brief comment on the cash and cash equivalents. We ended Q4 with $55 million in cash following an eventful quarter in terms of cash movements. The primary inflows during the quarter were the final closing proceeds from the Gett transaction and also closing proceeds from the Tise exit, which we previously announced, and main outflow again, was the partial bond redemption where we sort of cut outstanding debt in half. With that, I'll leave it back to Per, who will start and continue walking through the latest developments and the key holdings. Per Brilioth: Thanks, Bjorn. Yes, the portfolio is sort of similar to what you've seen in prior quarters over the course of '25. BlaBla and Voi sort of nearly 50% of the portfolio. And yes, the -- it's -- I know we marked the NAV downwards this quarter to the order of -- it is 6% in dollar terms. And it's -- and as Bjorn walked you through, this is technical. Sort of we do our valuation models, we look at peer groups in the listed world. Much of this sort of downtick is due to that these peers are down, but the actual companies, these big companies in our portfolio and the small ones are really doing well. And so it's -- the quarter-to-quarter movements don't necessarily sort of correspond to sort of the progression of the companies, which is sort of performance-wise revenues and EBITDA is doing really well. And also sort of how they're positioned in this sort of volatile world we live in with new sort of softwares, AI, et cetera. I think the portfolios are really robust, whereas, in other sectors, software, et cetera, it's kind of scary what's going on. But here, for example, what's going on in the much sort of focused on AI world, these companies will benefit from all those sort of new products and new AI sort of apps, et cetera. So I think that's an important starting point. We obviously trade at this discount. It was 49% we're down today, so it's a higher discount. And we think our NAV -- the NAV, these green bars, will deliver substantial returns annually over -- for the coming years. So we can't really find anything better to do than to buy our own stock. If we can buy that NAV at a 50% discount, 50%-plus discount, it's the best use of shareholder cash. And we have -- Bjorn gave you some numbers. Over the course of the second half of last year since we sold, we got the Gett cash and went to net cash, we have been buying back stock, and we'll continue to do this. We have a bunch of gross cash. We still have some debt outstanding. And that leaves a little net cash, but we also have progression of some further exits in the portfolio. So we intend to sort of work, operate, execute in accordance what markets tell us and that is to sort of sell at NAV and buy the stock. I think it's $170 million that we have exited over the past 2 years have all been around NAV. And the transactions that we sort of look at concluding going forward are also around that level. So that's where deals happen, and our stock trades at half that, we're very focused on it. And so spent some time in writing up this report and sort of trying to discuss, if you will, the reasons why this discount is there. I sort of thought that net debt was part of the reason, and I guess it's not because we're in net cash, and there's still that the discount is persistent. It's not that the portfolio creates a lot of cash. Sort of just shy of 80% of it is EBITDA positive in this number. We have Voi at EBIT positive, well, obviously, because they own and depreciate these assets. If you use their EBITDA figure, it's -- this 76% of course goes up, of course. The decline here a little bit is predominantly driven by that Gett is sold over this past year. So we're -- the portfolio is doing well. It's not craving cash. And in fact, it's not only profitable, it's also -- there's still growth. This shows the growth of the 6 largest holdings. And we've seen that growth sort of accelerating over the course of the year that we're now closing, so 40%. We see growth sort of continuing in '26, maybe to the order of like 30% and earnings at this -- at the bottom level here, gone from a negative in '23 to positive now, and one that we see growing much, much faster than revenues in the coming years. I think Dennis helped put together some numbers. And if you look at the '26 earnings, you are looking at -- and just using our share of these 6 companies, so these 6 companies, during the course of 2025, generated about SEK 1 billion in revenues. And so our share of that is like SEK 150 million. And if you take that into '26, the way we see sort of earnings growing, I think you got -- if you compare our market cap to our percentage of these guys' earnings, you're looking at a price to EBITDA of, call it, just above [ 20% ]. And how earnings is growing over the next year, you're looking at, in '27, our market cap, again, to the same sort of earnings -- our percentage earnings of these 6 companies getting down to levels of [ 10% ]. And that's then using the market cap and comparing it to the performance of these 6 companies. If you -- and that's assuming everything else is at 0. And everything else is very far from 0. Here is a bunch of the companies that show up in that are the part of the portfolio Flo. I think all of you know, it's the world's largest peer tracker, OURA. I'm sure many people on this call use OURA Rings. Ovoko is Europe's fastest-growing marketplace for used car parts. Yuv in the hair coloring space is doing fantastically well, growing fast, no traffic. Company predominantly selling their product within traffic control in the U.S. Tise actually just sold at above our NAV. It's the Vinted of Norway, was recently sold to eBay. Just to give you a sense that outside of these 6 companies, there's a lot of stuff going on in our portfolio. And as we've talked about before, I sort of say that in this other part of the portfolio, we have the next BlaBla, the next Voi that, in a few years' time when maybe BlaBla and Voi are exited, you have one of these companies will have taken their place and become one of the bigger parts of our portfolio. And in fact, just to go back to that NAV and us trading at this NAV sort of our NAV, we try to keep it conservative. Our auditors tell us that we should -- it should be fair. It should be correct, should be the true market value. If we are wrong, we'd like to be wrong that we're a little bit conservative. And I think these are 3 examples of late where Tise was sold for $11 million to us, we had it at [ 6.6 ]. Yuv raised money at equivalent of [ 4.7 ]. We had it [ 2.8 ]. And Yuv was done around the mark and OURA was done way, way above our mark. So sort of high-level intro to what's going on at large at VNV. So just to take you through BlaBlaCar, where there's not that much new to talk about. I think most of you know BlaBlaCar well by now. It's been many years in our portfolio. It's a marketplace for long-distance traffic where supply comes from -- predominantly from cars, but also bus and train operators offering seats into a marketplace where -- which has a very large and very fragmented demand side on the other side. It's a European business. Every little green dot here is BlaBlaCar on route on the car. So you see it's very, very active marketplace in Europe, but the fastest-growing countries for this company right now, it's in emerging markets where India has overtook France last year to become the largest market in terms of passengers and that's not yet monetized. And in fact, over the course of this year, one of the things that we are really eager to see the company perform, and we're confident that they will sort of execute on, is to monetize emerging markets, which they have in other parts of the world, but we see first up Brazil, where they've been at it for a long time, monetization is now starting to become well underway after they've spent some time on testing different sort of routes to monetize. Not every market is France. France is, of course, heavily monetized and very profitable. Brazil, they have sort of tested some new products and found the right one and now getting going in earnest with that. And then India, Mexico are to follow. But -- and in Europe, which is really profitable and not as fast-growing market as those emerging markets, there's still a potential to growth as the company sort of really improves the product to pick up the sort of the big demand that's out there when they offer a point-to-point solution in this sort of long distance sort of travel. So it's not only going from a big central station in Paris to big central station in Lyon or Madrid, for example, but this company actually offers a route from a small city like [indiscernible] to a small city like [indiscernible] where, today, you need to sort of take -- or outside of BlaBlaCar, rather, you need to take a train to [indiscernible] or bus to [indiscernible], take a train to Paris, change station in Paris, train to [indiscernible], bus to [indiscernible], which takes 6 hours and costs a lot of money. So the alternative in BlaBla trip is much more comfortable. It's door-to-door, it's faster, it's much, much cheaper. So as the product sort of starts to sort of cater even more to this sort of door-to-door kind of concept, we think there's also growth to be had out of places like France, which has been more sort of a profit center than a growth center of late. And just summing up, we're the second largest shareholder of this company now 14%. I mean that's not changed since we last spoke. And yes, we're very, very keen on this upside. I think, for the course of this year, monetization in emerging markets will be a very, very interesting thing to follow. But also beyond that, just generally from the sort of volatile year of '23, very, very sort of profitable and then '24 with the sort of the ceasing of these green revenues that they had in France, they're now on a very sort of stable footing and are profitable in earnest, and we see that those profits really sort of growing well into the coming years. So really, really keen to see this company now having just normal times and being able to grow in their -- in all their markets, but -- and especially in emerging markets and also monetize those, which will be obviously driver for revenues. And then a lot of that money, not to say all that money falls down to the bottom line. So those are few words on BlaBla. I'll hand over to Dennis to walk us through Voi. Dennis Mohammad: Thank you, Per. As we've highlighted in previous calls, Voi has had a very strong 2025, with net revenue growth in the 30% range and margin expansion across the board. On the back of this, VNV has written up its value in Voi by over 25% during the year, taking it from around 15% of the VNV portfolio to more than 22% of our portfolio this quarter. So given that performance and its increasing importance for VNV, we thought it made sense to do a bit of a deeper dive on Voi on this call. Starting with the basics, which I assume most of you are aware of, Voi is a leading European micromobility company. They operate both shared e-scooters and shared e-bikes in more than 110 cities in 12 countries. Whilst the hardware is the most visible part of the business, as you can see on the left most side of this slide, Voi is fundamentally a vertically integrated hardware, software and operations platform working as one system. On the software side, Voi has invested heavily in everything from machine learning for fleet optimization to ensure that supply and demand are matched in each city at any given point in time, to inventory and fleet tracking, the rider app that users see, but also the various types of data products for cities in the locations where Voi operates. On the operations side, Voi manages the full vehicle life cycle from sourcing and designing of the hardware to predictive maintenance and fleet management and ultimately, resale. To date, Voi has resold more than 60,000 vehicles when upgrading to newer models has made more economic sense than continuing to operate, which shows you how far this business model has come from where it started back in 2018. All of this makes this a highly complex industry and company, I believe, with meaningful barriers to entry. And it really strongly favors to operators that have invested in technology and operational excellence to drive down cost per ride, a metric we are fairly certain Voi is leading on in this industry. If you go to the next slide, Per, and apologies in advance for a slightly wordy slide, but I'll walk you through the highlights. Today, Voi has a highly diversified revenue base with over 100 cash-generating cities. The largest city accounts for only 8% of revenues. And we were often asked, I'm often asked what happens if Voi were to lose a major tender in cities such as Oslo or London or Paris. And the answer is really that the downside is quite limited here. The portfolio is diversified, as I said, and the fleet would just be reallocated to cities where they can continue to generate revenue, perhaps at a slightly lower pace in the beginning, but that is a very key component to the fact that it's a very kind of diversified portfolio of cities. Voi also has a very loyal and growing rider base with active users up more than 33% in 2025, highlighting that penetration remains very early in many European cities. And I'll show you a slide on that just after this one. Voi also holds the highest regulated market share in Europe at around 30%. And close to 80% of its revenues actually come from these regulated markets where competition is limited and unit economics are structurally more attractive. And then I think this is one part of why Voi has managed to achieve this margin expansion that we've seen over the course of the past 12 to 24 months. On hardware, Voi is now operating its ninth generation vehicle with roughly 1-year payback periods and an asset lifetime that exceeds 10 years. Also that a big improvement versus the first models that we saw in 2018. And during 2025, Voi scaled its e-bike offering quite meaningfully with further expansion planned also now in 2026. The benefit with e-bikes is that it not only diversifies the fleet, but it also broadens the user base and significantly expands the addressable market for Voi. You have more users willing to use the service. And over time, we expect additional vehicle types to be available on the platform as well. Finally, on this slide, Voi has industry-leading safety performance. On average, a rider will need to travel around 6 laps around the globe on Voi before being involved in a serious L2+ accident. And as a food for thought here, I think safety remains a core focus for Voi, but city infrastructure and car prevalence are also critical factors in that equation. If we go to the next slide, Per, as I alluded to before, what we're seeing here is the share of city population that are monthly and/or yearly active riders with Voi in a number of cities, but also for the top 50 European cities that Voi is active in. And as you can see, even in Voi's strongest cities, penetration remains quite low. In places like Stockholm and Oslo, more than 60% of the population remains untapped. And in larger cities such as Berlin, that runway is close to 90%. Voi has around 1 million retained monthly active users today, while more than 150 million people are aware of the brand and over 600 million people live in Europe. And I think this highlights how early the journey still is and how much growth there is to come from just growing user base. As mentioned earlier, Voi grew monthly active riders by 33% in 2025 with essentially no marketing spend, making this a highly efficient acquisition engine as well, and this is a metric we expect to continue to drive growth going forward. Going to the next slide and turning to this quarter or the fourth quarter of 2025. We've written down our stake in Voi by 7%. And -- while peer multiples have been volatile with mixed movements across the group and actually a net positive impact from the [ median ] multiple. VNV has essentially taken a more conservative view on the near-term LTM EBITDA forecast for 2026. This essentially reflects increased investments in mega cities such as London and Paris, which carry lower margins initially, but are likely to become the largest contributors to both revenues, but also profitability over time. Another thing worth highlighting here is that Voi is also investing in its first refurbishment hub in Poland, which expands vehicle lifetimes, improves unit economics and increases control over the supply chain, all positive long-term initiatives, but also part of explaining why we're taking down the EBITDA forecast in 2026. For the [indiscernible], however, we expect positive adjusted EBITDA and adjusted EBIT in 2026 with expanding margin versus 2025, but this will not be a year of steady-state margins. Instead it will be a year of continued investment within healthy positive margins, but prioritizing growth at the right price over short-term margin maximization, all of which we believe will drive long-term value for Voi. If we go to the final slide, this is actually not new from when we last looked at it in Q3. This shows Q3 LTM figures. And we -- as I said, we also did that in our last call as Voi actually reported ahead of us. This quarter, they're reporting after us, so Voi will release its Q4 results in February. So we encourage you to follow that on their IR site. But in essence, you're looking at growth in the 30% range with significant market expansion across the board. That was it on Voi. If we move to the next slide, we're seeing HousingAnywhere, which is the leading platform for medium-term accommodation rentals, typically 3 to 9 months in Europe. Over the past year housing -- past years, sorry, HousingAnywhere has grown roughly 20% per year and has been adjusted EBITDA positive since 2024. During 2025, at the beginning of the year, we updated the management team and instated a new CEO, Antonio Intini. Antonio brings tons of experience in the real estate and tech sector, having served both as Chief Business Development Officer at Immobiliare, which is Italy's leading housing platform, and several years at Amazon before that. During the year, we've also spent time and resources on updating the company's long-term strategy, where VNV, through me, have supported operationally as well. And as part of this work, HousingAnywhere is expected to complete a new funding round in the near term to finance its updated management plan, expected to close during this quarter or the first quarter of 2026. VNV is committed to invest around EUR 1 million in this round. And in the fourth quarter of 2025, since that was already decided, we have reflected -- we've adjusted the carrying value of HousingAnywhere to reflect that transaction, which is done at a small premium to our NAV. If we go to the last slide on my end, that is Numan, which is a digital health platform for specialized health in the U.K. As we've talked about in the past, this company has seen massive growth in its weight loss vertical from GLP products -- sorry GLP-1 products in the past couple of years. And it's expected to close 2025 with triple-digit growth on revenues and positive EBITDA despite increasing volatility in this market following Eli Lilly's price increases in the third quarter of 2025. This marks the second consecutive year with over 100% growth on top line and positive EBITDA for Numan. We also note that our sector colleague, Kinnevik, made an investment into this broader space, different business model, different company called Oviva, but definitely shows the interest in weight loss market in the U.K. In this fourth quarter, we value our stake in Numan on the back of a transaction that took place during the summer of 2025, where Numan raised both equity and debt to the order of around $60 million. So for that reason, the valuation is essentially flat in Q4 of 2025. That's it on my end. Handing it over to my colleague, Bjorn, to speak about Breadfast. Björn von Sivers: Thank you. A few quick words on Breadfast here, which we value at $30 million for the VNV stake based on the capital raising they have done during 2025. The company has been doing really well and accelerating growth during the year, ending the year with sort of a run rate GMV of around $290 million. And again, as a reminder, Breadfast is online grocery, quick commerce business based in Egypt. Primary market is Cairo, where they're currently expanding their footprint across the city with a lot of new fulfillment points. And importantly, while also sort of sustaining healthy contribution margins. We're super excited about this company, and I think they will have, hopefully, a stellar 2026. And if we move to the next slide, I'll also mention a few words on Bokadirekt, the SaaS beauty marketplace out of Sweden, a dominant player in the market, also a company that's doing well. Stable growth, 2025 looking to close short of just shy of SEK 200 million in net revenue with EBITDA of SEK 50 million. So in absolute terms, sort of still on the smaller side, but really solid business, which we think sort of have both potential to continue sort of stable double-digit top line growth, while improving margins, not maybe to the sort of full classifieds type level, but definitely increasing it compared to where they are today. And with that, I think we're sort of through the sixth largest holding, and I believe it's time to open up for Q&A. Björn von Sivers: As Per mentioned, and sort of if you want to ask a question, please type it in sort of in the chat or Q&A function here in Zoom, and we'll try to address them. And the sort of, I think, 2 BlaBlaCar related questions to kick off with. We already received this one, is there any new information on these energy saving certificates that we've discussed historically that were there and that's moved -- got away. And then also is BlaBla -- sort of more general question on the BlaBla product. Is this more focused on national users in their different markets? Or is it also sort of a visitor/tourist element to the product? Per Brilioth: Okay. Thanks. I'll take those. So yes, the energy saving certificates in France for transportation is gone for now. So the French government opted to sort of tax the energy -- heavy energy users rather than sort of let the market sort out. Trying to get the heavy users sort of reducing energy and the ultimate sort of goal of this. So in France, it's not present at the moment. It may come back, but we don't know. I think it will need sort of more stable sort of politics and sort of budgetary processes. Having said that, it's been started in Spain a few year ago and it's really growing fast in Spain, and it's -- the Spanish government thinks it's the best things in [indiscernible]. So it's like really popular across the board there and starting to contribute meaningfully. It's not yet meaningfully to sort of BlaBla revenues, but most importantly, to earnings because this is obviously very higher-margin revenue for the company. It's not yet to sort of the very high levels that we saw in France in 2023 when there was the base sort of -- the base level of these energy savings certificates, but in '23, they also had a booster on it. So Spain is still below that, but still a very good contributor and take a few years and be at the French level, but that's a very positive. And then we'll see what happens in France going forward, but it's not present for now. And the BlaBlaCar, yes, it's mostly sort of local, national, sort of going to visit parents or going to work, university, et cetera, inside the countries, but there's also a fair bit of cross-border stuff also for inside Europe for work purposes, but also for, we'll call it, tourists, that use it to go from Amsterdam to Paris, et cetera, when -- as it's -- again, using it for the same sort of reasons that sort of locals use it. It's cheap and it's also point-to-point. Björn von Sivers: And then I think we have a Voi-related question. You referred to a potential listing of Voi also sort of on the back of a potential IPO of its competitor. Why not move ahead and become the first and leading one? Better to be first than second. What's holding you back or Voi back in this case, I guess? Per Brilioth: Yes. Voi is not in need of equity funding right now. And so from a company perspective, it doesn't have to do this. And if Lime were to IPO or when Lime IPOs, I guess maybe it's more fair to say because there's been a lot of talk and they seem to be heading in that direction. And that IPO sort of establishes a certain sort of attractive cost of equity capital for the industry, then, in my view, I think that accelerates Voi's path to also being listed. But sort of putting that aside, I think sort of the timetable in my perspective for Voi is more to provide liquidity to shareholders who need liquidity, that being a reason from do a listing. That's more something that maybe happens in 2027. So -- but things could change on the back of a Lime IPO. Björn von Sivers: Thank you. And then we have 2 questions sort of around the discount and buybacks. So the question is, discount is persisting, we've done sort of relatively modest buybacks to date. Have you considered being more aggressive on that side, or can you? And what's the sort of considerations there? Per Brilioth: We will -- we've been buying back stock in VNV for, I don't know, at leat -- I mean, as long as I've been around, since 20 years. I think if you look across past 10 years, we bought back stock and distributed sort of cash to shareholders to the order of like, is it $750 million? So -- but throughout these years, we've done this in a very opportunistic way, not sort of buying on a downtime, but not chasing on an update kind of thing. And so that's the way we've sort of approached it over the autumn, and I think we'll continue to approach it. And then if sort of certain sort of block size opportunities come up, we'll look at those, too. But otherwise, we'll just be optimistic in the market. That's our way about it. We have quite a lot of gross cash, so there's firepower to do a lot. I know the net cash is smaller. But we're also working on a few exits, none of the sort of big, major things, but in the other part of the portfolio. There's some exits happening outside of us, which could lead to more liquidity. So yes, it's -- for us, who has this sort of insight into the performance of the portfolio and the development and the way we see that from the level of NAV, substantial returns, we'll be able to -- it will generate substantial returns from the NAV level. There's just nothing better for us to do. So I think you should expect us to continue doing this, but in an opportunistic way. I mean, speaking of Voi, I mean, I know we have Voi marked wherever it is. It's at $127 million today. I, in fact, think that you could argue in some ways that Voi -- our position in Voi today is, the way we value it, understates it massively perhaps to the extent that our stake in Voi sort of makes up the entire market cap of VNV and everything else is for free. I know that sort of requires having sort of a little bit of faith into them performing over the coming years. But the way from where we sit, we think that's entirely possible. But yes, so to give you a sense of buybacks. Björn von Sivers: Thank you. Another question here. Looking at the pro rata share of earnings, which you communicated, it looks like 2025 margin assumption is slightly lower quarter-on-quarter compared to third quarter. What has driven this development? Dennis, can you take this one? Dennis Mohammad: Happy to. So I think the question is on the $3.2 million of pro rata adjusted EBITDA, so that's the VNV share of the pro rata EBITDA of the portfolio companies in the top 6 list. As a reminder, Voi is on adjusted EBIT here, not on EBITDA. The biggest difference, so this is around 2%, 2.2%, I think, percent margin versus, I think, 2.5% to 3% range that we had before. And the biggest driver of that delta is -- a couple of hundred thousand is Breadfast that has invested quite heavily in growth, as Bjorn alluded to earlier. So they have seen a bigger kind of top line growth than anticipated, but done so at a slightly lower margin. So that's the biggest driver for 2025. And then 2026, we will get back to you in a couple of quarters' time. Björn von Sivers: Thank you. There's also a question here that says, arguably, you've been hurt by the dollar decline without any underlying assets that actually have dollar exposure. Have you considered changing your reporting currency? And so -- I mean, it's true that today, it's very little dollar exposure across the portfolio and, more importantly, on our sort of cash side. It was more dollar exposure in the beginning of 2025, where we still had Gett, which arguably could be sort of was priced in dollars and made up a sort of meaningful part of the portfolio. The historical sort of our reporting currency of USD has historical background. We've been reporting in dollar terms since the very first iteration of the company, which many years ago when we sort of still was a [ Bermuda Topco ] and had the [indiscernible] listed in Stockholm and that sort of continued while did the redomestication back in 2020. But given the change in the sort of portfolio, we have reviewed this topic, but haven't sort of made a decision or come to a conclusion. And again, sort of given that the portfolio is not dollar-denominated, the value sort of is what it is irrespective in which currency you reported. But there's obviously sort of pros and cons in communication especially in these times of very volatile effects. With that, I'm checking here if there's questions that we have missed. I think, sort of -- there was a few questions here on a more broader topic around our larger holdings and how we think about sort of -- when we do an investment, how do we think about and review the sort of original thesis we had when we did the initial investment? How sort of -- what frequency do we will review that? And if we realize that our original thesis was not, or is not sort of playing out, how do we think about that? And how do we sort of try to proactively work with those type of examples in the portfolio? So maybe if we can give a broad answer there. Per Brilioth: Yes. I think that's done sort of continuously. It's not that we have a meeting on a special position sort of every quarter and we go through it. I think it's done very continuously. And I think the way you should -- the way this sort of works out is that if -- typically, if we invest in something very early stage, then -- well, the tickets are very small. And if it doesn't work out, we stop funding it basically. It's not really possible to sell the market for those sort of really early-stage positions. It's very illiquid and seldom sort of works to sort of sell, but we stop sort of -- we've made a small check and then we don't do any more checks. There have been situations where we have sold where it has some sort of really, for various reasons, not sort of fitted in the portfolio. And then we have been proactive in sort of trying to find a buyer. We have found buyers typically and then sold them. And then there are situations where we -- I mean, Numan, which is the -- yes, it's the fourth largest of our positions and -- which is a really good company, a really strong company, but it's not quite what we invested in, in the beginning when it was much more community-based sort of phenomenon around male health. And well, the larger the community, the better the product kind of thing. So you sort of get this natural network effects around it. It's evolved from there to being more of a teledoctor, with an e-pharmacy attached to it. And it's a good company, but it's not really network effect. So here, we -- it's a big position for us. We're on the Board. We're quite active around the company. But yes, it's -- the original thesis hasn't really worked out, but it's developed into something good anyway. And we're not -- the sort of the good performance has not made it -- made any sense for us to sell into because prices have improved. So we've held on to it. Björn von Sivers: Thank you. I believe we're through the questions that I see here. If we missed anything, please ping us on e-mail or whatever, we'll try to address it offline. But with that, I'm sort of -- yes, over to you, Per, for final few words. Per Brilioth: Yes. No, thanks for joining, and you know where to find us. As Bjorn said, please, please, it's always great and fun to talk and address your questions in this format, but also on a one-on-one basis, if you want to kick things around. We report next time, I think it's April 22. So if not before, then please join us for a similar exercise for our Q1 of 2026. Thank you. Björn von Sivers: Thank you.
Johan Akerblom: So welcome, everyone. Today, myself and Masih will take you through our Q4 report, and our strategic review. We will start with the fourth quarter and the year-end 2025, then we will go through the strategic review presentation, and we will wrap up with Q&A. Moving into the fourth quarter, and looking at the developments, we've had a continued underlying business progress in both servicing and investing. We have had underlying costs that continue to go down. And we did take as part of the yearly review, a goodwill write-down, and we did also a tax asset write-down. We continue to focus on deleveraging. And if you look on year-on-year, the leverage ratio has improved from 5.3 down to 4.8. On top of that, we're continuously working on strengthening the balance sheet, and we did announce a sale in January '26 of the remaining stake of our joint venture with Brocc. This will have a positive impact on the leverage when we close it. On the servicing side, we see a continued organic growth. The margins remain elevated and steady, and we have had a strong sales execution in the fourth quarter. On the investing side, collection index continued to be above 100%. We did close SEK 436 million of new investments with an IRR of 18% in Q4, and we have, for the year done SEK 1.2 billion with an IRR of 20%. As you can see on the chart, the service margin has steadily been going up, and it continues up in Q4 as well. In Q4, we have a 31% margin on the quarter standalone. If we look at the servicing income, it's very positive to see 2 quarters now in a row, we have external servicing income growth, taking into account FX-neutral assumptions. On top of that, we continue to increase our pipeline, so we're moving into 2026 with SEK 2 billion in our pipeline. And we have continuously been working on the pricing model and strengthening the sales team. Investing displays another quarter of high collections, and we continue to extract a lot of value out of our portfolios. If we compare it to the original forecast, we're now at 109%. And it's interesting to see that our investing book and the performance on it remains very strong, even though we sold a large part of the back pool (sic) [ book ] in 2024. The ERC as we end 2025 sits at SEK 46 billion. Moving over to Masih, and the financials. Masih Yazdi: Thank you, Johan. So let's go into the Q4 P&L a bit more in detail. So income is down compared to a year ago, 7%. That is almost exclusively driven by FX. The investment book is a bit smaller as well, but a large share of decline in the investment book is also driven by FX this quarter. As Johan alluded to before, we did have a goodwill write-down. It's coming from a few different countries, we had preannounced that at SEK 3.1 billion, it ended up at SEK 2.9 billion, and the difference there is really driven by FX changes from the announcement to the end of the year, as well as some small adjustments to the WACC we use in the goodwill calculations. The adjusted EBIT is largely unchanged as the income decline has been largely offset with cost reductions. And here are the cost reductions, so the underlying costs continue to go down. It's down about SEK 1.6 billion on an annual basis in Q4, if you look at the 12-month trend, and it's mainly driven by personnel reductions. So FTEs are now down at year-end to around 8,500 people in the company. Looking into servicing, as Johan mentioned, so we do see organic growth for the second quarter running, but we do have FX headwinds here. So the income is down 3% year-on-year. But as I said, 1% organic growth underneath the surface. Cost development continues to be good. Here is the area where we continuously do take out costs and plan to do that also going forward, which means that we continue to have a good development of adjusted EBIT, which is up 31% compared to -- so full year 2025 compared to full year 2024. On the investing side, income is down more, 11% year-on-year if you compare '25 to '24 and 17% Q4 versus Q4 2024, very much driven by the fact that we have a portfolio that is shrinking as our new investments are less than what is being amortized. But at the same time, the performance we have, keep performing above the 100% means that the investment book, the income from the investment book is going down less than the size of the investment book, which is obviously a good development that we are extracting more value than what was initially thought in the forecast that we had. On leverage, we see a decline of leverage, 5.3 a year ago to 4.8 at the end of the year. It is marginally going up quarter-on-quarter. That increase is largely driven by the fact that we have improvement on the servicing side, but the cash flow improvements on servicing is not sufficient to offset the decline of cash flows coming from investing. That's the case in this quarter. Obviously, the plan going forward is to make sure that the improvements we see in servicing is more than offsetting the decline coming from the investing side. Johan is going to summarize the quarter. Johan Akerblom: Yes. So I mean, to wrap up, I think we said it all, but Q4 delivered continued underlying business progress. And we've also spent a large amount of time to actually do the strategic review. And I think with that, we move into the next section, and talk about what we have discovered. So let's talk about the strategic review. We have obviously spent a lot of time during the fall to look at where the company is, what the recapitalization entails, but also in terms of strategy and the way forward. I think the previous strategy was done in 2023. Some of the targets that were mapped out then has either been fulfilled or partly become obsolete. The company has changed dramatically. A lot of events that probably wasn't part of the first strategic review in '23 has happened. So it was time to do a strategic review, and really to set the foundation for the way forward. We will take you through what we think is the strategy for 2030, how we will execute, and then finally, what the financial impact will be delivering the strategy. So talking about Intrum 2030, it all starts with a continued focus on deleveraging and derisking. This has been very important over the last year. It will continue to be very important going forward, and it will be one of the guiding stars in everything we do in terms of activities. At the same time, we will also start working on our '26 to 2030 priorities, which are servicing performance, growth acceleration, and expanding our holistic view as an investing partner. When doing so, we will cement our positioning as the leading credit management servicer, and most attractive investment partner in Europe. And this will set a reinforcing wheel of value creation, an emotion, and that will deliver our 2030 financial targets, which are around service leveraging, total cost, and servicing EBIT margin. If we talk about Intrum and where we are today, first of all, we are already Europe's largest debt collector, and we have the scalability. We operate in 20 markets and the markets has slightly different characteristics, and we manage 400,000 customer interactions on a daily basis. We are working with 70,000 clients, and we are, as I said, in 20 countries. And every year, we basically have around 6 million debtors fully repaying their debt, out of 22 million active on an ongoing basis. When it comes to the markets, we have split them into three segments. One is the investing focused markets, which would be the Eastern European markets, Czech, Slovakia and Hungary. Then you would have the specialized markets where we have a composition of the business, which is built on something that has happened in the history. So there you would have Spain, you would have Italy, you would have Greece, and the U.K. And then you have the rest of our traditional servicing and investing markets. The way we operate is with the dual engine. We have the servicing where we collect debt on behalf of the clients, and we have the investing where we purchase debt portfolios either into our own balance sheet or together with the partner. These 2 engines are highly complementary and they're also reinforcing. Moving over to Masih. Masih Yazdi: Thanks, Johan. So already in the last couple of years, there's been a large transition in the company, moving more into becoming a servicer. You can see it in the financials. So the investment book has come down by 40% over the last couple of years. Obviously, a big chunk of that is due to the book sale that was done in 2024. But at the same time as that has happened, we've seen an increase of the external servicing revenue of 8%. The margin has gone up by more than 50% in the same period, and the share of the revenues generated for the company has increased when it comes to servicing from about 1/3 or 30% in '23 to now being the majority of the revenues being generated. And simultaneously to this happening, the net debt has gone down by 23% or almost SEK 14 billion. I think also just to add to this, I think when you make this transition from more of an investing focus to servicing company, you actually remove the business risk in the franchise, which is an important part of the strategy going forward as well. Johan Akerblom: Yes. When it comes to the market environment, we think there are a few trends that we believe are favorable for us. A large reason for why these are favorable for us is that we are a large company in a dominating position in Europe with significant scale. If you look at the competitive landscape, we can see that companies in our industry are specializing more, either becoming investor and servicer, and there are a few that have this full range of services that they offer as we do. On the technology side, this is still a very manual industry, and we know that there is a lot of new tech that has come into the market the last few years and will come into the market the next few years. And it's very difficult to find an industry where this can be more applicable than within our industry. And with the scale we have, we can justify the investments in the technology, because basically, what they do is that they help you with something that is repetitive and scalable, and we think we have a large advantage there. And the same goes with regulation, more regulation means that you need more scale to be able to absorb it and comply with everything that is being introduced. When it comes to the market as a whole, we know that the economy goes in cycles. And with the dual engine we have, we know that those 2 business lines generally offset each other. So when the market is benign, servicing does better, we have an easy way of collecting. And when the market is going down to a rough cycle, we know that the nonperforming loans typically increase, and we have a better opportunity investing. We've gathered some data on how these 2 business lines could grow in the market in the coming years. On servicing, we expect about 3% annualized growth until 2030. When it comes to servicing collections within the financial industry, we think that's going to grow slightly more, about 4%. And that's also where we have the bulk of our business today. So about 60%, 70% of the servicing revenues we have today is coming from financial sector. But at the same time, 90% of the collection business is outside of financial services. And what we plan to do is penetrate that part to a lot much larger degree than what we have historically going forward. On the portfolio side, there's been a significant decline of nonperforming loans in recent years after the increase we had post the financial crisis. The general expectation is that we are at the trough point. We're at trough point in 2024, and we'll see an increase of portfolio investments going forward, and that that will grow by about 9% annually until 2030. So talking about the 2030 strategy. First of all, as I said, in the near term, we will have a lot of focus on deleveraging and derisking. We have already started this journey. We started that journey already a year ago. I think we have started with an acceleration by the sale of the portfolio that we announced in January this year with the intent to repay the 2027 maturities. We are, as part of the strategic review, also looking into other type of divestments when it comes to either portfolios or nonstrategic assets, and this is carefully being evaluated. And again, the guiding star is that we can improve our leverage ratio. We will continue to apply very strict cost control. We are guiding a 5% lower cost in '26 versus '25 on the underlying basis, and also with the FX rates as we are experience right now. And the limited portfolio investments with a focus on return will continue, as we said, focusing on the deleveraging, which means that the cash flow will be used to a large degree for debt repayments. And this is necessary to give us the full flexibility in our strategy execution. So talking about the strategic priorities. We have a strategic ambition to become and cement the leading credit management servicer and the most attractive investing partner in Europe. That means that we need to have a superior servicing performance, we need to achieve growth acceleration, and we need to be the preferred investing partner in this segment. And I think Masih alluded to that before, we think a lot of this can be achieved by actually just starting to use technology data and AI in a completely different manner and scale than we do today. When we look at this, and both me and Masih are coming from the banking industry, we've been through the transition that the banking industry did. And we actually think that this industry is an even better used case than the banking industry, and the banking industry has received a massive amount of value from applying technology data and AI. We think that there is more value to be captured in this industry. To be a bit more concrete, what do we mean, i.e., where are we today, and what do we want to be in 2030? Talking about servicing performance and excelling in that area. Today, we have a quite bespoke and largely manual collection process. We need to be highly digital, automated, and we need to be very standardized across our processes. This means that we have to make a lot of changes in the way we work. On top of that, in order to make that changes happen and to be effective in our collection process when it's more digital, we need to leverage the data we have. Today, data is used in some processes and some decision-making, but it's not fully utilized. When we operate this in 2030, it should be a fully data-driven operations decision-making process. And that's going to give us not only much better predictability on what we can do, but it will give us a lot of other benefits. On accelerating the growth, we have very much a financial services focus today. We need to diversify our presence across other segments, and we need to be competitive, and we will explain later on how we will become competitive in those segments. And we are already today competitive in those segments in some markets. We have today a value chain expansion in some markets. So when we look at the collection business, there's a lot of services around it that are non-collection, but very closely related, that's why we see us as a full credit management service provider in the future. On the investing side, is just the fact that the investing volumes today are impacted by our funding cost and our capital structure. We need to create a very sustainable and competitive funding cost to be able to invest more and mainly continue to invest through the partnerships. And finally, we have been in a capital partnership now for a year, we need to build something which is more of a full stop shop full service offering for investors, because we have all those capabilities. So how will we make this happen? Well, first of all, we now have a new executive management team. It's not fully in place, but everyone has been recruited, and everyone has either started or is about to start. And I think a couple of common denominators for this management team is, first of all, they have a very long experience in the financial industry, which has been going through quite some changes if you look back 20 years, 25 years. Secondly, they have experience of being part of transformation or driving transformation journeys, which is exactly what we need to do going forward. And I think thirdly, they've been in a business where technology, data and -- not AI yet, but a little bit the ember of AI has made a huge difference in the way you operate. And those are the things we'll take with us. And on top of that, we have a lot of collection experience in our markets with our experienced managing directors. So in terms of strategy execution, we'll start talking about the servicing performance. We have basically an ambition to drive our platform optimization. And the way we do that is, first of all, we will consolidate our platform further, and this is a little bit coming back to how we think about our markets. Secondly, or in parallel actually, we have basically 5 major areas across the collection process that plays an impact. You have the inbound customer contact, and we have millions of calls, the outbound customer contacts where we also have millions of calls, you have the whole capacity management. And remember here, we have roughly 6,000 people working in this process. So to get the capacity management right makes a huge difference. So you can get the efficiency of every operator and every agent as high as possible. Then we have the agent productivity. So actually, when they are on a call, how do you make that call as productive as possible and how do you coach them and create a continuous learning to make sure that, yes, tomorrow is going to be a little bit better than today and the day after tomorrow will be even better than tomorrow. And then finally, there's a lot of work to be done on the noncore process optimization. In here, you would find pure process reengineering levers, you would find levers that are around performance management. So everything is not driven by just tech or data or AI. But if you apply the basic process optimization tools, and then you add technology, data and AI in there, you get very fast traction on that transformation. But it also has to have a lot of focus. So as you can see, the bars on the bottom basically shows how big the cost-out potential could be. And with 6,000 people in operations, we think that the cost trajectory that we've had in the past will continue going forward. At the same time, we will also make the user experience much, much better. To give an example of what we have done, and this is basically just illustrating how much you can do without actually making -- even starting to adopt some of the more modern technologies. In Norway, we've had a top line that has been flattish, slightly declining for structural reasons. The production cost to collect has gone down 36%. The collection per FTE has gone up 46%. And in the end, the adjusted EBIT margin has increased almost 50%. This not only gives us a much more competitive business today, it also allows us to win and be more -- much more competitive in winning new business going forward. So we think that this is the starting point to actually become a growing entity. You need to be efficient first and then you can basically become much more competitive in your offering. Yes. I mean, Norway is probably the prime example we have of adopting new ways and improving the processes. But they already have all the tools. So we have that in the group. So just getting every other market to be on par with Norway in terms of how you collect and how you can perform that more efficiently takes us a long way across this journey we're planning for. Obviously, in addition to that, we will apply new tools that everyone will use as well as Norway to become even better. And Norway has not done this through AI or some massive technology shift, this has mainly been done on standardization, process optimization, and proper capacity and performance management. Another area which we have just sort of scraped the surface on is how we can use the data. Today, we have 20,000 PI portfolios, so we have invested historically over 20,000 portfolios. We use that data, but that data is just a small fraction of all the data that we sit on in the group. Today, in the group, we have 70,000 clients, as I said before. A lot of those clients, they actually have several different portfolios that we have been or are collecting on. So when we can start pulling some of the insights out of that data stack, which we already started working on, so we're basically taking the same approach that we've done on our PI portfolio data analysis, and we're trying now to apply that for the bigger universe of servicing data. Then we can move from the current use of data to something that is much more value-enhancing going forward, which is around improving the underwriting data on the portfolio investments. We can add a lot of value-adding client services. Essentially, we can go and advise the client on the best way to collect on their debt, and the best way to structure insourcing versus outsourcing and so forth. We will use it more and more in our action decision engine to make the right decision rather than to make a decision based on your own experience. And then we can also do very good statistical servicing pricing and benchmarking to identify best practice both across verticals, but also in -- across geographies. On growth acceleration, which is the next element of the strategy, we think that the first part, what we talked about servicing performance, that is a very important foundation to accelerate the growth, because as we discussed with Norway, but in general, you need to be the best service performers in order to actually grow in the existing segments more than we do today. When you have the best competitive offering by being the most efficient and the smartest on how you collect, you can be much more competitive in pricing, you can get a better result for your clients, and you can also protect and grow your existing business. And when you have done that, you also underwrite to grow a new segments, because the new segments outside the FS, they are usually smaller tickets and it's usually faster processes, and they need to be driven by a very efficient collection process. So in order to excel there, we need to be the best when it comes to service performance. The top line that we're looking at is quite significant. So just to do more where we stand, i.e., close the white space within financial services, strengthen our strategic partnerships, continue adding value to our services, and be better in sales effectiveness, we think there's roughly SEK 0.5 billion to capture. And this is, again, comparing 2030 to 2025. If we can start capturing the untapped potential outside the large non-FS segments, there's another maybe SEK 2 billion of potential. And that means that we need to enhance our offering, and we need to be more on the digital collections, and we also need to start being better in offering adjacent services. Lastly, on the B2B segment, there's a little bit more than SEK 0.5 billion in potential. And that is a little bit aligned with the second part, because the need there is very much similar, and you can almost create a plug-and-play platform where SMEs plug in, load their cases and they run on our platform. So again, to be very concrete, for example, in Switzerland, where we've been very successful in growing outside the collection space, we have roughly 15% to 20% of our revenue in the non-collection. We make almost 3x as much the group average income per FTE. On the group, we would say we have somewhere around 5%. So by moving into this non-collection, you can actually capture a much bigger part of the value chain, and you actually get the leverage on the services you already provide as a collection partner. In Germany, we have a different situation, where the market size is really, really big. We have a 10% to 15% market share in the FS segment. In the other collections -- in the other industries, we have less than 1%. But the total market size is SEK 2 billion. So by just being able to move in and capture our fair share in the other services, there's a big, big upside in terms of income, and in the end, in terms of generating more profit. Finally, we also have, as you all know, Ophelos, which is a digital standalone platform. Here, we have now pivot from the fully integrated approach where we started to a standalone model. We think Ophelos should almost compete with us as a different business offering. We are today doing this by plugging it in, in Portugal, and then we're moving either existing clients onto that platform and also using to acquire new businesses. And then we were going to scale it across the group. And we already have good progress with some of the leading buy now pay later players, not only in Portugal, because it exists -- Ophelos still exists in pockets across the group, and that works extremely well. And the benefit with Ophelos is that there's a massive improvement in terms of speed, scalability, product innovation and the performance uplift. But to be a little bit conservative here, we have actually not fully -- we have not included the upside from Ophelos in the base case financial plan. So with that, I'm going to hand over to Masih to take you through the last element of the strategy. Masih Yazdi: Thanks, Johan. So let's talk about the third leg, investing partner. Here, our current situation is a bit different compared to the servicing side, where there are clear improvements to be made. On the investing side, we are clearly a dominant force in Europe. We see basically every deal that goes through, we get to analyze them, we get to see the deal flow. Obviously, recently, we've invested less, but at the same time, we see all the deals, we see all the data, and we've been able to combine some larger deals that typically have lower returns with smaller deals, which typically have higher returns and have a good enough blended return. As you know, most of you, in the last year or so, we've done this in one partnership with Cerberus. If you look at performance, the performance here has been very good. So every portfolio has a forecast, where we have an assumption of future cash flows that index is 100%, whereas if you look at the actual performance of the last 20 years, it's been at 107%. So the book value that we have and have had historically, this company has basically almost outperformed on that book value. Even in deep economic downturns, the performance has been almost in line with the forecast that has been used. Johan Akerblom: I would just like to add here. I mean, I think there was some skepsis in the market when we sold the back book in 2024. Now we sold the second part of that back book that the rest of the portfolio would actually not perform in line with historical performance. What we see now being basically more than a year down the road is that we continue to perform almost even better than we've done in the past. Yes. Masih Yazdi: So if you look at the strategy we aim to have when it comes to investing, we look at this in sort of a few different perspectives. There are investments on our own balance sheet. So the investments we do ourselves. In the near term, as we start out saying, we will be more conservative. We will have more limited volumes, and we'll focus quite a bit more on returns. We need to do that to make sure that we use the cash flows we generate to reduce the debt burden of the company. In the longer term, and this will be dependent on the evolution of funding costs, as the funding costs come down, we'll be more competitive on new investments and investments will be ramped up. And we believe that during the period '26 to 2030 at some point, investing more will be a contribution to the income growth we have as a company. On the capital partnership side, we will continue that. This is something we want to expand. We want to have capital partners. We believe that there are investors out there that would like to benefit from the underwriting capabilities we have, and the deal flow we see, and the fact that we can help servicing the portfolios and invest together with us. We typically take a smaller share, but we can offer other capabilities that they typically don't have. And we want to continue to work on that. And in the future, we'd like to add more partnerships in different shapes and forms than what we have today. Then there's an SDR option. In the near term, it's probably not feasible. We are continuously evaluating if there is a scope for us to have an access to an SDR vehicle. It could be a minority access, it could be a majority access. There are pros and cons with both of those. But during 2026, we expect to have fully evaluated that and have understood what the next best step for us is. And obviously, if we get that access, then that will also have a significant impact on the investment volumes we can do in the SDR vehicle given the funding cost we'll have at that point. So let's move into the financials and starting with the 3 new financial targets we've set. So the reason we set these targets is that we want -- for it to be something extremely relevant, help us in our strategy execution, but also be something that we feel that we have fairly good control over. Clearly, the most important one is leverage. We need to reduce leverage, and we've set a new target, which is 3x that the net debt when excluding 80% of whatever the book value is investing. So the book value is assumed to consume debt up to 80% of the book value. And then all the rest of the debt is allocated to the servicing business, and that leverage needs to come down to 3x. If you compare this to the current way of formulating the leverage, which was 4.8x, 3x on servicing and 80% LTV on investing is just below 3x leverage on the current definition. So it's a more ambitious target than we've had in the past, but we're giving ourselves a bit more time to get there, because obviously this needs to be realistic. On the cost side, the underlying cost in '25 were SEK 12.3 billion, we've guided for that to be reduced by another 5% in '26. And then we expect cost to come down every single year until 2030 to reach a level of SEK 10 billion to SEK 11 billion. And this level will be dependent on the actual growth on the servicing top line. If we have growth of, say, low single digits, we're more likely to be at the SEK 10 billion mark. And if growth is, let's say, high single digit, it's likely to be more closer to SEK 11 billion level. Then on the margins, there's been good margin improvement, and we are targeting to increase that further to somewhere between 30% and 35% by 2030. The reason we have an upper limit here is that we want to strike a balance between finding cost efficiencies and then transforming those efficiencies to our offering, so that we can offer a better price for customers, and therefore, gain market shares. So we want to find a good combination of a sufficiently good margin, but also growing our business faster. If you look at all of these 3 targets we're setting, and the development we've had, we actually are already moving in the right direction. Service deleveraging is coming down. The cost level is already down more than SEK 2 billion in the last couple of years, and servicing EBIT margin is up by 9 percentage points last couple of years. And if you look at those 2 targets, actually the trajectory at forward has a slower pace of improvement than the improvements we've seen in the last couple of years. So we think this is clearly realistic and something that we can achieve. And obviously, it's going to be a guiding star for the company. So let's talk about the debt we have and our view on how to deal with that. So we have about SEK 45 billion of nominal debt outstanding, the first maturities are in 2027. We had -- the announcement of the portfolio sale in January, the proceeds from that sale, combined with the organic cash flow we believe we will generate will be sufficient to completely redeem or pay back the second lien maturities in 2027, which is about EUR 370 million. When it comes to the other maturities in 2027, given the market input we have and the secondary market trading of those instruments, we believe we can refinance those at better terms than currently outstanding, and we plan to do so first half of 2026. When it comes to future maturities, we have made a plan of our P&L development and looked at the organic cash flow generation in that plan. And we believe that there will be a certain part of each year's maturities that we will be able to repay or redeem. And in combination throughout these years, we believe that we can reduce the debt by somewhere between SEK 10 billion and SEK 15 billion. Obviously, almost SEK 4 billion out of that is coming from the 2027 maturities already probably this year. And the SEK 10 billion to SEK 15 billion is really dependent on, obviously, the success of executing on the organic path, but also to what extent we can extract the value from the balance sheet by selling nonstrategic portfolios or assets that we have. And obviously, we're working on those different projects. Then at the bottom of the slide, you can see this is not a guidance or -- it's a forecast or guiding for us when we come up with the deleveraging plan that we have. Maybe just pointing out a couple of things here. On the servicing income, we expect it to be largely flat this year, and that's mainly due to the fact that already going into the year, we have fairly significant FX headwinds with the Swedish krona strengthening by about 5% versus the euro. So we need to see clearly good organic growth to offset that. Then on interest expense, we assume that will come down over the coming years as our debt burden comes down as we continue to see improvements in our operating performance. And portfolio investments, slightly lower in '26 than '25, and then we expect to be able to ramp that up slowly, and then at some point in time, invest more than what we are amortizing and this being a contribution to the general income growth of the company. Repeating what we started with, near-term focus, deleveraging and derisking, this is something we need to have to have flexibility in our strategy. We have the priorities, servicing performance, growth acceleration and being a good investing partner. We believe that we could be on the verge of coming into this positive momentum of deleveraging, lowering funding costs, being able to accelerate growth, which will continue to delever and so forth. And we have the guiding stars in our financial targets we will be working on. That's the end of the presentation, and we will open up for Q&A. Johan Akerblom: Yes. Before we start on the Q&A, I just want to say that the strategy here, what it actually accomplishes is not only creates shareholder value, but by transforming the company in this direction and working on these levers, we will actually create a much more stable business model. And that's the whole idea to create something that could sustain for a long, long time and that can carry a certain level of debt, but also give the flexibility to manage that up and down depending on the opportunities that are out there. So part of the strategy is actually creating something that fundamentally removes a lot of risk in what we've had as a previous franchise model. Masih Yazdi: Q&A? Johan Akerblom: Yes. Let's start the Q&A. Johan Akerblom: So as we kick off the Q&A, we will actually start with some of the questions coming from the teleconference. Operator: [Operator Instructions] The next question comes from Jacob Hesslevik from SEB. Jacob Hesslevik: Maybe we could begin on your financial target regarding the servicing EBIT margin. Could you provide some details on the drivers behind the margin expansion? Is it mainly from lower cost or rather growing top line to better scale the cost base? Masih Yazdi: Jacob, yes, I mean, it will be initially a lower cost. That's been the main driver between -- behind the improvements of the margin, and that will be the case at least in 2026. Then obviously, we're hoping and planning to see some revenue growth, which this year will be more difficult, because of FX headwinds, but organic growth is something we're planning for. And as we expand into new industries, you'll see that as well. When it comes to some of the other industries, so outside financial services, margins are typically lower than what we have today. So that expansion doesn't improve margins that much. So margin improvements really comes from lower costs. And we are planning as we lower the cost level to be able to translate some of that or pass that on to customers, because we think that's a good lever for us to grow the business more. So the real combination between sort of revenues or income and cost over this whole period is difficult to say. But I would say at the early parts of the period, it's going to be mainly a cost reduction. Johan Akerblom: Yes. And an important part is also to create the scalability. So when we start adding on more volumes on the income side, it actually implicitly increases the margin. So you add on basically more variable cost or more -- sorry, you add on more income with the limited variable cost on a scalable platform. So that will also help eventually the margin improvements. But as Masih said, initially, when entering all these new segments, they would probably come with slightly lower margin than we have today. Jacob Hesslevik: Great. And then a follow-up on the cost message there. Could you pinpoint it to which division do you see the largest potential to streamline? Is it within servicing? Or is it rather investing, which you are shrinking somewhat given the divestment you announced in January? Masih Yazdi: You mean in terms of cost? Jacob Hesslevik: Yes. Masih Yazdi: I mean the big bulk of cost sits in servicing. Investing, they are using servicing as a supplier, but the bulk of cost is in our collection process. Then obviously, when the investment book goes down, we have to adjust the servicing provided to the investing business, but the cost out and the process optimization is happening within our servicing business. Jacob Hesslevik: Great. And final question from my side is just on how large share of today's collection are automated? And how does that compare to the industry average? Masih Yazdi: We have less than 10% automated. So it's a small piece. And the problem is when you start talking about the industry, I think on average, the industry is probably slightly worse than we are, but then there's a couple of players, but they mainly operate outside the financial service industry. They have a higher level of automation. Okay. Moving on to the next. Operator: The next question comes from Ermin Keric from DNB Carnegie. Ermin Keric: Maybe first, do you expect any kind of implementation or execution costs for getting to a lower cost? And also, given that you're going to automate more, will you capitalize any IT investments and kind of how much will that CapEx be included in your leverage in any way? Masih Yazdi: Yes. Yes, there will be some implementation costs when it comes to future technology. I would say in the first couple of years, '26, '27, we basically have the tools we need. We just need to apply them to a larger base of the collection process, just like Norway has done. But when it comes to implementation costs in general, we will be fitting those into the cost targets that we have. So the cost target you see and what you will see over the course of the next few years underneath that target, we will have the implementation cost being fitted. So there won't be additional costs than the targets that we've had. On CapEx, I think we already have had CapEx on the balance sheet, and I don't think that's going to be higher in the future than it's been historically, to be honest. I don't see that as a big headwind going forward. And then I think also, I mean, in terms of -- I mean, we're obviously a people's business today. We have a lot of employees working across our processes. But so far, I mean, there's been a couple of bigger programs announced externally. I think going forward and what we've basically done during the last year is that a lot of this comes through natural attrition. We have a fairly high attrition rate in some of the -- especially in the sort of the more of the collection part of our business, and we intend to kind of continue working with that rather than announcing any big programs. I think it will be a very natural evolution as we sort of implement new services and new solutions. Ermin Keric: Then about your leverage targets. How are you doing with central costs? Where are they allocated in the leverage target? And also, do you include the full contribution from your kind of consolidated JVs in the servicing, because I suppose you need to pay some of that minorities later on? Masih Yazdi: Yes. I mean today, basically, all the central expenses have been allocated. So it's very, very little left centralized. On the JVs, we will be updating our reporting. So these targets are now set. So we had the old target of '25, and we'll be updating our reporting to reflect the new targets from Q1 2026. So exactly how we're going to do that, you'll see that in the coming quarters. But I would say, in general, the target we're setting now means a lower leverage than the old target we had as a company. Ermin Keric: Then the last one would be on the better usage of data. Do you mainly expect that to lower your cost to collect? Or how much more do you expect that you can increase your collections, for instance, on your own NPL book? Masih Yazdi: I think the data is probably more a driver of collection performance rather than cost to collect. Cost to collect is a way to -- I mean, you can automate a lot of things, and you can get your cost to collect very low, right? But if your recovery rate suffers, the equation might not hold. So I think data is for me to basically decide on what is the next best action. So that's one used case, that's going to be very helpful. The other part on the data is to use it to be better in advising our clients on the best way to structure their thinking around collections and maximize the money they get back on every late payment. So those are two areas. Then, of course, you can use data for many other things. But -- and then sorry, the third sort of used case is obviously to further enhance our underwriting capacities. Ermin Keric: Can I just put in one last question? It would just be on -- you showed the example with Norway, which I think is helpful, and its impressive improvements you've done there. But how replicable is it to Southern Europe? Because aren't the claims quite different that you're managing in Southern Europe and digitalization generally in those countries compared to Norway? Masih Yazdi: I mean, absolutely. I mean the way we think about our markets is that you have your 13 traditional servicing and investment markets where you would have Norway as a cluster in the Nordics, you have Germany, Austria, Switzerland, you have Ben there, so Belgium, Netherlands, you would have France and then you would have Portugal. Spain, Italy and Greece are different. And we will also manage them differently, and we will have different tactics in terms of implementing the strategy. So we think about the 30 markets, that's where we can apply a lot of common levers. And then for Italy, Spain and Greece and also the U.K., which is more of a BPO market, at least for us right now, we would have to be a little bit more specialized in how we implement the strategy. So one solution doesn't fit all. So let's go to the next question. Operator: The next question comes from Patrik Brattelius from ABG. Patrik Brattelius: So my first question would be regarding the income trajectory in the investing side, the coming years. As we saw on the last slide, you will invest less in portfolios the coming year in the short term. And we have seen investing falling for the last few quarters. Should we expect further decline? And when do you foresee in your financial planning that this will level out and more flat line? Masih Yazdi: Yes, I can start. The only thing we're guiding on today is that in '26, we're likely to invest less than we did in '25, because the priority we have is to reduce our leverage. When it comes to the evolution of investing beyond '26, it really depends on the evolution of our funding costs. We will make sure that we get a sufficient uplift in the returns we have on investing versus our funding cost. So the faster our funding costs come down, the more we can invest earlier. So we can't really dictate that. What we're trying to say is priority 1 is to delever, and then we will be disciplined on price, and we won't have volume targets. We do expect, we believe, and we want investing to contribute to income growth for this company at some point in time during this period, whether that's going to be '26, '27 -- or it's not probably not '26, '27, '28 or later, it's difficult for us to say. We have a plan of deleveraging. And to what extent and when the market translates that plan into a better rating and lower funding cost, it's very difficult to say without actually seeing it. And obviously, we need to execute quarter-by-quarter, so that -- I mean, presenting the strategy is one thing, executing on it is a different thing, and we need to execute on it to get the trust and see the funding costs come down, and that will lead to higher investment volumes eventually. Johan Akerblom: But I think also, I mean, on the slide where Masih shows sort of some estimates on how we think things will evolve, you clearly see when we see trends shifting. And I think that's probably your best input on how we see the future. Patrik Brattelius: My next and final question is regarding the JVs. We saw a divestment here announced at the beginning of the year. So could you talk a little bit how you see the divestment environment currently? And also when we look at the presentation, you have almost just below SEK 5 billion in JVs out of your ERC. Can you talk a little bit more and elaborate how much that is for sale and a little bit on that topic, please? Johan Akerblom: I mean I'll start, and then I think Masih can continue. We are always looking to optimize our portfolio. So if that means that we can recycle and we can sell something where we think the value is X and someone else ready to pay more, that makes -- I mean, that creates value for us. There's also the balance between cash now and cash later in terms of how the collection curve looks like, especially with our focus on deleveraging. But specifically on the JVs, I think we're going to have an opportunistic approach. And as we said, we already have a couple of things that we have identified that we continue to work on. Masih Yazdi: Yes. I mean there are differences between the JVs. And we have a JV, [ kind of LOP ], you can see it in our IR presentation. We are expecting cash flows from that JV of about SEK 1.5 billion between '27 and '29. It's not paying anything now. And the question there is that should we keep it and get those cash flows? Or is there a way to do something else? So it's this balance, as Johan mentioned, do we need the cash flows today? Or do we have the time and patience to wait for it? And we do that assessment for all the JVs we have. I mean accelerating cash is for us a good thing if we can clearly show that it adds value. At the same time, we also need to find someone on the other side who's ready to make that transaction happen. Johan Akerblom: Okay. So we have one more question on the phone. Operator: The next question comes from Johan Ekblom from UBS. Johan Ekblom: Just a couple of quick ones, please. So first, on the deleveraging target. Am I understanding correct that we should look at the cash EBITDA from servicing without any adjustments for Central or JVs or anything like that to be on a like-for-like basis? That's the first question. Masih Yazdi: You should look at the EBITDA, not the cash EBITDA. We will not be using the cash EBITDA. Johan Ekblom: But it's servicing only. There is no adjustments. And I guess we'll get the new structure at some point before Q1? Masih Yazdi: Yes, correct. Johan Ekblom: Perfect. And then on the margin assumptions, I think, Johan, when we met back in September and debated kind of what AI could do to servicing margins, et cetera. I think your view was that there's a kind of upper bound what the industry will accept before you kind of get intensified competition. And my sense was that at the time, you thought that was lower than the 30% to 35%. So just interesting to see if there's been any change in your thinking or if there are interim specific things that think you can be a huge outlier versus your peers? Masih Yazdi: I think we do think that there's more to capture. I mean here, you always need to be humble in terms of how much margin you can take and when it becomes unsustainable. But moving from '25 -- I mean, we already see today that we do deals that has a 30% margin. So if we can operate today with a 30% margin in an environment which we think is more inefficient than it will be in the future, I don't think it's very aggressive to assume that the margins in the future can actually be between 30% and 35%. So I think that's the simple logic. I think when we have done the analysis, we have come to realize that we can probably continue to expand our margins a little bit. Johan Akerblom: Yes. I mean just to add, I mean, we are reporting 25% on average. When you're in 17 markets, it means that you have markets that are clearly above that level and the markets that are clearly below. We can see in the data that where we are clearly below that, we actually have more structural issues, and we are markets -- we have markets operating at 35% today, without really seeing increased competition. We've just done more things. I mean, Norway is a good example, which is higher than the 25% we have as a group. So based on that data, we think that this is possible. And obviously, to some extent, we are trying and will be a first mover and adapt things faster than others. And that's a way, obviously, to improve your margin. I think another point which we never discussed, I think, it's also when you move into value-adding services, your margins should be higher, but they will still contribute to our servicing margin. And that's something that we can clearly see when we look at some of the markets where we have expanded into the value chain. Johan Ekblom: Yes. Perfect. And then I guess in an interview in the press today, you were -- or you made a comment that it would be nice to get a new core shareholder or a larger shareholder. And I don't know to what extent the journalist is putting words in your mouth. But is there anything you can tell us? I mean, is there any strategic action being taken to try and source that or anything you can share? Or was it kind of an offhand? Johan Akerblom: I mean -- I think what I said was we are always meeting investors. We are always welcoming long-term investors that shares our view on what can be achieved in the future. And I mean, it's a very generic statement, and I think that's where we will leave it. But I mean, the fact is that we have one major shareholder that has gone from plus 30% to maybe 10% or 11% -- and then we don't really have much institutional ownership. So of course, we would welcome a long-term investor or a couple of long-term investors that shares our view on what we can create in the future. Johan Ekblom: Perfect. That's how I thought I should understand it. And then just finally, I mean, you say you're going to be opportunistic about things like JVs, et cetera. I mean when we think about it, when you say, okay, this one has cash flow 2 or 3 years out, your funding cost, I guess, on the margin, at least today is high single digits. I mean, should we interpret that as you would be maybe not very willing, but at least willing to consider selling things at a book loss, because it would allow you to deleverage faster. I mean you haven't sold at any meaningful loss in the past. So I just wondered if there's a change in how you view these things now? Johan Akerblom: I mean -- I think we are going to be very sensitive to selling anything below book value. I think the recent transaction just shows what kind of appetite we have. So I mean, I think there's a strong hurdle before we actually go ahead and do something opportunistic. And that is we can clearly show there's a value for Intrum and its shareholders, and it helps us on the deleveraging. And I think that's where we're going to leave it. But there are -- there's a lot of people out there who looks into the space and what might be less value to us might be much more value to them. And I think that's the kind of the type of combinations we're trying to find. Masih Yazdi: I'm going to transform myself from a CFO to a moderator, because we have a few questions coming in, in writing format as well. I'll ask you one. So the first one is, what are your major considerations when assessing the advantages and disadvantages between owning 100% and minority stake in an SDR? Johan Akerblom: I mean that's a very interesting question, because owning a majority of an SDR comes with a lot of benefits. I mean, first of all, we would control the investment decisions. We would control the definitions of how much CapEx should be spent, how much dividend should be paid out. Of course, we would be regulated, but in line with all the regulatory requirements, we would still be the driver of that agenda. The downside of owning an SDR is that it creates regulatory complexity. It puts another pressure on how we run the group. And there's also a question around consolidation. So if we flip that into minority, being a minority, we need to have a very high comfort that whoever we own this with and whatever shareholder agreement we have, we have a lot of input when it comes to CapEx and dividend distribution. And also, we are probably then maybe an outsource provider of some underwriting advice. So I think those are the things. And then also having a minority stake, I think our partner needs to be someone where we feel that there's a natural flow. Either there's a natural flow of business that can go into the SDR or it's an investor that needs our support to basically build their book in this area. I don't know if you want to add something. Masih Yazdi: No. That's very good. I'll ask myself a question. So we have a question here on what the leverage ratio would have been had FX not moved in the quarter. And there's same person has asked a question about what targets we have in terms of servicing revenue. On the leverage ratio, generally, if the krona weakens, we benefit, because income is greater than cost. So you have a long period of weakening krona, we make more money and that has a positive impact on leverage. In a single quarter, that could differ. It depends on what the FX ended that quarter at versus the average during that quarter. In Q4, I would say the effect was very marginal from FX on the actual outcome of the leverage ratio. On the revenue target on servicing, it is by design. We have 3 financial targets and none of them are related to revenues. I mean, obviously, margins in combination with cost, that is to some extent, related to revenues, but we don't have an actual income target, because it's something we can't fully dictate. We've presented the data we have, which is that the market should grow by 3%. We presented data on pockets we think we can penetrate, which is up and above the 3%. So obviously, the goal for us is to grow faster than the market by improving our servicing performance and penetrating portions of the potential we've seen -- we see in financial services, nonfinancial services and SMEs. That's the ambition, but we don't set a target, because it's very difficult to know exactly at what pace, how quickly we can execute on the things we see in the market. So one more question to you then. Can future partnerships be different -- different type of investors than private equity like Cerberus and with different or better fee structures? Johan Akerblom: I think the future partnerships, if I understand the question, can it be different than Cerberus? Masih Yazdi: Than private equity? Johan Akerblom: Than private equity. Yes. Okay, the like. So basically, yes, definitely. I mean, I think that future partnerships, as I think I said earlier, could also be more of a passive investor that actually wants to have the experience and the capacity and also the servicing aspect of working with someone who's been in the industry for a long time. That could be one type of partner. It could also be an industrial partner. I mean, today, we see the dynamics in the industry changing. And a lot of the players are moving into either a pure servicing direction or a pure investing direction. We have both channels. We're obviously focusing more on the servicing, because we're changing the franchise model. But to work with someone who's in a pure play on the investing side, I don't necessarily think that that's ruled out either. So I think there's many opportunities. We just need to be treading carefully to always keep our credibility and our professionalism in every time we work with someone who's sometimes in conflict in business with us, sometimes in conflict of business with other partners we have. Masih Yazdi: Good answer. There's one more question. I'll take that myself. We have mentioned Norway as a leading example. Could you provide some color on how the EBIT margin in Norway compares to other geographies? The margin in Norway is higher than the average we show for the group of 25%. And this is despite the fact that in Norway, you've had a regulation in place since 2018, where you haven't been allowed to adjust servicing fees. So basically, with the exact same servicing fee for 8, 9 years, we've been able to improve the margin quite significantly only by reducing costs through operational efficiency. So that shows you the force in being able to do that across all the traditional markets that we have. The debtor fees has been locked. But now we actually are -- they are getting unlocked in '26, and there will be an adjustment to partly compensate for the historical non-adjustments. And that hopefully will make the Norwegian market even more interesting going forward. Johan Akerblom: Okay. We have one more question from the telephone. So let's go to that. Operator: The next question comes from Jacob Hesslevik from SEB. Jacob Hesslevik: Just one more question on Slide 31. You state that you plan to redeem SEK 10 billion to SEK 15 billion until 2030. Does that mean your net debt is expected to be SEK 29 billion to SEK 34 billion, where you aim to have a 3x leverage? Was that too simple to look at it? I'm just trying to see if I can backtrack the EBITDA target for servicing going forward. Masih Yazdi: Yes. No, that's the right way we're looking at it. What you also need to make an assumption for is how large our investment book is at that point in time, because that will consume some of the remaining debt we will have at that point. So -- and we're not guiding on that, but you can make your own assumptions based on the guidance we have, which is more limited investments in the short term, ramping up later on, and hopefully contributing to income growth later in this period '26 to 2030. But sure, I mean, you can start with the current net debt, reduce that with that amount and you get an understanding of where the debt will be and then assume something on the investment book and what is required from EBITDA and servicing to get to the 3x. Jacob Hesslevik: Great. And is it possible to state anything what your replacement CapEx level is currently on your portfolio investments? Masih Yazdi: It's slightly below SEK 3 billion, around SEK 3 billion. SEK 2.5 billion to SEK 3 billion. Johan Akerblom: So I think with that, we are concluding today's session. I think we have basically shown you where Intrum is heading. In 2030, the company will be a completely different franchise. We have taken a more ambitious approach when it comes to our targets. We have also said that it will take slightly longer. But in the end, we want to focus on the leverage. We want to deleverage. We want to create a much more stable franchise. We are continuing to take out the cost and be more efficient and basically make ourselves ready to compete outside the space where we're operating today. And thirdly, by doing so and capturing more business, both within where we work today, but also with outside in new verticals and new value-adding services, we will increase our margin. And with that, we basically create a much more stable business model. I would like to thank you all for listening. Thank you for many good questions. It's always great that Jacob is the first, and now he was also the last question. And yes, I guess we will have some bilaterals with some of you going forward. Thank you very much, and have a nice afternoon.
