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Operator: Thank you for standing by. My name is Jay, and I will be your conference operator today. At this time, I would like to welcome everyone to the Provident Financial Services Fourth Quarter Earnings Call. [Operator Instructions] I would now like to turn the conference over to Adriano Duarte, Investor Relations. Adriano Duarte: Good morning, everyone, and thank you for joining us for our fourth quarter earnings call. Today's presenters are President and CEO, Tony Labozzetta; and Senior Executive Vice President and Chief Financial Officer, Tom Lyons. Before beginning the review of our financial results, we ask that you please take note of our standard caution as to any forward-looking statements that may be made during the course of today's call. Our full disclaimer is contained in last evening's earnings release, which has been posted to the Investor Relations page on our website, provident.bank. Now it's my pleasure to introduce Tony Labozzetta, who will offer his perspective on the fourth quarter. Tony? Anthony Labozzetta: Thank you, Adriano, and welcome, everyone, to the Provident Financial Services Fourth Quarter Earnings Call. The Provident team delivered another strong quarter, driven by record revenues, favorable credit metrics and expanding core profitability. Throughout 2025, we built organic growth momentum on both sides of the balance sheet, which combined with positive operating leverage resulted in notable improvement in our financial performance. Accordingly, in the fourth quarter, we reported net earnings of $83 million or $0.64 per share. Our annualized return on average assets was 1.34%, and our adjusted return on average tangible common equity was 17.6%. Pre-provision net revenue was a record $111 million or an ROA of 1.78%. Since closing the Lakeland transaction, we have grown core pre-provision net revenue every quarter. Turning to our balance sheet. Our commercial loan team generated total new loan production of $3.2 billion in 2025. Elevated loan payoffs of $1.3 billion, which were primarily in our CRE portfolio, partially offset our strong production, resulting in net commercial loan growth of 5.5% for the year. We remain focused on generating high-quality diversified loan growth. At year-end, our pipeline remained solid at $2.7 billion with a weighted average rate of 6.22%. Our loan pipeline has consistently been north of $2.5 billion for the last 4 quarters, and more importantly, our originations have grown every quarter in 2025, peaking at over $1 billion in the fourth quarter. On the funding side, core deposits grew $260 million or 6.6% annualized compared to the linked quarter. Favorable trends in our commercial and consumer segments contributed to growth in our average noninterest-bearing deposits of 2% annualized. The deposit market remains competitive, but we continue to invest in our capabilities to drive meaningful growth in our core funding. Provident's commitment to managing credit risk and generating top quartile risk-adjusted returns has remained unchanged. During the quarter, we successfully resolved $22 million of nonperforming loans while experiencing just $1.3 million in associated net charge-offs. As a result, nonperforming assets improved 9 basis points to a favorable 0.32%. The business environment in our market continues to be healthy. And as a reminder, our exposure to rent-stabilized multifamily properties in New York City is less than 1% of total loans, all of which are performing. Growing our noninterest income remains a strategic priority. We generated record fee revenue of $28.3 million in the quarter. I want to take a minute to highlight the momentum and diversity of our noninterest income. Provident Protection Plus continues to drive consistent growth in our insurance agency income. New business and over 90% customer retention helped grow pretax income 13% year-over-year. Provident Protection Plus has a strong pipeline at the start of 2026, and I'm encouraged by the increased collaboration with both the bank and Beacon Trust, which should strengthen further in 2026. Beacon Trust saw revenue growth again in the fourth quarter, increasing to $7.6 million on approximately $4.2 billion of AUM. Beacon remains focused on both growth and retention, and we continue to make investments in talent to help achieve these goals. We also continue to invest in our SBA capabilities, which have been a more significant contributor to noninterest income in 2025, generating $946,000 of gains on sale in the fourth quarter. For the full year, we have generated $2.8 million of SBA gains on sale, which is up from $905,000 in 2024. While total assets grew nearly $1 billion in 2025, our strong profitability helped further build Provident's capital position, which comfortably exceeds well-capitalized levels. As such, earlier this week, we announced a new share repurchase authorization that will allow us to buy back an additional 2 million shares. I'd like to conclude my remarks by discussing our strategic priorities for 2026. We expect to continue investing in revenue-producing talent across our middle market banking, treasury management, SBA, wealth management and insurance platforms. We expect recent balance sheet growth momentum to be sustained and that loan payoff activity will normalize when compared to 2025. Finally, we are preparing for a core system conversion in the fall of 2026, an important investment that will enhance scalability and our digital capabilities. I'm confident in our team's ability to successfully complete this conversion, particularly given how seamlessly we integrated Lakeland Bank in 2024. I'm incredibly proud of the efforts and production of our employees. We are pleased with our organic growth momentum and improved profitability, and we continue to target sustained top quartile performance. Now I'd like to turn the call over to Tom for his comments on our financial performance and to discuss our 2026 guidance. Tom? Thomas M. Lyons: Thank you, Tony, and good morning, everyone. As Tony noted, we reported net income of $83 million or $0.64 per share for the quarter with a return on average assets of 1.34%. Adjusting for the amortization of intangibles, our core return on average tangible equity was 17.58%. Pre-provision net revenue increased 2% over the trailing quarter to a record $111 million or an annualized 1.78% of average assets. Revenue increased to a record for a third consecutive quarter at $226 million, driven by record net interest income of $197 million and record noninterest income of $28.3 million. Average earning assets increased by $307 million or an annualized 5.4% versus the trailing quarter, with the average yield on assets decreasing 10 basis points to 5.66%. This reduction in asset yield was more than offset by a 13 basis point decrease in the cost of interest-bearing liabilities to 2.83%. While a reduction in net purchase accounting accretion limited our reported net interest margin expansion to 1 basis point versus the trailing quarter at 3.44%, our core net interest margin increased by 7 basis points to 3.01%. The company continues to maintain a largely neutral interest rate risk position, but anticipates future benefit to the core margin from recent Fed rate cuts and expected steepening of the yield curve. The core margin for the month of December continued to trend upward at 3.05%. We currently project continued core NIM expansion of 3 to 5 basis points for the next 2 quarters with reported NIM estimated in the 3.4% to 3.5% range for 2026. Period-end loans held for investment increased $218 million or an annualized 4.5% for the quarter, driven by growth in multifamily, commercial mortgage and commercial loans, partially offset by reductions in construction and residential mortgage loans. Total commercial loans grew by an annualized 5.4% for the quarter. Our pull-through adjusted loan pipeline at quarter end was $1.5 billion. The pipeline rate of 6.22% is accretive relative to our current portfolio yield of 5.98%. Period-end deposits increased $182 million for the quarter or an annualized 3.8%, while average deposits increased $786 million or an annualized 16.5% versus the trailing quarter. The average cost of total deposits decreased 4 basis points to 2.1% this quarter, while the total cost of funds decreased 10 basis points to 2.34%. Asset quality remains strong with nonperforming assets declining $22 million or 22% to 32 basis points of total assets. Net charge-offs were $4.2 million or an annualized 9 basis points of average loans this quarter, while full year 2025 net charge-offs were just 7 basis points of average loans. Current quarter charge-offs reflected the disposition of several nonperforming and underperforming loans and the write-off of related specific reserves. We recorded a net negative provision for credit losses of $1.2 million for the quarter as year-end loan closings drove a decrease in approved commitments pending closing, asset quality improved, and there was modest improvement in our CECL economic forecast. This brought our allowance coverage ratio down 2 basis points from the trailing quarter to 95 basis points of loans at December 31. Noninterest income increased to $28.3 million this quarter with gains realized on calls of corporate securities and solid performance from our wealth management and insurance divisions as well as gains on SBA loan sales and increased core banking fees. Noninterest expense increased to $114.7 million this quarter as strong operating results drove increased performance-based incentive accruals, while expenses to average assets and the efficiency ratio were consistent with the trailing quarter at 1.84% and 51%, respectively. Excluding the amortization of intangibles and the related average balance, these ratios were 1.76% and 48.15%, respectively. We project quarterly core operating expenses of approximately $118 million to $120 million for 2026, with the second half of the year run rate being slightly higher than the first half. In addition to normal expenses, as Tony mentioned, we will be upgrading our core systems in Q3 of 2026 and expect additional nonrecurring charges of approximately $5 million in connection with this investment, largely to be recognized in the third and fourth quarter. Our sound financial performance supported earning asset growth and drove strong capital formation. Tangible book value per share increased $0.57 or 3.8% this quarter to $15.70, and our tangible common equity ratio increased to 8.48% from 8.22% last quarter. We realized a $3.4 million benefit to our income tax expense from the purchase of energy production tax credits for the 2025 tax year. We are exploring opportunities to purchase additional similar tax credits for the 2026 year and open carryback years. Excluding the discrete benefit of any tax credit carrybacks, we currently project an effective tax rate of approximately 29% for 2026. Regarding additional 2026 guidance, we are expecting loans and deposits to grow in the 4% to 6% range, noninterest income to average $28.5 million per quarter and are targeting a core return on average assets in the 120% to 130% range with a mid-teens return on average tangible common equity. That concludes our prepared remarks. We'd be happy to respond to questions. Operator: [Operator Instructions] Your first question comes from the line of Mark Fitzgibbon of Piper Sandler. Mark Fitzgibbon: Tom, first question for you. I heard your comments on the effective tax rate being 29% for 2026. I guess I'm curious, those tax credit investments that you announced you made, I think it was $54 million. How does that flow through to the effective rate or when does it flow through? Thomas M. Lyons: So that was in the Q4. Those are 2025 tax year benefits. So that was reflected in the $3.4 million we saw in reduction in income tax expense. Next year's purchases, the 2026 year will be realized in 2026 as a reduction. That's why we're dropping from close to 30% down to about 29% in our estimate of what the effective rate will be. Anthony Labozzetta: It's spread out throughout the year. So it's not a onetime like we did in 2025. Thomas M. Lyons: That's correct. We did them at the end of the year. So it should be spread through 3 quarters of the year in 2026. Mark Fitzgibbon: Okay. Great. And then secondly, I saw the buyback announcement. I guess you have a little bit of excess capital. Could you help us think about how you'd rank your priorities for deployment of excess capital today? Thomas M. Lyons: Yes, I don't think they've changed. Still profitable balance sheet growth is our primary objective. We think that's the longest-term value creator. But we wanted to add additional flexibility to our capital deployment options, which is why we refreshed the stock buyback plan. Anthony Labozzetta: I think that's spot on. Organic growth is our primary focus. The second half of the year, we might look at our dividend as our productivity continues. Obviously, there's always the additional uses of capital we want to invest deeper into our insurance and wealth platforms. And then there's always in the background, the thoughts of mergers, but our primary #1 focus is organic growth. Thomas M. Lyons: Yes. Our capital levels, we're comfortable with where they are now, and we're confident in our capital formation projections for the rest of the year. So again, that was another trigger, as Tony said, to both give some consideration in the remainder of the year to the dividend rate as well as to reintroduce some buyback options. Mark Fitzgibbon: Okay. And I hear what you're saying, Tony, on M&A being sort of back of the list, so to speak. But if you were to look at bank deals, what kinds of things would you be looking for in a potential target? Anthony Labozzetta: Well, I think, as I mentioned in the past, I think, the primary, I would start by saying this team is a pretty outstanding team, and we put together a pretty good engine. Everybody is meshing well. We got a good dynamic group from Board on down. And #1 thing is that the cultures have to be compatible so that we don't create a tremendous amount of hiccups in what we've been building here already that's producing value. So that being said, we would also love to see some additional talent acquisition and then also perhaps new line of business or a market that we're not in, complementary things, adding to the wealth side or the deepening our insurance penetration is certainly something of value, but we do recognize that you can't get all those boxes checked off in any situation. So you have to pick up how many boxes do you want checked off in order to get the deal done, but a lot of good -- still a lot of good franchises out there that we think we could be good partners with. However, I did just cover what we thought was a value of verge. Operator: Your next question comes from the line of Tim Switzer of KBW. Timothy Switzer: I also want to congrats to Tom on his pending retirement. Thomas M. Lyons: Thank you, Tim. Appreciate it. Timothy Switzer: The first question I have is there's been a good amount of talk on conference calls this quarter about rising deposit competition in some of your core markets, particularly on pricing and -- what have you guys seen in the market? Where is the highest level of competition right now in terms of like category or geography? And does that maybe impact your NIM outlook or liquidity management at all? Anthony Labozzetta: Well, I kind of want to say competition is heightening a little bit, but I see the competition for deposits in our market as being universal. It's always been there as long as I've been in this space. It kind of moves here and there in different segments. I would argue that everybody is in a fight for interest -- noninterest-bearing demand and low-cost money, and then that's part of your model. I think from our perspective, we're doing a good job with our core model. If you look this quarter, we had 16.5% growth on average balances. You're seeing, we produced nearly $479 million of commercial deposits this year that are -- tend to be your lower costing deposits. Funding about 24% of our loan production. So those are all good things. So the competition is there. But if you go to market with the right talent and with the right approach, I think you can win your share. I would say a safe answer would be that if everybody has designs to grow high single digits, there's just not enough new money for the -- for everybody's needs. So that's what creates the competition. It's like what -- it's just not enough to cover everybody's growth needs. Timothy Switzer: Got you. Yes, that makes sense. And then can you remind us on -- I think you have close to $5 billion to $6 billion of fixed rate loans repricing in your back book over the next year. Can you repress us on what that number is and maybe the gap on new origination yields versus what's rolling off? Thomas M. Lyons: Yes. The total repricing over the next 4 quarters, this is on the adjustable side, it's about $5.7 billion. Looking for. Okay, back book repricing, cash flows, both amortization and prepays, we're looking at another $4.7 billion over the next 12 months as well. So the pickup in rate is about 30, 40 basis points. I think it adds about 4 basis points to the NIM. Timothy Switzer: Got you. Okay. And then the last question I have is just on the CRE market trends. It seems like it's becoming a little bit healthier, volumes are improving, pricing holding up to rising. Trying to get -- like are you guys seeing the same thing there? And then I believe there's also -- due to some M&A in your market, there's a competitor looking to sell potentially some CRE portfolios in the New York market. Is that anything with your guys' capital levels you'd be interested in? Or just focused on organic? Anthony Labozzetta: Yes. I mean, there's a couple of questions in there. I'll try to tackle them all. I'll start with the last 1 first. There's probably little to no desire for us to acquire anyone's portfolio since our productivity is quite high, and being able to allocate that capital to our clients is more important, right? So the relationship banking that we do, we would view that book acquisition as a filler and it's just not necessary for us in the way we approach our business. When you look at the CRE market overall, I do see a healthier CRE market. Our CRE book has held up incredibly well throughout any of these perceived cycles. You're starting to see other banks that may have stepped a little bit back on the CRE space stepping back in. And certainly, the agencies, if you look at half of our prepayments that I mentioned in the call, 50% of them were with the agencies that basically are offering terms that we just don't do, which is high level of prepayments of IO is rather long-term IOs and high leverage and rates that are just not balanced with the risk reward. So again, I think that the market is healthy, and you're always going to have spotty situations like right now, the big thought process is what's happening on the rent controlled, rent stabilized in New York with the new administration. We're attentive to it. We don't see anything even in our small portfolio that is alarming to us at this point. So knock on wood, everything appears to be healthy going into the 2026 year. Operator: Your next question comes from the line of Feddie Strickland of Hovde Group. Feddie Strickland: I wanted to touch back on loan yields a little bit. And Tom, I think you mentioned this a little bit in your opening comments, but is there the potential for yields to move up a bit as we move into early '26, just given the increase in the pipeline yield of 12/31 versus 9/30? And what you just talked about back book repricing? Thomas M. Lyons: I think so stable to slight improvement overall. Anthony Labozzetta: Yes, that makes sense. We had a little bit of a lift in the 5-year from the prior quarter of about 20 basis points, and that's where the yield improvement came from, where the rate improvement came from. Feddie Strickland: Got it. And then just switching over to fees. I noticed the wealth AUM was down a little bit from last quarter despite what I'd imagine is positive market move impacts, but it still sounds like you're pretty bullish on '26. Can you talk a little bit about what drove AUM maybe a little lower in the fourth quarter? Thomas M. Lyons: It was down a little bit on a spot basis, up on average, though, by about $80 million. We did have some net outflows for the quarter, but we did have some good strong business production during the period as well. So overall client count is pretty stable. Anthony Labozzetta: Yes. I would add, it's a little bit more exciting of what we expect for 2026, right? So we've added some more talent to Beacon to augment the growth and retention strategies that are there. We brought in some teams along with that to help. Pretty exciting early indications. Obviously, it's way too early for any real huge material numbers to change, but we're seeing the engagement. We're seeing new-to-bank clients coming in. We're seeing a group that can deeper penetrate -- deeply penetrate both Provident and work with Provident Protection Plus and the bank to deepen those client relationships. So I'm pretty excited about the prospects for '26 when it comes to Beacon. I'm expecting some pretty good things there. Feddie Strickland: Got it. And just one last one for me. Just is there any desire or opportunity to expand the footprint a little bit more in adjacent geographies? More organically is what I'm talking about. I mean, maybe areas like Long Island, given some of the disruption there, maybe a little further south in the Philly suburbs? Or are you pretty happy with where you are today? Anthony Labozzetta: Well, people that know me, I'm never really happy. So I would say that. Yes, all of the above. I mean, we're already out on Long Island in Manhasset, and we have an office in Astoria. So continuing to penetrate there is obviously intelligent. We like the Westchester, Rockland markets. We do like the mainline around Philly. All of those areas are where we already have teams down there. We don't have physical locations in that -- around that Philly market, but we already have lending teams down there, same as in Westchester and New York. And so seeing us expand geographically in those areas is not something that should surprise anyone on this call. Feddie Strickland: Congrats, Tom, on the retirement. Thomas M. Lyons: Thank you very much. Really appreciate. Operator: Your next question comes from the line of Steve Moss of Raymond James. Stephen Moss: Tom, congrats on your retirement. Maybe just starting back on the accretion numbers here. Just kind of curious, Tom, what you're thinking for total purchase accounting accretion for 2026? Thomas M. Lyons: On the loan book, it's about $60 million for the full year. Stephen Moss: Okay. Got it. Thomas M. Lyons: The volatility there on prepayments, but that's our kind of base case model. Stephen Moss: Right. Okay. So then a lot of the adjustable rate loans you're referring to that are repricing carry rate marks at the current time, just looking to convert those to kind of like a core margin, kind of how to think about that benefit? Anthony Labozzetta: Not all. Some, not all, Steve, just because there's a blend -- a healthy blend of legacy Provident loans and leases. Stephen Moss: Got it. And -- but it is about 3 to 4 basis points or 4 basis points to the margin just from the back book repricing, if I heard that correctly. Anthony Labozzetta: That's correct, yes. Stephen Moss: Okay. Perfect. And then my other question here is just kind of, Tony, in your prepared remarks, you mentioned the hirings planned for 2026. You kind of alluded to it a little bit in some of your earlier commentary. Just kind of looking for any specific niches, maybe you're looking to add how many people you're looking to hire in the upcoming year? Anthony Labozzetta: Yes. As I mentioned the area, I think one of the biggest areas of focus, when we look at hiring the people, it's augmenting some of the things we're doing already, like in the insurance space and in our wealth space, you should expect to see a lot more on the production side and the retention side. I think the -- one of the greatest areas of investments for us this year is going to be in the middle market space. That range of $75 million to $0.5 billion in client size, we think that is an area that we haven't really penetrated deeply yet, comes with all the attributes that we like, strong deposits, strong relationships. We're able to use our wealth group in those segments as well as our insurance. It meets not that our other clients don't, but this is an area that we think is very suitable for us in the scale that we're at. So there's going to be some good -- I wouldn't be surprised in there if you add another 3 to 5 additional complements in this year. Obviously, all of that is timed in the expense guidance we've given, and we were paying -- we are very attentive to positive operating leverage. So it's not -- we're not going to race ahead of ourselves. Also, the other area that you could expect to see some growth, it is in our treasury management capabilities, particularly on the outbound deposit-only categories like deposit gathering functions. We want to deepen that investment as we move into -- deeper into '26. So great -- I mean, it's a great thing because we keep investing in our future and that it's exciting because we're having the growth, and we just want to make sure that we can continue to deliver the growth in '26 and '27. So hiring these productive individuals is going to be critical for us. Stephen Moss: Okay. Got you. That's helpful. And then one last one for me on credit here. Just with the reserve has come down a fair amount over the course of the year. Curious what the potential is for maybe incremental reserve bleed here? Or is there just -- is there less give on that number here going forward? Thomas M. Lyons: Yes. It's largely a model-driven exercise at this point. The macroeconomic variables drive the provision requirements. That said, it feels like we're at a base here, but we've been very consistent in our approach and our methodology throughout the year, and it really has been warranted as you could see, with 7 basis points in net charge-offs over the year. Good strong credit metrics, 32 basis points in NPAs, I think it's 40 basis points NPLs to loans. So the credit quality and the strong underwriting and the low leverage lending we do have all supported the lower allowance coverage ratio. Operator: Your last question comes from the line of Dave Storms of Stonegate Capital Partners. David Storms: Just wanted to start with -- you mentioned in the prepared remarks, a decrease in deposit costs. Just curious as to how you see the room to run here and if there's any specific initiatives that we should keep in mind as you continue to try to bring those costs down? Thomas M. Lyons: I'm sorry, Dave, I had trouble hearing that. Could you just try to speak a little louder, please? David Storms: Apologies, yes. Just around decrease in deposit costs. How much more room do you think there is to run here? And if there's any specific initiatives that we should keep an eye on as you're working through these costs? Thomas M. Lyons: So we are still repricing downward. We didn't get the full benefit of the last cut reflected, which is one of the reasons we wanted to bring to everybody's attention that the margin for the last month of the quarter, December was 3.05% on a core basis. So we'll see the full benefit of that I think every 25 basis point cut that we may get gives us another 2 to 3 basis points in the core margin in terms of improvement. Overall, I'd say our betas are going to continue to run in the 25% to 30% range relative to the Fed rate cuts. David Storms: That's great. And then just one more for me. You mentioned the core systems conversion. Is there anything more you can tell us about maybe the time line for that? And maybe any other tech investments or initiatives that you have on the horizon? Anthony Labozzetta: I think that's the major initiative on the near-term horizon. The conversion is scheduled for Labor Day weekend of 2026. It's the IBS platform of FIS. It's a very commercial-oriented, very proven system commercial-oriented. -- we'll meet the needs -- our needs as we move into the future from a digital perspective or product perspective, everything that we need. It's comparable to a lot of banks between $25 billion and $150 billion are on it. And we talk to them, and the system works very well for them. So I think it's something that we need to do to position our bank for the growth that we're experiencing in our future. Thomas M. Lyons: We expect to realize additional efficiencies in our processes as a result and enhancements that will help our product set and delivery to our customers. Operator: This concludes our Q&A session. I will now turn the conference back over to Anthony Labozzetta for closing remarks. Anthony Labozzetta: Well, thank you, everyone, for your questions and for joining the call. We hope everyone had a good start to the new year, and we look forward to speaking with you very soon. Thank you very much. Operator: This concludes today's conference call. You may now disconnect.
Operator: Good day, and welcome to the Renasant Corporation 2025 Fourth Quarter Earnings Conference Call and Webcast. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Kelly Hutcheson. Please go ahead. Kelly Hutcheson: Good morning, and thank you for joining us for Renasant Corporation's Quarterly Webcast and Conference Call. Participating in the call today are members of Renasant's executive management team. Before we begin, please note that many of our comments during this call will be forward-looking statements, which involve risk and uncertainty. There are many factors that could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements. Such factors include, but are not limited to, changes in the mix and cost of our funding sources, interest rate fluctuation, regulatory changes, portfolio performance and other factors discussed in our recent filings with the Securities and Exchange Commission, including our recently filed earnings release, which has been posted to our corporate site, www.renasant.com at the Press Releases link under the News and Market Data tab. We undertake no obligation, and we specifically disclaim any obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. In addition, some of the financial measures that we may discuss this morning are non-GAAP financial measures. A reconciliation of the non-GAAP measures to the most comparable GAAP measures can be found in our earnings release. And now I will turn the call over to our President and Chief Executive Officer, Kevin Chapman. Kevin Chapman: Thank you, Kelly, and good morning. 2025 was a transformative year for Renasant, marked by considerable improvement in our profitability and strong balance sheet growth on the heels of the completion of the largest merger in the company's history. As we discussed during our October call, systems conversion took place in the third quarter of this year, and we continue to build on the successful integration progress that has already occurred. Throughout the year, we have been intentional about maintaining and frankly, accelerating the momentum in the company and believe our financial results reflect that focus. Our goal is to create a high-performing company that leverages the opportunities presented by our presence in many of the country's best economies. We strive to deliver excellent customer service led by an exceptionally talented team. This was evidenced by the organic loan and deposit growth we achieved in 2025. Renasant's core profitability showed significant improvement this year, fueled by the benefits of the merger with The First, along with ongoing efforts to improve efficiency at legacy Renasant. Adjusted earnings per share for the year were $3.06, representing an 11% increase year-over-year. For the year, adjusted ROA grew 94 basis points in 2024 to 110 basis points in 2025. Likewise, the adjusted efficiency ratio saw an approximate 900 basis point improvement year-over-year to 57.46%, and the adjusted return on tangible equity grew from 11.5% in 2024 to 13.79% in 2025. I'm extremely proud of what our team has accomplished this year and excited about how we are positioned to grow on this success in 2026. I will now turn the call over to Jim. James Mabry: Thank you, Kevin, and good morning. I will now highlight financial results for the quarter. The company's net income was $78.9 million or $0.83 per diluted share. Adjusted earnings, excluding merger charges, were $86.9 million or $0.91 per diluted share. Our adjusted return on average assets of 1.29% for the quarter grew 20 basis points from the third quarter, and our adjusted return on tangible common equity of 16.18% for the quarter is an improvement of 196 basis points. Loans were up $21.5 million on a linked-quarter basis or 0.4% annualized. During the fourth quarter, the company sold approximately $117 million of loans acquired from the first which were not considered to be core to Renasant's business. Deposits were up $48.5 million from the third quarter or 0.9% annualized. From a capital standpoint, all regulatory capital ratios remain in excess of required minimums to be considered well capitalized. We recorded a credit loss provision on loans of $10.9 million comprised of $5.5 million for funded loans and $5.4 million for unfunded commitments. Net charge-offs were $9.1 million, which includes $2.5 million recognized in connection with the aforementioned sale of the acquired $117 million loan portfolio. The ACL as a percentage of total loans declined 2 basis points quarter-over-quarter to 1.54%. Turning to the income statement. Our adjusted pre-provision net revenue was $118.3 million. Net interest income increased $3.9 million quarter-over-quarter. Reported net interest margin increased 4 basis points to 3.89%, while adjusted margin was flat at 3.62% on a linked-quarter basis. Our adjusted total cost of deposits decreased by 11 basis points to 1.97%, while our adjusted loan yields decreased 12 basis points to 6.11%. Noninterest income was $51.1 million in the fourth quarter, a linked quarter increase of $5.1 million. This increase includes $2 million in income associated with the exit of certain low-income housing tax credit partnerships during the fourth quarter. Noninterest expense was $170.8 million for the fourth quarter. Excluding merger and conversion expenses of $10.6 million, noninterest expense was $160.2 million for the quarter, a linked quarter decrease of $6.2 million. This decrease includes an offset of $2.1 million in gains connected with branch consolidations during the fourth quarter. We are encouraged by the results of the fourth quarter and the positive momentum going into 2026. I will now turn the call back over to Kevin. Kevin Chapman: Thank you, Jim. As you have heard, Renasant is well positioned for 2026. We have a talented and motivated team, a strong balance sheet and an enhanced profitability profile. The banking industry continues to undergo significant change, and we are optimistic about our ability to take advantage of the opportunities. We appreciate your interest in Renasant and look forward to sharing our results. I will now turn the call over to the operator. Operator: [Operator Instructions] And the first question today will come from Michael Rose with Raymond James. Michael Rose: Just wanted to start on expenses. Really nice step down, Kevin here on the systems conversion. I know this is kind of a long process, extending back to the previous administration to not only get this to the finish line, but also get the conversion done maybe a little bit later than I think you and we all would have hoped. But this was a nice, obviously, quarter of progress. Can you just walk us through kind of the puts and takes of how we should think about expenses through the year? Clearly, there's been a lot of M&A in and around your markets and other deal announced in Texas today. Can you just talk about what's still left to go in terms of cost savings from the first? And then from an opportunistic standpoint, how do you see the hiring playing out? And then I guess, maybe for Jim to wrap up, how should we think about kind of the level of expenses over the next quarter or 2? James Mabry: Michael, this is Jim. And actually, I'll do that in reverse direction from the way you asked it, but I appreciate the question. And I will say, too, apologies upfront if we're not as smooth and filling the questions as maybe we usually are because we're each in a different location this morning due to the storm. And so we'll do our best. And actually speaking of that, we're definitely thinking of folks that have been impacting our marketplace. We're still feeling the impacts of the storm. We've still got lots of people without power. And like other companies, we've had a lot of people at the company working to make sure we get branches open and get people to where they need to be to help serve our customers. So it's been a grind, but hopefully, we're nearing the end of that. With that said, Michael, I'll start and then let Kevin sort of clean it up. But I think in Q3, we talked about roughly $2 million to $3 million we hope to see in Q4 and then in Q1 in terms of sort of core expense reduction, if you will. And I use that word core because I think it ties into, I think, what you're probably alluding to as we go forward in expenses and how we might think about that. So we still feel good about looking at Q1 and having that core number come down again in that $2 million to $3 million range. Salaries as we've seen -- that's the line item that probably shows the most significant impact, and that was down a couple of million dollars in Q4, and we expect a similar result in Q1. So I think our overall guidance in terms of core NIE, if you will, from what we said on the Q3 call remains unchanged. And -- but I do think it's important to talk about how '26 may unfold, and Kevin I would ask you to do that. Kevin Chapman: Yes. Thank you, Jim. And Michael, you're right. I mean, it feels like this quarter has been a long time coming. We announced the merger with the first back in July of '24 and really tried to put eyes on Q4 because we felt it'd be a good look as to how the company's performance was -- would look as we enter '26, and you start to see some of the benefits and the rationale of what we launched 18 months ago. And a lot of that is just cost saves from the merger, but also using it as an opportunity to unlock some of the potential at Renasant, legacy Renasant. And I think you saw this in Q3 that as we went through a conversion, that was the largest conversion that both companies ever contemplated we still grew. We grew in Q4, and we're doing it with less resources. We're doing it with less people. And I think Jim summed up where our expense trajectory as well. I'll just add to that, maybe a little bit of esoteric information about where our focus has been. If you go back and you look at our FTEs, us and the first back in June of '24, Q2 of '24, that was a little over 3,400 employees. I think at the end of this year, we're going to be a little bit above 3,000 employees. So we've eliminated 400 positions. That all hasn't been the first, by the way, and it all hasn't been by way of the merger. But as we stand right now, that number is sub 3,000. And so we are still working towards goals and efficiencies of improving our profitability and again, doing more with less. But also just to emphasize what Jim alluded to and what you mentioned, Michael, is we're seeing real opportunity and disruption, and we're not going to shy away from that. But we're going to continue to make investments in talent that will meaningfully improve our position, our customer service, our customer reach and ultimately improve our profitability. And so there'll be a little bit of a mixed message. We're still going to continue to focus on improving profitability and our expenses at Renasant. We're also going to continue to be very focused in making investments for future growth and future profitability. But like where we are, like our position, like the momentum in the company, like the focus from all of our teammates to improve the metrics that we think are important, but also be willing to be opportunistic and invest in future talent. Michael Rose: Very helpful. Jim, if I can ask a clarifying question. So the $2 million to $3 million, I think, reduction you said in the first quarter, I think that's what you said. So correct me if I'm wrong. But what base is that off of? Is that off of the core ex the merger charges? Or does it also incorporate the add-back from the gain that you guys booked, the $2.1 million gain. So I'm just trying to get a sense for what the base is. James Mabry: Yes. It does incorporate that gain, Michael. So as you said, sort of take the -- I guess, it was roughly $170 million of back out, call it, I think it was $10 million approximately in merger expenses, and then we had that offset of $2 million and change. I don't remember the exact number, but right around $2 million. And that's the number I'm sort of jumping off from for Q1. Michael Rose: Okay. So the $162.3 million roughly versus just ex the merger charge would be $160.2 million, right? James Mabry: Correct. Michael Rose: Okay. Perfect. Maybe just switching to loan growth. If I back out the loan -- or if I add back the loan sale gains this quarter, it looks like the growth was about 3% annualized. Can you just walk us through some of the puts and takes and maybe dovetailing with my prior question just on opportunities, not only for hires, but also for market share gains, just given some of the dislocation. What should we think -- is there any change to what you guys laid out last quarter, which I think is kind of a mid-single-digit growth outlook? Or could it potentially be better just given some of that dislocation and some of the hires that you guys have and plan to make? James Mabry: Kevin? Kevin Chapman: Yes. Thank you, Jim. Thank you, Michael. Yes, as we look at loan growth, really no change to our guidance. We're still targeting for the year mid-single digits. And look, I think '26 can be similar to '25, where there might be some lumpiness in the quarters. I can't project with precision what it will be in Q1, but would just say over a longer time horizon, we're definitely positioned for that mid-single digit. And there is the opportunity for upside as market disruption occurs. But if you break down kind of what led to that 3% annualized in Q4, the production was good. The production was there, and our pipeline is still holding as we look at that. All of '25, we predicted payoffs, and we were wrong for 11 months or 10 months, but they finally materialized in late Q4. And so payoffs were elevated, and that's going to be a wildcard, Michael, as much as market share gain or taking -- being opportunistic with disruption, the payoffs is still going to be a little bit of a wildcard to that net loan growth, maybe on a quarter-by-quarter basis, I don't think it changes our guidance for mid-single digits year-to-date. But when we look at -- again, when we look at how we're operating fully integrated with the first, production coming from all markets through all channels continues to remain good. And so the production is there. The wildcard is just going to be the payoffs. But I think we're well positioned in what we're currently doing. And again, there is upside as market dislocation may present some additional opportunities throughout the year. Operator: The next question will come from Stephen Scouten with Piper Sandler. Stephen Scouten: Kevin, you kind of spoke to maybe the push-pull between investing in growth and trying to manage expenses and profitability. I mean, I guess how can we think about that? I mean, could there be like an overarching efficiency initiative, coupled with a hiring plan? Is it you're adding production people, but trying to normalize maybe back office? Or just kind of how can we think about that push-pull dynamic around those 2 concepts? Kevin Chapman: Yes. So it's really -- it's all of the above. So let me just give you an example. If we just take production hires and terminations throughout the quarter, we eliminated 12 producers, not tied to the merger, not tied to -- there's more accountability measures is what drove that, but we added 6. And so it's that type of push/pull that we've been doing now for the last couple of years where accountability and an expectation of higher performance, not only of producers, but as a company as a whole. That is going to be our focus. With some of the talent that may be out there, Stephen, we may make an investment in back office that gives us scalability to a larger asset size than where we currently are today. And so it's hard to say that we're going to hire these many people and when we're going to hire them just given the opportunity for the disruption. What I'd tell you is, and I think this is consistent with what you've heard from us, our goal is to be high performing, not high performing, excluding all the bad stuff, but high performing. And so as we work to achieve that, A lot of the hiring we're doing, whether it's the investment or whether it is the additions to staff in the back office, that has to be paid for through higher levels of performance. And again, it's really hard to quantify and lay out where that will occur. I would just ask that you look over the last year, maybe the last 18 months, what we've been doing, and it's what's showing up in the numbers is that ROA, that ROE is going up to the right. The efficiency is down into the right. And that will continue to be our plan and our focus as we find ourselves in a really unique position with all the disruption, but also knowing Renasant has to continue to improve its profitability line. Stephen Scouten: Yes. No, that's great context. I appreciate that. And then maybe thinking about kind of capital usage from here. You've obviously got a fairly sizable repurchase plan. Kind of wondering how you're thinking about that given the stock still appears to be undervalued relative to peers and kind of how you'd stack rank that relative to obviously using for organic growth. And if M&A would even be on the table, I would think it'd be low down the priority list for you guys today, but just kind of curious how you think about that capital deployment. James Mabry: Stephen, this is Jim. I'll start and then ask Kevin to add on. But -- so as you know, we -- Q2 was the first sort of combined quarter, and we felt -- after the merger, we felt good about where everything sort of shook out. And we -- I think we still wanted the added comfort of seeing Q3 be on time and on schedule. And with that, we felt more confident in sort of flexing our muscle, if you will, a little bit as it relates to capital uses other than organic growth. So organic growth is still #1, and we're hopeful we'll have a strong year in terms of growth. But I would say in terms of those capital levers, at least near term, the most attractive one to us would be buybacks. And of course, we had some activity in Q4 and would anticipate that activity continues into '26. Kevin, do you want to comment on M&A? Kevin Chapman: Yes. I'll add to that. And look, as we look at our capital plan and capital deployment, Jim laid out many of what's on the table. I'll also add, and I think we did this in the Q4, also redemption of debt. So we've got our full capital plan playbook open right now. And Stephen, that does include M&A. And it's something that we'll continue to look at. It's just got to meet our metrics. It's got to be that right partner. And again, it's a little bit backdropped against all the other opportunities we have, but M&A is still part of our plan. And again, it's something that we're fully ready to deploy if we find that opportunity or when we find that right opportunity. Operator: The next question will come from David Bishop with Hovde Group. David Bishop: Jim, I was wondering maybe some thoughts here. How should we think about the NIM outlook here? It looks like the Fed could be on the sidelines near term. Just curious maybe expectations for the margin here into the first half of the year and throughout. James Mabry: Sure. So we -- coming into -- actually, I'll take a step back. The first, as you know, really helped our asset sensitivity position and lessened our asset sensitivity. And that played out in -- it's played out the last couple of quarters, but certainly in Q4 because we were -- I think, in talking with on the Q3 call and with investors post that, we were guiding to some slight degradation in the margin in Q4, we didn't see that, as you saw, and it behaved really well. Our outlook for '26 on margin. And I think we've got 2 cuts in sort of our outlook of, I think, March and September roughly of 25 bps each. Even with that, we expect the margin to behave relatively stable. We don't see much movement as we sit here today, plus or minus. And so with growth in balance sheet, net interest income should follow that. In other words, should grow as we've got balance sheet growth with a stable margin outlook, we should see some modest growth in those dollars. We're starting our year a little below where we thought we would in terms of loan balance given the loan sale and the payoff activity we had in Q4. But margin outlook, I would say, is stable, and we should have improving NII dollars as we go through the year. David Bishop: Got it. And then maybe as a follow-up, any commentary in terms of the specifics of the loan pipeline, how that broke down at the end of the year relative to the end of last quarter? James Mabry: Kevin? Kevin Chapman: Yes. So yes, Dave, just what -- so it's in line, it's consistent with what we've seen over the past couple of quarters kind of fully baked in with the first. And really, contributions, again, from all areas, no different than where we're seeing the production where all areas are providing. Likewise, we see that in the pipeline. Again, just good activity, good production potential. And again, that's across all segments, whether it's geographic, again, in the states we operate, Tennessee, Alabama, Georgia, the coastal area or even Mississippi or whether we look at it through our channels, the size of the loans, whether some of our small business, our middle market or even our larger corporate and our specialty lines. So just a good pipeline that really covers all the areas of the company. We continue to see that. And that's -- again, that's what we've seen for the last couple of quarters, and that's where we want to position the company. It's just not any one group driving all the growth, but a good contribution from everybody. And Dave, what I may add is that on the consumer side, we've seen a little bit of a pullback on the consumer side. If there is an area that's pulled back a little bit, it's more on the consumer side. But I would say that's probably more by choice than it is consumer behavior. Operator: The next question will come from Jordan Ghent with Stephens. Jordan Ghent: I just wanted to ask about the loan sale and then maybe if you could give any additional color on the types of loans. And then going forward, if we should expect to see any more loan sales? James Mabry: Jordan, this is Jim. So the loan sale involved a portfolio of loans secured by cash surrender value of life insurance policies. And it was a good performing portfolio, high-quality portfolio. And the first had picked it up through an acquisition, a previous deal that they had done. And I think they had sort of looked at that and said it's not really core to our business long term because there was no ancillary business with these loans, and they were not -- they were in and out of the footprint. So they had flagged this and we'd flagged it during diligence. And once we got systems conversion behind us and so forth, we started down that process and sold that book. There aren't any other portfolios or loans or categories at the first that we would see selling or divesting or slowing down. We felt like it was a good match. And David Meredith can add to this, but I think our initial read was we really like what they did. They had good client selection, and we like their book. So we don't really see anything else in the portfolio. But David, you may want to add to that? David Meredith: Jim, thank you. The only thing I would reiterate exactly what you said, it was a solid performing book of business for the first when we went through due diligence, they viewed it as noncore. We viewed it as noncore. And it was with the ability to obtain probably full relationships out of those things, we've chosen to better focus our capital and our attention on those were better in market opportunities for growth, be it other loan opportunities, other deposit opportunities. Jordan Ghent: Okay. And then maybe just one follow-up. I wanted to ask what you're kind of seeing on the loan and deposit competition side, if you're seeing loan yields kind of come down significantly and as well as any irrational behavior? James Mabry: So I would say, Jordan, generally, what we're seeing on both sides of the balance sheet in terms of competition is -- I'll embellish on it, but it's really unchanged. I mean, from what we've said the last couple of quarters, it's very competitive on both sides. I would say probably a little more competitive incrementally on the deposit side. And so our outlook for '26, we hope there is some relief on that front. We're not counting on it in our numbers. And so I think if somebody would say, okay, what's the vulnerability in our margin outlook, it would be maybe in the funding side, but I think we've accounted for it in terms of the way we're thinking about '26 and our margin. But it's definitely on the deposit side more than the loan side. We -- our 5-month special, the rate on that hasn't changed in probably 18 months, and it's sort of stuck at that 4% number, and we'd love to lower it. And hopefully, we'll get some relief on that in '26. But generally unchanged in terms of the competitive landscape on loans and deposits on the pricing front. Operator: The next question will come from Catherine Mealor with KBW. Catherine Mealor: I wanted to follow up on your commentary on buybacks, Jim. You said that you expect the activity to continue into '26. Is it fair to assume that we should see a higher level that we saw in the fourth quarter? You've got a big authorization, but the activity we saw this quarter was pretty light relative to the authorization. Just trying to kind of frame kind of the level of buybacks that's safe to assume in our modeling for '26. James Mabry: Sure. So with all the standard caveats in terms of how much organic growth we see and market conditions, I would frame it this way, Catherine, that I think we're roughly at 11.25% or thereabouts on CET1 at year-end. And I think we want to -- we would not want to -- I think we'd want to end up at year-end '26 something close to that or be willing to end up something close to that, I guess, I would say. And so again, we'll see what the environment holds in terms of other possible levers and so forth. But I would sort of frame it that way. We like where CET1 is. It's going to -- I think we're going to grow roughly 60 basis points, 50 to 60 basis points in that ratio. And so we'd like to end the year at roughly where we started the year. Catherine Mealor: That's fair. That's great. And then maybe one follow-up just on the margin. You added a great new slide, Slide 19 to your deck, which just shows some of the detail around loan repricing and maturity. As I look at that slide and I see fixed rate loans today are at around kind of 5.5% and then variable rate loans are about 6.3%. Where those 2 buckets, as you see those loans reprice and new originations replace it, where are you seeing new loan originations come on kind of relative to those rates? James Mabry: So new and renewed, I'd say, is if we looked at -- I don't remember the December quarter, but probably, call it, right around 6%, upper 5s, low 6s, somewhere in that range. And I think we've got roughly $1.3 billion, if you look at the math on that table that you're referring to, roughly $1.3 billion in fixed rate loans that will reprice and those loans are at, call it, 5.25%. So maybe that helps frame the opportunity there in terms of repricing. Operator: [Operator Instructions] And the next question will come from Janet Lee with TD Cowen. Sun Young Lee: So if I look at the fourth quarter profitability metrics, whether I look at ROA or ROTCE or efficiency ratio, you guys kind of achieved the levels that you wanted to achieve from the first acquisition, the slide deck that you filed a while ago, which was impacted in '25 given the changes in purchase accounting, et cetera. But -- so we're there. So is there any updated thoughts on where you want your profitability metrics to go from here? Or are we are we at the level that you guys wanted to achieve and it's more about scaling from here? James Mabry: Janet, this is Jim. So maybe I'll start with that, but Kevin should add on. So again, I think you summed it up well. We feel -- we're pleased with the fact that we -- except for a couple of assumptions, we're pretty much on pace to achieve what we set out 18 months ago with respect to the merger and the economic benefits of it. So I feel really good about that. And we had sort of pointed all along to Q1 '26 as being -- hopefully being a clean quarter and showing distinctly the benefits that came out of that merger. And the other thing I should have mentioned is in expenses. We don't anticipate any M&A expenses in Q1. We think -- I mean, there could be something that dribbles in, but I think we've incurred the last of those in Q4. So I think you framed it well. We feel like we're very much on pace in '26 to attain largely what we outlined 18 months ago. And I think to sort of go from that to all right, where do we -- how do we think about future profitability and incorporate all the things going on in the industry and around us, I'll turn it over to Kevin. Kevin Chapman: Yes. Great question, Janet. It's just got me reflecting because I think to your point, we're right on top of what we projected 18 months ago. But 18 months ago, that would have put us in the top quartile of our peer group, right, based on what we knew at that time. Well, today, we're not in that top quartile. The peer has moved. I think we find ourselves right in the middle, which isn't where we want to be. Our goal is to be a top-performing company in all areas, including our financial metrics. So no, we're not there yet. One, because we didn't plan to land here 18 months ago and then be satisfied with that. We plan to continue to improve. But what's exciting about what's happened with our peer groups with the peers moving is it's forced us to continue to set our sights on higher goals. And what I see in the company, what I feel in the company is real momentum and real buy into that. And in some cases, opting out of it. But that's okay because that opt out is what will help us achieve our higher performing status. But what I see by and large is most people embracing that and actually relishing in it. And so our goal is to continue to improve from here and chase a moving target with the ultimate goal of being high performing. And I just -- I was somewhat reflecting on just this past year and this morning. And if you look at our results for the year, particularly as we leave Q4, really don't know what we projected as far as pretax pre-provision revenue back in '18. I can't remember what that was, but I suspect it's probably appreciably higher today than what we projected. And what I mean by that is that one thing that we did this year is we maintained our allowance just as we saw some migration in credit. We're not seeing any massive breakout. We don't have any significant concern. But we've also maintained allowance, and that has weighed on ROA a little bit, all things being equal. We're probably a little bit ahead of where we thought provision would be for '25 actual results compared to where we thought it would be in '24. And if you normalize for that, maybe we are a little bit closer to that top-performing peer group. But again, I just out of a mindfulness of caution, we've maintained some reserves. But I think if you look at -- if you look through that and look at the operating results, we're probably doing a little bit better than what we projected. -- but still aren't ready to drop a mission accomplished banner yet. The peer has moved. And frankly, that's what's exciting about this is we're relevant. We're in the game. We're in the middle of the pack rather than the bottom of the pack as it relates to our performance. And the difference between top performing and where we are is a few basis points. And so our execution, the strategies we have, our execution is what will make the difference against the peer group. And that -- to me, that's what's exciting and fun about this. It's not discouraging. You could easily say, well, we did all this work and we ended up in the middle, not the top. That's not really what I feel in the company. What I feel is an excitement that our plan and our team and our execution I feel confident that we'll continue to move up the rankings as we just perform. And we just need a little bit more time to perform. And that will continue to allow us to improve financial performance and ultimately achieve our goal of getting to that top performing or high-performing status. Sun Young Lee: That's great to hear. And just my last follow-up on loan growth. In terms of -- you reiterated that mid-single-digit guide for 2026, you cited strong pipelines. I understand you really don't have a lot of line of sight into payoffs. But what's giving you that confidence that -- are you seeing signs that payoffs are -- have moderated versus the fourth quarter level? And what gives you that confidence? Kevin Chapman: Yes. So I would just say the confidence probably is a little bit more of a longer period of time. So let's extend this out 12 months. It gives me confidence that over the course of the year, things will normalize. It may be abnormal quarter-to-quarter. But over the course of a longer period of time, I think we're well positioned to grow at that mid-single run rate. And that's not only loans, but also funding that appropriately on the liability side with deposits. But payoffs just early on, I mean, we're early on into the quarter. So it's really hard to gauge what payoffs will be for Q1. We're just kind of projecting that it's going to be a similar level of payoffs that we had in Q4, which were elevated compared to previous quarters. But that really isn't necessarily based on what we've seen in the first 20-something days of the quarter. It's really just a concern that these are lumpy. They show up sometimes unexpected or the first 20-something days really aren't in a good indication of what will happen and play out throughout the course of 90 days. But I just -- when I look at our production, when I hear -- when I talk to our teams and hear the opportunities that they see or they're having, the conversations they're having, that's what -- that gives me confidence that we're -- over the course of the year, mid-single digits is the appropriate run rate for us. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Kevin Chapman for any closing remarks. Kevin Chapman: Thank you, Nick. And thank you to everybody that listened this morning, and we appreciate your interest in Renasant. We also look forward to meeting with investors throughout the quarter. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Wolfgang Wienand: Also a warm welcome from my side to all the ladies and gentlemen here in the room, of course, also to the ladies and gentlemen joining us online to our full year 2025 conference. And before we actually dive into the presentation, please take a look at our safe harbor statement, take note and feel bound to it. Quickly, we prepared a rich agenda for you today. And Philippe, myself, I guess, are very much looking forward to present this strong set of numbers to you and later on in the Q&A, discuss with you about what 2025 was to us at One Lonza and actually what 2026 in the future will bring. So One Lonza full year 2025 performance, kind of diving a little bit deeper into the business platforms, then the outlook 2026 and afterwards, you shooting questions at us and us providing useful answers. So my 5 key messages for you today. First of all, the One Lonza team delivered strong profitable growth in 2024, top line growth in constant exchange rates of above 21% and an expanding margin to 31.6%, plus 1.4 percentage points ahead of our upgraded CDMO outlook of July 2025. This business, of course, was driven by Vacaville, but not only. The underlying business actually expanded very nicely as well and at low teens constant exchange rate sales and also in line with our CDMO organic growth model. We successfully launched our new operating model 1st of April to introduce new ways of working in a new way, how we actually present ourselves to the outside world, to our customers and increase elevate the customer experience within One Lonza across all technologies and all business platforms. We actually saw and continue to see strong underlying business momentum. And considering the things that actually happened last year in terms of how the future supply chains in the pharmaceutical industry will look like, we, at Lonza actually are very well positioned to also support our clients on that journey, and I'll speak to that later in much more detail. Then the outlook for 2026. We expect our top line to grow at 11% to 12% in constant exchange rates and the CORE EBITDA margin to further expand, reaching a level well above 32%, which means actually that we, in 2026, will already enter the corridor of 32% to 34% that 2 years ago was given to you as a midterm guidance for 2028. Briefly on the CHI business, which developed well as planned and has shown growth, again, in line with the outlook that we provided to you a year ago and will from now on, considering that we intend to exit that business be accounted for as a discontinued operation. The exit process is advancing as planned. And with that, briefly, as a reminder for you our vision, which kind of states our ambition, which is we are the pioneer and the world leader in the CDMO industry with cutting-edge science, smart technology and lean manufacturing. In short, what it says actually Lonza is in a position to outgrow the underlying market and create outstanding value. What does it take to create outstanding value? First of all, an attractive underlying market. That is the case in the pharmaceutical industry. It takes a strong business model, the CDMO business model. But in order to outgrow and create superior value, we need something special, which actually is what we introduced to you a year ago, a little bit more than a year ago in December 2024, our unique One Lonza Engine, consisting of 5 elements, high-performance teams, leading scientific, technological and digital ecosystem, unparalleled customer partnerships, end-to-end execution excellence and plug-and-play investment and integration capabilities. While these are broad claims, highly abstract, I actually decided and want to share a number of evidence and proof points for our claims. First of all, high-performance teams. We continuously try to hold ourselves true in terms of that what is in my mind as a CEO and in the minds of the executive leadership teams actually is in line with reality for which we actually do voice of employee surveys every 6 months. And among the top 200 leaders of Lonza, 95% of them strongly support the new mission and purpose of Lonza. In terms of engagement index, also above 80%, which is really an outstanding value. So full support of high-performing teams. In terms of scientific support to our clients, Lonza and its GS system supported more than 100 commercial products. It is the leading cell line in the industry, unparalleled customer partnerships with a new operating model and creating an elevated customer experience, we actually have been able from an already industry-leading level in 2024 to further increase Net Promoter Scores, I mean, twice, 100% for big pharma and 50% for small biotech within just 12 months. Our integrated offering is gaining momentum, significantly increasing in terms of us offering Drug Substances and Drug Product services. And last but not least, in terms of our ability to continuously add people, technologies and acquisitions. Synaffix is a great example, acquired in 2023 and integration already done in the first quarter of 2024 and more notably, the integration of Vacaville mid of 2025. I'll speak to that in much more detail later. So in terms of, I mean, outgrowing our market, I mean, what are the components, which in the end lead to our ability as proven in the past 2025 and as we expect it to continue over the next year and years to come. First of all, it's the underlying market growth, 6% to 7% available to everyone. Then there is the increase of outsourcing. So pharmaceutical companies deciding not to manufacture everything in-house, but rather go to trusted partners like Lonza and have their products developed and manufactured. They are adding 1% to 2% growth increment. Then there is active market selection. So us deciding where to play, which are the high-growth, high-value market segments in the underlying pharmaceutical market, adding another 1% to 2%, leading to an underlying, I mean, selected market growth of 8% to 10%. And then there is the Lonza Engine. What makes us special, which is why people come to us, which provides for an additional upside, 2% to 3%. So overall yielding an underlying growth potential for Lonza of low teens, 10% to 13%. So I talked about market and us taking conscious decisions in terms of where to play, where not to play. Let's briefly break it down. The overall underlying pharma market is probably USD 1.2 trillion, growing at 7%. clinical pipeline, more than 7,000 molecules. Based on the technologies that we have chosen for ourselves, and based on the positioning in the value chain, in the product life cycle from early phase development down to commercial manufacturing, we at Lonza are able and operate within a USD 100 billion market growing at 8% to 10%. And we, in terms