Per Brilioth: Okay. Welcome, everyone our Q4 call, the VNV Global Q4 call. So welcome to this call. I'm Per. I'm joined by Bjorn and Dennis, my colleagues, who'll walk you through the results, what's going on in the portfolio, touch upon a few of the holdings. And there is -- so we'll walk through the presentation and then there will be Q&A afterwards. We -- so if you want to ask a question, please use the Zoom Q&A sort of function. This is the same as we've done in previous calls. So I think it's self-explanatory. So let's kick things off. And first numbers. I pass the microphone to my colleague, Bjorn. Björn von Sivers: Thank you, Per. If you can move to the next slide, we'll start with that. So as per year-end 2025, VNV Global's NAV stood that $547 million or roughly $4.25 per share, down 5.9% in USD during the quarter. In SEK terms, NAV is SEK 5 billion or roughly SEK 39.1 per share, down 8% over the quarter. For the 12 months period, NAV in USD terms is down 4.2% and down close to 20% in SEK terms. If you come to the next slide, Per, we go into sort of the simplified balance sheet here. And so we have a total investment portfolio that amounts to $589 million, consisting of investments of $537 million and cash and cash equivalents of $51 million. Borrowings at year-end '25 totaled $46.6 million following the partial redemption of the outstanding bond earlier in the quarter. We continue to trade at a material discount to NAV as per share close yesterday, January 28, at 19.9%. We're trading at sort of implied 49% discount NAV. During this quarter, we've continued to repurchase shares that we started in Q3. And as per year-end, company holds close to 2.4 million common shares, representing approximately 1.8% of the outstanding common shares. And the fair value change during the quarter is a per usual, primarily driven by the movements across the largest holdings in the portfolio. And if we move to the next slide, I'll quickly just go through the main drivers here before we jump in to a more broader view of latest developments and the key portfolio holdings. So starting from the top, we have BlaBlaCar, which has -- this quarter is valued at $164 million for our stake based on the same sort of model as per previous quarter, down 11% or roughly $20 million in the quarter, primarily driven by lower peer multiples. Second, we have Voi valued at $127 million for VNV's stake, down roughly 7% or $10 million during the quarter. Numan, third largest holding valued base -- still valued based on the latest transaction at $37 million, so flat over the quarter. HousingAnywhere also valued at $37 million based on EV sales model, relatively flat during the quarter. And then sort of final 6 of the largest holding Breadfast also valued based on the latest transaction in the company. We also have a Bokadirekt at model-based valuation, which is relatively flat during the quarter. All in all, these 6 companies represent close to SEK 30 per share in aggregate or 80% of the NAV. Finally sort of just a brief comment on the cash and cash equivalents. We ended Q4 with $55 million in cash following an eventful quarter in terms of cash movements. The primary inflows during the quarter were the final closing proceeds from the Gett transaction and also closing proceeds from the Tise exit, which we previously announced, and main outflow again, was the partial bond redemption where we sort of cut outstanding debt in half. With that, I'll leave it back to Per, who will start and continue walking through the latest developments and the key holdings. Per Brilioth: Thanks, Bjorn. Yes, the portfolio is sort of similar to what you've seen in prior quarters over the course of '25. BlaBla and Voi sort of nearly 50% of the portfolio. And yes, the -- it's -- I know we marked the NAV downwards this quarter to the order of -- it is 6% in dollar terms. And it's -- and as Bjorn walked you through, this is technical. Sort of we do our valuation models, we look at peer groups in the listed world. Much of this sort of downtick is due to that these peers are down, but the actual companies, these big companies in our portfolio and the small ones are really doing well. And so it's -- the quarter-to-quarter movements don't necessarily sort of correspond to sort of the progression of the companies, which is sort of performance-wise revenues and EBITDA is doing really well. And also sort of how they're positioned in this sort of volatile world we live in with new sort of softwares, AI, et cetera. I think the portfolios are really robust, whereas, in other sectors, software, et cetera, it's kind of scary what's going on. But here, for example, what's going on in the much sort of focused on AI world, these companies will benefit from all those sort of new products and new AI sort of apps, et cetera. So I think that's an important starting point. We obviously trade at this discount. It was 49% we're down today, so it's a higher discount. And we think our NAV -- the NAV, these green bars, will deliver substantial returns annually over -- for the coming years. So we can't really find anything better to do than to buy our own stock. If we can buy that NAV at a 50% discount, 50%-plus discount, it's the best use of shareholder cash. And we have -- Bjorn gave you some numbers. Over the course of the second half of last year since we sold, we got the Gett cash and went to net cash, we have been buying back stock, and we'll continue to do this. We have a bunch of gross cash. We still have some debt outstanding. And that leaves a little net cash, but we also have progression of some further exits in the portfolio. So we intend to sort of work, operate, execute in accordance what markets tell us and that is to sort of sell at NAV and buy the stock. I think it's $170 million that we have exited over the past 2 years have all been around NAV. And the transactions that we sort of look at concluding going forward are also around that level. So that's where deals happen, and our stock trades at half that, we're very focused on it. And so spent some time in writing up this report and sort of trying to discuss, if you will, the reasons why this discount is there. I sort of thought that net debt was part of the reason, and I guess it's not because we're in net cash, and there's still that the discount is persistent. It's not that the portfolio creates a lot of cash. Sort of just shy of 80% of it is EBITDA positive in this number. We have Voi at EBIT positive, well, obviously, because they own and depreciate these assets. If you use their EBITDA figure, it's -- this 76% of course goes up, of course. The decline here a little bit is predominantly driven by that Gett is sold over this past year. So we're -- the portfolio is doing well. It's not craving cash. And in fact, it's not only profitable, it's also -- there's still growth. This shows the growth of the 6 largest holdings. And we've seen that growth sort of accelerating over the course of the year that we're now closing, so 40%. We see growth sort of continuing in '26, maybe to the order of like 30% and earnings at this -- at the bottom level here, gone from a negative in '23 to positive now, and one that we see growing much, much faster than revenues in the coming years. I think Dennis helped put together some numbers. And if you look at the '26 earnings, you are looking at -- and just using our share of these 6 companies, so these 6 companies, during the course of 2025, generated about SEK 1 billion in revenues. And so our share of that is like SEK 150 million. And if you take that into '26, the way we see sort of earnings growing, I think you got -- if you compare our market cap to our percentage of these guys' earnings, you're looking at a price to EBITDA of, call it, just above [ 20% ]. And how earnings is growing over the next year, you're looking at, in '27, our market cap, again, to the same sort of earnings -- our percentage earnings of these 6 companies getting down to levels of [ 10% ]. And that's then using the market cap and comparing it to the performance of these 6 companies. If you -- and that's assuming everything else is at 0. And everything else is very far from 0. Here is a bunch of the companies that show up in that are the part of the portfolio Flo. I think all of you know, it's the world's largest peer tracker, OURA. I'm sure many people on this call use OURA Rings. Ovoko is Europe's fastest-growing marketplace for used car parts. Yuv in the hair coloring space is doing fantastically well, growing fast, no traffic. Company predominantly selling their product within traffic control in the U.S. Tise actually just sold at above our NAV. It's the Vinted of Norway, was recently sold to eBay. Just to give you a sense that outside of these 6 companies, there's a lot of stuff going on in our portfolio. And as we've talked about before, I sort of say that in this other part of the portfolio, we have the next BlaBla, the next Voi that, in a few years' time when maybe BlaBla and Voi are exited, you have one of these companies will have taken their place and become one of the bigger parts of our portfolio. And in fact, just to go back to that NAV and us trading at this NAV sort of our NAV, we try to keep it conservative. Our auditors tell us that we should -- it should be fair. It should be correct, should be the true market value. If we are wrong, we'd like to be wrong that we're a little bit conservative. And I think these are 3 examples of late where Tise was sold for $11 million to us, we had it at [ 6.6 ]. Yuv raised money at equivalent of [ 4.7 ]. We had it [ 2.8 ]. And Yuv was done around the mark and OURA was done way, way above our mark. So sort of high-level intro to what's going on at large at VNV. So just to take you through BlaBlaCar, where there's not that much new to talk about. I think most of you know BlaBlaCar well by now. It's been many years in our portfolio. It's a marketplace for long-distance traffic where supply comes from -- predominantly from cars, but also bus and train operators offering seats into a marketplace where -- which has a very large and very fragmented demand side on the other side. It's a European business. Every little green dot here is BlaBlaCar on route on the car. So you see it's very, very active marketplace in Europe, but the fastest-growing countries for this company right now, it's in emerging markets where India has overtook France last year to become the largest market in terms of passengers and that's not yet monetized. And in fact, over the course of this year, one of the things that we are really eager to see the company perform, and we're confident that they will sort of execute on, is to monetize emerging markets, which they have in other parts of the world, but we see first up Brazil, where they've been at it for a long time, monetization is now starting to become well underway after they've spent some time on testing different sort of routes to monetize. Not every market is France. France is, of course, heavily monetized and very profitable. Brazil, they have sort of tested some new products and found the right one and now getting going in earnest with that. And then India, Mexico are to follow. But -- and in Europe, which is really profitable and not as fast-growing market as those emerging markets, there's still a potential to growth as the company sort of really improves the product to pick up the sort of the big demand that's out there when they offer a point-to-point solution in this sort of long distance sort of travel. So it's not only going from a big central station in Paris to big central station in Lyon or Madrid, for example, but this company actually offers a route from a small city like [indiscernible] to a small city like [indiscernible] where, today, you need to sort of take -- or outside of BlaBlaCar, rather, you need to take a train to [indiscernible] or bus to [indiscernible], take a train to Paris, change station in Paris, train to [indiscernible], bus to [indiscernible], which takes 6 hours and costs a lot of money. So the alternative in BlaBla trip is much more comfortable. It's door-to-door, it's faster, it's much, much cheaper. So as the product sort of starts to sort of cater even more to this sort of door-to-door kind of concept, we think there's also growth to be had out of places like France, which has been more sort of a profit center than a growth center of late. And just summing up, we're the second largest shareholder of this company now 14%. I mean that's not changed since we last spoke. And yes, we're very, very keen on this upside. I think, for the course of this year, monetization in emerging markets will be a very, very interesting thing to follow. But also beyond that, just generally from the sort of volatile year of '23, very, very sort of profitable and then '24 with the sort of the ceasing of these green revenues that they had in France, they're now on a very sort of stable footing and are profitable in earnest, and we see that those profits really sort of growing well into the coming years. So really, really keen to see this company now having just normal times and being able to grow in their -- in all their markets, but -- and especially in emerging markets and also monetize those, which will be obviously driver for revenues. And then a lot of that money, not to say all that money falls down to the bottom line. So those are few words on BlaBla. I'll hand over to Dennis to walk us through Voi. Dennis Mohammad: Thank you, Per. As we've highlighted in previous calls, Voi has had a very strong 2025, with net revenue growth in the 30% range and margin expansion across the board. On the back of this, VNV has written up its value in Voi by over 25% during the year, taking it from around 15% of the VNV portfolio to more than 22% of our portfolio this quarter. So given that performance and its increasing importance for VNV, we thought it made sense to do a bit of a deeper dive on Voi on this call. Starting with the basics, which I assume most of you are aware of, Voi is a leading European micromobility company. They operate both shared e-scooters and shared e-bikes in more than 110 cities in 12 countries. Whilst the hardware is the most visible part of the business, as you can see on the left most side of this slide, Voi is fundamentally a vertically integrated hardware, software and operations platform working as one system. On the software side, Voi has invested heavily in everything from machine learning for fleet optimization to ensure that supply and demand are matched in each city at any given point in time, to inventory and fleet tracking, the rider app that users see, but also the various types of data products for cities in the locations where Voi operates. On the operations side, Voi manages the full vehicle life cycle from sourcing and designing of the hardware to predictive maintenance and fleet management and ultimately, resale. To date, Voi has resold more than 60,000 vehicles when upgrading to newer models has made more economic sense than continuing to operate, which shows you how far this business model has come from where it started back in 2018. All of this makes this a highly complex industry and company, I believe, with meaningful barriers to entry. And it really strongly favors to operators that have invested in technology and operational excellence to drive down cost per ride, a metric we are fairly certain Voi is leading on in this industry. If you go to the next slide, Per, and apologies in advance for a slightly wordy slide, but I'll walk you through the highlights. Today, Voi has a highly diversified revenue base with over 100 cash-generating cities. The largest city accounts for only 8% of revenues. And we were often asked, I'm often asked what happens if Voi were to lose a major tender in cities such as Oslo or London or Paris. And the answer is really that the downside is quite limited here. The portfolio is diversified, as I said, and the fleet would just be reallocated to cities where they can continue to generate revenue, perhaps at a slightly lower pace in the beginning, but that is a very key component to the fact that it's a very kind of diversified portfolio of cities. Voi also has a very loyal and growing rider base with active users up more than 33% in 2025, highlighting that penetration remains very early in many European cities. And I'll show you a slide on that just after this one. Voi also holds the highest regulated market share in Europe at around 30%. And close to 80% of its revenues actually come from these regulated markets where competition is limited and unit economics are structurally more attractive. And then I think this is one part of why Voi has managed to achieve this margin expansion that we've seen over the course of the past 12 to 24 months. On hardware, Voi is now operating its ninth generation vehicle with roughly 1-year payback periods and an asset lifetime that exceeds 10 years. Also that a big improvement versus the first models that we saw in 2018. And during 2025, Voi scaled its e-bike offering quite meaningfully with further expansion planned also now in 2026. The benefit with e-bikes is that it not only diversifies the fleet, but it also broadens the user base and significantly expands the addressable market for Voi. You have more users willing to use the service. And over time, we expect additional vehicle types to be available on the platform as well. Finally, on this slide, Voi has industry-leading safety performance. On average, a rider will need to travel around 6 laps around the globe on Voi before being involved in a serious L2+ accident. And as a food for thought here, I think safety remains a core focus for Voi, but city infrastructure and car prevalence are also critical factors in that equation. If we go to the next slide, Per, as I alluded to before, what we're seeing here is the share of city population that are monthly and/or yearly active riders with Voi in a number of cities, but also for the top 50 European cities that Voi is active in. And as you can see, even in Voi's strongest cities, penetration remains quite low. In places like Stockholm and Oslo, more than 60% of the population remains untapped. And in larger cities such as Berlin, that runway is close to 90%. Voi has around 1 million retained monthly active users today, while more than 150 million people are aware of the brand and over 600 million people live in Europe. And I think this highlights how early the journey still is and how much growth there is to come from just growing user base. As mentioned earlier, Voi grew monthly active riders by 33% in 2025 with essentially no marketing spend, making this a highly efficient acquisition engine as well, and this is a metric we expect to continue to drive growth going forward. Going to the next slide and turning to this quarter or the fourth quarter of 2025. We've written down our stake in Voi by 7%. And -- while peer multiples have been volatile with mixed movements across the group and actually a net positive impact from the [ median ] multiple. VNV has essentially taken a more conservative view on the near-term LTM EBITDA forecast for 2026. This essentially reflects increased investments in mega cities such as London and Paris, which carry lower margins initially, but are likely to become the largest contributors to both revenues, but also profitability over time. Another thing worth highlighting here is that Voi is also investing in its first refurbishment hub in Poland, which expands vehicle lifetimes, improves unit economics and increases control over the supply chain, all positive long-term initiatives, but also part of explaining why we're taking down the EBITDA forecast in 2026. For the [indiscernible], however, we expect positive adjusted EBITDA and adjusted EBIT in 2026 with expanding margin versus 2025, but this will not be a year of steady-state margins. Instead it will be a year of continued investment within healthy positive margins, but prioritizing growth at the right price over short-term margin maximization, all of which we believe will drive long-term value for Voi. If we go to the final slide, this is actually not new from when we last looked at it in Q3. This shows Q3 LTM figures. And we -- as I said, we also did that in our last call as Voi actually reported ahead of us. This quarter, they're reporting after us, so Voi will release its Q4 results in February. So we encourage you to follow that on their IR site. But in essence, you're looking at growth in the 30% range with significant market expansion across the board. That was it on Voi. If we move to the next slide, we're seeing HousingAnywhere, which is the leading platform for medium-term accommodation rentals, typically 3 to 9 months in Europe. Over the past year housing -- past years, sorry, HousingAnywhere has grown roughly 20% per year and has been adjusted EBITDA positive since 2024. During 2025, at the beginning of the year, we updated the management team and instated a new CEO, Antonio Intini. Antonio brings tons of experience in the real estate and tech sector, having served both as Chief Business Development Officer at Immobiliare, which is Italy's leading housing platform, and several years at Amazon before that. During the year, we've also spent time and resources on updating the company's long-term strategy, where VNV, through me, have supported operationally as well. And as part of this work, HousingAnywhere is expected to complete a new funding round in the near term to finance its updated management plan, expected to close during this quarter or the first quarter of 2026. VNV is committed to invest around EUR 1 million in this round. And in the fourth quarter of 2025, since that was already decided, we have reflected -- we've adjusted the carrying value of HousingAnywhere to reflect that transaction, which is done at a small premium to our NAV. If we go to the last slide on my end, that is Numan, which is a digital health platform for specialized health in the U.K. As we've talked about in the past, this company has seen massive growth in its weight loss vertical from GLP products -- sorry GLP-1 products in the past couple of years. And it's expected to close 2025 with triple-digit growth on revenues and positive EBITDA despite increasing volatility in this market following Eli Lilly's price increases in the third quarter of 2025. This marks the second consecutive year with over 100% growth on top line and positive EBITDA for Numan. We also note that our sector colleague, Kinnevik, made an investment into this broader space, different business model, different company called Oviva, but definitely shows the interest in weight loss market in the U.K. In this fourth quarter, we value our stake in Numan on the back of a transaction that took place during the summer of 2025, where Numan raised both equity and debt to the order of around $60 million. So for that reason, the valuation is essentially flat in Q4 of 2025. That's it on my end. Handing it over to my colleague, Bjorn, to speak about Breadfast. Björn von Sivers: Thank you. A few quick words on Breadfast here, which we value at $30 million for the VNV stake based on the capital raising they have done during 2025. The company has been doing really well and accelerating growth during the year, ending the year with sort of a run rate GMV of around $290 million. And again, as a reminder, Breadfast is online grocery, quick commerce business based in Egypt. Primary market is Cairo, where they're currently expanding their footprint across the city with a lot of new fulfillment points. And importantly, while also sort of sustaining healthy contribution margins. We're super excited about this company, and I think they will have, hopefully, a stellar 2026. And if we move to the next slide, I'll also mention a few words on Bokadirekt, the SaaS beauty marketplace out of Sweden, a dominant player in the market, also a company that's doing well. Stable growth, 2025 looking to close short of just shy of SEK 200 million in net revenue with EBITDA of SEK 50 million. So in absolute terms, sort of still on the smaller side, but really solid business, which we think sort of have both potential to continue sort of stable double-digit top line growth, while improving margins, not maybe to the sort of full classifieds type level, but definitely increasing it compared to where they are today. And with that, I think we're sort of through the sixth largest holding, and I believe it's time to open up for Q&A. Björn von Sivers: As Per mentioned, and sort of if you want to ask a question, please type it in sort of in the chat or Q&A function here in Zoom, and we'll try to address them. And the sort of, I think, 2 BlaBlaCar related questions to kick off with. We already received this one, is there any new information on these energy saving certificates that we've discussed historically that were there and that's moved -- got away. And then also is BlaBla -- sort of more general question on the BlaBla product. Is this more focused on national users in their different markets? Or is it also sort of a visitor/tourist element to the product? Per Brilioth: Okay. Thanks. I'll take those. So yes, the energy saving certificates in France for transportation is gone for now. So the French government opted to sort of tax the energy -- heavy energy users rather than sort of let the market sort out. Trying to get the heavy users sort of reducing energy and the ultimate sort of goal of this. So in France, it's not present at the moment. It may come back, but we don't know. I think it will need sort of more stable sort of politics and sort of budgetary processes. Having said that, it's been started in Spain a few year ago and it's really growing fast in Spain, and it's -- the Spanish government thinks it's the best things in [indiscernible]. So it's like really popular across the board there and starting to contribute meaningfully. It's not yet meaningfully to sort of BlaBla revenues, but most importantly, to earnings because this is obviously very higher-margin revenue for the company. It's not yet to sort of the very high levels that we saw in France in 2023 when there was the base sort of -- the base level of these energy savings certificates, but in '23, they also had a booster on it. So Spain is still below that, but still a very good contributor and take a few years and be at the French level, but that's a very positive. And then we'll see what happens in France going forward, but it's not present for now. And the BlaBlaCar, yes, it's mostly sort of local, national, sort of going to visit parents or going to work, university, et cetera, inside the countries, but there's also a fair bit of cross-border stuff also for inside Europe for work purposes, but also for, we'll call it, tourists, that use it to go from Amsterdam to Paris, et cetera, when -- as it's -- again, using it for the same sort of reasons that sort of locals use it. It's cheap and it's also point-to-point. Björn von Sivers: And then I think we have a Voi-related question. You referred to a potential listing of Voi also sort of on the back of a potential IPO of its competitor. Why not move ahead and become the first and leading one? Better to be first than second. What's holding you back or Voi back in this case, I guess? Per Brilioth: Yes. Voi is not in need of equity funding right now. And so from a company perspective, it doesn't have to do this. And if Lime were to IPO or when Lime IPOs, I guess maybe it's more fair to say because there's been a lot of talk and they seem to be heading in that direction. And that IPO sort of establishes a certain sort of attractive cost of equity capital for the industry, then, in my view, I think that accelerates Voi's path to also being listed. But sort of putting that aside, I think sort of the timetable in my perspective for Voi is more to provide liquidity to shareholders who need liquidity, that being a reason from do a listing. That's more something that maybe happens in 2027. So -- but things could change on the back of a Lime IPO. Björn von Sivers: Thank you. And then we have 2 questions sort of around the discount and buybacks. So the question is, discount is persisting, we've done sort of relatively modest buybacks to date. Have you considered being more aggressive on that side, or can you? And what's the sort of considerations there? Per Brilioth: We will -- we've been buying back stock in VNV for, I don't know, at leat -- I mean, as long as I've been around, since 20 years. I think if you look across past 10 years, we bought back stock and distributed sort of cash to shareholders to the order of like, is it $750 million? So -- but throughout these years, we've done this in a very opportunistic way, not sort of buying on a downtime, but not chasing on an update kind of thing. And so that's the way we've sort of approached it over the autumn, and I think we'll continue to approach it. And then if sort of certain sort of block size opportunities come up, we'll look at those, too. But otherwise, we'll just be optimistic in the market. That's our way about it. We have quite a lot of gross cash, so there's firepower to do a lot. I know the net cash is smaller. But we're also working on a few exits, none of the sort of big, major things, but in the other part of the portfolio. There's some exits happening outside of us, which could lead to more liquidity. So yes, it's -- for us, who has this sort of insight into the performance of the portfolio and the development and the way we see that from the level of NAV, substantial returns, we'll be able to -- it will generate substantial returns from the NAV level. There's just nothing better for us to do. So I think you should expect us to continue doing this, but in an opportunistic way. I mean, speaking of Voi, I mean, I know we have Voi marked wherever it is. It's at $127 million today. I, in fact, think that you could argue in some ways that Voi -- our position in Voi today is, the way we value it, understates it massively perhaps to the extent that our stake in Voi sort of makes up the entire market cap of VNV and everything else is for free. I know that sort of requires having sort of a little bit of faith into them performing over the coming years. But the way from where we sit, we think that's entirely possible. But yes, so to give you a sense of buybacks. Björn von Sivers: Thank you. Another question here. Looking at the pro rata share of earnings, which you communicated, it looks like 2025 margin assumption is slightly lower quarter-on-quarter compared to third quarter. What has driven this development? Dennis, can you take this one? Dennis Mohammad: Happy to. So I think the question is on the $3.2 million of pro rata adjusted EBITDA, so that's the VNV share of the pro rata EBITDA of the portfolio companies in the top 6 list. As a reminder, Voi is on adjusted EBIT here, not on EBITDA. The biggest difference, so this is around 2%, 2.2%, I think, percent margin versus, I think, 2.5% to 3% range that we had before. And the biggest driver of that delta is -- a couple of hundred thousand is Breadfast that has invested quite heavily in growth, as Bjorn alluded to earlier. So they have seen a bigger kind of top line growth than anticipated, but done so at a slightly lower margin. So that's the biggest driver for 2025. And then 2026, we will get back to you in a couple of quarters' time. Björn von Sivers: Thank you. There's also a question here that says, arguably, you've been hurt by the dollar decline without any underlying assets that actually have dollar exposure. Have you considered changing your reporting currency? And so -- I mean, it's true that today, it's very little dollar exposure across the portfolio and, more importantly, on our sort of cash side. It was more dollar exposure in the beginning of 2025, where we still had Gett, which arguably could be sort of was priced in dollars and made up a sort of meaningful part of the portfolio. The historical sort of our reporting currency of USD has historical background. We've been reporting in dollar terms since the very first iteration of the company, which many years ago when we sort of still was a [ Bermuda Topco ] and had the [indiscernible] listed in Stockholm and that sort of continued while did the redomestication back in 2020. But given the change in the sort of portfolio, we have reviewed this topic, but haven't sort of made a decision or come to a conclusion. And again, sort of given that the portfolio is not dollar-denominated, the value sort of is what it is irrespective in which currency you reported. But there's obviously sort of pros and cons in communication especially in these times of very volatile effects. With that, I'm checking here if there's questions that we have missed. I think, sort of -- there was a few questions here on a more broader topic around our larger holdings and how we think about sort of -- when we do an investment, how do we think about and review the sort of original thesis we had when we did the initial investment? How sort of -- what frequency do we will review that? And if we realize that our original thesis was not, or is not sort of playing out, how do we think about that? And how do we sort of try to proactively work with those type of examples in the portfolio? So maybe if we can give a broad answer there. Per Brilioth: Yes. I think that's done sort of continuously. It's not that we have a meeting on a special position sort of every quarter and we go through it. I think it's done very continuously. And I think the way you should -- the way this sort of works out is that if -- typically, if we invest in something very early stage, then -- well, the tickets are very small. And if it doesn't work out, we stop funding it basically. It's not really possible to sell the market for those sort of really early-stage positions. It's very illiquid and seldom sort of works to sort of sell, but we stop sort of -- we've made a small check and then we don't do any more checks. There have been situations where we have sold where it has some sort of really, for various reasons, not sort of fitted in the portfolio. And then we have been proactive in sort of trying to find a buyer. We have found buyers typically and then sold them. And then there are situations where we -- I mean, Numan, which is the -- yes, it's the fourth largest of our positions and -- which is a really good company, a really strong company, but it's not quite what we invested in, in the beginning when it was much more community-based sort of phenomenon around male health. And well, the larger the community, the better the product kind of thing. So you sort of get this natural network effects around it. It's evolved from there to being more of a teledoctor, with an e-pharmacy attached to it. And it's a good company, but it's not really network effect. So here, we -- it's a big position for us. We're on the Board. We're quite active around the company. But yes, it's -- the original thesis hasn't really worked out, but it's developed into something good anyway. And we're not -- the sort of the good performance has not made it -- made any sense for us to sell into because prices have improved. So we've held on to it. Björn von Sivers: Thank you. I believe we're through the questions that I see here. If we missed anything, please ping us on e-mail or whatever, we'll try to address it offline. But with that, I'm sort of -- yes, over to you, Per, for final few words. Per Brilioth: Yes. No, thanks for joining, and you know where to find us. As Bjorn said, please, please, it's always great and fun to talk and address your questions in this format, but also on a one-on-one basis, if you want to kick things around. We report next time, I think it's April 22. So if not before, then please join us for a similar exercise for our Q1 of 2026. Thank you. Björn von Sivers: Thank you.
Mary-Ann Chang: Good morning and good afternoon to all our listeners. Welcome to Scancell's results call for the 6 months ended 31st of October 2025. My name is Mary-Ann Chang, Investor Relations. And with us presenting today, we have our CEO, Phil L’Huillier; and our CFO, Sath Nirmalananthan. After the presentation, we'll conduct a Q&A session for which you may submit written questions at any point during the webcast. Before we start, a few housekeeping items. This call is being recorded. [Operator Instructions] Please note, today's discussion will include forward-looking statements, which are based on current expectations and assumptions. Actual results may differ materially, and we encourage you to review our filings for more information on risks and uncertainties. With that, I'll now turn the call over to our CEO, Phil L’Huillier, to get us started. Over to you, Phil. Phillip L'Huillier: Thank you, Mary-Ann. Hello, everybody. Thank you for joining this Scancell update. Both myself and Sath will present this update to you this afternoon. This is our disclaimer. Here's a summary slide of the highlights for the interim period that we're summarizing. iSCIB1+ as a novel DNA active immunotherapy has shown and is showing best-in-class potential. It has the potential to redefine the standard of care in first-line unresectable melanoma, a really terrible condition. This is a significant unmet need and a large market opportunity, blockbuster opportunity as pharma calls it. And we're now at the stage of being registrational ready to move this product forward into a Phase III registrational study. iSCIB1+ has demonstrated progression-free survival of 74% at 16 months. That's a 24% delta over historic studies and real-world data that exists from recent studies. And it has the potential to really double standard of care progression-free survival as the study continues to read out with no potentiating toxicities. We have a strong clinical data package, a translational package also. And these packages illustrate to us that we understand well how our drug is working, and we understand mechanistically what's going on. And we understand why we're seeing long durable responses because we're seeing development of memory T cell responses in our patients and those T cell responses correlate to clinical response. This product and the platform that iSCIB1+ comes from ImmunoBody is really now a differentiated therapy. The platform is validated in the clinic with the recent data and the endorsement from the FDA earlier in the week. It overcomes some of the predecessor challenges that existed with these types of technologies. And we have clinical monotherapy efficacy data as well, which highlights the potential to move into earlier settings in melanoma, what we call neoadjuvant adjuvant setting. We're putting in place the commercial building blocks in parallel with advancing forward the development of the Phase III program. And we have a strong patent protection through to 2041 for the product. So the commercial proposition is really very positive. It's a large market opportunity, and we have protection in that market for a long period of time. Those that follow us closely will have seen we announced this week clearance from the FDA for our Phase III study. That was a very positive interaction we had with the FDA, and I'm delighted that we've got that clearance. There's really nothing standing in our way to move this forward in partnership or alone into the clinic and on our time line and on our plan, as we'll show you, we see the possibility to take this to commercialization in the second half of 2029. We've had a strong focus over the last couple of quarters on the lead program, the ImmunoBody platform and iSCIB1+, but we shouldn't forget the additional assets that make up our pipeline. Modi-1 is in the clinic in 2 studies in head and neck and renal cancer. And we also have the GlyMab's portfolio of antibodies at the preclinical stage, and we continue to progress forward those 2 parts of our pipeline. We also continue and have had good active conversations over the last quarter, evaluating partnering and financing options. As I've said previously, we deploy a two-pronged strategy, build to go it alone whilst be opportunistic for partnering, and we continue to work both of those fronts as we move forward to find the path to take our lead program into the clinic. This slide shows you our pipeline. That's a little more extended than some of the earlier versions we've had. You can see on the top there, the 2 clinical platforms, the ImmunoBody platform with the SCIB product, but also the modified platform with the Modi-1 product. And as I just mentioned, iSCIB1+, we selected that during the year to go forward into development for quite a number of really important reasons. And it's that product we want to take forward into the Phase III later in 2026. As I touched on alongside that, Modi-1 continues in the clinic in the 2 indications, head and neck and renal, and that program is progressing positively. We, of course, have 2 partnered assets, as you can see on the slide, further down here with Genmab. Two antibodies heading towards the clinic under Genmab's development. And those -- both of those programs are on track and an important validation of what we're doing in the antibody space, but also they are potential upsides for us, as Sath will come to. And then in-house, we have 2 programs that we're talking publicly about in the antibody portfolio, GlyMab Therapeutics, one in small cell lung cancer, SC134 and SC27 that could be used in various cancers. We are moving forward those 2 products also. Let me come back to iSCIB1+. It has the potential to redefine the standard of care. This slide shows you the market opportunity and the market potential here. On the left, we lay out some of the indicators of the substantial unmet need that still exists in advanced melanoma. It is the fifth largest cancer. Unfortunately, there are a lot of patients die from this disease and a lot of patients that receive current therapies, but relapse or are resistant and need something else pretty quickly. 5-year survival for late-stage melanoma is very, very low. Only 1/4 of the patients are still alive at 5 years. So a substantial unmet need. And I think we have a product here that will really make a dent in that unmet need. In the middle of the slide here, you can see the patient journey, but also the therapies that are being used or being evaluated as the patient progresses through the stages of melanoma. As you can probably see from this slide, we are down here in the blue box in the frontline advanced melanoma. That's where we're working at the moment. That's where the bulk of our data from the Phase II study comes from, and that's the focus of the Phase III. We know from our estimates of the market opportunity that, that market alone could be as much as $3 billion. On top of that, from our monotherapy data and from other work we've done, we know we also could go up to earlier disease, what we call the neoadjuvant or adjuvant therapy. And that's a real possibility to build out the value proposition in the future for the company. And that market opportunity is even more substantial in the range of $6 billion to $9 billion. So we're very much in blockbuster territory here. Over on the right hand of the slide, you can see the approved therapies. And below that, you can see the U.S. market and how the U.S. market is split for different types of therapies. The important takeaway from this slide -- this part of the slide is that 63% of patients in the U.S. receive still today the combination of ipilimumab and an anti-PD-1, most often nivolumab. And that's the combination of checkpoints that we are working with and that we'll add our iSCIB1+ onto in the Phase III. So even in the U.S., it is the dominant marketplace, let alone in the rest of the world. So a substantial market opportunity, and we have the potential to really create a new standard of care for advanced melanoma. This slide lays out the building blocks that we have put in place and we continue to build on to move forward towards a commercialization. We now have a product that we know is beneficial in the clinic and has an excellent safety profile. We have a protection, an IP protection out to 2041, a really long patent life here. The manufacturing is in place. It is a simple process off the shelf and it's scalable, and we have a long-term stability and the FDA have given us a good tick for our manufacturing process. We have in place a commercial agreement for a needle-free delivery device. This is our partnership with Pharmajet. That partnership includes development where we are at the moment, but also commercialization. We have had really good interaction with the regulators. The FDA clearance is, of course, the highlight this week of those, but we also have conversations going on with MHRA here in the U.K. and EMA in Europe. And then finally, we start to put our eyes on what does commercialization look like, how will we think about partnering and moving forward in a seamless way through registration and into commercialization. We have optionality there, and we start to really think about what that looks like. According to our study plan that we've laid out, we could be into commercialization in the second half of 2029. Just a reminder or an introduction for some of you, if you're new to us, of our iSCIB1+ product. It's a DNA ImmunoBody. It has a very novel mechanism of action. And you can see here that this is the product that's manufactured. It's a DNA molecule, a plasma DNA, we call it, delivered to patients with the needle-free device that I mentioned. It's in fact, a shot into each thigh and a shot into each arm, very quick, very convenient, pain-free for the patient. Scancell has developed 2 generations of this product over the last few years, a first gen that targets a restricted patient population and a second-gen product that targets a much broader patient population. And some of the learnings from the antibody work, as Lindy would say to you, have been applied to the second-generation product to improve its binding. So it's even better than the first-generation product. But importantly, it targets a much broader patient population. And our Phase II data told us which patients it works in. But also, we know it binds and it works better than the first-generation product. The product has epitopes to 2 proteins that come from melanoma from the production of melanin in the skin, epitopes to GP100 and TRP-2. Why are these relevant? Well, these were isolated from patients that have spontaneously recovered from melanoma. So that means the immune system sees them. But also from our translational work, our T cell work, we know that in most patients that they create an immune response to both of those proteins. And that's really important when you start to treat patients with this product because it makes it harder for the cancer to overcome the therapy and become resistant to the therapy because the T cells are working against both those products. So it's 2 shots rather than 1 to protect the patient, and that's really, really important. Our mechanism is a very novel one. The DNA molecule goes direct into muscle cells and is taken up, but it also alongside that, binds a receptor on immune cells, activated immune cells, dendritic cells, they call to stimulate a very potent T cell response. And that's an important part of the way it works and why we see such positive responses. I touched on before that we have some monotherapy activity from an early study that the company did. And monotherapy activity is really important in the pharma discussions that we have, but also that's doing the study in that setting helps us think about that earlier setting of the neoadjuvant adjuvant disease setting. But for now, we're developing the product in combination with the checkpoints. And that's what we want to take forward into the clinic in Phase III. There's quite a lot on this slide, but we've created this slide to illustrate why our iSCIB1+ and our ImmunoBody platform is differentiated from other therapies that have come before, but also why we believe in it for melanoma. So firstly, there is compelling science. Lindy and the team really developed a very compelling product with a very novel mechanism that when you compare it to predecessor products, it's overcome many of the weaknesses that were there. And basically, by creating these very strong high avidity T cells and targeting the 2 proteins, GP100 and TRP-2, we have overcome many of the challenges that led to products not progressing forward in earlier decades. This is also a nonpersonalized approach. It's scalable. It's cost effective. It's easy to manufacture, fast to patients and straightforward to deliver the patients. We have very good clinical validation now. I showed you the PFS data at the beginning. But I think the other thing to take on board now is we have a much better understanding of how to use the immune system to attack a cancer. And the combination of our therapy with the checkpoints is really an important part of success of our product, but products like this going forward. And that's learning over the last decades of testing different immunotherapies on the immune system. We've got the FDA clearance to move forward. We've also identified from our Phase II studies, a biomarker that we can use to enrich for responders as we go into the Phase III. This derisks that development. And then I've touched on the commercial opportunity, a substantial first commercial opportunity and even more substantial one to follow on in the neoadjuvant adjuvant, the resectable disease setting, and we have very good regulatory support to move forward with the study and to seek commercial approval second half of 2029, if the data stacks up in a positive way. This is the PFS curve. This is the data that I just mentioned at the beginning, iSCIB1+ showing you a progression-free survival at 16 months of 74%. You can see here when we overlay it with earlier older studies, that in this case, at 11.5 months, ipi and nivo alone show a median PFS that means 50% at 11.5 months. So we've got this big delta of 24%. Now let me just try to put that into a context for you. In the study that led to this -- the combination of ipi/nivo being -- becoming a blockbuster, at the same stage, the ipi/nivo combination was only 6% better than nivo alone. We are at 24%. So this is why we get excited about what we've got in front of us. Look at the difference in that delta. Now I have to caution that the ipi/nivo nivo comparison is from a single controlled study. And what I've done here is to compare across 2 studies. There's a bit of license there, but if you look at that delta, we're very excited about what's happening. And then -- so that's the clinical parameter. Clinical success is based on that progression-free survival. The commercial success really comes down to we make a difference to the overall survival. And at the moment, with the SCIB1 product, because we went into the clinic earlier, we've started to get data there, and we've got a 16% improvement for SCIB1 compared to that red line that I showed you. So the commercial proposition is also starting to build positively. And just to give you a comparison, some of you might have seen that Moderna published some data, 5-year follow-up recently. In their data, the risk of death was reduced in that study, and that's what they publicized. When I do that same calculation based on our data, we're actually at a similar order of magnitude. So we're tracking very well with the Moderna data that is published. But of course, remember, we're off the shelf. We don't have the high-cost logistics and the other challenges with our product. So I'm excited about this data as it builds both, as I say, for PFS, that's about the clinical impact, but also overall survival, that's about the commercial impact potential going forward. This is the indicative plan for the registrational study. It's a simple 2-arm study, as we call it. The control arm is the standard of care now, the ipi and nivo, and we put a placebo into that. And then the treatment arm is the ipi/nivo with our product, iSCIB1+ added on to that. The study will have about 230 patients per arm. So a substantial study that will be carried out across the U.K., Europe, the U.S., Australia and maybe some other locations. So a substantial study for us. And we have an initial readout as we go through the study, and that will be a registrational readout. But we also want to follow the patients for a longer period of time to do a post in-market follow-up on the survival of the patients. Down the bottom here, we've got a number of factors that we stratify the patients coming into the study for. So that means we just balance each side of the study with patients of particular types so that it's a balanced study. This is the design that the FDA have seen and -- let me just comment on how do we think about risk mitigation in a study like this. There is still risk there. That's the nature of what we do. But we believe we can really mitigate and are mitigating risk in the study design. First of all, we did a fairly substantial Phase II translational or exploratory study with 140 patients in it. It was designed to determine the parameters, the key parameters for the Phase III study, and it was successful. We've been able to identify those parameters. We use some of those parameters to give us a statistical model to design the Phase III study, but we've used a conservative delta on that design. So we feel comfortable about the delta that we're using for that design. We've also built in a piece that we call an adaptive design. So if we get through towards the end of the study and we see we, for example, might not quite have enough patients in there, then we've built in the ability to add some more patients to make sure we hit the end goal. And also then we've looked very hard at our patient characteristics. We often compare our data with that historic standard of care, as I was showing you earlier. Okay. So then you ask the question, how do our patient characteristics look compared to those patients from that study, CheckMate 067, but also alongside real-world studies that have been recently conducted. And we know our patient profiles are very similar. So in other words, we've not inadvertently or on purpose selected patients that are one type or another, and they are not directly comparable with those older studies. They are very, very comparable. And then as I've showed you previously, we've also looked at subgroups of patients where the benefit of particularly the checkpoints is less because of a particular condition of the patients. And we know when you add iSCIB1+ on top, that adds a benefit in all of those, I call them poor prognosis subgroups. So we've done a detailed analysis of our patient characteristics and feel really comfortable we're comparing like with like, and therefore, that helps us mitigate the risk going forward. In terms of market risk mitigation, it's worth recognizing that we have that study in metastatic disease, but we have the possibility of doing the neoadjuvant study also. And the neoadjuvant study is derisked because we've seen monotherapy activity in that setting previously. Of course, investor risk is also mitigated, I have to say, by the other components of our portfolio, the Modi program, but also the GlyMab's part of the portfolio. So I feel really comfortable that we have a design. It's been endorsed by the FDA, and we've really thought through how do we mitigate risk here to be successful in the outcome. Here's a summary of the regulatory conversations. Massive tick here on Monday or Friday, but Monday when we announced that we've got IND clearance. Getting IND clearance for a Phase III registrational study is a pretty rare beast, but it's an even rare beast as a U.K. biotech company. I'm really proud of what we did there. What it means in breakdown is the FDA have said, we accept your proposal for the dose and how you deliver the dose Scancell. We accept and we agree with the design of the study, the stats plan, the endpoints and all of those things. Your manufacturing process is satisfactory for this late stage of study. And then on other information and other studies, preclinical, nonclinical, other sorts of studies, they agreed that we had satisfied all of those criteria. They've granted us a safe to proceed and IND is open, and they've granted that with a surrogate primary endpoint. That's effectively granting us an accelerated approval in the one swipe of the pen. So it's a really big outcome for us and a really exciting time for us. As I touched on earlier, we progressed forward with the MHRA and EMA and other regulatory bodies because it will be a global study. Now with the IND under our belt, we are also moving forward with a breakthrough designation application and other regulatory applications and the CTA is near completion. CTA's clinical trial agreement, the next step down underneath the IND clearance that you need to move forward a study. So really strong progress on the regulatory front. This slide comes back -- this slide and the next slide are really where we start to think about what's the longer term look like, now with a validated ImmunoBody platform? We're able to start to think about what's beyond iSCIB1+ in advanced melanoma. So perhaps for the first time down the bottom of this slide, we've started to think about how else could we use this platform. And there are a lot of possibilities here. So this makes the market opportunity and the value potential of the company even more substantial going forward. I think we've probably shown SCIB2 before with the NY-ESO antigen. There are a number of others now we are in concept stage, I'll say, thinking about. I'm not going to disclose those antigens. We're in a world in the biotech industry where things get copied very quickly these days. And then if you look more broadly across the Scancell portfolio, my last slide, I think, but just to say to you, we have the iSCIB1+ program in melanoma, and there's multiple ways we can move that forward in multiple indications in the future this product could be taken into. But the ImmunoBody platform, iSCIB1+ -- iSCIBx has the potential to go into quite a number of other therapy areas. So a lot of potential in that platform. But on top of that, there's the Modi program, which is applicable to a broad range of solid tumors, and that has its own potential and is making good progress. And then, of course, there's the antibody portfolio where there are a number of products at various stages of preclinical development. So as a company, the potential currently is substantial, I think, but the future is even larger for us. Let me finish there and hand over to Sath to walk you through the financials. Sathijeevan Nirmalananthan: Thank you, Phil. I'm pleased to give you the key highlights from the interim financial results for the 6 months ended 31st of October 2025 before updating you on some key upcoming milestones this year. Starting with revenues. Whilst there were no revenues in the period, as previously highlighted, there is potential for near-term milestones from our partnered assets with Genmab. Development of those antibodies remain in progress. And based on recent updates from the company late last year, we anticipate further milestones this year. As a reminder, there are up to $630 million in further milestone payments with low single-digit royalties and commercial sales on each antibody license with Genmab. Research and development expenses were $6.2 million in the period. Research and development costs predominantly reflect our in-house clinical, manufacturing and research costs, where the majority of the spend is discretionary in nature. The reduction in the expense from the prior period primarily reflects lower manufacturing costs. We made additional investment in iSCIB1+ manufacturing in the prior period to ensure readiness for future stages of development. We have a robust, scalable manufacturing process for iSCIB1+ with a high-quality formulation and long-term stability. It has allowed us to move seamlessly through regulatory approval for late-stage development, the recent IND clearance being a mark of the team's diligent preparation and execution on this front. Administrative expenses were GBP 2.7 million with continued focus on cost control. The increase primarily noncash share-based payments following the last set of leadership appointments and share issues. This leaves our operating loss at GBP 8.9 million. We record a profit on finance and other income of GBP 2.1 million and recorded tax credit of GBP 1.1 million, resulting in a net loss for the year of GBP 5.7 million. Our cash of GBP 8.6 million at the end of October 2025 was enhanced by the timing receipt of the R&D tax credit of GBP 3 million. This leaves our cash runway in line with previous guidance as the second half of 2026 beyond key development milestones and with runway for ongoing partnering and finance discussions. We do have upside on this runway, too, namely the development milestones for SC129 anticipated this calendar year. Furthermore, the discretional nature of our spend allows us to take decisions if needed. We have good investor support too and remain confident of our near-term runway as we evaluate the right way to develop all of our assets. Next slide, please. Here are the key milestones for Scancell. We've made really strong progress over the last 18 months with solid execution from the team behind the scenes and on time, too. For iSCIB1+, we have already delivered U.S. IND clearance and we'll pursue U.S. Fast Track status on the back of this. Fast Track status has multiple benefits, including regular interactions with the U.S. FDA, which will favorably impact time lines and costs. In parallel, we are pursuing regulatory clearances in the U.K. and Europe, and we have already received some positive feedback in discussions so far. We continue to build our capabilities to execute development in-house while we assess the right way to finance the next stages of development. And on that, the recent IND clearance represents an important development milestone. It strengthens our development plans and discussions. And off the back, we are actively evaluating our options to ensure the right way forward with timely development and shareholder value in mind. In addition to the lead asset, we expect to report data on Modi-1 in the first half of this year, following which we will assess the right development path for that asset. Further, Genmab milestones, as I previously highlighted, are expected in the next -- in this calendar year. And finally, GlyMab Therapeutics, we continue our partnering and strategic discussions with the preclinical portfolio of antibodies targeting these novel glycans. This includes the most progressed antibody, SC134 for small cell lung cancer with -- which has a novel co-dosing approach, which we're quite excited about. We're also focusing on further antibody discovery in this space, too. So lots of upcoming milestones, and we remain confident of our ability to develop these assets and realize their true potential. Thank you for listening. I will now turn over to the operator for questions. Operator: [Operator Instructions] We'll take our first question from Julie Simmonds with Panmure Liberum. Julie Simmonds: Congratulations on all the good progress over the last few months. Initially, I was just wondering about -- you're talking about the sort of stratification of the patients in the iSCIB1+ Phase III. I was just wondering whether you have any idea whether you're expecting to see any geographical variation in that when you start bringing geography into the patient recruitment? Phillip L'Huillier: Julie, I'll take that one. Thank you for that question. We've looked very, very closely at the HLA types across geographical locations. So understand those details, which, as you know, our product works on that basis. And in the territories that I mentioned that we will go into in the Phase III study, I think we understand the patients from that perspective and don't anticipate major differences. Julie Simmonds: Excellent. That should simplify that. And then I was thinking you're currently applying for breakthrough designation for iSCIB1+ as well. From a sort of practical perspective, at what point do you think that might be likely to be received? And what difference does it make for you whilst the trial is ongoing? Phillip L'Huillier: It's a relatively fast process. It's kind of probably a 2- or 3-month process. So we should have an outcome on that fairly quickly. I'm a hostage to fortune now, but it's a relatively quick process. And what it means, as Sath mentioned, is that we'll be able to have more regular and ongoing dialogue with the FDA. And that's important as we go forward. You will have seen it over the last 18 months, the changing regulatory landscape out there with the FDA, but also elsewhere. So being able to have an active dialogue is important in this process as we move through this study. And I have to say the conversations to date that we've had over the last quarter with the FDA have been really collaborative and really positive. So I'm very pleased where we are with our interaction. But these other designations will help us have further interaction as we move through the Phase III study. Julie Simmonds: Excellent. And then just on the GlyMab program, you talked about a co-dosing approach for your sort of lead one there. Can you tell us a little bit more about that? Phillip L'Huillier: Yes. We have shared a little bit of data. I think I shared a little bit of data to tantalize everybody at the AGM on that, and we've now filed a patent over that approach. But Lindy and the team have identified an approach that uses a co-formulation of a code antibody and a T cell engager in combination and that has shown much greater efficacy. And also in at least our laboratory studies shows reduced toxicity. So what we could have in our hands here is a generally applicable approach to improve both the efficacy of this type of product, but also reduce the toxicity. And you'll know, Julie, that CRS toxicity is a feature of T cell engagers. So we're excited about this product and this new development and potentially have a best-in-class in small cell lung cancer on the back of this co-dosing approach. Operator: Our next question comes from the line of Edward Sham with Singer Capital Markets. Edward Sham: Congratulations on another great update. So I think my -- I've got 2 questions really. So congratulations on the IND clearance. And I'm just thinking whether that will change the quality of conversations you're having with potential partners for the Phase III? Phillip L'Huillier: Yes. Good question. Yes, absolutely. I think it's an important catalyst for both the conversations we're having with pharma and mid-caps, the strategics, but also with investors. And in both cases, it illustrates, I think, not only the quality of the product, but the quality of the data. And as Sath touched on, the quality of the team that executed this, we're executing with pace and with precision. So it makes a difference to all of those conversations, and it is, I think, a key catalyst for the next stage. Edward Sham: That's really helpful. And then just my next question, just really on as you wait for the funding for the Phase III, what preparation activities can you continue to progress? So for example, the CTA? Sathijeevan Nirmalananthan: Yes, absolutely. I'll take that one, Ed. Absolutely. We've got a decent runway, and we've got things planned that allows us to move as quickly as possible into Phase III development. The team are working diligently just to make sure that we're prepared and well planned as possible, subject to financing, of course, but we are making good steps so that we can start the study and build capabilities this year and start the study this year. Operator: As there are no further questions on the conference line, we will now address the written questions submitted via the webcast page. I will hand over to Mary-Ann Chang, Investor Relations to read this out. Mary-Ann Chang: Thank you. So we have a follow-up for you, Sath. This is from Frank Gregory at Trinity Delta. I have read and heard about your plans to explore partnering arrangement, but I guess this is directed to Sath as he used to be an analyst in former life. Why are you not thinking of going it alone more proactively? The scope data is very solid, and you can identify the patients likely to respond. We reckon the study around 500 patients. So the risks are containable and the funding doable. The arithmetic is quite compelling, go it alone until the interim data in and retained with so much more of the value. So Sath, those are his words. Over to you. Sathijeevan Nirmalananthan: Thank you, Frank. Thanks. It is an option, as Phil has highlighted, that we will actively consider. We are pursuing a dual track process. But Frank is right. The market potential, as we've highlighted, this has blockbuster potential. And so when we do the financial modeling and when we think about the value that this has, we have that go alone strategy firmly in our sight too, and it provides a nice proxy for conversations that we have on the partnering side. But it is something that we are actively evaluating. And the market potential and the sums that we have in mind for further development would make it compelling if we did decide to go alone as well. Mary-Ann Chang: Okay. So it's related to that, a similar question on financing, but from a different angle. So if we could just continue Sath. With your cash runway to H2 2026, could you please provide more commentary on options being explored, in particular, how you think about dilution risk? Sathijeevan Nirmalananthan: Sure. I think it's definitely something very topical. But as I want to give a strong confidence on our runway. We feel very confident with the assets and the milestones and the pipeline that we have. And we have optionality. We've got multiple assets and multiple ways to raise funds as well. We are in active conversations on the partnering side. And one of those is thinking about how to drive shareholder value, too. So when we think about the individual assets and how we can drive value and drive development of iSCIB1+ forward, we continuously evaluate what it means for shareholder value too. So that is something that we will take into consideration when we pick a path forward. Phillip L'Huillier: It's perhaps worth adding there, Sath. If you read between the lines with Frank's question, when he does the numbers on the potential upside of going it alone, it's less about, I think, dilution risk and more about retain value and grow value by going it alone. Sathijeevan Nirmalananthan: That's very true as well. I think the long-term potential, even if we did go alone, will definitely drive shareholder value. This is a blockbuster market, and we've got multiple assets. So a very good point, the long-term potential, whichever way we go, there's huge value to be gained here. Mary-Ann Chang: So going back to the data, Phil, there's a question about the chart that you showed. Forgive me if I missed it. Could you please explain why the PFS chart on Slide 10 is flat for iSCIB1+ versus standard of care? If you could just give a little bit more explanation there, please. Phillip L'Huillier: Well, that's a nice question. Thank you. It's flat because no patients are relapsing. So it's flat because all of the patients that are still on therapy are still getting a benefit from the therapy. So it just adds to our duration of response that these patients are on therapy, responding and remaining on therapy. It's very positive, unusual, too, but very positive for us. Mary-Ann Chang: Yes. And then related to that, another shareholder has asked looking out, could the results improve from here? So can you give a sort of an indication of should that -- where could that line be going? I think is the question. Phillip L'Huillier: Could the results improve even further? Yes, if you look at that PFS curve we were just talking about and it's flat, and you can see that as it's flat and the other red line is going down and down and down. So if our curve continues to stay flat or near flat, then the delta continues to grow. So it could become even more a greater delta. Mary-Ann Chang: Yes. Right. So the delta is the key to watch. Very good. Okay. We have another question on the Phase III trial. I understand the registration trial is to read out second half of 2029. Will there be any or even many updates during the trial? Or do we have to wait until the end, Michael Hart? Phillip L'Huillier: That's a very good question. By the nature of the design as a double-blinded study, as we call it, it means there are not data updates as you go through the study, like has been possible with, say, the Phase II study, where we do get data updates and we can share those. We won't even as a company, see results going through the Phase III study. It's double blinded. So that means we and the patients and the clinicians don't see the results as it progresses. And that's an important feature of the study because that feeds into the statistical power you have to analyze the results at the end. So it is a study that we take on board and then we execute that study. Where there will be readouts as we progress through that is things like our recruitment rate, our recruitment success because that then impacts on the time line. So I think that's the sort of milestones we will monitor is our recruitment, our execution of the study. I should also say there will be news flow also coming out of the company over this period of time from other components of the pipeline. If we start a neoadjuvant study, there will be news related to that study. That won't be a double-blinded closed study. So there will still be a lot of news coming from the company, but that Phase III registrational study is blinded for statistical reasons and for patient reasons. Mary-Ann Chang: Good. Question on SCIB1+ -- sorry, SCIB1 was granted FDA orphan drug status in the U.S. Does that automatically transfer to iSCIB1+? Or would you have to apply again for iSCIB1+? And if so, will it still meet qualification criteria given the expanded patient population? Phillip L'Huillier: That's a good question about orphan drug status. I'm not totally sure about the process of changing over from one product to the other. I think it possibly is a new application. But perhaps what's more important here is an orphan drug designation relates to a defined and small patient population. So whereas SCIB1 could get it because it just treated the A2 patients, about 30% of melanoma patients. Because iSCIB1+ works in 80% of the patient population, I think it's probably too big to get orphan drug designation. It's a good problem to have. We've got a large commercial opportunity now, which we may not get orphan drug designation for. But what's more important now is accelerated approval and breakthrough to move us forward to registration. Mary-Ann Chang: Good. Looking at the rest of the portfolio, there's a question if you can give more of an update on the rest of the portfolio. You've given some update, but any more detail you can add for either of the 2, Modi-1 or GlyMab? And in particular with GlyMab, there's a question on the progress in setting up the subsidiary status. Phillip L'Huillier: Yes, yes. Okay. Let me, first of all, take Modi-1 there from the modified platform. As we touched on through the presentation, it's in -- Modi-1 is in a Phase II program in the U.K. in head and neck and renal cell carcinoma kidney cancer. That study progresses well. We are progressing towards full recruitment, in fact, in that study. So recruitment has progressed nicely. We continue to follow up and monitor the patients. We're now looking for a PFS readout, which will happen over this quarter, this half year. And then that could well be a driver subject to that data to a potential licensing opportunity and non-diluting financing for the company. That's certainly how Sath and I think about the opportunity. So we're excited about the program and about the progress of the product, but we don't have sufficiently mature data yet to talk about it either here or quite yet to talk about it with pharma companies about working with us to take it forward. The second part of the portfolio and the second part of the question was around GlyMab Therapeutics. We have gone through the process of setting up the subsidiary entity, and we've done a lot of work around conversations with pharma, strategics as well as investors to join us in the journey to make a wholly owned subsidiary and then bring investment on to progress that portfolio forward. The -- we've had a lot of conversations, and we continue to have further conversations there, and it's something that we continue to progress to move both the portfolio forward, but also move forward the concept of creating the GlyMab Therapeutics entity and then putting in place the management and investment to move forward the portfolio. Mary-Ann Chang: All right. We have one more question that just came in. In today's RNS, you mentioned partnering the broader ImmunoBody platform. Could you explain a little more about this, please? Phillip L'Huillier: Yes. You will have seen as we went through the slides that what we've got in our hands now is a validated platform that really is very effective to treat late-stage cancers. And I wouldn't call it quite plug and play, but in fact, we are exploring at a concept stage, how else do we move this platform forward and what else can we apply it to. And there is possibility, I think, now because of the validation from the iSCIB1+ and the scope study to contemplate other products being developed with this platform. And those even at an early stage may tickle the fancy of pharma companies to come on board and collaborate with us in disease areas where they are focused. Mary-Ann Chang: Very good. Going back to -- Miles Dixon has come back. He asked about the Kaplan-Meier curve. And he's asking on this, just how unusual is it to have a completely flat curve for 10-plus weeks in these patients? What is the end number? Phillip L'Huillier: How unusual is it to have a completely flat curve? That's a hard one for me to answer. You do -- I have seen in many other studies, curves like we see here where there's a rapid decline initially because of comorbidities of patients at the early stage and then the curves typically flatten out, maybe not absolutely flat, but flatten out as they progress over time. So it's not unusual. In the context of a long-term study here, we need to be -- remember that what we're talking about here is we have 16 months data. So it's a short snapshot of data that we're looking at, at the moment relative to long-term benefit for patients over 3, 4, 5 years. But I am really delighted to see that once a patient goes on to therapy and responds, that response is very, very durable. Mary-Ann Chang: Very good. Good. We have one final question asking about liquidity. And given the conservative nature, the question says of U.K. fund managers, have you looked at a stock rotation on the U.S. market to broaden the shareholder base? Sathijeevan Nirmalananthan: Yes, we have. It is something that we've evaluated and I'd be quietly confident of our capabilities to be able to dual list, and it's something that we will continue to consider with development and access to capital in the U.S. and liquidity in mind. So I think the potential of a NASDAQ listing for pretty much all biotech is there for everyone to see. And it's something that we have actively considered and we have the capabilities to deliver. And if the time is right, we will definitely look to pursue that at the right stage in terms of a dual listing. But we're evaluating all our options at this stage, and we'll keep investors updated as we make decisions. Mary-Ann Chang: Very good. There are no further questions. So I'll hand back to Phil L’Huillier for closing remarks. Phillip L'Huillier: Good. Thank you, Mary-Ann. Today, my closing remark goes to acknowledge the team that put together the IND application. You'll remember those that follow us that during midyear or at the end of the summer, we said we're pivoting, going forward with the intramuscular approach, and we needed to get on with regulatory submission and planning for a study. A team put together 104 documents and submitted this to the FDA just before Christmas. They took a breath and waited over the Christmas, New Year period and into January to see how many questions would come back from the FDA on our 104 documents. There were, in fact, no questions back from the FDA. The FDA read all of that material and endorsed what we proposed as our study, back the data, back the manufacturing. It was a Herculean effort. I'm really proud of the team that did this, and it's now moved Scancell to a pretty special place for any company, let alone a U.K. biotech company. So my last word goes to the team in Scancell and our advisers that have got us the IND in pretty damn quick time. Thank you, everyone, for listening.