of future potential, are able to cover more than 90% of the innovative pharmaceutical pipeline to fuel future growth. Quickly on outsourcing because there was a lot of discussion in the last year in terms of, I mean, will the world change? And if so, how? And what does that change? Would that change mean for the CDMO business model? First of all, and we should never forget that the CDMO business model is a beautiful business model. It's a sustainable business model because it adds tangible value and creates efficient global pharmaceutical supply. This has been true over the last 15 years and will be true in the next 15 years to come as well. But let's be more specific with all the big numbers and the big headlines out there about large pharmaceutical companies investing in the U.S., we kind of just took from actually historic figures and also Bloomberg consensus forecast what actually the world and the pharmaceutical companies themselves expect going forward in terms of their own CapEx behavior. And the outcome actually is in absolute terms, CapEx of the top 20 large pharma companies between 2015 and 2025 grew at a CAGR of 3%, and it's expected to grow at a same CAGR between 2025 and 2030. So no change. Kind of normalizing it for CapEx -- sorry, for sales, same outcome. We will not leave the corridor of 4.5%, maybe 5% of revenues. So no real change in terms of the CapEx behavior of large pharmaceutical companies. What will most likely change though, is where that CapEx will be spent. And it's just likely that more of it, which would have otherwise been spent 1 or 2 years ago around the world might rather go to the [ S ] to a larger extent. So no change when it comes to large pharmaceutical customers. I mean for small and midsized biotechs, actually, there has not been the option anyway to spend a lot of money into own captive manufacturing. They shouldn't, they can't and they won't. And those small and midsized biotech companies are actually gaining traction. And we shared here for 2015, the share of innovation, so new clinical assets becoming available for small pharma, 60% versus 40% of large pharma. This increasing to 75% in 2025 and 25% for large pharma. So those companies will spend every dollar they have on the true value driver of their business, which is innovation. They will continue to rely on reliable partners like Lonza to make their products happen to turn their breakthrough innovation into viable therapies and true products. However, regionalization is most likely to stay with us and to further evolve going forward. And here, Lonza as the one global CDMO being able and having a track record to build and operate all around the world is very well positioned to support our clients on that journey as well. So here is some evidence what it specifically means when I speak about the largest global manufacturing network in the whole industry. First of all, demand is kind of distributed 1/3, 1/3, 1/3 across the U.S., Europe and Asia, rest of world. And we actually have significant presence, significant capacities in all those key regions in the U.S., 5 sites and in Europe, 6 sites, 2 in Asia. Looking back in terms of how we have built that global manufacturing network from 2020 to 2025, we as Lonza spent CHF 10 billion in terms of CapEx, out of which CHF 3 billion went into U.S. capacities. With Vacaville and all those investments in the past, we have created the largest mammalian CDMO business in the U.S., very well positioned like no one else to actually help our clients for U.S. supply for U.S. demand. And all that leads to an active business portfolio of more than 1,000 molecules at a certain -- at a given point in time, approximately 10% of our revenue is related to early phase business, so preclinical Phase I, 20% Phase II and the remaining 70% for Phase III on commercial assets, which leads to strong revenue visibility. We have a very low concentration in terms of risk and us being exposed to individual products, and we have a high level of diversification by technology, indication and company type. And with that, I actually continue with sharing what we believe have been the business highlights in 2025. Three topics. First of all, a robust sales momentum across all our key modalities, technologies, so mammalian, small molecule, bioconjugates, drug product and also the Bioscience technology platform had significant growth again in 2025, driven by mammalian small-scale assets and maturing growth projects across different technologies. We actually saw sustained high commercial contracting, again, across technologies and sites, altogether, well above CHF 10 billion signed in 2025, of course, materializing over the years to come, including a fifth significant long-term contract for Vacaville with further contracts, sorry, for Vacaville being in late-stage negotiations. So thirdly, on CHI, we saw as planned, as predicted, the recovery of the business returning back to growth, almost 4% and the margin expanding as planned. The exit process is also advancing as planned. And as I said before, we will actually report CHI as a discontinued operations as we should for a business that we will not keep within our portfolio. So this is actually what we are currently doing to not only deliver the business as promised today, but to also prepare the company for future growth. Currently, the teams are managing 23 CapEx -- growth CapEx projects around the world. Again, no other CDMO actually can do it, has proven to be able to do it. Lonza can do it. Currently, 23 large CapEx growth projects worth CHF 7 billion. 90% of it for commercial and mixed assets, so highly profitable and 100% in Europe and the U.S. A few examples to point at. In Visp, a large-samammalian started GMP production in 2025 and will be ramped up with a tilt towards the second half 2026. Going forward, a large important project for Lonza and for our clients. Commercial bioconjugation, it's a medium-sized CapEx project will actually start stepwise from 2029 and then reach peak sales in the mid-2030s, large-scale fill/finish and Stein ongoing, start expected for '27 peak sales also in the early 2030s. Type 1 diabetes cell therapy, cool technology science, CRISPR/Cas together with Vertex in Portsmouth, start expected in 2027 and peak sales around 2030. And Vacaville, I mean, I thought about the headline, make it as crisp and as clear as possible. A great fit to Lonza coming at a great point in time, creating the largest CDMO mammalian network in the U.S. in one go. So remember, we paid in 2024, CHF 1.1 billion for that asset. Closing was 1st of October, and we expect the site to fully deliver to its full potential in the early 2030s. Some evidence why we are so happy and so confident and so optimistic for what we will be doing with that site and already start to do with that site. First of all, a very stable and strong team. I've been there after JPMorgan, doing town halls, taking investors there and also talking to people. We have attrition rate of 99 -- I mean, actually retention rate of 99-point something, so essentially 100%. Great people willing to work for us and embracing the opportunity that Lonza actually gives to them. It's a high-quality asset, as you can expect from Roche and the investment that we have started to do of up to CHF 500 million is into the flexibility of the site so that we can even further increase operational efficiency. Customer interest is very high, remains high, as evidenced by now altogether 5 large commercial contracts for the site, which will, by the way, be able to already now kind of substitute the Roche volumes going out by 2028 and will make the site deliver at the stable level that we have seen today, plus/minus. So very good outcome also in terms of the commercial development and the selling of that capacity. Also important, the first U.S. FDA inspection under the new ownership in Q4 last year was a very strong outcome, only minor observations, which could be resolved almost immediately. First successful tech transfer. So a site which actually didn't receive so many products over the past years had to prove that. And we have been able to execute that tech transfer in a seamless way, and the team actually lived up to the challenge of now operating within a CDMO business model, and I actually included a quote of the responsible external manufacturing head of that large pharmaceutical company, "A truly seamless tech transfer into Vacaville execution at a level I have rarely experienced in my career." And I can tell you, this gentleman is not 21 years old. He has seen a lot. right? Last but not least, post-merger integration finalized successfully mid of 2025. So what we can actually say now and announce to you today is that this site is now a regular part of our global manufacturing network and will be managed as such and will start to contribute and continue to contribute over the next years. As a heads up, now that we actually can tell you that already with those 5 contracts in our business portfolio, we can actually substitute the Roche business and deliver stable revenue plus/minus at the current level until 2028. We will not further comment and report on individual contracts for that site as we don't do it for any other site in our overall manufacturing network. And with that, I hand over to Philippe, who will take you through our financial figures for 2025. Philippe Deecke: Thanks, Wolfgang. Good afternoon, and good morning to people joining from the U.S. also from my side. Before I start, let me just give you 1 or 2 disclaimers. All numbers that I will present are for the Lonza continuing business, which means that they all exclude our CHI business. The CHI business, as was mentioned by Wolfgang, is now reported as discontinued operation according to the definition in IFRS 5. Further, as usual, our sales growth rates are in constant currencies. All other growth rates are in actual currencies. With that, let me go to the key financials. I need to click myself. So first of all, the Lonza business delivered CHF 6.5 billion in 2025. This is CHF 1 billion more sales than we did back in 2024. So CHF 1 billion growth, 21.7% of constant currency growth. This is ahead of the upgraded guidance of 20% to 21% that we communicated back in July last year. This includes roughly CHF 0.6 billion of sales from our Vacaville site, so slightly at the upper end of the CHF 0.5 billion that we had forecasted. We're very pleased, obviously, operationally, Wolfgang mentioned that we're very pleased with the site operationally. We are also very pleased financially with the contribution of Vacaville. Organically, the organic business, excluding Vacaville, contributed or grow at low teens, which is fully aligned with our CDMO organic growth model. Going to the margin. We delivered a margin of 31.6%, up 1.4 percentage points, also very pleased about that. And this as well is ahead of the guided range of 30% to 31%. Three main contributors to the margin. One is, of course, operating leverage. When you grow the top line at that rate, of course, we are not growing our cost at the same rate. So administration costs, sales and marketing costs, research costs are growing at a much lower rate, providing leverage. Second, the maturing of our growth projects. Some of our projects are now getting close to higher utilization and therefore, increasing their margin. And number three, several targeted productivity initiatives across the organization. One word on FX. You see that we had an FX impact of roughly 2.5 points on both the top line and the bottom line. This is coming mainly from the weakening of the U.S. dollar back in the early part of 2025. Luckily, we have a very strong natural hedge. We are selling and having costs in roughly the same currencies. We're helping that as well with additional financial hedging program to protect our margins. With that, let's go to the sales evolution. As you can see on this page, we had good performance from 2 of our large platforms. Let me start with the exceptional performance of our ADS business, Advanced Synthesis, with very strong contribution from both bioconjugates as well as small molecule assets, the platform growing 22% organically. We had very -- we had several assets in both platforms growing and ramping up simultaneously and growing at a fast pace. On the I&B, in Integrated Biologics, you see a growth of 32%, a large chunk of that obviously coming from the Vacaville side, but also the other organic assets ramping up nicely. Going to Specialized Modalities. This was probably or is the soft point of our performance in 2025. We had discussed that in the first half last year and in Q3. We saw soft operational performance from the Cell & Gene business that actually continued during the year, but we're looking forward to a much better year in 2026. And then on the microbial side, where we experienced a phasing towards the end of 2025 into 2026. Also here, a better '26 is expected. The platform ended up with a small decline of minus 3%. Moving on to our CORE EBITDA performance. Here, again, very pleased with the progress, reaching 31.6%, close to the 32%, but we'll do that in 2026 and beyond. So the 3 key reasons why we grew our margin. I mentioned that before, but maybe a little bit more detail, again, operating leverage where we have very strong cost discipline across the organization now, both at headquarters level, but as well in the different sites. We have several maturing assets, especially in mammalian bioconjugates and small molecules that are allowing us to offset the dilution from the newer assets. And last but not least, operational excellence and high utilization in our commercial sites allow us to offset a slightly negative mix versus 2024. Maybe a few words to the platforms. I'll start with ADS, again, an exceptional margin improvement of 5 points, reaching margins of 42%. This is even slightly above the margins that we delivered in the first half of 2025. So here as well, again, very pleased. However, this is an exceptional year, and we will probably look at the normalization into '26. Looking at Integrated Biologics, a slight margin decline here of 0.9%, mainly due to unfavorable product mix and as well some new assets that have been coming online and growing in 2025. And then this is also the platform where we have the highest U.S. dollar exposure. And so while we have hedging, there is some impact from the weaker dollar. On SPM, I think very pleased that the platform could almost hold their margin at 17%, only down 0.5% despite the lower performance. This is due to some profitable mix and as well some very high cost discipline across the platform. Moving over to our CapEx details. You see here that we spent roughly CHF 1.3 billion in our CDMO business. Again, CapEx is a key enabler for Lonza's future growth and also a key focus for the organization now and going forward. The CHF 1.3 billion was spent most of it on gross assets, 60% of the spend was for growth. This includes a diversified portfolio of the 23 projects that Wolfgang mentioned earlier. You see as well that the peak of CapEx is behind us. This was in the past year. You see in the middle of the page that we are on a slope to actually normalize our CapEx spend. This -- in 2025, we reached 19.6% of CapEx, slightly below the guided range of low 20s, mainly due to some higher sales and some more discipline in maintenance spend. We're looking at high teens for 2026. And then over the midterm, normalizing in what we call our CDMO organic growth model for CapEx in the mid- to high teens. The normalizing CapEx also allow us to do great progress on our free cash flow. You see for this year that for our continuing business, we delivered CHF 0.5 billion of free cash flow, CHF 545 million, almost double the amount we delivered back in 2024. One of the key reasons, obviously, CapEx, which has been stable while the business has been growing, but also actually very strong management of inventories and trade working capital in general. You see that our trade working capital grew CHF 200 million. This is much less than what obviously our business has been growing in '25. And so you see that our trade working capital in percent of sales has actually declined by almost 5 points. Our inventories -- inventory coverage is also declining almost by a week, and this is something that we will focus a lot more to continuously drive down inventories to the right amount for our business. Moving from cash to our capital allocation framework. This is not new. We have not changed anything on that slide. This is more of a reminder for you, obviously, because a lot of people are asking us the questions about what will we do with the CHI proceeds. Well, first of all, it's not sure that there will be CHI proceeds depending on the exit route that will actually happen. But let me take you through our priorities in terms of capital allocation. Priority #1 is the investment into maintenance, infrastructure and systems. Why? Because we need to make sure that our base assets and our growing base assets are future-proof and are well maintained and will contribute to the future growth of the company. Priority #2, our progressive dividend policy, very important to us as well, and I'll get to that on the next page, which lead us to our discretionary cash. This is the cash that is available for investment into growth. This discretionary cash may be increased by proceeds from the CHI exit, should it be leading to proceeds. These proceeds as well will flow into what we call discretionary cash, will be invested into organic or inorganic bolt-on M&A investments. Now rest assured that we will be very disciplined in the way we allocate this capital. You know that for internal organic CapEx projects, we use very strict financial thresholds, 15%, 1-5 of internal rate of return and a ROIC at peak of 30%. This is for the organic investments. For bolt-on and M&A, it's not that easy to put a formal threshold, but we will remain very disciplined and basically look at 2 things: one, attractive returns; and second, is there a strategic fit with our Lonza Engine. And if you look back at the last 2 acquisitions being Synaffix and Vacaville that Wolfgang also shared with you, you can see that these were very disciplined and very attractive acquisitions. Looking at our dividend. As you can see, this dividend policy fully in line with our capital allocation framework. The Board of Lonza is actually proposing to increase the dividend by 25% to an amount of CHF 5 per share. This reflects obviously the strong earnings performance and will let shareholders benefit directly from our growth of earnings. Our progressive dividend, just to be very clear, means that we will maintain or grow our dividend per share on a year-by-year basis. And you can see on the chart that we have proven this over the last 10 years. Now let me finish with a quick update on our ESG performance before handing back to Wolfgang. We've made strong progress in 2025 on our ESG agenda. I'd like to drive your attention to the top 2 pie charts. One is the greenhouse gas emission intensity and on the right, the waste intensity. Both of these targets have actually been met in 2025, 5 years ahead of schedule. We are planning to have the intensity by 2030, and we have achieved that already in 2025. We are, therefore, deciding to rebase and to now looking at cutting by 50% the 2021 base, which is in line with the Science Based Target initiative. So great progress on greenhouse gas and on waste intensity. Also great progress on actually renewable energy. As of January 2026, all our electricity in the U.S., in Europe and in China will be renewable sources. Our progress is also well recognized externally, and we've been, for the first time, awarded the EcoVadis Gold rating and have been named again by Ethisphere as one of the world's most ethical companies. So again, great internal progress and great external progress. And with that, I'd like to hand back to Wolfgang, who will take you through the business platform performance and our outlook for 2026. Thank you very much. Wolfgang Wienand: Thank you, Philippe. And indeed, let's take a brief look at the 3 business platforms before then turning our heads towards the future. So Integrated Biologics, robust sales and margins driven by strong demand and operational execution. Here, Vacaville, as discussed before, kind of contributed more than we expected at the beginning of last year. We also saw a margin accretion from strong operational execution, however, was kind of more than offset by growth project dilution and unfavorable portfolio mix, as already mentioned before by Philippe. And also here, it's kind of clear. I mean, the significant amount of contracted business of above CHF 10 billion, a major part of it comes from our Integrated Biologics business platform. So ADS, our Advanced Synthesis business, an exceptional year in terms of sales growth driven by rapid and at the same time, occurring ramp-up of growth assets, which was great to see and actually great to see how well the teams in small molecules and also bioconjugates actually made it work and delivered according to the expectation of our clients, outstanding profitability above 40%, which is probably plus/minus what we can expect going forward from that business in terms of profitability. Our Specialized Modalities business, which is in terms of strategic importance, relevance to us, and an area from which we expect significant future growth over the next years to come and also significant contributions to our profitability. However, it's still suffering from this whole universe being small and limited. And as a consequence of that, also our own business portfolio being much smaller than for the other modalities and as a consequence of that, also more volatile. However, we are one of the very few CDMOs actually having 5 commercial assets in our network. And essentially, each of our manufacturing sites now has one commercial asset. So Bioscience briefly on that, which is our media business plus some other smaller businesses also returned on a very attractive growth trajectory, which supported that business platform. And with that, I actually turn our heads towards the future outlook 2026. What can you expect from us? What do we expect from us in 2026. First of all, continued high demand for the services of One Lonza. So stronger in constant exchange rates, stronger relative growth in the second half as compared to -- sorry, in the first half as compared to the second half. However, in absolute terms, the year will be balanced, and it's more a baseline effect how 2025 look like. Regionalization of supply chains will be with us also going forward. However, will not apply to existing businesses, to existing products in existing assets because typically, no one actually changes a winning team and changes an existing well-functioning supply chain. It's more about where will we allocate new business going forward. And this will be in line with the expectation and the desires and preferences of our clients, probably much more supporting regional demand by regional supply, which will then, in turn, also help -- further help our already strong natural hedge. CORE EBITDA margin expanding from maturing growth projects, productivity, a topic which is very close to my heart, cost discipline and obviously, operating leverage. I mean key priorities for myself, for the whole One Lonza team, of course, continue to elevate the One Lonza customer experience already evidenced by the significant increase in Net Promoter Score, but the journey goes on. A base business, execute with rigor and deliver constant -- I mean, through grinding of our business, our assets, constant margin expansion. Cash, it's going to be important this year or last year actually was an important step forward. We will continue on that journey, and we know how. In terms of growth, execute this 23 growth projects and of course, kick off new ones and also on top of that, being agnostic to doing it organically or inorganically, driving our M&A agenda. Group Functions are elevated in their role and their impact on the businesses, which is around standardization and also making us work in a more consistent way. CHI is going to be an important topic in 2026, driving the exit process and executing it at the appropriate time in the best interest of our shareholders and stakeholders. And with that, I want to close with actually reminding all of us of the financial model that we are applying here at Lonza. Based on our Lonza Engine, there's an underlying market opportunity in terms of growth of low teens every year on average over time. In order to translate those opportunities into tangible business, we need to continue to add capacity, invest. And these investments as long as the growth opportunities on average over time are in the range of low teens, this CapEx requirement will be around mid- to high teens of sales going forward. This then delivers our CDMO organic growth model, which is a constant exchange rate sales growth of low teens percentages on average over time and the CORE EBITDA margin growing ahead of -- so CORE EBITDA growing ahead of sales growth. Specifically for 2026, it means our constant exchange rate at sales growth is expected to be between 11% and 12% and a further CORE EBITDA margin expansion to a level above 32%. So already entering the corridor that was 2 years ago predicted to be achieved only in 2028. So what have been the key messages that I, we shared with you today. First of all, Lonza has delivered in 2025 and is well prepared for the ongoing journey of transformation and growth in 2026 and beyond. We have made progress as promised and are set up for success in terms of consistently delivering our business and also the project in Vacaville and further evolve as the global One Lonza team. We expect, again, significant profitable growth and we'll continue on that journey. And for the longer term, we are having -- we actually defined a clear strategy and the capital allocation framework to deliver in line with our CDMO organic growth model. We are One Lonza, the pioneer global CDMO market leader, manufacturing the medicines of tomorrow for our customers and their patients worldwide. I thank you for your attention and look forward to your questions. David Carter: Many thanks, Wolfgang. I'm David Carter. I'm the Global Head of Communications, and I'm going to be hosting the Q&A session. I'm going to ask my 2 colleagues here to just slightly rearrange the setup for us so that our leaders can relax. Philippe is back on the stage. And I'm going to ask anyone who's got questions in the room, we're going to start with you. If you could say your name, your institution and ask, I know it's ambitious, but if it's at all possible, no more than 2 questions. We will also, for people that are online, flick over to you at a certain point and make sure that you have a chance to ask questions, too. But first and foremost, are there any questions in the room? Let's start over here. Daniel Jelovcan: Daniel Jelovcan, ZKB. So two, the CHF 70 million hedging gain, which is booked in the top line, I'm not an auditor, but shouldn't an hedge can be booked somewhere in the financial expense or below the EBIT. I don't understand the mechanism if you can clarify. And then I ask the second question. Philippe Deecke: Yes. No, this is fully in line with hedge accounting. So this is normal. We've been doing this all along. It's just this year, this -- or last year, 2025, given the volatility in exchange rates, it has been higher than in previous year. But this has always been booked at the same place. Now to be clear as well, this is not accounted for in our constant exchange rate growth. So we remove it from that. Daniel Jelovcan: Okay. And the second question, when I do my calculation in Integrated Biologics, excluding Vacaville, you must have had an organic growth of 8% in the second half, quite a slowdown from the first half which was 17%. Why was that? Was that maybe some batches which were not booked in December, but in January, that's why you're guiding for a strong first half '26. Just to understand the picture. Philippe Deecke: Yes. No special reason. I think there's always volatility between the halves. We've seen that in the past. So I think it's more of a mix rather than kind of batches that would have been blocked in December. So nothing special to notice. It's the different phasing of assets coming online and mix. Nothing different. David Carter: Are there any more questions in the room? We have a quiet house today. We're usually more challenging that. Do we have any more questions online at the moment? We're going to hand over to Sandra online in that case, Sandra, if I could ask you to host the online question session, that would be great. Operator: The first question comes from Ebrahim Zain from JPMorgan. Zain Ebrahim: Zain Ebrahim, JPMorgan. My first question is on the Advanced Synthesis business, and growth momentum sounds -- was really strong in 2025 at [ 22 ] growth momentum going forward in '25 benefited from 2 growth projects that seems and you'll have further growth project contribution in 2026. Margins sound like 40% plus/minus, as you said. So any further commentary there would be helpful. And my second question is just on the Cell & Gene therapy business where you've indicated you expect an improvement in 2026. And just the question is what underpins that confidence? Wolfgang Wienand: Thank you for the question. I'll take the first one, I propose. Philippe Deecke: If you understood the first one, I will pick the second one. So I'm happy to take this. Wolfgang Wienand: Yes. I actually didn't understand the second one, so pass it on. But either way, on ADS, indeed, in terms of profitability, it probably will hover around the 40%. And that's what we expect going forward in 2026 in the years to come. The growth obviously was kind of exceptional in 2025 due to, I mean, many positive events coinciding. But it will be a growth engine going forward as well, but in 2026 and not at the level that we have seen in 2025. And maybe Philippe has made up his mind in terms of the second question in the meantime. Philippe Deecke: No. Second question, I think -- thank you, Zain, it's Philippe. So I think we're confident in terms of the growth rate for Cell & Gene in '26 versus '25. As we mentioned, I think, in the first half, we had some operational challenges in Cell & Gene in one of our sites during '25. This is being resolved. And so the business will kind of continue in a more normal fashion in '26. So from that point of view, yes, we are confident. On top of that, actually, we keep on ramping up commercial products in all of our sites. So all the Cell & Gene sites in the world for Lonza have a commercial product, which is, of course, helping to stabilize somehow the utilization of these sites. So yes, we are much more confident for '26 than what you've seen in '25. Wolfgang Wienand: Before we move on to next question if I could just ask anybody who's joining online to speak as slowly and clearly as possible. The line is not quite so clear at this end. So the slower and clear you are, the more easily we can understand you. So Sandra, I'll hand back to you for the next question. Operator: The next question comes from Charles Pitman-King from Barclays. Charles Pitman: Firstly, just on Vacaville, you're targeting stable CHF 0.6 billion sales now for FY '26 versus prior CHF 0.5 billion. Can you just confirm that this is going to remain stable around CHF 0.6 billion to '28 now. And with these 5 contracts in place derisking that target, can you confirm you're still targeting 30% utilization? Provide a little bit more detail around the predicted phasing of the contract and just confirm whether they all need to be fully ramped by '28 to offset that -- those lost contracts. Then just secondly -- sorry, just secondly, could you confirm what the current Form 483s are currently outstanding for Lonza facilities? And what advised rectifications are required and how this is expected to impact any ongoing operations and just confirm there were no impacts in FY '25. Wolfgang Wienand: Yes. Let me indeed start with the second question. Thank you, Charles. This 483, and there has been rumors around that and around other topics as well on which I will briefly comment in a bit. This 483 actually was a huge success. Not that it wouldn't have been even better to have a clean sheet, but a 483 with only 3, I believe, minor observations, which could either be immediately in the short term, close out or a few weeks later, actually is a very good outcome and receiving 483 is more the standard outcome that essentially across the pharmaceutical industry is yielded. It is not to be also clear around that. It has nothing to do in this case with the warning letter. The sequence from the process of the U.S. FDA is, I mean, a bad 483 with major observations, official action indicated can turn into a warning letter, but it's actually typically not the case, but what typically is the case that you get this form with your observations. And in this case of Vacaville, it actually was a very good outcome with only 3 minor observations which have been immediately being addressed and closed and are all addressed and closed right now. There was no impact, nothing on the ongoing operations and actually nothing of concern. I think that's important to say. There are, of course, also, I mean, at least you're telling us that, because it's not brought to us ourselves, other rumors around Vacaville not being a high-quality asset, not being capable of being run in an efficient way as a CDMO asset and all that, obviously, coming from other market participants. I actually won't comment on that in detail, but I would like to let the evidence that we shared with you speak for itself. Just 2 thoughts, maybe. First of all, and that is kind of my take of it as long as our competition continues to speak about us, and can't help itself to speak about us. I take it as reconfirmation of Lonza being the market leader in the space, first thought. Second thought on Vacaville. And I don't know, but one way of looking at it, of course, is that people might be concerned from a competitive standpoint, what great things we, at Lonza can do with great assets over the next years. But I would like to leave it there, but I wanted to address that because I think it's important. What you should take with me is what I shared with you today, a great asset, a great acquisition at a great point in time with a business secured until 2028 and beyond to keep, actually to substitute the Roche volumes going out and to keep the revenue at the level of where we are today, plus/minus CHF 50 million maybe over time. And that actually leads to the first question of you, Charles, which is on, first of all, phasing and ramping up. First of all, now having 5 contracts, of course, we will continue to sign contracts, right? We don't stop even though we will stop talking about it and reporting it because we don't do it for individual sites, which in the end are run as an integral part of the global network. So we will continue to add business because interest is very, very high. Those 5 contracts, which are large. I mean, they will only come to full fruition after 2028 because that's the time you need to