Operator: Ladies and gentlemen, thank you for standing by. My name is Colby, and I'll be your conference operator today. At this time, I would like to welcome you to the West Bancorporation, Inc. Q4 2025 Earnings Conference Call. [Operator Instructions] I will now turn the call over to Jane Funk, Chief Financial Officer. Please go ahead. Jane Funk: Thank you. Good afternoon, everybody. I'm Jane Funk, the CFO at West Bancorporation, Inc., and I'd like to welcome the participants on our call today, and thank you for joining us. With me today are Dave Nelson, CEO; Harlee Olafson, Chief Risk Officer; Brad Winterbottom, Bank President; Brad Peters, Minnesota Group President; and Todd Mather, West Bank's Chief Credit Officer. I'll begin by reading our fair disclosure statement. During today's conference call, we may make projections or other forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding future events or the future financial performance of the company. We caution that such statements are predictions and that actual results may differ materially. Please see the forward-looking statement disclosure in our 2025 fourth quarter earnings release for more information about risks and uncertainties, which may affect us. The information we will provide today is accurate as of December 31, 2025, and we undertake no duty to update the information. With that, I'll turn it over to Dave Nelson. David Nelson: Thank you, Jane. Good morning, and thank you, everyone, for joining us. We appreciate your interest in our company. I have a few general comments and then others will add more detail. We had a really good fourth quarter. And during the quarter, we executed a securities loss trade to better position ourselves for 2026. Jane will speak more to this, but despite the loss trade, net income on the year was up 35% over last year. We also maintained a problem-free loan portfolio. Deposits are growing quite nicely. Margins are expanding with more of that to come. Loan growth is expected to pick up when the economic expansion begins. We are in a really good shape to grow and are looking forward to a special year. West Bank has declared a $0.25 dividend payable February 25 to shareholders of record as of February 11. Those are the extent of my prepared remarks. I'd now like to turn the call over to Mr. Harlee Olafson. Harlee Olafson: Thank you, Dave. Good afternoon, everyone. For the year-end 2025, credit quality is very strong. We have no past dues over 30 days. We have no other real estate owned. We have no nonaccruals. We have no substandard loans. Our watch list has increased, but our watch list of total loans is still at a very low 1.7% of loans. 70% of our watch list is related to the trucking industry. The trucking industry has been suffering through low freight and excess capacity. The industry has a history of going through good times and bad times. Our portfolio is well secured, and we believe the businesses are making good decisions to remain viable. Our commercial real estate portfolio continues to perform very well. We are diversified in both the type of commercial real estate we have and by location. Our commitment to strong underwriting is the foundation of our credit quality, customer relationships with multiple sources of repayment and liquidity are sought after. Our portfolio is strong because we have chosen good customers that have the financial characteristics that align with our underwriting. After all prepared remarks, I'm available for questions. And now I'll turn it over to Todd Mather, our Banking Manager and Chief Credit Officer. Todd Mather: Thank you, Harlee. For the quarter ended 12/31/25, our loan outstandings were down slightly at just under $3 billion. We experienced a few larger payoffs from asset sales and refinance activity. The majority of those assets were priced below the current rate environment. We replaced those assets with quality new assets at better interest rates. Deposit gathering efforts continue to be an emphasis, and we have been successful in attracting new depositors. During the quarter, deposit balances increased just over $162 million with increases in core commercial and retail deposits. We remain selective in obtaining new loan opportunities, and those opportunities are less than in prior years. We are confident in our abilities to create and maintain positive relationships with our customers and prospects that we are pursuing in a highly competitive market. I will now turn it over to Brad Peters, our Minnesota Group President. Bradley Peters: Thanks, Todd. Good afternoon, everyone. I'm going to provide you a brief update on our Minnesota banks. But first, I want to describe to you a history of where we started and how we have built our Minnesota regional center banks. Each of our locations started as a loan production office with 0 revenue, beginning with our Rochester Bank in 2013. We added the St. Cloud, Mankato and Owatonna locations in early 2019 with our lift-out strategy. Our bankers had existing relationships with business owners, key executives and community leaders. We built an efficient model using a small staff supplemented with community leaders as advisory board members. These leaders have been key in building our business through their endorsement and advocacy efforts. Each market grew quickly with a time line of 8 months to achieve a positive run rate. We then constructed permanent single bank locations in each market that became full-service banks. These facilities are designed as a relationship building tool, hosting client and prospect entertaining events and high-quality one-on-one conversations. These unique facilities align perfectly with our strategy of building business based on strong relationships. Our team has embraced this and has done an outstanding job of leveraging our buildings to grow our business. Today, we are seeking new business opportunities with the recent M&A activity from our competitors in our markets. Our bankers have specific activity plans that target high-quality prospects. Each market has been successful in attracting new business to West Bank. Our bankers are focusing on full relationships, including deposit-rich business banking opportunities. Our disciplined calling approach has enabled our team to have success in building this new business. Our business banking focus and our seasoned group of bankers set us apart from our competition. As part of our relationship focus, we are also targeting high-value retail deposits. We have been successful in winning the retail deposits of our business owners, key executives and employees. We are also attracting new deposits from high-earning individuals in our communities. Those are the end of my comments. I will now turn the call back over to Jane. Jane Funk: Thanks, Brad. I will make just a couple of financial comments, and then we'll open it up for questions. So net income was $7.4 million for the fourth quarter compared to $9.3 million in the third quarter of 2025 and $7.1 million in the fourth quarter of last year. Net income for 2025 was $32.6 million compared to $24.1 million in 2024. As Dave mentioned, in the fourth quarter, we sold $64 million of securities available for sale and realized a pretax net loss of $4 million. We believe this transaction improves the flexibility of our balance sheet. Proceeds may be used for strategic improvement in our long-term earnings profile through redeployment into higher earning assets or repayment of high-cost funding. Without incurring the loss of the security sale, our fourth quarter net income would have exceeded $10 million. We are very pleased with the continuous improvement in core earnings and believe we are set up for a strong 2026. Net interest income continued to improve through improvement in our net interest margin. Margin increased 11 basis points compared to third quarter and 49 basis points compared to fourth quarter last year. The cost of deposits declined 28 basis points compared to third quarter and 64 basis points compared to fourth quarter last year. Core deposit balances, excluding brokered funds, increased approximately $212 million in the fourth quarter and $223 million for the year. We saw increases in all sectors, including retail, commercial and public fund deposits. We consider our public funds to be core deposits because of the relationships we have with those municipalities. As described earlier, the credit quality remains pristine and no provision for credit losses was recorded this quarter. Those are the end of our comments, and we'll open it up for questions. Operator: [Operator Instructions] Your first question comes from Nathan Race with Piper Sandler. Nathan Race: I was wondering if you could just kind of walk us through some of the loan growth dynamics in the quarter. It sounds like maybe payoffs were elevated. And I would just be curious to get a sense for how the loan pipeline stands heading into this year? I know Brad mentioned there's a lot of opportunities going on in around the twin cities and south of there across the locations in those geographies. So I would just love to get some more color along those lines. Brad Winterbottom: This is Brad Winterbottom. We had one specific customer sell some medical office buildings, and that was north of $50 million in payoffs. We've had some other customers sell or refinance out into the secondary markets and multifamily, large multifamily. So we've -- that activity was very active in the fourth quarter. And I think we'll have a little bit more of that in the first quarter, but we've -- we're out trying to replace that volume. Bradley Peters: Nate, this is Brad Peters. The other -- I mean, I mentioned the opportunities we've had with the M&A. We kind of see that as continuing into next year, even though that transition took place with the [ Bremer ] merger. But we've also seen some opportunities with the [ Aleris ] transaction as well. So I see that continuing into 2026. Nathan Race: Okay. Great. And then, Jane, can you just update us in terms of the amount of loans you have repricing over the balance of this year and kind of what the yield pickup could be [ on the fixed [indiscernible] side of things ]? Jane Funk: Yes. The fixed rate portfolio that reprices in 2026, I think it's just under $400 million. And the pickup is probably going to be around 1.5%, maybe 2% on those. So they're in the 4s. I think the average rate on that, what's maturing is in the low 4s. Nathan Race: Okay. Great. And then as you described, the deposit growth among core categories was quite pronounced in the quarter. Any seasonality there or any kind of unique flows? And just generally, are you expecting kind of continued mid-single-digit growth in terms of both loans and deposits this year? Jane Funk: Yes. I would say our outlook on deposits is a little bit uncertain at this point just because some of that growth comes from public funds. We've got some public entities that did some bonds, raised funds through bond offerings this year. We know that money is going to flow out in 2026. So whatever growth we can transact in retail and commercial might be offset by public funds, but that would just be normal public fund volatility. Nathan Race: Okay. Great. And then maybe just one last one. It seems that securities portfolio repositionings have been pretty well received among investors these days, and I think that's reflected in your stock today and among other banks that have executed securities portfolio repositionings lately. So just curious what the appetite and potential magnitude would be to execute additional kind of bite-sized repositionings over the course of 2026? Jane Funk: Yes. We look at it on a regular basis. I think part of that depends on kind of our liquidity and our needs for that cash, where else can we deploy it. So that's an ongoing evaluation that we do. So we don't have any set goal or plans for 2026, but we will continue to evaluate that. Nathan Race: Okay. Great. And then, Jane, if I could just sneak one more in, I apologize. Just any thoughts on kind of a good starting point for the margin, just given the timing of the repositioning in the quarter? And just it seems like you guys still have some opportunities to reduce deposit costs on the heels of the December rate cut. So just trying to put all the pieces that we discussed together in terms of margin starting point for the first quarter. Jane Funk: Yes. I would say right now, kind of for the December end of year, January, beginning of year, we're probably running around 2.5% margin. And we think that there's room certainly to improve that throughout the year without any changes in the rate environment. Operator: [Operator Instructions] Thank you. I'm showing no further questions in queue. I'd like to turn the conference back over to Jane Funk for closing remarks. Jane Funk: We appreciate everybody's interest in our company that's on the call today and just want to thank you for joining us. Have a good day. Operator: This concludes today's conference call. You may now disconnect.
Joseph Ahlberg: Good morning, and a warm welcome, everyone. Today, we present the fourth quarter and the full year results for 2025 for the H&M Group. My name is Joseph Ahlberg, and I'm Head of Investor Relations. Before I hand over to our CEO, Daniel Erver, let me briefly outline today's agenda. As usual, Daniel will start with a high-level overview of the quarter and the full year. This will be followed by a more detailed financial review from our CFO, Adam Karlsson. Daniel will then highlight strategic progress, priorities going forward, and Adam will share a financial outlook. We will close the conference with a Q&A session, where Daniel, Adam and I will be available to answer your questions. So with that, please welcome Daniel. Daniel Erver: Good morning, everyone, both those of you joining us here and those of you joining us online. Today, I'm concluding my second year as CEO of the H&M Group. And with that, I feel confident that we are on the right track. I want to start by saying that the progress that we saw in the third quarter has continued into the fourth quarter across several key areas, even though the world around us continues to be uncertain. Sales in the quarter increased by 2% in local currencies. We increased our operating profit by 38% in the quarter, corresponding to a margin of 10.7% for the quarter. This increase was mainly due to a further strengthening of our customer offering as well as maintained good cost control and an improved inventory efficiency. Looking at the full year 2025, it shows a solid progress across all our key areas, and we continue to strengthen our foundation for future profitable growth. The sales trend was positive over the year as a whole and profitability strengthened during the second half. For the full year, sales increased by 2% in local currencies and our operating margin increased to 8.1%. Earnings per share increased by 5% during 2025. And according to the first preliminary figures, we see that we have reduced our CO2 emissions in Scope 3 by 30% compared to the base year 2019. Overall, these results confirm that we are making a solid progress towards all our important long-term targets. I will now hand us back to you, Adam, and you will take us through more of the financial numbers, and then we come back to the strategic outlook for . Adam Karlsson: Thank you, Daniel, and a warm welcome, and good morning, everyone. As Daniel highlighted, we have a strong foundation to build on as we have made solid progress during the year. So let me take you through some of the key financial developments for the fourth quarter and the full year. In the fourth quarter, sales increased in local currencies by 2%. And for the full year, sales also increased by 2% in local currencies, confirming a stable underlying trend. We saw sales increasing across a vast majority of our regions in both Q4 and the full year. Online continued to perform well. The sales development should also be seen in the light of 4% fewer stores compared to last year, and we have now also concluded our closures of Monki physical stores. As we're showing a stable trend in the underlying sales performance, the appreciation of the Swedish crown has negatively affected the reported numbers versus last year and with a currency translation effect as big as 7% during Q4. And given the current FX situation, this effect is expected to be even more negative in the first quarter of 2026. The positive gross margin trend that we saw in the third quarter continued into the fourth quarter with 130 basis points year-over-year improvement. After this strong second half year, we reached a gross margin of 53.4% for the full year. The majority of this development was supported by our improvement work in our supply chain, where the sourcing excellence work and the initiatives drives gross margin improvements. External factors affecting gross margins were positive in the quarter. In the fourth quarter, selling and administrative costs decreased by 3% in local currencies compared to the same quarter last year. As mentioned, cost control is and remains an important focus across the organization. And just to highlight a few of the key drivers behind our improved cost base throughout 2025, I'd like to mention logistic efficiencies. We have continued ongoing renegotiations of lease agreements. We have strengthened our indirect sourcing and also found more effective and efficient ways to use our marketing resources. Operating profit increased significantly in the quarter and operating margin for Q4 was 10.7% compared to 7.4% during last year, an improvement of 330 basis points. For the full year, operating margin increased from -- increased to 8.1% compared to 7.4% last year. And with a strong profitability improvement in the second half of 2025, the long-term rolling 12-month trend continues in a positive direction towards our long-term profit targets. This development comes as we sharpen focus on our core business, as Daniel was outlining, strengthening product, our experience, our brand and with a firm focus on cost control. Inventory productivity improved during the year, and we ended the quarter with a stock in trade in relation to sales of 15.5% compared to 17.2% last year. This improvement reflects the strengthened demand planning capabilities, more efficient buying and overall good stock management. The composition of the inventory is good. Looking at the long-term trends for gross margin and stock in trade relative to sales, we continue to strengthen both of these measures during 2025 and particularly in the second half. Looking at the graph, you see the dark gray line representing the quarterly gross margin and the light gray line representing the stock in trade versus sales development. And as you can see, the gross margin trajectory continues towards what we have previously discussed as normalized levels. Leverage has been maintained inside the H&M Group's net debt-to-EBITDA ratio, and that is 1 to 2x. In the fourth quarter, we proactively secured a long-term financing with an 8-year EUR 500 million bond at attractive terms under our EMTN program. And with that, we have continued high degree of financial flexibility and liquidity buffer, and that makes us able to navigate the volatility and set us up to be well positioned for capturing future opportunities. Cash conversion remains strong, and it's helped by active working capital management where we have seen good progress. And in order to distribute surplus liquidity and thereby adjust the company's capital structure, a share buyback program was initiated in November, and it was concluded by the 23rd of January. The Board of Directors are proposing a dividend increase to SEK 7.1 per share for 2025. And if approved by the AGM, it will be split into 2 installments in May and November as in previous years. So before handing back to you, Daniel, to summarize, we strengthened our gross margin in the second half. We improved inventory productivity, and we delivered strong cost control. Together, these factors supported a significant improvement in the profitability for the quarter and enabled a positive margin development for the full year. So with that, I'll hand back to you, Daniel. Thank you. Daniel Erver: So throughout 2025, we have continued to focus on what matters most to our customers, and that is really offering great products, inspiring customer experiences and building strong brands. On the product side, we have made improvements in several foundational areas during the year. We have made our product creation process more effective by a number of things. We have strengthened creativity and craftsmanship. We have improved our demand planning. We are working on becoming faster in our decision-making by strengthening how we spot and analyze trends and through a closer collaboration with our suppliers, as you already have mentioned, Adam. Combined, these different initiatives helps us to respond better and faster to customer needs and strengthens our availability to deliver more on-trend current fashion. At the same time, we have also continued to develop our customer experience across all of our channels. During the year, we have completed a comprehensive upgrade and rollout of our online store across the globe, where we offer more inspirational content, better product pages and improved search functionality. And that has been very well received by customers, and that has led to a strong sales performance in the online channel during the year. We have also, while improving our digital experience, accelerated upgrades across our physical store portfolio, including improvements in both technology layout as well as product presentation. We will continue to optimize our store portfolio. And for 2026, we see and estimate that the sales effect from the optimization will turn around to become slightly positive in support of our sales. In addition, we will continue with our digital expansion as well. In August, we reached a really important milestone for the H&M Group when we launched the H&M brand in Brazil. The pride of our teams and the excitement in the eyes of our customers clearly showed us that our elevated customer offering, inspiring experiences and a strong brand truly resonated with the local Brazilian consumer. During the fourth quarter, we continued to strengthen the physical presence with several other exciting openings in key locations across the globe. We opened new stores in Athens, in Los Angeles as well as in Shanghai, where we reopened our store on Huaihai Road, giving new life to a really iconic location for H&M. Another example is our new store in Le Marais in Paris, where we are offering our customers a more curated and both assortment and experience. And in October, we opened a fantastic new concept store in Seoul in the historical district of Seongsu. Creativity and brand strength remains central to our strategy as we move forward. And during the year, both the H&M brand as well as COS presented their autumn/winter collections at the fashion weeks in London and New York. And I particularly want to highlight and point out that this was important for 2 different reasons. Both it shows our fashion credibility that we can show up at the world's most important fashion weeks as well as it enables us to reach audiences and engage them in relevant social channels in a way that we haven't done before. And here, you see a few examples from our London fashion show with the H&M brand during September. During the year, we also entered several important external creative collaborations, continuing our ambition to democratize great design and make it accessible to the many. In November, the H&M brand launched a well-received designer collaboration together with Glenn Martens, who is the highly regarded Creative Director of Maison Margiela and Diesel. H&M also announced that we will launch a new collaboration with Stella McCartney during the spring of 2026. I'm very proud together with the team to make real progress in reducing our climate impact. Since 2019, we have reduced our CO2 emissions in Scope 3 by around 30% compared to the 2019 baseline. That puts us well on track to meet our science-based targets to reduce emissions by 56% 2030. And these results did not come from one single initiative. They come from a hard work of integrating sustainability into how we run and operate our business on a daily basis. So to achieve this, what we have done is we have increased the use of lower impact materials such as certified recycled or organic fibers. And we are decarbonizing our supply chain by working differently with our suppliers. This means that we have fewer but stronger partnerships. We have suppliers that we want to grow with long term, which is possible for us to offer them more stable volumes and better visibility of what to expect from us. And in return, that leads to them investing in renewable energy, more energy-efficient processes and a phaseout of coal. This close collaboration is truly what makes the difference. When business and sustainability come together, we can truly reduce emissions at scale and show that fashion can be both affordable and sustainable at the same time. And the impact of the work that we've been doing is not only obvious in the results, the work we do both for climate but as well as for all the other sustainability areas. The work is also being recognized externally, where we are seen as one of the leaders in the industry, as you can see here on the slide. Firstly, the report, what fuels Fashion 2025 by Fashion Revolution. In this ranking, H&M, we were ranked as the #1 out of 200 major fashion companies for our public disclosure on climate as well as energy. Secondly, you can see the Stand.earth, who ranks us as #1 out of 42 different fashion companies in their 2025 fossil-free fashion scorecard, and that's for the second year in a row. Thirdly, you can see the NGO Remake 2024 Fashion Accountability report that rates 52 different fashion companies in 6 different categories. And here, we came out on the second place overall. And finally, we were just A listed by CDP for our work on climate as well as water. CDP is one of the world's leading environmental disclosure system that assesses thousands of companies each year. So before we wrap up, I want to take the opportunity to have a look with you on some of the key highlights that we just talked about that has happened during 2025. So please enjoy a very short film on what has happened. [Presentation] Daniel Erver: 2025 was a year that was characterized by both geopolitical and economical uncertainty affecting both consumers and as well markets in general. And we see similar conditions continuing into 2026, which underlines the importance of us having an effective organization with short decision-making paths being close proximity to our customers and having high flexibility as well as you spoke about Adam's strong cost control. Looking ahead, we will continue to strengthen the foundation for continuous profitable and sustainable growth looking into 2026. Our focus will remain on what's most important to our customers, and that is to always offer the best value for money. We will continue to expand into growth markets such as Brazil and other parts of Latin America, for example. We are also happy to share that we will reopen the H&M location here in Stockholm on the iconic location of Hamngatan later on this spring. And alongside investments in new markets and upgraded customer experiences across many of our existing stores, we will also continue to invest in our tech infrastructure. By enabling a more data-driven decision-making and increased use of AI, we will be able to make better informed decisions, which will strengthen our flexibility and further enhance our creative capabilities. Altogether, that will help us to deliver a more inspiring, relevant and competitive customer offer. So now back to you, Adam, for an outlook -- financial outlook at 2026. Adam Karlsson: Yes. Just try to frame the year then in terms of how it will potentially affect our numbers then. Starting with the gross margin. Our sourcing excellence initiatives continues both in Tier 1 and through the Tier 2 supplier base. We see that the improved inventory productivity enables lower need for end-of-season clearances. But as you were also pointing out, Daniel here, we see a weak consumer sentiment, particularly in many of the European markets, and that could drive an increased need for temporary activations and deals. For the first quarter of 2026, we assess that the overall effect of external factors to be somewhat positive compared to the corresponding period last year. However, the cost impact of tariffs that we've already spoke about and that we've already paid are now starting to fully funnel through into our cost base. We see that we have a somewhat increased cost pressure for 2026, for instance, coming from a low level of one-offs in the cost base for 2025 and connected to the implementation of new tech infrastructure in 2026. Our focus remains on enabling a continued strong cost control and through further efficiency measures that, for example, are including continued rationalization of our store portfolio, implementation of a more efficient organization and of course, continuously allocating resources to the highest area of impact. With this, our ambition is to grow sales and admin costs at the low single-digit levels, and that will continue into 2026. Daniel, you pointed out currency volatility. It has continued also into 2026. A stronger euro versus U.S. dollar contributes positively to the gross margin. And this factor positively contribute as one of the external factors in the gross margin development for the fourth quarter and also affects our outlook for the first quarter in 2026. However, then the opposite, a stronger Swedish crown leads to negative currency translation effects. This affected our result in the fourth quarter and is expected to have an even greater effect on the first quarter based on the current FX development. We continue to implement demand planning improvements. We continue to strengthen our in-season buying. We continue to improve availability in our warehousing network. And we have an investment frame of SEK 9 billion to SEK 10 billion throughout 2026. And just to point that where the main investment will lie, it will continue to be in the store portfolio and investments in the tech infrastructure that will now lift to be the second biggest area. After a high period of investments in the supply chain, we are now deploying new warehouses during the year, leading to increased availability and flexibility through across our channels. So that was a broad outlook into 2026. And with that, over to you, Daniel. Daniel Erver: So all in all, we know that we have more work to do and that we are not done at all. But the progress that we have made so far, combined with a clear plan for where we're moving ahead, gives us confidence that we are moving in the right direction and that we are making progress across all of our long-term targets. I'm proud of what we have achieved, improving our results, our financial results while also staying true to our long-term climate ambitions. And at the center of that progress are our people. It's our great teams that I and colleagues that I meet in stores, warehouses, offices around the globe that truly makes this possible every day. Driven by creativity, engagement and shared values, all of us, we worked really hard to offer fashion, quality and sustainability at a price that is accessible to the many. Thank you for listening. And then we will now go to the Q&A. So Joseph, will you take us through? Joseph Ahlberg: I will indeed. Thank you, Daniel. We will now start our Q&A. We will begin with questions from participants in this room and then open up for questions from the telephone participants. [Operator Instructions] With that, we start with the gentleman to the right here. Niklas Ekman: Niklas Ekman here from DNB Carnegie. I guess the biggest surprise in the results here was the low OpEx. Can you elaborate a little bit here on the reasons for the decline? And you just said here at the end of the presentation that you expect a single-digit increase of SG&A during '26. So I guess this is not a lasting impact. Is this due to a reduction of one-off items or anything? Just if you can elaborate a little bit on that. Adam Karlsson: On top of the more sort of structural improvements that we've done throughout sort of logistic efficiency, how we operate our stores and how we improve sort of marketing productivity. We have also improved because of the work that we've done in the supply chain, the levels of write-downs and also somewhat affecting the result in the fourth quarter, the depreciation level. So it's -- some of those effects are more sort of isolated connected to Q4 effects, and that is where sort of they end up in the book and I think reinforces the overall trend we have in the more general OpEx development. So I think that is the area to highlight connected to the development in the fourth quarter. Fredrik Ivarsson: Fredrik Ivarsson, ABG. Question on the start of Q1, minus 2% December, January. Can you say anything about the sort of momentum through those 2 months, whether maybe January was a little bit stronger than December? Daniel Erver: So when we guide for current trading, it's always important to take that number with caution because on that short-term perspective, there are so many different short-term effects affecting the trading. So there are a number of effects that are, I think, good to be aware of when we look at -- when we looked at the first quarter development. On one is we see a shift in the market around Black Friday. We see Black Friday becoming Black Week. We see 11/11 Singles Day becoming a phenomenon. That also helped us to drive a strong end of the fourth quarter with a strong performance in the fourth -- in November, and that had a muted effect on the start of December, which we could see across the markets, but also for us. So that's one effect. Then there is a calendar effect in Q1, the fact that the Chinese New Year is in February this year that was in January last year. So that has a significant effect on the number. Then we have seen muted market demand in some of the large European markets that are important for us. We see that in public numbers and figures for Central Europe. We also see it in some of our competitors reporting. And we believe that we are performing better than the market, but the market sentiment has gone down in Central Europe. And then the last thing to be aware of is we -- looking at the U.S., we speak about the report that we went into the fall with a very prudent planning, given everything that was happening around tariffs and with a big respect for the U.S. consumer. We've seen that the demand has stayed very strong, and it's positively surprised us, and we haven't been able to fully supply to that demand. And that we worked hard on using the flexibility that we have in our supply chain to really catch up on the supply, but that also have a spillover effect into the first quarter, which is a quarter that is a lot about reductions of the fall season. So those are the different components that we think are important to take into account when we look at Q1 trading. Fredrik Ivarsson: And also quick, if you could reflect on the marketing investments you've done during the last few years and then maybe especially if you have seen any great impacts on younger generations? Daniel Erver: So the marketing investments, we believe, are truly important. As a brand, we have all of our brands, but especially the H&M brand has an important job to always attract and onboard new generations that are coming and marketing plays a crucial role in how we keep the brand interesting, that there's a heat around the brand. So we're happy that we do invest in marketing to be resilient for the long term. We did start and as you know, when we -- in 2024 with increasing the level of investments. And as we have moved ahead, we have learned. So in the beginning, it was a lot about the brand position at large. When we came into 2025, we shifted more into using our product and the product offering as the core engine of marketing. And that's why we decided for the first time since 2004 to put the H&M's main collection on the catwalk at London Fashion Week because we see that we get a stronger efficiency and effect out of the marketing when we tie it closer to our product offering. And that's -- that has helped us, as Adam mentioned, to continue to stay very active and see marketing as a tremendously important tool, but improve the efficiency, and that work will continue into 2026. Daniel Schmidt: Daniel from Danske. Previously, you have singled out the performance in different sort of gender segments. Would you shed some light on that, womenswear, kids, men's in Q4 into Q1? Daniel Erver: So as we talk about also today, product and the product offering truly is the most important for our customers. And we worked really hard, as we mentioned, on a lot of different areas to improve how we leverage our creativity in craftsmanship, how we improve the supply chain, how we improve trend precision. And that work started within womenswear, and that's where we started to see effects during 2025. And it has performed really well during 2025. As we come out of the year, we start to spread those learnings and that development to all the customer groups. So we expect to see effect from the learnings we made on womenswear also spreading to the other customer groups throughout 2026. Daniel Schmidt: Is it sort of kids before men's? And I think you've said before that kids are maybe 1 year behind in terms of spreading the learnings. Daniel Erver: I think we have assessed that doing work at that scale as we have done in womenswear, it probably takes a year. And sort of as we started the work in womenswear, it takes some time to catch on. But we don't -- we see no need for holding menswear back as we accelerate kids, they can accelerate in parallel. Daniel Schmidt: But are you seeing that sort of the learnings being translated into kids and men's? And is that now having an impact? Or is that still too early to see a real impact? Daniel Erver: We're starting to see really positive receipts and indications, especially looking at the new spring season that has come in that we start to get traction on menswear and kids wear -- that makes us confident that they will benefit from the same development as ladies did. Daniel Schmidt: Yes. And then just maybe a question for Adam. You mentioned the tech investments. Is that going to be evenly spread through the year? Or is that sort of front-end, back-end loaded in any way? Adam Karlsson: We will see an elevated level of investments coming into the end of '26. And then we believe some of these things that we're doing, changing sort of the fundamental ERP systems for a group and so forth will take multiple years. So I think we will see the first beginning of it in this year and then will be fairly evenly spread over the coming years. So it's more of a late '26 effect for this year, but then ongoing on an elevated level to capture this potential that Daniel was speaking about, AI improvements and such. Daniel Erver: We have invested significantly in our logistic network, and we start to see that, that comes to life and start to generate benefits in '26 and then that investment level goes down as we ramp up the tech investment. And that's not only for necessity, it's really to build the foundation for future success for H&M that we need to do these tech investments. Joseph Ahlberg: So with no further questions from the room currently, let's hand over and receive some questions from telephone participants. Operator: [Operator Instructions]First question comes from Adam Cochrane with Deutsche Bank. Adam Cochrane: First question, you're talking about your supply chain improvements. Can you just try and either quantify or at least qualitatively describe what the -- what you're doing in terms of the supply chain improvements, what it means for the customers, the speed of lead times? Just a way of thinking how much have you done on it compared to where we were? And how much have you still got to go looking forward? Daniel Erver: So we're doing a number of different things when it comes to supply chain. One important thing we spoke about that helps us both with the speed, with the quality as well as sustainability is to consolidate our supplier base, where we work with fewer, but really the best suppliers out there, and we build long-term strategic partnership with them, which helps us both to improve the product making, but also price quality as well as sustainability. So consolidating the supplier base and improving the way we negotiate and build strategic partnerships is one important piece. That also allows us to leverage some of their capabilities and strength when it comes to trend detection, design, supply and leveraging some of their best capabilities to a bigger extent helps us to further improve our entire sort of flexibility and speed of reaction. Then we are working with improving the way we forecast demand and then how we build a strong logistics network to match supply to that demand and that is leveraging data and now further on looking to leverage also AI into that process to become much more precise in how we forecast demand down to every single stock node, and that helps us to better match supply to that demand. So -- and then we work intensely with our design teams here, which is also part of the supply chain on improving their trend forecasting capabilities, leveraging their craftsmanship, giving them AI tools that really can enhance their creativity at scale. So those things combined helps us to reduce lead times. And as we talked about before, we don't need to reduce lead times everywhere, but in certain product lines within certain categories, that speed and flexibility is tremendously important, and that we can really make sure that we within 5 to 6 weeks can take a product from idea to the shelf and present it to the customer. So on the cost side, we have come far. It's been a big part of how we have been driving the -- gross margin improvement has been through the sourcing excellence initiatives that Adam described. But as we also mentioned, we see continued potential into 2026 and beyond on how we work with both Tier 1 and 2 suppliers on that side. When it comes to leveraging the capabilities and developing our own capabilities for being more reactive and more relevant, I think we have taken one important steps, but there are several more important steps to be taken to further improve the current fashion level of the collections that we present to our customers. I don't know, Adam, if you want to complement this. Adam Karlsson: But also mentioning the investments that we have done in the sort of just pure logistic network also enables us to stock pool effectively and not to be sort of channel-specific in how we steer the stock. So it's, as you said, a full end-to-end approach that we're taking, everything from leveraging data in our creative processes to enabling just physically simplifying that we ensure that the stock is supporting the customer in the right place at the right time, so... Daniel Erver: And the tech investments that we speak about will also heavily focus around not only, but to a large extent, also around supply chain improvements and new capabilities. Adam Cochrane: Are those in supply chain changes, do they go across all of the cost of goods sold, all of the products that you're doing? Or is it only at the moment, a limited proportion of your products and there's still some to come? Daniel Erver: It goes across all. But I think, as I said, there is some potential that we have captured and more potential to be captured still, but it goes across all the categories. Then there is different benefits in different product categories. If you look at Essentials and Basics that have a very high predictability. It's more about having a good safety stock, high availability, low cost of transportation. That's where we can optimize. And then if you look at the latest fashion is, of course, to make decisions later with better data, which reduces the fashion risk and increase the precision. Adam Cochrane: Great. And the second question I've got was really the market we're hearing from some others is that they're having in Europe, particularly to invest more of the gross margin gains into pricing, maybe the market has become more competitive. Chinese retailers or others. How are you thinking about -- you've obviously got your gross margin external factor gains coming into 2026. You've got to make some investments into OpEx. How are you balancing the equation with thinking about investing gross margin to get that top line moving in the current customer environment? Is it something that you can do with regard to pricing and promotions to stimulate demand? Do you think that's likely to happen? Daniel Erver: Yes, that was what Adam mentioned. So we have a couple of factors working in our favor. It's the external effect on the gross margin, but it's also a lot of the improvements we do ourselves in the sourcing excellence work. But then it's also the fact that the collections have been very well received by the consumer, which allows us to sell a wider range of products and also helps us to reach a much better stock composition. And coming out of the fourth quarter, we also see that we have a very healthy stock level. So as Adam said, we don't need to use as much of promotion investments to solve overstock because the stock is very healthy and the collections are being well appreciated. But we do see a given the muted demand and that there is a large part of the customer base who is really looking for making not only great value for money, but also finding -- making a great deal and finding products at discounts. So that's why we are using reductions as a lever to drive top line and stimulate that demand. If you look just at how collection has been received and how our stock levels, we could be more aggressive in reducing the reductions, but we do see a need that we need to stimulate the demand. Adam Karlsson: And on the investment side, that's where we also reiterate -- our speaking about normalized gross margin. So we don't aim to have a gross margin elevation, I mean, to the stars given the somewhat temporary external factors, but we'd rather take that and as what you said and then reinvest in the product, so to say. But there's still some improvement potential in how we work, but then also that allows us together with external factors to reinvest in the product to strengthen the customer offer. Operator: We now turn to Vandita Sood with Citi. Vandita Sood Chowdhary: The first one was just on the CapEx. So I think it's -- you guided to SEK 9 billion to SEK 10 billion, which is lower than this year. And I know you've commented on sort of completing the supply chain investments, but you're ramping up tech. But I guess it's still a bit surprising in the context of a net positive contribution from stores. So just wondering if you can walk us through your plans for CapEx. Adam Karlsson: Well, if we then divide it from the top then, so we will see a lower level of closures this year and a higher share of new openings. And then we were pointing out some of the markets we continue to invest in. Then we are also finding ways to leverage learnings from sort of rebuilds over the last couple of years to really deploy that into many stores and make many customers get the upgraded shopping experience. And that allows us to be sort of CapEx effective during 2026, but then, of course, leveraging the learnings in an effective way. Secondly, we have the logistics side that has been on elevated levels, both '24 and '25, and that is more of a cyclical level. Now we're sort of seeing that we have a very strong setup that will be started to take into operations during end of the year that allows us for the benefits that we're outlining then with flexibility and availability. And thirdly then, tech is also somewhat cyclical. During 2018, 2019, we did big sort of fundamental investments in our online platforms. Now it's time again to do those and also leveraging a lot of the new technology that comes to ensure that we are future-proof here. So we're shifting focus to ensuring that the core of our technology is future-proof, and that is also somewhat cyclical. But it's, at this time, countercyclical towards the logistic investments. So the net effect will be negative as the elevated levels are coming down on the logistics side. And as I mentioned, the increase on the tech side is starting this year, but it's likely to increase on a somewhat elevated level also into '27 and '28. I don't know if you want to add anything on. Daniel Erver: I think you can connect to the store portfolio. I think we spoke with that before that we are opening as well as closing stores. The stores that we are opening are stronger than the stores that we are closing. So -- and now we come down given that we are moving out of a period of high level of consolidations, both with Monki as we closed the last Monki physical store this year and also coming into a lower level of closures in Asia, the net effect becomes positive. And then we have worked with the team intensely on how do we build an exciting, inspiring physical store experience. And part of that is completely rebuilding a store, which is high CapEx intensive, but part of it is also identifying what are the key levers that really makes the difference for the customer and their perception and picking out some of those pieces and putting that into a program that can reach a further -- a much larger part of the portfolio is the work that we initiated in the end of 2025 that would spread into 2026. So that means that we'll touch a lot of stores, but at a lower CapEx level than if we would go through with a full level rebuild where we sort of clear out ceiling, flooring, HVAC and everything. Now we're going to touch the key value drivers instead. And that allows us then to touch more customers and their experience. Vandita Sood Chowdhary: And just one more sort of more long-term question. You also own Sellpy. Could you just comment on how you see the increasing sales in the customer-to-customer platforms and the resale market and if you're seeing any impact on that in the first-time market? Daniel Erver: No, we see an increasing consumer interest and the behavior shifting to be a more natural complement to the first-time market is how you shop secondhand. And we are really proud and grateful to have Sellpy as a part of our group, and they have delivered a very strong year when it comes to growth, tapping into to that shift in customer sentiment. We see it in Northern Europe, but we also see a very strong year in Central Europe for Sellpy, which is great to see. And we see, of course, on the site -- so Sellpy is not the peer-to-peer. That's sort of a well-managed service, which makes life very easy for the customer where you sort of have your garments picked up, you have them sold for you and you're part of splitting with the profit, which makes it very easy to reuse your wardrobe and be more sustainable. And it also is a clear customer benefit of having a monetary sort of gain from doing it. The peer-to-peer, we see are accelerating. We are -- have a few venture investments in our venture into peer-to-peer platform because we see that is also a great service for the customer and that we will see continuing. But we are monitoring through Sellpy and through our venture investments, how the market is developing. And we are continuously looking at how can we combine these 2, where does it make sense to combine it for the customer behavior and where is it more that it runs in separate channels. But it is an interesting development and a development that we see as very positive that our garments are made to be used many, many times and they can be used through generations and having more ways for the consumer to do that is something very, very positive for our long-term transformation. Operator: Now I'll turn to Richard Chamberlain with RBC. Richard Chamberlain: I've got 2 questions as well, please. First one is around FX. Obviously, there's been some quite extreme FX moves going on with a stronger SEK and a stronger euro against the dollar and so on. And I wondered if you can talk about how you approach pricing in that environment, especially in markets where the currency has been particularly weak against the Swedish crown and whether you're trying to sort of smooth some of that pricing impact out for this year? Daniel Erver: Should I start and then please fill in. So for us, the most important thing is to always offer the best value for money and be truly competitive so that all customers coming to us can feel really confident that they always make the best deal and get the best value for the money they spend when they come to us as the combination of relevant fashion, quality, price and sustainability. So that means that we are monitoring our positioning in the market, assessing the strength in our customer offer, how strong are we? And based on that, we are adjusting our price positioning. We are not adjusting price in markets that are euro markets or dollar markets because of the SEK strengthening. We are looking at each individual market because that's the market where our customer lives. And then, of course, those markets are shifted depending on how their currency is affecting inflation and the local market position. But we are not -- by being a Swedish company and translating into SEK, our top line, we are not making currency adjustment because of that. We do it from the end of looking at the competitiveness and the strength of the customer offer that we want to see in each market. Adam Karlsson: So our hedging strategy then supports that way of thinking. Richard Chamberlain: Got it. Okay. Brilliant. And my second one is on the U.S. performance that looks to have been a bit sluggish in Q4. I think you mentioned that you felt you're a bit tight on stock availability there. Are you now building back stock availability in the U.S.? Do you think it will -- it sounds like there's still going to be some effects in Q1, but are you expecting that to be sort of more normalized by the end of this first half? Or should we still expect a pretty cautious sales outlook for the U.S. market? Daniel Erver: So when we looked at the U.S. this spring with all the changes that were happening around tariffs and the situation, we decided to apply a prudent way to approach the U.S. And then we were positively surprised by the continuous demand for our offering and the resilience of the U.S. consumer. And then we have used the flexibility that we built up in the supply chain to gradually catch up on the supply to match it better to the demand, but there is a delayed effect. And we see now looking at the spring season that we have a better composition and a better supply in the U.S. But with that said, U.S. continues to be a very volatile market. We have seen a very high level of inflation and price increases in the U.S. markets across competitors. So -- we are accelerating supply, but we are still monitoring to make sure we don't pivot to the other side of overallocating to the U.S. But we see that the composition of the spring season is better fit to the demand expectations that we have for the U.S. Operator: We now turn to William Woods with Bernstein Societe Generale Group. We will now turn to Georgina Johanan with JPMorgan. Georgina Johanan: I have 2 questions related to the gross margin, please. The first one was just in terms of the tailwinds from external factors that are coming through. You've obviously been very clear that there's tailwinds in Q1, but less so than in Q4 if we include tariff effects. As we go through the rest of the year, would you expect the magnitude of that tailwind to widen? Or actually is Q1 like sort of a peak point for that tailwind, please? And then my second one was just in terms of the translation drag on the gross margin that you call out. Is it possible to quantify what that was in Q4, please? That's something I at least find very difficult to estimate. Adam Karlsson: Yes. So looking at the external factors, as we have called out, we have seen that some of those were positive in the third quarter, also in the fourth quarter, but somewhat less positive than in the third quarter connected to increased cost for tariffs that we have been paying throughout the year. And that sort of trajectory continues also expectedly into Q1, where we maintain an overall positive impact from external factors, but on the margin, more cost impact from tariffs. Overall, looking at 2026, it is positive outlook from the start of the year and with the visibility we have from these external factors. So currency, freight, materials and so forth, looking net positive, also including tariffs. Then to your second question connected to the currency translation drag. Here, we have seen a -- connected to the strengthening of the Swedish krona and increased impact sequentially in the fourth quarter compared to the third quarter. As we have disclosed, our sales impact from currency translation was negative of 7% in the fourth quarter compared to 6% in the third quarter. And given how currencies have developed so far in this quarter, we also see that this could be also a more negative impact in the first quarter compared to the fourth quarter. So that is what we're seeing. And since we are calling out this effect, it does have a significant effect on the reported outcomes. Georgina Johanan: Just one follow-up, if I may. May I check, does that external tailwind, does that get larger as the year -- as this year progresses? Adam Karlsson: It's very difficult, of course, to predict where it's going. But we had a very sharp drop and a sharp difference, at least in the effects that we ended your answer with the SEK to the U.S. dollar. So that was very sharp during the first quarter of last year with then yes, difficult to predict, but we will have a big effect in Q1 and then potentially a less negative relative effect throughout the rest of the year. But that's only sort of speculating, of course, in how the currencies will move. But we are assessing the situation that we're meeting a sharp drop in the first quarter. So that is what we have visibility on right now. Operator: We now turn to Sreedhar Mahamkali with UBS. Sreedhar Mahamkali: Maybe just a couple from me then, please, both on margins, just to build on what Georgina was asking. Maybe again, trying to stand back from the detail a little bit. Adam, I think you referred to normalized gross margin and not wanting, obviously, the margins to go through the stock. I think in the past, you've referred to 54% to 55% being the sort of what you see as normalized gross margin and that being consistent with a 10% operating margin. So maybe just if you can take a look at it that way, it feels like this is a year where you could be at least at the lower end of that 54% to 55%. Then the question is, how do you sustain it is an important one because clearly, there's a lot of volatility, a lot of moving parts here. So even if you were to get the 54%, 55%, and that sort of range? How do you sustain it? What are your thoughts there? That's the first one. Secondly, going back to a margin target that we have talked about in the past, the 10% operating margin target. What conditions do you now need if you're already within the sort of thresholds of the normalized gross margin to then achieve the sort of 10% operating margin? And do you get -- is your confidence and conviction in reaching that growing based on what you've seen over the past year? Adam Karlsson: You're starting with the gross margin, you are right that there are opportunities now to continue given the external factors to move in closer to that normalized interval as we were speaking about. But also reinforcing what Daniel said here is that the product is the most important thing we do. So it's not about short-term sort of increase in gross margin. It's to build a stronger long-term offer. And I think that is then the strongest hedge towards gross margin pressure over time that we take the opportunity now to invest in the product to further then improve our stock availability, reducing the need for sort of clearance markdown and over time, then also through the product, strengthen our brand, the pricing power that will sort of help us to sustain gross margin levels over time. So it's -- for us, it's a long-term journey where we have an opportunity now to both, I think, take steps towards the more normalized gross margin level whilst then continuously strengthening the offer and the product and the value to the consumer. So I think that is sort of the long-term strongest hedge we can do connected to volatility. The second question was the 10% margin target. And I sort of mechanically see that if we then move into this range, let's estimate that we have another 100 bps if you're in the middle of that range on the gross margin, that takes us then to plus 9% and then -- or like north of 9% EBIT margin. And then connected to what we also call out that we've been showing that we have the ability despite an inflationary pressure in our cost base to have a sort of positive delta in local currencies in how much sales grows and how much our cost base grows. So that is our clear intention to continue that journey. And that over time, of course, with normalized gross margin levels will sequentially then take us closer to the long-term margin targets. Daniel Erver: While continuing to have strong collections, inspiring experiences -- excitement around -- with the positive sales momentum to make sure that... Adam Karlsson: Absolutely. Sreedhar Mahamkali: Very small follow-up on the sales point. Clearly, externally, as we see, there's quite a lot of volatility in the quarterly sales data that you report. I guess if there is something that you can share perhaps in terms of the loyalty data, customer data in terms of transactions or average selling prices items per transaction. Anything you can talk to that is giving you really are firmly on the right track on sort of rebuilding the sales in H&M brand? Daniel Erver: If you look back to the year, I think we have been posting growth around 1% to 2% and in that interval consistently through the quarters, which is, as Adam explained in the report and higher level of consistency what we've seen in the past, and we attribute that 100% to more appreciation for our customer offer from customers across the board. And what we see positive is that the customers that we have within our customer base really want to trust us in a wider range of categories. And that means they're referring from trusting us not only maybe on basics where we've been very appreciated or in kids clothes, but also trusting us in their sportswear, H&M Move has performed very well, but also trusting us in other product categories like in dresses, in dresses for occasions and that they widen their spend with us, which we see as a receipt that they are appreciating what we're doing. So when looking at the customer base, we see that the loyal customer truly want to widen their spend with us. And we see when we perform well and when we deliver strong collections that are really relevant, they are also very keen on sort of deploying a larger share of their wallet with us. That gives us confidence that we are on the right way, but we really are from our own ambitions, just getting started. We do believe there is much more potential to tap into as we move along in implementing the plan, strengthening our foundation to then further accelerate growth as we look ahead. Joseph Ahlberg: And I think these clear receipts we see across regions and also over time, each quarter, we have seen the same pattern repeating. So we -- with that, we feel this is a clear trend. Daniel Erver: Trend is the right way, but we believe that we have higher ambitions. Joseph Ahlberg: The level can be improved. Operator: And our final question comes from Matthew Clements with Barclays. Matthew Clements: The first question was on Agentic Commerce. Just wondering how you're positioning H&M in that world. The second question was on logistics. You're talking about new European warehouses that you're launching. Just wondering how you're managing that capacity amid relatively muted volumes and what you're looking for from that new logistics capacity. And the final one is on the work you're doing in the assortment relative to how that's being -- how the brand is perceived by customers. So obviously, you've done a lot of work over the last 2 years, investing quality, value, stretching out the high end of the price architecture. But have you seen a meaningful shift in how customers actually perceive the H&M brand? And where is the brand now relative to where you would like it to be? And what are the biggest areas of improvement or future improvements? Daniel Erver: Okay. I'll try to, and then please remind me if I miss any of the questions. So if we start -- what was the first one? Agentic. Agentic -- yes. It's a very, very interesting area that I believe will drive a big impact on how we meet the customer over time. And then as always, with really new disruptive technologies, the speed of adaptation is difficult to assess. But we know that a large amount of our customers, they want to be better guided in how they make their choices. Fashion is fantastic. It's fun. It's energizing, but not for everyone. It also -- it can be painful and difficult to find what you want to wear and how you want to dress. And anyone who has tried to get a little bit of help of any agentic AI know that it's early, but you can start to see the signs of that you actually get help on how to dress, how to express your personality, how to look good. So I think it will drive a lot of change. We are looking at it from different angles. We're looking at for how can we apply agentic AI into our own experience. We have seen the first tests that we have done in improving search, for example, applying conversational search as opposed to just normal keyword search, reduces the amount of 0 search results and sort of increase the relevance for the customer. We see a young consumer being more used to the conversational search pattern. That also helps us to apply many more attributes to the product so that the results can be more relevant and more guiding. So we are working on looking at how can we implement Agentic AI into our own digital experience to better serve and guide the customer. At the same time, we are curiously looking at what does it mean for the customer -- for the consumer journey in what way will they show up to us in the future. How do we make sure that we are present in the journey regardless of where they start the journey. So that is, of course collaborating with Google, OpenAI, with other platforms that are driving that change to see sort of how do we tap into that ecosystem. And that is a very, very, very early stage where there is a lot to be learned and a lot to be seen, but something that we are curious about. And I believe an area where outstanding value for money will become more important than ever that truly our product lives up to standing out from competition when it comes to value. The better the customer becomes of making that assessment, the more important is that we really stand out on the value that we offer in the specific product. So area of big disruption, very, very early stages, and we are exploring it both in our own sort of world, but also in the ecosystem outside of our own channels. Yes. Secondly, logistics. So the key here is to increase availability. We see an opportunity to create better stock pooling, both in general, but also especially between the channels so that we truly can use our omni presence to drive better availability for our customers so that we can use online stock to serve a store customer, that we can use stores as a stock node to serve online customers, and that's a lot of the work we do when we look at the European network, how can we leverage the total stock of Europe to better serve our European customer in improving the availability while we reduce the total stock levels and increase the precision of the stock that we carry. So a lot of the work goes into making sure that we have capacity, but especially that we increase availability. And then, of course, that we make -- this is one area where we need to manage the inflationary pressure on costs, and that's also an important work of the logistic investments that we do in Europe. And then thirdly was... Joseph Ahlberg: The brand perception... Daniel Erver: The brand perception. So we see also that we have taken steps that we get signs that we're moving in the right direction. We get those receipts from customers in the way they act, but also what they say when we ask them in quantitative surveys. But we are not where we want to be yet. We are on a long journey. We are putting the foundations in place. I'm confident that the direction that we have set are taking us towards the right direction, but a lot of the effect of the work that we have started is yet to be seen and a lot of the work that we have not yet started is also yet to be done. So we are starting to take steps, but impact is not yet where we want it to be. We are in 81 markets, and we are changing the perception of a wide demography of customers, and there's a lot of work left for us to be done in that area. Matthew Clements: And just a follow up very quickly on the logistics point to say, are you -- how are you managing capacity across the network? Are you moving capacity from old centers and closing those down? Or what's the management of the network? Adam Karlsson: Right now, we're opening new warehouses to ensure that we have created the -- what we said, the capabilities and the capacities to grow and grow in a way which is then truly then enabling the omni setup we have with stores and the digital store sort of combined and through the customer demand more clearly than served through a more flexible logistic network. Daniel Erver: And we work both how we optimize own operated 3PL as well as where we -- how far we go on automation, and that's different depending on sort of the different circumstances. Full strategic network puzzle that we're working on. Operator: We have no further questions. Joseph Ahlberg: Thank you for clarifying. And I take it we don't have any more questions in the room either. So with that, thank you all very much for joining today's conference and for your continued engagement with the H&M Group. We wish you a very nice day. Adam Karlsson: Thank you so much. Daniel Erver: Thank you.