actually tech transfer and ramp it up. So this is already feeding growth beyond 2028 and the other business that we actually will win over the next days, maybe even weeks and months will then take us further for this site to, I mean, come to its full potential, come to full fruition in the early 2030s. I think what is still open from your question, Charles, is the utilization. Yes, it's plus/minus that because the Roche business going out, new business coming in, keeping us stable at around where we are today, plus/minus. And us having the time invest into the flexibility, into the operational efficiency of the asset to them from 2028 onwards, be able to actually run at full steam and make it CHF 1 billion revenue and way beyond CHF 1 billion revenue side within the global network of One Lonza. I hope that answers. Charles Pitman: Can I please just double check on the [indiscernible] 483 as well? Wolfgang Wienand: I actually don't have the details to the degree as I had them for Vacaville, but same here. I mean what I heard, and that's actually the feedback from quality is that this has been actually a successful inspection and all observations have been minor only and have been closed out in the meantime. So also nothing which would worry me or anyone within Lonza and nothing that should worry anyone outside Lonza or anyone holding Lonza shares. Operator: The next question comes from Charles Weston from RBC Europe. Charles Weston: So my first is back on Cell & Gene therapy. You've indicated that perhaps you could have grown faster should there have been no operational issues. So I just wanted to get a sense of how much those issues may have held you back and what the state is of the relationship with any of the customers where they may have wanted more product? And my second is on the EBITDA margin. As you highlighted, you've already hit or you intend to already hit the low end of your 2028 guide 2 years early. Can you help us understand whether there's anything to prevent margins even excluding Vacaville, continuing to grow at similar rates, particularly given there was some negative mix in Integrated Biologics in 2025 that perhaps gives you a nice start. Wolfgang Wienand: Yes. Thank you, Charles. Maybe Philippe starts, and I take the second question. Philippe Deecke: Which is on Cell & Gene? Wolfgang Wienand: Yes. Philippe Deecke: yes, I think I'm not going to quantify, but let me make sure and reassure that there was no customer issues related to that. Of course, this is our first concern when something doesn't go as planned. But then we work very closely with the customer. So on this one, there was no impact on customer and the issues are resolved, and we just need the time to restart everything at the regular run rate. So from that point of view, I think things are fixed, and we're looking forward to return to normal operations in '26. Wolfgang Wienand: Yes, and Charles, on margin expansion, that's our commitment to grow EBIT -- core EBITDA ahead of sales. And our organic growth model, our commitment what we want to do with this company to constantly expand margin, right? And you will see that already this year, and that's how we guided, and you will continue to see that over the next years to come through different measures. Of course, it's expansion of our gross profit margin through pricing, through efficiency when it comes to productivity, again, very close to my heart, cost discipline. It's also about keeping SG&A costs growing at a much lower pace. So operating leverage and a number of growth projects maturing and then contributing rather than diluting our profitability. That's what you can expect from us going forward. And that is our commitment. Charles Weston: I guess I just wanted to ask, is your confidence on hitting the upper end of that now increased given the strong performance you've had in '25? Wolfgang Wienand: Yes. Charles, I would like to leave it there because, I mean, while this margin, of course -- sorry, this guidance has been put out before me joining Lonza, it is, of course, rightfully so still in your hands, which is why I actually used it and kind of went back to it, to tell you that actually, what we are doing is in line with what has been promised to you before, but we're not going to guide again specific margins for specific years, but thought that actually the organic growth model is a much more useful framework for you because it's not guiding for a specific point in time, but rather providing for a trajectory in terms of both top line growth, our margin will evolve and what it takes to make that happen in terms of CapEx. So I actually would like to leave it there, but hope that I've been able -- we have been able to create confidence that this is a serious ambition that we will make happen. Operator: The next question comes from James Vane-Tempest from Jefferies. James Vane-Tempest: Just one on free cash flow, please. Very helpful to have what the business is now and obviously comparing to what that looked like in 2024, at a group level, including the CHI. So last year, you disclosed net working capital was 13.7% of revenues. I guess now we have trade working capital of 34%, showing a reduction. But from memory, in 2024, working capital went up, I think, by around CHF 45 million with Vacaville inventories and receivables into year-end. So my question really is underlying free cash flow for this year because if it's CHF 545 million with this new definition you've got, is CHF 500 million more like the right number on an underlying basis to how to think about for this year, just so we can figure out you understand what the underlying improvements have actually been. Wolfgang Wienand: You start Philippe, I'll take the end. Philippe Deecke: I'll probably finish. James, there is no change in definition in our free cash flow definition. So the comparators to last year is fully comparable to what we do this year. The only thing we have changed is to give you a much more precise view on what our trade working capital, which we believe is a number that we should all track and also be aware. To remind everybody, trade working capital for us is inventory, AR and AP. And so in the past, in net working capital, you had a lot of other things, which included early payments, also discounting liabilities, et cetera, which were partially also even noncash, which is correcting from the EBITDA line. So no change in free cash flow definition. So the improvement that you see in free cash flow versus '24 is the true underlying free cash flow improvement of the business -- of the CDMO business. You'll find in our reporting as well the cash flow from the entire group, including discontinued operation, which top of my head is CHF 674 million, I think, if I remember well. So that's the full group. But in terms of CDMO, this is true underlying performance. Wolfgang Wienand: And adding to that, I mean, the financial engine, if you would like to call it like that. So top line growth profitably, expanding margins and decreasing CapEx as shared by Philippe through not because we would build less capacity, we need the capacity. Otherwise, we wouldn't go. But more discipline in terms of how we execute CapEx, I mean, has the ultimate goal of delivering ever more cash year-over-year. So that's what we are committing to with that CDMO organic growth model. James Vane-Tempest: Sorry to come back, I guess maybe just to ask a question in a slightly different way. I mean in '24, it was highlighted that there was much stronger Vacaville inventories, which contributed to the free cash flow decline. So my question is looking at the growth, is it a clean number, the CHF 545 million? Or does it kind of benefit from perhaps some working capital, which was pulled forward into Q4 '24 rather than actually seeing that in 2025? Philippe Deecke: Yes. I think it's usually the case that our trade working capital is higher in the fourth quarter. I think this is nothing new. So from that point of view, I don't think that the number is anywhere significantly or materially influenced by what you're describing. But please, if you're not satisfied with the answer, it's maybe something you can pick up with Daniel. So we make sure you fully get the answer. Operator: The next question comes from James Quigley from Goldman Sachs. James Quigley: I have two, please. So the first is on the contract signing. So you said well above CHF 10 billion in contract signings in 2025 that follows CHF 10 billion in '24 and CHF 13 billion the year before. Does well above mean between CHF 10.5 billion? Or does it mean between CHF 10 billion and CHF 13 billion. And how do you use this figure? You said before, it could be quite volatile. How are you thinking about it in terms of targeting and signing -- future signing contracts and driving future growth? That's question one. And question two, you gave some good details on the shift in number of molecules in development by pharma and biotech. But how do you think about M&A impacting that commentary around outsourcing and outsourcing trends as it stands as we look at the pharma industry, it looks like there was quite a big need for M&A. We've seen a pickup in M&A recently. So what happens when that shifts over time? And what have you seen when your customers, your biotech customers or even your larger pharma customers have been acquired in the past? Wolfgang Wienand: Thank you, James. To start with the contract signing value. It's not even a KPI. It shouldn't be a KPI because what is it really? It is an addition of value based on signed contracts, which might distribute over 3, 5, 7, 10, 15 years, right? And you just don't know. I mean our recommendation -- first of all, we will not make it a KPI. We will share it from time to time, but we don't believe that it's actually a meaningful KPI for which you should create or can create in a meaningful way, a time [ series ], which will actually tell you anything. On the other hand, it's also clear that, I mean, high contracting will translate into future business, which is why we shared it as a qualitative information, right? So I would, while being relevant, useful, providing confidence reassurance it's actually, I wouldn't even call it a KPI, which is kind of also already the answer of. Let's not talk about, I mean, digits after the comma because it's actually not a precise signs around that. And maybe one further thought, while signing with a certain customer, a 10-year contract, which might even be in the interest of that customer as opposed to signing a 5-year contract. The 5-year contract, even though the value in terms of contracted value, of course, is lower because just 5 years instead of 10 years, it might be commercially more attractive because it offers opportunity to speak about pricing after 5 years rather than being locked in for 10 years, just as an additional thought how to think about that figure not being a useful KPI. In terms of M&A and pharmaceutical assets being acquired by large pharma through M&A takeover of small biotechs, actually, we have seen it all. We actually have seen the molecule just staying where it was with Lonza and the new owner of that asset being super happy, having a robust, proven global supply chain for this acquired asset. We actually have seen also the case where Lonza wasn't involved. But for example, when that pharmaceutical assets came from China, it was important for the Western acquirer to build a robust Western supply chain, calling us and Lonza creating that robust supply chain. And there have been cases and will probably always be cases where if there is capacity and technology and capability available for that asset within the acquirer that this asset might actually be in-sourced or partially in-sourced. So it's kind of business as usual and nothing where we would actually see any trend or any shift in behavior. Operator: We take now the last question for today's call from Odysseas Manesiotis from BNP Paribas. Odysseas Manesiotis: Firstly, on the Visp, large-scale mammalian ramp, your 2030 peak sales assumption seems a bit pushed compared to earlier comments. Could you explain why that is? Was there some movement with contracts from Vacaville so on? And did you manage to deliver commercial batches within 2025 from that facility. And last one quick one on the FX, given the moves you're seeing today. Can I confirm with you that the 2 percentage point headwind you're assuming for the guide takes into account January average rates rather than something closer to spot and would and around 4 percentage point impact be reasonable if we take into assumption today's moves. Wolfgang Wienand: Philippe, do you want to start with the last question, I'll take the 2 first questions. Philippe Deecke: Odysseas, thank you for the FX question. So obviously, I think if you read the small print, our forecast of 2% impact was based on mid-January rates. So I think if you take into account what happened on Friday, Monday, I think the number is probably closer to 2.5%, with probably the rate if you were to use that. So I think 4% is probably too high, but we'll provide you an update in Q1 and in half year again. So I think rates are more volatile nowadays than they were in the past. Rest assured that our financial hedging and natural hedging works to stabilize margin, but we'll provide you an update as rates evolve. Wolfgang Wienand: Yes. And thank you for the 2 first questions. I mean my main assumptions are not lower, to be clear, so now, unchanged. And in 2025, that large-scale assets in Visp actually started GMP production with, let's say, commercial ramp-up starting in 2026 and especially towards the second half of 2026. Operator: I would now like to turn the conference back over to David Carter, if you have more questions in the room. David Carter: Any more questions in the room. We have one just over here. I'm aware that we are slightly running over time, but I'd like to give the room a chance to have a few questions if we can. Unknown Analyst: [indiscernible] I have a question about the CapEx 2025. You had 38% maintenance CapEx. I expected it to be a little less. Could you give us any advice about the next years, will this be the same level? Or will it come down a little? Philippe Deecke: Yes, if you look at our CDMO growth model, it actually tells you roughly how much we want to invest in growth, which is roughly low teens in terms of growth, the rest being mid- to high single digit actually in system infrastructure and maintenance. So that gives you the ratio. I think the ratio this year is probably normal. I think the majority of our investment go into growth. This will be the case also going forward. But this is -- this changes year-over-year depending on the different assets that are planned. But I think the CDMO growth model gives you a fair way to kind of value the amount of capital that would go into maintenance system and infrastructure. Unknown Analyst: And the second question is about one facility you moved from small molecules to the capsules business to be divested. Could you explain what kind of business it is and why you moved it. Philippe Deecke: Yes. This is a small site in Florida. They actually do fill/finish for clinical and very small batch sizes. This is a business that actually came with Capsugel at the time that we moved into small molecules because there were some synergies in what was being filled. I think we feel that this is a better fit with the CHI business overall and in terms of providing growth opportunity for CHI and synergistic. So we moved it back into the CHI parameter. Wolfgang Wienand: For clarification, when Philippe said fill/finish, it's not aseptic sterile manufacturing, it's OSD. So oral solid dosage forms. And especially in the case of Tampa, it's filling and that is where the fill/finish probably comes from of capsules, which actually is a nice fit as a kind of a business extension of the Capsules business itself. And again, came with Capsugel and we thought it makes sense to go with Capsugel because it's not going to be a strategic focus to do OSD for Lonza. Talking about that and kind of as a reminder, what CHI is today is not the same that CHI was when acquired in 2017. So certain businesses, which are strategic for Lonza will actually stay within Lonza, for example, Bend in Oregon where we actually do really high tech around particle design and spray drying. So it's not going to be the same scope that we acquired at the time that we are actually exiting in 2026. David Carter: Any further questions in the room? One just here. Laura Pfeifer-Rossi: Laura Pfeifer, Octavian. I'm just wondering if you could talk a little bit about the Vacaville profitability in '25 and also maybe the outlook for '26 given that you will have new products being transferred there so a little bit of puts and takes, please? Philippe Deecke: Yes. I think profitability for '25 was better than we said. I think it was operationally dilutive as expected. And I think going forward, again, probably 2025 was still an easy year. That's why we called it for Vacaville because I think they produce the same products. Now we are starting to introduce new products. We will have also shutdowns for construction work that we also explained in the past. So I think the margin will improve over time. I think it's not a linear path that will be getting better every year in the same increments. But I think we can confirm that by 2028, the site will be in line with the group at that point in time and therefore, neither dilutive nor accretive at that time, but it's not a straight line, but I think we were happier in '25 than we had expected. Wolfgang Wienand: So while it's adding in a relevant way already until 2028, I mean the rocket we will actually start in 2028 in terms of being ready, having done our CapEx into operational efficiency, new products at attractive pricing, then creating true volume, and that's actually where we will see the full benefit of the site and then reaching peak probably in the early 2030s. David Carter: Very good. We are over time now. So thank you all for your engagement both in the room and online, and I will pass back to Wolfgang to share some final words. Wolfgang Wienand: Yes. Thank you, David, and thank you all here in the room, ladies and gentlemen. And also those joining virtually for spending the time together with us, listening to actually a strong performance of the global One Lonza team delivering and even overdelivering on our promises and also listening to the commitments that we actually made for 2026 and listening to how we think about a great future for One Lonza, which should include, first and foremost, our customers and their patients will include our shareholders and, of course, ourselves as members of the global One Lonza team. So thank you for coming, all the best and looking forward to stay in touch with you the latest for the half year in July. Thank you so much, and have a great day.
Wolfgang Wienand: Also a warm welcome from my side to all the ladies and gentlemen here in the room, of course, also to the ladies and gentlemen joining us online to our full year 2025 conference. And before we actually dive into the presentation, please take a look at our safe harbor statement, take note and feel bound to it. Quickly, we prepared a rich agenda for you today. And Philippe, myself, I guess, are very much looking forward to present this strong set of numbers to you and later on in the Q&A, discuss with you about what 2025 was to us at One Lonza and actually what 2026 in the future will bring. So One Lonza full year 2025 performance, kind of diving a little bit deeper into the business platforms, then the outlook 2026 and afterwards, you shooting questions at us and us providing useful answers. So my 5 key messages for you today. First of all, the One Lonza team delivered strong profitable growth in 2024, top line growth in constant exchange rates of above 21% and an expanding margin to 31.6%, plus 1.4 percentage points ahead of our upgraded CDMO outlook of July 2025. This business, of course, was driven by Vacaville, but not only. The underlying business actually expanded very nicely as well and at low teens constant exchange rate sales and also in line with our CDMO organic growth model. We successfully launched our new operating model 1st of April to introduce new ways of working in a new way, how we actually present ourselves to the outside world, to our customers and increase elevate the customer experience within One Lonza across all technologies and all business platforms. We actually saw and continue to see strong underlying business momentum. And considering the things that actually happened last year in terms of how the future supply chains in the pharmaceutical industry will look like, we, at Lonza actually are very well positioned to also support our clients on that journey, and I'll speak to that later in much more detail. Then the outlook for 2026. We expect our top line to grow at 11% to 12% in constant exchange rates and the CORE EBITDA margin to further expand, reaching a level well above 32%, which means actually that we, in 2026, will already enter the corridor of 32% to 34% that 2 years ago was given to you as a midterm guidance for 2028. Briefly on the CHI business, which developed well as planned and has shown growth, again, in line with the outlook that we provided to you a year ago and will from now on, considering that we intend to exit that business be accounted for as a discontinued operation. The exit process is advancing as planned. And with that, briefly, as a reminder for you our vision, which kind of states our ambition, which is we are the pioneer and the world leader in the CDMO industry with cutting-edge science, smart technology and lean manufacturing. In short, what it says actually Lonza is in a position to outgrow the underlying market and create outstanding value. What does it take to create outstanding value? First of all, an attractive underlying market. That is the case in the pharmaceutical industry. It takes a strong business model, the CDMO business model. But in order to outgrow and create superior value, we need something special, which actually is what we introduced to you a year ago, a little bit more than a year ago in December 2024, our unique One Lonza Engine, consisting of 5 elements, high-performance teams, leading scientific, technological and digital ecosystem, unparalleled customer partnerships, end-to-end execution excellence and plug-and-play investment and integration capabilities. While these are broad claims, highly abstract, I actually decided and want to share a number of evidence and proof points for our claims. First of all, high-performance teams. We continuously try to hold ourselves true in terms of that what is in my mind as a CEO and in the minds of the executive leadership teams actually is in line with reality for which we actually do voice of employee surveys every 6 months. And among the top 200 leaders of Lonza, 95% of them strongly support the new mission and purpose of Lonza. In terms of engagement index, also above 80%, which is really an outstanding value. So full support of high-performing teams. In terms of scientific support to our clients, Lonza and its GS system supported more than 100 commercial products. It is the leading cell line in the industry, unparalleled customer partnerships with a new operating model and creating an elevated customer experience, we actually have been able from an already industry-leading level in 2024 to further increase Net Promoter Scores, I mean, twice, 100% for big pharma and 50% for small biotech within just 12 months. Our integrated offering is gaining momentum, significantly increasing in terms of us offering Drug Substances and Drug Product services. And last but not least, in terms of our ability to continuously add people, technologies and acquisitions. Synaffix is a great example, acquired in 2023 and integration already done in the first quarter of 2024 and more notably, the integration of Vacaville mid of 2025. I'll speak to that in much more detail later. So in terms of, I mean, outgrowing our market, I mean, what are the components, which in the end lead to our ability as proven in the past 2025 and as we expect it to continue over the next year and years to come. First of all, it's the underlying market growth, 6% to 7% available to everyone. Then there is the increase of outsourcing. So pharmaceutical companies deciding not to manufacture everything in-house, but rather go to trusted partners like Lonza and have their products developed and manufactured. They are adding 1% to 2% growth increment. Then there is active market selection. So us deciding where to play, which are the high-growth, high-value market segments in the underlying pharmaceutical market, adding another 1% to 2%, leading to an underlying, I mean, selected market growth of 8% to 10%. And then there is the Lonza Engine. What makes us special, which is why people come to us, which provides for an additional upside, 2% to 3%. So overall yielding an underlying growth potential for Lonza of low teens, 10% to 13%. So I talked about market and us taking conscious decisions in terms of where to play, where not to play. Let's briefly break it down. The overall underlying pharma market is probably USD 1.2 trillion, growing at 7%. clinical pipeline, more than 7,000 molecules. Based on the technologies that we have chosen for ourselves, and based on the positioning in the value chain, in the product life cycle from early phase development down to commercial manufacturing, we at Lonza are able and operate within a USD 100 billion market growing at 8% to 10%. And we, in terms of future potential, are able to cover more than 90% of the innovative pharmaceutical pipeline to fuel future growth. Quickly on outsourcing because there was a lot of discussion in the last year in terms of, I mean, will the world change? And if so, how? And what does that change? Would that change mean for the CDMO business model? First of all, and we should never forget that the CDMO business model is a beautiful business model. It's a sustainable business model because it adds tangible value and creates efficient global pharmaceutical supply. This has been true over the last 15 years and will be true in the next 15 years to come as well. But let's be more specific with all the big numbers and the big headlines out there about large pharmaceutical companies investing in the U.S., we kind of just took from actually historic figures and also Bloomberg consensus forecast what actually the world and the pharmaceutical companies themselves expect going forward in terms of their own CapEx behavior. And the outcome actually is in absolute terms, CapEx of the top 20 large pharma companies between 2015 and 2025 grew at a CAGR of 3%, and it's expected to grow at a same CAGR between 2025 and 2030. So no change. Kind of normalizing it for CapEx -- sorry, for sales, same outcome. We will not leave the corridor of 4.5%, maybe 5% of revenues. So no real change in terms of the CapEx behavior of large pharmaceutical companies. What will most likely change though, is where that CapEx will be spent. And it's just likely that more of it, which would have otherwise been spent 1 or 2 years ago around the world might rather go to the [ S ] to a larger extent. So no change when it comes to large pharmaceutical customers. I mean for small and midsized biotechs, actually, there has not been the option anyway to spend a lot of money into own captive manufacturing. They shouldn't, they can't and they won't. And those small and midsized biotech companies are actually gaining traction. And we shared here for 2015, the share of innovation, so new clinical assets becoming available for small pharma, 60% versus 40% of large pharma. This increasing to 75% in 2025 and 25% for large pharma. So those companies will spend every dollar they have on the true value driver of their business, which is innovation. They will continue to rely on reliable partners like Lonza to make their products happen to turn their breakthrough innovation into viable therapies and true products. However, regionalization is most likely to stay with us and to further evolve going forward. And here, Lonza as the one global CDMO being able and having a track record to build and operate all around the world is very well positioned to support our clients on that journey as well. So here is some evidence what it specifically means when I speak about the largest global manufacturing network in the whole industry. First of all, demand is kind of distributed 1/3, 1/3, 1/3 across the U.S., Europe and Asia, rest of world. And we actually have significant presence, significant capacities in all those key regions in the U.S., 5 sites and in Europe, 6 sites, 2 in Asia. Looking back in terms of how we have built that global manufacturing network from 2020 to 2025, we as Lonza spent CHF 10 billion in terms of CapEx, out of which CHF 3 billion went into U.S. capacities. With Vacaville and all those investments in the past, we have created the largest mammalian CDMO business in the U.S., very well positioned like no one else to actually help our clients for U.S. supply for U.S. demand. And all that leads to an active business portfolio of more than 1,000 molecules at a certain -- at a given point in time, approximately 10% of our revenue is related to early phase business, so preclinical Phase I, 20% Phase II and the remaining 70% for Phase III on commercial assets, which leads to strong revenue visibility. We have a very low concentration in terms of risk and us being exposed to individual products, and we have a high level of diversification by technology, indication and company type. And with that, I actually continue with sharing what we believe have been the business highlights in 2025. Three topics. First of all, a robust sales momentum across all our key modalities, technologies, so mammalian, small molecule, bioconjugates, drug product and also the Bioscience technology platform had significant growth again in 2025, driven by mammalian small-scale assets and maturing growth projects across different technologies. We actually saw sustained high commercial contracting, again, across technologies and sites, altogether, well above CHF 10 billion signed in 2025, of course, materializing over the years to come, including a fifth significant long-term contract for Vacaville with further contracts, sorry, for Vacaville being in late-stage negotiations. So thirdly, on CHI, we saw as planned, as predicted, the recovery of the business returning back to growth, almost 4% and the margin expanding as planned. The exit process is also advancing as planned. And as I said before, we will actually report CHI as a discontinued operations as we should for a business that we will not keep within our portfolio. So this is actually what we are currently doing to not only deliver the business as promised today, but to also prepare the company for future growth. Currently, the teams are managing 23 CapEx -- growth CapEx projects around the world. Again, no other CDMO actually can do it, has proven to be able to do it. Lonza can do it. Currently, 23 large CapEx growth projects worth CHF 7 billion. 90% of it for commercial and mixed assets, so highly profitable and 100% in Europe and the U.S. A few examples to point at. In Visp, a large-samammalian started GMP production in 2025 and will be ramped up with a tilt towards the second half 2026. Going forward, a large important project for Lonza and for our clients. Commercial bioconjugation, it's a medium-sized CapEx project will actually start stepwise from 2029 and then reach peak sales in the mid-2030s, large-scale fill/finish and Stein ongoing, start expected for '27 peak sales also in the early 2030s. Type 1 diabetes cell therapy, cool technology science, CRISPR/Cas together with Vertex in Portsmouth, start expected in 2027 and peak sales around 2030. And Vacaville, I mean, I thought about the headline, make it as crisp and as clear as possible. A great fit to Lonza coming at a great point in time, creating the largest CDMO mammalian network in the U.S. in one go. So remember, we paid in 2024, CHF 1.1 billion for that asset. Closing was 1st of October, and we expect the site to fully deliver to its full potential in the early 2030s. Some evidence why we are so happy and so confident and so optimistic for what we will be doing with that site and already start to do with that site. First of all, a very stable and strong team. I've been there after JPMorgan, doing town halls, taking investors there and also talking to people. We have attrition rate of 99 -- I mean, actually retention rate of 99-point something, so essentially 100%. Great people willing to work for us and embracing the opportunity that Lonza actually gives to them. It's a high-quality asset, as you can expect from Roche and the investment that we have started to do of up to CHF 500 million is into the flexibility of the site so that we can even further increase operational efficiency. Customer interest is very high, remains high, as evidenced by now altogether 5 large commercial contracts for the site, which will, by the way, be able to already now kind of substitute the Roche volumes going out by 2028 and will make the site deliver at the stable level that we have seen today, plus/minus. So very good outcome also in terms of the commercial development and the selling of that capacity. Also important, the first U.S. FDA inspection under the new ownership in Q4 last year was a very strong outcome, only minor observations, which could be resolved almost immediately. First successful tech transfer. So a site which actually didn't receive so many products over the past years had to prove that. And we have been able to execute that tech transfer in a seamless way, and the team actually lived up to the challenge of now operating within a CDMO business model, and I actually included a quote of the responsible external manufacturing head of that large pharmaceutical company, "A truly seamless tech transfer into Vacaville execution at a level I have rarely experienced in my career." And I can tell you, this gentleman is not 21 years old. He has seen a lot. right? Last but not least, post-merger integration finalized successfully mid of 2025. So what we can actually say now and announce to you today is that this site is now a regular part of our global manufacturing network and will be managed as such and will start to contribute and continue to contribute over the next years. As a heads up, now that we actually can tell you that already with those 5 contracts in our business portfolio, we can actually substitute the Roche business and deliver stable revenue plus/minus at the current level until 2028. We will not further comment and report on individual contracts for that site as we don't do it for any other site in our overall manufacturing network. And with that, I hand over to Philippe, who will take you through our financial figures for 2025. Philippe Deecke: Thanks, Wolfgang. Good afternoon, and good morning to people joining from the U.S. also from my side. Before I start, let me just give you 1 or 2 disclaimers. All numbers that I will present are for the Lonza continuing business, which means that they all exclude our CHI business. The CHI business, as was mentioned by Wolfgang, is now reported as discontinued operation according to the definition in IFRS 5. Further, as usual, our sales growth rates are in constant currencies. All other growth rates are in actual currencies. With that, let me go to the key financials. I need to click myself. So first of all, the Lonza business delivered CHF 6.5 billion in 2025. This is CHF 1 billion more sales than we did back in 2024. So CHF 1 billion growth, 21.7% of constant currency growth. This is ahead of the upgraded guidance of 20% to 21% that we communicated back in July last year. This includes roughly CHF 0.6 billion of sales from our Vacaville site, so slightly at the upper end of the CHF 0.5 billion that we had forecasted. We're very pleased, obviously, operationally, Wolfgang mentioned that we're very pleased with the site operationally. We are also very pleased financially with the contribution of Vacaville. Organically, the organic business, excluding Vacaville, contributed or grow at low teens, which is fully aligned with our CDMO organic growth model. Going to the margin. We delivered a margin of 31.6%, up 1.4 percentage points, also very pleased about that. And this as well is ahead of the guided range of 30% to 31%. Three main contributors to the margin. One is, of course, operating leverage. When you grow the top line at that rate, of course, we are not growing our cost at the same rate. So administration costs, sales and marketing costs, research costs are growing at a much lower rate, providing leverage. Second, the maturing of our growth projects. Some of our projects are now getting close to higher utilization and therefore, increasing their margin. And number three, several targeted productivity initiatives across the organization. One word on FX. You see that we had an FX impact of roughly 2.5 points on both the top line and the bottom line. This is coming mainly from the weakening of the U.S. dollar back in the early part of 2025. Luckily, we have a very strong natural hedge. We are selling and having costs in roughly the same currencies. We're helping that as well with additional financial hedging program to protect our margins. With that, let's go to the sales evolution. As you can see on this page, we had good performance from 2 of our large platforms. Let me start with the exceptional performance of our ADS business, Advanced Synthesis, with very strong contribution from both bioconjugates as well as small molecule assets, the platform growing 22% organically. We had very -- we had several assets in both platforms growing and ramping up simultaneously and growing at a fast pace. On the I&B, in Integrated Biologics, you see a growth of 32%, a large chunk of that obviously coming from the Vacaville side, but also the other organic assets ramping up nicely. Going to Specialized Modalities. This was probably or is the soft point of our performance in 2025. We had discussed that in the first half last year and in Q3. We saw soft operational performance from the Cell & Gene business that actually continued during the year, but we're looking forward to a much better year in 2026. And then on the microbial side, where we experienced a phasing towards the end of 2025 into 2026. Also here, a better '26 is expected. The platform ended up with a small decline of minus 3%. Moving on to our CORE EBITDA performance. Here, again, very pleased with the progress, reaching 31.6%, close to the 32%, but we'll do that in 2026 and beyond. So the 3 key reasons why we grew our margin. I mentioned that before, but maybe a little bit more detail, again, operating leverage where we have very strong cost discipline across the organization now, both at headquarters level, but as well in the different sites. We have several maturing assets, especially in mammalian bioconjugates and small molecules that are allowing us to offset the dilution from the newer assets. And last but not least, operational excellence and high utilization in our commercial sites allow us to offset a slightly negative mix versus 2024. Maybe a few words to the platforms. I'll start with ADS, again, an exceptional margin improvement of 5 points, reaching margins of 42%. This is even slightly above the margins that we delivered in the first half of 2025. So here as well, again, very pleased. However, this is an exceptional year, and we will probably look at the normalization into '26. Looking at Integrated Biologics, a slight margin decline here of 0.9%, mainly due to unfavorable product mix and as well some new assets that have been coming online and growing in 2025. And then this is also the platform where we have the highest U.S. dollar exposure. And so while we have hedging, there is some impact from the weaker dollar. On SPM, I think very pleased that the platform could almost hold their margin at 17%, only down 0.5% despite the lower performance. This is due to some profitable mix and as well some very high cost discipline across the platform. Moving over to our CapEx details. You see here that we spent roughly CHF 1.3 billion in our CDMO business. Again, CapEx is a key enabler for Lonza's future growth and also a key focus for the organization now and going forward. The CHF 1.3 billion was spent most of it on gross assets, 60% of the spend was for growth. This includes a diversified portfolio of the 23 projects that Wolfgang mentioned earlier. You see as well that the peak of CapEx is behind us. This was in the past year. You see in the middle of the page that we are on a slope to actually normalize our CapEx spend. This -- in 2025, we reached 19.6% of CapEx, slightly below the guided range of low 20s, mainly due to some higher sales and some more discipline in maintenance spend. We're looking at high teens for 2026. And then over the midterm, normalizing in what we call our CDMO organic growth model for CapEx in the mid- to high teens. The normalizing CapEx also allow us to do great progress on our free cash flow. You see for this year that for our continuing business, we delivered CHF 0.5 billion of free cash flow, CHF 545 million, almost double the amount we delivered back in 2024. One of the key reasons, obviously, CapEx, which has been stable while the business has been growing, but also actually very strong management of inventories and trade working capital in general. You see that our trade working capital grew CHF 200 million. This is much less than what obviously our business has been growing in '25. And so you see that our trade working capital in percent of sales has actually declined by almost 5 points. Our inventories -- inventory coverage is also declining almost by a week, and this is something that we will focus a lot more to continuously drive down inventories to the right amount for our business. Moving from cash to our capital allocation framework. This is not new. We have not changed anything on that slide. This is more of a reminder for you, obviously, because a lot of people are asking us the questions about what will we do with the CHI proceeds. Well, first of all, it's not sure that there will be CHI proceeds depending on the exit route that will actually happen. But let me take you through our priorities in terms of capital allocation. Priority #1 is the investment into maintenance, infrastructure and systems. Why? Because we need to make sure that our base assets and our growing base assets are future-proof and are well maintained and will contribute to the future growth of the company. Priority #2, our progressive dividend policy, very important to us as well, and I'll get to that on the next page, which lead us to our discretionary cash. This is the cash that is available for investment into growth. This discretionary cash may be increased by proceeds from the CHI exit, should it be leading to proceeds. These proceeds as well will flow into what we call discretionary cash, will be invested into organic or inorganic bolt-on M&A investments. Now rest assured that we will be very disciplined in the way we allocate this capital. You know that for internal organic CapEx projects, we use very strict financial thresholds, 15%, 1-5 of internal rate of return and a ROIC at peak of 30%. This is for the organic investments. For bolt-on and M&A, it's not that easy to put a formal threshold, but we will remain very disciplined and basically look at 2 things: one, attractive returns; and second, is there a strategic fit with our Lonza Engine. And if you look back at the last 2 acquisitions being Synaffix and Vacaville that Wolfgang also shared with you, you can see that these were very disciplined and very attractive acquisitions. Looking at our dividend. As you can see, this dividend policy fully in line with our capital allocation framework. The Board of Lonza is actually proposing to increase the dividend by 25% to an amount of CHF 5 per share. This reflects obviously the strong earnings performance and will let shareholders benefit directly from our growth of earnings. Our progressive dividend, just to be very clear, means that we will maintain or grow our dividend per share on a year-by-year basis. And you can see on the chart that we have proven this over the last 10 years. Now let me finish with a quick update on our ESG performance before handing back to Wolfgang. We've made strong progress in 2025 on our ESG agenda. I'd like to drive your attention to the top 2 pie charts. One is the greenhouse gas emission intensity and on the right, the waste intensity. Both of these targets have actually been met in 2025, 5 years ahead of schedule. We are planning to have the intensity by 2030, and we have achieved that already in 2025. We are, therefore, deciding to rebase and to now looking at cutting by 50% the 2021 base, which is in line with the Science Based Target initiative. So great progress on greenhouse gas and on waste intensity. Also great progress on actually renewable energy. As of January 2026, all our electricity in the U.S., in Europe and in China will be renewable sources. Our progress is also well recognized externally, and we've been, for the first time, awarded the EcoVadis Gold rating and have been named again by Ethisphere as one of the world's most ethical companies. So again, great internal progress and great external progress. And with that, I'd like to hand back to Wolfgang, who will take you through the business platform performance and our outlook for 2026. Thank you very much. Wolfgang Wienand: Thank you, Philippe. And indeed, let's take a brief look at the 3 business platforms before then turning our heads towards the future. So Integrated Biologics, robust sales and margins driven by strong demand and operational execution. Here, Vacaville, as discussed before, kind of contributed more than we expected at the beginning of last year. We also saw a margin accretion from strong operational execution, however, was kind of more than offset by growth project dilution and unfavorable portfolio mix, as already mentioned before by Philippe. And also here, it's kind of clear. I mean, the significant amount of contracted business of above CHF 10 billion, a major part of it comes from our Integrated Biologics business platform. So ADS, our Advanced Synthesis business, an exceptional year in terms of sales growth driven by rapid and at the same time, occurring ramp-up of growth assets, which was great to see and actually great to see how well the teams in small molecules and also bioconjugates actually made it work and delivered according to the expectation of our clients, outstanding profitability above 40%, which is probably plus/minus what we can expect going forward from that business in terms of profitability. Our Specialized Modalities business, which is in terms of strategic importance, relevance to us, and an area from which we expect significant future growth over the next years to come and also significant contributions to our profitability. However, it's still suffering from this whole universe being small and limited. And as a consequence of that, also our own business portfolio being much smaller than for the other modalities and as a consequence of that, also more volatile. However, we are one of the very few CDMOs actually having 5 commercial assets in our network. And essentially, each of our manufacturing sites now has one commercial asset. So Bioscience briefly on that, which is our media business plus some other smaller businesses also returned on a very attractive growth trajectory, which supported that business platform. And with that, I actually turn our heads towards the future outlook 2026. What can you expect from us? What do we expect from us in 2026. First of all, continued high demand for the services of One Lonza. So stronger in constant exchange rates, stronger relative growth in the second half as compared to -- sorry, in the first half as compared to the second half. However, in absolute terms, the year will be balanced, and it's more a baseline effect how 2025 look like. Regionalization of supply chains will be with us also going forward. However, will not apply to existing businesses, to existing products in existing assets because typically, no one actually changes a winning team and changes an existing well-functioning supply chain. It's more about where will we allocate new business going forward. And this will be in line with the expectation and the desires and preferences of our clients, probably much more supporting regional demand by regional supply, which will then, in turn, also help -- further help our already strong natural hedge. CORE EBITDA margin expanding from maturing growth projects, productivity, a topic which is very close to my heart, cost discipline and obviously, operating leverage. I mean key priorities for myself, for the whole One Lonza team, of course, continue to elevate the One Lonza customer experience already evidenced by the significant increase in Net Promoter Score, but the journey goes on. A base business, execute with rigor and deliver constant -- I mean, through grinding of our business, our assets, constant margin expansion. Cash, it's going to be important this year or last year actually was an important step forward. We will continue on that journey, and we know how. In terms of growth, execute this 23 growth projects and of course, kick off new ones and also on top of that, being agnostic to doing it organically or inorganically, driving our M&A agenda. Group Functions are elevated in their role and their impact on the businesses, which is around standardization and also making us work in a more consistent way. CHI is going to be an important topic in 2026, driving the exit process and executing it at the appropriate time in the best interest of our shareholders and stakeholders. And with that, I want to close with actually reminding all of us of the financial model that we are applying here at Lonza. Based on our Lonza Engine, there's an underlying market opportunity in terms of growth of low teens every year on average over time. In order to translate those opportunities into tangible business, we need to continue to add capacity, invest. And these investments as long as the growth opportunities on average over time are in the range of low teens, this CapEx requirement will be around mid- to high teens of sales going forward. This then delivers our CDMO organic growth model, which is a constant exchange rate sales growth of low teens percentages on average over time and the CORE EBITDA margin growing ahead of -- so CORE EBITDA growing ahead of sales growth. Specifically for 2026, it means our constant exchange rate at sales growth is expected to be between 11% and 12% and a further CORE EBITDA margin expansion to a level above 32%. So already entering the corridor that was 2 years ago predicted to be achieved only in 2028. So what have been the key messages that I, we shared with you today. First of all, Lonza has delivered in 2025 and is well prepared for the ongoing journey of transformation and growth in 2026 and beyond. We have made progress as promised and are set up for success in terms of consistently delivering our business and also the project in Vacaville and further evolve as the global One Lonza team. We expect, again, significant profitable growth and we'll continue on that journey. And for the longer term, we are having -- we actually defined a clear strategy and the capital allocation framework to deliver in line with our CDMO organic growth model. We are One Lonza, the pioneer global CDMO market leader, manufacturing the medicines of tomorrow for our customers and their patients worldwide. I thank you for your attention and look forward to your questions. David Carter: Many thanks, Wolfgang. I'm David Carter. I'm the Global Head of Communications, and I'm going to be hosting the Q&A session. I'm going to ask my 2 colleagues here to just slightly rearrange the setup for us so that our leaders can relax. Philippe is back on the stage. And I'm going to ask anyone who's got questions in the room, we're going to start with you. If you could say your name, your institution and ask, I know it's ambitious, but if it's at all possible, no more than 2 questions. We will also, for people that are online, flick over to you at a certain point and make sure that you have a chance to ask questions, too. But first and foremost, are there any questions in the room? Let's start over here. Daniel Jelovcan: Daniel Jelovcan, ZKB. So two, the CHF 70 million hedging gain, which is booked in the top line, I'm not an auditor, but shouldn't an hedge can be booked somewhere in the financial expense or below the EBIT. I don't understand the mechanism if you can clarify. And then I ask the second question. Philippe Deecke: Yes. No, this is fully in line with hedge accounting. So this is normal. We've been doing this all along. It's just this year, this -- or last year, 2025, given the volatility in exchange rates, it has been higher than in previous year. But this has always been booked at the same place. Now to be clear as well, this is not accounted for in our constant exchange rate growth. So we remove it from that. Daniel Jelovcan: Okay. And the second question, when I do my calculation in Integrated Biologics, excluding Vacaville, you must have had an organic growth of 8% in the second half, quite a slowdown from the first half which was 17%. Why was that? Was that maybe some batches which were not booked in December, but in January, that's why you're guiding for a strong first half '26. Just to understand the picture. Philippe Deecke: Yes. No special reason. I think there's always volatility between the halves. We've seen that in the past. So I think it's more of a mix rather than kind of batches that would have been blocked in December. So nothing special to notice. It's the different phasing of assets coming online and mix. Nothing different. David Carter: Are there any more questions in the room? We have a quiet house today. We're usually more challenging that. Do we have any more questions online at the moment? We're going to hand over to Sandra online in that case, Sandra, if I could ask you to host the online question session, that would be great. Operator: The first question comes from Ebrahim Zain from JPMorgan. Zain Ebrahim: Zain Ebrahim, JPMorgan. My first question is on the Advanced Synthesis business, and growth momentum sounds -- was really strong in 2025 at [ 22 ] growth momentum going forward in '25 benefited from 2 growth projects that seems and you'll have further growth project contribution in 2026. Margins sound like 40% plus/minus, as you said. So any further commentary there would be helpful. And my second question is just on the Cell & Gene therapy business where you've indicated you expect an improvement in 2026. And just the question is what underpins that confidence? Wolfgang Wienand: Thank you for the question. I'll take the first one, I propose. Philippe Deecke: If you understood the first one, I will pick the second one. So I'm happy to take this. Wolfgang Wienand: Yes. I actually didn't understand the second one, so pass it on. But either way, on ADS, indeed, in terms of profitability, it probably will hover around the 40%. And that's what we expect going forward in 2026 in the years to come. The growth obviously was kind of exceptional in 2025 due to, I mean, many positive events coinciding. But it will be a growth engine going forward as well, but in 2026 and not at the level that we have seen in 2025. And maybe Philippe has made up his mind in terms of the second question in the meantime. Philippe Deecke: No. Second question, I think -- thank you, Zain, it's Philippe. So I think we're confident in terms of the growth rate for Cell & Gene in '26 versus '25. As we mentioned, I think, in the first half, we had some operational challenges in Cell & Gene in one of our sites during '25. This is being resolved. And so the business will kind of continue in a more normal fashion in '26. So from that point of view, yes, we are confident. On top of that, actually, we keep on ramping up commercial products in all of our sites. So all the Cell & Gene sites in the world for Lonza have a commercial product, which is, of course, helping to stabilize somehow the utilization of these sites. So yes, we are much more confident for '26 than what you've seen in '25. Wolfgang Wienand: Before we move on to next question if I could just ask anybody who's joining online to speak as slowly and clearly as possible. The line is not quite so clear at this end. So the slower and clear you are, the more easily we can understand you. So Sandra, I'll hand back to you for the next question. Operator: The next question comes from Charles Pitman-King from Barclays. Charles Pitman: Firstly, just on Vacaville, you're targeting stable CHF 0.6 billion sales now for FY '26 versus prior CHF 0.5 billion. Can you just confirm that this is going to remain stable around CHF 0.6 billion to '28 now. And with these 5 contracts in place derisking that target, can you confirm you're still targeting 30% utilization? Provide a little bit more detail around the predicted phasing of the contract and just confirm whether they all need to be fully ramped by '28 to offset that -- those lost contracts. Then just secondly -- sorry, just secondly, could you confirm what the current Form 483s are currently outstanding for Lonza facilities? And what advised rectifications are required and how this is expected to impact any ongoing operations and just confirm there were no impacts in FY '25. Wolfgang Wienand: Yes. Let me indeed start with the second question. Thank you, Charles. This 483, and there has been rumors around that and around other topics as well on which I will briefly comment in a bit. This 483 actually was a huge success. Not that it wouldn't have been even better to have a clean sheet, but a 483 with only 3, I believe, minor observations, which could either be immediately in the short term, close out or a few weeks later, actually is a very good outcome and receiving 483 is more the standard outcome that essentially across the pharmaceutical industry is yielded. It is not to be also clear around that. It has nothing to do in this case with the warning letter. The sequence from the process of the U.S. FDA is, I mean, a bad 483 with major observations, official action indicated can turn into a warning letter, but it's actually typically not the case, but what typically is the case that you get this form with your observations. And in this case of Vacaville, it actually was a very good outcome with only 3 minor observations which have been immediately being addressed and closed and are all addressed and closed right now. There was no impact, nothing on the ongoing operations and actually nothing of concern. I think that's important to say. There are, of course, also, I mean, at least you're telling us that, because it's not brought to us ourselves, other rumors around Vacaville not being a high-quality asset, not being capable of being run in an efficient way as a CDMO asset and all that, obviously, coming from other market participants. I actually won't comment on that in detail, but I would like to let the evidence that we shared with you speak for itself. Just 2 thoughts, maybe. First of all, and that is kind of my take of it as long as our competition continues to speak about us, and can't help itself to speak about us. I take it as reconfirmation of Lonza being the market leader in the space, first thought. Second thought on Vacaville. And I don't know, but one way of looking at it, of course, is that people might be concerned from a competitive standpoint, what great things we, at Lonza can do with great assets over the next years. But I would like to leave it there, but I wanted to address that because I think it's important. What you should take with me is what I shared with you today, a great asset, a great acquisition at a great point in time with a business secured until 2028 and beyond to keep, actually to substitute the Roche volumes going out and to keep the revenue at the level of where we are today, plus/minus CHF 50 million maybe over time. And that actually leads to the first question of you, Charles, which is on, first of all, phasing and ramping up. First of all, now having 5 contracts, of course, we will continue to sign contracts, right? We don't stop even though we will stop talking about it and reporting it because we don't do it for individual sites, which in the end are run as an integral part of the global network. So we will continue to add business because interest is very, very high. Those 5 contracts, which are large. I mean, they will only come to full fruition after 2028 because that's the time you need to actually tech transfer and ramp it up. So this is already feeding growth beyond 2028 and the other business that we actually will win over the next days, maybe even weeks and months will then take us further for this site to, I mean, come to its full potential, come to full fruition in the early 2030s. I think what is still open from your question, Charles, is the utilization. Yes, it's plus/minus that because the Roche business going out, new business coming in, keeping us stable at around where we are today, plus/minus. And us having the time invest into the flexibility, into the operational efficiency of the asset to them from 2028 onwards, be able to actually run at full steam and make it CHF 1 billion revenue and way beyond CHF 1 billion revenue side within the global network of One Lonza. I hope that answers. Charles Pitman: Can I please just double check on the [indiscernible] 483 as well? Wolfgang Wienand: I actually don't have the details to the degree as I had them for Vacaville, but same here. I mean what I heard, and that's actually the feedback from quality is that this has been actually a successful inspection and all observations have been minor only and have been closed out in the meantime. So also nothing which would worry me or anyone within Lonza and nothing that should worry anyone outside Lonza or anyone holding Lonza shares. Operator: The next question comes from Charles Weston from RBC Europe. Charles Weston: So my first is back on Cell & Gene therapy. You've indicated that perhaps you could have grown faster should there have been no operational issues. So I just wanted to get a sense of how much those issues may have held you back and what the state is of the relationship with any of the customers where they may have wanted more product? And my second is on the EBITDA margin. As you highlighted, you've already hit or you intend to already hit the low end of your 2028 guide 2 years early. Can you help us understand whether there's anything to prevent margins even excluding Vacaville, continuing to grow at similar rates, particularly given there was some negative mix in Integrated Biologics in 2025 that perhaps gives you a nice start. Wolfgang Wienand: Yes. Thank you, Charles. Maybe Philippe starts, and I take the second question. Philippe Deecke: Which is on Cell & Gene? Wolfgang Wienand: Yes. Philippe Deecke: yes, I think I'm not going to quantify, but let me make sure and reassure that there was no customer issues related to that. Of course, this is our first concern when something doesn't go as planned. But then we work very closely with the customer. So on this one, there was no impact on customer and the issues are resolved, and we just need the time to restart everything at the regular run rate. So from that point of view, I think things are fixed, and we're looking forward to return to normal operations in '26. Wolfgang Wienand: Yes, and Charles, on margin expansion, that's our commitment to grow EBIT -- core EBITDA ahead of sales. And our organic growth model, our commitment what we want to do with this company to constantly expand margin, right? And you will see that already this year, and that's how we guided, and you will continue to see that over the next years to come through different measures. Of course, it's expansion of our gross profit margin through pricing, through efficiency when it comes to productivity, again, very close to my heart, cost discipline. It's also about keeping SG&A costs growing at a much lower pace. So operating leverage and a number of growth projects maturing and then contributing rather than diluting our profitability. That's what you can expect from us going forward. And that is our commitment. Charles Weston: I guess I just wanted to ask, is your confidence on hitting the upper end of that now increased given the strong performance you've had in '25? Wolfgang Wienand: Yes. Charles, I would like to leave it there because, I mean, while this margin, of course -- sorry, this guidance has been put out before me joining Lonza, it is, of course, rightfully so still in your hands, which is why I actually used it and kind of went back to it, to tell you that actually, what we are doing is in line with what has been promised to you before, but we're not going to guide again specific margins for specific years, but thought that actually the organic growth model is a much more useful framework for you because it's not guiding for a specific point in time, but rather providing for a trajectory in terms of both top line growth, our margin will evolve and what it takes to make that happen in terms of CapEx. So I actually would like to leave it there, but hope that I've been able -- we have been able to create confidence that this is a serious ambition that we will make happen. Operator: The next question comes from James Vane-Tempest from Jefferies. James Vane-Tempest: Just one on free cash flow, please. Very helpful to have what the business is now and obviously comparing to what that looked like in 2024, at a group level, including the CHI. So last year, you disclosed net working capital was 13.7% of revenues. I guess now we have trade working capital of 34%, showing a reduction. But from memory, in 2024, working capital went up, I think, by around CHF 45 million with Vacaville inventories and receivables into year-end. So my question really is underlying free cash flow for this year because if it's CHF 545 million with this new definition you've got, is CHF 500 million more like the right number on an underlying basis to how to think about for this year, just so we can figure out you understand what the underlying improvements have actually been. Wolfgang Wienand: You start Philippe, I'll take the end. Philippe Deecke: I'll probably finish. James, there is no change in definition in our free cash flow definition. So the comparators to last year is fully comparable to what we do this year. The only thing we have changed is to give you a much more precise view on what our trade working capital, which we believe is a number that we should all track and also be aware. To remind everybody, trade working capital for us is inventory, AR and AP. And so in the past, in net working capital, you had a lot of other things, which included early payments, also discounting liabilities, et cetera, which were partially also even noncash, which is correcting from the EBITDA line. So no change in free cash flow definition. So the improvement that you see in free cash flow versus '24 is the true underlying free cash flow improvement of the business -- of the CDMO business. You'll find in our reporting as well the cash flow from the entire group, including discontinued operation, which top of my head is CHF 674 million, I think, if I remember well. So that's the full group. But in terms of CDMO, this is true underlying performance. Wolfgang Wienand: And adding to that, I mean, the financial engine, if you would like to call it like that. So top line growth profitably, expanding margins and decreasing CapEx as shared by Philippe through not because we would build less capacity, we need the capacity. Otherwise, we wouldn't go. But more discipline in terms of how we execute CapEx, I mean, has the ultimate goal of delivering ever more cash year-over-year. So that's what we are committing to with that CDMO organic growth model. James Vane-Tempest: Sorry to come back, I guess maybe just to ask a question in a slightly different way. I mean in '24, it was highlighted that there was much stronger Vacaville inventories, which contributed to the free cash flow decline. So my question is looking at the growth, is it a clean number, the CHF 545 million? Or does it kind of benefit from perhaps some working capital, which was pulled forward into Q4 '24 rather than actually seeing that in 2025? Philippe Deecke: Yes. I think it's usually the case that our trade working capital is higher in the fourth quarter. I think this is nothing new. So from that point of view, I don't think that the number is anywhere significantly or materially influenced by what you're describing. But please, if you're not satisfied with the answer, it's maybe something you can pick up with Daniel. So we make sure you fully get the answer. Operator: The next question comes from James Quigley from Goldman Sachs. James Quigley: I have two, please. So the first is on the contract signing. So you said well above CHF 10 billion in contract signings in 2025 that follows CHF 10 billion in '24 and CHF 13 billion the year before. Does well above mean between CHF 10.5 billion? Or does it mean between CHF 10 billion and CHF 13 billion. And how do you use this figure? You said before, it could be quite volatile. How are you thinking about it in terms of targeting and signing -- future signing contracts and driving future growth? That's question one. And question two, you gave some good details on the shift in number of molecules in development by pharma and biotech. But how do you think about M&A impacting that commentary around outsourcing and outsourcing trends as it stands as we look at the pharma industry, it looks like there was quite a big need for M&A. We've seen a pickup in M&A recently. So what happens when that shifts over time? And what have you seen when your customers, your biotech customers or even your larger pharma customers have been acquired in the past? Wolfgang Wienand: Thank you, James. To start with the contract signing value. It's not even a KPI. It shouldn't be a KPI because what is it really? It is an addition of value based on signed contracts, which might distribute over 3, 5, 7, 10, 15 years, right? And you just don't know. I mean our recommendation -- first of