Johan Akerblom: So welcome, everyone. Today, myself and Masih will take you through our Q4 report, and our strategic review. We will start with the fourth quarter and the year-end 2025, then we will go through the strategic review presentation, and we will wrap up with Q&A. Moving into the fourth quarter, and looking at the developments, we've had a continued underlying business progress in both servicing and investing. We have had underlying costs that continue to go down. And we did take as part of the yearly review, a goodwill write-down, and we did also a tax asset write-down. We continue to focus on deleveraging. And if you look on year-on-year, the leverage ratio has improved from 5.3 down to 4.8. On top of that, we're continuously working on strengthening the balance sheet, and we did announce a sale in January '26 of the remaining stake of our joint venture with Brocc. This will have a positive impact on the leverage when we close it. On the servicing side, we see a continued organic growth. The margins remain elevated and steady, and we have had a strong sales execution in the fourth quarter. On the investing side, collection index continued to be above 100%. We did close SEK 436 million of new investments with an IRR of 18% in Q4, and we have, for the year done SEK 1.2 billion with an IRR of 20%. As you can see on the chart, the service margin has steadily been going up, and it continues up in Q4 as well. In Q4, we have a 31% margin on the quarter standalone. If we look at the servicing income, it's very positive to see 2 quarters now in a row, we have external servicing income growth, taking into account FX-neutral assumptions. On top of that, we continue to increase our pipeline, so we're moving into 2026 with SEK 2 billion in our pipeline. And we have continuously been working on the pricing model and strengthening the sales team. Investing displays another quarter of high collections, and we continue to extract a lot of value out of our portfolios. If we compare it to the original forecast, we're now at 109%. And it's interesting to see that our investing book and the performance on it remains very strong, even though we sold a large part of the back pool (sic) [ book ] in 2024. The ERC as we end 2025 sits at SEK 46 billion. Moving over to Masih, and the financials. Masih Yazdi: Thank you, Johan. So let's go into the Q4 P&L a bit more in detail. So income is down compared to a year ago, 7%. That is almost exclusively driven by FX. The investment book is a bit smaller as well, but a large share of decline in the investment book is also driven by FX this quarter. As Johan alluded to before, we did have a goodwill write-down. It's coming from a few different countries, we had preannounced that at SEK 3.1 billion, it ended up at SEK 2.9 billion, and the difference there is really driven by FX changes from the announcement to the end of the year, as well as some small adjustments to the WACC we use in the goodwill calculations. The adjusted EBIT is largely unchanged as the income decline has been largely offset with cost reductions. And here are the cost reductions, so the underlying costs continue to go down. It's down about SEK 1.6 billion on an annual basis in Q4, if you look at the 12-month trend, and it's mainly driven by personnel reductions. So FTEs are now down at year-end to around 8,500 people in the company. Looking into servicing, as Johan mentioned, so we do see organic growth for the second quarter running, but we do have FX headwinds here. So the income is down 3% year-on-year. But as I said, 1% organic growth underneath the surface. Cost development continues to be good. Here is the area where we continuously do take out costs and plan to do that also going forward, which means that we continue to have a good development of adjusted EBIT, which is up 31% compared to -- so full year 2025 compared to full year 2024. On the investing side, income is down more, 11% year-on-year if you compare '25 to '24 and 17% Q4 versus Q4 2024, very much driven by the fact that we have a portfolio that is shrinking as our new investments are less than what is being amortized. But at the same time, the performance we have, keep performing above the 100% means that the investment book, the income from the investment book is going down less than the size of the investment book, which is obviously a good development that we are extracting more value than what was initially thought in the forecast that we had. On leverage, we see a decline of leverage, 5.3 a year ago to 4.8 at the end of the year. It is marginally going up quarter-on-quarter. That increase is largely driven by the fact that we have improvement on the servicing side, but the cash flow improvements on servicing is not sufficient to offset the decline of cash flows coming from investing. That's the case in this quarter. Obviously, the plan going forward is to make sure that the improvements we see in servicing is more than offsetting the decline coming from the investing side. Johan is going to summarize the quarter. Johan Akerblom: Yes. So I mean, to wrap up, I think we said it all, but Q4 delivered continued underlying business progress. And we've also spent a large amount of time to actually do the strategic review. And I think with that, we move into the next section, and talk about what we have discovered. So let's talk about the strategic review. We have obviously spent a lot of time during the fall to look at where the company is, what the recapitalization entails, but also in terms of strategy and the way forward. I think the previous strategy was done in 2023. Some of the targets that were mapped out then has either been fulfilled or partly become obsolete. The company has changed dramatically. A lot of events that probably wasn't part of the first strategic review in '23 has happened. So it was time to do a strategic review, and really to set the foundation for the way forward. We will take you through what we think is the strategy for 2030, how we will execute, and then finally, what the financial impact will be delivering the strategy. So talking about Intrum 2030, it all starts with a continued focus on deleveraging and derisking. This has been very important over the last year. It will continue to be very important going forward, and it will be one of the guiding stars in everything we do in terms of activities. At the same time, we will also start working on our '26 to 2030 priorities, which are servicing performance, growth acceleration, and expanding our holistic view as an investing partner. When doing so, we will cement our positioning as the leading credit management servicer, and most attractive investment partner in Europe. And this will set a reinforcing wheel of value creation, an emotion, and that will deliver our 2030 financial targets, which are around service leveraging, total cost, and servicing EBIT margin. If we talk about Intrum and where we are today, first of all, we are already Europe's largest debt collector, and we have the scalability. We operate in 20 markets and the markets has slightly different characteristics, and we manage 400,000 customer interactions on a daily basis. We are working with 70,000 clients, and we are, as I said, in 20 countries. And every year, we basically have around 6 million debtors fully repaying their debt, out of 22 million active on an ongoing basis. When it comes to the markets, we have split them into three segments. One is the investing focused markets, which would be the Eastern European markets, Czech, Slovakia and Hungary. Then you would have the specialized markets where we have a composition of the business, which is built on something that has happened in the history. So there you would have Spain, you would have Italy, you would have Greece, and the U.K. And then you have the rest of our traditional servicing and investing markets. The way we operate is with the dual engine. We have the servicing where we collect debt on behalf of the clients, and we have the investing where we purchase debt portfolios either into our own balance sheet or together with the partner. These 2 engines are highly complementary and they're also reinforcing. Moving over to Masih. Masih Yazdi: Thanks, Johan. So already in the last couple of years, there's been a large transition in the company, moving more into becoming a servicer. You can see it in the financials. So the investment book has come down by 40% over the last couple of years. Obviously, a big chunk of that is due to the book sale that was done in 2024. But at the same time as that has happened, we've seen an increase of the external servicing revenue of 8%. The margin has gone up by more than 50% in the same period, and the share of the revenues generated for the company has increased when it comes to servicing from about 1/3 or 30% in '23 to now being the majority of the revenues being generated. And simultaneously to this happening, the net debt has gone down by 23% or almost SEK 14 billion. I think also just to add to this, I think when you make this transition from more of an investing focus to servicing company, you actually remove the business risk in the franchise, which is an important part of the strategy going forward as well. Johan Akerblom: Yes. When it comes to the market environment, we think there are a few trends that we believe are favorable for us. A large reason for why these are favorable for us is that we are a large company in a dominating position in Europe with significant scale. If you look at the competitive landscape, we can see that companies in our industry are specializing more, either becoming investor and servicer, and there are a few that have this full range of services that they offer as we do. On the technology side, this is still a very manual industry, and we know that there is a lot of new tech that has come into the market the last few years and will come into the market the next few years. And it's very difficult to find an industry where this can be more applicable than within our industry. And with the scale we have, we can justify the investments in the technology, because basically, what they do is that they help you with something that is repetitive and scalable, and we think we have a large advantage there. And the same goes with regulation, more regulation means that you need more scale to be able to absorb it and comply with everything that is being introduced. When it comes to the market as a whole, we know that the economy goes in cycles. And with the dual engine we have, we know that those 2 business lines generally offset each other. So when the market is benign, servicing does better, we have an easy way of collecting. And when the market is going down to a rough cycle, we know that the nonperforming loans typically increase, and we have a better opportunity investing. We've gathered some data on how these 2 business lines could grow in the market in the coming years. On servicing, we expect about 3% annualized growth until 2030. When it comes to servicing collections within the financial industry, we think that's going to grow slightly more, about 4%. And that's also where we have the bulk of our business today. So about 60%, 70% of the servicing revenues we have today is coming from financial sector. But at the same time, 90% of the collection business is outside of financial services. And what we plan to do is penetrate that part to a lot much larger degree than what we have historically going forward. On the portfolio side, there's been a significant decline of nonperforming loans in recent years after the increase we had post the financial crisis. The general expectation is that we are at the trough point. We're at trough point in 2024, and we'll see an increase of portfolio investments going forward, and that that will grow by about 9% annually until 2030. So talking about the 2030 strategy. First of all, as I said, in the near term, we will have a lot of focus on deleveraging and derisking. We have already started this journey. We started that journey already a year ago. I think we have started with an acceleration by the sale of the portfolio that we announced in January this year with the intent to repay the 2027 maturities. We are, as part of the strategic review, also looking into other type of divestments when it comes to either portfolios or nonstrategic assets, and this is carefully being evaluated. And again, the guiding star is that we can improve our leverage ratio. We will continue to apply very strict cost control. We are guiding a 5% lower cost in '26 versus '25 on the underlying basis, and also with the FX rates as we are experience right now. And the limited portfolio investments with a focus on return will continue, as we said, focusing on the deleveraging, which means that the cash flow will be used to a large degree for debt repayments. And this is necessary to give us the full flexibility in our strategy execution. So talking about the strategic priorities. We have a strategic ambition to become and cement the leading credit management servicer and the most attractive investing partner in Europe. That means that we need to have a superior servicing performance, we need to achieve growth acceleration, and we need to be the preferred investing partner in this segment. And I think Masih alluded to that before, we think a lot of this can be achieved by actually just starting to use technology data and AI in a completely different manner and scale than we do today. When we look at this, and both me and Masih are coming from the banking industry, we've been through the transition that the banking industry did. And we actually think that this industry is an even better used case than the banking industry, and the banking industry has received a massive amount of value from applying technology data and AI. We think that there is more value to be captured in this industry. To be a bit more concrete, what do we mean, i.e., where are we today, and what do we want to be in 2030? Talking about servicing performance and excelling in that area. Today, we have a quite bespoke and largely manual collection process. We need to be highly digital, automated, and we need to be very standardized across our processes. This means that we have to make a lot of changes in the way we work. On top of that, in order to make that changes happen and to be effective in our collection process when it's more digital, we need to leverage the data we have. Today, data is used in some processes and some decision-making, but it's not fully utilized. When we operate this in 2030, it should be a fully data-driven operations decision-making process. And that's going to give us not only much better predictability on what we can do, but it will give us a lot of other benefits. On accelerating the growth, we have very much a financial services focus today. We need to diversify our presence across other segments, and we need to be competitive, and we will explain later on how we will become competitive in those segments. And we are already today competitive in those segments in some markets. We have today a value chain expansion in some markets. So when we look at the collection business, there's a lot of services around it that are non-collection, but very closely related, that's why we see us as a full credit management service provider in the future. On the investing side, is just the fact that the investing volumes today are impacted by our funding cost and our capital structure. We need to create a very sustainable and competitive funding cost to be able to invest more and mainly continue to invest through the partnerships. And finally, we have been in a capital partnership now for a year, we need to build something which is more of a full stop shop full service offering for investors, because we have all those capabilities. So how will we make this happen? Well, first of all, we now have a new executive management team. It's not fully in place, but everyone has been recruited, and everyone has either started or is about to start. And I think a couple of common denominators for this management team is, first of all, they have a very long experience in the financial industry, which has been going through quite some changes if you look back 20 years, 25 years. Secondly, they have experience of being part of transformation or driving transformation journeys, which is exactly what we need to do going forward. And I think thirdly, they've been in a business where technology, data and -- not AI yet, but a little bit the ember of AI has made a huge difference in the way you operate. And those are the things we'll take with us. And on top of that, we have a lot of collection experience in our markets with our experienced managing directors. So in terms of strategy execution, we'll start talking about the servicing performance. We have basically an ambition to drive our platform optimization. And the way we do that is, first of all, we will consolidate our platform further, and this is a little bit coming back to how we think about our markets. Secondly, or in parallel actually, we have basically 5 major areas across the collection process that plays an impact. You have the inbound customer contact, and we have millions of calls, the outbound customer contacts where we also have millions of calls, you have the whole capacity management. And remember here, we have roughly 6,000 people working in this process. So to get the capacity management right makes a huge difference. So you can get the efficiency of every operator and every agent as high as possible. Then we have the agent productivity. So actually, when they are on a call, how do you make that call as productive as possible and how do you coach them and create a continuous learning to make sure that, yes, tomorrow is going to be a little bit better than today and the day after tomorrow will be even better than tomorrow. And then finally, there's a lot of work to be done on the noncore process optimization. In here, you would find pure process reengineering levers, you would find levers that are around performance management. So everything is not driven by just tech or data or AI. But if you apply the basic process optimization tools, and then you add technology, data and AI in there, you get very fast traction on that transformation. But it also has to have a lot of focus. So as you can see, the bars on the bottom basically shows how big the cost-out potential could be. And with 6,000 people in operations, we think that the cost trajectory that we've had in the past will continue going forward. At the same time, we will also make the user experience much, much better. To give an example of what we have done, and this is basically just illustrating how much you can do without actually making -- even starting to adopt some of the more modern technologies. In Norway, we've had a top line that has been flattish, slightly declining for structural reasons. The production cost to collect has gone down 36%. The collection per FTE has gone up 46%. And in the end, the adjusted EBIT margin has increased almost 50%. This not only gives us a much more competitive business today, it also allows us to win and be more -- much more competitive in winning new business going forward. So we think that this is the starting point to actually become a growing entity. You need to be efficient first and then you can basically become much more competitive in your offering. Yes. I mean, Norway is probably the prime example we have of adopting new ways and improving the processes. But they already have all the tools. So we have that in the group. So just getting every other market to be on par with Norway in terms of how you collect and how you can perform that more efficiently takes us a long way across this journey we're planning for. Obviously, in addition to that, we will apply new tools that everyone will use as well as Norway to become even better. And Norway has not done this through AI or some massive technology shift, this has mainly been done on standardization, process optimization, and proper capacity and performance management. Another area which we have just sort of scraped the surface on is how we can use the data. Today, we have 20,000 PI portfolios, so we have invested historically over 20,000 portfolios. We use that data, but that data is just a small fraction of all the data that we sit on in the group. Today, in the group, we have 70,000 clients, as I said before. A lot of those clients, they actually have several different portfolios that we have been or are collecting on. So when we can start pulling some of the insights out of that data stack, which we already started working on, so we're basically taking the same approach that we've done on our PI portfolio data analysis, and we're trying now to apply that for the bigger universe of servicing data. Then we can move from the current use of data to something that is much more value-enhancing going forward, which is around improving the underwriting data on the portfolio investments. We can add a lot of value-adding client services. Essentially, we can go and advise the client on the best way to collect on their debt, and the best way to structure insourcing versus outsourcing and so forth. We will use it more and more in our action decision engine to make the right decision rather than to make a decision based on your own experience. And then we can also do very good statistical servicing pricing and benchmarking to identify best practice both across verticals, but also in -- across geographies. On growth acceleration, which is the next element of the strategy, we think that the first part, what we talked about servicing performance, that is a very important foundation to accelerate the growth, because as we discussed with Norway, but in general, you need to be the best service performers in order to actually grow in the existing segments more than we do today. When you have the best competitive offering by being the most efficient and the smartest on how you collect, you can be much more competitive in pricing, you can get a better result for your clients, and you can also protect and grow your existing business. And when you have done that, you also underwrite to grow a new segments, because the new segments outside the FS, they are usually smaller tickets and it's usually faster processes, and they need to be driven by a very efficient collection process. So in order to excel there, we need to be the best when it comes to service performance. The top line that we're looking at is quite significant. So just to do more where we stand, i.e., close the white space within financial services, strengthen our strategic partnerships, continue adding value to our services, and be better in sales effectiveness, we think there's roughly SEK 0.5 billion to capture. And this is, again, comparing 2030 to 2025. If we can start capturing the untapped potential outside the large non-FS segments, there's another maybe SEK 2 billion of potential. And that means that we need to enhance our offering, and we need to be more on the digital collections, and we also need to start being better in offering adjacent services. Lastly, on the B2B segment, there's a little bit more than SEK 0.5 billion in potential. And that is a little bit aligned with the second part, because the need there is very much similar, and you can almost create a plug-and-play platform where SMEs plug in, load their cases and they run on our platform. So again, to be very concrete, for example, in Switzerland, where we've been very successful in growing outside the collection space, we have roughly 15% to 20% of our revenue in the non-collection. We make almost 3x as much the group average income per FTE. On the group, we would say we have somewhere around 5%. So by moving into this non-collection, you can actually capture a much bigger part of the value chain, and you actually get the leverage on the services you already provide as a collection partner. In Germany, we have a different situation, where the market size is really, really big. We have a 10% to 15% market share in the FS segment. In the other collections -- in the other industries, we have less than 1%. But the total market size is SEK 2 billion. So by just being able to move in and capture our fair share in the other services, there's a big, big upside in terms of income, and in the end, in terms of generating more profit. Finally, we also have, as you all know, Ophelos, which is a digital standalone platform. Here, we have now pivot from the fully integrated approach where we started to a standalone model. We think Ophelos should almost compete with us as a different business offering. We are today doing this by plugging it in, in Portugal, and then we're moving either existing clients onto that platform and also using to acquire new businesses. And then we were going to scale it across the group. And we already have good progress with some of the leading buy now pay later players, not only in Portugal, because it exists -- Ophelos still exists in pockets across the group, and that works extremely well. And the benefit with Ophelos is that there's a massive improvement in terms of speed, scalability, product innovation and the performance uplift. But to be a little bit conservative here, we have actually not fully -- we have not included the upside from Ophelos in the base case financial plan. So with that, I'm going to hand over to Masih to take you through the last element of the strategy. Masih Yazdi: Thanks, Johan. So let's talk about the third leg, investing partner. Here, our current situation is a bit different compared to the servicing side, where there are clear improvements to be made. On the investing side, we are clearly a dominant force in Europe. We see basically every deal that goes through, we get to analyze them, we get to see the deal flow. Obviously, recently, we've invested less, but at the same time, we see all the deals, we see all the data, and we've been able to combine some larger deals that typically have lower returns with smaller deals, which typically have higher returns and have a good enough blended return. As you know, most of you, in the last year or so, we've done this in one partnership with Cerberus. If you look at performance, the performance here has been very good. So every portfolio has a forecast, where we have an assumption of future cash flows that index is 100%, whereas if you look at the actual performance of the last 20 years, it's been at 107%. So the book value that we have and have had historically, this company has basically almost outperformed on that book value. Even in deep economic downturns, the performance has been almost in line with the forecast that has been used. Johan Akerblom: I would just like to add here. I mean, I think there was some skepsis in the market when we sold the back book in 2024. Now we sold the second part of that back book that the rest of the portfolio would actually not perform in line with historical performance. What we see now being basically more than a year down the road is that we continue to perform almost even better than we've done in the past. Yes. Masih Yazdi: So if you look at the strategy we aim to have when it comes to investing, we look at this in sort of a few different perspectives. There are investments on our own balance sheet. So the investments we do ourselves. In the near term, as we start out saying, we will be more conservative. We will have more limited volumes, and we'll focus quite a bit more on returns. We need to do that to make sure that we use the cash flows we generate to reduce the debt burden of the company. In the longer term, and this will be dependent on the evolution of funding costs, as the funding costs come down, we'll be more competitive on new investments and investments will be ramped up. And we believe that during the period '26 to 2030 at some point, investing more will be a contribution to the income growth we have as a company. On the capital partnership side, we will continue that. This is something we want to expand. We want to have capital partners. We believe that there are investors out there that would like to benefit from the underwriting capabilities we have, and the deal flow we see, and the fact that we can help servicing the portfolios and invest together with us. We typically take a smaller share, but we can offer other capabilities that they typically don't have. And we want to continue to work on that. And in the future, we'd like to add more partnerships in different shapes and forms than what we have today. Then there's an SDR option. In the near term, it's probably not feasible. We are continuously evaluating if there is a scope for us to have an access to an SDR vehicle. It could be a minority access, it could be a majority access. There are pros and cons with both of those. But during 2026, we expect to have fully evaluated that and have understood what the next best step for us is. And obviously, if we get that access, then that will also have a significant impact on the investment volumes we can do in the SDR vehicle given the funding cost we'll have at that point. So let's move into the financials and starting with the 3 new financial targets we've set. So the reason we set these targets is that we want -- for it to be something extremely relevant, help us in our strategy execution, but also be something that we feel that we have fairly good control over. Clearly, the most important one is leverage. We need to reduce leverage, and we've set a new target, which is 3x that the net debt when excluding 80% of whatever the book value is investing. So the book value is assumed to consume debt up to 80% of the book value. And then all the rest of the debt is allocated to the servicing business, and that leverage needs to come down to 3x. If you compare this to the current way of formulating the leverage, which was 4.8x, 3x on servicing and 80% LTV on investing is just below 3x leverage on the current definition. So it's a more ambitious target than we've had in the past, but we're giving ourselves a bit more time to get there, because obviously this needs to be realistic. On the cost side, the underlying cost in '25 were SEK 12.3 billion, we've guided for that to be reduced by another 5% in '26. And then we expect cost to come down every single year until 2030 to reach a level of SEK 10 billion to SEK 11 billion. And this level will be dependent on the actual growth on the servicing top line. If we have growth of, say, low single digits, we're more likely to be at the SEK 10 billion mark. And if growth is, let's say, high single digit, it's likely to be more closer to SEK 11 billion level. Then on the margins, there's been good margin improvement, and we are targeting to increase that further to somewhere between 30% and 35% by 2030. The reason we have an upper limit here is that we want to strike a balance between finding cost efficiencies and then transforming those efficiencies to our offering, so that we can offer a better price for customers, and therefore, gain market shares. So we want to find a good combination of a sufficiently good margin, but also growing our business faster. If you look at all of these 3 targets we're setting, and the development we've had, we actually are already moving in the right direction. Service deleveraging is coming down. The cost level is already down more than SEK 2 billion in the last couple of years, and servicing EBIT margin is up by 9 percentage points last couple of years. And if you look at those 2 targets, actually the trajectory at forward has a slower pace of improvement than the improvements we've seen in the last couple of years. So we think this is clearly realistic and something that we can achieve. And obviously, it's going to be a guiding star for the company. So let's talk about the debt we have and our view on how to deal with that. So we have about SEK 45 billion of nominal debt outstanding, the first maturities are in 2027. We had -- the announcement of the portfolio sale in January, the proceeds from that sale, combined with the organic cash flow we believe we will generate will be sufficient to completely redeem or pay back the second lien maturities in 2027, which is about EUR 370 million. When it comes to the other maturities in 2027, given the market input we have and the secondary market trading of those instruments, we believe we can refinance those at better terms than currently outstanding, and we plan to do so first half of 2026. When it comes to future maturities, we have made a plan of our P&L development and looked at the organic cash flow generation in that plan. And we believe that there will be a certain part of each year's maturities that we will be able to repay or redeem. And in combination throughout these years, we believe that we can reduce the debt by somewhere between SEK 10 billion and SEK 15 billion. Obviously, almost SEK 4 billion out of that is coming from the 2027 maturities already probably this year. And the SEK 10 billion to SEK 15 billion is really dependent on, obviously, the success of executing on the organic path, but also to what extent we can extract the value from the balance sheet by selling nonstrategic portfolios or assets that we have. And obviously, we're working on those different projects. Then at the bottom of the slide, you can see this is not a guidance or -- it's a forecast or guiding for us when we come up with the deleveraging plan that we have. Maybe just pointing out a couple of things here. On the servicing income, we expect it to be largely flat this year, and that's mainly due to the fact that already going into the year, we have fairly significant FX headwinds with the Swedish krona strengthening by about 5% versus the euro. So we need to see clearly good organic growth to offset that. Then on interest expense, we assume that will come down over the coming years as our debt burden comes down as we continue to see improvements in our operating performance. And portfolio investments, slightly lower in '26 than '25, and then we expect to be able to ramp that up slowly, and then at some point in time, invest more than what we are amortizing and this being a contribution to the general income growth of the company. Repeating what we started with, near-term focus, deleveraging and derisking, this is something we need to have to have flexibility in our strategy. We have the priorities, servicing performance, growth acceleration and being a good investing partner. We believe that we could be on the verge of coming into this positive momentum of deleveraging, lowering funding costs, being able to accelerate growth, which will continue to delever and so forth. And we have the guiding stars in our financial targets we will be working on. That's the end of the presentation, and we will open up for Q&A. Johan Akerblom: Yes. Before we start on the Q&A, I just want to say that the strategy here, what it actually accomplishes is not only creates shareholder value, but by transforming the company in this direction and working on these levers, we will actually create a much more stable business model. And that's the whole idea to create something that could sustain for a long, long time and that can carry a certain level of debt, but also give the flexibility to manage that up and down depending on the opportunities that are out there. So part of the strategy is actually creating something that fundamentally removes a lot of risk in what we've had as a previous franchise model. Masih Yazdi: Q&A? Johan Akerblom: Yes. Let's start the Q&A. Johan Akerblom: So as we kick off the Q&A, we will actually start with some of the questions coming from the teleconference. Operator: [Operator Instructions] The next question comes from Jacob Hesslevik from SEB. Jacob Hesslevik: Maybe we could begin on your financial target regarding the servicing EBIT margin. Could you provide some details on the drivers behind the margin expansion? Is it mainly from lower cost or rather growing top line to better scale the cost base? Masih Yazdi: Jacob, yes, I mean, it will be initially a lower cost. That's been the main driver between -- behind the improvements of the margin, and that will be the case at least in 2026. Then obviously, we're hoping and planning to see some revenue growth, which this year will be more difficult, because of FX headwinds, but organic growth is something we're planning for. And as we expand into new industries, you'll see that as well. When it comes to some of the other industries, so outside financial services, margins are typically lower than what we have today. So that expansion doesn't improve margins that much. So margin improvements really comes from lower costs. And we are planning as we lower the cost level to be able to translate some of that or pass that on to customers, because we think that's a good lever for us to grow the business more. So the real combination between sort of revenues or income and cost over this whole period is difficult to say. But I would say at the early parts of the period, it's going to be mainly a cost reduction. Johan Akerblom: Yes. And an important part is also to create the scalability. So when we start adding on more volumes on the income side, it actually implicitly increases the margin. So you add on basically more variable cost or more -- sorry, you add on more income with the limited variable cost on a scalable platform. So that will also help eventually the margin improvements. But as Masih said, initially, when entering all these new segments, they would probably come with slightly lower margin than we have today. Jacob Hesslevik: Great. And then a follow-up on the cost message there. Could you pinpoint it to which division do you see the largest potential to streamline? Is it within servicing? Or is it rather investing, which you are shrinking somewhat given the divestment you announced in January? Masih Yazdi: You mean in terms of cost? Jacob Hesslevik: Yes. Masih Yazdi: I mean the big bulk of cost sits in servicing. Investing, they are using servicing as a supplier, but the bulk of cost is in our collection process. Then obviously, when the investment book goes down, we have to adjust the servicing provided to the investing business, but the cost out and the process optimization is happening within our servicing business. Jacob Hesslevik: Great. And final question from my side is just on how large share of today's collection are automated? And how does that compare to the industry average? Masih Yazdi: We have less than 10% automated. So it's a small piece. And the problem is when you start talking about the industry, I think on average, the industry is probably slightly worse than we are, but then there's a couple of players, but they mainly operate outside the financial service industry. They have a higher level of automation. Okay. Moving on to the next. Operator: The next question comes from Ermin Keric from DNB Carnegie. Ermin Keric: Maybe first, do you expect any kind of implementation or execution costs for getting to a lower cost? And also, given that you're going to automate more, will you capitalize any IT investments and kind of how much will that CapEx be included in your leverage in any way? Masih Yazdi: Yes. Yes, there will be some implementation costs when it comes to future technology. I would say in the first couple of years, '26, '27, we basically have the tools we need. We just need to apply them to a larger base of the collection process, just like Norway has done. But when it comes to implementation costs in general, we will be fitting those into the cost targets that we have. So the cost target you see and what you will see over the course of the next few years underneath that target, we will have the implementation cost being fitted. So there won't be additional costs than the targets that we've had. On CapEx, I think we already have had CapEx on the balance sheet, and I don't think that's going to be higher in the future than it's been historically, to be honest. I don't see that as a big headwind going forward. And then I think also, I mean, in terms of -- I mean, we're obviously a people's business today. We have a lot of employees working across our processes. But so far, I mean, there's been a couple of bigger programs announced externally. I think going forward and what we've basically done during the last year is that a lot of this comes through natural attrition. We have a fairly high attrition rate in some of the -- especially in the sort of the more of the collection part of our business, and we intend to kind of continue working with that rather than announcing any big programs. I think it will be a very natural evolution as we sort of implement new services and new solutions. Ermin Keric: Then about your leverage targets. How are you doing with central costs? Where are they allocated in the leverage target? And also, do you include the full contribution from your kind of consolidated JVs in the servicing, because I suppose you need to pay some of that minorities later on? Masih Yazdi: Yes. I mean today, basically, all the central expenses have been allocated. So it's very, very little left centralized. On the JVs, we will be updating our reporting. So these targets are now set. So we had the old target of '25, and we'll be updating our reporting to reflect the new targets from Q1 2026. So exactly how we're going to do that, you'll see that in the coming quarters. But I would say, in general, the target we're setting now means a lower leverage than the old target we had as a company. Ermin Keric: Then the last one would be on the better usage of data. Do you mainly expect that to lower your cost to collect? Or how much more do you expect that you can increase your collections, for instance, on your own NPL book? Masih Yazdi: I think the data is probably more a driver of collection performance rather than cost to collect. Cost to collect is a way to -- I mean, you can automate a lot of things, and you can get your cost to collect very low, right? But if your recovery rate suffers, the equation might not hold. So I think data is for me to basically decide on what is the next best action. So that's one used case, that's going to be very helpful. The other part on the data is to use it to be better in advising our clients on the best way to structure their thinking around collections and maximize the money they get back on every late payment. So those are two areas. Then, of course, you can use data for many other things. But -- and then sorry, the third sort of used case is obviously to further enhance our underwriting capacities. Ermin Keric: Can I just put in one last question? It would just be on -- you showed the example with Norway, which I think is helpful, and its impressive improvements you've done there. But how replicable is it to Southern Europe? Because aren't the claims quite different that you're managing in Southern Europe and digitalization generally in those countries compared to Norway? Masih Yazdi: I mean, absolutely. I mean the way we think about our markets is that you have your 13 traditional servicing and investment markets where you would have Norway as a cluster in the Nordics, you have Germany, Austria, Switzerland, you have Ben there, so Belgium, Netherlands, you would have France and then you would have Portugal. Spain, Italy and Greece are different. And we will also manage them differently, and we will have different tactics in terms of implementing the strategy. So we think about the 30 markets, that's where we can apply a lot of common levers. And then for Italy, Spain and Greece and also the U.K., which is more of a BPO market, at least for us right now, we would have to be a little bit more specialized in how we implement the strategy. So one solution doesn't fit all. So let's go to the next question. Operator: The next question comes from Patrik Brattelius from ABG. Patrik Brattelius: So my first question would be regarding the income trajectory in the investing side, the coming years. As we saw on the last slide, you will invest less in portfolios the coming year in the short term. And we have seen investing falling for the last few quarters. Should we expect further decline? And when do you foresee in your financial planning that this will level out and more flat line? Masih Yazdi: Yes, I can start. The only thing we're guiding on today is that in '26, we're likely to invest less than we did in '25, because the priority we have is to reduce our leverage. When it comes to the evolution of investing beyond '26, it really depends on the evolution of our funding costs. We will make sure that we get a sufficient uplift in the returns we have on investing versus our funding cost. So the faster our funding costs come down, the more we can invest earlier. So we can't really dictate that. What we're trying to say is priority 1 is to delever, and then we will be disciplined on price, and we won't have volume targets. We do expect, we believe, and we want investing to contribute to income growth for this company at some point in time during this period, whether that's going to be '26, '27 -- or it's not probably not '26, '27, '28 or later, it's difficult for us to say. We have a plan of deleveraging. And to what extent and when the market translates that plan into a better rating and lower funding cost, it's very difficult to say without actually seeing it. And obviously, we need to execute quarter-by-quarter, so that -- I mean, presenting the strategy is one thing, executing on it is a different thing, and we need to execute on it to get the trust and see the funding costs come down, and that will lead to higher investment volumes eventually. Johan Akerblom: But I think also, I mean, on the slide where Masih shows sort of some estimates on how we think things will evolve, you clearly see when we see trends shifting. And I think that's probably your best input on how we see the future. Patrik Brattelius: My next and final question is regarding the JVs. We saw a divestment here announced at the beginning of the year. So could you talk a little bit how you see the divestment environment currently? And also when we look at the presentation, you have almost just below SEK 5 billion in JVs out of your ERC. Can you talk a little bit more and elaborate how much that is for sale and a little bit on that topic, please? Johan Akerblom: I mean I'll start, and then I think Masih can continue. We are always looking to optimize our portfolio. So if that means that we can recycle and we can sell something where we think the value is X and someone else ready to pay more, that makes -- I mean, that creates value for us. There's also the balance between cash now and cash later in terms of how the collection curve looks like, especially with our focus on deleveraging. But specifically on the JVs, I think we're going to have an opportunistic approach. And as we said, we already have a couple of things that we have identified that we continue to work on. Masih Yazdi: Yes. I mean there are differences between the JVs. And we have a JV, [ kind of LOP ], you can see it in our IR presentation. We are expecting cash flows from that JV of about SEK 1.5 billion between '27 and '29. It's not paying anything now. And the question there is that should we keep it and get those cash flows? Or is there a way to do something else? So it's this balance, as Johan mentioned, do we need the cash flows today? Or do we have the time and patience to wait for it? And we do that assessment for all the JVs we have. I mean accelerating cash is for us a good thing if we can clearly show that it adds value. At the same time, we also need to find someone on the other side who's ready to make that transaction happen. Johan Akerblom: Okay. So we have one more question on the phone. Operator: The next question comes from Johan Ekblom from UBS. Johan Ekblom: Just a couple of quick ones, please. So first, on the deleveraging target. Am I understanding correct that we should look at the cash EBITDA from servicing without any adjustments for Central or JVs or anything like that to be on a like-for-like basis? That's the first question. Masih Yazdi: You should look at the EBITDA, not the cash EBITDA. We will not be using the cash EBITDA. Johan Ekblom: But it's servicing only. There is no adjustments. And I guess we'll get the new structure at some point before Q1? Masih Yazdi: Yes, correct. Johan Ekblom: Perfect. And then on the margin assumptions, I think, Johan, when we met back in September and debated kind of what AI could do to servicing margins, et cetera. I think your view was that there's a kind of upper bound what the industry will accept before you kind of get intensified competition. And my sense was that at the time, you thought that was lower than the 30% to 35%. So just interesting to see if there's been any change in your thinking or if there are interim specific things that think you can be a huge outlier versus your peers? Masih Yazdi: I think we do think that there's more to capture. I mean here, you always need to be humble in terms of how much margin you can take and when it becomes unsustainable. But moving from '25 -- I mean, we already see today that we do deals that has a 30% margin. So if we can operate today with a 30% margin in an environment which we think is more inefficient than it will be in the future, I don't think it's very aggressive to assume that the margins in the future can actually be between 30% and 35%. So I think that's the simple logic. I think when we have done the analysis, we have come to realize that we can probably continue to expand our margins a little bit. Johan Akerblom: Yes. I mean just to add, I mean, we are reporting 25% on average. When you're in 17 markets, it means that you have markets that are clearly above that level and the markets that are clearly below. We can see in the data that where we are clearly below that, we actually have more structural issues, and we are markets -- we have markets operating at 35% today, without really seeing increased competition. We've just done more things. I mean, Norway is a good example, which is higher than the 25% we have as a group. So based on that data, we think that this is possible. And obviously, to some extent, we are trying and will be a first mover and adapt things faster than others. And that's a way, obviously, to improve your margin. I think another point which we never discussed, I think, it's also when you move into value-adding services, your margins should be higher, but they will still contribute to our servicing margin. And that's something that we can clearly see when we look at some of the markets where we have expanded into the value chain. Johan Ekblom: Yes. Perfect. And then I guess in an interview in the press today, you were -- or you made a comment that it would be nice to get a new core shareholder or a larger shareholder. And I don't know to what extent the journalist is putting words in your mouth. But is there anything you can tell us? I mean, is there any strategic action being taken to try and source that or anything you can share? Or was it kind of an offhand? Johan Akerblom: I mean -- I think what I said was we are always meeting investors. We are always welcoming long-term investors that shares our view on what can be achieved in the future. And I mean, it's a very generic statement, and I think that's where we will leave it. But I mean, the fact is that we have one major shareholder that has gone from plus 30% to maybe 10% or 11% -- and then we don't really have much institutional ownership. So of course, we would welcome a long-term investor or a couple of long-term investors that shares our view on what we can create in the future. Johan Ekblom: Perfect. That's how I thought I should understand it. And then just finally, I mean, you say you're going to be opportunistic about things like JVs, et cetera. I mean when we think about it, when you say, okay, this one has cash flow 2 or 3 years out, your funding cost, I guess, on the margin, at least today is high single digits. I mean, should we interpret that as you would be maybe not very willing, but at least willing to consider selling things at a book loss, because it would allow you to deleverage faster. I mean you haven't sold at any meaningful loss in the past. So I just wondered if there's a change in how you view these things now? Johan Akerblom: I mean -- I think we are going to be very sensitive to selling anything below book value. I think the recent transaction just shows what kind of appetite we have. So I mean, I think there's a strong hurdle before we actually go ahead and do something opportunistic. And that is we can clearly show there's a value for Intrum and its shareholders, and it helps us on the deleveraging. And I think that's where we're going to leave it. But there are -- there's a lot of people out there who looks into the space and what might be less value to us might be much more value to them. And I think that's the kind of the type of combinations we're trying to find. Masih Yazdi: I'm going to transform myself from a CFO to a moderator, because we have a few questions coming in, in writing format as well. I'll ask you one. So the first one is, what are your major considerations when assessing the advantages and disadvantages between owning 100% and minority stake in an SDR? Johan Akerblom: I mean that's a very interesting question, because owning a majority of an SDR comes with a lot of benefits. I mean, first of all, we would control the investment decisions. We would control the definitions of how much CapEx should be spent, how much dividend should be paid out. Of course, we would be regulated, but in line with all the regulatory requirements, we would still be the driver of that agenda. The downside of owning an SDR is that it creates regulatory complexity. It puts another pressure on how we run the group. And there's also a question around consolidation. So if we flip that into minority, being a minority, we need to have a very high comfort that whoever we own this with and whatever shareholder agreement we have, we have a lot of input when it comes to CapEx and dividend distribution. And also, we are probably then maybe an outsource provider of some underwriting advice. So I think those are the things. And then also having a minority stake, I think our partner needs to be someone where we feel that there's a natural flow. Either there's a natural flow of business that can go into the SDR or it's an investor that needs our support to basically build their book in this area. I don't know if you want to add something. Masih Yazdi: No. That's very good. I'll ask myself a question. So we have a question here on what the leverage ratio would have been had FX not moved in the quarter. And there's same person has asked a question about what targets we have in terms of servicing revenue. On the leverage ratio, generally, if the krona weakens, we benefit, because income is greater than cost. So you have a long period of weakening krona, we make more money and that has a positive impact on leverage. In a single quarter, that could differ. It depends on what the FX ended that quarter at versus the average during that quarter. In Q4, I would say the effect was very marginal from FX on the actual outcome of the leverage ratio. On the revenue target on servicing, it is by design. We have 3 financial targets and none of them are related to revenues. I mean, obviously, margins in combination with cost, that is to some extent, related to revenues, but we don't have an actual income target, because it's something we can't fully dictate. We've presented the data we have, which is that the market should grow by 3%. We presented data on pockets we think we can penetrate, which is up and above the 3%. So obviously, the goal for us is to grow faster than the market by improving our servicing performance and penetrating portions of the potential we've seen -- we see in financial services, nonfinancial services and SMEs. That's the ambition, but we don't set a target, because it's very difficult to know exactly at what pace, how quickly we can execute on the things we see in the market. So one more question to you then. Can future partnerships be different -- different type of investors than private equity like Cerberus and with different or better fee structures? Johan Akerblom: I think the future partnerships, if I understand the question, can it be different than Cerberus? Masih Yazdi: Than private equity? Johan Akerblom: Than private equity. Yes. Okay, the like. So basically, yes, definitely. I mean, I think that future partnerships, as I think I said earlier, could also be more of a passive investor that actually wants to have the experience and the capacity and also the servicing aspect of working with someone who's been in the industry for a long time. That could be one type of partner. It could also be an industrial partner. I mean, today, we see the dynamics in the industry changing. And a lot of the players are moving into either a pure servicing direction or a pure investing direction. We have both channels. We're obviously focusing more on the servicing, because we're changing the franchise model. But to work with someone who's in a pure play on the investing side, I don't necessarily think that that's ruled out either. So I think there's many opportunities. We just need to be treading carefully to always keep our credibility and our professionalism in every time we work with someone who's sometimes in conflict in business with us, sometimes in conflict of business with other partners we have. Masih Yazdi: Good answer. There's one more question. I'll take that myself. We have mentioned Norway as a leading example. Could you provide some color on how the EBIT margin in Norway compares to other geographies? The margin in Norway is higher than the average we show for the group of 25%. And this is despite the fact that in Norway, you've had a regulation in place since 2018, where you haven't been allowed to adjust servicing fees. So basically, with the exact same servicing fee for 8, 9 years, we've been able to improve the margin quite significantly only by reducing costs through operational efficiency. So that shows you the force in being able to do that across all the traditional markets that we have. The debtor fees has been locked. But now we actually are -- they are getting unlocked in '26, and there will be an adjustment to partly compensate for the historical non-adjustments. And that hopefully will make the Norwegian market even more interesting going forward. Johan Akerblom: Okay. We have one more question from the telephone. So let's go to that. Operator: The next question comes from Jacob Hesslevik from SEB. Jacob Hesslevik: Just one more question on Slide 31. You state that you plan to redeem SEK 10 billion to SEK 15 billion until 2030. Does that mean your net debt is expected to be SEK 29 billion to SEK 34 billion, where you aim to have a 3x leverage? Was that too simple to look at it? I'm just trying to see if I can backtrack the EBITDA target for servicing going forward. Masih Yazdi: Yes. No, that's the right way we're looking at it. What you also need to make an assumption for is how large our investment book is at that point in time, because that will consume some of the remaining debt we will have at that point. So -- and we're not guiding on that, but you can make your own assumptions based on the guidance we have, which is more limited investments in the short term, ramping up later on, and hopefully contributing to income growth later in this period '26 to 2030. But sure, I mean, you can start with the current net debt, reduce that with that amount and you get an understanding of where the debt will be and then assume something on the investment book and what is required from EBITDA and servicing to get to the 3x. Jacob Hesslevik: Great. And is it possible to state anything what your replacement CapEx level is currently on your portfolio investments? Masih Yazdi: It's slightly below SEK 3 billion, around SEK 3 billion. SEK 2.5 billion to SEK 3 billion. Johan Akerblom: So I think with that, we are concluding today's session. I think we have basically shown you where Intrum is heading. In 2030, the company will be a completely different franchise. We have taken a more ambitious approach when it comes to our targets. We have also said that it will take slightly longer. But in the end, we want to focus on the leverage. We want to deleverage. We want to create a much more stable franchise. We are continuing to take out the cost and be more efficient and basically make ourselves ready to compete outside the space where we're operating today. And thirdly, by doing so and capturing more business, both within where we work today, but also with outside in new verticals and new value-adding services, we will increase our margin. And with that, we basically create a much more stable business model. I would like to thank you all for listening. Thank you for many good questions. It's always great that Jacob is the first, and now he was also the last question. And yes, I guess we will have some bilaterals with some of you going forward. Thank you very much, and have a nice afternoon.
Operator: Thank you for standing by, and welcome to the Beacon Financial Corporation Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] I'd now like to turn the call over to Dario Hernandez, Corporate Counsel. You may begin. Dario Hernandez: Thank you, Rob, and good afternoon, everyone. Yesterday, we issued our earnings release and presentation, which is available on the Investor Relations page of our website, beaconfinancialcorporation.com, and has been filed with the SEC. This afternoon's call will be hosted by Paul Perrault, Carl Carlson and will be joined by Mark Meiklejohn as well. This call may contain forward-looking statements with respect to the financial condition, results of operations and business of Beacon Financial Corporation. Please refer to Page 2 of our earnings presentation for our forward-looking statement disclaimer. Also, please refer to our other filings with the SEC, which contain risk factors that could cause actual results to differ materially from these forward-looking statements. Any references made during this presentation to non-GAAP measures are only made to assist you in understanding Beacon Financial's results and performance trends and should not be relied on as financial measures of actual results or future predictions. For a comparison and reconciliation to GAAP earnings, please see our earnings release. At this time, I'm pleased to introduce Beacon Financial's President and Chief Executive Officer, Paul Perrault. Paul Perrault: Thanks, Dario, and good afternoon, everyone. Thank you for joining us for our fourth quarter earnings call, which represents the first full quarter of results for Beacon Financial Corporation. We finished the quarter and the year with $23.2 billion in assets, $19.5 billion in deposits and $18 billion in loans. Our net interest margin improved to 3.82% with fourth quarter operating earnings of approximately $66 million or $0.79 per share before merger expenses and special charges. We also continued our record of returning capital to stockholders with a $0.32 per share quarterly dividend. Our balance sheet and asset quality remains solid. Operating performance improved with fourth quarter return on assets of 1.13% and return on tangible equity of 13.43%. These results exclude the full benefit of projected cost savings announced at the time of the merger. Overall, the strategic and financial goals outlined in our initial merger announcement are already materializing, and I fully expect to meet our remaining targets as intended. The entire integration remains on course, and we are scheduled to complete our core systems conversions in February 2026. Our highly experienced teams have spent many months preparing for this milestone by developing robust integration plans, testing technology and training of colleagues. We continue to speak with our clients and introduce the new Beacon Bank brand so that they are fully prepared for a seamless transition. I'm pleased with the positive responses to date, which gives me added confidence that we will execute a successful conversion with strong client retention next month. I'm proud of the hard work and dedication of our colleagues who continue to provide exceptional service to support our clients and are working to drive meaningful performance improvements across the entire organization. Their leadership, resilience and collaboration are integral to our ability to support those we serve, create greater value for our stockholders and generate long-term success. I will now turn you over to Carl, who will review the company's fourth quarter results in detail. Carl Carlson: Thank you, Paul. Before I get into the fourth quarter, I'd like to briefly cover 2 items. First, the early adoption of FASB's ASU; and second, how the early adoption changes expectations for the merger since our original announcement back in December 2024. As we mentioned in our press release, we chose to early adopt FASB's new ASU 2025-08 related to purchased loans. The FASB finalized this update in November, and it fixes what many in the industry refer to as the CECL double count. By adopting the new standard for 2025, purchase credit deteriorated loans for our merger of equals are treated the same as non-PCD loans. In financial terms, that means there's no day 1 hit to the income statement. Therefore, equity increases immediately. However, we no longer accrete the credit mark into income over the life of the loan. For Beacon, the day 1 impact was an increase of roughly $49 million to equity and about $0.55 to tangible book value per share. Estimated pretax annual credit mark accretion of $10 million to $13 million is foregone. Both the balance sheet and income statement for Q3 and year-to-date have been updated to reflect this. Since this is our first full quarter of combined results and there have been a few changes since we announced the merger, I thought a brief reconciliation of expectations might be helpful. Back in December 2024, our announcement provided a reconciliation of 2026 earnings per share on Page 29 of that presentation. Based on analyst expectations at the time, we projected a 2028 GAAP EPS of $3.85. As I just mentioned, the FASB issued the ASU impacting the accounting for acquired PCD loans. At the time of the merger announcement, the annual after-tax impact was estimated at $13.9 million. This reduces the EPS projection $0.17 per share to $3.68, which I would consider operating. At announcement, we also estimated a November 2025 systems conversion, which was moved to February 2026, which delayed some of the timing on synergies and pushed some of the merger charges to the first quarter of 2026, which will lower GAAP EPS estimates. Based on the 6 analysts covering Beacon, which I track, the average EPS for 2026 was $3.62 with a high of $3.75 and a low of $3.49, with stock prices ranging from $28 to $39. I believe all of these are operating EPS estimates and exclude Q1 merger charges. Turning to Q4. Total assets were up $353 million in the quarter, mainly due to higher cash and equivalents tied to strong period-end payroll fulfillment deposits. Loans declined $275 million with commercial real estate making up $235 million of that decrease. Investor commercial real estate declined to 333% of total risk-based capital. Loan originations and draws were just over $1 billion with a weighted average coupon of 631 basis points. 49% of originations were floating rate. On the funding side, customer deposits grew by $262 million, driven by $127 million of DDA growth. Broker deposits and borrowings both moved lower, down $496 million and $293 million, respectively. Our loan-to-deposit ratio ended the quarter at 92.4%. I'd like to take a minute and discuss the payroll fulfillment deposits. This business works with various payroll processing companies, which process payrolls for hundreds of companies and pay thousands of employees. Funds are transferred in for payroll, taxes and benefits with ACH payments to employees shortly thereafter. The average balance of payroll deposits are in the range of $800 million to $900 million. For liquidity purposes, we maintain balances over $500 million at the Fed. Depending on the day of the week the quarter ends on, payroll deposits can fluctuate significantly. A more informative calculation of the loan-to-deposit ratio uses average balances. Our average loans to average deposits was 96.8% at year-end. The allowance for loan losses close to $253 million or 140 basis points of coverage. This includes $76 million of specific reserves on about $354 million of substandard loans, for a coverage rate of 22%. The general reserve of $177 million represents a coverage level of about 100 basis points on the balance of the portfolio. Given the strong reserve position and the current environment and improving risk rating trends, we continue to see the quarterly provision running in the $5 million to $9 million range. We expect the coverage ratio to gradually trend lower as charge-offs will likely exceed provision as we work through existing substandard credits. Net charge-offs were $9 million for the quarter or 20 basis points annualized, all about $1.4 million of that had already been reserved. Turning to the income statement. This was our first full quarter of combined results. On a GAAP basis, including $14.4 million of merger-related charges, we earned $53.4 million or $0.64 per share, that translates to a 94 basis point ROA and 11.2% return on tangible equity. Our net interest margin came in at 382 basis points which included a 26 basis point lift from purchase accounting. Net interest income was $199.7 million, which included $13.8 million of purchase accounting accretion. Of that amount, only a net $1.9 million came from loan prepayments on purchased loans. Noninterest income was $25.9 million, noninterest expense was $119.1 million, and the provision for credit losses was $8.1 million. Excluding the $14.1 million of merger charges, operating earnings were $89.6 million or $0.79 per share. That's an operating ROA of 113 basis points, a 13.4% return on tangible equity and efficiency ratio of 56.7%. Excluding noncash intangible amortization, our core efficiency ratio was 52.8%. We'll continue to see merger-related charges in the first quarter as we complete our core systems, integrations and realize the remaining cost synergies. I want to recognize the Beacon teams for the work they've done preparing for the upcoming systems conversions. They've partnered closely with our vendors, and we're all looking forward to getting to the other side of this process. The strategic and economic benefits of the merger are already showing up greater diversification, better balance, lower overall risk, stronger efficiency along with a focused regional leadership and customer service. Yesterday, the Board approved a quarterly dividend of $0.3225 per share payable February 27 to stockholders of record on February 13. That represents a dividend yield of about 4.5%. That concludes my comments. Back to you, Paul. Paul Perrault: Thanks, Carl. We will now be joined by our Chief Credit Officer, Mark Meiklejohn, and we will open it up for questions. Operator: [Operator Instructions] Your first question comes from the line of Karl Shepherd from RBC. Karl Shepard: I guess my first question is on capital. I think you had a nice build with the accounting change and some of the CRE pay downs. And you kept the language in the deck around keeping exploring opportunities to optimize capital. Just how do you want us to think about that and kind of any landmarks over the next couple of quarters after you get past the conversion? Carl Carlson: Sure. So I'm more specifically talking to the sub debt, both at legacy Brookline. Legacy Brookline at $75 million of sub debt. And it's already about 40% of it does not count as regulatory capital at this point. And come September of this year, another 20% declines. Legacy Berkshire has $100 million of sub debt that starts to go into that kind of same discount factor come next year in 2027. So we'll be looking at refinancing. I think I want to get a good quarter of results, a clean quarter once we get all our cost savings included before we go out and refinance that. I want to try to get the best rate on that. So I think that's kind of how I'm looking at that. We all know the tools around common equity stock buybacks and things of that nature. And that's always something that we keep top of mind if we think that's right, the right thing to do at any particular time. But we also -- I've said this before, so any new shareholders, we feel capital is very precious, and we want to be very, very thoughtful about that as we move forward. Karl Shepard: Okay. And then, I guess, as a follow-up here, you kept the loan growth guidance, I think in -- you had obviously a lot of CRE declines, which I think you'd welcome. But just kind of anything surprise you in terms of maybe the pace of CRE declines? And how should we think about maybe core C&I and maybe when could we inflect, I guess, from a net number? Paul Perrault: Well, we are targeting to get down to the 300% level by the end of next year. In the meantime, we want to be able to take very good care of our very important, our very good customers who are the backbone, the legacy Brookline's real estate families. And one of the tools that we're going to use to do that is legacy Berkshire had brought in a significant amount of participations led by other banks. As those mature, we will kindly bow out of the refinance. And in the meantime, the normal order of business, the real estate is in Metro Boston does seem to be stabilizing a little bit. And so I think we'll have a good pace of originations and paydowns which will keep us on track and keep our customers happy. Operator: Your next question comes from the line of Mark Fitzgibbon from Piper Sandler. Mark Fitzgibbon: First question I had for you, Carl, is you have a little over $2 billion of cash today in short-term investments on the balance sheet. I guess I'm curious what your target for that is and maybe how long it takes you to get cash balances back to the appropriate level? Carl Carlson: Well, that happens very, very quickly, Mark. So -- and I'll go over this a little bit, again, folks that really followed Berkshire kind of know the business of the payroll deposits. But it was -- it's a nice business that they have, and we love the fee income associated with it. The efficiency around what they were able to build, and it's a great part of the new Beacon Financial Corporation. But the payroll deposits are highly volatile. They come in and then they go out. It's very, very predictable. They know exactly what's coming in. They know exactly what's going out, but it's deposits. It's in and out. And so on average, those balances range around $800 million to $900 million on an average basis. And that's kind of why I was trying to start pointing people towards a very common thing to look at is the loan-to-deposit ratio. And for us, I think a better measure is an average loan to average deposit ratio because that kind of tells more of a story. We finished the year at just under $1.9 billion in deposits, payroll deposits, which was up $800 million or so from the prior quarter. When I talk about the predictability, yesterday, our payroll deposits were up $600 million. Today, they're around $2 billion. So they fluctuate quite a bit. Money comes in and then it goes out. So what we do, we consider a portion of that core, about $500 million, and that's core. That can fund loans, that can fund securities, that can fund the balance sheet. The balance of it, we like to keep in at the Fed. So we make a little bit of a spread on it there, but it's not something that we're putting to use, and it's just going in and out. I hope that answers your question. Mark Fitzgibbon: It does. Just one other question for me. I guess you guys have talked in the past about the opportunity to do some larger loans with new and existing customers given the increased size in the balance sheet. I guess I'm curious, is that baked into your projections of mid- to lower single-digit loan growth for 2026? Paul Perrault: I think a little bit. We will still look to try to syndicate some of the largest loans as we have in the past. So we will walk through glue on the size thing. We don't want to move too fast, but we are interested in looking at somewhat larger loans. Operator: Your next question comes from the line of Laura Hunsicker from Seaport. Laura Havener Hunsicker: Yes, just wanted to go back to the buyback. I wanted to understand that a little bit more. Certainly, a lot of your peers are actively buying back stock, and you're sitting with a plethora of capital, right? Your CET1 is 11%. So how do you think about that? I mean, obviously, I realize price is a consideration and other uses. But where do you want that CET1 ratio? Or how is it that you look at it? What is it that would get you excited and say, okay, now we have to be back in the market. How should we think about that? Carl Carlson: I think you only go back in the market and buy back your stock when, number one, the stock is just not doing well and it doesn't represent the value of the organization. And you're not able to grow and use the capital for growth. Now the first thing that we easily hit that number because that's -- just going to what the analysts expect us to be trading at, we're very undervalued in that sense. Not that I'm saying we're undervalued. I'm just saying the analysts are saying that. I bought back some -- I bought some stock personally, but that's different. It's something that -- but as far as making sure that we think about this for the long term, it's not a short-term thing it's a long-term thing. And right now, we're focused on getting to that 300% of capital for our ICRE portfolio concentration numbers. And growth in capital gets us there. And so we expect to see that capital growth, but also growth in loans. So if we don't for some reason, get the growth of loans that we expect, we understand that that's an opportunity to pull on. We also understand that when we do raise some sub debt, there may be opportunities to use some of those proceeds for common stock buyback if it makes sense. These are all big hits. But that's -- hopefully, that's helpful. We do provide our capital ratios in the deck and where we feel comfortable with them. Laura Havener Hunsicker: Sorry, I see them provided in the deck. Can you name a target? Did I missed that? Carl Carlson: We have operating targets that we're very comfortable with. Our stress tests show that we could operate at that level. That doesn't mean that we're going to go right down to that level because you also have to consider the market and what peers are doing and things of that nature as well as other uses of capital. You always need capital for growth. Laura Havener Hunsicker: I mean, just one more thing. I mean, it would also seem your dividend yield there, I mean, I agree with you. I think, obviously, your stock is cheap, but your dividend yield here is so high. And so that's also an expensive cost that if you retire those shares, it's not there. Is that -- is that part of the thinking? I mean... Carl Carlson: It goes into the -- yes, it does go into the calculus whenever you're thinking about doing buybacks. Laura Havener Hunsicker: Okay. Okay. And then just jumping over to credit. You -- obviously, you had a small jump here in your CRE nonperformers. It looks like that was all office. Just wondered on that, if there was any color on that $10 million increase? And then also on office, the $137 million of criticized, how much of that is set to mature this year in 2026? Mark Meiklejohn: So Laura, to your answer to your question, the jump on the nonaccruals was a single office property CBD. It was about a $9 million loan, vacancy issues there, and we have a very strong reserve on that. It's 56% reserved. Laura Havener Hunsicker: Okay... Mark Meiklejohn: And I apologize. I missed the second part of your question? Laura Havener Hunsicker: Yes, the $137 million you have of criticized office and by the way, I really appreciate all the disclosures here. How much of that is set to mature this year? Carl Carlson: Very little actually. We had 2 in our -- in the 5 quarters, including the current quarter, we only had 2 criticized loans scheduled to mature. One is the loan that I just described to you. And then the second loan is a special mention loan, so it's not a substandard loan, and that is not until the third quarter of '26. And frankly, I don't expect any issues with that loan. Laura Havener Hunsicker: Okay. Okay. Great. And then the reserves to loans, you mentioned that's obviously nice and high at 1.4%, and you'd expect that to obviously come down. Where do you see that ending up as we look throughout 2026. Where could we see it in the fourth quarter? Mark Meiklejohn: Yes. I would probably hesitate to give you a number because that's being driven by some of the specific reserves, as Carl mentioned that we have on our substandard loan portfolio. Some of those loans are long-term workout loans. We have strategies with all of those that we're working through. But it's hard for me to say exactly when we -- we've said that we expect elevated charge-offs based upon the level of provision we have. It's hard for me to predict on when those may actually occur. But I think over the next 4 to 6 quarters, we'll see it ride down into the [ 125% ] range. Laura Havener Hunsicker: Okay. Okay. That Great. Okay. And then last question, onetime charges by my math, there's about $10 million or so remaining for the first quarter. Is that still a good number? Or is there a better number to be using? Mark Meiklejohn: I think it's -- yes, it's in the $10 million to $13 million, I think, range. Operator: Your next question comes from the line of David Konrad from KBW. David Konrad: Carl, thanks for your comments earlier in the call regarding the accounting change. But I wanted to take it another way with your guidance. You were 15 to 20 accretive yield prior with the 3.90% to 4% NIM. I was interpreting the 15% to be with the new accounting change. And so now your accretable yield is estimated to be 15% and the guide now is 3.85% to 3.95% for the NIM. So I kind of get why the high end would be reduced, but maybe am I interpreting the accounting change and why do we drop to the 3.85% NIM on the low end, that makes sense. Carl Carlson: Sure. Well, as you know, we came in -- this is the guidance I gave almost exactly for last quarter. And -- but I gave, as you said, the 3.90% to 4%. The -- and I was always thinking when I think about prepayments on the -- on the loans that were marked with the merger of equals, I was -- I was just thinking about the upside, and so we were estimating about $3 million of benefit from loans being prepaid. And that's kind of what our baseline guestimate, and I'll say, guesstimate because it is mostly a guess on prepayments. Our prepayments would have been actually a little higher than that, but it was knocked down because we had 1 large loan that prepaid that actually had a premium on it. And so I wasn't really thinking about the loans with premiums on them. And that actually had a big impact on what we actually realized this quarter on interest, so knocked us down to 13% and change. And so I think a better adjust my -- take that into a little bit of that into consideration. So you are right, the $15 million did exclude the impact -- the FASB impact because we knew it was coming or we were very hopeful that it was coming. And -- but prepayments are a little bit more volatile. I wanted to give myself a little bit more room there. David Konrad: Got it. Okay. And then on the expenses, 1 quick question. Amortization expense came in at $8.8 million, I think, which is a little bit higher than I thought. Is that a good number to think about going forward? Carl Carlson: Yes. That's a good number. I mean it does step down over time because we do it on a -- some years digits basis. I think if the CDI component is over 12 years, so it does step down over time. And we've got a wealth amortization component of that as well. David Konrad: And then last one, as you achieve all the cost saves in the 2Q '26 area, what should we expect for like the back half of the year expense growth rate once all the cost saves are down? Carl Carlson: Well, I think we would stay in that 3% to 3.5% growth after we get -- realized our cost savings. I mean we do have a lot of work going into our branding efforts right now. So that will be in the run rate basically. It will be -- it will start in the run rate, I'd say, in Q1, but you'll see the impact in Q2. So we'll have a net impact in Q2 of all the cost savings as well as some of the investments in the organization. Paul Perrault: Lot of signs. Carl Carlson: There's a lot of sings. We're doing some upgrades to some of our systems, but there's also a lot of savings around -- around systems and vendors and things of that nature as well. Operator: Our next question comes from the line of Steve Moss from Raymond James. Stephen Moss: Maybe just, Paul, so maybe just starting on kind of how to think about the loan runoff portfolios. Just on the equipment finance and the Berkshire Hills commercial real estate participations, kind of curious if you could size up how much you're looking to carve out over the next -- or let go over the next kind of 12 to 18 months? Paul Perrault: Mark? They get the 3 portfolios that are running off that we're not in those businesses anymore. Mark Meiklejohn: Yes. So for Eastern funding, the tow portfolio is down to about $190 million. Macro lease is about $150 million and the aircraft or -- I'm sorry, the Firestone is just under $20 million. In terms of runoff on those, we've got tow at about $27 a quarter, macro lease at $19 a quarter and Firestone at $2 million to $3 million per quarter. So those are running off quite quickly. In terms of the participation side, I don't think we can put a number on that because there are lot of factors involved with that, the maturity of the loans, the desirability of those loans in the marketplace when they do mature, and then our ability to sort of work our way out of those. So it's a stated strategic goal for us, but it would be -- it would be inappropriate for me to put a number on that. Stephen Moss: Okay. Got you. Appreciate that. And then in terms of just the office loan, I apologize if I missed it. Just kind of curious as to how you're thinking about the timing of resolution around that $9 million NPL? Mark Meiklejohn: Currently on that, that's the new nonaccrual that we discussed. We're working. The sponsor is very amenable to working with the bank on a potential sale of that property. So we think there's some interest, and we're hopeful. Stephen Moss: Okay. And then a third one here, just in terms of -- I know it's a disclosure on the rent control multifamily properties in New York. Just wondering if you could size up how large that portfolio is? Mark Meiklejohn: Yes. I think we had talked about this last quarter. If I recall correctly, we -- I believe we have 7 loans in that portfolio. The total is about $18 million or $19 million. So it's a really very small population of loans, and it comes out of our -- formerly the PCSB bank. Stephen Moss: Okay. Appreciate that. And then I guess a question for Carl here. Just kind of curious as you have the balance sheet combined here, you've laid out your expectations for growth. Kind of curious how you're thinking about positioning the balance sheet for rates? How a 25 basis point rate cut could impact you guys these days and if there's anything you're looking to in terms of adjusting balance sheet positioning? Carl Carlson: Yes, I'd say we like the position of the balance sheet right now. It is a little bit on the asset-sensitive side in the very near term. So when rates move quickly, the rates on our loans and our assets move a little faster than our deposit side. But deposits tend to catch up fairly quickly. It may not be in the quarter, but pretty quickly. So we like where we're positioned. You can see the duration of loans is short. The duration of the securities portfolio is short and the size of the securities portfolio is minimal to support the organization in very vanilla and what they're invested in. But -- and the deposit portfolio just continues to get better and better. Paul Perrault: But from a strategic point of view, Steve, we work to try to be neutral. We don't like to take a guess on where interest rates are going to go and then take action on the balance sheet, that you may or may not realize that. So we'll make our money the old-fashioned way. Operator: Your next question comes from the line of David Bishop from Hovde Group. David Bishop: Curious from an economic backdrop perspective, I think, Paul, maybe you mentioned this in the preamble. Maybe just an update in terms of what you're seeing in terms of the health of the Boston commercial real estate market. I know life science is pausing up there in terms of available space, maybe what you're seeing from a macro level perspective on the commercial real estate side? Mark Meiklejohn: Yes, certainly, this is Mark. Certainly, there continues to be stress in the portfolio, both -- in the market, I should say, both in terms of office and lab. I think there are quality lease opportunities out there. There are quality tenants out there, and they've got a lot of leverage right now. So we are seeing values drop. We've seen that in the resolution of some of our problem assets. But I think we're generally seeing that stress in the marketplace as it relates to price per square foot type values. And I expect that stress to continue. But I think the new news or the green shoots, if you will, in the market is that there are people out there. We're seeing some -- particularly on the Life Science side some of the tenants starting to be successful with the rounds of finance -- rounds of funding, I should say. So that's creating some opportunities in the marketplace for sort of buy the lease market a little bit, if you will. Paul Perrault: I would just add, David, that the core business district in Boston has gone through some pain, probably has to go through some more pain, but it does seem to be coming back green shoots. I think Mark mentioned and some life science stuff, which got overbuilt in the past few years where we don't have all that much in that. I think that continues to suffer. But in our entire footprint, the rest of the stuff is really pretty good. That's all going pretty well. When I talk about Rhode Island and even Western Mass and all many places like that they are all holding up pretty well. David Bishop: Got it. And then maybe back to the loan side of the equation on the yields. Just curious what you're seeing in terms of new origination yields, how this trended quarter-over-quarter? Carl Carlson: So like I said, we originated a little over $1 billion at 631 basis points on average. Now remember we had 3 rate moves in the quarter as well. So we saw the impact on that on not only just the originations, 49% of our originations are basically floating rate, but also on the balance sheet of those loans that reprice. So if there's any particular category you're interested in, C&I loans were coming in on a weighted average base of 701 basis points, consumer loans around 549 basis points and commercial real estate, 607 basis points. David Bishop: Eastern fund, I appreciate that color. Carl Carlson: Yes, the Eastern funding, as far as equipment financing, that's as a subset of commercial loans, 853 basis points on that book. David Bishop: Got it. Then maybe 1 final question. Turning back to capital. Carl, you probably saw maybe 1 of your peers last week, I think, announced they did a credit risk transfer. Any thoughts? Is that something that could ever enter the capital management equation? Carl Carlson: I never want to say never, but it's not something that we're really interested in. And God the bid, I said I was interested. I get 400 calls. Operator: That ends our question-and-answer session. I will now turn the call back over to Paul Perrault for closing remarks. Paul Perrault: Thanks, Rob, and thank you all for joining us today, and we will look forward to talking with you next quarter. Operator: This concludes today's conference call. Thank you for your participation, and you may now disconnect.