all, we will not make it a KPI. We will share it from time to time, but we don't believe that it's actually a meaningful KPI for which you should create or can create in a meaningful way, a time [ series ], which will actually tell you anything. On the other hand, it's also clear that, I mean, high contracting will translate into future business, which is why we shared it as a qualitative information, right? So I would, while being relevant, useful, providing confidence reassurance it's actually, I wouldn't even call it a KPI, which is kind of also already the answer of. Let's not talk about, I mean, digits after the comma because it's actually not a precise signs around that. And maybe one further thought, while signing with a certain customer, a 10-year contract, which might even be in the interest of that customer as opposed to signing a 5-year contract. The 5-year contract, even though the value in terms of contracted value, of course, is lower because just 5 years instead of 10 years, it might be commercially more attractive because it offers opportunity to speak about pricing after 5 years rather than being locked in for 10 years, just as an additional thought how to think about that figure not being a useful KPI. In terms of M&A and pharmaceutical assets being acquired by large pharma through M&A takeover of small biotechs, actually, we have seen it all. We actually have seen the molecule just staying where it was with Lonza and the new owner of that asset being super happy, having a robust, proven global supply chain for this acquired asset. We actually have seen also the case where Lonza wasn't involved. But for example, when that pharmaceutical assets came from China, it was important for the Western acquirer to build a robust Western supply chain, calling us and Lonza creating that robust supply chain. And there have been cases and will probably always be cases where if there is capacity and technology and capability available for that asset within the acquirer that this asset might actually be in-sourced or partially in-sourced. So it's kind of business as usual and nothing where we would actually see any trend or any shift in behavior. Operator: We take now the last question for today's call from Odysseas Manesiotis from BNP Paribas. Odysseas Manesiotis: Firstly, on the Visp, large-scale mammalian ramp, your 2030 peak sales assumption seems a bit pushed compared to earlier comments. Could you explain why that is? Was there some movement with contracts from Vacaville so on? And did you manage to deliver commercial batches within 2025 from that facility. And last one quick one on the FX, given the moves you're seeing today. Can I confirm with you that the 2 percentage point headwind you're assuming for the guide takes into account January average rates rather than something closer to spot and would and around 4 percentage point impact be reasonable if we take into assumption today's moves. Wolfgang Wienand: Philippe, do you want to start with the last question, I'll take the 2 first questions. Philippe Deecke: Odysseas, thank you for the FX question. So obviously, I think if you read the small print, our forecast of 2% impact was based on mid-January rates. So I think if you take into account what happened on Friday, Monday, I think the number is probably closer to 2.5%, with probably the rate if you were to use that. So I think 4% is probably too high, but we'll provide you an update in Q1 and in half year again. So I think rates are more volatile nowadays than they were in the past. Rest assured that our financial hedging and natural hedging works to stabilize margin, but we'll provide you an update as rates evolve. Wolfgang Wienand: Yes. And thank you for the 2 first questions. I mean my main assumptions are not lower, to be clear, so now, unchanged. And in 2025, that large-scale assets in Visp actually started GMP production with, let's say, commercial ramp-up starting in 2026 and especially towards the second half of 2026. Operator: I would now like to turn the conference back over to David Carter, if you have more questions in the room. David Carter: Any more questions in the room. We have one just over here. I'm aware that we are slightly running over time, but I'd like to give the room a chance to have a few questions if we can. Unknown Analyst: [indiscernible] I have a question about the CapEx 2025. You had 38% maintenance CapEx. I expected it to be a little less. Could you give us any advice about the next years, will this be the same level? Or will it come down a little? Philippe Deecke: Yes, if you look at our CDMO growth model, it actually tells you roughly how much we want to invest in growth, which is roughly low teens in terms of growth, the rest being mid- to high single digit actually in system infrastructure and maintenance. So that gives you the ratio. I think the ratio this year is probably normal. I think the majority of our investment go into growth. This will be the case also going forward. But this is -- this changes year-over-year depending on the different assets that are planned. But I think the CDMO growth model gives you a fair way to kind of value the amount of capital that would go into maintenance system and infrastructure. Unknown Analyst: And the second question is about one facility you moved from small molecules to the capsules business to be divested. Could you explain what kind of business it is and why you moved it. Philippe Deecke: Yes. This is a small site in Florida. They actually do fill/finish for clinical and very small batch sizes. This is a business that actually came with Capsugel at the time that we moved into small molecules because there were some synergies in what was being filled. I think we feel that this is a better fit with the CHI business overall and in terms of providing growth opportunity for CHI and synergistic. So we moved it back into the CHI parameter. Wolfgang Wienand: For clarification, when Philippe said fill/finish, it's not aseptic sterile manufacturing, it's OSD. So oral solid dosage forms. And especially in the case of Tampa, it's filling and that is where the fill/finish probably comes from of capsules, which actually is a nice fit as a kind of a business extension of the Capsules business itself. And again, came with Capsugel and we thought it makes sense to go with Capsugel because it's not going to be a strategic focus to do OSD for Lonza. Talking about that and kind of as a reminder, what CHI is today is not the same that CHI was when acquired in 2017. So certain businesses, which are strategic for Lonza will actually stay within Lonza, for example, Bend in Oregon where we actually do really high tech around particle design and spray drying. So it's not going to be the same scope that we acquired at the time that we are actually exiting in 2026. David Carter: Any further questions in the room? One just here. Laura Pfeifer-Rossi: Laura Pfeifer, Octavian. I'm just wondering if you could talk a little bit about the Vacaville profitability in '25 and also maybe the outlook for '26 given that you will have new products being transferred there so a little bit of puts and takes, please? Philippe Deecke: Yes. I think profitability for '25 was better than we said. I think it was operationally dilutive as expected. And I think going forward, again, probably 2025 was still an easy year. That's why we called it for Vacaville because I think they produce the same products. Now we are starting to introduce new products. We will have also shutdowns for construction work that we also explained in the past. So I think the margin will improve over time. I think it's not a linear path that will be getting better every year in the same increments. But I think we can confirm that by 2028, the site will be in line with the group at that point in time and therefore, neither dilutive nor accretive at that time, but it's not a straight line, but I think we were happier in '25 than we had expected. Wolfgang Wienand: So while it's adding in a relevant way already until 2028, I mean the rocket we will actually start in 2028 in terms of being ready, having done our CapEx into operational efficiency, new products at attractive pricing, then creating true volume, and that's actually where we will see the full benefit of the site and then reaching peak probably in the early 2030s. David Carter: Very good. We are over time now. So thank you all for your engagement both in the room and online, and I will pass back to Wolfgang to share some final words. Wolfgang Wienand: Yes. Thank you, David, and thank you all here in the room, ladies and gentlemen. And also those joining virtually for spending the time together with us, listening to actually a strong performance of the global One Lonza team delivering and even overdelivering on our promises and also listening to the commitments that we actually made for 2026 and listening to how we think about a great future for One Lonza, which should include, first and foremost, our customers and their patients will include our shareholders and, of course, ourselves as members of the global One Lonza team. So thank you for coming, all the best and looking forward to stay in touch with you the latest for the half year in July. Thank you so much, and have a great day.
Operator: Greetings, and welcome to the GCC Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions] It's now my pleasure to turn the call over to Sahory Ogushi, Head of Investor Relations. Please go ahead. Sahory Ogushi: Good morning, everyone, and thank you for joining. With me today are Enrique Escalante, our Chief Executive Officer; and Maik Strecker, Chief Financial Officer. The earnings release detailing this quarter's results was released yesterday after market close and is available on GCC's IR website. This conference call is also being broadcast live within the Investors section at gcc.com, and both the webcast replay of the call and transcript will be available on the same site approximately 1 hour after the end of today's call. Before we begin, I would like to remind you that our remarks today will include forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are set forth in yesterday's press release and in our quarterly report filed with the Mexican Stock Exchange. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. With that, let me now turn the call over to Enrique. Hector Enrique Escalante Ochoa: Thank you, Sahory, and good morning, everyone. At GCC, we manage the company with a long-term view. Our markets are cyclical and can move quarter-to-quarter, but our strategy is firm and gives us flexibility to adapt to short-term conditions without changing our mid- and long-term view. We focus on disciplined execution, operational reliability and capital allocation across cycles. And this approach guided our decisions throughout the year. During 2025, we operated in an environment where external conditions influenced the pace and timing of customer decisions. As conditions evolve, we revised our expectations in the summer. From that point forward, our focus sharpened with an increased emphasis on cost management and operational discipline, and we delivered record sales for the full year of USD 1.4 billion, reflecting the strength of our operational model, disciplined execution across the network and particularly strong performance in the U.S. These results demonstrate the resilience and demand across our markets. From an earnings standpoint, it is also important to keep perspective. 2024 set a record benchmark for margins and returns, and that level remains the reference point for where we expect the business to operate over the cycle. While we did not replicate those record levels in 2025, we came very close, and we continue to position the company to move closer over time as efficiencies, cost actions, commercial initiatives and network investments take us to near records. The fourth quarter did not introduce new dynamics. Instead, it confirmed the trajectory we have outlined earlier in the year. Our operations were reliable, customer [indiscernible] the same mix and activity dynamics we managed through 2025 with improved execution translating into record quarterly results. Our people strategy remain a constant source of strength in 2025. We continue to invest in safety, training and leadership development, reinforcing a culture of operational discipline and accountability. Safety performance improved again in the fourth quarter and full year results reflected continued progress across key indicators with recordable incidents, including lost time incidents declining 10.5% year-over-year. Our continued recognition as a Great Place to Work further reflects the strength of our culture and employee engagement and the consistency with which we have integrated these values across the organization. Training is embedded across the company with structured programs aligned to specific plant and functional needs. Through the GCC Training Institute, we delivered more than 15,000 hours of training during the year. This investment supports reliability today and prepares our teams for the ramp-up of Odessa and the next phase of growth. Progress on our planet strategy continued steadily. In 2025, we increased blended cement production, expanded the share of alternative fuel in our fuel mix and continue to reduce our clinker factor. These actions support cost efficiency and operational resiliency while contributing to incremental progress in environmental performance. In addition, our Pueblo and Rapid City plants once again received ENERGY STAR certification, placing them among the top 25% of cement facilities nationwide for electricity efficiency. As we move into 2026, our focus remains on executing these initiatives pragmatically, prioritizing efficiency, reliability and long-term value creation. Turning now to our growth strategy. Our focus on execution and network strength is reflected in how the business performs across our key markets. In the United States, ready-mix was the primary driver of growth in 2025, supported by strong project activity. This project-led demand generated consistent downstream pull for cement and reinforce the strength of our integrated operational model. Ready-mix volumes reached record levels in 2025, increasing 31.5%, while cement volumes increased 2.6% during the year. As a result, we outperformed the U.S. cement market in 2025, driven by disciplined project execution and commercial management. Operationally, this translated into high utilization across our operations, supported by investments in mobile capacity and execution capabilities. Energy-related projects, including wind farm and associated transmission continue to provide volume support throughout the year. Infrastructure activity remained stable through the quarter and continues to provide visibility into 2026, supported by multiyear funding programs and ongoing execution at the state and local level. As we enter the new year, we remain proactive and focused in identifying project opportunities, reinforcing the depth and visibility of our commercial pipeline. Residential construction remain under pressure. Mortgage rates have not sustainably broken below 6% since September 2022. As a result, we do not expect a meaningful improvement in residential activity during the first half of 2026. Oil and gas activity softened during the year and continued to soften in the fourth quarter, reflecting the current oil price environment. This segment is expected to soften further in the near term before improving. While this affects mix, it does not alter our long-term positioning within the network as we rely on the flexibility of our plants to ship different types of cement and adapt to market demand. Throughout the year, our commercial focus remains on protecting margins and returns. While market conditions limited pricing momentum during 2025, the pricing increases announced entering 2026 reinforce our focus on offsetting cost inflation and improving profitability over time. In Mexico, fourth quarter performance was in line with our expectations. Residential demand and bagged cement continues to provide stability, supporting margins. The federal housing initiative is beginning to take shape in certain regions. And as projects move into execution, we expect to be able to quickly increase shipments as its impact materializes during the first quarter of 2026. Infrastructure in Mexico, it's an area of growing optimism. Historically, the first year following election is complex. But during the quarter, we saw projects advance with a more meaningful contribution expected in 2026 as execution accelerates. In addition, mining-related comparisons normalized in November, removing a headwind that affected volumes last year. We expect the segment to perform broadly in line with 2025 levels going forward. Industrial customers remain cautious, advancing projects gradually and using this period to prepare to move more decisively as visibility improves. We're cautiously optimistic about the industrial activity improving in the second half of 2026 as trade discussions become clearer. Capital allocation in 2025 remain consistent with our long-term priorities. We continue to focus on ensuring that recent investments in cement distribution and aggregate operations across our network reach their full potential, allowing us to ship product to more destinations, easing the pressure to rely on single markets with a larger volume. In parallel, the Odessa expansion continues to progress on schedule and within budget. Our M&A posture remains unchanged. We continue to evaluate opportunities that strengthen the existing network and meet our strategic and financial criteria while maintaining balance sheet strength and flexibility. As we look ahead, 2026 will be a pivotal year for GCC. With Odessa completing construction and entering ramp-up, the company moves into a new phase focused on integrating capacity, optimizing logistics and strengthening earnings power across the network. With that, let me turn the call over to Maik for a review of the financial results. Maik Strecker: Thank you, Enrique, and good morning to everyone. For the full year 2025, we delivered record consolidated sales of USD 1.4 billion, an increase of 3% year-over-year, driven primarily by volume growth in the United States. Fourth quarter sales totaled $360 million, up 7% year-over-year, consistent with the operating trends discussed earlier. During the year, the depreciation of the Mexican peso created some headwinds, which reduced consolidated sales by approximately $80 million on a reported basis. In the United States, ready-mix volumes increased by 31% for the full year and 27% in the fourth quarter, driven by strong activities tied to wind farm and infrastructure-related projects. Cement volumes increased 2.6% for the full year and 1.4% in the fourth quarter, supported by strong ready-mix activity and contributions from infrastructure and commercial projects across our network. Average cement pricing in the U.S. decreased by 1.2% during the year, reflecting product, project and geography mix dynamics. The aggregate business performed well and delivered the results we expected when we acquired the assets, contributing positively to our EBITDA generation and reinforcing the strategic rationale for advancing our aggregates growth strategy. In Mexico, cement volumes decreased 3% for the full year, however, increased 11% in the fourth quarter, supported by normalized demand in the mining segment and early execution of infrastructure and housing projects. On the cost side, full year cost of sales as a percentage of sales increased by 2.5 percentage points, reflecting factors discussed earlier in the year, including the absence of the natural gas liability benefit we recognized in 2024, higher fuel and power costs, a lower contribution from the [indiscernible] segment and increased transfer freight as we ship products to new terminals. In addition, during the year, we incurred higher freight costs as product was supplied from the Pueblo cement plant to support customers during the period in which the Rapid City cement plant was offline. While this resulted in higher transfer costs, it allowed us to meet customer commitments, preserve volumes and demonstrate the flexibility and competitive advantage of our distribution network. In the fourth quarter, cost performance benefited from disciplined inventory management, which offset the unfavorable inventory impact we recorded during the first 9 months of the year. SG&A expenses declined modestly as a percentage of sales for the full year, reflecting a reduction in consulting services as part of our cost and expense optimization initiatives, partially offset by higher operating expenses. As we move into 2026, we're placing renewed emphasis on cost discipline, particularly third-party spend, fixed cost and staffing optimization while maintaining our standards for reliability and safety. As a result, full-year EBITDA totaled $492 million with an EBITDA margin of 34.9%. Importantly, the fourth quarter delivered record EBITDA margins of 39.6%, up 3.4 basis points with EBITDA increasing to $142 million, reflecting improved operating execution as the year progressed. The depreciation of the Mexican peso reduced EBITDA by approximately $6 million on a reported basis during the year. Free cash flow for the full year totaled $349 million, representing a conversion of 71% of EBITDA with a strong fourth quarter contribution of $156 million, driven primarily by higher EBITDA generation. On capital allocation, we returned $45 million to shareholders through a combination of share buybacks and dividends. During the fourth quarter, we deployed $7 million in buybacks. We remain disciplined and opportunistic in balancing shareholder returns with investments for growth and keeping our financial flexibility. Strategic capital expenditures totaled $309 million in 2025, reflecting continued investment in our Odessa project and logistics across our network. As of year-end, we have invested approximately $600 million in the Odessa project and associated logistics capabilities with the remaining $150 million planned for 2026. We ended the year with a strong balance sheet with cash and equivalents of $969 million and a net debt-to-EBITDA ratio of negative 0.7x, preserving flexibility as we prepare for the next phase of growth and the ability to act decisively on future opportunities. In summary, 2025 reflects a year in which we delivered record sales, observed mix and one-off impacts, maintained strong operating discipline and continued to invest in strengthening our network. With that, I will turn the call back to Enrique. Hector Enrique Escalante Ochoa: Thank you, Maik. As we look ahead, our guidance reflects a year focused on stabilization and execution, consistent with our strategy. We are entering 2026 with a clear operating backdrop, a stronger network and defined levers within our control. In the United States, we expect cement volumes to grow at a high single-digit rate, driven primarily by the contribution from new markets and the initial ramp-up of Odessa. Cement pricing is expected to be flat, reflecting product, project and geography mix dynamics. In ready-mix concrete, volumes are expected to decline at a high single-digit rate, reflecting a high comparison base in 2025, while pricing is expected to be flat, reflecting product mix and the broader distribution of volumes across new markets. In Mexico, cement and concrete volumes are expected to grow at a low single-digit rate, supported by increased infrastructure and residential activity. Pricing for both products is also expected to increase at a low single-digit rate. At the consolidated level, EBITDA is expected to grow at a mid-single-digit rate, driven primarily by higher sales volumes. During the year, the one-off incremental logistics costs associated with the ramp-up will continue to weigh on margins, while cost discipline and efficiency initiatives will help manage the transition. Turning to capital allocation. Capital expenditures in 2026 are expected to be $270 million as the Odessa expansion nears completion, and we will continue with logistics investments across the network. Free cash flow conversion is expected to remain strong and consistent with historical levels. In closing, we remain focused on restoring margins towards the levels achieved in 2024, executing the Odessa ramp-up in a controlled manner and maintaining financial flexibility. While the pace of improvement will vary by segment and geography, we believe the actions we are taking position GCC to deliver resilient and improving performance through the cycle. Thank you for your continued support. We will now open the call for your questions. Operator: [Operator Instructions] Our first question today is coming from Alejandra Obregon from Morgan Stanley. Alejandra Obregon: Perhaps the first one is for you, Enrique. So you mentioned 2026 will be a pivotal year for GCC. And of course, Odessa plays a big role, and if you've provided a little bit of color on that. But just wondering if you can walk us through the different milestones that you think that will make 2026 a pivotal year? Is it kind of like a new distribution setup, savings, energy growth? Anything that you think we will be seeing throughout the next quarters? And so that's the first question. And the second one is perhaps for you, Maik, on CapEx. So you mentioned $150 million of strategic CapEx for, if I understood correctly, new investments on distribution. Just wondering if I got that right and if you can be a little bit more granular on where you think those $150 million are going in 2026. Hector Enrique Escalante Ochoa: Number one, in your question about 2026 pivotal comment. Of course, I mean, bringing a new cement line online in a challenging market is in itself a challenge, right? But we have a strong experience from what we did exactly under even worse conditions when we started up the Pueblo plant during the Great Recession. So we have to obviously manage initially, I mean, a good start-up of the plant. It's a challenging business. It's always -- there are always things in those big equipment that we need to be in control of, and we expect to do that successfully. So that's the first part of this pivotal change. And of course, as we ramp up, we need to have a very good coordination of how we start returning volume that Samalayuca is shipping into the region back as we start, I mean, switching customers, I mean, to the cement produced in the new country. And this, of course, also has to have a good coordination with the series of terminals that we're setting up in several cities and towns to precisely have a more controlled entry into the market, I mean, cautiously, slowly, but with a firm mid strategy of how we will position that increased capacity over time in different markets. So there's a lot of moving parts at the same time as we introduce the new Odessa line during the year. Maik Strecker: Very good. Alejandra, thanks for your question regarding the CapEx. So the $150 million, that is really primarily driven by the project, Odessa, and that's the heavy lift there. However, there's also some additional logistics capabilities that we're building out, starting at the plant level with rail and truck capabilities really to be able to ship that incremental volume and distribute that. That was always part of the scope, and it's now just the time to execute on that. And then what Enrique just said, right, we're looking at several markets where we plan to distribute the volume. And for that, we need some logistics capabilities as well, smaller terminals, access again to rail and so on. So that's kind of the scope of that $150 million for Odessa. In addition, as you saw, we guided for some additional growth CapEx as well. The total is $200 million, which is related to energy-related alternative fuels, continue to invest in the aggregates business to unlock potential there and so on. Operator: Your next question today is coming from Garrett Greenblatt from JPMorgan. Garrett Samuel Greenblatt: I was wondering if you could give a little more color on the regional demand drivers, specifically around U.S. cement volumes up high single digits as opposed to pricing flat. I guess just wondering how those dynamics play out and then for Mexico as well. Hector Enrique Escalante Ochoa: Garrett, yes, as I mentioned, I mean, in my answer to Alejandra, it's a challenging year with a lot of different market or segment performance, right? I mean we are relying on the infrastructure segment more than anything to offset further decreases in short-term in the Oil Well cement market as that industry, I mean, gets more stability and more visibility going forward. So that's one offset. That's why one is growing and the other one is decreasing and one is offsetting each other, right? Residential, as we mentioned, it's weak. It's continued at the same level, I mean, for us this year. There are some other segments like, I mean, obviously, everything that is commodities in the agricultural, I areas where we participate are having, I mean, a strong -- normal to strong, I mean, performance. So that's good for us that we have this mix of segments all the time. So we think that overall, I mean, there is going to be, of course, compensation from some segments with others. And that's why I mean we're basically projecting I mean a flat volume for the year. Mexico, on the contrary, we're seeing some increases overall, pretty much, I mean, driven by housing. The federal government initiative, it's taking off now. I mean it seems like there is clear, I mean, funding and direction to build, I mean, the houses on that federal program. And we're already experiencing projects in several of our locations in Mexico. And we're already shipping volume specifically for that segment. And as we mentioned, the mining segment, I mean, it's stable now. I mean we already stimulated. I mean, the volume loss from the couple of mines that ended operations, I mean, last year. So the conversion is, of course, it's going to be better. And at the local level, I mean, municipal projects, especially some state projects are taking off now. And obviously, I mean, with some growth over last year, it's also going to help, I mean, the improvement in the Mexican market. Garrett Samuel Greenblatt: Great. And maybe just a quick follow-up just on what you're expecting in terms of pricing in the U.S. Have you sent out any letters? Or do you plan to do midyear increases as demand trends progress through the year? Hector Enrique Escalante Ochoa: We are always, I mean, committed to recover at least our cost inflation through pricing in every market where we operate. We're very disciplined in that respect and very consistent. We announced an $8 price increase in the U.S. for January. There are always, I mean, conversations with the different individual customers about, I mean, their ability to take on, I mean, the price at this moment or delays a couple of months and then obviously, one-on-one conversations about, I mean, the total amount, I mean, to increase. Everything I will say, so far, it's going well in those conversations, pretty normal, and we expect, obviously, to execute the majority of that price increase in the first quarter of this year. So that's a very good news. Now in our case, specifically, I mean, we're not in our guidance reflecting directly that price increase that we're going to execute because of several factors that we alluded to during our comments here. Of course, we have a big -- I mean, mix effect here with, again, more cement going to construction segments and less to Oil Well cement, which obviously command different prices. And so that mix doesn't help in terms of the increase. We also have a lot of project work related to infrastructure mean that we mentioned. And in some cases, that project work also has, I mean, a lower pricing than the regular ready-mix precast, I mean markets that are usually very stable. And of course, I mean, there's one third, I mean, factor here that is geography, right? With the start-up of Odessa, and as I mentioned, we're going to do this, I mean, slowly and cautiously. Dispersing more cement to further away locations in smaller volumes, that commands higher freight, of course, and somehow that is reflected on a lesser, I mean, net price because one has to compensate on that incremental freight to be competitive in distant markets. So that's the third factor, I mean, that we have there. And finally, I think that we had, some one-offs in last year that affected in our pricing strength with some segments and some markets derived from things that we disclosed, I mean, last year with some problems in the Rapid Plant during the winter of last year to start up on time because of an accident with there and then an issue with the ball mill that were in the Odessa plant that also delayed us a little bit. So we needed to make some adjustments, I mean, to recover market share that we lost during those incidents. And we did that successfully, I mean, last year. That's why, obviously, we're running much better than the industry as a whole in terms of cement growth. And also comparing our own region, we accomplished that recovery of market share, and we got back basically to our normal levels of share. We're going to, I mean, now run constant there. I mean we don't see any more need to continue, I mean, pressing on prices because of that reason. That's already behind us. So with all that said, with all those -- a combination of all those 4 factors, that's why we're seeing a flat price in our guidance. I see -- I personally see this as a very positive, I mean, ironically because, I mean, I think that it takes us back to a very good solid platform, and it's only building up from this, what I call one-off because of all these reasons at the start of the first 6 months of 2026. So we're very -- I mean, pleased and confident that this is the right strategy for GCC and it's going to be successful for us. Operator: Next question today is coming from Carlos Peyrelongue from Bank of America. Carlos Peyrelongue: I joined a bit late, so I apologize if you have answered this already, but I just wanted to get a bit more color on the status for demand for cement from oil -- from the Texas, in particular, from Oil Well cement. If you could comment a bit on that would be helpful. Hector Enrique Escalante Ochoa: Yes, Carlos, thank you for the question. Yes, we already comment on that, as you were pointing out. I mean, obviously, we're seeing still more pressure in the Permian Basin on demand for Oil Well cement. I mean, given the uncertainty and lack of clarity of where, I mean, the oil price -- international oil prices and the segment is going to end this year. We believe, of course, it's transitory and cyclical as has demonstrated throughout history. And that's why we feel very confident that we really prepare a good, I mean, expansion of Odessa, taking those cycles into account and being able to capitalize on construction cement when the Oil Well demand is slow. So having said that, that's why we're shifting more to, I mean, infrastructure projects. That's where we're concentrating, I mean, for the rest of this year, I mean, as our driver for demand in the U.S. So it's work project, infrastructure, I