Operator: Welcome to GSI Technology's Third Quarter Fiscal 2026 Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. At that time, we will provide instructions for those interested in entering the queue for the Q&A. Before we begin today's call, the company has requested that I read the following safe harbor statement. Matters discussed in this conference call may include forward-looking statements regarding future events and the future performance of GSI Technology that involve risks and uncertainties that could cause actual results to differ materially from those anticipated. These risks and uncertainties are described in the company's Form 10-K filed with the Securities and Exchange Commission. Additionally, I have also been asked to advise you that this call is being recorded today, January 29, 2026, at the request of GSI Technology. Lee-Lean Shu, the company's Chairman, President, and Chief Executive Officer, will be hosting the call today. With him are Douglas Schirle, Chief Financial Officer, and Didier Lasserre, Vice President of Sales. I would now like to turn the conference over to Mr. Shu. Please go ahead, sir. Good afternoon. Lee-Lean Shu: And thank you for joining us to review our third quarter fiscal 2026 results. I am encouraged by our overall progress this quarter. Revenue in the third quarter increased by 12% year over year and 28.5% on a fiscal year-to-date basis. Demand for our excellent products remains solid, and we expect strong sales from our largest customers. In 2026, after completing all financials in fall 2025, we will defend our APU roadmap. We begin PLATO hardware development after purchasing the required IP. We have also added contract engineers to support our hardware design team, keeping us on track to take operation in early 2027. We finalized the agreement with G2 Tech, the Israel-based AI company, for our recently announced proof of concept. We are partnering with G2 Tech on Sentinel, a program for autonomous perimeter security using drones and cameras. The project is backed by the US Department of War and a foreign government agency. This government funding will offset our cost to build a software stack and the libraries needed for this project. Didier will share more details shortly. Another recent milestone is Gemini II's time to first token benchmark, announced in the press release earlier today. For those who have not reviewed it, please see today's release for the full detail on the benchmark result and the methodology. Accordingly, we reported three-second time to first token, or TTFT, performance for HLON with text and video input, consuming approximately 30 watts of system power. Compared to third-party testing of competitive platforms, Gemini II's TTFT delivered up to three times faster first token at a lower power than the competitive chip on the same workload. We believe these test results validate Gemini II's fast response for edge use cases that need low power and low latency. In his comments, Didier will expand on the benchmark results. We are making steady progress for the Benzene pretzel, continue to improve Gemini II performance, and completing the 17 of watches. We are also pursuing early proof of concept and prototyping opportunities for Gemini II in systems in different programs, including zone and unmanned systems, and in selected commercial edge deployments. In parallel, we continue to pursue long-diluted R&D funding through government defense programs and strategic partners. With that, I hand the call over to Didier Lasserre. Didier Lasserre: Thank you, Lee-Lean. I will start by expanding on some of Lee-Lean's comments. On the Sentinel POC, we expect to receive more than $1 million in government funding. We will record this as an offset to R&D expenses. We plan to use it to complete key software milestones for the project, including software development for GEMMA 312B on our Gemini II ahead of the planned demonstration to the government agencies later this year. Our POC partner, G2 Tech, is receiving additional funds to develop the drone platform for this demo. I am pleased to share that G2 Tech conducted a competitive evaluation, and GSI was selected based on Gemini II's performance, delivering the lowest TTFT at 30 watts. If the government evaluation later this year is successful, it could lead to a potential Gemini II design win with G2 Tech, and we would move to pursue additional opportunities with other drone and unmanned system customers beyond the POC sponsors. Turning to today's press release, our Gemini II TTFT benchmarks discussed preliminary results showing a three-second time to first token for a multimodal model at the edge using video and text inputs at approximately 30 watts of system power. TTFT is how long it takes the system to produce the first response, which is critical for drones and unmanned systems. The threshold for a useful TTFT in video surveillance to ensure nothing is missed is three seconds. That means we are sampling the video image every three seconds. If the TTFT is ten seconds, it takes too long, so the surveillance video could miss something. In preparation for the Sentinel demo, we will continue improving TTFT over the next five months to further reduce Gemini II's first time to response. What's exciting for GSI about these Gemini II preliminary benchmark results is that they demonstrate what compute and memory can provide for physical AI: faster time to first token and materially lower chip power. This will help enable a broader set of viable, cost-effective deployments. For added color, at CES 2026, there was a clear shift towards edge AI and physical AI systems that must make real-time decisions under tight power constraints. In that context, Intel noted that TOPS, the number of operations per second, does not tell the whole story. What matters more in edge AI and physical AI is real-world workload performance and efficiency. That is the takeaway for us as well. For edge inference, performance per watt and responsiveness matter more than peak training metrics. We are confident that our compute and memory APU architecture, designed to reduce data movement, is well-suited for power-constrained edge inference. Our near focus is to continue validating this with additional benchmarks and customer proof of concepts and convert that progress into design wins for Gemini II. To be clear, we are not trying to compete with folks at training and data centers. Our goal is to be a strong option for fast, low-power edge AI applications. Switching to the customer and product sales breakdown, in 2026, sales to KYEC were $1.1 million or 17.9% of net revenues, compared to $1.2 million or 22.7% of net revenues in the same period a year ago, and $802,000 or 12.5% of net revenues in the prior quarter. Sales to Nokia were $675,000 or 11.1% of net revenues compared to $239,000 or 4.4% of net revenues in the same period a year ago, and $200,000 or 3.1% of net revenues in the prior quarter. Sales to Cadence Design Systems were $233,000 or 3.8% of net revenues compared to $971,000 or 17.9% of net revenues in the same period a year ago, and $1.4 million or 21.6% of net revenues in the prior quarter. Military defense sales were 28.5% of third-quarter shipments compared to 30% of shipments in the comparable quarter a year ago, and 28.9% of shipments in the prior quarter. SigmaQuad sales were 41.7% of third-quarter shipments fiscal 2026 compared to 39.1% in 2025 and 50.1% in the prior quarter. I would now like to hand the call over to Douglas Schirle. Go ahead, please. Douglas Schirle: We reported net revenues of $6.1 million for 2026, compared to $5.4 million for 2025 and $6.4 million for 2026. Gross margin was 52.7% in 2026 compared to 54% in 2025 and 54.8% in the preceding 2026. The decrease in gross margin in 2026 was primarily due to product mix. Total operating expenses in 2026 were $10.1 million compared to $7 million in 2025 and $6.7 million in the prior quarter. Research and development expenses were $7.5 million compared to $4 million in the prior year period and $3.8 million in the prior quarter. The increase in research and development spending compared to the prior quarter is primarily due to the purchase of IP for the development of PLATO and associated consulting expenses. Selling, general, and administrative expenses were $2.6 million for the quarter ended December 31, 2025, compared to $3 million in the prior year quarter and $3 million in the previous quarter. Third-quarter fiscal 2026 operating loss was $6.9 million compared to an operating loss of $4.1 million in the prior year period and an operating loss of $3.2 million in the prior quarter. Third-quarter fiscal 2026 net loss included interest and other income of $3.6 million reflecting a non-cash accounting adjustment of $6.2 million for the change in fair value of the prefunded warrants and issuance costs of $2.8 million in the recent registered direct offering, and a tax benefit of $251,000 compared to $70,000 in interest and other income and a tax provision of $44,000 for the same period a year ago. In the preceding second quarter, net loss included interest and other income of $43,000 and a tax provision of $41,000. Net loss in 2026 was $3 million or $0.09 per diluted share compared to a net loss of $3.2 million or $0.11 per diluted share in 2026. For the prior year 2025, net loss was $4 million or $0.16 per diluted share. Total third-quarter pretax stock-based compensation expense was $783,000 compared to $429,000 in the comparable quarter a year ago and $856,000 in the prior quarter. Beginning this quarter, GSI is expanding the cash disclosures in its quarterly earnings release process to help investors understand the company's cash consumption and cash generation. Going forward, we will disclose the beginning cash balance, net cash used by operating activities, net cash used by investing activities, and net cash provided by financing activities. This will complement the condensed consolidated statement of cash flows included in our Forms 10-K and 10-Q. Cash flows for the quarter ended December 31, 2025, in thousands of dollars: Cash and cash equivalents as of September 30, 2025, were $25.3 million. Net cash used in operating activities was $7.9 million. Net cash used in investing activities was $296,000, and net cash provided by financing activities was $53.5 million. Cash and cash equivalents as of December 31, 2025, were $70.7 million. The increase in cash and cash equivalents as of December 31, 2025, primarily reflects $46.9 million in net proceeds from the company's October 22, 2025, registered direct offering. Cash used in operation activities includes spending for the development and commercialization of Gemini II and PLATO. As of December 31, 2025, we had $70.7 million in cash and cash equivalents compared to $13.4 million as of March 31, 2025. Working capital was $71.7 million as of December 31, 2025, versus $16.4 million as of March 31, 2025. Stockholders' equity as of December 31, 2025, was $83.6 million compared to $28.2 million as of the fiscal year ended March 31, 2025. Before I hand the call over to the operator for Q&A, I would like to provide the fourth quarter fiscal 2026 outlook. Current expectations for the upcoming fiscal fourth quarter are net revenues in the range of $5.7 million to $6.5 million with a gross margin of approximately 54% to 56%. Operator, at this point, we will open the call to Q&A. Operator: Thank you. Please press 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. It may be necessary to pick up your handset before pressing the star keys. In the interest of time, we ask that you limit yourselves to one question and one follow-up and then return to the queue for any other follow-ups. Thank you. Our first question comes from the line of Quinn Bolton with Needham and Company. Please proceed. Robert Christian: Hi, guys. This is Robert Christian on for Quinn here. Congrats on all of the progress on Gemini II. I just wanted to ask, you also announced during the quarter a partnership with G2 Tech as well. You know, and you know, that application for defense. Maybe how important is kind of the defense applications for Gemini II? You know, how does that establish the capabilities of Gemini in sort of real-world applications? And can you speak to potential commercial uses beyond kind of drones and defense and how this may impact the business going forward? Didier Lasserre: Sure. So certainly, the military and defense area have been, you know, the sectors that we have had our early successes in. We have talked about it in the past. You know, we have had some of the SBIR wins with entities under the DOD or DOWS as it is called today, specifically with the Air Force, Space Development Agency, and US Army. We certainly have had some successes there in, you know, getting the message out. We have also talked about a SAR application, a board that we sent out to an offshore defense contractor for a Leo satellite for SAR in which they are, you know, doing their evaluation now. So, certainly, this is the area that has adopted our technology most quickly. And as you mentioned, with G2 Tech, it is really a nice partnership because they are able to actually bring a product using our subsystem APU to create a true product. In this case, like you said, a drone and camera surveillance system. Can you repeat the last part of the sentence or the question, though? Robert Christian: Yeah. I guess how much will be... Didier Lasserre: Yeah. Yeah. So good point. So the effort we are doing right now with this POC, you know, this time to first token and the whole GEMMA 312B, you know, lends itself to other applications outside of drones and unmanned vehicles, things like smart cities, things like robotics. And so, certainly, we will be able to leverage all the work we are doing now for this current POC with G2 Tech for these other markets as well. Robert Christian: For sure. Thanks for that. And just one more on you mentioned that government funding as a catalyst for 2026. Can you talk through maybe potential timelines of when you expect this funding to come in? Any other details that you have on that front would be great. Didier Lasserre: Yes. So for SBIRs, we have a continuous pipeline of submittals. So we have, you know, a handful right now that have already been submitted, and we are waiting for word on whether we have been awarded or not. And we have others that we are putting together. This is an ongoing process, and there are different levels. They fall under, you know, the classic SBIRs. There are also other areas like BAA, which stands for Broad Agency Announcement, I believe. It is trafficified. There are other programs where other fundings are involved. We are active in all those areas. Again, the benefit of this funding is it is non-dilutive. First and secondly, it allows us to get more exposure within the DOD elements for future business. Robert Christian: Great. Thanks. That is all for me for now. Thank you. Operator: If you would like to ask a question, please press 1, and a confirmation tone will indicate your line is in the question queue. Lee-Lean Shu: Seems like there are no more questions from the investors. Thank you all for joining us. We look forward to speaking with you again for our fourth quarter and the full year fiscal 2026 results. Thank you. Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time. And thank you for your participation.
Operator: Ladies and gentlemen, welcome to the Q4 2025 Analyst Conference call and live webcast. I'm Moore, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Ioana Patriniche, Head of Investor Relations. Please go ahead. Ioana Patriniche: Thank you for joining us for our fourth quarter and full year 2025 preliminary results call. As usual, our Chief Executive Officer, Christian Sewing, will speak first; followed by Chief Financial Officer, James von Moltke. The presentation, as always, is available to download in the Investor Relations section of our website, db.com. Before we get started, let me just remind you that the presentation contains forward-looking statements, which may not develop as we currently expect. We therefore ask you to take notice of the precautionary warning at the end of our materials. With that, let me hand over to Christian. Christian Sewing: Thank you, Ioana, and good morning from me. Let me start with the key message. We delivered on all our 2025 targets. Thanks to strong momentum across all our businesses, we reported revenues of EUR 32 billion. This represents compound annual revenue growth of 6% since 2021, the midpoint of our target range of 5.5% to 6.5%. We self-funded this growth by achieving EUR 2.5 billion of operational efficiencies and delivered a cost income ratio of 64%, in line with our target of below 65%. Asset quality remains solid. Credit loss provisions at EUR 1.7 billion are down year-on-year and in line with our most recent expectations. We delivered record profits in 2025 with pretax profit of EUR 9.7 billion and net profit of EUR 7.1 billion. Post-tax return on tangible equity was 10.3%, meeting our full year target of above 10%. We see this as a great start towards our commitment of greater than 13% by 2028. We are also delivering on our capital objectives. We finished the year with a strong CET1 ratio of 14.2% even after a number of capital headwinds absorbed in the fourth quarter. James will detail these shortly. And thanks to our robust organic capital generation and delivery of our capital efficiency program, we again raised distributions to shareholders. With the proposed EUR 1 dividend per share and an authorized share buyback of EUR 1 billion, distributions in respect of 2025 will represent EUR 2.9 billion in line with our 50% payout commitment. As a result, cumulative distributions for 2021 to 2025 would reach EUR 8.5 billion, exceeding our original EUR 8 billion target. And we will be looking to do a further share buyback this year. And importantly, over these last few years, we have significantly strengthened our foundation. We have positioned Deutsche Bank to further increase value creation in the years ahead by scaling our global Hausbank. Let's look at how we delivered the improved profitability. As we explained at our Investor Deep Dive in November, we have transformed Deutsche Bank into a simpler, more focused business with a significantly improved financial profile. We delivered on our revenue ambition of around EUR 32 billion this year, an increase of 7% compared to the prior year or 26% since 2021 due to our diversified business mix and revenue composition. Cost discipline remains strong in 2025. Noninterest expenses came in at EUR 20.7 billion, down 10% year-on-year. We kept adjusted costs broadly flat and achieved a material reduction in nonoperating costs, reflecting lower litigation expenses. Our 2025 cost base is nearly EUR 1 billion lower than in 2021, a reduction of around 4% over this period. Operational efficiencies enabled us to self-fund foundational investments in our technology architecture, control environment and client franchise. This cost reduction, combined with our strong revenue growth, created significant operating leverage. In 2025 alone, we delivered operating leverage of 17% and our pre-provision profit was EUR 11.4 billion, up threefold since 2021. This resulted in record profits in 2025 with pretax profit of EUR 9.7 billion, up by 84% year-on-year. The improvement in our profitability was delivered through the successful execution of our global Hausbank strategy across all our divisions as you can see on Slide 4. All 4 businesses have delivered a reduction in their cost income ratios and substantial improvement in profitability since 2021 leading to double-digit returns in 2025. Corporate Bank delivered revenue growth of more than 40% since 2021. The revenue mix benefited from a normalized interest rate environment, and importantly, from our actions to increase fee income. This helped us to deliver stable revenues in 2025 despite lower rates and FX pressures. Going forward, the action we took in recent years mean the Corporate Bank is well positioned to scale the global Hausbank model by further leveraging our global network, product capabilities and client relationships. Our investment bank has transformed over the past few years. In fact, our efforts were focused on deepening and broadening the franchise with targeted investments into existing and adjacent businesses, reinforcing our world-class franchise. As a result, we gained market share and client activity increased by a further 11% in 2025 compared to the previous year. We are also repositioning Investment Banking and Capital Markets, or IBCM, building on our German leadership and focused offering, investing in sector and product expertise to expand our advisory and ECM capabilities while maintaining the strength of our debt franchise. Private Bank has made tremendous progress with its transformation creating a more focused, efficient and connected franchise with cost-to-income ratio below 70% and returns above 10% in 2025. The Private Bank's 2 complementary business attracted EUR 110 billion of net inflows since 2021, setting a strong foundation for the next stage of our plan. Our Asset Management arm DWS attracted EUR 85 billion of net new assets in the last 4 years, with assets under management surpassing EUR 1 trillion in 2025. And DWS, as a leading German and European asset manager with strong capabilities across asset types, is uniquely positioned to offer clients a gateway to Europe. We also delivered on our sustainability agenda across divisions. Sustainable finance volumes were EUR 98 billion in 2025, the highest annual volume since 2021, with EUR 31 billion raised in the fourth quarter alone. And we have achieved a cumulative total of over EUR 470 billion since 2020. Together with significantly improved ESG ratings, our sustainable finance business activity sets a strong base to further strengthen and scale our sustainability agenda in years ahead. Delivering on our strategy has created significant shareholder value, as you can see on Slide 5. First, improved profitability contributed to a 25% increase in our tangible book value per share since 2021 to almost EUR 31. And second, we have consistently increased shareholder distributions. For the financial year 2025, we plan to propose a dividend of EUR 1 per share or around EUR 1.9 billion in total at the AGM in May. We were pleased to have received supervisory authorization for EUR 1 billion share buyback. The resulting distribution of EUR 2.9 billion are consistent with our goal of a payout ratio of 50% for 2025. Including these proposed distributions, we would reach cumulative distributions of EUR 8.5 billion in respect of the financial years 2021 to 2025. And as I mentioned earlier, we will evaluate the possibility of an additional share buyback in the second half of 2026. Before I hand over to James, I want to briefly address the next phase of our strategy on Slide 6. We have built a firm foundation for the next phase of our strategic agenda, which is all about scaling our Global Hausbank. At the Investor Deep Dive in November, we set out a road map to increase post-tax return on tangible equity from 10% in 2025 to greater than 13% over the next 3 years. We also set out our plans to further improve our cost/income ratio to below 60% from 64% in 2025. We plan to achieve this via 3 levers: focused growth, strict capital discipline and a scalable operating model. Disciplined execution will accelerate value create for our shareholders include further increased capital distributions. As we guided, we are increasing our payout ratio to 60% this year. As we made clear in November, we have all the levers to achieve our goals in our hands today. We have planned prudently, and we see upside to our targets if the environment develops positively. 2026 is about taking the next steps to successfully deliver our strategy, and we are encouraged by the strong start to the year we have made so far. Delivering on our 2028 agenda will enable us to reach our long-term goal to become the European champion and banking as measured by a clearly defined set of criteria, a truly global bank domiciled in Germany, the largest economy in Europe and the #3 economy in the world. A champion for our clients as their trusted partner in a world which remains uncertain. A champion for shareholders, reflecting the value we create for them and a great home for our talented people. A final thought before I hand over to James. Today's results mark the end of an era in more ways than one. This will be the last quarter in which I sit down together with my colleague, James von Moltke, to discuss our results with you. James joined us in 2017, and as you know, I was appointed CEO the following year. Since then, James has been a fantastic partner and a trusted counselor of Deutsche Bank's journey of transformation. It would be impossible for me to put into words everything James has contributed to what we have achieved on that journey. But there is one thing I can tell you, the successes we are discussing with you today are a great deal to James professionalism and his outstanding dedication to our bank. And in the past few months, I have witnessed a seamless transition to our incoming CFO, Raja Akram, who had a great start. Raja, it is a joy working with you. Thank you, James, for all you have done for Deutsche Bank. James von Moltke: Christian, thank you for the kind words. Indeed, this is the last time I will present the bank's results before handing over the CFO role to my successor, Raja Akram. Doing this from a position of strength is something I'm particularly proud of. The management team and the entire bank have put tremendous effort into turning the bank around and achieving this milestone. And as I said in November, we have significantly strengthened our foundations, rebuild stakeholder confidence and position the bank for sustainable value creation above our cost of capital in the years ahead. Let me now turn to Page 8, a slide we have consistently shown since we made commitments to accelerate our Global Hausbank strategy and which shows the development of our key performance indicators. With a strong finish to the end of the year and continued execution, we successfully delivered against all broader objectives and targets we set for ourselves for 2025. We maintained a strong capital foundation and our liquidity metrics are robust. The liquidity coverage ratio finished the year at 144% and the net stable funding ratio was 119%. And let me add the proposed EUR 2.9 billion capital for dividends and share buybacks, which complete our distributions in respect of 2025 are already deducted from our CET1 capital, such that the 14.2% CE Type 1 ratio represents an excellent starting point going into 2026. With that, let me now turn to the fourth quarter and full year highlights on Slide 9. Our diversified and complementary business mix enabled us to generate revenue growth of 7% year-on-year both in Q4 and for the full year. With normalized nonoperating costs this year and adjusted costs broadly flat, fourth quarter and full year noninterest expenses were 15% and 10% lower, respectively, year-on-year. Our full year tax rate was 27% benefiting from the German tax reform and the geographical mix of income. We expect the 2026 full year tax rate to be around 28%. In the fourth quarter, diluted earnings per share was $0.76 bringing the full year to EUR 3.09, while tangible book value per share increased 4% year-on-year to EUR 30.98. Before I move on, let me share my usual remarks on Corporate & Other with further information in the appendix on Slide 37. C&O generated a pretax loss of EUR 109 million in the quarter, primarily driven by shareholder expenses, legacy portfolios and other centrally held items, partially offset by positive revenues in valuation and timing differences. Let me now turn to some of the drivers of these results, starting with net interest income on Slide 10. NII across key banking book segments and other funding was EUR 3.4 billion for the quarter and $13.3 billion for the full year, in line with our plans when adjusted for FX effects. The Private Bank continued to deliver steady NII growth and improved its net interest margin by around 30 basis points year-on-year, reflecting higher deposit revenues and the ongoing rollover of our structural hedge portfolio. Momentum continued in FIC financing with sequential growth in NII supported by loan growth. Corporate Bank NII was slightly up quarter-on-quarter, reflecting a significant deposit increase, which positions us strongly going into 2026. Overall, for 2026, we expect NII across key banking book segments and other funding to increase to around EUR 14 billion. We expect this increase to be supported by targeted portfolio growth in both deposits and loans, but the largest contributor will be structural hedge rollover of which around 90% is locked in through swaps. You can find details on the benefit from the long-term hedge portfolio rollover on Slide 25 of the appendix. Turning to Slide 11. We maintained strict cost discipline throughout the year and delivered adjusted costs in line with our guidance at EUR 5.1 billion for the fourth quarter and EUR 20.3 billion for the year. As in prior quarters, the compensation costs were up on a year-on-year basis, primarily reflecting higher performance-related accruals. For the full year, higher deferred equity compensation and the impact of increasing Deutsche Bank and DWS share prices also played a role. Noncompensation costs were down across categories, both in the fourth quarter and the full year. And similar to last year, fourth quarter bank levies were mainly driven by the U.K. levy. With that, let me turn to provision for credit losses on Slide 12. Overall, provision for credit losses was stable in the fourth quarter as an increase in Stage 3 was offset by releases in Stages 1 and 2. Full year provisions stood at EUR 1.7 billion, 7% lower than in 2024 despite elevated macroeconomic and geopolitical uncertainty and ongoing headwinds in commercial real estate. Net releases in Stages 1 and 2 provisions were mainly driven by improved macroeconomic forecasts with additional benefits from portfolio effects, partially offset by a net increase in over lease. Key Stage 3 drivers were higher provisions in the Corporate Bank and CRE-related provisions in the investment bank, including one larger single name event. Private Bank provisions returned to a more normalized level. Wider asset quality remains resilient, and we continue to expect provisions for credit losses to trend moderately downwards in 2026 relative to 2025. Turning to capital on Slide 13. Our fourth quarter common equity Tier 1 ratio came in at 14.2%, a decrease of 30 basis points compared to the previous quarter with a 44 basis point reduction related to one-off effects as discussed last quarter. These effects included the discontinuation of the transitional rule for unrealized gains and losses on sovereign debt, and the annual update of operational risk-weighted assets impacting the ratio by 27 basis points and 17 basis points, respectively. Higher market risk-weighted assets reduced the ratio by 9 basis points as trading activity picked up to more normalized levels in the quarter, while credit growth was offset by a securitization benefit. The impact of these items on the ratio was partially offset by 21 basis points of capital generation, reflecting our strong fourth quarter earnings, net of AT1 coupon and dividend deductions. Our fourth quarter leverage ratio remained flat at 4.6%. The discontinuation of the aforementioned transitional OCI filter had an impact of 6 basis points. The 10 basis point reduction relating to an increase in cash and reverse repo was more than offset by a 13 basis point increase due to our EUR 1 billion AT1 issuance in November and the other CET1 capital increase drivers. Now let us turn to performance in our businesses, starting with the Corporate Bank on Slide 15. Corporate Bank closed 2025 with a solid financial performance, delivering a full year post-tax return on tangible equity of 15.3% and a cost income ratio of 62% providing a strong foundation for growth in 2026. In the fourth quarter, Corporate Bank revenues remained stable sequentially as strong deposit volume growth offset the impact of lower deposit margins. Compared to the prior year quarter, revenues were essentially flat. Margin normalization and FX headwinds were largely offset by interest rate hedging, higher average deposits and a 4% increase in net commission and fee income. Deposit volumes increased significantly by EUR 25 billion in the quarter, driven by strong growth in site deposits towards year-end. This underscores the strength of our client relationships and product capabilities. Adjusted for FX movements, loans grew by EUR 2 billion sequentially and by EUR 7 billion year-on-year, driven by both flow and structured transactions in our trade finance business. Noninterest expenses were essentially flat sequentially, reflecting disciplined cost management and down year-on-year due to the nonrecurrence of a litigation matter. After low levels in prior quarters, higher provision for credit losses reflect a few Stage 3 events in the middle market. However, we do not see the most recent quarter as evidence of a pattern. For the full year 2026, we expect a modest increase in Corporate Bank revenues with accelerating sequential growth as the year progresses. Remaining interest rate and foreign exchange headwinds will impact the year-on-year comparisons in the first half of the year, temporarily masking the underlying business momentum. As these effects diminish in the second half, we expect the year-on-year growth to be more pronounced. I'll now turn to the Investment Bank on Slide 16. Revenues for the fourth quarter increased 5% year-on-year, driven by ongoing strength in FIC. FIC revenues increased 6%, representing the strongest fourth quarter on record despite lower levels of volatility driven by continued outperformance in FIC markets, specifically foreign exchange and emerging markets. FIC financing revenues were slightly higher, reflecting ongoing momentum and targeted balance sheet deployment seen throughout 2025. Client engagement continued to be strong with full year activity increasing across both institutional and corporate clients. Moving to IBCM. Revenues were slightly lower, driven by a reduction in advisory compared to a very strong prior year quarter. Capital Markets performance was broadly flat as higher equity origination revenues were offset by slightly lower debt origination with reduced LDCM revenues broadly mitigated by strength in investment-grade debt. For the full year, the IBCM revenue decline of 6% was driven by mark-to-market losses on LDCM exposures early in the year and the business would have been essentially flat excluding these losses. Looking ahead to the first quarter, the IBCM pipeline is the strongest it has been at this point for a number of years. Noninterest expenses were essentially flat year-on-year despite higher variable compensation and irrespective of favorable FX, reflecting continued cost discipline seen throughout the year. Provision for credit losses was EUR 97 million, essentially flat to the prior year. Increased Stage 3 provisions, including one larger single name event were offset by lower Stage 1 and 2 provisions. Let me now turn to Private Bank on Slide 17. In the Private Bank, disciplined strategy execution delivered 14% operating leverage, driving significantly higher quarterly profitability, supporting the delivery of a post-tax return on tangible equity of 10.5% for the full year. Revenues of EUR 2.4 billion include NII growth of 10% year-on-year driven by higher deposit revenues, including benefits from hedge rollover while the prior year quarter was affected by the impact of certain hedging costs. Net commission and fee income was essentially flat year-on-year with growth in discretionary portfolio mandates offset by lower income from cards and payments. Personal Banking revenues were essentially flat. Continued growth in deposit revenues was offset by the nonrecurrence of smaller episodic items and by lower lending revenues, reflecting our strategic focus on value-accretive products totaling approximately EUR 80 million. Excluding these impacts, revenues would have grown by 5%. Wealth Management revenues also grew by 5% year-on-year, adjusted for the aforementioned hedging costs and 10% on a reported basis, driven by higher deposit revenues and continued momentum in discretionary portfolio mandates. Noninterest expenses declined by 11%. The cumulative impact of transformation-driven efficiencies and lower restructuring and severance costs was partially offset by higher performance-related compensation. The Private Bank advanced its strategy with additional branch closures in the quarter, bringing the total closures to 126 for the year and contributing to workforce reductions of nearly 1,600 with further net reductions expected this year. Net inflows into assets under management for the full year were EUR 27 billion. This was supported by EUR 12 billion of inflows and investment products as well as deposit campaigns in Germany. Provision for credit losses improved year-on-year with the prior quarter impacted by a small number of legacy cases in Wealth Management and residual transitory effects from operational backlogs. Provisions in the third quarter benefited from model updates. Turning to Slide 18. DWS is showing a significantly improved financial profile, over achieving its financial targets for 2025 as communicated 3 years ago, notably by reporting an EPS of EUR 4.64 for the full year. In Deutsche Bank's Asset Management segment, profit for tax in the fourth quarter improved significantly by 73% from the prior year period, driven by higher revenues and resulting in an increase in return on tangible equity of 20 percentage points to 41% for this quarter. Revenues increased by 25% versus the prior year quarter. Higher management fees reflected an increase in average assets under management with higher fee levels from almost all asset classes. Performance fees saw a significant increase from the prior year period, primarily due to the recognition of fees from an infrastructure fund. Other revenues also improved significantly compared to the prior year period, reflecting a small gain from guaranteed product valuations compared to a loss reported in the prior year quarter. Noninterest expenses and adjusted costs were essentially flat as higher variable compensation costs were effectively offset by lower general and administrative expenses, resulting in a decline in the cost income ratio to 55% for the quarter. Quarterly net inflows totaled EUR 10 billion with positive inflow flows across passive, including X-trackers, active and alternatives and reflected sustained long-term inflows across all regions and client types. The total inflows also include EUR 5 billion of net inflows in cash products, which were partially offset by EUR 2 billion of net outflows from advisory services. Total assets under management increased to EUR 1.08 trillion in the quarter, driven by positive market impact and the aforementioned net inflows. As you may have seen in DWS' disclosure materials this morning, DWS upgraded its ambitions for 2028 raising its EPS growth target to 10% to 15% per year and setting a performance and transaction fee contribution of 4% to 8% per year of net revenues. DWS now also targets a cost income ratio of below 55% for 2027 and has aligned its net flow ambitions with the targets we communicated at our IDD in November. For further details, please have a look at DWS' disclosure on their Investor Relations website. Turning to the outlook on Slide 19. Looking ahead, the delivery of all of our 2025 targets and objectives provides a firm basis for the next phase of our strategy until 2028, scaling the Global Hausbank. Business moment going into 2026 has been good and sets us up well as we start scaling our franchise and benefit from the investments we are making. As we said at our Investor Day in November, we plan to show improvements in operating performance every year, including in 2026. We expect full year revenues to increase to around EUR 33 billion, aided by banking book NII growing to EUR 14 billion as well as growth in net commission and fee income. As I said earlier, we expect a modest increase in full year Corporate Bank revenues with accelerating sequential growth as the year presses. In the Investment Bank, we expect revenues to be slightly higher compared to 2025 with growth in IBCM revenues in line with the overall growth strategy of the business and essentially flat FIC revenues. We also expect continued growth in the Private Bank with full year revenues slightly higher. Likewise, asset management should also see a modest increase in revenues. Looking at the first quarter, in light of a normalization in C&O revenues and against a very strong FIC performance in the prior year quarter, our baseline expectation is for revenues to be flat year-on-year. Nonetheless, we are encouraged by the very good start we have seen in January. Noninterest expenses in 2026 are expected to increase to slightly above EUR 21 billion, in line with the trajectory provided in November. This includes around EUR 900 million of incremental investments in 2026 to unlock growth and efficiencies as early as this year. Our asset quality remains solid. And as I said earlier, we continue to expect provision for credit losses to trend moderately downwards in 2026 as commercial real estate provisions ameliorate and other portfolios normalized, bringing us closer to lower expected average run rate of around 30 basis points through 2028. The EUR 2.9 billion of capital distributions proposed in respect of 2025 bring us above our EUR 8 billion target for cumulative distributions in respect of 2021 to 2025. We also want to deliver attractive capital returns going forward, which is why we're increasing our payout ratio to 60% starting this year with modest but continuous growth in the dividend per share, complemented by share buybacks. In short, our strong capital position and full year profit growth provide a firm foundation as we head into 2026 and we aim to deliver additional shareholder distributions in the second half of this year, subject to customary authorizations. As Raja rightly said in November, we are ready to scale Deutsche Bank with focused growth and strict capital discipline and a scalable operating model at its core. For me, personally, being able to hand over the CFO role at a moment when the bank stands on strong foundations, enjoys business momentum and strong client engagement and is able to execute with discipline and purpose is deeply meaningful. With that, I'd like to conclude my last set of quarterly remarks for Deutsche Bank with a heartfelt thank you to all employees globally for their hard work over the years to support the transformation of the bank and the delivery of our 2025 goals. I also want to thank our analysts and investor community for the high level of engagement over the years as you have followed the story and supported this management team in a myriad of ways. Lastly, I want to take a moment to thank Raja for his partnership and efforts to ensure a smooth transition and to wish him every success as he assumes the CFO role. Christian, Raja and I look forward to the Q&A session. With deep dedication, thank you. And I'll now hand back to Ioana. Ioana Patriniche: Thank you, James. Operator, we're now ready to take questions. Operator: [Operator Instructions] And the first question comes from Nicolas Payen from Kepler Cheuvreux. Nicolas Payen: I just wanted to start by thanking you, James for all your help and support for over the years. It was much appreciated. I'm wishing you the best for your next chapters and I'm happy to welcome, Raja. Then I have 2 questions, please. The first one is regarding your revenue guidance. Maybe could you clarify a bit how you intend to reach the EUR 33 billion of revenues with, for instance, as you mentioned, high CO, which was pretty strong and also the FIC trading, which we mentioned has a very strong by in January. And maybe also how the -- what are the FX rate that you assumed in your guidance? And if the recent moves had any impact on it? So yes, what are the different moving parts for the revenue picture in 2026 and also in Q1? Then still for 2026, the operating leverage is likely to be rather limited as we invest quite significantly in the business. I think you mentioned EUR 900 million at the last IDD. So if you could elaborate on what are you spending the money on and how this will support your business going forward? Christian Sewing: Nicolas, it's Christian. Thank you very much for your questions. I start with the revenue guidance. Also a little bit of the composition we see, and then I hand over to Raja with regard to operating leverage for 2026, also taking investments into account. Look, first of all, I'm really happy not to stay too long about that, what we achieved in 2025 because it's nothing else than a very, very solid starting position for the next era of growth for Deutsche Bank. You have seen that actually the momentum is in each and every business, also in business like the Corporate Bank, even if it looks like a nominal number that we have a reduction '25 versus '24, if you really take out the interest rate pressure and you think about the operating growth which we have achieved, and it's a very, very positive story. And that is actually something which we see continuing in 2026. We actually anticipate continued growth in every operating business in 2026 with a little bit of different levels and different dynamics at divisional level as we said in our prepared remarks. Corporate Bank, modest increase full year over '25, in particular, with accelerating sequential growth as the year progresses. So all I can see also with the discussions we have with our clients on lending with the investments we have done into our fee business, I can see that this is ramping up. Then from our NII guidance, we have, there is a clear sequential growth in the second half, and that will lead actually that Corporate Bank will see a modest increase year-over-year. To be honest, in this regard, the overall situation which we are facing in this world, the geopolitical uncertainties, the way the Corporate Bank works with the investment bank. And I said before, but it's coming more and more through that we are seen as the European alternative also outside Europe for the clients is gaining momentum, and therefore, I'm very positive that we see an increase in the Corporate Bank. Investment Bank, we also see the revenues to be slightly higher compared to 2025. Now driven by IBCM, we said that also in our prepared remarks, we do believe that the investments we have done, but also that actually the movement, which we have seen in IBCM U.S. is going more and more into Europe is gaining traction. And if only the last 8 weeks is a guide in terms of pitches we have done, mandates we have won in particular here in Europe, then I'm very optimistic that Ellison's strategy to reposition IBCM, in particular on the advisory side, is actually being very, very successful. On top of that, if I just look at our, sort of, say, existing and traditional business in the IBCM business like debt origination super-strong start in January. And I do believe that this is further pushing the growth. Now you see we are conservative, and that is because we have actually planned FIC to be, so to say, essentially flat for the year. Again, if the last 3.5 weeks are only a guide for what is happening, I think then this is very conservative. And -- but it gives us the buffer for further increases and also potentially compensating other items. So a really good start. And again, the momentum we see in the investment bank, be it on the trading side, but also on the advisory side, very, very good. Private Bank is simply expected to show continued growth, with full year revenues higher than last year. Where does it come from, from both sides, Personal Banking, I talked in November very extensively with Claudio about the chances we have on the investment side. You have seen over the last 2 months, actually, what has happened in Germany when it comes to the restructuring of the pension system in Germany, more and more efforts and emphasis is put on private pension. And here, we have a huge chance and we see it simply by looking at our assets under management in the Personal Banking how it's growing. And on the wealth management side, to be honest, I'm very happy with the progress Claudio is doing, not only what he has shown in '25, but actually, that he is continuing and is actually executing on the growth in terms of hiring people, and we have seen, I think, in the first 3 weeks of January, we have already from his anticipated growth, 24 people relationship managers on the platform, another 40 have been hired. And there, you can see that everything we told you in November is playing out, and it will go into growth. And if I just look at the assets under management, it plays favorably. So Private Bank larger or higher than last year. And asset management, likewise, I mean you saw last night's ad hoc and also the reaction this morning. Very good job by Stefan Hoops, I think he has positioned DWS in the asset management as the European alternative. We see the growth in that business. And therefore, I'm confident that also asset management over a record year in '25 sees another increase. Now if I put this all together, we will be at EUR 33 billion. And again, I just gave you a little bit of feel how January started, that it's not only confidence, I have a bit of hope. And that brings me to a hope in terms of doing it more. Now that brings me to Q1. Q1, we plan essentially flat over last year. Never forget that last year, we had a fantastic Q1, in particular, in the Investment Bank and in FIC. Now again, I think it's a right plan to do this. However, if I see the first 3.5 weeks in FIC, then there is hope that we can even overshoot that. And therefore, I do believe what we see right now is that the positioning in each of the 4 business is having a real momentum is helping us. And if I then see the EUR 33 billion of revenues, which we will have in year 2026 compared to the quality of revenues in 2025, where we'll also benefit from C&O and the benefit from C&O will be lesser in '26 and '25, it's even a better bank. And that makes me so confident that we have strong qualitative growth in each of the business. Raja, would you take the other question? Raja Akram: Nicolas, this is Raja. Thanks for taking my first question as an incoming CFO, I think you had 2 questions. One was on FX and what we had planned around that. I think the December FX, which is based on our planning is around $1.18. Today, we're around $1.19 has implications on both top line and the expense. But at this point, where we sit, given the magnitude of our revenue and expense base, I think it's completely manageable. Obviously, we will evaluate it if there are any course of change. On the other question that you had about operating leverage, you're absolutely right. We committed in the Investor Day to a $1.5 billion investment program over the last -- next 3 years, of which almost less than half was slated for 2026, but let me also remind you, we also signed up for $2 billion of operating efficiencies over the same period, which also began in 2026. Now the mix of investments and the operating efficiencies, obviously, is different given its first year. So that will obviously have an impact on our reported operating leverage. I'm not a big fan of doing things excluding things, but I would just say that the underlying operating leverage of the business is extremely strong. And what we are really excited about is that with these investments, the incremental operating leverage that will generate in 2027 and 2028 will be exponential. So yes -- but that said, we are absolutely committing to absolutely having positive operating leverage starting in 2026. And as Christian said, let's see how the revenue trajectory plays out and also how our calendarization of the investments plays out because, obviously, that's something that we completely control. But at this point, we are absolutely committed to our expense guidance in the IDD, which was, if you remember, around 3% over 2025. Operator: The next question comes from Flora Bocahut from Barclays. Flora Benhakoun Bocahut: First of all, James, thank you from me too. And obviously, wishing you all the best. Moving to the questions. The first question is on the excess capital usage. You just closed the year now at 14.2% CET1, that's after the distributions that you announced today. You say very clearly, you want to do potentially another buyback later this year. So can you maybe tell us how, at this stage you are thinking about using the capital that you already have in excess and that you will continue to build this year between reinvesting into your organic growth, potential M&A, so external growth or additional distribution to shareholders? And can I also maybe just clarify on FRTB, if there's any new news regarding the magnitude and the timing on the capital walk? The second question would actually be on the deposits because there was a good deposit growth this quarter. And actually, we have more and more banks that are talking about tougher competitive pricing across various geographies. Obviously, Germany is a market where we continue to see appetite from some of your competitors to try and gain share. So can you maybe elaborate on what it is you expect in terms of the deposit volume growth as well as pricing, especially for Germany, but actually for the various markets, that would be helpful. Raja Akram: So let me start with capital. Let me take you back a couple of months where we clearly kind of laid out our capital cadence, the top priority being safety and soundness and resiliency, clearly, with the 14.2% capital ratio, we have kind of put that to bed. And as you -- as I mentioned, we said that we would like to operate between a range of 13.5% to 14% on an ongoing basis. James talked about the authorized capital distribution that is already coming for 2026. And I think we also have now a plan to start an in-year buyback rhythm, which we did not have previously. So we expect that we will be doing buybacks during 2026. And obviously, the cadence of that will be dependent on how the revenue and trajectory is going and the timing. So we absolutely commit to that. I will also remind you that from an M&A perspective, it was kind of on the bottom of my list of capital hierarchy. We remain open to opportunities as every management team should be. But from our perspective, and Christian and I share the same view that it has to fit various criteria of strategy, culture, financial before we will consider that. So at this point, if it was up to us, we would like to do return to the shareholders because they deserve it. And in fact, we're generating a lot of capital that needs to be deployed. And we -- if we see business opportunities we will do that. But with a 14.2% ratio, honestly speaking, we feel pretty well set up for business opportunities that should allow us to continue with our buyback rhythm. On FRTB, I think we had mentioned at the Investor Day for the purpose of planning, we actually had left that in there. Now look, if you were to ask us today with that in the absence of concrete information, that assumption probably looks a little bit conservative in terms of us assuming that, that was going to come as planned. So we remain hopeful that the right thing will be done there from a European perspective. And then -- and at that time, obviously, we will make a change. The last part on deposits, it is clear that there's been some competition and there are teaser rates that our competitors are bringing in. We're actually running a campaign on Private Bank right now. And after the third -- 3 weeks of January, actually, we're pretty confident that our planned growth strategy for deposits is going to work out. We think that our value proposition and our access is something that is not that easily replicable from people coming outside. Same thing on the Corporate Bank, we have not seen too much deposit pricing trends changing, there's been some stability in the payouts. But remember, on the Corporate Bank side, it's just not a matter of pricing. It's the capability that comes with it is do they have the operational reliability? Do they have the network to move cash around? So in that sense, with our very unique footprint on corporate -- with corporates around 60 countries, it kind of gives us some advantage of continuing to take operational deposits without having to compete on price. And last thing I'll say to you, this might be the first 3 weeks of January, but I think the good challenge that we may actually face this year would be actually an abundance of riches where we may actually have to decide which deposits do we really want to take versus turn down. So at this point, I would say we feel pretty confident about our ability to potentially meet or exceed our deposit targets. Christian Sewing: Flora, just to add one comment on the regulatory question and I completely agree with Raja. I witnessed over the last 12 weeks, but in particular, over the last 4 weeks. And this can also be an impact of all the geopolitical discussions a real reconsideration on the European side, what happens with regulation. And therefore, the word simplification, the word reduction of regulation in certain items is gaining speed. You have heard our Chancellor there were discussions also around doubles on that topic. So completely agree. While we don't have now a concrete decision on FRTB, I would be more than surprised actually if this would come into play. And therefore, we see that as an absolute cushion in our plan an absolute advantage that potentially on the side, we have also too conservatively. Operator: Then the next question comes from Chris Hallam from Goldman Sachs International. Chris Hallam: Two from me. First on CLPs. You've guided for them to come down year-over-year in 2026 and then trend down towards 30 bps. How much of a step down should we expect this consensus, I think, has around EUR 150 million. And what trends are you seeing both in Q4 last year and at the start of this year that give you confidence on that trajectory? That's my first question. And then secondly, James, taking a step back, you've been CFO since 2017. And from the outside, we can all see the change in the business over that period, not least of which the higher returns, but also the fact the bank is now distributing capital rather than raising it. But from the inside, from your perspective, what main changes you've seen during your tenure that might be a little bit less obvious to us and how do they inform the future outlook for the bank from here? James von Moltke: Thanks, Chris. So I'll take both. Raja, may want to add to the forward on CLPs, but let me just start with the fourth quarter. We said in our prepared remarks that the Stage 3 was higher than we might have expected. And as you saw, essentially run rates in both Private Bank and Corporate Bank stepped up a little bit, but we don't think those are necessarily sort of indicators of a trend. And I would put the kind of natural run rate on both on a quarterly basis, just moderately below where we were in the fourth quarter. . As we said as well, we see the overall credit conditions in both book to be reasonably stable, in fact, in some cases, improving. The Investment Bank obviously had a higher Stage 3 than we would normally have. Clearly, a big feature of 2026 is the CRE tail, how big and how long it takes to wind off, and obviously a nonrepeat as well of the single name item that we referred to as well. So short answer, Chris, is I think a normalization of Stage 3 run rates, strong credit quality generally and this sort of amelioration of commercial real estate all play into what would be at least a modest reduction in CLPs this year. Raja said trending down to 30 basis points. I think that's appropriate. We were at, I think, 38, 36. And I think there's a couple of steps perhaps still to go before it fully normalizes in that area. Thank you for the kind question about my time as CFO, Chris, it's -- I mean there's a lot to look back on. But I guess 2 points I'd make. One is we really changed the culture in the firm and this is -- Christian and myself and the management boards of the time around accountability and discipline in terms of delivery. And I think that is -- that culture will stick in the organization. So that's something, I think, that is a significant change. Obviously, the finance functions played an important role, but by no means alone. COO risk in the control functions have been very important. And then in some senses, most importantly, it's also being adopted and internalized in the first line. So I think that's a major change for the organization. Going forward, I'm genuinely excited about the impact that SVA can have on the organization, and we've talked about that a little bit in the briefings. Again, that's -- we've -- it's been, if you like, originated and led out of finance, but it's been adopted by the organization wholesale. And I think the willingness to guide decisions through the use of the SVA tools, has been embraced in the organization, and I think it will have a significant impact in the year's end. Christian Sewing: Chris, it's always hard for James to talk about himself, but let me add 2 or 3 items. I think the integrity and the credibility he has given Deutsche Bank to the market, again, is simply outstanding. We would not be there without his work, but also without his integrity and credibility without his work. So that is something where we are all benefiting from and that discipline is now so instilled in the bank, but it's one of his greatest achievements. Secondly, next to all the day-to-day work and KPI management holding us responsible. There is one other thing which makes him an outstanding CFO. And that is last year, you all remember that we took our target down on the cost/income ratio from 62.5% actually, we took it up, the cost/income ratio to 65%. And James and I, we got criticized because it was sort of say, a deterioration. We did it on purpose because we saw the long-term chances of the investments at that point in time. And you don't find too many CFOs who move voluntarily away from an own target, which is to the heart of a CFO to do the long-term better of a bank, and that is James. And that is something where, I would say, really, thank you, James, because again, that long-term thinking has really created a completely new culture in this bank. And there, we are benefiting all from it in all business divisions, and I think it's actually the secret of success of Deutsche Bank going forward. Operator: The next question comes from Anke Reingen from RBC. Anke Reingen: But firstly, thanks -- thank you very much, James, and all the best for the future. So in terms of the questions, just in terms of the -- apologies, just for the cost trends, the EUR 21 billion approximately in 2026, can you talk a bit about the trajectory in the course of the year in terms of the investments coming in and potentially leading to higher costs in the first half to second half, apart from the normal seasonality, but just in terms of your spending plan? And then secondly, on the additional capital distribution. The way you seem to be talking, it seems to be with more confidence that there is an additional distribution coming. So I just wonder when should we be thinking you could be revisiting another distribution? And are there any moving parts like regulation disposals we should be aware of that, that would help to additionally inform that decision? James von Moltke: Thank you for your question. Let me take the first one and then Christian may want to also add in his views on the second one since I express mine. I think on the investment side, look, the great part is that these are our own investments, meaning that we are deliberately and diligently making them. So we do have some control over how we pace them. That said, you would naturally expect that there will be a natural buildup over the year as the hiring gets done, as the technology dollars get deployed. But at this point, we would not expect that any one quarter would be extremely outsized one way or the other. I think you could expect to see a slow trajectory upwards and then stabilizing over the course of the year. That's the way we think about it. Obviously, the revenue environment will drive if we do better than on revenues and we expect it will drive volume-driven expenses and other related expenses, which is something that we have now projected based on our current revenue plan, but let's see how that plays out. But at least that's the path for investments. Christian Sewing: Anke, Raja indicated that with regard to share buybacks, first of all, very happy with the approval we have in hand for the EUR 1 billion. It brings us there what we promised actually above EUR 8 billion. I think it's now on us, to be honest. And like we have done it in the past, we need to deliver. Again, in my view, it's now Q1, and then also, obviously, Q2. And then I think if we do this, and I don't see any sort of say, clouds for the time being that we can't deliver then I think we have all the right to have another discussion with the regulator. I think we gained credibility with the regulators around the world, but in particular, also with our home regulator here. And if we deliver on our plan, to be honest, and if we are showing capital ratios like we do it right now, there is no reason why we shouldn't ask for another one. Now to give you a confirmation when this is exactly happening, it's too early, we should be fair. Let's deliver first, but we have done this for the last 5 years, and therefore, I'm confident that we will also do it this year. Operator: And the next question comes from Tarik El Mejjad from Bank of America. Tarik El Mejjad: Just a couple of questions on my side. First, I would like to challenge you on the EUR 33 billion revenues, more to the upside. First, on the Corporate Bank growth, I mean, you insist on modest growth, but I think you have a self-help strategy there, which you go back to the kind of some corporates that you've lost focus on and you capture this growth, which is completely independent from actually how the market will do. And also, I wanted to confirm on the Corporate Bank, how much you still price on your outlook, a potential pickup on the benefit of fiscal stimulus towards the back end of the year. I mean, same for IBCM, the pipeline was good, FIC is flat. I mean, you guided for flat, but clearly, I mean, all indicates for volatility will stay with us and January should be a good indication of what to come. And also on NII, I mean you're talking of deposit growth with Q4 as an exit rate, which basically implies that a full year guide before even considering the hedge, if you can help me as well square that. And the second question is on the capital return. Really just to confirm that the extra share buyback you could have in the second half would be as a special from '25 earnings and not an advanced buyback on the '26 earnings accrued. Just a clarification on this. And lastly, I don't know how much you can comment on the news yesterday on this remainder AML issue. I don't know how much you can say on that. Raja Akram: Thanks, Tarik. Let me take the first question, and I'll let Christian respond to the penultimate question. Look, I think we actually feel pretty good about the EUR 33 billion. The reason that I feel good about EUR 33 billion is because it is not dependent on any one business delivering outsized performance, but actually everybody is doing a little bit better than what they did. Now the Corporate Bank is an interesting question, and I fully appreciate why there's a little bit of skepticism on that. But honestly speaking, that is the one that I actually have the most conviction on because under the surface, what I see is a bank that is actually growing super healthy. Just to put some things in perspective, in the last year, we actually grew net fee and commission income in the Corporate Bank by 5%, which was almost entirely offset by the margin compression on the interest rate side. And if you look at 2026, we believe we can certainly do better than 5%, and in fact, the margin compression headwinds are now starting to subside even on a reported basis. So if you just put that together, we should see positive momentum on Corporate Bank and at what we're seeing on the deposit side, we're doing pretty well. So I think that we actually are pretty well set up. The other thing that -- the data point that I'll give you on the Corporate Bank is that we actually have underlying loan growth in Corporate Bank that was in excess of 5% to 6% last year. But based on our SVA decisions, we decided to exit or reduce our exposure to a couple of products where we actually didn't want to be in. So the underlying growth of the loan volumes, putting the German fiscal aside for a second, is actually super, super healthy. At some point, the SVA process will play its course and the loan growth even on a reported basis will be much higher. So I actually feel pretty good about the Corporate Bank because, one, the idiosyncratic FX headwinds and the margin compression, which were all a feature of 2025, which made it a very complicated story. In fact, we probably need a separate Analyst Day just to discuss Corporate Bank and its trajectory is all kind of subsiding giving us confidence that the second half of the corporate bank is going to be showing sequential growth and year-over-year growth. So let me put that aside. The other thing is on the IBCM side, we spend a lot of time with our teams, not just on an aspiration basis. The pipeline that we see today is at least double digit higher than in 2025, whether it's on investment-grade debt, it's a leverage lending or it's M&A. So there too, we are seeing signals that gives us some conviction that the revenue growth over there. Remember, we are planning for a little bit over 3% revenue growth versus what we have done in the past. So that is obviously dependent on a flat FIC, which Christian had talked about, so I'm not going to go there again. So lastly, on the interest income side, look, we are projecting to go to around from EUR 13.3 billion to around EUR 14 billion, almost half of that is already kind of baked in with the hedge rollover and alongside the deposit and loan growth that I mentioned, I think the conviction on interest rate -- interest income as it stands today, is pretty good. I think our focus now is to make sure that our investments get deployed correctly and with agility because we also want to see the one thing that you did not mention, we also want to make sure that our client assets and our net new assets get the same momentum that we want because that obviously is very value accretive for us. So all in all, I would say going from EUR 32 billion to EUR 33 billion and offsetting some of the C&O headwinds with the Corporate Bank recovering is actually something that we feel pretty confident about. James von Moltke: So on capital, just briefly, Tarik, I just want to make sure you heard us right. Our expectation is that an additional buyback request in the second half of the year would be in respect of 2026 earnings, not '25. I think as you've heard Raja speak to, that is -- and also to Anke's question, that is distinct from in time the question of whether there are excess capital distribution. So think of it as additional distribution is potentially coming from 2 different sources, accelerating of in-year earnings and at some point in time, once we've established that capital is excess on a sustainable basis, potentially excess distributions. On the last part of the question, obviously, there's relatively little we can say. We obviously confirm that the fraction prosecutor paid a visit to our offices. Obviously, we see the timing is unfortunate. The prosecutor is looking for information, as you saw in some of the reporting yesterday, on transactions that date back to the period between 2013 and 2018. And the allegation is that on that basis, there's potentially delayed suspicious activity reporting. Obviously, we need to follow the facts and work with the prosecutor on the investigation as ever, we cooperate as we're doing fully with the investigation. It actually builds on earlier investigations of a very similar nature. And so we will continue working with the prosecutor's office. The last thing to say really is we do not anticipate that it will have any impact on our financial or strategic plans. Tarik El Mejjad: And thank you, James, for all the interactions. And Raja, just to be clear, I'm actually thinking there is upside to the EUR 33 billion. I was just trying to see [ where pockets for upside ]. I'm quite above actually your guidance on '26. Just to be clear. Raja Akram: Good to hear. Operator: And the next question comes from Giulia Miotto from Morgan Stanley. Giulia Miotto: And thanks, James, also from my side for all the dialogue and all the best for the future. So I have 2 questions. One is on the Private Bank fees in the quarter. If I think -- I mean, this seems to me one of the best areas for upside going forward, given that the Postbank is now on the same systems, given the momentum in investments in Germany, et cetera, yet, it was disappointed in the quarter, it was flat year-on-year. There is no growth. So when can we expect this potential to start materializing on the private bank? And then secondly, just on SRTs, what should be a base case assumption in our model for SRTs that you plan over a year? James von Moltke: Giulia, I think Christian is going to take your private bank question. Christian Sewing: Giulia, look, as I said on the first question, overall, year-over-year, we see increase in Private Bank. And again, coming from the domestic business in the Personal Bank, in particular, on the investment side, but then also from -- in particular, the growth and the hirings Claudio is doing on the wealth management side. And that I actually expect that based also where the markets are that I expect an increase already in Q1. It is not something which is just backdated, so to say, to the third or to the fourth quarter. I see a continuous improvement on the Private Bank. And the Private Bank is in this regard, always for me, which I watch with 2 eyes, number one, the constant increase in revenues, in particular, driven by the investment business. And you see it in the assets under management continuously growing. But at the same time, and Claudio just illustrated that again, that we are working on our costs. We will have another 100 branch closures just in 2026. It is part of our plan. It is, so to say, all in implementation. And you will see that also the operating leverage in the Private Bank will further continue. And hence, I do believe that already next year or this year in 2026, you will see another nice increase in the return on equity of the Private Bank because last but not least, it's not only the Corporate Bank, which is working from an SVA point of view on certain sub-portfolios where we can do better, same is done actually by Claudio. And hence, I can see a nice continuous development in the Private Bank, and you will see it already in Q1. Raja Akram: Giulia, it's Raja again. I hope everybody is down there. I think I'll just add to Christian's point on the Private Bank, you should expect to see growth in the Private Bank throughout the year. I think that is the way we are seeing the trends develop. I think your second question was about SRTs, if I caught it right. I think, as I mentioned, we have a plan for increasing SRTs by approximately 25% over the next couple of years. We've actually demonstrated very strong access to the SRT market in '25, and we're going to continue to use and expand the use of this tool. And it obviously helps us with capital and SVAs, but the plan is the same, EUR 5 billion incremental for '26-'27. Operator: Then the next question comes from Kian Abouhossein from JPMorgan. Kian Abouhossein: Yes. First of all, James, thank you very much for your support, helping us to understand the bank a bit better. So we have a better understanding than before, so highly appreciate it. Secondly, in terms of question, the first one is on revenues again, but less around '26, we have roughly 3% growth guidance versus your target, which would then imply more like 6% over the next 2 years. And I'm just trying to understand what the acceleration would be driven by. I assume it is -- part of it is the Corporate Bank, where you clearly have a target of 8% and you're talking about a slight increase and clearly reviewing the slides of the Corporate Bank, you talk about a lot of customer acquisition, but I'm just trying to maybe understand and rationalize this higher growth case better, if you could outline that post '26, assuming your base case of 3% roughly gets achieved for this year? And then the second question is on the hedges. They've gone up in terms of contribution going forward, I think, EUR 200 million and EUR 100 million respectively, in the next 2 years? Just trying to understand what drives that? And if I may, just very briefly as well, if you could just talk about CRE U.S. briefly in terms of situation the way you see it for '26? Raja Akram: Kian, it's Raja. Let me just take the revenue questions first, and then James might contribute a little bit on the hedge question. Look, I think the '27 and '28 conviction is around basically the investments, one, that we're making. And two, we're going to see underlying growth start appearing its head when it is being masked today, especially in the Corporate Bank. So I think as you remember from our Investor Day, we have around an 8% conviction on the Corporate Bank. What you will expect to see once -- now that we are going to be over the FX headwind as well as the margin compression in the first half of the year, you can expect to see, and as I already mentioned, we had 5% net fee and commission income already in Corporate Bank last year. You can expect to see us exiting out of this year on Corporate Bank, perhaps not at the 8%, but mid-single digits to out that from a growth perspective. So that gives us the conviction that the future 5% that we have laid out is achievable. The second thing, clearly, on IBCM, we have 2 things going on. One is a different macro environment for us versus where we were. Two, what we're doing on the business side from a strategy perspective and pivoting towards corporates versus sponsors. And three, we are actually making investments in 4 target sectors where historically, we have been a little bit underweight. And we have a lot of conviction that we actually now have the ability to capture more market share even in the U.S. given the back of what Christian has very clearly laid out the macro geopolitical volatilities and the client need for an adviser. So -- so if you were to put on an investment bank, and remember, the third thing that we, at this point, are being pretty in some ways, conservative around is assuming that FIC is going to stay flattish or will have some margin compression even. So we obviously don't know how -- what the macro situation would be. But that, to me, is a little bit of a wild card in terms of opportunities. Where we are also obviously super excited about growth is in Wealth Management, because there, we're just getting started to be totally honest with you, I think we are on an early innings of getting our strategy right of attracting client assets, generating new net assets across our client base. So that growth is going to be a big contributor for our overall target. And finally, I would say Asset Management, as we just talked about, they have just recently increased their targets. So clearly, we have a little bit upside there that we were probably even 2 months ago, we would have asked the question whether it was there. So I think all in all, putting the Corporate Bank story on the side and working over the '25 dynamic, growing wealth management, increasing our market share in IB, I think that kind of gets us to the 5% and hopefully more in the future. Christian Sewing: And before James comes to the next question, let me just add one point here, and that's the German impact. You have heard in November that EUR 2 billion out of EUR 5 billion we actually planned from Germany as an increase in revenues. Actually, the smallest part, low 3-digit million number is only in our plan for 2026. The real impact of that what is happening in Germany is in our revenue plan for '27-'28, because now you can see the stimulus impact on certain areas, defense starts, infrastructure starts, but the pullover, so to say, in the corporate -- broader corporate industry is coming, and we have that in our plan for '27-'28, again, in my view, the right approach. James von Moltke: Kian, on the hedges, the biggest impact is the gap, if you like, on the rollover benefit. So if you just assume a constant portfolio of hedges of swaps and you look at today's gap in -- that is in 26. So go to Page 25 of the analyst deck and look at the gap between the hedges that are rolling over and the 10-year swap rate. You can see that right now, that gap is about 2.5%. And if you go back to the same slide in last year's Q4 results, you can see that the gap was 1.9%. So that difference is a big driver. Now obviously, volume of hedges will have an impact as well, which, over time, reflect growth in the portfolios that we're then hedging larger portfolios of deposits. And then the other thing, as we've talked about in prior calls has been whether there are any sort of overlay hedges that we do, that can also influence the hedge results. So for this year, it's a very strong benefit as much as EUR 500 million, and that's obviously a big help. It's influenced then beyond that by, as I say, deposit and loan growth that should also be a significantly supporting factor. On CRE, I'm a little snakebit having sort of thought we'd seen a bottom in this market before and then seeing, if you like, more floors broken through. And so then the question for us is, will there be really a floor put under the market this year in 2026. And as we've talked about, particularly in the West Coast office submarket. Now at the risk of yet again sort of expecting an improvement and seeing another downturn, we do think we're in the tail of this cycle. And if you look at indices more broadly, they have been stable. But we're obviously subject to a potential downward revision of the appraisals. And so that's what causes us to be a little cautious at this point in time to fully call an end to the cycle in our portfolio, and we'll wait to see how and when the full normalization of that market takes place. Kian Abouhossein: James, but you're assuming some kind of -- what are your assumptions for your provision guidance for the group on CRE values, as you just discussed for '26, I mean? Raja Akram: This is Raja. So let me just take the -- I guess overall provision guidance for the group. We do expect that on an overall basis, we will expect to continue to see downwards improvement in the CLP provision number. Now as James said, and I had said actually at the Investor Day, we do expect that we are not completely over the CRE hurdle. I think there's some tail -- small tail still left in 2026, which could be idiosyncratic. So on the whole, we expect improvement in CRE, gradual improvement in CRE. And the offsetting that potentially will be of normalization on Corporate Bank, which we actually saw very, very low defaults this year. So on the whole, trending downwards towards my target rate, CLP rate and also on CRE expecting improvement year-over-year. Operator: The next question comes from Máté Nemes from UBS. Mate Nemes: James also from my side, thank you for the dialogue, discussions and all your help in the past couple of years, and wish you all the best for the next stage of your career. As for the question, I just wanted to go back to the banking NII guidance of EUR 14 billion for 2026. It seems like a EUR 700 million step-up from 2025. And when I look at the Slide 25, the hedge rollover, that seems to indicate also roughly EUR 700 million positive year-on-year in 2026. So in that context, it seems like the over EUR 14 billion number doesn't have much in terms of benefit from either the growth in size of the hedge or loan growth, deposit growth and so on. Could you help me understand the moving parts here? And the second question would be on your EUR 21 billion cost guidance. It seems like in some areas, perhaps you have pockets of opportunities that help you outperform the EUR 33 billion on the revenue side. If that is the case and perhaps FIC revenues also end up better than flat this year, is the EUR 21 billion number slightly flexible or that is a very hard cost target for '26? Raja Akram: Let me take the second question first. Look, the cost number can always remain flexible. Obviously, given that we have significant investments in there, but we have a lot of conviction around those. And what we have -- I mean, not me, but James and Christian have demonstrated that they have the ability to be pretty disciplined around costs. So look, I think if the FIC comes out much better than what we expect, I think that's actually a great tailwind to the bottom line for us because we can manage this organization pretty nimbly. So let's see. But at this point, our best estimate is to be a little bit over EUR 21 billion, assuming that all the investments get made in the calendarization that we have now laid it out to be and the revenues -- and the revenue mix more importantly, plays out the way we have thought. So that's kind of our best view at this point. But that said, we are constantly looking for other opportunities to improve our cost base. And that work doesn't stop just when we commit to the plan. That work is going to continue to go on through the year. And if we see opportunities to take some of the productivity benefits that we actually have slated for '27 or '28 in X rate, then we'll certainly going to try to do that. So on the NII guidance, you're absolutely right that the hedge rollover, which, by the way, I consider that as a component of how we manage the overall deposit book is actually a big beneficiary -- we are a big beneficiary for that and actually that's a very well-designed hedge program. Remember, I also talked about that we are making intentional decisions on the loan portfolios of exiting out certain portfolios where we are not SVA accretive, and that also goes for -- even including the net interest income. So there are some deliberate decisions that mute the underlying operating growth of NII along with the hedge rollover. But the expectation is that as that calibration of the exiting portfolios tapers off, then you will not only have the benefits from the hedge rollover in the outer years, but you also will have a real bottom line increase in the NII from both loans and deposits. James von Moltke: Just one other thing to add is in 2026, you're going to have, if you like, a grow-over effect for both FX and the margin compression that took place through the year. So there's some other dynamics in the numbers that are harder to pick out. Operator: And the next question comes from Stefan Stalmann from Autonomous. Stefan-Michael Stalmann: James, thank you very much for everything and all the best going forward. I have 2 questions on asset quality, please. The first one on the U.S. CRE book. It does look as if you actually exited about EUR 2 billion of office exposure during the quarter. And at the same time, the average LTV on the office book in the U.S. went up quite a bit during the quarter. Can you maybe add a little bit of color on what happened? Do you actually sell NPLs? Was there a general mark up or mark down of collateral? Any color there would be useful. And the second question, there was a media article maybe a few weeks ago about your intention to hedge your data center lending exposure. And I don't recall whether you actually commented on that already or not. But if you can to the degree you can, could you give us maybe a bit of a sense of how big this book actually is and whether it actually overlaps with your U.S. CRE book or whether that's considered a corporate exposure mostly in your perspective? James von Moltke: Thanks, Stefan. And to you and all the others, thank you for your very kind words and the partnership. On CRE, we noticed that as well, and it's really mostly payoffs of loans that took place. And the effect, especially of payoffs with low LTVs has been to increase the average LTV of the remaining book. There were some -- the closings of some of the sale transactions that we first sort of announced in the third quarter and executed in the third and fourth quarter. So some of it was loan sales. Some of it were pay downs and the net effect on the LTVs was to increase them. On the data centers, we didn't make a public statement about that. It did become public, and there's truth to it. But the truth -- the wider truth is, we've been a very strong participant in this marketplace for several years. We're very proud of the franchise that was built here, but we've always operated that business under, as you'd expect, risk appetite sort of parameters for our overall exposure, both on the book and in new originations. And as you'd expect that given those parameters, we -- as we do for -- in a sense, all other financing types here, we manage those exposures carefully, especially in an underwriting period. And so that, I would just characterize as ordinary course risk management. Remember that the hyperscalers, what we do in that book is obviously seek out the highest quality loans to underwrite. And the feature is an interesting one, which is that the stronger the contract with the ultimate offtake provider, the more highly rated the underlying position is. We lend mostly to investment-grade tenants or indirectly, if you like. And so we feel very good about the strength of the portfolio, but nevertheless, manage it carefully. As to the CRE, I believe the -- if you like, direct CRE exposures -- data center exposures are treated as CRE in the same way that warehouse distribution and hotels are commercial real estate. And so it does, I believe, add to the total balances. Operator: And the next question comes from Joseph Dickerson from Jefferies. Joseph Dickerson: Most of my questions have been asked. But I guess, as you look out in your ability to deliver on your targets for 2028, the market didn't believe you on what you've achieved on this plan through 2025. And if I look out at 2028, it looks like expectations are sitting at least 100, if not 150 basis points below your RoTE target. I guess what do you think that the Street is missing in that regard about your ability to deliver the RoTE that you've outlined? Christian Sewing: Look, let me start, and my 2 CFOs may want to add the luxury this quarter still. To be honest, I think it's execution and evidence. And if we deliver again on the next step in 2026, and we committed to a gradual improvement year-over-year, we actually told the Street that we will invest a bit more in 2026 in order to capture all the opportunities. I'm absolutely sure that also the Street will move its consensus. And to be honest, if I see actually the gap between consensus 3 years ago to the 10% and where we are now with the gap to consensus to 2028, I think there is a huge amount of credibility we have already gained. It's on us to show that quarter by quarter, year by year. And we will lose nothing of the dedication and discipline we put into this company going forward. So it's actually nice to, so to say, race and beat all the time. Raja Akram: Thanks, Christian, if I may just to add. I think, obviously, the company went through a transformation internally and now that transformation has been visible to externals. I think at the same time, I think the pivot that we have from now defense to offense, while we have all internally bought off on it and understand what we are doing, that is -- there's obviously going to be a natural lag for people to get a full understanding of how we will get there. And I think that's completely understandable. So it is our job, I think from my perspective, there, we have 2 jobs. One is to deliver on what we said we will deliver on '26. But more importantly, we want to show you the underlying drivers of what is leading us up to '28 in terms of the KPIs that we shared at the Investor Day. So even if the underlying financial output of that is on a lag, we want to be able to show to you what we are actually doing on the cash side, what net new assets we're boarding, how many advisers we were able to bring in, how our volumes are increasing. So I think my hope and my expectation is that once we start delivering quarter-by-quarter in '26, show the discipline on expenses, and then start sharing the underlying drivers of where we are succeeding that gap will hopefully narrow and maybe we'll end up at a stage where we are being -- we are behind the other way around. Operator: The next question comes from Jeremy Sigee from BNP Paribas. Jeremy Sigee: And thanks and wishes to James from me as well. A couple of follow-ups. One on the NII discussion and the sort of the limited progression to the EUR 14 billion. You mentioned loan portfolio exits. You also talked earlier about negative margin impact. Are they largely done now? Or is there a bit more of the negative margin impact still to come through in '26? That's my first question. And then secondly, just a very broad question for Christian perhaps. You touched a couple of times on the German stimulus and deregulation programs. I just wondered if you could give some further perspectives on those, particularly from your conversations with corporate clients and the extent to which they're moving from kind of just thinking about it to actually doing something and preparing concrete plans for investment and borrowing and all that kind of good stuff? Raja Akram: Sure. Let me take the first question. Look, we had said out at the Investor Day that we -- it was our intention to move our SVA from 40% to 70%. Now obviously, that was on the business level. As you saw this quarter, each of our businesses on an RoTE basis was in excess of 10%. So at a portfolio level, we are obviously in a pretty good situation, but there are certainly pockets of activity inside our businesses or in geographies, which we either need to improve the SVA on or through their expenses, through better capital allocation or better pricing or we decide need to downside -- to downsize to create capacity for lending that makes sense. So that work will continue to go on over the next 2 or 3 years. But obviously, this '26 is a start for that. So it's a little bit more transparent. On the margin headwinds, we expect that we will probably -- they will subsist for the first half of the year, as James said, but we think that we will most likely grow over them in the second half of the year, especially, it will become a little bit more prominent in corporate bank where they have been the most impacted by the margin. Operator: [Operator Instructions] Christian Sewing: Sorry. Sorry, I was on mute. I just wanted to take the second question, and that is on the German stimulus. We see actually in the fourth quarter and now in the start of the year, the impact of the stimulus in particular, so to say, in 2 asset classes, defense and infrastructure financing. As I said before, we can see quite a good momentum, in particular on the defense side, also with mid-cap companies because in Germany and in Europe, it's actually the case that it's not the big defense companies who actually need lending. It's actually the mid-cap companies supporting these large-cap companies. And there, we're working not only by ourselves, but with banks like KFW, you have seen our announcement with EIB actually on a joint program where things are really developing. And I do believe from all that I can see in Germany, but also in Europe that actually the activity is slowly starting. And hence, from a planning point of view, I outlined that before, we firmly stick to our EUR 2 billion of revenue increase out of the EUR 5 billion coming from Germany. But I think for the right reasons, we have put most of that actually into the years '27 and '28 because it needs preparation. In this regard, although it sounds sometimes differently in the media, the government is doing everything they can in order to focus on competitiveness and growth. We have seen a couple of reforms. And of course, we all wish for even quicker implementation. But I also have to say that on the European level, things are moving. And therefore, I gave you the example of regulation, how the talk is there. But also the extra summit, which will take place in 2 weeks' time, which actually at the request of Germany that we need more reforms in Europe on bureaucracy, less regulation, Capital Markets union, digital investments. It all shows that something is happening. And that brings me to the last point where we obviously benefit. We should not only think when we talk about stimulus in Germany and hopefully also growth in Europe. The biggest theme in Davos last week, next to all the geopolitical discussions was actually the investors talking about redistributing their assets. And they are doing it for 2 reasons, and the beneficial is Europe for diversification, but also because they see Alpha in Europe and they see Alpha in Germany. And that's what we also see in the Made-for-Germany initiative. So therefore, I remain positive personally. Of course, I also want to have things always quicker, but I can clearly see that things are picking up. Operator: [Operator Instructions] The next question comes from Andrew Coombs from Citi. Andrew Coombs: Firstly, just all the best James. On the questions, same theme I'm afraid, but I wanted to touch upon margin in both the Personal Bank and the Corporate Bank. Obviously, you have fantastic deposit growth. It hasn't shown through in the net interest income thus far. And I know the comments that you've made on the trajectory for this year. But on the PB side of things, can I just ask what you're seeing in terms of deposit competition and any commentary you can make around household deposit meters, where they stand today, where you think they're going to trend to? And on the Corporate Bank side, you've talked a lot about the first half of this year, still having an impact from lower rates in FX, but how you plan or think you'll exit that in the second half, but can I just clarify how much of your deposit book in the Corporate Bank is dollar-denominated rather than euros? And what's the consequence of lower Fed rates on the margin there? Raja Akram: Let me start with the PB. As I mentioned earlier on, we're certainly seeing some competitors coming in with teaser rates in January for -- through all the markets for new and fresh money, a couple of outsiders in there as well. We also have some campaigns running. So at this point, from a growth strategy perspective, we don't see an impact of us basically losing out on these deposits in the short term. As I mentioned, we've done that pretty successfully in the previous year. But there's certainly some pressure, which I think there was an NII question earlier about as well as to why they were not -- why the hedge was the predominant contributor. Part of it was loan exits, but part of it also was some deposit compression. On the CB side, at this point, we are not seeing the deposit pricing trends change, but we do have the year-over-year headwind that I talked about earlier that I think is going to persist at least to the first half of the year before we start exiting out of it and start seeing sequential growth. That's kind of what we're seeing on CB. In terms of the deposit mix between U.S. and Europe, I'll may have to get back to you on that one from Ioana. But obviously, we have a pretty global franchise, and we raised deposits -- institutional deposits across the world, but I will have to get back to you on the precise mix. Operator: So it looks like there are no further questions at this time. So I would like to turn the conference back over to Ioana Patriniche for any closing remarks. Ioana Patriniche: Thank you for joining us and for your questions. For any follow-ups, please come through to the Investor Relations team, and we look forward to speaking to you at our first quarter call. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Francoise Dixon: And welcome to the Mach7 Q2 FY '26 Results Briefing. My name is Francoise Dixon, and I'm Head of Investor Relations for Mach7. Today, our CEO, Teri Thomas; and our CFO, Daniel Lee, will provide an overview of our Q2 FY '26 results. We will then open it up for questions. If you have a question, please submit it by the Q&A text box at the bottom of the screen. I'll now hand over to Teri. Teri Thomas: Thank you, Francoise. All right. Before I speak about the quarter, I want to briefly ground everyone in who we are and what we do, particularly for those who are newer to Mach7. So we complete the patient's picture with the patient's pictures. We get the right medical images to the right people in the right places at the right time. We do it fast and with diagnostic quality. We operate in a growing and important industry. And in my frequent conversations with our customers, I'm reminded regularly just how mission-critical our work is. While the health care industry has seen pretty solid progress organizing text-based clinical data over the years, imaging data, which goes far beyond x-rays, remains quite fragmented. Many types of images are locked in proprietary systems spread across multiple departments, stored in lots of different formats, and that causes fragmentation. That fragmentation represents opportunity and this opportunity Mach7 is well positioned to address. So our ambition is for Mach7 to become the world's imaging EMR. That ambition, big, it underpins our strategy of moving from archive to architecture, connecting imaging across the enterprise and enabling AI, improving interoperability with EMRs like Epic and Cerner and closing the gaps that still well exist to create comprehensive and unified patient records. Now turning to what you all are looking for the quarter. So today, Mach7 is providing a business update and quarterly cash flow report for the quarter ending 31 December 2025, our 4C. The quarter reflects continued and deliberate execution of the reset we outlined last quarter, sharpening our strategy, strengthening discipline and aligning the organization for sustainable and profitable growth. The quarter marked an inflection point, the strategy that we designed in September and October, and we announced on Halloween is now in motion. This is no longer about planning. It is about execution. The reset has been comprehensive. We've taken a top-to-bottom look at our structure, our processes, our technology, our commercial model, our culture, and we've brought this together into a dynamic operating model that links strategy, execution and accountability. This is hard work. As part of that work, we are taking a disciplined look across our customers, partners and contracts to ensure they support long-term profitability and strategic alignment. That includes being more selective about who we work with and in some cases, stepping back from low revenue relationships that create competitive conflicts or long-term risk to our growth and profitability. The outcome with the VHA, it was disappointing, but it also allows us to focus our resources on opportunities that better align with our core platform, our operating model and path to sustainable profitability. The VHA program required a level of custom development and service intensity that would have continued to weigh on margins over time. Now not all of these changes show up immediately in the numbers, but the foundations are now in place. We are building a performance-driven culture that values top talent, measurable outcomes and disciplined execution while balancing innovation with rigorous cost management and a respect for shareholder capital. So with that context, I'm going to hand it over to Dan, our CFO, to walk you through the financials for the quarter. Dan? Daniel Lee: Thanks, Teri. Looking at our financials for a moment, the second quarter reflects continued execution against the reset strategy that we did outline last quarter with improving discipline and operating performance. Our annual recurring revenue run rate was stable at $23 million on a constant currency basis, reflecting the underlying resiliency of our subscription and maintenance revenues. Our contracted annual recurring revenue or total CARR, closed at $26.1 million, representing a net reduction of $2.9 million over the quarter. This was primarily driven by the removal of the NTP project from our CARR backlog, partially offset by net new CARR sales. Sales orders totaled $6.8 million in the second quarter, including $3.1 million of new sales, reflecting industry confidence in Mach7's value proposition and the effectiveness of our strategy to date. Operating cash flows improved significantly over the prior quarter. Cash receipts from customers were $7.9 million, reflecting a catch-up of the majority of timing-related renewals and invoices that were delayed into Q1 and driving positive operating cash flow for Q2. On the cost side, total payments were $7.9 million, down 9% compared to the same quarter last year and 6% lower than the first quarter, reflecting the benefits of our efficiency and cost reduction initiatives. Advertising and marketing spend was $0.4 million, consistent with the prior year and higher than Q1 due to targeted investment in our primary marketing and lead generation event, RSNA. All other expense categories were on par or lower compared to both the prior quarter and prior year. We ended the quarter with $18.5 million in cash and 0 debt, maintaining a strong balance sheet that positions us well to continue executing on our strategy. Overall, the fundamentals remain very sound, and we continue to operate efficiently as we move into the second half. With that, I will hand it back to you, Teri. Teri Thomas: Thank you very much, Dan. All right. I'll now share a little bit more progress about the progress we're making on executing on our strategy. So first of all, commercial transformation, a big focus for me. It is well underway. During the quarter, we continued simplifying how we operate and lowering our cost base while selectively investing in areas that directly support commercial momentum and customer outcomes. Our primary focus has been strengthening our commercial engine. Today, our sales organization has grown, is more focused and is better supported than when I began 6 months ago with clear ownership across new customer acquisition, expansions, partners and services. We have reenergized the sales and marketing model, and we're strengthening our partner engagement through a more proactive and structured approach, including expanded partnerships with AWS, Dell and Ingram. Our new commercial leadership team is currently with me in California, translating strategy into execution plans across pipeline quality, revenue discipline, partner leverage and demand generation. Now RSNA 2025 was an important commercial activity for us. We showcased our move from archive to architecture with the launch of Flamingo, and we generated some high-quality sales leads through a more customer-grounded marketing approach, and we deepened engagement with more than a dozen partners, an increasingly important growth lever for us. We celebrated a significant product and commercial milestone this quarter with our first Flamingo architecture customer in Q2 fiscal year '26. This was our first contract for the new product and our first brand-new direct customer relationship since July 2023. It is an important signal that our refreshed commercial engine has begun executing. Expanding our commercial opportunities, Flamingo is modular by design, allowing customers to adopt capabilities incrementally, whether for existing Mach7 customers or those entirely new to us. It can be deployed alongside our VNA, our eUnity Viewer with both or independently. And over time, we will continue to expand the capabilities under the Flamingo's wings, strengthening clinical impact, AI integration, EMR connectivity and delivering seamless imaging access to complete the patient's record. While this extends beyond the quarter, January has been busy, and it represents a solid continuation of our execution. We achieved a key regulatory milestone with the eUnity Viewer receiving a new CE certificate under the EU medical device regulations, supporting continued access to European and critical Middle Eastern markets. We initiated platform expansion in Malaysia by hiring a developer, including also an experienced API integration developer, who is now fully onboarded and leading our first development work from that region. Development is underway supporting our global customer base and strengthening Flamingo's integration capabilities. We've established an intern program in both North America and Malaysia for access to fresh graduates with fresh ideas. These new staff are part of a deliberate expansion of our Asia-based team with plans to continue scaling as execution progresses. Operating discipline does remain a core focus. As Dan outlined, the organizational reshaping completed during the quarter delivered cost savings from reductions in IT, operating costs and infrastructure changes, also licensing optimization and contract renegotiations. We're moving and shaking things in a good way. Execution quality with customers also improving. Early gains in eUnity Viewer KLAS scores reflect the initial benefits of our flight crew customer engagement operating model and a renewed focus on accountability, responsiveness and consistency. This remains a top priority area as we continue to refine our model and raise that bar on the customers' experience. As we continue to shift from strategy definition into execution, leadership alignment continues to evolve. We've commenced a search for an experienced Chief Technology Officer following the departure of the Chief Innovation Officer in January. This reflects our focus on strengthening our engineering leadership, delivery of technology, platform scalability and execution excellence. We are also recruiting additional sales staff across Asia and North America to support expected demand from our expanded marketing activity, but we are doing this selectively and in alignment with demand. Looking ahead, Mach7 enters the second half of FY '26 with a clearer strategy, stronger operational foundations and improving commercial momentum. We remain focused on disciplined cost management while selectively investing in growth critical capabilities across sales, product development and platform scalability. As we shift away from the high effort Veterans Health Administration Teleradiology program, we're increasing our emphasis on capital deals in Asia and the Middle East. Over the past 2 weeks, I visited 4 customers across these regions, including one of our largest customers and was encouraged by the innovation we are seeing with Mach7 in production overseas. A parallel focus is continuing to build our transformed commercial engine. Expanded marketing initiatives are in planning and officially launched in February. The industry will see us showing up differently, and we intend to get more visibility with our target customer types. Now I'd like you to know, we are expanding our marketing capability in a disciplined way. Rather than materially increasing spend, we're partnering with an external marketing provider that brings stronger tools, deeper capabilities and greater scale. And this allows us to significantly expand our marketing output as well as our market presence and branding while keeping our investment essentially flat. The same approach applies to how we're expanding our development capability. By hiring developers in Malaysia, we can bring on 3 to 4 engineers for the market cost of 1 in the United States. Paired with our deeply knowledgeable engineering team on the ground in Malaysia, this approach allows us to expand our innovation capacity and accelerate the development of Flamingo as well as other innovations without a matching increase in our development cost base. While our industry sales cycles of 1 to 2 years means it will take time for these initiatives to produce the expected growth in revenue, we are digging in and we are doing the hard work with urgency and with focus, emphasizing not just growth of pipeline, but improved sales conversion rates. We expect Flamingo-related opportunities to begin contributing more meaningful to our ARR in the second half of fiscal year '26 and into fiscal year '27. I will provide further updates at our half year results, including additional insight into execution progress as we continue to build and gather momentum. Before I close, I want to thank our Board for their guidance and support, our employees for embracing change with energy and optimism and our shareholders for your patience and your continued belief in the company. And now time for questions. Francoise Dixon: Thanks, Teri. We have received several questions via the live chat, and I'll commence with the first one from Max. He asks, in dollar terms, what was the contribution to sales orders from renewals and separately, add-on and expansions? Teri Thomas: [indiscernible]. Go Dan. Daniel Lee: I'm happy to take that one. Thanks Teri. Thanks, Max, for that question. Renewals represented around 40% of our sales orders for the quarter. In dollar terms, that was $2.9 million. And add-ons and expansions were just over $0.9 million or 14% of total sales orders. Francoise Dixon: Thanks, Dan. Our next question comes from Andrew Stewart. I noted the comment of improvement in KLAS. Where do we sit at the moment? Teri Thomas: The best-in-KLAS results come out on February 4. And so I cannot tell you it's a few days away what they're going to look like. I do look regularly at KLAS myself as well as several of our other team members, and we put it on our corporate vital signs dashboards. Our eUnity numbers have been improving and looking great. They were tops, they went down. They're coming back up. Our VNA isn't where I wanted to be quite yet. Even this morning, I got a very nice positive comment from one of our VNA customers. So the positive comments are starting to trickle in. However, it's going to take a while before we work through some of the comments that brought our score down over time. So we're targeting the VNA. KLAS is a little challenging because it is a lagging indicator. So I see the VNA not where we want it to be yet, but we're systematically going through our customer base to engage with them in a different way than we've done before. We're executing a systematic engagement and assessment process, which will take several more months for us to complete. With the KLAS reporting lag, we expect it will take up to a year to see the benefits come through fully. So while we've had some fantastic early comments and feedback, including the comments KLAS publishes, but also the direct engagement and feedback from the KLAS staff themselves. And in fact, by the way, I'm going to share one of the most recent comments, they said they are very pleased with the results of our restructure. They love having a cockpit of people, and they're finding those people to be responsive and knowledgeable. The last part of the comment, I feel extremely confident in their ability to fix problems, which I would not have said a year ago. That's the profile I want to see from all of our KLAS comments, but it will take a while for KLAS to get a hold of those people and also for us to orient those customers to the changes underway. Francoise Dixon: Thanks, Teri. We have another question from Max who asks, can you expand on how some of these low revenue relationships were creating competitive conflicts? Teri Thomas: Yes. I'm not sure I'm comfortable sharing the actual names of the companies as that could create some legal risks. Therefore, I'm not going to name any names. However, when we acquired eUnity, some of the eUnity customers had a competing VNA and used our viewer. And that's a delicate situation. Do you want to enable a competitor to better compete with you with your own technology? So we've gone through and prioritized our partnerships, and we've looked at them carefully based on how much revenue they currently bring in, but also how strategically are they aligned with our growth expectations and the quality of the relationships. And there are a small number of those relationships that essentially cost more to maintain than they bring in for revenue and also carry some business probably not best practices. So we are doing a little bit of cleaning up the closets. Francoise Dixon: Thanks, Teri. We have another question from Max. What have you learned from customers around mission criticality? Teri Thomas: Now I've been in health care technology since 1989, and I'm a nurse. And so I understand the pain if a customer goes down or if the system isn't responsive. However, one thing I've learned is that I need the whole team to feel that pain, not just the flight crew, not just the support person. So one of the biggest things I've learned is how incredibly important it is to make sure that our staff really fully understand the impact on patients' lives and clinicians who are just trying to do their best work if our software isn't performing. And in fact, even this morning, I had a call with our team about a customer, and I said, forget the flow charts. If a customer is in trouble, you all get on the phone with them together right away. And if it means a developer is on, a developer is on. So it's creating that strong understanding across all of the roles and living our culture code, which starts with customers drive all of our decisions. So as a leader, I regularly prompt and ask the question, how would this answer feel to the customer? What does this mean to the customer? And what is the impact to the customer and training our company to think about that, not just in the customer-facing part of the business, but also product management, development and even the simple thing that we executed in our strategy, which is having someone answer the phones. Francoise Dixon: Thanks, Teri. Our next question comes from Darren who asked, if you could only focus on one weakness at Mark7 as a business right now, what would it be? And how would Mark7 fix it? Teri Thomas: That's a tough one. I do regularly sit back and think what is the most important thing for us to do. And I actually have a meeting next week to get alignment on big hairy audacious goals for the quarter because I do believe that can be an effective approach to rally our customers or rally our staff around our customers. That's actually the theme of what we're talking about. So I think what -- that last question is actually the answer to this next question. I think somehow Mach7 over time did a good job with taking care of its staff, organizing the business, but stepped away from that deep understanding of the customers' world, and we need to build that back. So in a great intentioned way, let's protect developer time, for example, developers stopped engaging with customers. They started operating on specifications that might have come from a customer to a support person to a product person to a development ops person to a developer. And it's a little bit like the phone game. You actually need to get people on the phone talking directly to be effective and not only do better quality development, but also it teaches people to really care. And it's a different level of caring when you talk to the customer than you're writing to a spec. So if I would say biggest weakness, that's the one we are attacking most heavily that I think will have the most profound impact on the work that we do as a company from top to bottom. Francoise Dixon: Thanks, Teri. Our next question comes from Scott Power who asks, can you expand on your plans to sell Southeast Asia and the Middle East? Teri Thomas: Sure. Yes, I had a whirlwind tour there last week. We have a fantastic team on the ground in Malaysia and Singapore. They're deeply knowledgeable. They actually don't have that Mach7 weakness in that they're really closely connected to the customers there, good understanding of the products. And the customers are really happy. I -- they were proud to show off what they're doing with our software. I visited 3 hospitals in Hong Kong. And I was amazed. They were telling me they were doing things that I heard from the North American team we couldn't do. And I'm like, well, are you doing this with our software? And I validated that, yes, in fact, they are. And so I thought build on where you've got success, and so my first visit there, I was impressed. This last visit there, I was even more impressed. And that's part of why I brought our founder, Ravi, back into the business. He lives in Singapore. He sees Mach7 kind of like a child of his. He wants us to grow up and be all we can be. And so he has this infectious enthusiasm and this energy and this just deep caring about the technology itself that carries a massive amount of credibility in Asia, a high context culture that really values founders. And between the new sales hire that we've got, another person that we're looking to hire, Ravi and that really strong technical team on the ground, we have several prospects in the pipeline that I think we have a great chance of closing as well as some expansion opportunities with our current customers, primarily in Qatar, in Hong Kong, but also even in Malaysia. People like to see their software being used in their country. And so there -- it's not super high profit compared to other areas, but they're right there and it makes a lot of sense. So we haven't done a lot of work on prospecting and trying to build the pipeline deliberately yet, but that will be one of the first things for both the new hire that just began and the open position that we hope to fill soon. So it's a great team. It's happy customers. That's a great recipe for that sales marketing flywheel. So I want to get that thing rolling. Francoise Dixon: Thanks, Teri. Our next question from Max is actually for Dan. Dan, what attracted you to the opportunity? Daniel Lee: Yes. Thanks again, Max. Well, I was drawn to the opportunity because really a combination of the company's reset mission, the stage of growth that the company is currently in and the mission to turn around the culture of the leadership team. The company had a very strong balance sheet. Fundamentals look very sound. And truthfully, it just felt like the kind of environment where I could make the most meaningful contributions and impact as well as continue to grow professionally. Francoise Dixon: We have no further questions on the chat, but I'll just pause a moment in case there are any final questions that crop up. Last chance for people. No, nothing has come through. I'll hand you back to you, Teri, for closing remarks. Teri Thomas: All right. I do believe in setting expectations correctly and then delivering, whether it's with customers, staff or even our investors. So with that in mind, I'm going to close by noting that we are driving a fundamental change in culture, in operating model and in execution, and that kind of change does not happen overnight. While we're pushing hard to accelerate sales cycles, the reality is the full impact on revenue, and as we mentioned, the KLAS scores will likely take 12 to 24 months to be fully visible in the form of our growth of ARR. So progress will be steady, but that kind of transformation and that acceleration of growth and profitability will take time. I'm very proud of the progress we've made, and I'm super excited by the opportunities ahead of us. I'm confident in where we're headed. Our strategy is pretty clear. The market opportunity, very real, and our balance sheet is strong. Delivery is what matters now. So I appreciate your patience as Mach7 evolves. It changes for the better, and we realize our immense potential. And with that, I thank you, and I look forward to sharing more with you soon. Thanks for joining us.
Operator: Ladies and gentlemen, welcome to Roche's Full Year Results Webinar 2025. My name is [ Henrik, ] and I'm the technical operator for today's call. Kindly note that the webinar is being recorded. [Operator Instructions] One last remark. If you would like to follow the presented slides on your end as well, please feel free to go to roche.com/investors to download the presentation. At this time, it's my pleasure to introduce you to Thomas Schinecker, CEO of Roche Group. Mr. Schinecker, the stage is yours. Thomas Schinecker: Thank you very much, and good morning, good afternoon and good evening. I'm really, really excited to share with you the update for the full year because we had an amazing fourth quarter, not only in terms of financial results, but also in terms of pipeline news. So let me get started on the normal overview slide. So group sales in 2025 grew with 7%, Pharma at 9%, Diagnostics at 2%. Again, this was due to the China healthcare pricing reforms. Without that, Diagnostics actually grew with 7% last year with a very strong operating performance with a core operating profit of plus 13% and a core operating margin plus 1.9 percentage points and core EPS plus 11%. So you may ask what's the difference between EPS and OP? Why is there a deceleration there? This is basically mostly driven through higher taxes. On the full year LOE impacts, we had impact of about CHF 700 million. Now I come really to the exciting part. We had truly an outstanding Q4 when it comes to pipeline news. From a pharma regulatory perspective, the EU approval for Gazyva in lupus nephritis, U.S. and EU approval for Lunsumio as subcut solution in third-line plus follicular lymphoma. And U.S. filing for giredestrant in post-CDKi ER-positive HER2-negative metastatic breast cancer. Now come the many positive readouts that we had. Phase III, FENtrepid and FENhance, so 2 positive studies in fenebrutinib, 1 in PPMS, the other one in RMS, a positive Phase III study just already this year in Enspryng in MOG-AD, positive Phase III lidERA giredestrant study in adjuvant ER-positive HER2-negative breast cancer, a positive Phase III PiaSky in aHUS and a positive Phase III in Gazyva in INS and another positive Phase III Gazyva in SLE and positive Phase II in CT-388 in obesity. And I know Teresa will go through a lot of these details with you, but you can see with very, very busy newsflow, and I think there are more exciting things to come also this year. On the diagnostic side, regulatory approval of the Elecsys dengue test, Matt will talk about that, the cobas BV/CV test and also the mass spectrometry extension of our menu. So exciting launches there as well. There is significant newsflow ahead in 2026. We are awaiting the second fenebrutinib study in RMS. We are awaiting persevERA, so the giredestrant in first-line ER-positive, HER2-negative metastatic breast cancer. We have other studies reading out in -- for Itovebi, but also for our divarasib KRAS medicine and further in Lunsumio and Gazyva. So again, I think very exciting. And we have a number of Phase II readouts coming. So it could again be a very busy year in terms of transition from Phase II into Phase III. And of course, everyone is talking about it, our next-generation sequencing solution. And we promised it for many years. Now here it is. So I'm super excited also personally that we are now coming with this very exciting solution to the market. And yes, I think it will cause a couple of [ waves ] in the market. Now let me go through the growth rates. And I don't think I have to cover too much on the left-hand side. But what you can see on the slide is that we have consistently strong growth in the last 2 years. And even before that, when we had the washout of COVID-19 tests and the medicine, we had a good underlying growth. So we always said we will deliver and we delivered. Now on the 2025, Pharma kept growing at 9%. Diagnostics, we did have the healthcare pricing reforms impact in China. Without that, Diagnostics would also have been growing consistently at 7% over this time period. Again, here, we just look at the full year, 9% growth, again by Pharmaceuticals division, 2% by Diagnostics. Again, without the China effect, it's 7% and the Roche Group has 7% growth. And this is really driven across our entire portfolio. I think Diagnostics, I already explained, and I know Matt will go into that further. Vabysmo, we have continued strong global growth. We do expect that we will see even more uptake in the next year when it comes to the U.S. market now that we are also supporting more on the co-pay assistance foundations, and Teresa will go into that. Also Xolair keeps growing significantly. Gazyva, we have now launching in lupus nephritis, but you will see also the other indications really contributing to the growth in this business. Oncology growing well at 6%. For Phesgo, we are now at the global conversion rates above 50%. Tecentriq, returning to low single-digit growth, Alecensa growth driven by U.S. and Japan. On the Hematology side, Polivy strong now. We are reaching a U.S. patient share of 36%. Columvi/Lunsumio, growth driven by second-line plus launch and third line plus DLBCL, strong third-line growth in follicular lymphoma. So you can see also in the Ocrevus franchise, we see now a strong uptake of the subcut solution, as we also discussed, and Evrysdi is the leading SMA solution and medicine now with more than 21,000 patients on treatment. So overall, we've achieved the upgraded guidance. On mid-single-digit sales growth, we had 7%. And you may remember in the QR -- in the IR call in Q3, you asked why are we not upgrading the guidance on sales? And my answer was because 7% is still mid-single digit, and we delivered 7%. So we delivered on what we also communicated. On core EPS, we upgraded the guidance from high single digit to high single digit to low double digit. And why did we do that? Because we already knew that we would land in double-digit range. So we wanted to include it in that range, and that's why we upgraded it at the time. And we further increased the dividends in Swiss franc. So I can say we, for the second year, upgraded the guidance during the year, and we ended up on the upper end of these 2 guidances every time in '24 and in '25. Now what's super exciting is the growth outlook. And the growth outlook has fundamentally changed based on some of the Phase III readouts that we have seen in Q4. Giredestrant, our SERD has had 2 positive readouts, one with evERA and the second one with lidERA, lidERA reading out early. We expected the readout only next year. But based on the very significant results, it read out early already this year. We're now waiting for the persevERA data, but we clearly see that we have a very active and very good molecule in hand. Not only is it going to replace the standard of care and it's going to become the new backbone in this field but it's so safe and tolerable that we do believe that this will become the standard of care. Fenebrutinib in MS, we had 2 positive studies here in RMS and in PPMS, and now Teresa will go into that. We're still waiting for the second, the FENhance 1 study in RMS in order to be able to file this. You will see the data in not-too-distant future. But again, we are very excited with the data that we have seen. Gazyva, the same. We've had already positive data in lupus nephritis. Now we have 2 more additional Phase III data, again, something that will give us momentum in the midterm. On vamikibart and in Enspryng, we had 2 trials each. And each of the 2 trials, we always had 2 arms and 2 different doses. In one trial, in both of those, it was fully positive trial. In the second trial, one dose was positive, the other one was negative. Now this was always a very close call. And based on the conversations we had with the FDA, we do believe that the FDA will support filing here. So this is the midterm. And in the long term, what's also exciting is that we had 10 NMEs moving into Phase III. That's a record for us. We've never had 10 NMEs moving into Phase III. And these are all NMEs with substantial revenue and patient impact attached to them. Now we know the other part or a topic that's on your mind is our agreement with the U.S. government. Now the agreement we reached with the U.S. government is not an LOI, it's a contract with the U.S. government. And based on this contract with the U.S. government, which is terminated for the next 3 years, we get an exemption from tariffs, and we get an exemption of the demo projects. In return, we agreed to the Medicaid rebates in some of our portfolio. We agreed to the encouragement of other wealthy nations to reward biopharmaceutical innovation and to pay their share to contribute to innovation. And we also support the direct-to-patient medication access with our influenza portfolio, Xofluza and Tamiflu and also future medicines with which we can go direct to patients. Also, we agreed to invest in the United States $50 billion over the next 5 years. This includes R&D and PP&E investments. And for example, on the red dots on the right-hand side, you can see where these investments are happening. In North Carolina, Holly Springs, we are investing $2 billion in manufacturing for our CVRM portfolio. In Indianapolis, we're investing in CGM manufacturing. And in Boston, we're investing in our research hub as well as we're going to invest more in Genentech in San Francisco. But we already have a very strong manufacturing and R&D network present in the United States. Now it's all about delivering on the next innovation cycle. So I think we have good growth momentum. We do believe we can sustain the good growth momentum and how do we keep that beyond 2030. Well, one is we've made substantial progress on our initiatives in order to prepare the company for future success. For the last 3 years, we've been talking about high-performing organization, about delivery and about execution. And I do believe we've delivered on that. We've introduced the bar so that we focus on those medicines with the highest impact. We have an intentional focus in terms of TAs and also -- and disease areas. And we look at the portfolio as an overall investment portfolio with certain risk and reward profiles that we want to balance to have the right portfolio. We're expanding into new technologies, not only in Dia, but also in Pharma, and we're implementing AI across the value chain. And we've made good progress in R&D. Now more than 60% of the NMEs are post bar, 66% of the late-stage projects have best-in-disease potential. We want to get to 80% and 60% more average peak sales per pipeline project. If you actually take not end of '23, if you take end of '22, it's even higher. And the same for the total portfolio value. Since end of '23, it's about 45%. If you look at end of '22 as a comparator, we are more than 60% higher, and this is a risk-adjusted value. So we do believe we've made a significant move when it comes to our pipeline in terms of higher rewards and also manageable risk. We have a strong on-market portfolio. In the midterm, we have great readouts that are going to help us sustain our growth, but we have many, many NMEs that will read out before the end of this decade. And many of them can be significant contributors to the sales of our company. And here, you can see the prioritization that we have done over the years in our portfolio, really taking out high-risk, low-value projects and adding higher-value projects with very strong data as a foundation that gives us more confidence into Phase III. And this has resulted in a significant shift in our portfolio value. As mentioned, this is year-end '23 as a baseline. If you take year-end '22, it's even significantly higher. And on the Diagnostics side, as I mentioned, we have been experiencing the headwinds in China from the healthcare pricing reforms. These headwinds will become a lot less in 2026 and will be gone in 2027. We will continue to grow significantly. This year, we expect mid-single-digit growth, but then back to mid- to high single-digit growth. And these products that you see here can each contribute additional CHF 1 billion when it comes to sales per year. And again, very excited about the sequence of that's coming. Now let me go through the outlook. For 2026, we again have an exciting year when it comes in terms of pipeline readouts. But then after that '27, '28, '29, we will have many different NMEs that will have Phase III readouts. In '26, I just want to highlight a couple, persevERA for giredestrant and fenebrutinib, Itovebi, divarasib, a number that can also continue to drive our growth in the next years. And of course, we have a number of Phase II readouts in obesity, 2 of them already have been positive this year. So we had a very good start. So the year ended well in terms of readouts and the year started well in terms of readouts. So we are very positive in terms of the momentum that we have and that we can continue this momentum. And these are the 19 medicines that we can launch by the end of the decade. Now it's clear that not all 19 ultimately will make it. But these are really substantial contributions that they can deliver to the future business of our company and to patients out there. So I'm very excited about what's ahead for us. Now let me talk about the 2026 guidance. In group sales, again, we expect mid-single-digit sales growth; in core EPS, high single-digit core EPS growth, and we do believe that we can continue to further increase the dividend in Swiss francs. With that, I hand it over to Teresa or to Alan, yes. Alan Hippe: Yes, welcome from my side as well. As Thomas said, great pipeline progress. And that really then combined with great financial results. I think that's really -- that's a great setup, and thanks to the whole Roche team for delivering that. So let's go into the results right away. And here's the overview. And I will focus on the right-hand side, so really the changes in constant rates. Sales plus 7%. Matt and Teresa will go into this, 9% on the Pharma side, 2% on the Dia side. As said, I think on the Dia side with the impact from China. Matt will highlight this. The core operating profit, plus 13%. So you see really good cost containment, but at the same time, we have invested where it really matters. And I will lead you through this. And then Thomas mentioned it, slower momentum on the core net income and the core EPS, yes, driven by a higher tax load, roughly CHF 600 million, CHF 579 million more taxes that we had to pay, which brought the momentum a little bit down. IFRS net income up 58%. And you know where it comes from. It comes from a base effect from last year. We had 2 goodwill impairments accounted for CHF 3.2 billion negatively. If you adjust for that, I think it would be a plus 20%, which, in my opinion, mirrors very well the operational performance. Well, now I come to the cash flow. And we can now debate quite a bit about the cash flow. I think you see it, CHF 16.2 billion, down from CHF 20.2 billion. Let me say here, we had really a very strong December when it comes to sales and quite an increase in accounts receivables. They will convert into cash. So automatically, what I'm saying, I'm expecting quite a strong cash year 2026. The other piece here is in the net trade working capital inventories. We had the situation that we had to deal with the tariffs. So we brought inventories up a little bit. That contributed to this. And last but not least, we have invested more into intangible assets, roughly CHF 600 million. I come to this, but I think that explains the number very well. As I said, I think we will recover quite well on the cash flow side in 2026. Let me say, I will also highlight this net debt came down at the same time. I will lead you through this. Good. I think when you look really at the bridge here for the sales, in constant rates, 7% up, as you can see. When you go from the left-hand side to the right-hand side, it's a plus 2% because we have the currency impact in, which is quite significant with minus 5 percentage points. Let me focus on the middle. You see Pharma and the loss of exclusivity of minus CHF 745 million, in total, a plus 9%, as mentioned. And then you see the situation in Dia, where we have a 7% growth, excluding China. And we have then an impact of minus CHF 579 million coming really from the healthcare pricing reform in China, which means a minus 24% of sales in China itself. Good. With that, let's go through the P&L. I talked about the sales growth. Other revenue, I think on one hand, we had a lower milestone income compared to last year, minus CHF 87 million, but we also had higher royalty income. That's why this is very, very stable and really looks good. Cost of sales, both divisions increased their cost of sales by 7%, but with very different dynamics. I think we in -- from a volume point of view in Pharma, plus 13%. So very, very clearly, I think here a driver for the plus 7% growth on the cost side. I think that growth was also a little bit supported by royalty expenses. And the Dia division, plus 4% on the volume side compared now to a plus 7% growth on the cost side. So what is that triggered by? Well, very clearly, the healthcare reform plays a role here, so China once again, but also higher costs related to placing of machines, which certainly fuels our future growth of diagnostics, so well invested here. We had certainly investments into the new technologies like CGM, Lumira, et cetera. And last but not least, we had a tariff impact on the Diagnostics side of CHF 64 million half year impact. So it's also something we potentially have to deal with in 2026. Core operating profit up 13%, a nice margin increase. When you look at the margins itself, I think really in constant rates, overall, plus 1.9 percentage points for the group. You see a nice progression on the Pharma division. You see a decrease of minus 1.1 percentage points in CER on the Diagnostics division side, which is explainable given that here, a significant portion of the sales in China went away. When you look at the core financial results, and really here, interestingly, I think really in CER, we have an increase. When you look at Swiss francs, we have a decrease. And I think really what that speaks for is, well, the U.S. dollar is weak, hurts us a little bit in the P&L, but helps us with the financial result. That's one conclusion here. You see the equity securities with minus CHF 88 million. I think the market has recovered, but we have some investments in the Roche Venture Fund where we wait for data. So hopefully, a better year ahead. Net interest income, we had less cash available, led to less income here. Interest expenses was plus CHF 69 million; in concentrate, it would be rather flattish. But let me say here, certainly, the weak U.S. dollar helped. And then we have really here other, and these are predominantly less hyperinflation impacts compared to last year. So with that, let's go to the tax rate. And Thomas mentioned it, I mentioned it already. Let's focus on the middle of the slide. First, you see really the effective tax rate full year 2024, excluding the resolution of tax disputes, 18.1%. And then you see really the effective tax rate full year 2025, excluding the resolution of tax disputes, 19.5%. So you really see the increased momentum here. Both years were really mitigated by the resolution of tax disputes. In 2024, that was a positive of CHF 263 million, representing a minus 1.4 percentage points. And in 2025, it was a lower effect, plus CHF 185 million in constant rates, resulting in minus 0.9 percentage points, leading to the effective tax rate full year 2025 with 18.6%. Well, for 2026, I think we will hover more to a 20% tax rate. Core EPS. On the core EPS side, this is the bridge here. I think for me, the most important point to say is it's driven by operations. The increase in core EPS is driven by operations. And I think there's nothing better to say here. Look, I think the product disposals, you've seen in the P&L, I think less income coming from that. Financial income and expenses are negative in constant rates, the slides in constant rates, that's a negative. It's roughly CHF 60 million. And then effective tax rate changes, as said, this is the once again mentioned increase on the tax side that we have seen here. So operations was the major driver. All other effects on that slide worked against us. When you look at non-core, and the IFRS income, I've mentioned the IFRS income, see it on the right-hand side, plus 58%. Core operating profit, I've mentioned as well with plus 13%. Perhaps 2 points to mention on that slide. One is the global restructuring plans. You see really the restructuring charges have increased by roughly CHF 300 million. I would argue that's a positive because that gives us savings in the future. And then I think you see the impairments of intangible assets, as mentioned, not a lot of impact in 2025. In 2024, with CHF 4.6 billion negatively, an enormous impact, very much driven by the 2 goodwill impairments for Spark and Flatiron accounting both together, minus CHF 3.2 billion. With that, let's go to the cash. And here's the story. And look at the left-hand side, CHF 20.2 billion, I've mentioned that already in 2024. And then you see in constant rates, full year 2025 with CHF 17.7 billion. Well, you see really when you go back to the left-hand side, the operating profit, net of cash adjustments. I think that's the positive momentum coming from operations, really positive. And then you see the net working capital movement. And out of that net working capital movement's, minus CHF 2.2 billion comes from net trade working capital. And as I said, predominantly driven by accounts receivables. Let me mention here that has nothing to do with extended payment terms for certain products and nothing to do with Vabysmo. This is really we have for -- especially for Vabysmo payment terms for a longer period for the last couple of years, and we have not changed them. So this is really because we had a strong December and that brought the accounts receivables up. We have the higher inventories on the Pharma side. That explains the minus CHF 2.2 billion. We have the investments in PP&E, placements in Diagnostics for the positive site investments that we have done. And then we have the investments in intangible assets, the increase of CHF 645 million, very much driven by Zealand and the deal we have done there. Then foreign exchange kicks in with minus 8 percentage points quite significantly leads us to an operating free cash flow of CHF 16.2 billion. Well, I think when you look at the margins, I think that tells the same story here. When you look for it, I can just really point back to the fact that we will recover in 2026. Now when I talk about cash, I have to talk about the net debt development and debt in total as well. And as said, I think interestingly, when you look really at net debt at the end of 2024 with minus CHF 17.3 billion. If you compare that on the right-hand side with the net debt position at the end of 2025, we have reduced by CHF 1.1 billion. So you might ask yourself, okay, the cash flow was not so strong. How is that possible? Did they invest less, especially on the M&A side? No, we didn't. I think that the numbers are really on the lower part of the slide. As you can see on the right-hand side, you see what we've invested in intangible assets and in M&A is pretty equal, CHF 4.6 billion in 2024 and even more in 2025 with CHF 5.1 billion. One driver here is the weaker U.S. dollar. And you see it really when you look really on this bar, minus CHF 10.7 billion, dividends, M&A and alliance transactions and other, there is the currency translation point with plus CHF 1.8 billion. That is a major driver here and helps us on the debt side. By the way, we have decreased gross debt by CHF 3.1 billion. And certainly, as 70% of our gross debt is in U.S. dollar, the U.S. dollar helps in that sense to bring the debt down, at least when we report in Swiss francs. Good. With that, a quick comment on the balance sheet. Not too much to say. When you look really on the left-hand side, where we have the assets, I think cash and marketable securities went a little bit down. Nothing to mention here, paid the dividend, all of that. When you look at other current assets, well, higher trade receivables, as mentioned already, mostly coming from the Pharma side. And when you look really at the noncurrent assets, that was driven by higher intangible assets of CHF 4.1 billion, mostly acquisitions accounting for plus CHF 2.5 billion. On the right-hand side, you see the liabilities and the equity. The current liabilities increased mainly due to the higher accounts of payables and bank creditors, some loans here. And the noncurrent liabilities decreased slightly due to the decrease in long-term debt. I've mentioned the CHF 3.1 billion already. Leads us to an equity increase quite nicely and now an equity ratio of 38%. Good. Leads me to the currencies. Well, yes, I think really, the volatility is certainly disturbing. And the weak U.S. dollar is something we're fighting against. You see really the result for the full year, minus 5 percentage points on sales and minus 8 percentage points on core operating profit, a minus 7 percentage points on core EPS. To be honest, if you apply today's rates, that would be basically the same picture for 2026 if we keep all that rates from today until the end of the year 2026. So I think it would be basically the same impact. When you compare at year-end 2025 and you keep these currency rates stable until the end of 2026, you see it really on the box down low. The impact would be minus 4 percentage points on sales and minus 6 percentage points on core operating profit and core EPS. This topic remains in 2026. Good core EPS. I think really we want to set the base right for you for the core EPS and what is the starting point because we have currency effects in the core EPS. So let me lead you through this. You see on the left-hand side, the CHF 19.46 per share as reported. And then I think really, we adjust for CHF 0.37 to get to the CHF 19.83 per share, which would be the starting base for your calculations in -- or if you like, for the core EPS in 2026. So let me explain now the CHF 0.37. What you see here, these are the exchange rate effects. This is a result of dividing the 2025 currency losses of minus CHF 273 million as well as the 2025 losses on net monetary position in hyperinflationary economies of minus CHF 48 million. This is shown in Note 4 of the consolidated financial statements on Page 64. So on Page 64, you find these 2 numbers. Net of taxes and noncontrolling interest by the number of diluted shares of 803 million, and this number is outlined in Note 29 of the finance report on Page 126, just to confirm that, which is, I think, quite a positive because it sets the higher bar for us, so to say. So hopefully, a little bit of a positive for the projections for 2025. Here's the guidance again. Thomas has alluded to it. Let me mention to it, the loss of exclusivity impact that we have estimated or actually that we expect of roughly CHF 1 billion for 2026. So relatively narrow to what we had for 2025 and well in line between the CHF 1 billion and CHF 1.5 billion that we've indicated to you that we will have on an ongoing basis. And with that, I have the pleasure to hand over to Teresa. Teresa Graham: Fantastic. Thanks, Alan. So I'm going to hand it back to Alan. Alan Hippe: You hand it back to me. Teresa -- it's hard to bring it to you. But let me make a last comment here. We have a change in our income statement presentation for 2026. Let me say very clearly, has nothing to do with the group in itself. So really, when you look at sales, group core operating profit and the core EPS, the metrics are unaffected. This topic is between corporate and the divisions. And basically, what we're doing is we are centralizing the legal department. That's what we're doing. And that has quite an impact. When you look at Pharma, we reduced SG&A costs in Pharma by CHF 250 million, roughly, I think, certainly in constant rates, which represents roughly 0.5 percentage point in core operating profit margin. So you should adjust for that in your calculations. On the Diagnostics side, that's roughly CHF 50 million less for the SG&A costs, which represents 0.4 percentage points in the core operating profit margin in CR. Corporate equally then would increase by CHF 300 million. Just to point that out, as I said, for the group accounts, nothing changed. This is between the divisions and corporate. Just to remind you when you project your margins forward for 2026, especially for the divisions. And now, yes, I have the pleasure to hand over to Teresa. Teresa Graham: I'm going to move forward really quickly in case they try and take it away from me again. So let's jump right in. So as Thomas shared the group perspective with you a little earlier, I wanted to provide some additional color on the key priorities for the Pharma division, starting with our focus on delivering the on-market portfolio. Q4 2025 marks our eighth consecutive quarter of growth. So today's on-market portfolio continues to deliver strong performance with 16 blockbusters across our 5 therapeutic areas. We expect this momentum to continue until 2028. And thereafter, we expect that sales become stable to fully compensate for generic erosion. Importantly, we do not expect a patent cliff. As Thomas mentioned, though, in the near term, we are expecting to deliver multiple key launches, which come on top of today's on-market portfolio. This includes Gazyva in immunology, giredestrant in breast cancer, fenebrutinib in MS, vamikibart in UME and Enspryng with additional indications in both neurology and ophthalmology. We expect that these products are going to continue to extend our growth momentum until well beyond 2028. We are currently in the process of updating our mid- to long-term outlook, and we'll be sharing that with you a little bit later this year. And so while we're very excited for these upcoming launches, we are just as excited about the progress that we've made on our pipeline. As Thomas mentioned, through R&D excellence