mean, everything, I mean, related to that segment. And that's how we plan to set the decrease in Oil Well demand. Carlos Peyrelongue: Understood. And have you given some guidance as to your expectation to utilize the new capacity that you build in Odessa in terms of what's the expectation for this year or next year to get to higher utilization rates on that new capacity? Hector Enrique Escalante Ochoa: Yes. Definitely, we lower our expectations compared to what we planned when we were, I mean, planning I mean the construction of the plant. The market conditions are totally different. If you remember at that time, I mean, all U.S. markets were basically sold out and so the conditions were very different. And so that's why we're adjusting our ramp-up of the plant to a much more slower and careful introduction of the plant. The line is going to run at full capacity itself, the new line. So we capture there the decreases in variable cost compared to the current, I mean, [indiscernible] in Odessa. And of course, the line run at full capacity will substitute all that Oil Well cement that is produced currently in that plant, plus the imports that we're bringing from Samalayuca into the area. So that's a way of optimizing, I mean, our cost structure and our network. Where we're going to feel the pain, of course, of this slowdown is going to be in the Samalayuca plant that it's going to have to slow down its shipments to West Texas. And so we're, again, going slowly in the introduction based on those factors. But I think that's the best strategy for us at the moment. Operator: Next question is coming from Marcelo Furlan from Itaú BBA. Marcelo Palhares: My question is related now to capital allocation going forward. So you guys are guiding now for this $270 million of total CapEx for this year. So I'd like to understand if we could expect this level of CapEx, let's say, below the $300 million levels as the new normal for the company at least for the medium term. And my next question regarding to capital allocation is regarding M&A. You guys have provided some color that the likelihood of guys likely seeking M&As in the aggregates business in the U.S. and so on and so forth would be likely to be the main driver. So I'd like to understand if this strategy continues in terms of pursuing this type of M&As. And if you guys could give a little bit more color on potential size if you guys are expecting only small bolt-on acquisitions or if you guys could likely reach to larger M&A activities after due completion. So these are my questions. Maik Strecker: Yes. Thanks for the question. Regarding capital allocation, as I already mentioned, out of the $200 million growth CapEx, $150 million is really allocated to finishing Odessa and the related logistics capabilities. Then the remaining $50 million also already mentioned, but we have some very high-return projects around fuel and energy that we want to execute. Again, and that's in the context really to optimize these very important input costs for the company. A third element here is aggregates, right? We have the first year of the new aggregates business under our belt. We see some opportunities to optimize, to grow, to expand that will require some level of CapEx. And we have some, again, very high return quick projects to execute on. So that kind of comprises the $200 million in growth. And then the $70 million in maintenance, it's in line with our previous years to really keep the cement plants, the network in new light conditions to really perform well for the market that's in front of us. So that's on CapEx. Regarding M&A, yes, we are very active. We have a pipeline of more smaller midsized opportunities. I would call them bolt-ons to, again, the existing aggregates network that we now have within the cement network that we're operating. Again, those are small and midsized acquisitions similar to what we have done in 2024. And again, now that we know pretty well how these markets perform and where the opportunities sit, you will see us throughout the year '26 being very active and focused on that. That's kind of the most actionable part. Nevertheless, as we always stated, we remain very focused also on cement, looking at options for cement to grow the network across the United States, and that remains to be part of the focus as well. Operator: Next question is coming from Emilio Fuentes from GBM. Emilio Fuentes De Leon: First of all, congratulations on the results. I have 2 questions, if I may. First of all, on CapEx during the quarter, is it correct to assume that the downtick on CapEx is related to a postponement on the ramp-up of the Odessa plant given the current market situation? And second, is -- are the extraordinary weather events seen during the beginning of first quarter 2026 in the U.S. already reflected on the guidance? Or is there any downside risk to the guidance given the rough start to the year given related to weather? Hector Enrique Escalante Ochoa: This is Enrique. I will take your second question first and then turn it to Mike for the CapEx. I think that the weather, even though it's been very severe in the U.S., it's not abnormal for us. So no, it does not affect our guidance at all. I mean, for us, I mean, this is, again, in the regions where we participate, pretty normal, I mean, weather pattern. So we'll be fine in terms of our shipments for the quarter. Maik Strecker: Yes. Enrique, regarding the CapEx for the quarter, it's a little bit of timing. The reason we came in lower than kind of what we had expected and also the Q4 of 2024 was purely timing. We're -- from an Odessa perspective, we're in execution phase and everything is towards the defined time line to be completed kind of Q2 of this year. So you saw a little bit of timing effect there on the strategic CapEx in the quarter. Operator: Next question is coming from [ Azeem Tori ] from Anfield Investment Research. Unknown Analyst: Maybe first a question on the ramp-up of Odessa. So you're adding a lot of capacity in the local market. Is it fair to assume that you will try to address some of the big urban centers of Texas like the Dallas Urban Center or the San Antonio Urban Center? And if you -- when you're talking about like new distribution or new terminal center, is it new terminal that you would develop to support the commercial strategy of this Odessa cement plant? That would be my first question. And then second question on the price increase that you've announced of $8. Is it $8 price increase that you have announced in every single state, including Texas? And a last question around the cost inflation that you're expecting in your cement business. I think we see a lot of data center being built around the United States. They are consuming a lot of electricity. Do you see a risk of electricity prices going up in the coming years in the U.S. that could potentially impact your margin? Maik Strecker: Yes. Let me start with the question around the network and the additional volume from Odessa. As Enrique already kind of walked us through, the plan really is to distribute through several markets, small and bigger. North Texas is a market that we see a lot of growth. And yes, we plan to participate in that growth. But we also see good levels of growth for Odessa closer to home. In that part of the country, there are some very interesting data centers planned. So we'll participate in that. And then as mentioned, we're looking at kind of small and midsized markets to establish distribution points agile with some level of CapEx, but not heavy CapEx load. And I think through that distribution, the goal is to have that very focused and measured introduction of the Odessa capacity. So that's on that. Regarding cost of inflation, as mentioned also, we're taking some proactive steps. We're investing in capabilities around power with solar projects. We're investing in some additional capabilities utilizing more natural gas, pipeline infrastructure and burning capabilities. So all of those, we see as kind of a proactive step to manage the future cost dynamics around fuels. So that's key for us. And I think with that, we should be able to manage accordingly what's ahead to come. Unknown Analyst: And the price increase... the $8 price increase, is it everywhere in every state? Or is there a difference from one state to another? Hector Enrique Escalante Ochoa: The price increase was announced in all the regions where we participate, including Texas. Unknown Analyst: And so far, the discussion is encouraging and you would expect to get part of this during the first quarter. Hector Enrique Escalante Ochoa: We will. I mean that's evolving dynamic and fluid, and we expect to get the majority of that announcement. Operator: Our next question is coming from Enrique Soho from Fundamental Capital. Unknown Analyst: Could you give us some insights into your and the Board's thoughts into potential corporate action or financial engineering to further unlock value and decrease the valuation gap between you and peers? Maik Strecker: Yes. Thanks for the question. I think, first off, our goal is really operationally to perform and to unlock the value by improving our margins. Again, our benchmark is 2024, the 36.6% and to get back to that level and to show that we get back to those very attractive margin levels, number one. Number two, when you look at our kind of cash flow conversion, we maintain a very high level and push that hard, again, to show the value. And then as you have seen, we're looking at kind of the overall shareholder returns with buyback program. We're more proactive on that. You've seen the dividends continuously to be increased over the years. So all those are elements, how we demonstrate the value of GCC and where we push for further investments from shareholders. And yes, strategically, we get the question. We're looking at what long term from a corporate structure, we should consider to further enhance kind of the value of the company and the value to all shareholders. That is a conversation that we have on a regular basis with the Board, with the team. And these topics are, for us, very long term and it's part of the tools and the portfolio of how do we increase the shareholder value for all participants. Operator: Your next question today is coming from Alejandro Azar from GBM. Alejandro Azar Wabi: Just a quick follow-up and to clarify something on my end. Regarding the Odessa plant, the start of the plant remains second and third quarter of this year. What you are delaying is just the ramp-up or you are delaying the start of the plant? And can you give us more color on delaying the ramp-up for you guys, what that meant before? Were you planning to reach full capacity in '28, '27, and that's where you're delaying? That would be my question. Hector Enrique Escalante Ochoa: I think that, I mean, the -- I mean, it's not delay the start-up of the plant. The plant is going to start up on time. We continue to run the project on schedule. So we should be, I mean, ramping up in the third quarter basically of. We're testing many of the equipment for commissioning, I mean, a good portion of the plant already. So things are progressing well there. So I think that what we are referring to here is entering at a slower pace, not delaying it on time, but entering at a slower pace overall for GCC. And I'd like to reemphasize overall because for us, it's managing the whole network through the start-up of the Odessa new line. Again, I mean, I mentioned we plan to, I mean, as quickly as we can run the line at full capacity. That means probably shutting down both of the other [indiscernible] today at the plant in order to favor, I mean, running the more modern and efficient plant. And the effect of that because we cannot put all that cement in the market today, the effect of that is a slowdown in other parts of the network in GCC, more specifically the Samalayuca plant. So again, I mean, where we're going to feel the pain or take the burden of the start-up of the line in Odessa is going to be in Mexico and part of the shipment that, that plant was doing in West Texas and other markets. Alejandro Azar Wabi: That's very clear. Just another clarification on my end, and that's implicitly in the 5% growth in the guidance, right? Hector Enrique Escalante Ochoa: Yes, sir. Operator: Our next question today is coming from [ Matias Ostrowicz ] from Citibank. Unknown Analyst: I joined a bit late, so I apologize if you have already replied to this. But I'm just wondering about your price guidance in the U.S. market. Was your guidance relatively flattish considering your volumes are in the high single digits. Is it a mix situation? Or is it just softness in the market? Hector Enrique Escalante Ochoa: Well, I would say derived from the softness in the market, I mean -- and there are many factors that I already mentioned, Matias, of why we are going to experience a mix effect between segments. Again, I mean, more construction cement and less Oil Well cement that affects negatively the average price. And geography, with more shipments to further markets precisely of that new, I mean, production in Odessa going to further different markets in every direction. So we keep it a smaller impact in dispersed market. So that's, again, another factor that is affecting obviously our price, our average mix price to be competitive in longer destinations or further away destinations. And again, I already talked about, I mean, other effects, but it's basically, again, a mix and geography effect that it's putting pressure or that it's compensating the price increase that we're doing in every U.S. market. Operator: We reached the end of our question-and-answer session. I'd like to turn the floor back over to Ms. Ogushi for any further or closing comments. Sahory Ogushi: Thank you again for your time and continued interest in GCC. We look forward to speaking with you again soon. Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the BMI Q4 and Full Year 2025 Earnings Call. [Operator Instructions] I will now hand the conference over to Barbara Noverini, Head of Investor Relations. Barbara, please go ahead. Barbara Noverini: Thank you for joining the Badger Meter Fourth Quarter and Full Year 2025 Earnings Conference Call. I'm here today with Ken Bockhorst, our Chairman, President and Chief Executive Officer; Bob Wrocklage, our new Executive Vice President of North America Municipal Utility; and Dan Weltzien, our recently appointed Chief Financial Officer. This morning, we made the earnings release and related slide presentation available on our website at investors.badgermeter.com. As a reminder, any forward-looking statements made on this call are subject to various risks and uncertainties, the most important of which are outlined in our news release and SEC filings. On today's call, we will refer to certain non-GAAP financial metrics, including certain base metrics. Use of the term base for these purposes is intended to refer to certain financial metrics, excluding the SmartCover acquisition. Our earnings presentation provides a reconciliation between the most directly comparable GAAP measure and any non-GAAP or base financial measures discussed. With that, I'll turn the call over to Ken. Kenneth Bockhorst: Thanks, Barb, and thank you all for joining our call. Turning to Slide 3. We delivered solid financial results in the fourth quarter, capping off another full year of record sales, profitability and cash flow. We continue to see robust demand for our industry-leading cellular AMI solution and the recent addition of SmartCover to our BlueEdge suite of smart water management solutions positions us well for long-term growth across the water cycle. I'm thankful for the dedication and perseverance demonstrated by the entire Badger Meter team during a year marked by global trade uncertainty and exciting acquisition integration and many ongoing AMI projects in various stages of deployment. I'll be back to provide a recap of the year and discuss our outlook later in the call. But for now, I'll introduce you to Dan Weltzien. As announced in December, Dan became our new CFO on January 1, 2026, following 7 years as Vice President and Controller. Dan, welcome to the earnings call. Bob Wrocklage is also here today in his new capacity as Executive Vice President, North America Municipal Utility. Bob will join me later in the call to provide more detail about the significant AMI project for PRASA that we mentioned in today's press release. With that, I'd like to turn the call over to Dan to cover the numbers. Daniel Weltzien: Thank you, Ken. I'm truly honored to serve as Badger Meter's Chief Financial Officer. I've benefited personally and professionally from the strong relationships I've had with both Ken and Bob for many years, and remain excited by the opportunity we have ahead of us to build upon our long track record of market leadership and success. So let's go ahead and start by reviewing another quarter of solid financial performance. Turning to Slide 4. Total sales of $221 million in the fourth quarter of 2025 represented an increase of 8% year-over-year or 2% base sales growth. Total utility water product line sales increased year-over-year by 9% or 2%, excluding SmartCover. As expected, fewer operating days in the fourth quarter and previously communicated project pacing effects resulted in a 6% sequential decline in utility water sales versus the third quarter of 2025. The term project pacing is intended to describe typical variation in activity driven by periodic changes in our active customer base and whether or not we act as prime contractor in what we refer to as turnkey projects. Simply put, the sequential quarterly sales decline between the third and fourth quarters of 2025 has everything to do with the calendar and quarter-specific customer and project mix and very little to do with other influences such as underlying market conditions, customer demand trends, utility budgets or the broader funding environment. On the last point, though not all that relevant to metering, recent congressional actions support funding of state revolving funds consistent with historic levels. This should allay some broader water industry funding reduction concerns. Sales for the flow instrumentation product line were flat year-over-year with modest growth in water-focused end markets, offsetting declines across the array of deemphasized applications. Turning to profitability. We were very pleased with the year-over-year operating earnings growth of 10%, which outpaced revenue growth. Operating profit margins increased 40 basis points from 19.1% to 19.5%. Base operating earnings increased 9% year-over-year, expanding base operating profit margins by 140 basis points to 20.5%. Gross margins expanded 180 basis points to 42.1% in the fourth quarter from 40.3% in the prior year quarter. Gross margin continued to benefit from structural mix driven by ultrasonic meters, cellular AMI, water quality and SmartCover sales, which were all above line average profitability. It's also important to mention that the same project pacing effects that impacted utility water sales also benefited margins in the fourth quarter. This is because when we act as prime contractor during certain turnkey projects, sales often include pass-through activities such as outsourced meter installation labor and ancillary meter pit supplies, which tend to have a lower margin profile. Separately, while we now have largely reached price cost parity on 2025 tariff and trade-related cost impacts and related price mitigation actions, we do expect global tariff and trade conditions to remain fluid in 2026. In addition, we expect elevated prices of copper and certain other components of our Bi-alloy ingot material cost to be a gross margin headwind in 2026. We factor all of these components, along with other puts and takes into our normalized gross margin range of 39% to 42% and into ongoing and routine price mitigation actions. SEA expenses in the fourth quarter were $49.9 million, with the $6.4 million year-over-year increase driven primarily by the SmartCover acquisition. When excluding SmartCover-related expenses, including $1.6 million of intangible asset amortization, base SEA expenses increased $1.3 million or 2.9% year-over-year. The year-over-year increase in base SEA expense was mainly driven by higher personnel costs to support normal course growth of the business. The income tax provision in the fourth quarter of 2025 was 24.8% versus the prior year's 27.1%. Consolidated EPS was $1.14 versus $1.04 in the prior year quarter, representing a 10% year-over-year increase. Primary working capital as a percentage of sales at December 31, 2025, was 20.9%, largely consistent with the comparable prior year period. Record quarterly free cash flow of $50.8 million increased by approximately $3.4 million year-over-year. With that, I'll turn the call back over to Ken. Kenneth Bockhorst: Thanks, Dan. For those of you who followed our story and interacted with Bob over the years, you've certainly experienced the passion and knowledge he has for our business, extending well beyond the traditional CFO focus. Badger Meter will benefit greatly from Bob's business acumen, customer focus and growth mindset as the leader of our largest line of business. I'm now going to hand it over to Bob, so he can talk specifically about the Puerto Rico Sewer Aqueduct Authority (sic) [ Puerto Rico Aqueduct and Sewer Authority ] or PRASA AMI project. Robert Wrocklage: Thanks, Ken. From the CFO's chair, it's been gratifying to be part of more than doubling our top line revenue over the past 7 years. In my new role, I'm excited about further expanding our market leadership as cellular AMI technology continues to increasingly be adopted by North American water utilities as the industry standard for AMI. Consistent with our Choice Matters BlueEdge portfolio, we continue to enable our customers to walk up the technology curve at a pace that's right for them. Our blueprint for growth begins with cellular AMI as the foundation to real-time insights and analytics and expands through the BlueEdge suite of smart water management solutions, enabling visibility and efficiency throughout the entire water cycle. A very recent example of our success with cellular AMI is the announced award for the PRASA AMI project, which will be one of the largest deployments in the world. An overview of the project is provided on Slide 5. This transformative multiyear project will include E-Series ultrasonic meters, ORION Cellular AMI radios and BEACON SaaS across the island of Puerto Rico, representing approximately 1.6 million service connections. Badger Meter's role in the project will be supply only, and we will not assume any prime contractor or installation or ancillary product supply responsibilities. Those activities will be handled by others. We will be utilizing our Racine, Wisconsin facility for production. Over the past year, investors have understandably focused on assessing the installed base of AMI and the remaining AMI adoption potential in North America, along with the underlying customer demand drivers and typical time horizons for AMI projects. To provide color on these factors, let's use the PRASA award as an example of a large project. PRASA's planning for the project began over 5 years ago. That planning materialized into a technology pilot and RFP, which Badger Meter, along with its partners, first participated in beginning in 2021. The pilot deployment began in 2023 and the project award occurred in 2025. We expect the PRASA project to translate into product shipments in 2026 with an initial ramp earlier in the year and more meaningful revenue contributions in the second half of 2026 when project deployment begins -- is expected to begin in earnest. To be clear, project awards of this nature, PRASA or otherwise, underpin our long-term high single-digit outlook over the next 5 years, and the PRASA project specifically is not additive to that either in a single year or over the long-term horizon. While we don't regularly share customer-specific wins and project awards, we're highlighting PRASA due to its scope and scale, to illustrate the drivers behind the uneven project nature of our business and to acknowledge that even today, there are many PRASA project variables known and unknown that will influence near-term 2026 revenue contributions, the year-to-year project pacing thereafter and the duration of the project deployment. Explicitly stated, for these reasons, we will not be sizing the revenue impact of this project on 2026 or more broadly. On that note, I'll pass it over to Ken for his closing remarks. Kenneth Bockhorst: Thanks, Bob. I'd like to take a moment to review our full year 2025 performance against the 5-year trend line. Please turn to Slide 6. In 2025, we delivered 11% sales growth, surpassing $900 million in revenue. This reflects a 17% compounded annual growth rate over the past 5 years. Our software revenue, which includes SmartCover, now exceeds $74 million and represents 8% of sales. Software revenues, largely driven by cellular AMI have grown at a 28% compounded annual growth rate over the past 5 years. In 2025, operating profit margins expanded 90 basis points to 20% despite the initially dilutive impact of the SmartCover acquisition. Base operating profit margins increased 200 basis points year-over-year. Over the last 5 years, both gross margin improvement and SEA leverage contributed to 470 basis points of operating margin expansion. And finally, we continue to manage our working capital intensity and again generated free cash flow in excess of 100% of net earnings. Our clean balance sheet with more than $225 million of cash on hand continues to provide significant financial flexibility to reinvest in our business, both organically and inorganically. In the third quarter, we increased our dividend for the 33rd consecutive year. And in the fourth quarter, we opportunistically repurchased $15 million in shares when the market price implied an attractive long-term return on capital. Turning to Slide 7. I'm proud of what we accomplished in just 11 short months as we integrated SmartCover into the Badger Meter organization. SmartCover delivered $40 million of sales in 2025 or 25% on an annualized basis. Over this time, SmartCover's profitability improved, driven by both higher sales volumes and focused cost management. We successfully transferred SmartCover's manufacturing operations to our facility in Racine, Wisconsin, and we're on track for earnings accretion in 2026 as expected. And finally, I'll conclude with some thoughts on both our near-term and long-term outlook. As we mentioned in our press release this morning, the second half of 2025 included a concentrated mix of concluding AMI turnkey projects, resulting in base revenue growth of 6%, which was lower than our 5-year forward outlook. We expect this project pacing dynamic to extend throughout the first half of 2026 until several awarded projects, including PRASA, begin multiyear turnkey deployments. We'd like to remind investors that it is not unusual to experience certain quarters or even whole years that are above or below our expectation of high single-digit sales growth over a 5-year forward period. Quarter-to-quarter variation in project pacing is typical in our industry and attempting to precisely time it can cause those who follow us to miss the big picture. Our products and solutions support critical elements of the water infrastructure and the long-term secular trends impacting the water industry will continue to influence our customers to plan for better resiliency. We are actively involved in enabling that change. For example, we created the market for cellular AMI against an incumbent technology and have since demonstrated success at gaining share. Via acquisition and internal development, we've expanded our opportunity set to include solutions across the entire water cycle. Long enduring secular trends support demand for smart water management solutions. When speaking directly with our customers, we have not seen meaningful evidence that real or perceived federal funding constraints will impact our ability to generate high single-digit sales growth, operating profit margin expansion and free cash flow conversion in excess of earnings over a 5-year forward time horizon. In summary, I'm proud of our performance in 2025, look forward to what's ahead in 2026 and see great opportunity for the execution of our long-term strategy to compound value for both our customers and shareholders. With that, operator, please open the line for questions. Operator: [Operator Instructions] Your first question comes from the line of Robert Mason with Baird. Robert Mason: Congratulations, Bob and Dan, on your new roles. Ken, just to touch on the topic around the timing of projects, understandable that it's not going to be always an even flow there. But I'm just curious, did we see the full impact of the conclusion of those projects in 4Q? Just trying to think about maybe we normally see a sequential rise in the number of operating days in the first quarter, how that dynamic may play into the first part of 2026. Kenneth Bockhorst: Yes. So first off, Rob, there are several projects that can be at play at any given time, some large, some medium, some small. So it's hard to really nail down exactly that point. But if I could take just a little look back to some of the earlier calls, if you recall, in Q2 of the year, we talked about project pacing and timing and some of those issues that we thought we might see in the second half. And then additionally, we talked about the fewer working days that you start to see in Q4. So it isn't unexpected to us that the second half of the year was a lower growth than the first half. So nothing specific on any individual project, but just the nature of the business that can be uneven from time to time. Robert Mason: But -- Okay. Fair enough. I guess just did we -- I guess, did more of those conclude in the third quarter versus the fourth quarter or if we're looking at another step down as those have now fully concluded? Kenneth Bockhorst: Yes. So what I would think about, if you look at 2025 and how it played out in 2026 and how we see it happening, the first half started out with a higher growth rate, the second half of the year with a lower growth rate. I think the way we see '26 is a lower growth rate in the first half and a higher growth rate in the second half. And that's something that is driven by the confidence that we have in projects that are in flight, awarded projects that haven't yet started. So we have visibility to some of those projects, and we do see how they're layering out in the year. Operator: Your next question comes from the line of Nathan Jones with Stifel. Nathan Jones: I guess I'll start. I know you don't want to talk about the size of this Puerto Rico project. So maybe I'll ask another question that you have answered previously. I think, Ken, you've said over the years that the size of the U.S. market is about 6 million meters per year and Badger's share is roughly about 30%. Are those numbers still accurate for what the size of the overall U.S. market is? Kenneth Bockhorst: Yes, give or take, 85% of the market every year is replacement, and it's roughly in that space, yes. Nathan Jones: Okay. So Badger ships give or take 2 million meters a year. So Badger ships about, give or take, 2 million meters a year is the rough way that would break down for what the overall U.S. market is. Robert Wrocklage: Yes. I mean it's not far off. Again, the indicated general volume that you alluded to flexes year-to-year. It's probably a little bit higher than 6 million. That reference figure is dated. But at the same time, the share element that you mentioned is still relevant. Nathan Jones: Got it. I'm just trying to give people a general sense for how big a project 1.6 million connections is for Badger Meter even over a 3- to 5-year period. Again... Kenneth Bockhorst: And Nathan, one thing is the reason we mentioned PRASA is because, as you know, we don't get into the habit of announcing projects because there's so many. But obviously, this one is pretty meaningful in size, as you point out. And to just give it some reference and the reason we're talking about it more publicly, is we never announced the win in the project that we did recently complete in Orlando. So everyone is aware, Orlando is a pretty large city. To put it in scope and scale, the PRASA award is the equivalent to 8 Orlandos. Nathan Jones: That's extremely helpful. My next question is going to be around gross margins. Obviously, gross margins very strong. There's probably a few headwinds as we go through the year. I mean second half of '26, you're talking about some more turnkey projects, which will be headwinds to gross margins. You've obviously seen a big spike in copper prices that will come through your business on a delay. But the first half is, as you said, is going to have an absence of some of these turnkey projects, which is a tailwind for margins. Any help you can give us with how we should think about first half versus second half gross margins in terms of that mix or how we should think about the full year for gross margins given you're at the very high end of the gross margin target range in 2025? Daniel Weltzien: Yes, Nathan, this is Dan. I think a couple of things to point out. I think as we think about it quarter-to-quarter, there's nothing that we would specifically point to say there's going to be variability from quarter-to-quarter. But I think you're thinking about the right topics being we continue to see structural mix impacting margins in a positive way in 2026. And I think you highlighted a couple of the areas that we're continuing to watch, which are the commodity input costs into our ingot recipe. And then certainly, tariffs is something that we continue to monitor. We've gotten to price cost parity on tariffs in 2025, and we'll continue to manage whatever comes our way in 2026 from that perspective. Operator: Your next question comes from the line of Jeff Reive with RBC Capital Markets. Jeffrey Reive: I had another one on the Puerto Rico project. I mean this is a really sizable win. Can you walk us through the typical timing and phasing of a large AMI project like this? How do the deployments ramp? Are they smoother, chunky? How much is in year 1, 2 versus 3, 4, 5 just over the life? Kenneth Bockhorst: Andrew, that's a fantastic question. And I would say you're a straight man for why we don't provide guidance from quarter-to-quarter. The project ramp-ups, oftentimes, there's a plan. There's so much that goes into an AMI project in terms of going through all the budget cycling and then having to align all the resources because you need people out on the street doing installations. And then you might have weather factors from quarter-to-quarter. So it's not as smooth as people might think that it would be to do a large deployment, whether that's something the size of Puerto Rico or something the size of a medium town anywhere in the United States. So typically, people look at these things and they expect them to be done over a 5-year period. If everything goes really smoothly, it could potentially go faster. If you have issues, it could go longer. But there's no real blueprint, but generally, we're thinking of this over a 5-year horizon for PRASA. Jeffrey Reive: Got it. And I think you said in the prepared remarks, the meters are being manufactured in Racine, not your Mexico facility. Is there a margin differential happening there? Robert Wrocklage: Yes. I mean I think you can just -- you can imply just from labor cost differential, there'd be a potential margin impact. Of course, that was all contemplated in the contracting stage. And so ultimately, the location of manufacture is being driven by U.S.