and rigorous application of the bar, we have successfully rejuvenated our pipeline. With our post-bar NMEs, we have the potential to enter new disease areas like Alzheimer's and obesity, and we aim to bring multiple new transformational medicines to patients. As I mentioned at Pharma Day, all of our activities are really driven by 2 key tenets: discipline in the business and rigor in the science. Discipline in the business, we remain committed to keeping our COP at least stable. And rigor in the science, optimizing how we spend our R&D budget and applying our bar criteria to each and every asset progressing in the pipeline or entering it, including from partnerships or acquisitions. I am truly excited and confident for the future of Pharma, delivering transformative medicines and sustaining our growth momentum. So now let's take a closer look at how this momentum played out in 2025, and we'll start with the full year sales. So as you heard from both Thomas and Alan, Pharma sales grew at 9% at constant exchange rates, reaching CHF 47.7 billion. All regions are delivering strong performance, led by our international region with 14% growth. And overall, our volumes were up by 13%. As Alan mentioned, COP increased by 13% versus that 9% sales increase with a COP margin of 49.2%, so a slight increase over last year. Clearly, COP grew ahead of sales, which we mainly attribute to effective cost management, particularly in R&D, but I am going to drill down on the individual line items in a little more detail. Other revenue slightly decreased by 1% with higher profit share income from the higher sales of Venclexta in the U.S., which was offset by lower income from our out-licensing agreements. As Alan mentioned, cost of sales increased 7% against a 13% volume growth. R&D costs declined by 3%. This was mainly driven by savings in Flatiron as well as some other operational efficiencies. But let me say that this reduction was very thoughtful and deliberate as it gives us the oxygen that we need for the upcoming CVRM Phase III trials. SG&A costs increased by 8%, and this is primarily for 2 reasons. It was driven by some investments in our growth drivers, particularly Ocrevus and Xolair, but also increased donations to multiple independent co-pay assistance foundations. As part of our broader corporate philanthropy strategy, Genentech doubled its donations to those independent co-pay assistance foundations in 2025 versus 2024. Our corporate giving strategy is focused on supporting the patients most in need across multiple therapeutic areas, including oncology, neurology, immunology and ophthalmology. And we continually evaluate the strategy to ensure that it remains aligned to patient needs. And finally, other operating income and expenses decreased by 43%, and this is primarily due to lower gains on the disposal of products. And so now let's look at our individual growth drivers. So as always, first, I have to comment on the graph. These are all absolute values and year-over-year growth rates are presented at constant exchange rates. At full year, our top brands, Phesgo, Xolair, Ocrevus, Hemlibra, Vabysmo and Polivy generated roughly CHF 3.6 billion in new sales at constant exchange rates. For the fourth quarter in a row, Phesgo is our #1 growth driver with 48% growth, closely followed by Xolair, driven by the continued outstanding uptake in food allergy. You'll also notice the strong performance of Xofluza. And I just want to talk for a minute about that here, which is driven by the strong flu season that we saw in Q1 of 2025 in China. This may create a bit of a base effect for Xofluza in 2026, especially considering that we haven't seen a similarly strong flu season in China this year. So now let's dive into our TAs, starting with oncology. Oncology sales increased by 2% to CHF 15.3 billion, primarily driven by our HER2 franchise. As I mentioned, Phesgo posted an impressive 48% growth and the global conversion rate keeps climbing. We're now at 54%, well on our way to our new goal of 60%. This, of course, also means that Perjeta conversion to Phesgo continues to impact Perjeta sales, which is to be expected. Kadcyla growth continues to be driven by uptake in adjuvant breast cancer. Looking forward to the HER2 franchise overall, and as I've said previously, we expect the HER2 franchise to peak this year at about CHF 9 billion at 2024 exchange rates, followed by a steady decline through the end of the decade with a solid tail of around CHF 4 billion. And that CHF 4 billion is primarily Phesgo, about CHF 1 billion for Kadcyla and a bit of HMP. We do not foresee a biosimilar in the U.S. for Perjeta until the end of 2027. And let me also confirm again that we do not expect a cliff situation for the HER2 franchise. For Itovebi, we see good launch momentum in our first-line PI3 kinase HR-positive breast cancer population, and we expect 2 Phase III readouts this year with INAVO121 and 122, which could enable further indication expansion. But of course, the highlight of Q4 was the positive Phase III lidERA result for giredestrant. I am going to cover this in more depth on the next slide, but let me give you a few quick updates on giredestrant in general. We presented the lidERA data at San Antonio Breast, and we have already filed the evERA results with the FDA that happened at the end of last year, and EU filing is expected for 2026. Therefore, we expect evERA U.S. approval later this year, lidERA results will be filed with the U.S. and EU regulators this year. In the first half of this year, we expect the readout of persevERA in first-line ER-positive, HER2-negative metastatic breast cancer. Moving on to Tecentriq. Tecentriq exited 2025 with 3% growth and actually quite a nice Q4. For 2026, we expect low single-digit growth for Tecentriq, driven by the positive studies that we shared last year, such as IMforte in small cell, IMvigor in MIBC and ATOMIC in dMMR colon cancer. And finally, before I move to the next slide, let me just briefly mention that we expect the first Phase III readout for our KRASG12C inhibitor, divarasib, later this year. So now let's take a closer look at the lidERA results for giredestrant. So here are the giredestrant-lidERA results in adjuvant ER-positive HER2-negative breast cancer, which we presented last December. As you can see, giredestrant demonstrated a statistically significant and clinically meaningful improvement in invasive disease-free survival versus standard of care endocrine therapy, achieving a hazard ratio of 0.7. Let me emphasize here that this is the first oral SERD to show superior IDFS versus endocrine therapy in the adjuvant setting. And in terms of overall survival, the data was still immature, but clearly, a positive trend for giredestrant was observed with a hazard ratio of 0.79. Giredestrant safety profile remains favorable as we've seen in previously -- previous studies. And importantly, we saw a lower discontinuation rate with giredestrant versus the comparator arm. This is a significant improvement in this setting, and it indicates the improved patient experience on giredestrant compared to standard of care. So taken together, these results further underline giredestrant's potential as a next-generation best-in-class endocrine therapy in ER-positive breast cancer. To expand on this, let me dive a little bit deeper into the giredestrant development program. So now given the positive evERA and lidERA results we just discussed and the upcoming readouts, we're very excited for the future of giredestrant. Giredestrant has the potential to replace standard of care endocrine therapy in ER-positive breast cancer and become the new backbone of choice in this setting. As you can see in the treatment paradigm on the left, our clinical development program for giredestrant covers different lines of treatment and risk groups with the readout of persevERA in first-line expected mid-first half of this year. Please note that the giredestrant plus CDK4/6 combination in lidERA relates to a single-arm substudy that's still being evaluated. That's in combination with [ abema ]. We have also started a sub-study in combination with [ ribo ] as well. As you would expect, we are working at speed to complete filings and collaborate with regulators to ensure that this transformational medicine gets to patients as fast as possible. And just to reiterate, we have already filed evERA in the U.S. and expect lidERA filing in Q1. Beyond giredestrant, we also have a strong pipeline of potentially best-in-class molecules in breast cancer that give us the opportunity for numerous future combinations. For instance, our highly potent CDK4/2 inhibitor, which may overcome some of the limitations of currently available CDK4/6 inhibitors. And as I mentioned, we believe giredestrant has the possibility to become the new backbone of choice in ER-positive breast cancer. And therefore, we're exploring many combinations with some of the internal assets, as I just mentioned. Additionally, our phone keeps ringing as we are getting calls from potential partners interested in combination studies with giredestrant. We look forward to sharing future updates on our breast cancer pipeline with you in the near future. But for now, let's move on to hematology. The hematology franchise delivered strong growth of 15% in 2025, achieving CHF 8.6 billion in sales. Hemlibra closed the year with strong growth, 12% (sic) [ 11% ] driven by increasing adoption in the non-inhibitor patient population. For 2026, we expect low single-digit growth, and that's partly driven by competitor launches, which are anticipated later in the year. Polivy's growth momentum continued in 2025, reaching U.S. patient sales of 36% in first-line DLBCL. But in fact, we reached 2 significant milestones with Polivy last year. First, it is now the most prescribed regimen for IPI 2-5 patients in the U.S. And second, we have officially hit more than CHF 1 billion in sale in the first-line DLB setting alone. Shifting to Columvi and Lunsumio, our CD20, CD3 bispecifics. Launch performance remains on track for Columvi in third-line plus DLBCL with second-line DLBCL launches gearing up. For Lunsumio, we're happy to report that the subcutaneous formulation has been approved in both the U.S. and the EU. And just a reminder that, that new formulation reduces administration time from hours down to actually under a minute. Additionally, we expect 2 key events for Lunsumio later this year. We expect U.S. approval for Lunsumio plus Polivy in second-line DLBCL based on the positive SUNMO results, and we expect the readout for the Phase III CELESTIMO in second-line plus follicular lymphoma. So now let's move on to neurology. Our neurology franchise achieved CHF 9.8 billion in sales in 2025 with a strong growth of 11%. Ocrevus continues to have good momentum, delivering 9% growth globally and crossing the CHF 7 billion milestone in annual sales. We're excited to see the increasing growth momentum of our subcutaneous formulation known as Zunovo in the U.S. In Q4, more than half of global Ocrevus growth was driven by the subcut formulation. And importantly, in the U.S. and many other early launch countries, roughly 50% of Zunovo patients are naive to an Ocrevus. This represents that acceleration that we've been talking about. U.S. uptake continues to be driven primarily by community practices, which emphasizes how Zunovo is actually expanding the addressable market and can help overcome healthcare system restraints like IV capacity limitations. Overall, we now have more than 17,500 patients on Ocrevus now globally, and that's roughly 5,000 more than we had at Q3. For 2026, we expect to hit high single-digit to low double-digit growth for Ocrevus. And as a reminder, we upgraded our peak sales expectations for Ocrevus for the Ocrevus franchise to CHF 9 billion by 2029. This includes CHF 2 billion of incremental sales from Ocrevus subcut. But of course, there's also going to be some switching from IV to subcut. Staying with the MS franchise, you've seen the exciting news regarding the positive 3 results for fenebrutinib. We're going to cover that more on the next slide. But for now, let's take a minute on Evrysdi. The global rollout of the tablet formation continues, and we see great pickup from that as well as very positive feedback from the patient community. As Thomas mentioned, this remains the leader in SMA. Quick note that Q4 performance for Evrysdi in international was boosted by a tender-related buying pattern, but we are still expecting double-digit growth for Evrysdi next year. Earlier this week, you saw positive data from Elevidys in DMD. We continue to believe in the positive risk-benefit profile in the ambulatory DMD population and more than 1,050 patients have already been treated globally in this setting. Furthermore, the latest 3-year data from EMBARK shows the durable efficacy and slowing of disease progression for ambulatory DMD patients treated with Elevidys. We are working with EMA continually to find a viable path forward for EU patient access here. Quickly stopping over prasi, a quick update here where we have achieved both FPI for the Phase III study as well as we have been able to materially accelerate site activation. So we're a number of months ahead of schedule with the prasi trial, which is great news for patients. And let me close quickly by speaking a little bit about Enspryng in MOG-AD. So MOG-AD, if you are not aware, is a rare antibody-mediated autoimmune condition of the central nervous system, which causes inflammation of the brain, optic nerve and spinal cord. The Phase III study METEOROID read out positively. And we're looking forward to presenting that data at an upcoming medical conference later this year. We expect to file these results with the U.S. and EU regulators in 2026, and this additional indication could unlock an upside of approximately CHF 500 million for Enspryng. So now as promised, let's take a little bit of a deeper look at fenebrutinib. We are very excited about the positive Phase III readouts for fene. This includes FENtrepid in PPMS and FENhance 2 in RMS with the FENhance 1 readout expected mid half of this year. These results make fenebrutinib the only BTK inhibitor with positive Phase III results in both RMS and PPMS, and it has the potential to be both first and best-in-class in RMS and PPMS, which would also make it the first and only high-efficacy oral treatment for both relapsing and progressive multiple sclerosis. We see fenebrutinib as an opportunity to increase high efficacy treatment rates amongst MS patients and expand the footprint of our franchise. Ocrevus and now Ocrevus subcut have brought transformational impact to people living with MS, and we believe fenebrutinib has the potential to be that next transformational medicine for these patients. Let me also briefly remind you that fenebrutinib is differentiated by design from other BTK inhibitors. It is the only noncovalent binding BTK in Phase III development for MS and has a highly optimized PK profile that allows it to reach its target, including in the brain. So stay tuned for the FENhance 1 readout in half 1. And until then, we look forward to presenting the FENtrepid results in PPMS at ACTRIMS, where we are also inviting you to attend our IR event on the 9th of February. And so with that, let's move on to immunology. Our immunology franchise grew at 12% at constant exchange rates and reached CHF 6.7 billion in sales. Xolair's strong growth momentum continues, driven by uptake in food allergy. In 2025, we achieved 32% growth in sales of CHF 3 billion. We are also happy to celebrate a key Xolair milestone in 2025, which is more than 100,000 patients have now been treated for food allergy since launch. Regarding the 2026 outlook for Xolair, we expect around 20% growth, and this includes the impact of an expected first biosimilar entering the market in the second half of the year. You will have seen that Xolair was selected for the latest rounds of IRA negotiations. So let me provide a little bit of extra information on this. Xolair's inclusion on this list, as you know, does not change patient access or pricing at this time. Any potential pricing impact, if applicable, would not take effect until 2028 at the earliest. But CMS' final guidance provides that a selected drug will no longer be subject to negotiation and will cease to be a selected drug if CMS determines that a generic or biosimilar has been marketed by November 1, 2026, and we do expect that a biosimilar for Xolair will be launched before that date. Actemra sales declined by 2% in 2025. As predicted, we are now seeing increased biosimilar impact in the U.S., which resulted in a 10% decline in growth in Q4. This is aligned with all of our previous communications of an accelerating biosimilar impact in the second half of 2025, which will obviously continue into 2026. Just like in Q3, Gazyva is one of our key highlights for the quarter. Following the FDA approval in Q3, we achieved EU approval in lupus nephritis, and we announced positive Phase III readouts in both SLE and INS. In both indications, Gazyva has first-in-class potential. SLE results have been submitted for presentation at SLE Euro in early March, and the INS results have been submitted to WCN in late March. Both indications, as I mentioned, I think, previously, will be filed in the U.S. and EU later this year. And I'm also very happy to share that the FDA has granted breakthrough therapy designation for Gazyva in childhood onset idiopathic nephrotic syndrome, which is INS based on the positive ENSURE results. And we are not quite done with Gazyva just yet. There's one more Phase III trial, which is expected to read out in 2026, and that's MAJESTY in membranous nephropathy. And as a reminder, we see up to a CHF 2 billion opportunity for Gazyva in kidney disease. And just finally, I'd like to mention the upcoming Phase III readout for sefaxersen in IgAN, which is expected later in the year. Now let's move on to ophthalmology. Ophthalmology grew by 10%, achieving CHF 4.2 billion in sales. Vabysmo performance, as you know, was impacted by the contraction of the U.S. branded market. It landed at 12% growth for the year, which is still quite strong. We had mentioned this contraction previously. And through 2025, we saw a decline in the branded IBT market in the U.S. of about 15%. Nevertheless, Vabysmo continues to gain market share in the branded IBT market in the U.S. and across early launch countries globally. In the U.S., we now see that more than 60% of Vabysmo patient starts are from treatment-naive patients, and this further solidifies Vabysmo's position as the standard of care. Looking forward, we would expect the U.S. branded market to gradually recover in 2026. And taking this into account, we expect a growth acceleration in 2026, driven by the ex U.S. continued growth and U.S. recovery. In fact, as Thomas mentioned, there is a lot to look forward to in ophthalmology this year. We have 2 potential new medicines entering our ophthalmology portfolio. That's the vamikibart in UME, which is expected to be filed in both the U.S. and EU. Enspryng in thyroid eye disease will be filed in the U.S., and we are currently considering ex U.S. filings with the appropriate regulators. Now let's jump into our CVRM pipeline. This is one slide with a whole bunch on it, but I am very happy to share with you the key developments in our pipeline as well as provide a perspective on a very newsflow-rich 2026. So earlier this week, we shared positive final Phase II top line results at week 48 for the once weekly CT-388 in people with obesity. This is study 103. For the efficacy estimand, we achieved a placebo-adjusted weight loss of 22.5%. As a reminder, the efficacy estimand includes patients who dropped out from further analysis, so the effect size measured represents the true efficacy of the medicine tested. For the treatment regimen estimand, we achieved a placebo-adjusted weight loss of 18.3%. The treatment regimen estimand reflects a more real-world outcome, acknowledging the fact that not all patients will be able to adhere to treatment. In this case, data after treatment discontinuation, either in the treatment [ or ] placebo arm are included in the analysis. So for example, it includes data from patients who discontinued treatment early and have regained weight. Now this is a question we received a number of times over the last week. So I'm just going to take another minute here to reiterate. Generally speaking, the difference between the efficacy and treatment regimen estimands is usually driven by treatment discontinuation, either due to patients on the active treatment arm who regained weight after discontinuing treatment or patients on placebo who go on a weight loss therapy after discontinuation. There are many ways to potentially address this phenomenon in our future Phase IIIs from a more flexible dosing regimen, which allows patients to stay on lower maintenance doses in case of tolerability issues to the incentive of a long-term extension to retain more placebo patients. But these kinds of measures should serve to improve the discontinuation rate and eventually reduce the gap between the 2 estimands. In that context, I should also point out that in most of the recent Phase III trials in obesity, marked differences between the estimands greater than 5% have been observed. Let me also highlight 2 other key points in terms of the efficacy achieved in the study. First, we saw a clear dose-dependent relationship on weight loss. And secondly, and most importantly, we are pleased by the absence of a visible efficacy plateau at 48 weeks for the highest dose tested, which was 24 milligrams. Taken together, this clearly indicates that further weight loss can be achieved after 48 weeks, and it gives us confidence in CT-388's potential to deliver best-in-class efficacy for obesity. In terms of safety and tolerability, CT-388 was well tolerated and the tolerability profile was generally consistent with incretin class. The majority of gastrointestinal-related events were mild to moderate and total treatment discontinuations due to AEs in all arms were low at 5.9% for CT-388 versus 1.3% for the placebo arm. Let me also highlight here as we received this question a number of times as well, the discontinuation rate due to AEs at the highest 24-milligram dose was similar to the total discontinuation rate observed. We look forward to sharing more detail on the Phase II results with you at an upcoming medical conference later this year. Similarly to 388, we saw positive results for CT-868 in the Phase II 004 study in type 1 diabetes. And just like for CT-388, we will share the final results at an upcoming medical conference in 2026. So speaking of the outlook for the rest of the year, let's start with our Phase II and Phase III study initiations. As a reminder, we announced for both CT-388 and CT-868 that we will move them into Phase III development in 2026. For CT-388, we can now provide a first update. The Phase III trials for CT-388 named Enith1 and Enith2 are now scheduled to start in Q1. In addition, you can see that we plan to initiate the first Phase II studies for petrelintide in CT-996 as well as a Phase II combination study for CT-388 with petrelintide. In addition, we have a number of other CVRM readouts scheduled for 2026. There are multiple Phase II readouts to look forward to. For CT-388, we have data for patients with obesity and with type 2 diabetes, which will come later this year. We also expect the first Phase II readout for CT-996, our oral GLP-1 and for petrelintide, ZUPREME 1 and 2 trials in obese overweight patients with and without type 2. And finally, emugrobart and tirzepatide combination data in obesity are expected towards the end of the year. So as you can see, we continue to progress our CVRM pipeline at pace, and we are excited to share updates with you throughout the year. So last but not least, let's go to the next slide to bring us home. Here, we have the 2026 pharma key newsflow. We start the year with 4 green check marks, certainly a good omen for the year ahead. And we have discussed everything else on previous slides, so I won't go into more detail here. For any of you who are feeling the lack of the 2025 newsflow table, we have moved that to the appendix. And with that, I would say, I'll give it back to Alan but I'll be crazy and I'll give it over to Matt. Matthew Sause: That's wild. Teresa Graham: Wild. Wild times. Matthew Sause: All right. Thank you, Teresa. Good morning, good afternoon, everyone. It's my pleasure to present the full year 2025 Diagnostics division financial results. So with sales, as you heard from Alan and from Thomas, sales in diagnostics were CHF 13.8 billion. We grew 2% or CHF 292 million compared with 2024 at constant exchange rates. But as you heard from both Thomas and Alan earlier, excluding the sales in China, which I would reiterate is our second largest market, was impacted by health care pricing reforms. The growth of the diagnostics business was 7%. So now let me walk you through these results by each of our customer areas. So sales in our largest customer at Core Lab were flat, again, driven by this previously mentioned health care pricing reform. Excluding this effect, sales were plus 10%. Sales in the Molecular Lab increased 4% due to growth in our blood screening business. Now this was partially offset by reduced sales growth in the infectious disease segment, which grew at 1%. This was impacted by the USA funding stop in Q1 that caused a corresponding decrease in HIV testing, which I covered last year. Sales in our Near Patient Care customer decreased at minus 3%, mainly driven by the decline of our blood glucose monitoring business at minus 2% due to the market shift to continuous glucose monitoring as well as a decline in respiratory molecular point-of-care testing due to the late start of the 2025 respiratory season. And again, back to what you heard earlier from Thomas, we expect the CGM product to really be a driver for this customer area in the future and we continue to invest in expanding and preparing for this. Finally, sales in the Pathology Lab grew strongly at plus 14%, mainly driven by sales of advanced staining at plus 10% and our companion diagnostics business, which grew at plus 25%. So now I'd like to show the geographic performance that's behind these results. Taking through the regional view, North America, the business grew at plus 9%, well ahead of market. You saw good growth in EMEA at plus 6%, again, ahead of market. Latin America, strong growth at plus 11%. Now Asia Pacific, again, as we discussed, minus 12%, driven by the minus 24% decline in China. Excluding the effect of China, APAC grew at plus 4%. Now as you heard earlier, our consistent ambition in the Diagnostics division is to grow our sales at mid- to high single digits. However, given that we anticipate diminished but continuing headwinds in China for 2026, we would set our ambition this year at mid-single digits for 2026. Again, our consistent ambition is to grow this business at mid- to high single digits. Now I'd like to walk you through the P&L line by line. As previously mentioned, sales grew at plus 2%. Cost of sales, as you heard from Alan, grew at plus 7% but this was mainly driven by that unfavorable impact of the China health care price reforms, half a year impact of tariffs and the production ramp-up of our new technologies such as CGM and sequencing and the placement of a significant number of instruments in 2025. And I would highlight that we saw growth of some of our key platforms like our immunoassay at strong double-digit increase. And for example, our molecular workstation, the 5800 grew at over 40%. So very strong placement of instruments. R&D costs decreased at minus 2%. Now this is a result of significant and focused cost containment measures across the organization in response to China impact. As mentioned previously, we are ensuring delivery on all our key priorities, especially our investment in the key new product areas such as CGM and our AXELIOS Sequencing Solution and LumiraDx. SG&A decreased by 2%, again, reflecting focused cost containment measures across the organization. This resulted in a core operating profit of approximately CHF 2 billion, declining at 4% at constant exchange rates, which reflects the cost control initiatives. So now I would like to transition to some of the innovation that we launched in last year and really specifically focus on our cobas Mass Spec 601, which as you heard from Thomas, these are CHF 1 billion opportunities that we're very excited about and their potential to really deliver growth to the Diagnostics division. So as I mentioned before, current mass spec primarily relies on lab-developed tests and lack automation, are highly manual and require highly skilled labor. With the launch of our mass spec solution in 2024, we've introduced the first fully automated IVD platform for clinical mass spec. So throughout 2025, we received CE mark for all of our wave 1 menu composed of 39 analytes spanning the key parameters used in mass spec testing, including therapeutic drug monitoring, steroid and hormone analysis as well as vitamin D testing. These comprise the majority of parameters used in a routine clinical mass spec lab and we are going to follow that with a second wave of additional parameters. I would add that this system, which integrates with our existing serum work area platforms, strengthens our leading position in the Core Lab. And now I'd like to talk about some of the high medical value content that we launched last year for our serum work area, specifically our dengue antigen test, which received CE mark in October. Dengue is the most common mosquito-borne viral disease globally and represents a major global health burden. It accounts for an estimated 390 million infections per year. It has shifted from being a seasonal illness to a year-round risk with locally transmitted cases shifting from historical geographies such as South America to now in Europe and North America. Diagnosing dengue can be challenging as patients are often misdiagnosed due to overlapping conditions with other febrile illness. With our Elecsys antigen test, we will enable health care systems to diagnose dengue more reliably and efficiently by providing all 4 dengue virus serotypes differentially diagnosed with a rapid test that takes only 18 minutes. This will add one more test to our leading immunohistochemistry platform -- or excuse me, immunochemistry platform, which comprises of approximately 120 different parameters. So now I would like to move on to a customer who're very near and dear to my heart, the Molecular Lab and switch to discussing our cobas BV/CV assay, which we received CE mark in December. Sexual health diagnostics market is valued at CHF 1.1 billion with a yearly growth rate of 11%. Vaginitis is the primary growth driver within this segment showing a yearly growth rate of 26%. With our cobas BV/CV assay, we will provide a multiplex assay designed for the direct detection of bacterial vaginosis and candida vaginitis and expand our molecular STI offering. With the addition to our STI portfolio, we will continue to enable testing the most commonly sexually transmitted infections using a single tube and a vaginal swab. In the future, we plan to continue expanding our offering in this area with home collection solutions as well as novel molecular point-of-care assays. Transitioning to our point-of-care portfolio, I would like to discuss our recent CE mark and FDA clearance with a CLIA waiver for our liat Bordetella panel. Pertussis is a highly contagious disease that causes more than 24 million estimated yearly cases, resulting in 160,000 deaths with the majority of those in children. Diagnosing pertussis can be particularly challenging as its symptoms often overlap with those of common colds, leading to underdiagnosis. Our liat Bordetella panel offers a reliable point-of-care solution, delivering results in just 15 minutes between 3 Bordetella pathogens and again, delivers lab-like performance. This will enable health care providers to act quickly and prevent severe complications, especially in vulnerable populations such as children. As you can see from this slide, this launch, we further expand our cobas liat menu of lab equivalent point-of-care testing and we will continue to expand this in the future. And with that, I would like to transition to our key launches in 2026 and call out a few highlights. Again, I would really want to emphasize that 2026 is the year that we will launch our AXELIOS Sequencing Solution. This is a groundbreaking high-throughput solution that will deliver high accuracy, high throughput and flexible sequencing based on our proprietary Sequencing by Expansion technology. And would also again highlight that this represents a potential blockbuster opportunity for us with sales potential and above the CHF 1 billion range. I would also like to call out the expansion of our neurology menu, including the Elecsys pTau 217, which is a blood-based diagnostic for Alzheimer's disease and Elecsys Neurofilament light chain for detection of disease activity in Multiple Sclerosis, greatly expanding our offering in neuroscience. Additionally, I would like to -- I would really like to particularly mention our TB IGRA test, our assay to detect latent tuberculosis infection, which remains a global health care challenge and a significant commercial opportunity and I'm very convinced that we will offer a very differentiated, highly competitive solution here. And overall, this 2026 is going to be a very exciting year of launches and I look forward to keeping you updated over the course of the year. Thank you and now I hand it to Bruno. Bruno Eschli: Thanks, Matt. And with that, we open our Q&A session. The first question goes to Sachin Jain from Bank of America. Sachin Jain: Two, please. So firstly, on Vabysmo, I don't think you've guided to growth for this year beyond acceleration. So any color on what you're assuming within the guide? And perhaps, Teresa, you could just provide a bit more color on your funding comments. What does that doubling in '25 versus '24 mean relative to historic levels? Like where is that funding relative to sort of a 3-, 4-year average? And any color on how that flows back to patients? When we should see an impact on sales? The second question is on persevERA, if I may. It's a topic that I think has come up on prior calls but just to reiterate as we approach data. If the study hits, is any hit clinically meaningful for you, would you need to see a certain hazard ratio or absolute PFS benefit -- you used that wording in the press release. The reason for the question is, there's been speculation since your San Antonio call around passing an interim. Those are my 2 questions. Teresa Graham: Yes. Great. So in terms of Vabysmo, I'm not going to give you specifics on the amount of money that we contributed because as you have heard me say many, many times before, our charitable giving is not in any way related to our commercial expectations for the product. So those 2 things are and have to be completely separate. I can tell you that we doubled our donations last year and that was a significant increase for us over the last couple of years as you sort of alluded to. We do believe that 2025 represented sort of a rebaselining of the branded market in the U.S. And so what we are hopeful is that 2026 will now allow the underlying growth of Vabysmo to actually be more visible. And so we would expect an acceleration in 2026. I don't believe we've been more specific than that. In terms of persevERA, so clearly, the fact that we've now seen positive data from giredestrant in a number of important settings, both neoadjuvant, adjuvant and in a complex late-stage population, sort of underscores our belief in this molecule and that clinically, it is potent, it's active and it's combinable, it's tolerable. It's given us great confidence that we do have the opportunity to be really impactful for many different patients and to really become a new standard of care in hormone receptor-positive breast cancer. Reading through though, to different settings is complex. And so thinking about how we would read through to persevERA, happily, we don't have too long to wait to actually get the answer to that question. In terms of what would be clinically meaningful, we have designed the study to yield a clinically meaningful result. And so generally speaking, a 20% reduction would be considered clinically meaningful. Did I answer your question? Sachin Jain: Perfect. Bruno Eschli: Okay. Very good. Then we move on. Next one in the row would be Peter Verdult from BNP Paribas. Peter Verdult: Pete Verdult from BNP. Two questions. Teresa, just on obesity. We understand from Zealand that the amylin data is in-house and the market seems to have set the bar at sort of being low to mid-teens weight loss. Forget the market for a second. Can we just focus on Roche? What is the minimum target profile you are looking to demonstrate for amylin in obesity? And then secondly, on BTK, you sound very confident about the approvability despite recent CRLs elsewhere in the BTK class. You know the efficacy in the first relapsing-remitting study in PPMS, which we don't. Just wanted a sense or kick the tires with you. Is your confidence based on a highly skewed benefit risk profile? Or is it more because you think the 2 cases of Hy's Law that you've seen in the data set can be attributed to other or nondrug causes? Teresa Graham: Yes. So I'm going to start with your second question first because I think we've gotten a lot of questions over the last couple of weeks about tolebrutinib and read-throughs to fenebrutinib. And I think we have to be very, very cautious here. If you actually read that CRL, it is incredibly specific to the risk benefit that was seen with tolebrutinib. And unfortunately, they had a number of failed trials. They had a number of Hy's Law cases. So I think it is very difficult and inappropriate to actually take the language that was applied to tolebrutinib and actually put that forward on to fenebrutinib. Let me be really clear because I think there have been some -- there's been some confusion about what we've actually seen in terms of Hy's Law cases for fenebrutinib. We had 2 cases of elevated liver enzymes with bilirubin, which was what put us on clinical hold with the FDA. Both of those cases were in FENhance 1, which currently is a study that still remains blinded. When we looked at those 2 cases, only one case was deemed by the FDA to be a Hy's Law case. The other one was confounded due to alcohol use by the patient. And so right now, in fenebrutinib, we have only one case and it is in FENhance 1. So we are sort of blinded to any more detail. It's also really important to note that since we put liver monitoring in place in the clinical trials, we have not seen any more cases. And so I think we feel very good about the overall benefit risk profile that we have with fenebrutinib, particularly when you consider the other half of that coin, which is the benefit. When you look at the Phase II trials for fenebrutinib, you saw a significant amount of clinical benefit to patients. And the data that we've seen are sort of very consistent. And so I think when you look at that very high efficacy with a very -- what looks to be a very manageable safety profile, I think we're just in a totally different situation than what you saw with tolebrutinib. So hopefully, that kind of provides a little bit more perspective there. So in terms of petrelintide, so as a monotherapy, we believe that petrelintide holds the potential to be a foundational therapy for weight management. We are looking forward to being able to deliver a weight loss that the vast majority of people are actually looking for, which is something more in that sort of 10% to 20-ish percent with the potential to be a much more improved tolerability profile compared to the GLP classes as well as just a better patient experience in terms of titration, quality of weight loss, et cetera. So obviously, we don't, again, happily have long to wait. We'll see that data soon. You mentioned the data being in-house. We remain blinded to that data. So we have not seen it but we do -- we expect to see it very soon. Bruno Eschli: Peter, did this answer your questions? Peter Verdult: Yes. Bruno Eschli: And we move on then. Next one would be Simon Baker from Redburn. Simon Baker: Two, if I may, please. Firstly, just continuing on Pete's question about fenebrutinib. I just wonder if you could give us some idea about how we should be thinking about the relative tolerability profile of fenebrutinib versus Ocrevus ahead of the ACTRIMS data? And how do you see in light of that fenebrutinib being positioned relative to Ocrevus? And then secondly, a question for Matt. It's a little while since you unveiled to us the new sequencing offering. I just wonder if you could update us on the market feedback you've had in terms of levels of demand and where that demand is coming from, whether it's smaller scale or larger scale applications or indeed both? Teresa Graham: You want to go first? Matthew Sause: I would be delighted to go first. Teresa Graham: And I would be happy to yield the floor. Matthew Sause: Super. Wow. So yes, and I would maybe give a plug for our Dia Day in May, which will talk quite a bit more about this and Bruno will mention that at the close. Maybe I'll just say that first. But yes, we've seen a high level of demand for the sequencer, I would say in, more than we had originally anticipated ahead of launch. We're already starting commercial activities with select customers. And the feedback from our early evaluators has been extremely positive. So when you talk about applications, we're really seeing interest in a broad variety of applications from translational, such as single cell but then on to more focused clinical applications such as whole genome sequencing and germline. So what we're really seeing is the potential of an instrument with that kind of flexibility, throughput and accuracy and a dual assay format with the longest reads of Simplex as well as the very high accuracy Duplex format to have a broad applicability really across the spectrum of sequencing applications. And I think we're very confident in the potential for this technology as well as the launch. Does that answer your question? Bruno Eschli: Simon? Simon Baker: Perfect. Teresa Graham: Yes. Great. So when we think about where fenebrutinib sits, I mean, we believe that it has best-in-class potential. And together with OCREVUS, OCREVUS subcut and potentially further on -- down the line, OCREVUS high concentration, we believe, ultimately, we are going to have a range of highly efficacious and very tolerable therapies that meet every patient with MS exactly where they're at. Right now, 30% of patients are on a less efficacious oral therapy. And so that's sort of an easy place to imagine fenebrutinib starting. But I think ultimately, we believe that this is -- the combination of these 2 therapies gives us the opportunity to really sort of revolutionize the entire patient journey for MS patients. And I think we're feeling very confident about our ability to do that. Simon Baker: [indiscernible] Very clear. Bruno Eschli: Next questions go to Matthew Weston from UBS. Matthew Weston: Hopefully, you can now hear me. The first one on giredestrant. Teresa, there's a lot of debate about how the commercial potential in the adjuvant setting could be impacted by the data from persevERA. Can you give us your thoughts as to whether or not you see adjuvant as independent of that frontline metastatic result? And also, there's a lot of debate about the peak sales potential of giredestrant.. So when do we -- when should we expect to hear what Roche thinks the potential of this medicine is? And then secondly, if I can just pick up on biosimilar erosion. So Q2, Q3 of last year, you made a number of comments about delays to the entry of Xolair and now similar comments about potential delays to the entry of biosimilar Perjeta. Clearly, there are multiple patents, so you can do deals with biosimilar companies. But do you think investors should get used to a more gradual erosion of some of these biosimilars at the beginning of generic entry? Or should we still continue to expect to see like a minus 40% that has been kind of the underlying trend so far when we actually see biosimilars enter the market? Teresa Graham: Yes. So I'll take -- thanks, Matthew, for your questions. I'll take your second one first and I have a very definitive answer for you, which is that it absolutely depends. So it depends on the therapy. It depends on the part of the world. I mean, I think it -- this is one of those things where biosimilar impact is not a one size fits all. So in some parts of the world, with some therapies, you are going to see an immediate decline. With some others like Xolair, we just do expect that to be a smidge more sticky because you're dealing ultimately with a very allergic patient. And so physicians might be a little bit more tentative about switching so quickly. And so I think this is one of those areas where we are constantly monitoring the environment. We're constantly talking to treating physicians to get a sense of how they may think about the utilization of biosimilars and we give to you our best knowledge of how we believe those erosion curves will happen. But it's very difficult to give you one answer because I think it is actually quite variable, again, by therapeutic area and by geographic area. When it comes to giredestrant, so this market is somewhere between a $20 billion and $30 billion opportunity. Adjuvant is about 2/3 of that between initiation and maintenance therapy. We do think that adjuvant and first-line is pretty separate. And we think that giredestrant has the opportunity, as we said, to really be establishing itself as a new standard of care. When are you going to get a better read-through from that? Q1 is a very data-rich -- here, so the first half is a very data-rich time for us. We're in the process of updating our own assumptions. And as soon as we have a clear read-through, we will share that with you. Thomas Schinecker: Maybe just to answer your question on Perjeta as well because you had this question. So we don't expect the biosimilar for Perjeta until '28 in the U.S. and '27 in the EU. Teresa Graham: Correct. Thomas Schinecker: Just to clarify that. Bruno Eschli: Matthew, did we answer your questions? Matthew Weston: That's perfect. Bruno Eschli: Then we move on. Next one would be James Gordon from Barclays. James Gordon: James Gordon from Barclays. Two questions, please. One would be on giredestrant, actually 2 subparts. One would be, the slight delay in persevERA readout timing and I think it's now more likely to be Q2. Is that because the event rate is a little bit slower? Or could you be getting a few more events in and could that actually help the [ powering ], which has been a concern some people have had? And also on giredestrant, the lidERA Study, the [ side ] study of about 100 patients, I think they're getting on top of the CDK. How will you communicate that? And it sounds like you're filing ahead of that because you're filing the data in Q1. So is that something that then gets added to the filing package and you hope to have on the initial label? Or how does that work? And then the other one was on fenebrutinib. So you sound very confident talking about the Vabysmo upcoming launch, which is great. And there's been some talk about liver already. But in terms of other tolerability issues, I saw the comment in the original release about additional safety data that is further being evaluated. So could there be some other off-target BTK side effects you need to think about? And just on the side effect point, though, if you're comparing it to something like Ocrevus, so you've got the advantage of oral but could you have to have liver monitoring or something like that? Could that be a barrier to becoming a very big drug? How would you think about that? Teresa Graham: Great. Okay. So we'll start with the second question first. So we intend to assess the safety of fenebrutinib when we have the -- all of the studies read out and we look at -- when we look at the pooled safety. So obviously, we only have 2 of the 3 studies. So we need to wait a little bit in order to be able to step back and look at that. The data that we've seen so far, we haven't seen anything that is different than what you would see in the background rate of the overall MS population. In terms of liver monitoring, as is typical, when you get your label, usually for things like monitoring, you get what you studied in your label. So we would anticipate that we would have the same liver monitoring in our label that we had in our clinical trial. And again, I think when you look at the efficacy and the risk-benefit profile that fenebrutinib has, I think this still -- this is going to be a meaningful medicine in MS. So more to come as we get FENhance 1 data. For persevERA, just to be really clear, the timing on that has not changed. We have consistently been messaging, the first half, mid-first half of this year and that has not changed. So that is remaining consistent. And again, we do plan to file the lidERA data first. We get the [ abema ] data, I believe, the substudy data comes, is that also in Q1? Guys, someone is going to have to remind me of that. And then the [ ribo ] study, which is a 200-patient substudy is just kicking off, so that will come later. So those are data pieces that clearly, as soon as they are available, we will be making public. But the adjuvant filing is going in -- into Q1 as planned and it looks like end of 2026 for the substudies. Bruno Eschli: James, all questions answered? James Gordon: That's great. Bruno Eschli: Yes. Then next one is Sarita Kapila from Morgan Stanley. Sarita Kapila: So you addressed the study approval risk and I guess others have touched on it. But what is underscoring the confidence in the commercial potential? What's the initial feedback from the physician community being? So we've seen orals with LiverTox launch post CD20 approval, which have struggled to reach 1 billion. So I guess why is fenebrutinib different? And how are you viewing risk from Novartis' remibrutinib in RMS data in Q2 and they've had no signs of LiverTox so far? And then the second one is just on persevERA. It's also been touched on but how confident are you that you have enough patients in the trial to hit stat sig? And how should we think about the [indiscernible] study and the potential read across to persevERA? Teresa Graham: Great. So let's start with fenebrutinib. So obviously, the data have not yet been presented. So the PPMS data goes to ACTRIMS shortly, and then the RMS data will be packaged together when we have FENhance 1 as well. That having been said, we've obviously shared it with those physicians who are part of the trial. And I think people have been really impressed with the data that we've seen. And in particular, people were really impressed with the Phase II data that we've seen. So what we're talking about is the ability to get OCREVUS like efficacy in an oral treatment. And for many patients for many, many different reasons, that's a very attractive option. So again, I think in this market, a lot of it comes down to the overall efficacy that we're able to deliver. And based on the Phase II data, we believe we have a highly efficacious molecule on our hands. In terms of the Novartis data, I mean, it's important to remember, we haven't really seen anything in MS from Novartis yet. This is a dose that I think is about 4x higher than the existing dose. They had sort of second mover advantage and they started their trial with liver monitoring. So I think it's very difficult to compare because we just really haven't seen anything. We have first-mover advantage here. We've had robust Phase II data. And yes, I mean, I think we're -- it's very difficult to say anything until we actually see data. It's also, I think, important to remember that fenebrutinib is a non-covalent molecule. And in a chronic indication, that noncovalency really matters because it means that even though you're taking it chronically, if you need to stop for whatever reason, it does leave your system more quickly. And I think that really in a chronic care environment is a benefit. So in terms of read-through for persevERA, it's clear when breast cancer is dependent on the endocrine receptor for viability, giredestrant can perform very well. And we've seen that in a number of settings. So all of these patients are, by definition, dependent on ER signaling and it's worked really well here. So clearly, in the front line, the likelihood that it's successful hasn't gone down. And we should always be really cautious with cross-trial comparisons. And so I think we are -- again, as I mentioned, the benefit is, we don't really have long to wait. So we'll know really soon. And yes, persevERA is designed to show improvement over palbo plus letrozole. Bruno Eschli: Sarita, all questions answered? Sarita Kapila: Yes. Bruno Eschli: Yes. And the next one in the queue is Richard Vosser from JPMorgan. Richard Vosser: Two questions, please. First question, just to go to diagnostics for a little bit. Margins obviously hit by ramp-up of mass spec sequencing and the machine placements. Could you give us a bit of color on how to think about the margins from here? Those placements seem likely to continue as you ramp those 2 businesses up. So how should we think about '26 and then the improvement in the margins from there? And then second question back to pharma. Just going back to Vabysmo -- thanks for the comments on the foundations. Could we go a little bit further out and think about the future competition potentially from less frequently dosed injectable products? I think ocular has one half yearly. How you think about that sort of competition? And also closer to today, the biosimilars are really starting to come. They're having some impact in Europe as far as we can see. So just what's the thoughts globally, U.S., Europe on biosimilars from Eylea on Vabysmo? Matthew Sause: So in this case, maybe... Teresa Graham: No. Go ahead. I can use a break. Matthew Sause: Thank you. So maybe starting with diagnostics. So we talked about a couple of effects. There's the new technologies. There's the tariffs of which Alan said we had half the year and we'll have a full year this year. But the biggest effect on what hit us last year on the margin was really the China effect. And as you heard from Thomas, we expect to see this meaningfully diminish this year. 2027, again, we expect to decline but it will be small enough that it won't really be meaningful. And then we expect to see a recovery. In terms of specific ambition on margin this year, I think I would refer you back to the group position that Alan mentioned earlier. But I would say our consistent ambition is to grow profit faster than sales. And that is once we really get ourselves to the headwinds this year, that is our ambition going forward. And it's also our continuous ambition to improve the margin in diagnostics. That's something that is a goal for the entire organization. What I would call out, though, in 2025 is you had our second largest market with a 25% reduction. So obviously, there was an impact but that's something that you can see with our discipline on the cost line that you can also expect to see continue again in 2026 but we expect the gradual washout of that. Anything you would add to that, Alan? Alan Hippe: Well, I think for '26, I think, well, we expect kind of a stabilization. I think that's a little bit here. But we will give that additional information. Matthew Sause: Absolutely. Yes. So I would maybe just refer to what Alan said. Our goal really this year is going to be that we stabilize the margin. Thomas Schinecker: And I think on a group level, you have seen that our intention is to expand margin in 2026. And what I've said in the past still holds, which is that also going forward, we will at least keep margins stable also for the coming years. Matthew Sause: Perfect. Does that answer your question? Bruno Eschli: I think so. Matthew Sause: You go ahead. Teresa Graham: Yes. Great. So I'd like first just to start by talking about Vabysmo. So I mean, Vabysmo is highly efficacious therapy with a very well-defined safety profile where patients and physicians do have a lot of good experience in extending doses. And so -- and it is designed to do just that. When you look at -- you asked specifically about ocular, I mean, this drug is going into Phase III with a very small safety database and really no known data on long-term safety. And when you talk about something that's going to be used intraocularly over a long period of time, I think long-term safety is incredibly important. So I think it's very difficult to think about how these -- how something like that is a threat to something that has such good efficacy, such good safety and where you do actually have the ability to extend doses. So I think from a future competition perspective, just like in other disease areas, sort of the bar is high here to unseat Vabysmo. And you had one other question. Oh, biosimilars. So far, what we see is that the Eylea biosimilars are taking from Eylea. And so for those patients who are really benefiting from a new and novel treatment, Vabysmo, they were just less impacted. So yes, I mean I think we saw Lucentis take from Lucentis. We're seeing Eylea biosimilars take from Eylea and we're seeing high-dose Eylea take from low-dose Eylea. So there's a lot of trading within that space. But I think for new patients who are going on therapy, physicians are picking the best available therapy out there available to them and that is Vabysmo. Thomas Schinecker: And on ophthalmology, I would like to add that we have an amazing pipeline in ophthalmology. So when you look at all the different validated targets, I think we're the only company that actually has all the different validated targets in-house. And so if you look at our pipeline, we have trispecifics, tetrapecifics, [indiscernible] et cetera. So if I look at our ophthalmology pipeline, I think the one that's going to succeed surpassing Vabysmo, is then hopefully us. Bruno Eschli: Very good. Richard? Richard Vosser: Yes. Perfect, everyone. Bruno Eschli: And next one in the queue is James Quigley from Goldman Sachs. James Quigley: Hopefully, you can hear me. Just a couple of quick questions from my side left over. So firstly, again, on giredestrant and revisiting lidERA. What's the KOL reaction been from your side? So some of the KOLs we spoke to have been a little bit more cautious than the presenter at your SABCS event, given the more limited follow-up versus the CDK4/6 class. So how do you think this could impact the giredestrant trajectory, of course, assuming approval? Would it be more of a step up -- stepwise ramp or more a stepwise ramp as more data comes? Or do you -- or do your feedback suggest the potential for a faster, more optimistic ramp on giredestrant? So that's the first one. Second one, more a financial question. So underlying pharma growth has been pretty strong in recent years, driving operating leverage. So how is Roche balancing R&D investment with profitability? So how long can R&D expenses stay flat? This half seem to show that Roche has a strong ability to reallocate costs in R&D. But how long can this go on to support operating leverage? Teresa Graham: I mean I think what we're hearing from the KOL community regarding where they would use lidERA is pretty bullish. I mean I think what we hear from -- the lidERA population is 55% of the adjuvant breast cancer population. That's 10% more than what we saw on the NATALEE trials. So I think you are really seeing physicians believe that this could have very broad applicability in their practice. And so I think that would -- that's what leads us to be fairly bullish about the opportunity. There's a 74% overlap with the population in NATALEE and monarchE. And so I think we're very -- yes, I think we're very confident that we have something on our hands here that is quite a game changer based on the data that we've seen. Thomas Schinecker: Yes. Let me answer the second question. But first, something to add on giredestrant. I mean you look at the hazard ratio of 0.7. You can see that, that's, I would say, highly competitive to also some of the CDK4/6 trials that you've seen. But what you have on top of that is the tolerability. If you look at CDK4/6, you have quite a high amount of patients that actually stop using it simply because they cannot take the tolerability. So I think these are all the right arguments for SERDs to be used. So I do believe that the pickup will be strong. Unfortunately, I wasn't at the Congress in San Antonio but I heard there was standing innovation from the clinicians there. Then the second question on R&D. So we're working very hard to be a high-performing, very cost-efficient organization. There are still opportunities, in my view, to continue to work on that. AI, by the way, plays a big role in that. We're using AI throughout the entire development process where we want to, on the one hand, speed up using AI but also reduce costs doing that. Regarding R&D expenses, also for 2026, I would say it will be broadly flat. Again, really focusing very hard on making sure that we put the money to work in the best possible way for the sake of patients in our company and for our investors. Alan Hippe: And it all goes back to the margin point that you've made before. Thomas Schinecker: That I made before, which is, it's clear for '26, expand margin. And as previously always said, at least stable for the long term. Bruno Eschli: James? James Quigley: Thank you very much. Bruno Eschli: Okay. Then we move on to Graham Parry from Citi. Graham Glyn Parry: So one on lidERA. Thanks for clarifying the filing time line as being Q1. Just wondering if you could comment on whether you expect priority review or to use a priority review voucher or not. And when exactly do you think you would expect to see the [ ribo ] combo substudy data, 200 patients, how long does that take to recruit? And could we see something by the end of this year? Is that a next year event? And then on fenebrutinib, could you just confirm how important you think confirmed disability progression is versus annualized relapse rate reduction in showing a risk-benefit profile and differentiation versus Ocrevus to the regulator, just given the -- it's a very brain-penetrant molecule and has potentially, therefore, the ability to work on disability progression where CD20 doesn't? And then the final question is, you're technically still on clinical hold with FDA. So does that have to be lifted before you can actually file or receive approval? And what are the steps to doing that? Teresa Graham: Okay. So we expect the [ abema ] substudy by the end of the year. We would expect [ ribo ] in 2027, that is really only starting now. So we've got a little time. That's 100 patients in the [ abema ] arm. And in [ ribo ] it's 200 patients. The FDA hold will be addressed as part of the planned [indiscernible] filings, but we've obviously been in consistent conversation with the agency over time. So there -- we've been in very close contact. I won't comment on our filing strategy only to say that we plan to bring lidERA to patients as quickly as possible. In terms of confirmed disability progression, I think we are -- the annualized relapse rate is also a very good endpoint here. And we are confident that, that is giving us what we need in order to proceed. Bruno Eschli: Graham, any additional questions or -- all good? Then we move on. And I hand over to Rajesh Kumar from HSBC. Rajesh Kumar: Two questions, if I may. First, on CT-388, thanks for clarifying discontinuation rate in the highest dose was similar to the overall group. You also mentioned that you could consider a flexible dosing in Phase III trials as an option. So could you give us some color on how you're thinking about Phase III progression? Would flexible dosing or an active comparator be something you might consider? Or is it at the moment, too early to comment on that? Second, just on giredestrant, quick follow-up. You highlighted the overall TAM this class is targeting to be quite a large number. You are filing with a few -- some persevERA data is about to read. So just in terms of the market segmentation, how much of the market you think it have been risked -- derisked to some extent and how much we still depend on the data in your assessment of the market would be very much appreciated. And because I'm an analyst and I cannot count, the third question would be just on the clarification on Vabysmo. Appreciate the working capital impact has gone up and that sort of reflects a very strong December. So should we consider the exit rate of December close, the indication of how you're thinking about growth in 2026? Or should we take an overall slower growth rate going forward on Vabysmo? Teresa Graham: So I would just go back to my earlier comments. For Vabysmo, we expect to see an acceleration of growth in 2026. So more to come on that. In terms of the dosing for CT-388, so what we have disclosed is that CT-388, it will be administered once a week and we're aiming to develop it at 3 maintenance doses. We are not disclosing at this time the details of that dosing strategy. But just to avoid any misunderstanding, we have not indicated that we will be doing flexible dosing within the trial. So -- but right now, the details of that Phase III design, that specifically have not been disclosed. And then in terms of giredestrant and the market segmentation, so -- and how much do we feel like has been derisked? Well, 2/3 of the market is adjuvant and we have a positive adjuvant trial. So I mean, I think a significant portion of the -- we have a significant portion of the market that has been derisked. Bruno Eschli: Okay. And then next questions are from Michael Leuchten from Jefferies. Michael Leuchten: A question for Matt, please. Abbott said last week that the Chinese may be pursuing VBP for Core Lab oncology. Just wondering whether you've heard that and how that may or may not have been reflected in your outlook and the margin commentary you made earlier? And then sorry, Teresa, just going back to Vabysmo, just your comment about 2025 in the U.S. being reset. Q4 was still soft. It didn't really improve upon Q3 sequentially. So when you say you think that's now stabilized and it can grow from here, just wondering how you look at that Q4 versus Q3 dynamic in the U.S. Matthew Sause: Okay. 3. Wow. I know what 3 is [indiscernible]. So what I would first start off by saying is, as you may know, there was VBP for Core Lab oncology reagents last year. And so that was what you see, our China effect last year significantly represented a decrease in our Core Lab oncology reagents, which were down about 50%. So some of that effect is still pulling through this year. But I can't speak for what was said on that call but we are seeing the effect of the VBP last year and the national reimbursement reduction. So we don't anticipate additional Core Lab oncology VBP this year. Teresa Graham: So in thinking about Vabysmo, Q4 -- so 2025, we saw a big reset in the branded market in the U.S., right? With the closure of the co-pay foundations, fewer patients were put on branded drugs, more patients were put on Avastin and biosimilars. And you saw a big just sort of reset in how many new patients and continuing patients were actually going on a branded therapy and that constricted the market by about 15%. That constriction went all the way through Q4 because normally, when donations are given or grants are given, they're given 4 years' worth of therapy. What's happening right now in the oncology world is something called the blizzard. It's where every retinal specialist in the U.S. goes and reverifies the benefits for every single one of their patients. And it's at that point in time that patients actually determine what -- will they be continuing on their current medication, will they be switching, et cetera. And so over the course of the next couple of months, I think we're going to get a real sense of what is the trajectory of the branded market going to look like in 2026. But because that underlying base effect of 2024 is now washed out, you should be able to see the actual branded growth of people going on to new therapies actually come through. So I think there's a reason why we didn't see Q4 look any different than what the rest of the year looked like. I think we had sort of hoped that we might see some early signs of recovery but I think those signs of recovery really are going to come -- become a little bit more evident as we get towards the end of Q1. So Michael, I hope that addresses your question. Thomas Schinecker: Yes. And I mean, we -- the co- assistance foundations, they are separate, right, so nothing that -- in terms of influence. But what we can say is in general, that our donation was towards the end of Q4. Teresa Graham: Yes. And then again, we don't link those 2 things. It is interesting to know though that in Q4, we did see a 4% growth. So we saw... Thomas Schinecker: Quarter-over-quarter. Teresa Graham: Yes, quarter-over-quarter growth. We did see a 4% growth. So we did see a little bit of an uptick. Bruno Eschli: Michael, any follow-on? If not, then I would hand over to Paul Kuhn from Cowen. Paul? Paul Kuhn: Thanks, Bruno. This is Paul on for Steve Scala. Two questions, please. What feedback have you heard from U.S. oncologists and how they plan to initially use giredestrant in the adjuvant setting? And secondly, how did the change in Xolair biosimilar entry from end of 2026 to before November 2026 come about? Was this a change in the settlement with generic manufacturers? Teresa Graham: So with regards to Xolair, I think we have long said sort of second half of 2026 is when we expected the first biosimilars to come in for the U.S. So I don't actually think that that's a change. Bruno Eschli: I think mentioning November was just related to IRA. So that is really, we need to have a biosimilar place -- a payer in the market before the 1st of November. So then we cannot get negotiated. Teresa Graham: That is correct. So my reference to the 1st of November was purely around CMS guidance that says if you have a marketed biosimilar by November 1, 2026, then you will be removed from the negotiated basket. So that's where that date comes from. But we've always said second half of 2026, we would expect to have a biosimilar in the market. And then feedback from oncologists on where they intend to use for adjuvant. I mean, again, just to continue to reiterate, 55% of the adjuvant population was covered by the lidERA trial. And so I think you see a high degree of confidence in an oncologist to use in a very significant portion of their patients. And again, what we saw here was a very efficacious, seemingly combinable and well-tolerated therapy that I think has the opportunity to really become a new standard of care in this setting. So what we're hearing from oncologists in general is that they're pretty excited to have this in their hands and we're excited to get it to them. Bruno Eschli: Paul, if we answer all your questions? Paul Kuhn: Thank you. Bruno Eschli: Then next one would be Justin Smith from Bernstein. Justin Steven Smith: Two, please. Pharma, #1, NXT007, just wondered if you could share some thoughts on when the Phase III design head-to-head versus Hemlibra will hit ct.gov. Second one, diagnostics, Matt, just wondered if you could talk a little bit about CGM and when the finger prick recalibration will be removed and the impact that might have? Matthew Sause: Wow, 4 is new territory. So I want to first thank Teresa for generosity. But -- so starting with your question on auto calibration, which is the comparison of the CGM device with a blood glucose lancet, what we are planning to do is have that launch happen this year. I won't say exactly which quarter but that is an improvement that we expect to deliver this year. Teresa Graham: And with regards to NXT007, we would expect those trials to start in Q1, Q2 with clinicaltrials.gov entries at around that time frame. And again, these are 2 studies, one, head-to-head and one, versus [indiscernible] and one Hemlibra. Bruno Eschli: Justin, all questions are answered? Justin Steven Smith: Yes. Great. Bruno Eschli: Then I would maybe read here loud 3 questions, which I got from Luisa Hector. She had to drop off and I promised her I will go through them. There is one question on Ocrevus [indiscernible]. So the split of naive versus switch patients that we are capturing and what is the target switch rate for 2026 and at peak? What I think we have been communicating that we have 2 billion in incremental sales for Ocrevus but this is true incremental sales. And on top, basically, we would have revenues coming from switching. So we have not yet provided a detailed outlook on what the ratio, IV to subcutaneous would be at around 29%. We might do that at a later point in time. There's then a second question I found interesting on the pipeline. 66 NMEs now on the pipeline. Is this rightsized? And what we have seen now with the turnover in the fourth quarter with 4 molecules added, 5 going out -- so 5 added, 4 going out, is this now -- is there still cleansing ongoing of the pipeline? Is this now the regular run rate and the turnover? Or would we target more NMEs overall? Thomas Schinecker: Yes. I mean I can answer that question. So overall, you apply the bar not only once, you apply the bar constantly based on data that you generate but also data that you get from the outside. So clearly, I think we are at a point where we'll continue to bring in additional NMEs. We have actually -- when you look at the very early stage of our research organization, we've actually doubled the amount of molecules moving ahead there. So we do believe that we'll continue to expand on the amount of NMEs that we have in our portfolio beyond the 66. But this kind of, I would say, prioritization is just something that you have to do constantly based on just availability of data. Bruno Eschli: And then the final question here would be on capital allocation. Given your positive pipeline progress, pharma deals with the U.S. administration and with competitor developments in obesity, are there any changes to your M&A objectives and R&D investment plans? Thomas Schinecker: No, I can say there is no fundamental change. I think what we have really shown over the last couple of years that we've been very disciplined, very disciplined in terms of financials but also in terms of really screening the market for interesting molecules with good data. If you look at the amount of money that we spent compared to other companies and the kind of pipeline we've built doing that, I think we've been pretty efficient. And our intention is to continue to do the same and just continue to be quite disciplined on that. The good thing is, we are not in a situation where we have a huge patent lift, right? So we are not in a situation where we have to do late-stage deals, which are very costly. I think we are in a very good position when it comes to our late-stage pipeline. But obviously, I mean, if you look at the amount of innovation that's ongoing outside, you look at what's happening in China, we need to continue to screen the market and look at everything that's out there. I mean I looked at a statistic, for about 1,000 companies that we look at we do 1 deal. And I think that's also what I expect of our organization that we know exactly what's going on outside so that we can make data-driven good decisions. Bruno Eschli: Very good. I think with that, actually, we are at the end of our Q&A session. Let me just remind you of the 2 upcoming IR events we already have flagged. I assume there might even be more. There's on February 9, our neurology call, we will cover up the PPMS data for fenebrutinib presented at ACTRIMS. And then on May 12, we again will have our Diagnostic Day as a live event in London, where we will take you through the entire portfolio and highlight this year, I think, will be SBX sequencing. As we are now in the global launch phase, I think there is the next steps to come with pricing and so on. So I think it will be an exciting event. And with that, I hand over to Thomas for the final remarks. Thomas Schinecker: Thank you very much, Bruno and huge thanks also to the team. I would say, quite exciting times. I mean, if I see all the discussions that we've had as a team over the last 3 years and the progress we made, I think it's significant. And it's not only that, it's also a lot of fun because we get to talk about what we like to talk about, which is science, which is about progress for patients. And with people like Alan and myself who like math, also we can talk a lot about financials. So I think there's a lot of good things that are going on. And we have a good momentum both on financials and pipeline. So very proud of the team. And I do believe we've always done what we said that we are going to do and you will continue to see that going forward. We continue to move with focus. We continue to move with speed. And as always, you can count on us because we will deliver.
Operator: Good afternoon, and thank you for standing by. Welcome to the Deckers Brands Third Quarter Fiscal 2026 Earnings Conference Call. [Operator Instructions] I would now like to remind everyone that this conference call is being recorded. I will now turn the call over to Erinn Kohler, Vice President of Investor Relations and Corporate Planning. Please go ahead. Erinn Kohler: Hello, and thank you, everyone, for joining us today. On the call is Stefano Caroti, President and Chief Executive Officer; and Steve Fasching, Chief Financial Officer. Before we begin, I would like to remind everyone of the company's safe harbor policy. Please note that certain statements made on this call are forward-looking statements within the meaning of the federal securities laws, which are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements made on this call today, other than statements of historical fact, are forward-looking statements and include statements regarding our ability to respond to the dynamic macroeconomic environment and the impacts on our business and operating results, including as a result of changes to global trade policy, tariffs, pricing actions and mitigation strategies and fluctuations in foreign currency exchange rates. Our current and long-term strategic objectives, including continued international expansion, the performance of our brands and demand for our products; anticipated impacts from our brand, product, marketing, marketplace and distribution strategies, product development plans and the timing of product launches; changes in consumer behavior, including in response to price increases, our ability to acquire new consumers and gain share in a dynamic consumer environment; our ability to achieve our financial outlook, including anticipated revenues, product mix, margin, expenses, inventory levels, promotional activity, anticipated rate of full price selling and earnings per share; and our capital allocation strategy, including the potential repurchase of shares. Forward-looking statements made on this call represent management's current expectations and are based on information available at the time such statements are made. Forward-looking statements involve numerous known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from any results predicted, assumed or implied by the forward-looking statements. The company has explained some of these risks and uncertainties in its SEC filings, including in the Risk Factors section of its annual report on Form 10-K and quarterly reports on Form 10-Q. Except as required by law or the listing rules of the New York Stock Exchange, the company expressly disclaims any intent or obligation to update any forward-looking statements. On this call, management may refer to financial measures that were not prepared in accordance with generally accepted accounting principles in the United States, including constant currency. For example, the company reports comparable direct-to-consumer sales on a constant currency basis for operations that were open through the current and prior reporting periods. The company believes that these non-GAAP financial measures are important indicators of its operating performance because they exclude items that are unrelated to and may not be indicative of its core operating results. Please review our earnings release published today for additional information regarding our non-GAAP financial measures. With that, I'll now turn it over to Stefano. Stefano Caroti: Thanks, Erinn. Good afternoon, everyone, and thank you for joining today's call. Deckers delivered an outstanding third quarter performance, underscored by a strong composition of results that demonstrate robust global demand for our brands, fueling an increased outlook for fiscal year 2026. For the third quarter, we delivered $1.96 billion of revenue, representing a 7% increase versus the prior year. Global HOKA and UGG performance was exceptional, with revenue increasing by 18% and 5% versus last year, respectively, and each brand delivering balanced growth across DTC and wholesale. From a regional perspective, HOKA and UGG collectively drove third quarter revenue increases of 15% in international markets, reflecting continued momentum from the first half and 5% in the United States, demonstrating positive inflection relative to the first half based on our effective marketplace management initiatives. This result exceeded our expectations for both brands. Importantly, it was achieved while maintaining high levels of full price selling and demonstrated resilient price elasticity. As a result, Deckers preserved strong gross margins, which contributed to an 11% increase in our third quarter diluted earnings per share, a record $3.33. As I reflect on our progress this year and our focus to build brands for long-term sustainable growth, I'm extremely pleased with our performance over the first 9 months of this fiscal year, which contributed to total company revenue increasing 10%, HOKA revenue growing 16%, UGG revenue growing 8% and diluted earnings per share increasing 13%. Decker's year-to-date fiscal results and raised outlook demonstrate our commitment to generate shareholder value through sustained growth in revenue and earnings per share, bolstered by our share repurchase program and fortified balance sheet. Now in the final quarter of this fiscal year and looking into the next, I'm confident that we'll continue to execute on our strategic plan and deliver compelling results through the sustained strong momentum of our global brands. Steve will provide specific details on our updated guidance and third quarter performance later in the call. But first, I'll share some brand-specific highlights from the third quarter. Starting with UGG. Global UGG revenue in the third quarter increased 5% versus last year to a record $1.3 billion. UGG continues to be top of mind for consumers, growing its leadership position as a premium lifestyle brand through a combination of purposeful consumer-informed product creation that celebrates recognizable brand codes, broadening the dimensions of category acceptance and an elevated global marketplace aligned to our target consumer segments, where the brand is able to build connections and community through a tailored yet consistent brand identity. As discussed on our last call, in response to the ongoing rise in consumer demand for the UGG brand, we strategically allocated additional products to the wholesale channel prior to peak season. The results indicate that this approach has proven effective. Our strategic execution enabled improved in-stock positions for our wholesale partners, boosting fall sales and as planned, we effectively address late season demand through our direct-to-consumer channels. In terms of the UGG brand's third quarter performance across channels, DTC revenue increased 5% versus last year and wholesale revenue grew 4% compared to last year. From a direct-to-consumer perspective, our marketplace teams around the globe work closely across different departments to fill consumer demand, both in retail locations and online. Through these efforts, we drove meaningful growth in UGG Rewards membership, e-mail subscribers and retain consumers, providing ample opportunity to further strengthen consumer connections and drive repeat purchases in the future. During the quarter, we also used our DTC channel to test products with speed to market, strategically pulling forward targeted new silhouettes to generate early reads at a time where UGG historically has the greatest attention from consumers. Our new Quill franchise was a standout success through this initiative. By sharing performance insights with our wholesale partners for products like the Quill, we are able to accelerate the global expansion and adoption of new offerings. UGG has firmly positioned itself as the top premium lifestyle brand in the global market. Our ongoing goal is to further enhance UGG's presence at every consumer touch point through consistent product presentation that highlights our distinctive brand identity. While we focus on improving the consumer experience in our direct-to-consumer channels, we're also collaborating very closely with our retail partners to elevate the brand through intentional product offerings that support year-round wearability in our men's initiative. By planning strategically for shared growth, we sustain strong partnerships and nurture future opportunities, all while ensuring marketplace scarcity for UGG remains healthy. We're especially proud of how our retail partners supported the UGG brand during the holiday season, strengthening consumer connections and raising awareness and adoption across categories. Overall, this was an exceptionally well-executed third quarter and holiday season for the UGG brand. Our marketing teams did a brilliant job leveraging product collaborations, brand activations and ambassadors to drive UGG brand heat, including a feel house experience in New York City, celebrating the UGG SACAI product collaboration, pop-ups in Chicago and Berlin that featured the UGG Palace product collaboration and new male brand ambassadors across sport and pop culture in China, contributing to our strongest men's regional performance. Globally, the men's category performed very well as we continue to see healthy adoption of popular all-gender products like the Tasman, Ultra Mini and Lowmel. As well as men'-specific styles like the Weather Hybrid collection that spans across multiple silhouettes. Overall product performance was positively influenced by robust consumer response to newness, which underscores the growing demand for UGG and its diversified product range across various categories. Iconic UGG franchises continue to benefit from the addition of complementary styles such as the new Tazelle and Classic Micro, helping fuel growth for the brand with the latter even placing among the 10 best-selling styles this quarter. We also made notable progress with products aimed at supporting the UGG brand's 365 initiative. The Lowmel franchise continued to expand UGG's presence in the lifestyle sneaker segment, more than doubling its revenue this quarter and ranking among the brand's top 5 best sellers. As we approach the fourth quarter, our priority is to finish another successful year by boosting interest in new product launches that align with our brand strategies, including the Minimel, an all-new low-profile spring sneaker with/the Lowmel collection, the Otzo, an all-new Clog with a sleeker aesthetic that features elevated materials and new fashion sandal silhouettes within the Golden collection. Congratulations to Anne and the entire UGG team on a fantastic fall season and holiday quarter. We are excited for what's to come as we continue to expand consumer reach and category acceptance of our compelling product assortment and grow this amazing brand around the world. Speaking of amazing brands, let's shift to HOKA. Global HOKA revenue in the third quarter increased 18% versus last year to $629 million. This growth included strength in both DTC and wholesale with gains in the U.S. as well as international markets. The strong performance was driven by broader consumer adoption of the HOKA brand's innovative and versatile products, especially as we've refined our approach to managing the global marketplace. This helped achieve balanced growth across channels as DTC revenue increased 19% versus last year and wholesale revenue grew 18% compared to last year. As we continue to build this brand and introduce new products to the market, we are proactively maintaining a healthy pull model of demand across all channels. This approach aligns with our long-term objectives of achieving growth in every channel and region. While some fluctuations in channel growth may occur as we make strategic adjustments to distribution, we remain committed to creating a more balanced business over time as demonstrated by HOKA's performance this quarter. We continue to incorporate insights from consumers and learnings from the marketplace to refine how we go to market. A notable initiative this quarter has been our HOKA membership program, which enhanced consumer loyalty by delivering a distinct and differentiated customer experience. Our revamped membership program now includes exclusive and early product access, select opportunities for special discounts and rewards for higher purchase frequency. Though we are still early in the development of the HOKA membership program with additional consumer engagement drivers and differentiation in the pipeline for next year, we're already seeing a benefit in revenue per consumer, units per transaction and multi-category purchasing from HOKA members relative to the average consumer. These members' key performance indicators are directly contributing to our positive results, helping drive an acceleration of the HOKA brand's DTC growth in the third quarter compared to the first half of the fiscal year. In the U.S., DTC returned to healthy growth in the quarter with a meaningful improvement of new consumer acquisition online compared to what HOKA experienced earlier this year. In addition, as we look ahead to future product transitions, we see an opportunity to more effectively utilize our higher-margin DTC channel to strategically manage end-of-season inventory in a controlled manner as we tightly manage wholesale marketplace inventories to ensure a clean environment for future launches. The HOKA brand's improved DTC performance demonstrates the effectiveness of our loyalty marketing tactics, which have enabled us to enhance the consumer's journey increase brand affinity, build lasting relationships and increase customer lifetime value for a growing base of consumers. At the same time, we remain focused on driving strong performance with HOKA in the wholesale channel. We believe it's very important for HOKA to compete in a multi-brand environment, particularly in the performance category where innovation is critical to success. Our partners remain an important destination for consumers to experience the HOKA brand's unique blend of technology, geometry and premium materials directly on their feet. HOKA has continued to perform very well in the wholesale channel globally, driving healthy levels of full price sell-through and gaining additional market share. In the U.S., according to Circana, HOKA's market share increased significantly in the road running category above $140 for the 3 months ending in December. This growth further establishes HOKA as a top brand in the segment and demonstrates the strength of our full price sell-through. In Europe, the pace of sell-out continues to drive record levels of reorders with our top strategic customers averaging 90% sell-through, which is fueling future season demand. We attribute the HOKA brand's market share expansion to 3 main factors: compelling innovative products that resonate with consumers, enhanced global brand awareness and recognition and increased brand access in more locations. These developments have opened the door for a wider range of consumers to connect with the brand, not just for performance-related reasons. With more people choosing to wear HOKA as part of their active lifestyle wardrobe, the brand is well positioned to take advantage of this growing trend. HOKA is proactively advancing its lifestyle strategy, identifying this segment as a significant opportunity in terms of product development and expansion through wholesale distribution, account segmentation and differentiation. As the lifestyle category evolves, HOKA is positioned to leverage the company's global expertise in this area. As HOKA continues to tap into significant lifestyle opportunities, it's important to acknowledge the valuable growth potential within our established categories. Our main global marketplace priorities for HOKA include enhancing the brand's premium position through product innovation, engaging authentically with consumers through strategic product segmentation and expanding the brand's reach while maintaining performance integrity. As we look at wholesale distribution in the U.S. market, run specialty remains our priority segment to introduce and engage consumers with HOKA brand's innovative performance products. Our aim here is to uphold HOKA's performance credibility by continuing to lead in this segment. In sporting goods, HOKA is present in roughly half of the targeted stores we consider potential distribution points. We also see more opportunities to expand shelf space and market share in existing doors as we continue to diversify our product offering. The biggest opportunity for HOKA's expansion in the U.S. lies within the athletic specialty segment, where we are currently represented in only about 1/4 of the stores we believe will be relevant for the brand moving forward. Internationally, we're much earlier in the process of expanding HOKA's distribution. In Europe, we're making steady progress in building awareness and marketplace presence. We still have room for door and market share expansion in the European run specialty segment, where we continue to climb in brand ranking throughout various countries in the region, having captured around 80% of the opportunity we see for this segment. Furthermore, HOKA has reached approximately 40% of the European sporting goods destinations considered relevant for the brand and is available in less than 20% of suitable athletic specialty stores in the region. This illustrates the significant opportunity that remains for attractive distribution expansion. In Asia, our primary area of focus remains China, where we operate mainly through a mix of company-owned and partner-run mono-brand retail stores. Typically, we keep a 2:1 ratio of wholesale partner locations to company-owned retail stores. Currently, we occupy a little less than 1/3 of the potential we see over the next several years. All of this to say, we continue to see meaningful untapped global opportunities for HOKA. We're building this brand for the long term, and we'll continue to take a methodical approach to global expansion, maintaining a full model of demand while gradually improving the balance between DTC and wholesale channels. Our ongoing progress in international markets, along with positive developments in our U.S. operations makes us very optimistic about HOKA's promising future. From a product perspective, top franchises continue to perform very well, and we are now operating in a much cleaner global marketplace relative to a year ago. The brand's launch of Gaviota 6 is off to a great start, further bolstering our positioning in the stability category alongside the positive reception of the Arahi 8. HOKA has a number of exciting product updates to come in the fourth quarter across our key strategic priorities of winning in road, dominating trail and igniting lifestyle. The category has 2 key product stories launching in Q4. Our Pinnacle racing shoe, the Cielo X1 3.0, which is the fastest and lightest racing shoe HOKA has ever created and our completely redesigned Mach 7, crafted for responsive daily runs with tempo. Beyond the Road segment, we eagerly anticipate the launch of Speedgoat 7, which is designed to build HOKA's legacy in the trail category by offering an exceptional underfoot experience across diverse terrains. In lifestyle, we are excited to announce the launch of our first fully integrated marketing campaign for this category, featuring new ambassador partnerships, global brand experiences and products that connect with well-known HOKA franchises. Congratulations to the whole HOKA team on a well-executed quarter. We look forward to closing out the year with these exciting product launches to come. I am really proud of the success our entire team has delivered this year, and I'm even more excited for what lies ahead as I look at the opportunities for the next year and beyond. We intend to continue driving healthy profitable growth for both UGG and HOKA. We expect HOKA to remain our fast-growing brand with significant potential for international expansion and consistent progress in the U.S., supported by effective marketplace management. At the same time, we also expect the UGG brand to continue driving growth across DTC and wholesale through its men's and 365 product initiatives, similarly led by international regions alongside continued growth in the U.S. Given these growth opportunities, our disciplined management of the global marketplace to sustain strong full price sales and our strategic investments leveraging portfolio synergies, I'm confident that Deckers will continue to be a leader in our space. Thanks, everyone. Over to Steve for more details on our third quarter financial results and an update to our fiscal year '26 guidance. Steve Fasching: Thanks, Stefano, and good afternoon, everyone. Our third quarter performance exceeded expectations and demonstrated robust momentum of the UGG and HOKA brands. For the third quarter, UGG drove solid growth to deliver its largest quarter in history with balanced increases across channels and regions. HOKA delivered another quarter of strong global growth with this quarter being balanced across DTC and wholesale. HOKA growth was led by international and included meaningful contributions from the U.S. market, highlighted by the positive inflection of the U.S. DTC business. These results are a testament to the exceptional strength of our premium brands within the U.S. and internationally as our disciplined approach to marketplace management, combined with innovative product and an elevated consumer experience led to high levels of full price selling and exceptional performance during the holiday season. Now let's get into the details of the third quarter results. Third quarter fiscal 2026 revenue was $1.96 billion, representing a 7% increase as compared to the prior year. Revenue growth in the quarter was primarily driven by HOKA, which increased 18% versus last year to deliver $629 million, adding $98 million of incremental revenue over the prior year. As anticipated, HOKA performance benefited from another sequential improvement in the U.S. DTC business, which delivered healthy growth in the quarter, contributing to a more balanced result across DTC and wholesale. UGG increased 5% versus last year to deliver record quarterly revenue of $1.3 billion, adding $61 million of incremental revenue over the prior year. UGG growth also benefited from improved global DTC performance, which inflected to positive growth following a more pressured first half. Gross margin for the third quarter was 59.8%, which was better than we had expected for the quarter, primarily due to a lower-than-expected impact from increased tariffs, reflecting the timing of inventory flows and the mix of inventory sold through during the quarter, benefiting from lower tariff inventory in the pipeline. Larger benefits from our pricing actions, primarily attributable to the UGG brand and though above last year, we had slightly lower promotions than planned for the quarter. In achieving this result, both UGG and HOKA maintained a very healthy level of full price selling with each achieving an average selling price slightly above the prior year and HOKA delivering gross margin expansion in the quarter, contributing to our better-than-expected result. SG&A dollar spend in the third quarter was $557 million, up 4% versus last year's $535 million as we continue investing in key areas of the business. As a percentage of revenue, SG&A was 28.5%, which is 80 basis points below last year's rate of 29.3% with leverage primarily driven by favorable impacts from foreign currency exchange rate remeasurement. Our tax rate for the quarter was 23.3%, which compares to 21.8% for the prior year. These results culminated in a record diluted earnings per share of $3.33 for the quarter, which is $0.33 above last year's $3 diluted earnings per share, representing EPS growth of 11%. Turning to our balance sheet. At December 31, 2025, we ended December with $2.1 billion of cash and equivalents. Inventory was $633 million, up 10% versus the same point in time last year and includes tariffs paid on inventory received this year. And during the period, we had no outstanding borrowings. In the third quarter, we repurchased approximately $349 million worth of shares at an average price of $92.36. Through the first 9 months of fiscal year 2026, we have repurchased approximately 8 million shares, representing more than 5% of shares outstanding at the beginning of this fiscal year. As of December 31, 2025, the company had approximately $1.8 billion remaining authorized for share repurchases. And given our strong cash flow and cash balance and in consideration of the current market valuation, we remain committed to continue returning value to shareholders through our share repurchase program. In fiscal year 2026, we are on track to repurchase more than $1 billion in total by the end of the year, which is expected to contribute more than $0.20 of diluted earnings per share improvement. Now moving into our updated guidance for fiscal year 2026. Based on the strength of our brand's performance in the third quarter, we are increasing our full year revenue expectations to a range of $5.4 billion to $5.425 billion. For HOKA specifically, we've raised our expectation now reflecting mid-teens revenue growth versus last year. And for UGG, we now expect revenue to increase mid-single digits versus last year, which is at the high end of our prior guidance. Gross margin is now expected to be approximately 57%, which is 100 basis points above our prior guidance, primarily due to lower than previously anticipated net impact from tariffs. We still expect SG&A to be approximately 34.5% of revenue as we continue to make investments that support the long-term growth and opportunities ahead for UGG and HOKA. Our operating margin is now expected to be approximately 22.5%, which is 100 basis points above our prior guidance and remains best-in-class. We still expect an effective tax rate of approximately 23%. These updates and the continued benefits from both year-to-date and projected fourth quarter share repurchase result in a raise to our expected diluted earnings per share, which is now in the range of $6.80 to $6.85, representing a 7% to 8% increase over last year's record EPS. Regarding tariffs, based on the robust pricing power of our brands, which has not materially impacted demand to date, combined with a lower-than-expected blended tariff rate in Q3, we now expect the unmitigated tariff impact on fiscal year 2026 to be approximately $110 million. As a result of our better-than-expected price action benefits and the favorable timing of inventory sold, we now estimate a net tariff impact of approximately $25 million. Please note, this does not represent a full year impact if tariffs remain in place moving forward. Our increased full year 2026 guidance includes the following assumptions for the fourth quarter. HOKA is expected to deliver 13% to 14% growth, representing the brand's largest ever quarterly revenue based on the momentum from international regions and continued U.S. growth with both contributing to global market share gains. UGG revenue is assumed to be roughly flat to last year as some orders previously planned for Q4 shipped earlier in Q3 with the total of both quarters contributing to the brand's increased outlook for the year. Our implied gross margin assumes an approximate 200 basis point headwind, the entirety of which is expected to come from the net pressure from tariffs. Note that this is projected to be our largest quarterly net impact from tariffs in fiscal year 2026 on a rate basis as we anticipate the full 20% burden in Q4 and slightly more deleverage in our SG&A spend in the quarter as we continue to make investments while taking advantage of our overall improved outlook. We believe these targeted variable investments will help us continue to carry momentum into FY '27. As Stefano touched on, we have a high degree of confidence in our brands to continue delivering exceptional results into next fiscal year. Specifically, we believe Deckers has the ability to continue delivering meaningful revenue growth paired with a top-tier operating margin beyond this year, through operating a pull model of demand, maintaining a well-managed global marketplace that drives high levels of full price selling, utilizing shared service synergies across brands as we invest to add capabilities and remaining disciplined in our approach to portfolio management, focusing on investments in areas that we see the highest long-term returns. In closing, we are proud of the outstanding results achieved in the third quarter as our in-demand brands drove record quarterly revenue and earnings per share. UGG and HOKA are operating at a high level across the global marketplace. And I, along with the rest of our leadership team, remain confident in our ability to deliver on our increased guidance for fiscal year 2026 and continue driving healthy growth over the long term. With that, I'll hand the call back to Stefano for his final remarks. Stefano Caroti: Thank you, Steve. Deckers performed very well in the quarter, achieving record results that highlight the strength of our brands in the global marketplace. During the holiday season, UGG and HOKA drove consistent growth across channels, demonstrating success in both international markets and in the U.S. through compelling and innovative products that are meeting the demands of our consumers. Deckers has once again demonstrated resilience, gaining share and improving growth momentum in the current environment. We have visibility to continued growth, both domestically and internationally, and this gives us the confidence to raise our full year outlook. We are very proud of our company's ability to guide for another year of robust and profitable growth through our powerful differentiated brands that are operating in growing segments of the global marketplace. UGG and HOKA are both actively scaling their respective addressable audiences through category expansion, giving each brand ample opportunity to gain market share, grow in underpenetrated markets and capture new consumers globally. They remain highly complementary, allowing us to benefit from shared synergies and knowledge expertise across the organization as we maintain our best-in-class profitability profile. Before we close, I want to once again express my sincere gratitude for the tremendous work of our dedicated global teams and all we've accomplished thus far in this fiscal year 2026. In December, the Wall Street Journal recognized Deckers as one of the best managed companies of 2025, an honor made possible by the collective efforts of our employees who are the driving force behind what makes our company so special. Thank you all for joining today's call, and thank you to our shareholders for your continued support. With that, I'll turn the call over to the operator for Q&A. Operator: [Operator Instructions] Your first question comes from the line of Jay Sole of UBS Financial. Jay Sole: Stefano, it sounds like HOKA really had a terrific quarter. It sounds like that you've seen an acceleration in the business from last quarter to this quarter. Can you maybe just dive into what has changed? What has driven the improvement? You talked a lot about product. I think you mentioned the Gaviota, the Arahi. There's a lot of newness out there. You mentioned the Cielo, the Mach, Stinson, some of these other things that have popped up. Is it product? Is it marketing? Is it just maintaining a very strong full price sell-through mentality? Maybe just explain to us what has gotten better? And do you see it as sustainable going forward? Stefano Caroti: Yes. First of all, I do see it sustainable going forward. I think we had a few learnings last year. We decided to space out key franchise launches with tightened inventories of outgoing styles, and we better leverage our DTC channel to move closeouts in a controlled manner. We see opportunity across every region every channel in every category of our business this year. So I feel confident that this trajectory will continue. Steve Fasching: Yes. I think, Jay, just to add on to that, too. I think what's also encouraging in some of where we're seeing acceleration is with some of the new product that we introduced last year, performing very well with consumers. So recall that we had some of our big franchise updates last year, early last year, and we've continued to see consumers engage with those updates quite a bit. Stefano Caroti: Yes. And as you mentioned, Jay, Gaviota 5 is off to a great start on the back of a successful Arahi introduction. Now we're a meaningful player in the stability category. Transport 2, again, launched last week, but off to a good start. Cielo X1 3.0, our fastest and lightest shoe to date, launched today, and it's already our best-selling style online. So I feel very good about the product pipeline coming. Jay Sole: Got it. Maybe if I can just follow up on that. You talked about lifestyle in your prepared remarks. I think you mentioned you're going to do a new ad campaign. Can you talk a little bit more about where lifestyle is today, what your projection is for how that business will develop? And with all the new stuff that you're talking about, Machs, Speedgoats, Cielo, Gaviota, Arahi, Stinson and Transport, I mean, how much is the diversification of the product line really changed the mix of the business from just Bondi and Clifton? Can you give us a sense of that as well? Those are really the 2 questions. Stefano Caroti: That is really one of our aims. We have boosted capabilities, as you know, across innovation, design, color and lifestyle. And this is helping us more effectively segment the marketplace and also differentiate DTC. Performance, however, remains at the core of what the brand is. And as you know, the lifestyle consumer has adopted many performance styles. At the same time, we do view this category as a huge opportunity for the brand. And I'm really encouraged by what is coming. Early reads on some of the products we launched in Q4 is very positive. [ Stinson ] 7, Bondi Mary Jane, Speed loafer are performing very well. And as I look ahead, the team has done a great job in clarifying the line architecture, simplifying designs and also hit more commercial price points. So I do believe that we have a good runway also in lifestyle going forward. Operator: Your next question comes from the line of Peter McGoldrick of Stifel. Peter McGoldrick: I was interested in the channel strategy for the UGG brand. It's encouraging to see both channels grow in tandem in the key sell-through quarter. Given the shift in strategy to prioritize retail partner in-stocks for fiscal '26, I'm curious how we should think of your plans to manage the UGG brand in fiscal '27 on a wholesale versus DTC basis. Stefano Caroti: Potential for the UGG brand across all channels. all regions and all categories. So you should continue to see a balanced growth in the UGG portfolio. We're very happy with what the brand has delivered in terms of newness. Our 365 offering has been very well received. Our -- we're now playing legitimately in the sneaker category with the Lowmel. And our classic products continue to perform very well. So you should expect continued segmentation of the marketplace, continued differentiation and growth across all channels, markets and categories. Steve Fasching: Yes. And I think, Peter, also, as you looked at this year in terms of channel strategy, I think the important thing to recall is a couple of things. that impacted timing, especially around the wholesale channel distribution. So recall, in Europe, we had a distribution center move. So we were shipping earlier product to avoid disruption on some of that business logistics change in Europe. And then I think with the strong demand that we saw coming out of last year, we saw strong wholesale orders and then reorders. And so much of those customers wanted product earlier this year. That's why you were seeing a shift of the wholesale growth more to the first half of the year. And that was really more of an indication of the strength of the demand of the UGG brand coming up to our biggest season. And so what that allowed us to do was shift more focus to DTC. So very encouraging to see how that channel played out during the course of the year because, again, we're not managing just every quarter. We're managing the business for the long run and for the season. So what's very encouraging is how well the season did. And I think some of the dynamics that you saw play out between quarters was just a way of managing the increasing demand that we're seeing for the brand. Peter McGoldrick: I appreciate that. And Steve, a follow-up for you on DTC performance. Nice to see the consolidated inflection. I'm curious how we should consider this moving forward? It seems like you've got some nice structural contributors from HOKA membership, and then we're looking at easier comparisons. Can you help us think about assumptions for traffic, conversion, ticket and basket embedded in the outlook? Steve Fasching: Yes. So we continue to see improvements. So I think encouraged with what we saw, consistent with what we've been saying for the past few quarters in terms of an expectation that we would see momentum and improvements in the DTC performance. You're seeing that continue in the current quarter that we just reported, and we're continuing to look for improvements going forward. So I think encouraged with everything that we've said. I think the other highlight was some of the things that we talked about in prepared remarks, which improved DTC and I think importantly, drove gross margin improvement on the HOKA brand, right? So it shows that the work that we're doing to improve the business, draw more full-priced consumers in and bring them through the DTC channel is working, and we'll continue to build on that. Operator: Your next question comes from the line of Laurent Vasilescu of BNP Paribas. Laurent Vasilescu: I wanted to follow up on Peter's Steve. The HOKA guide of 13% to 14%, this is despite a very, very easy compare. Any considerations there on that front? Is it just conservatism? I think you mentioned in your prepared remarks, maybe with Stefano, going forward, there's fluctuations in channel growth that may make strategic decisions. Can you maybe unpack a little bit more for the audience? Steve Fasching: Yes, sure. I'll start on that. I think the point there, right, is how we're managing both our brands for long-term sustainable growth, right? And so we're not going to get hung up on kind of quarterly compares if we believe it's kind of detrimental to the brand. So if we look at what happened this year, right, as I talked about with Peter's question in terms of how we were flowing inventory into the channel, we're making sure that we have the appropriate amount of inventory with the demand that we're seeing, but also setting up an opportunity to continue to grow our DTC, right, with a long-term target of improving the proportion of our DTC business overall, which will take several years. It's an important marketplace management setup of how you get there. And I think that's what you're seeing play out this year is a focus on balancing some of that wholesale demand out, fulfilling it a little bit earlier, placing then a little bit more emphasis on DTC growth as we get into the selling or bigger selling seasons. And that works, right? And so as we look going forward, it's about maintaining that. One of the positive things, I think, that we see is when we have these strong quarters, it's a signal of the consumer demand that's out there, right? And the demand for our brands is very strong. What it also does is it encourages some wholesale accounts to order bigger and order earlier, and we'll take advantage of that. And that's where that will play out. But again, we have a very keen focus on how we continue to develop our DTC business. You've seen some of the improvements that we've made and how that's driving more consumer engagement and more full-price consumer engagement for us. Laurent Vasilescu: Very, very helpful. And then as a follow-up second question here. I think on the last call, it was noted that you have strong spring/summer order for HOKA. I think today, I think you talked about meaningful growth. Curious to know what your order books look like. If you can maybe unpack that a little bit more in terms of dimension, like in terms of how do we think about the growth rates there because you mentioned meaningful growth. And did I hear this correctly, Steve, that you anticipate UGG to grow next year for fiscal '27? Was that in the prepared remarks? Steve Fasching: Sure. I'll take a shot at the first one, and then Stefano, you can jump in. Yes, we're anticipating growth for UGG in FY '27. I think through the quarter that we just delivered is a demonstration of how well the UGG brand resonates with consumers across the globe, including the U.S. So even as we continue to get bigger, the demand continues to grow for this brand. And so yes, we see UGG continuing to grow in FY '27. Stefano Caroti: Yes. And to the order book, we're not going to provide today fiscal '27 guidance, but I'm pleased with how the order books are coming in for both brands, especially for HOKA, given the fact that HOKA books a bit early fall than UGG does. Typically, wholesalers wait for the holiday season to end given how big that season is for UGG to place orders in early spring. And -- but we have visibility through the first 3 quarters of next year, and we're very encouraged by how the order book is developing globally. Operator: Your next question comes from the line of Paul Lejuez of Citi. Paul Lejuez: Curious within the HOKA wholesale business, if you can talk about sell-through by channel, specialty running, sporting goods, athletic specialty, what you saw this quarter? And I'm curious if you've seen any change quarter-to-date. Stefano Caroti: No major changes. Throughout the fall season, sell-through continued to outpace sell-in, which is a good indicator of brand health in the marketplace. All our major introductions for the season and the color updates on our 2 biggest franchise continue to perform well. In the athletic specialty space, our performance product has actually outperformed our lifestyle product. But in one of the 2 leading athletic specialty retailers for the month of December, we're the #2 brand in the doors we're in. So the brand is performing well really across channels. Paul Lejuez: Can you talk about the sell-through at the sporting goods channel as well? Stefano Caroti: Very similar -- my comment was for the -- for all channels. So generally speaking, yes, we continue to perform well across all channels, across every market. Paul Lejuez: Got it. And then just one follow-up. I think last quarter, you had some cautionary comments about the U.S. consumer. Just curious about your outlook for the consumer, just given that we've just got through the holiday season, how that might influence or inform how you're thinking about growth for each brand in the U.S. next year. Stefano Caroti: Yes, that's fair. We've been cautious about the economy and the consumer, but never about our brands. So the brands did show up, and this increases our optimism going into next year. Steve Fasching: Yes. I think, Paul, just on that, I think as Stefano said, our comments in prior quarters more has been just watching especially the U.S. consumer as we've seen very strong growth internationally. We knew our brands are well positioned. And I think we even said that on the call last quarter, which was, hey, if the consumer shows up, we expect our brands to do well. And that's exactly what happened. So even in the current environment, I think we see consumers choosing and buying the brands that they want. And again, with our performance, this is just an indication of the resonance that our brand has with consumers. And so that really gives us confidence going into next year. Operator: Your next question comes from the line of Sam Poser of Williams Trading. Samuel Poser: Aaron, I'm sorry, we can't go through our normal stuff. We already got all the info. Can you hear me? Steve Fasching: Yes, we can hear you. Samuel Poser: Okay. All right. A couple of questions. Can you give us some idea of how the domestic DTC business was for HOKA and for UGG? Stefano Caroti: Both UGG and HOKA performed well indeed. Steve Fasching: And I think continuing -- yes, continuing to grow positively inflecting, right, which is kind of what we said on the call. So again, as we said at the beginning of last year, we expected sequential improvement. We've delivered sequential improvement, and we've positively inflected in the U.S. Samuel Poser: So is that -- I mean, you're up 19% with your DTC. Does that mean U.S. was up like 8% and you were -- or I mean, can you give us a little warmer? And then was the UGG DTC business up in the U.S.? Steve Fasching: Yes. So both were up. Stefano Caroti: Brands were up, yes. Samuel Poser: Okay. And then you talked about lifestyle. And then, Stefano, but you mentioned like with athletic specialty, how they were doing better with performance products. How do you define lifestyle? I mean, because a lot of product over the years has -- so the product has run over the years has just always hit the it's a gray area, what's lifestyle and what's performance sometimes based on how consumers respond. So how do you define lifestyle? Stefano Caroti: We define lifestyle as product created by our category, right? But to your point, we're treating performance products also in a lifestyle manner that have been adopted by our Flex specialty distribution, and those have performed very well. So... Steve Fasching: Yes. And I think, Sam, just on that a little bit, right? I think to your point on kind of the gray area nature is we build performance product. But clearly, we have people wearing it once they experience kind of the comfort of HOKA for lifestyle applications. So we have performance shoes that are being worn in lifestyle applications. When we talk about the further lifestyle ability, it's more around the improvement on certain styles or designs where we can further amplify our ability to get into a lifestyle category. Clearly, people are wearing -- individuals, consumers are wearing HOKA product for lifestyle. That is giving us more permission to move more aggressively into a lifestyle-defined category. Samuel Poser: And one last thing. Back to the breakout, the regional breakout. Based on the information you gave us about DTC, that implies that 1 of the 2 brands, HOKA or UGG was down, the wholesale business was down in the quarter. Could we assume that, that was HOKA just because of the amount of Bondi that you shipped? Steve Fasching: No. Yes. So just to clarify on that, no, both UGG and HOKA were up. If you'll see on the press release, part of what's driving the decline is the phaseout of the Koolaburra brand. And so that's where you're seeing decline. So if you refer back to the press release, you'll see where we've broken out kind of the 3 categories, the declines there are driven by the phaseout of Koolaburra. UGG and HOKA were all positive. Samuel Poser: In both geographies? Stefano Caroti: Yes. Operator: Your next question comes from the line of Rick Patel of Raymond James. Rakesh Patel: I also have a question on HOKA U.S. DTC. So you've touched on the numbers, but can you help us understand what drove the positive inflection in Q3 relative to the first half? Because you previously alluded to consumers preferring to shop in person for new products and this weighed on D2C in the first half. So just curious what's changed in the go-to-market strategy to drive the positive outcome in Q3 as we evaluate the durability of this DTC growth. Stefano Caroti: One of the main reasons, Rick, has been the HOKA membership program that has helped us improve revenue per customer, units per transaction, multi-category purchases and relative to the average customer. That was one of the main reasons for our success. and the fact that there was less noise in the marketplace of outgoing styles. If you recall last year with the Bondi transition, and there was a lot of product in the marketplace. This year, the marketplace is a lot cleaner, and we benefited from it. Steve Fasching: Yes. And I think, Rick, to the point you made where we were saying people were finding the updates, right? People were more familiar with the updates. So as we moved into Q3, and this was part of our comment on the sequential improvements, as people became more familiar with the product having been in the market, they were responding, right, to the updates. That's to my earlier one of the questions where I talked about what's driven confidence for us is the consumer engagement with our updates. And so yes, it's Clifton, Bondis, Arahis, it's other styles, too. But that it speaks to consumers coming back to us directly through improvements through the membership program and engaging with us to buy that product. So there are a number of things there that are embedded. It's product improvement... Stefano Caroti: Exclusives, early drops, and that has definitely helped our DTC business. Rakesh Patel: Great. And then can you also help us think about the opportunity for HOKA pricing? I think the increase you took last year was a bit lower than what competitors have done. So do you see room to take pricing higher? And if so, is that a near-term event? Stefano Caroti: Selectively and strategically, as we've done, we have some price increases hitting the spring and some more in the fall. We typically, when we upgrade the product, we price it up. that has been our approach and has served us well so far. Steve Fasching: Yes. And I think the quarter demonstrates that we have more pricing power, and that's something that we can always look at. Operator: Your last question comes from the line of Dana Telsey of Telsey Advisory Group. Dana Telsey: As you think about the DTC channel, any difference by brand of e-commerce and stores? And what are your plans for opening stores this year? And then just on the wholesale channel, any more color on any specific retailers that's been working? And did you have any exposure to SAC? Stefano Caroti: On the latter, no, we have little or no exposure to SAC. Both channels, retail and e-commerce performed well. And your third question was sort of related to DTC -- on wholesale. We're very happy with really the performance of the brand really across all retailers. Journeys had a good run with the brand. Foot Locker is performing well with the brand. ESG is performing well with the brand. Run specialty continues to perform well with the brand, and we are together with Brooks, #1, 2 in the run specialty channel. So generally, the brand has performed in a balanced way across the wholesale portfolio. In the U.S. Operator: There are no further questions at this time. With that, ladies and gentlemen, concludes today's call. We thank you for participating. You may now disconnect your lines.
Operator: Good afternoon, and welcome to the Beazer Homes Earnings Conference Call for the First Quarter Ended December 31, 2025. Today's call is being recorded, and a replay will be available on the company's website later today. In addition, PowerPoint slides intended to accompany this call are available in the Investor Relations section of the company's website at www.beazer.com. At this point, I will turn the call over to David Goldberg, Senior Vice President and Chief Financial Officer. David Goldberg: Thank you. Good afternoon, and welcome to the Beazer Homes conference call discussing our results for the first quarter of fiscal '26. Joining me today is Allan Merrill, our Chairman and Chief Executive Officer. After our prepared commentary, we will open up the line, and Allan and I will be happy to take your questions. Before we begin, you should be aware that during this call, we will be making forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors described in our SEC filings, which may cause actual results to differ materially from our projections. Any forward-looking statement speaks only as of the date the statement is made. We do not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is simply not possible to predict all such factors. I will now turn the call over to Allan. Allan Merrill: Thank you, Dave, and thank you for joining us on our call this afternoon. We began fiscal '26 in a stubbornly soft demand environment, but stayed focused on actions within our control that can drive timely and measurable progress toward our 2026 and multiyear goals. Our efforts were concentrated on proving the value of our differentiation, reducing direct construction costs and enhancing balance sheet efficiency. While most metrics came in at or below our expectations, the December quarter is always our slowest and we have plenty of time to make up for the shortfall. While caution is certainly warranted, we have paths to grow both full year EBITDA and book value per share. Here's how. First, since mid-December, we've seen better traffic and buyer engagement. In fact, January sales pace has been in line with the prior year after 8 quarters of year-over-year pace compression. Second, we have tangible catalysts in place that will drive higher homebuilding margins in the back half of the year. And third, we're managing our balance sheet and land spend to accelerate highly accretive share repurchases. Let's take these one at a time. On sales, we're not just hoping market conditions continue to improve. We're also benefiting from the new branding and lead generation efforts we launched in the fall. The focus of our Enjoy the Great Indoors message is a more comfortable and healthier home and dramatically lower utility bills. This is a message other builders can't deliver and it amounts to thousands of dollars in savings per year for most customers. We're also extending our leadership in utility savings by introducing solar included homes in many communities. This makes the full potential of 0 energy ready homes and easy reality for our buyers. No complicated sizing decisions, no cumbersome leases or guessing at payback periods. From day 1, our solar included homes reduce monthly utility bills to a little more than a basic service charge. Now there are two keys for making solar work for homeowners without tax credits or incentives. First, you must significantly reduce a home's energy consumption in order to shrink the size of the system. All of our homes do this. Second, you have to eliminate the many inefficiencies that have existed in residential solar business models. Working with our partners, we've been able to reduce installation costs for more than $4 per kilowatt hour to less than $2, and we know we can drive it even lower. Results thus far are promising. Homebuyer enthusiasm has been strong and margins in our fully solar communities are among the very best in the company. This is exactly the kind of offering that separates us from other builders in meeting the affordability challenge. On profitability, last quarter, we laid out a series of specific catalysts for about 300 basis points of margin expansion between the first quarter and year-end. And these remain firmly intact. So far, we've reduced labor and material construction costs by more than $10,000 per home or nearly 200 basis points, which should be reflected in our third and fourth quarter results. By the fourth quarter, we expect another 100 basis points of margin expansion from the combination of positive mix shifts within our existing communities and the increase in contributions of new communities. These newer communities, which we have defined as those that started selling in or after April 2025 were just over 10% of first quarter revenue, but are projected to account for about 50% of fourth quarter revenue. ASPs and margins on sales in these communities are both substantially above existing communities. Finally, we're seeing a modest shift toward to-be-built sales so far this year, which if sustained would be another margin catalyst. Turning to capital allocation. Our strategy remains disciplined and aligned with our multiyear goals. Within our portfolio, we continue to sell nonstrategic assets in submarkets that no longer match our differentiated product strategy or were intended for sale when we bought them. We now expect around $150 million in proceeds, increasing balance sheet efficiency and freeing up capital for higher return uses, particularly share repurchases. During the first quarter, we bought back $15 million of stock, bringing our trailing 12-month total to $48 million or about 7% of our shares. We have $72 million remaining on our share repurchase authorization, and we expect to fully execute it this year. Selling land above book value to fund share buybacks below book value is obviously highly accretive for shareholders. Of course, we evaluate all of our actions through the lens of achieving our multiyear goals for growth, deleveraging and book value per share accretion. With 168 communities at quarter end and 23,500 active lots under control, we remain on track to reach our greater than 200 community count goal by the end of fiscal '27 even accounting for the impact of our planned asset sales. We are committed to deleveraging to the low 30% range by the end of fiscal '27. With our plan to accelerate share repurchase activity, however, net leverage is likely to be flat year-over-year at or just under 40% at our fiscal year-end. Finally, book value per share finished the quarter above $41, up versus last year. Our goal remains to generate a double-digit CAGR in book value per share through the end of fiscal '27 through both profitability and share repurchases. Allocating $72 million to share repurchases through the rest of this year will certainly drive book value per share growth. Even in a challenging market, we're determined to move profitability and returns higher, by capitalizing on our differentiated product strategy, reducing labor and material costs, driving toward a higher-margin community mix and allocating capital to maximize shareholder value. With that, I'll turn the call to Dave. David Goldberg: Thanks, Allan. During the first quarter, we sold 763 homes with a pace of 1.5 sales per community per month. While part of this weakness reflected a continued tough market, we also chose not to chase volume as many of our peers discounted homes into their year-end. Our average active community count continued to grow, reaching 167, up 4% year-over-year. Our homebuilding revenue was $359.7 million with 700 homes closed at an average selling price of $514,000. Homebuilding gross margin was reported at 14%, though this included a litigation-related charge arising from an attached product community that began in 2014. Excluding the charge, which represented about 180 basis points, our homebuilding gross margin would have been about -- would have been 15.8% in line with our guidance. Looking at our mix, specs represented 70% of our closings, but only 61% of our sales. If the trend toward more to-be-built homes continues, it would add to margin in the back half of the year. SG&A was $65 million, in line with our expectations. Taxes represented a $1.5 million expense despite our pretax loss. This reflected our projected annual effective tax rate applied to our quarterly results. All told, first quarter adjusted EBITDA was negative $11.2 million and the diluted loss per share was $1.13, which again included a $6.4 million pretax or $0.23 per share impact of litigation-related charge. Now let's walk through our second quarter expectations. We expect to sell approximately 1,100 homes comparable to last year. We expect to finish Q2 with about 165 active communities, another quarter with a year-over-year increase. We anticipate closing about 800 homes with an ASP around $520,000 to $525,000. Adjusted homebuilding gross margin should be relatively flat sequentially, excluding the impact of the litigation-related charge. SG&A total dollar spend should be about flat versus the prior year quarter. From a land sale perspective, we expect to generate about $30 million of revenue. This should result in total adjusted EBITDA of around $5 million, including gains from land sales. Interest amortized as a percent of homebuilding revenue should be about 3%. Taxes are projected to be an expense of approximately $1 million, similar to Q1. This should result in a net loss of about $0.75 per diluted share. Depending on the prices paid for repurchase shares, we ought to be able to offset most, if not all, of the loss in book value per share by quarter end. Last quarter, we established the goal of generating growth in EBITDA for the full year. While the sales miss in our seasonally slowest first quarter certainly didn't help, we are still working to achieve this goal, excluding the impact of a litigation-related charge. Operationally, here's what needs to happen in the back half of the year. I'll start with the factors where we have higher visibility and more control of our outcomes. First, our average selling price will need to reach $565,000 in the second half, which is in line with our current backlog ASP propelled by our newer communities. Second, the direct cost actions and positive mix shifts Allan outlined will need to materialize and drive 3 points of adjusted homebuilding gross margin expansion by the fourth quarter. Third, we need to keep growth in SG&A under $25 million for the full year. And fourth, we'll need to execute the $150 million of land sales we've discussed. We have very good visibility on these transactions and anticipate they will generate a double-digit EBITDA margin in the aggregate. There are two other factors that will determine whether we can achieve EBITDA growth both of which depend on market conditions and competitive activity. Incentives will need to remain consistent with current levels for each community type, and we need to deliver a sales pace above 2.5% in Q3 and Q4 on a gradually increasing community count. Admittedly, we have not achieved this pace in the last 2 years, but it's a level well below historical trends. It's not going to be easy, but we do have a path to achieving EBITDA growth this year. Independent of whether we reach our EBITDA growth goal in 2026, we still expect to grow book value per share at year-end by 5% to 10% as we execute the remaining $72 million of our buyback authorization. At current prices, our full repurchase capacity represents more than 10% of the company, which would bring our total buyback to nearly 20% over an 18-month period. Because of the strength of our land position, we expect to do this and still finish fiscal '26 with a net leverage at or below 40%. We are focused on maintaining a strong balance sheet. At quarter end, we had more than $340 million of total liquidity, including $121 million of unrestricted cash and $222 million of revolver availability and no maturities until October 2027. As we said, net leverage will be flat this year as we balance our allocation of capital against our multiyear goals. During the first quarter, we spent $181 million on land acquisition and development and generated $3 million in land sale proceeds. At quarter end, our active controlled lot position was approximately 23,500 with 61% of our lots under option contracts. Over the last several years, we built a very strong land position, allowing us to maintain our growth poster even while selling nonstrategic assets. We anticipate our land sales will be above book value in the aggregate demonstrating that even if assets that no longer fit our strategy are worth more than what we paid for them. With that, I'll now turn the call back over to Allan. Allan Merrill: Thanks, Dave. To wrap up, I just want to reiterate two key takeaways. First, it was a slower start to fiscal '26 than we would have liked. But the first quarter is a small piece of the picture, and we still have a path to full year EBITDA growth. We're seeing green shoots for the spring selling season, and we've got very good visibility on margin catalysts, ASP growth and profitable land sales into the back half of the year. Whether we're able to achieve our goal will depend on stability and normalization in market conditions, but we're working very hard to make it happen. Second, we're fully committed to driving book value per share growth this year, independent of EBITDA growth. By realigning our land portfolio to accelerate share repurchases, we know we can create significant shareholder value. Let me just finish by thanking our team for their ongoing efforts to create value for our customers, partners, shareholders, and, of course, each other. With that, I'll turn the call over to the operator to take us into Q&A. Operator: [Operator Instructions] Our first question is from Alex Rygiel of Texas Capital Securities. Alexander Rygiel: Is your repurchase plan contingent on the timing of the $150 million profitable land sales? David Goldberg: No, I mean, not really, Alex. I mean, obviously, we're not going to do all at once. We talked about that we would be over the timing of the year, but it's not contingent on specifically the timing of the land sales. Alexander Rygiel: Helpful. And then generally speaking, sort of what is that gross margin spread between a build-to-order versus a spec home? Allan Merrill: It depends widely, but it has always been in the 4% or 5% range, and I would say that's probably gotten a little wider in the last year. I don't have the exact percentage because, of course, you're comparing apples and oranges between geographies and communities. But it's 400- or 500-plus. Alexander Rygiel: And then lastly, as it relates to sort of the favorable commentary about traffic in kind of the latter half of December and January. Do you see there -- is that kind of solely based upon interest rates sort of pulling back a little bit here? Or is it just because of a better mix? What are some of the reasons that you believe are driving that improved traffic? Allan Merrill: I think there are a couple of things going on. The very last slide in the appendix of our slides is a chart that we've shown for years, which is the affordability math looking at monthly mortgage payments as a percentage of income. And what's been happening slowly, I mean, imperceptibly looked at day-to-day, but it's very obvious when you look at it over years is rates have moved down a little bit. Home prices have stabilized or on a net basis have come down. Incomes have kept moving forward, so we're a lot closer to that low 20% affordability band that has characterized really healthy housing demand. So I think that we shouldn't overlook that is going on in the background. And we can get excited about rates doing this or that on a day-to-day basis, but the trend that has been underway over the last year has been very positive and improving affordability. It's still elevated, but it's getting a lot closer. Then I think the second part is just what you said, as we go from 10% of our revenue in the first quarter to 50% of our revenue in our newest communities just the demand patterns. And we talked about it before we launched them. We've talked about it since we've launched them. We've seen very good traction with communities that were purpose-built with our super high efficiency, our zero energy ready homes and an increasing share with solar included. A combination of things I think we're doing in this improving affordability backdrop, is, I think, what's contributing to what we've seen from a traffic and sales progression over the last month. Operator: Our next question comes from Julio Romero of Sidoti & Company. Julio Romero: On your introduction of solar included homes, when do you expect those homes to begin to flow through orders and closings? And then any color you can provide and how accretive those homes are expected to be to either sales or profitability? Allan Merrill: Well, right now, they're not a huge percentage of our closings, but we've got a couple of markets, and I'd highlight Las Vegas. There is some risk, I'll be wrong by a single community, but we basically had solar included across our attached and detached product in Las Vegas for the last couple of years. And that's really where we've been able to get after the supply chain and the installation protocols and sort of ring out what I call some of the excesses from the traditional solar residential solar business models. We've expanded that into Phoenix. And of course, we've got our big greenhouse community here in Georgia, the largest solar included community in the state. We've got it in a very big community in South Carolina that we're launching next month. So I think we're trending towards 20% of our business at the end of the year will be in solar included communities, but it's in our sales and closings now. In terms of the mix, all I would say is that solar included communities definitely have higher margins than not just the average, but even of similar generation communities, like they are accretive. But it's a small enough sample size that I think we start getting into basis points and they could get dangerous, but this has helped. I wanted -- having been enthused about this, and I am, I want to be a little cautious about the fact that this is also a function, the adoption of this is going to relate to utility providers and their posture vis-a-vis rooftop solar. What we've seen in the last year or 2 is kind of a 180 in some municipalities and with some public power companies where electricity demand has surged and we've all heard about data centers. And as that's happened, it has changed the dialogue with these utility providers, where all of a sudden, what had looked like competition becomes a little bit of a savior for them because now they have an opportunity for new communities to be much more self-sufficient or closer to self-sufficient, which takes some of the pressure off of the demands that they're experiencing. Now we all know that the rate of growth in electricity demand is not evenly spread, but in markets where you're seeing significant growth in demand for power, and I would point out Western markets, including Arizona, we have definitely benefited from and are changing the conversation with utility providers because that's one of the bottlenecks, right? They have to be willing and they are not just net metering things. We don't really worry about net metering, but what are the hookup charges? What are the barriers to getting your permits. And I think we are finding a more and more receptive environment, but it isn't going to be everything all at once. Julio Romero: Very helpful. And you noted that your to-be-built mix was trending favorably in 1Q orders relative to the mix in your closings. Can you talk about the drivers of that positive mix trend and if that's expected to continue trending towards... David Goldberg: I think, a, it has to do with some of our newer communities that are drawing a lot of attention. I also think the fact that inventory is coming down is creating some buyers who are willing to wait because it's not everything about get me the house immediately. I think it's probably a combination of those two factors more than anything else. Operator: The next question comes from Natalie Kulasekere of Zelman & Associates. Natalie Kulasekere: So last quarter, you mentioned that you're looking at a closings growth of 5% to 10% for fiscal 2026. And pardon me if I missed this on the call, but how exactly are you looking at it now? Are you still expecting to grow closings this year? And if so, what does it depend on? David Goldberg: Yes. Nate, what I would say is, obviously, some of it will depend on what happens in the selling season and what happens in the next 90 days. But our focus is really about our path to executing growth in EBITDA and book value per share. And we know that we have a path to go do so. And as I said in my comments, we're kind of independent of what happens from the EBITDA growth perspective. We're going to go and grow book value per share and it's to increase land sales and a little less spend, and we think that's really accretive for our shareholders. Natalie Kulasekere: Okay. And I guess my next -- just one quick follow-up. I'm just trying to figure out what happened in the first quarter. Was it particular markets that were underperforming? Or did you just see weakness across all your divisions as a whole? Allan Merrill: So we had two or three divisions where sales pace was up in the first quarter, but it means we had a dozen or more of that sales pace was flat or down. So it was pretty broad-based. But I want to put it in a little bit of context. We're probably between 100 and 150 sales short of where we thought we would be, which is less than one home per community over the course of the quarter. The other thing, and it's why I said what I said about a path, first quarter normally represents about 15% of our order volume and 10 or 15 whatever percent miss on that, it's 2% or 3% of our total orders for the year. And we know that. We know this every December, in particular, we get into this dynamic where people are discounting like crazy to hit their fiscal year-end goals. . And I understand it, but this was a year where we just decided this was not the time to be particularly aggressive and go toe to toe. And honestly, based on how the December traffic and the sales environment has changed, I'm pretty glad we didn't go ultra low in December to try and get an extra 100 sales because the repercussion across communities over the balance of the year would have been pretty significant. Operator: [Operator Instructions] Our next question comes from Tyler Batory of Oppenheimer & Company. Tyler Batory: I wanted to circle back on the guide and really the commentary about sales pace in particular in the back half in terms of the 2.5% there. Do you think that's achievable in the current backdrop? Do you think there needs to be a little bit of an improvement in the macro to hit that? And just kind of remind us what gives you confidence that there's going to be this ramp in the second half of the year versus the first half? David Goldberg: Well, look, Tyler, we certainly think it's achievable. I mean Allan kind of talked about what was happening in January and late December and improving buyer engagement, seeing more traffic, the receptivity to our Enjoy the Great Outdoors messaging. Is it what we did in '24 and '25? No. You're absolutely correct. It would be -- the last years haven't shown that. But if you look at historical trends, that's actually below what we used -- what we've done in Q3, Q4. So we think in a more normalized market with inventory levels coming down, some improvement in buyer demand that we've seen already into January, if that persists, it certainly is an achievable level. Look, I said in my remarks, and I think it's clear to say we have a path. It's not easy. It's not an easy path, but we clearly have a path. But our focus is on how we grow book value per share and get that EBITDA growth. Tyler Batory: Okay. And then my follow-up, thinking about the gross margin progression here, you're flat quarter-over-quarter, Q2 versus Q1, and Q1 was a little short of what you had guided to previously. So just talk a little bit about the shortfall in Q1 and the moving pieces sequentially into Q2? And then just remind us and help us think about the progression in terms of the ramp in gross margin in the back half? David Goldberg: So let's talk about it. First, I don't need to pick a bone, but I would tell you, we said we'd be about 16.8 -- we've got 16%, excuse me. Ex the litigation charge was 15.8%. So it feels pretty close to about 16%. I mean that feels pretty close to me. In terms of queue, what's really happening in the back half of the year that's causing that change we tried to outline it. And look, it's not about incentives going down or us assuming the market gets better. Incentives do go down because of mix shift because we have newer communities coming online. We have some higher-priced existing communities that are delivering more homes, and we have those direct cost savings that we have very good visibility to in our new starts. So it's very similar to what we said last year -- last quarter, excuse me, Tyler, last quarter about the 300 basis points. We still have good visibility into it. We obviously aren't trying to make a prediction on incentives of what happens in the back half of the year. But if incentives on like products stay the same, we've got some good improvement coming through in the back half. Tyler Batory: Okay. And then last one for me. In terms of some of these newer communities, 10% of revenue in Q1, just remind us the ASP or margin premium on those communities compared with the other 90% of revenue that was coming through in Q1? Allan Merrill: Well, you're starting to see it in the backlog ASP. I think backlog ASP is around $560 thousand. And that backlog are to be built from those newer communities. So that's giving you a flavor for what is going to happen to ASP in the back half of the year as those newer communities represent 50% or more of our revenue. On the margin progression, it's a couple of hundred basis points. I mean it is definitely material. And so moving from 10% to 50% on our revenue, picking up that kind of margin lift in addition to what we're seeing on the direct cost side, that's where our confidence in the movement of 300 basis points in margin comes from. David Goldberg: I would just add to that, Tyler. We don't give out specific ASP and backlog on new versus existing, but I would tell you, it is significantly higher. Operator: Our next question comes from Rohit Seth of B. Riley Securities. Rohit Seth: Just on the litigation expense, was that a onetime charge or is it ongoing? David Goldberg: That is a onetime charge. As we mentioned in the remarks and had to do with the community that we started construction in 2014, it's not our current product. It's not a repeating charge. It is a onetime charge. Rohit Seth: Okay. And where do you guys stand now on incentives? What was the change into the... David Goldberg: Yes. We don't give the exact incentive numbers out. It's not something we publish. But I think it's safe to say that the margin degradation that you saw from Q4 to Q1 was in part because of higher incentives around mix. Rohit Seth: Okay. And with the industry looking at clear inventory in the December quarter, you guys opted not to go that route. How is your inventory position heading into the new year? Allan Merrill: It's very healthy. We've got a combined spec position of in the 6s per community, down from in the 7s. So it's a little bit lighter like everybody else's. The finished inventory, I think, is in great spot for the spring selling season. So it's lower, but I think it gives us an opportunity. I mean we really focus on what our production universe is as we think about tracking down profitability for the year. And I think the combination of better cycle times and the inventory position we have today give us the unit inventory that -- or the unit universe that can drive the EBITDA growth path that we described. Rohit Seth: Okay. And if demand were to snap back, what are your cycle times now? Are you guys are well positioned to ramp back up pretty quickly? Allan Merrill: Yes. In the first quarter, we added a little over 2 calendar weeks or reduced our cycle time by about 2 calendar weeks. And I think in the starts in this next quarter, we'll get a little bit more. And when I think about that year-over-year, I really think about what's the last day of our fiscal year that we can sell a to-be-built home and still get it started and closed by the end of our fiscal year. And gosh, in the middle of COVID, that cutoff date was like in January. And we've been slowly pushing it further out as we've been reducing cycle time. And in most of our markets now, we're in April or May. And that really helps, right? That's the way -- it's maybe not a perfect way to think about it, but it's like adding 2 weeks to your fiscal year if you compress cycle time by 2 weeks because you've got the opportunity for that additional period to make those sales that you can get started and closed. Rohit Seth: Okay. And then final question, with the government talking about intervening in the housing market. For you guys and your customers, what do you think would be more impactful, something on the rate side or the down payment side? Allan Merrill: That's an interesting question. I mean every buyer has got their own environment. We've been really focused on affordability, this math on the slide that I referred to. So I think a combination of wage growth and monthly payment reduction, and that's why we're so focused on utility savings and mortgage rate savings and all of the things that we do, I think that's probably more important for our buyers than down payment assistance. Operator: I show no further questions. David Goldberg: Okay. I want to thank everybody for joining us on our call this quarter, and we will talk to you in 3 months. Thank you very much. This concludes today's call. Operator: Thank you. This does conclude today's conference. You may disconnect at this time. Thank you, and have a good day.