-made manufacturing requirements. So that's part of the reason why we made an investment in that facility and continue to invest there. That's what dictates where it's made, and we understand that cost footprint, and we're able to engage and embed that, if you will, into the RFP process. Kenneth Bockhorst: Yes. And I'm sure I'm jumping the route here on anticipating the margin question on the project, which, of course, which we won't disclose. But since we're not -- since it's not full turnkey and there's a whole lot of different factors in here, but this is one where I think we've struck a really good value proposition where PRASA sees the value in what we're offering and they're happy to buy it, and we're happy to sell it at the margin it's going for. Operator: Your next question comes from the line of Andrew Krill with Deutsche Bank. Andrew Krill: I want to go back to the outlook for sales. One of your competitors yesterday suggested their revenue could be slightly to modestly down year-over-year. I think you used the word growth rate for this year. So I just wanted to confirm, I think that would -- do you feel pretty confident sales should grow this year even if they're below that high single-digit through the cycle target? Kenneth Bockhorst: Yes. So real quick, I know people really enjoy the read-throughs and trying to do the comparisons and see how things will work. First of all, there could be inherent unevenness in their business that's different than the mix of customers that we have that is hard to do just to begin with industry-wide. Secondly, the particular competitor you're talking about, I think we have several differences that have been built over the last several years. We have an industry-leading AMI offering that has several in-flight projects and awarded not started projects informing our view. We've got a really exciting software business at 8% of our revenue now that's 100% recurring. We're really excited about what's happening with sewer line monitoring and water quality monitoring and network monitoring. And these are things that I believe the competitor you're talking about doesn't have. So the read-through that people are getting, I would say, isn't the same. So when we look at all those factors that we're talking about, again, I would think you should view '26 as the inverse effect of '25 like I talked about before. But we feel confident given what we're seeing. Our conviction on high single digits through the 5-year horizon is as strong today as it was yesterday as it was 3 months, 6 months or 12 months ago based on all the same factors we use to think about that 5-year horizon. But some years -- and one thing, not to follow it all up here on this question, but everyone who's talked to us before, we've never pegged and said every single year is going to be 8%. We've said some years might be 12%, some years might be 5%. We just came off of 6% that I'm pretty proud of. And I think this next year is going to be exciting, and our 5-year conviction is as strong as it's ever been. Andrew Krill: Great. Very helpful. And then a quick one on pricing, and I know you don't disclose that exactly. But just can you remind us, has it been primarily or all list price increases thus far to deal with tariffs mostly? Or have you been using surcharges as well? And in the event tariffs were ruled illegal, like do you expect you can hold on to this price looking forward? And any conversations with customers looking for kind of some discounts at this point? Kenneth Bockhorst: Yes. So in our pricing, keeping in mind, 75% of our revenue is sold direct. And so when we're in a constant state of doing project pricing based on real-time output, so that helps us in some ways. Two, yes, we do list price increases. What we didn't do was temporary tariff add-ons or tariff issues that could be challenged in court or could be reversed once a customer says tariffs are gone or could be demanded back because tariffs have been rolled back. So ours is pretty clean, I think, compared to how other people have handled the pricing aspects of tariffs. Operator: Your next question comes from the line of James Ko with Jefferies. Jae Hyun Ko: I guess I wanted to kind of follow up on the project pacing dynamic here. So was this like dynamic kind of extending into first half 2026 expected? Or is this something new kind of developed? And kind of how much confidence do you have in kind of project converting into revenue in second half 2026? Kenneth Bockhorst: Yes, there can always be some variability. So in full disclosure, some of the projects that are starting in the second half, we thought would have started in the first half. So things can slide sometimes from a quarter or 2 out. And this is why we talk so much about the 5-year horizon. I'm absolutely confident all those things are going to happen within the 5-year. I'm confident what's going to happen in the year, but trying to peg it from quarter-to-quarter can be difficult. Daniel Weltzien: I just want to clarify, too, that when Ken says project slides to the right, for example, it's not related to funding. Each one of these projects is different. Every customer is different. There's contracting phases. There's initial deployment areas. There's full rollout. So there's multiple steps to these projects and everyone is different, and that's the largest impact to the timing of them. Kenneth Bockhorst: I think the point that I would like to maybe emphasize here is that these aren't hoping for backlog increases. These aren't hoping for things to happen. These are known awarded, not started projects that even if they have some variability in where they move, they're in our pocket. Jae Hyun Ko: Got it. And I guess similar questions, you kind of reiterated high single-digit kind of organic growth over the 4- to 5-year horizon. So like how much of that outlook is kind of supported by awarded but not executed projects versus kind of broader just few new opportunities? Kenneth Bockhorst: Well, so it's a great question. I mean this is how we -- when we think about our 5-year view and what we've talked about in several meetings is we're looking at several segmentations of how many people are looking -- working with consultants and working on budget, which are items that turn into revenue 3, 4 and 5 years out. We've got the whole bucket of things that are in RFP today that become revenue in the next year to 2. Then we've got in-flight projects. We've got awarded, not started projects. So it's this whole funnel of activity that we look at. And -- but what underpins it all that's really helpful for us is we're confident that no matter what happens with these project cycles, 85% of what we're going to take orders and ship for every year are replacement by nature in terms of meters and radios. So the project stuff is all very interesting, but the bottom line is very strong. And then, of course, the software continues to grow the last 5 years at a 28% CAGR. So it's a multivariable equation and one that we feel good about how those come together. Operator: Your next question comes from the line of Bobby Zolper with Raymond James. Robert Zolper: It looks like there's about $1 billion of metering projects in the ARPA data, which all needs to be spent by the end of 2026. How have you reflected that in your 2026 commentary? Kenneth Bockhorst: So we haven't. I mean, so when we sit here and we talk about what's fueled our growth for the last 5 or 6 years, it's really informed by the buckets I just walked you through. And when we look at who's planning for projects, who's actually doing RFPs for projects, what we have in known projects, there's so many ways that funding is done, especially around the AMI side, whether that be SRFs, WIFIA loans, rate base increases, municipal bonds. That is one factor, you're right, but it certainly is not an outsized consideration for us at all when we think about our forecast. Robert Wrocklage: I'd also be cautious about taking something that's listed in an ARPA database with reference to the word metering and assuming that, that whole total of money is related to metering. It's oftentimes considerably larger than the actual metering spend. So a headline grabbing number or a question like that is not necessarily indicative of the true metering content on those line items. Robert Zolper: All right. I appreciate it. And then I have a 2-part question on the PRASA project. I guess, one, how is PRASA funding that project? And then secondarily, what is the legal status of that project? Robert Wrocklage: The first part of that question shouldn't surprise anyone. Part of the project purpose and intent is in response to Hurricane Maria, which took place in 2017, so over 8 years ago. And so the funding of that project in part is coming from FEMA dollars. And so that is a FEMA-funded project, which ultimately drives the Buy American requirement, I mentioned earlier, which then drives our location of manufacture. In our -- to the second part of your question, in our -- first of all, we don't comment certainly on litigation of ourselves or and/or the legal status, if you will, of even our customers or potential customers. But in the direct sense in our commentary, we mentioned there's a lot of variables related to this project. And certainly, those variables could impact the pace at which that project gets deployed, whether it be here in the immediate term of 2026 or thereafter. And so I'm not making that statement generally, not specific to your legal question. But ultimately, there are a lot of variables at play. But what is known is the award and our participation in that award. Operator: Your next question comes from the line of Scott Graham with Seaport Research Partners. Scott Graham: I want to understand a little bit more, Ken, about some of your statements in the press release and then followed up on the call here about first half versus second half. It seemed in the press release to suggest that your second half growth was slower than your high single-digit long term and that, that decrement was either because of the roll-off projects, as you've discussed and the days in the fourth quarter, and that the first half of this year will essentially be the same, the roll-off of the projects. Does that suggest, Ken, that the organic growth that you're expecting in the first half of the year will be the same amount lower on a percent basis as the second half was versus the high single? Kenneth Bockhorst: So Scott, as you, I'm sure, expect, we're not going to get that granular with you. But when I had mentioned previously that I think you'll see 2026 play out in a similar fashion, except the inverse of how 2025 did. I would just expect a lower growth rate in the first half of the year and a higher growth rate in the second half of the year. Scott Graham: I had to try. Okay. So the stock is obviously, seems to not be reflecting what you're saying in this call. And I'm just wondering, you've been buying back some stock last couple of quarters. Is the plan here with that the stock where it is, is there an opportunity to maybe restrain some costs in the first half of the year to boost earnings? Or will we continue to see share repurchases to boost earnings or both? Kenneth Bockhorst: Yes. So a couple of things. So first off, obviously, with our great balance sheet, we still feel 100% positive about our capital allocation priorities. So we're going to continue to invest organically and inorganically in the business. So what that means is we'll do the right things to continue to drive long-term strategy and growth. So we would never do any shortsighted cost-cutting type things to try to short circuit a result. So we're going to continue to invest in the business. Two, returning cash to shareholders. That's traditionally for us been 33rd consecutive year of increased dividends. We did buy some shares back in Q4, as we talked about. And certainly, we have the authorization to purchase more. And if we thought it was attractive in Q4, I'm not forecasting anything for you, but I would think you'd think -- we think it's attractive now, too, to repurchase shares. And then on the M&A funnel, we're really, really thrilled with the deals that we've done over the last 5 years, and we continue to have a really exciting funnel. So the capital allocation priorities are still going to be aligned to support growth, return value to shareholders and do more M&A. Operator: Your next question comes from the line of Michael Fairbanks with JPMorgan. Michael Fairbanks: My first question is on SmartCover. So it was up 25% annualized and profitable in 4Q. I guess now that the integration is 12 months in, can you just give us an update on what you now see as the potential in that business? And how we should think about the growth algorithm there going forward? Kenneth Bockhorst: Yes. You cut out there a little bit, but I think what you asked was we saw a 25% growth in SmartCover and you're asking how we see the future of sewer line monitoring growth rate. So the thing that we were excited about SmartCover to begin with is that before we acquired it, it was growing at a 20% CAGR for multiple years. So that's the first point. Second point is we're still so early in adoption of sewer line monitoring that there's still so much more room to grow, which is why we really want to get into that space. And acquiring a known brand like SmartCover, the leader in North America was really important to us. So we fully, fully expect to continue to grow our sewer line monitoring at a higher rate than average. Michael Fairbanks: Great. And then on PRASA, can you maybe just talk about how you could use potentially an AMI deployment like that to expand the reach of the other offerings in the portfolio, just in the BlueEdge portfolio broadly? Robert Wrocklage: Yes. In fact, the answer doesn't even need to be PRASA specific. I think we have multiple examples where AMI adoption by a utility ultimately serves as the catalyst to the extension of other beyond the meter technologies. Essentially, AMI becomes an implementation that, in many cases, a utility grows into having data availability and the insights and analytics to influence how they run primarily their meter billing operations, but then having cascading effects into the remainder of the utility. And once that kind of capability or core discipline is in place, it then becomes very clear that marrying up that meter and flow data with other pressure management and/or water quality data becomes a very valuable value proposition, if you will. And so whether it's PRASA or any other AMI customers of ours, that's oftentimes the foundation or the springboard to the broader beyond the meter technologies. We often talk about Galveston. We've talked about Galveston historically over time. But that is the exact scenario that played out there. AMI was the first technology adoption and then other use cases followed in short order as data and analytics became a primary point of emphasis with the utility. Operator: There are no further questions at this time. I will now pass the call back to Barbara for closing remarks. Barbara Noverini: Thank you, operator. Badger Meter's First Quarter 2026 earnings release is tentatively scheduled for April 16, 2026. In addition, please save the date for Badger Meter's inaugural Investor Day, which will be held on May 21 in New York City. During the event, we will provide greater color and tangible examples of the evolution of our BlueEdge portfolio, along with the discussion of the key drivers enabling growth of our comprehensive suite of smart water management solutions. Information about how to attend and what more to expect will be available in early March. Thanks for your interest in Badger Meter, and have a great day. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Has any objections, you may disconnect at this time. I would now like to introduce today's conference host, Mr. Craig Lampo. Sir, you may begin. Craig Lampo: Great. Thank you so much. Afternoon, everyone. This is Craig Lampo, Amphenol's CFO, and I'm here together with Adam Norwitt, our CEO. I would like to wish everyone a Happy New Year and welcome you to our 2025 conference call. Our fourth quarter 2025 results were released this morning. I'll provide some financial commentary, and then Adam will give an overview of the business and current market trends. Then we will take your questions. As a reminder, during the call, we may refer to certain non-GAAP financial measures and make certain forward-looking statements. Please refer to the relevant disclosures in our press release for further information. The company closed 2025 with record sales of $6.4 billion and GAAP and adjusted diluted EPS of $0.97 and $0.93, respectively. 48% local currencies, The fourth quarter sales were up 49% in US dollars, and 37% organically compared to 2024. Sequentially, sales were up 4% in US dollars and in local currencies, and up 3% organically. Adam will comment further on trends by market in a few minutes. For the full year 2025, sales were approximately $23.1 billion, up 52% in US dollars, 51% in local currencies, and 38% organically compared to 2024. We are very encouraged by our orders in the quarter, which were a record $8.4 billion, up a strong 68% compared to 2024 and up 38% sequentially, resulting in a very strong book-to-bill ratio of 1.31 to one. This impressive book-to-bill in the quarter was primarily driven by robust bookings in the IT datacom market related to AI applications. We have seen customers open their order window a bit in certain cases, which helped to drive these strong bookings. For the full year, orders were $25.4 billion, up 51% compared to 2024, resulting in a book-to-bill ratio of 1.1 to one. GAAP operating income was $1.7 billion in the quarter, and GAAP operating margin was 26.8%. GAAP operating margin included $47 million of acquisition-related costs, primarily for external transaction costs and the amortization of acquired backlog. Excluding acquisition-related costs, adjusted operating margin and adjusted operating income was 27.5% and $1.8 billion, respectively. On an adjusted basis, operating margin increased by a strong 510 basis points from the prior year quarter and was flat sequentially. The year-over-year increase in adjusted operating margin was primarily driven by robust operating leverage on the significantly higher sales volumes, which was only modestly offset by the dilutive impact of acquisitions. For the full year 2025, GAAP operating income was $5.9 billion and included $181 million of acquisition-related costs. Excluding these costs, adjusted operating income was $6.1 billion in 2025. For the full year, GAAP operating margin and adjusted operating margin reached annual records of 25.4% and 26.2%, respectively. On an adjusted basis, operating margin increased 450 points compared to 2024, primarily driven by strong operational performance on the significantly higher sales volumes, which again was only modestly offset by the dilutive impact of acquisitions. I'm extremely proud of the company's operating margin performance in the fourth quarter and for the full year 2025, both of which reflect continued strong execution by the team. Breaking down fourth quarter results by segment. Compared to 2024, Sales and Communication Solutions segment were $3.4 billion and increased by 78% in US dollars and 60% organically. Segment operating margin was 32.5%. Sales in a Harsh Environment Solutions segment were $1.7 billion and increased by 31% in US dollars and 21% organically. And segment operating margin was 27.6%. Sales in Interconnect and Sensor Systems segment were $1.4 billion, increased by 21% in US dollars and 16% organically. And segment operating margin was 20.1%. Bringing down full year results by segment compared to 2024, sales in the Communication Solutions segment were $12.1 billion, an increase by 91% in US dollars and 71% organically. And segment operating margin was 31.1%. Sales in the Harsh Environment Solutions segment were $5.9 billion, increased by 33% in US dollars and 17% organically. And segment operating margin was 26.2%. And sales in the Interconnect and Sensor Systems segment were $5.2 billion and increased by 15% US dollars and 13% organic. The segment operating margin was 19.5%. For the fourth quarter, the company's GAAP effective tax rate was 26.9%, which compared to 17.4% in the '4. And full year 'twenty five GAAP effective tax rate was 23.1%, which compared to 18.9% at 2024. On an adjusted basis, the effective tax rate of 25.5% both for the fourth quarter and full year, which compared to 24% in the prior year periods. As we discussed last quarter, the increase in our adjusted effective tax rate in '25 was due to some shift in income mix to higher tax jurisdictions. For modeling purposes, you should assume that this higher tax rate of 25 and a half percent continues into 2026. As our typical practice, our adjusted our adjusted tax rate percent compared to the 55¢ in the 2024. This was an outstanding result. For the full year, GAAP and adjusted diluted EPS were both a record 3034¢, an increase of 7477%, respectively. Operating cash flow in the fourth quarter was $1.7 billion or 144% of net income. And free cash flow was $1.5 billion or 123% of income. And for the full year of 2025, operating cash flow was a record $5.4 billion, 126% of net income, and free cash flow was a record $4.4 billion or a 103% of net income. Considering the high growth rates we experienced this year, this is a very strong result. From a working capital standpoint, inventory days, days sales outstanding, and payable days are all within our normal range. During the quarter, the company repurchased 1.3 million shares of common stock at an average price of approximately $134. When combined with our normal quarterly dividend, total capital return to shareholders in 2025 was approximately $373 million and was nearly $1.5 billion for the full year of 2025. Total debt at December 31 was $15.5 billion, and net debt was $4.1 billion, which included $7.5 billion from the US Bond offering we completed in October and in anticipation of the closing of the CCS acquisition. Total liquidity at the end of the fourth quarter was $17.5 billion, which included cash and short-term investments on hand of $11.4 billion plus availability under our existing credit facilities. And $3.1 billion of term loan facilities put in place in anticipation of the CCS acquisition. In early January, the company closed the CCS acquisition, which was funded with cash on hand primarily resulting from the October 2025 bond deal as well as the $3.1 billion of term loan facilities. As a result of the acquisition of CCS, we expect 2026 quarterly interest expense, net of interest income from cash on hand, to be approximately $200 million, which is reflected in our first quarter 2026 guidance. Adjusting for the impact of the CCS acquisition, our net debt at year-end would have been $14.7 billion, and our liquidity would have been $6.9 billion, which includes pro forma cash and short-term investments on hand of $3.9 billion. Fourth quarter 2025 EBITDA was $2 billion, and our net leverage ratio was 0.6 times at the end of the quarter. Pro forma net leverage at the 2025, including the CCS acquisition, would have been approximately 1.8 times. As of December 31, the company had no outstanding borrowings under its revolving credit facility or its commercial paper programs. I will now turn the call over to Adam, who will provide some commentary on current market trends. Well, thank you very much, Craig, and I also would like to offer my best New Year's wishes to all of you here. Craig and I are here in the winter wonderland of Wallingford, Connecticut, and it's a real pleasure to talk to you about our fourth quarter and full year achievements. I'll highlight some of those achievements, and then as Craig mentioned, I'm going to discuss the trends across our served markets. We'll make some comments on the outlook for the first quarter, and then, of course, we'll have time for questions. Turning to the fourth quarter, there's no doubt that Amphenol had a strong finish to a very successful 2025. With sales and adjusted diluted earnings per share in the fourth quarter both exceeding the high end of our guidance. Sales grew by 49% in US dollars and 48% in local currencies, reaching a new record of $6.439 billion. And on an organic basis, our sales increased by 37%, with robust growth across nearly all of our served markets. As Craig mentioned, we booked a record $8.4 billion of orders in the fourth quarter, which represented a very strong book-to-bill of $1.31 to one. These orders grew by 68% from the prior year and were up 38% sequentially. And while orders were strong across the board, there's no doubt that these robust orders were driven primarily by data center demand related in particular to artificial intelligence investments being planned by a number of our large customers. We're also pleased in the quarter to have delivered adjusted operating margins of 27.5% in the quarter, which matched our record-setting margins in the third quarter and which represented an increase of 510 basis points from the prior year. This superior profitability is a direct result of the outstanding execution of the Amphenol team around the world. Our adjusted diluted EPS in the quarter grew by 76% from the prior year, reaching a new record of 97¢. Finally, the company generated record operating and free cash flow in the fourth quarter, $1.7 billion and $1.5 billion, respectively. Both clear reflections of the quality of the company's earnings. I just can't express enough my pride in our team here in the fourth quarter. These results once again reaffirm the value of the discipline and agility of our entrepreneurial organization. As we continue to perform well amidst a very dynamic environment. We're also very excited in the quarter that we closed on the previously announced acquisition of Trexon. With operations in the US and Europe and with annual sales of $290 million, Trexon's a leading provider of high-reliability interconnect and cable assemblies primarily for the defense market. We're particularly excited that Trexon further expands our value-add interconnect offering for the defense market. Enabling us to offer our customers in this important area a complete solution of high-technology interconnect products, really the broadest in the industry. We look forward to the Trexon team flourishing as part of the Amphenol family. In addition, just here in January, we're excited to have closed on the acquisition of the CCS business from CommScope a bit earlier than we had anticipated. This business, which will be known going forward as CommScope, an Amphenol company, represents a significant expansion of our interconnect capabilities across three of our important end markets. As we discussed last year, CommScope had significant fiber optic interconnect capabilities, for the IT datacom and communications networks markets as well as a diverse range of industrial interconnect products for the building connectivity market, which will be included in our industrial segment. We look forward to working closely with the CommScope team as they embrace the Amphenol uprooting culture. And are really excited about the potential that this significant acquisition can bring to our company. As previously disclosed, we expect CommScope to generate full year 2020 sales of $4.1 billion and to add 15¢ to Amphenol 2026 adjusted earnings per share. As we welcome the outstanding CommScope and Trexxon teams to the Amphenol family, we remain confident that our acquisition program will continue to create great value for the company. Our ability to identify and execute upon acquisitions and then to successfully bring these companies into Amphenol remains a core competitive advantage. And there's no doubt that as our organization has evolved and scaled, so too has our ability to effectively manage a greater number of acquisitions of all sizes. Now turning to the full year 2025, 2025 was a uniquely successful year for Amphenol. We expanded our position in the overall market. Growing our sales by 52% in US dollars, 51% in local currency, and 38% organically, reaching a new sales record of $23 billion or $23.1 billion. As we cross $23 billion in sales in 2025, we're very proud to have more than doubled Amphenol's revenues in the past four years. A great reflection of our organization's ability to navigate market dynamics while capitalizing on the broad array of opportunities arising across the electronics industry. Our full year 2025 adjusted operating margin reached a record 26.2%, and that was a robust increase of 450 basis points from the prior year. And this strong level of profitability enabled us to achieve record adjusted diluted EPS of $3.34, an increase of 77% from the 2024 levels. As Craig mentioned, we generated record operating cash flow of $5.4 billion and free cash flow of $4.4 billion. Clear confirmations of the company's superior execution and disciplined balance sheet management. Very proud that our acquisition program again created great value this year. We completed five acquisitions in 2025. Including Andrew, our largest acquisition at the time, together with the acquisitions of Trexon, Nardemitek, LifeSync, and Rochester Sensors. Collectively, these acquisitions have added to Amphenol annualized sales of nearly $2 billion. In addition, as I just mentioned and as we announced earlier this month, we also closed on our largest ever acquisition now, which is the CommScope acquisition. What is in common across all these acquisitions? Is that they enhance our position across a broad array of end markets, and deep enabling technologies. All while bringing outstanding and talented individuals into the Amphenol family. We also returned substantial cash to shareholders in 2025, buying back nearly 7.5 million shares under our share repurchase program and increasing our quarterly dividend by 52%. This represented a total return of capital to shareholders of nearly $1.5 billion. As we enter 2026, remain excited about the opportunities ahead of us for Amphenol. Our agile entrepreneurial organization has created a new position of strength for the company. From which we can continue to drive superior long-term performance. Now turning to our served markets. Once again, I'm very pleased that the company's end market exposure remains diversified, balanced, and broad. And there's no doubt that presence that we have across all these end markets creates great value for the company. As we're allowed to participate across all areas of the global electronics industry, wherever there may be new revolutions arising, all while not being disproportionately exposed to the of any given application or market. Turning first to the defense market. That market represented 10% of our sales in the fourth quarter and 9% of our sales for the full year 2025. Sales in the fourth quarter grew strongly from the prior year. Increasing by 44% in US dollars and 43% in local currencies. On an organic basis, sales increased by 29% with broad-based growth across virtually all defense applications. Including in particular radar, space, communications, avionics, and unmanned aerial vehicles. Sequentially, sales increased by 16% well ahead of our expectations for mid-single-digit growth. For the full year 2025, our sales grew by 30% in US dollars in local currency, and by 21% organically. Reflecting our superior operational execution as well as growth across all segments of the defense market. In addition, we're very pleased that our growth in '25 was really broad-based geographically. Reflecting our leading position across the many countries for increasing their defense spending. Looking ahead, we expect sales in the first quarter to increase slightly largely driven by the benefit of the Trexon acquisition. And we remain encouraged by the company's leading position in the defense interconnect market. Where we continue to offer the industry's widest range of high-technology products. Amidst the current dynamic geopolitical environment, countries around the world are further expanding their investment into both current and next-generation defense technologies. With our existing offerings, as well as the exciting and complementary capabilities from Trexon, we are positioned better than ever to capitalize on this long-term demand trend. The commercial air market represented 5% of our sales in the quarter and for the full year 2025. In the fourth quarter, our sales grew by 21% in US dollars, and 20% in local currencies. On an organic basis, sales increased by 19% from the prior year driven by broad-based strength with virtually all commercial aircraft manufacturers. Sequentially, our sales grew by 10% from the third quarter well above our expectations coming in ninety days ago. For the full year 2025, sales in the commercial air market increased by 39% in US dollars and 38% in local currency. As we benefited from accelerating demand across aircraft platforms as well as from acquisitions. Organically, our sales increased by 13% from the prior year, reflecting our robust design in positions on a broad array of jetliners. Looking into the first quarter, we expect sales to moderate seasonally by approximately 10% on a sequential basis. I'm truly proud of our team working in the commercial air market. With the ongoing growth and demand for aircraft, our efforts to expand our product offering both organically and through our successful acquisition program continued to pay real dividends. In particular, I just want to note that we're very pleased. With the progress of the CIT team who have truly embraced being part of Amphenol and have driven outstanding results. We look forward to further capitalizing on our expanded range of product solutions for the commercial air market. Long into the future. The industrial market represented 18% of our sales in the quarter and 19% of our sales for the full year 2025. Our sales grew by 20% in US dollars and 18% in local currencies from the prior year. And on an organic basis, we were pleased that sales grew by 10%, driven by relatively broad-based growth across the industrial end markets. In particular medical, alternative energy, e-mobility, heavy equipment, industrial instrumentation applications. We also grew again in all of our major geographic regions. On a sequential basis, sales grew by 2%, better than our expectations. For the full year 2025, sales grew by 21% in US dollars and 20% in local currency. As we benefited from relatively broad-based growth as well as from acquisitions. Organically, sales grew by a strong 10%, from the prior year. Looking into the first quarter, we expect our sales to increase approximately 20% from these fourth quarter levels driven by the addition of CommScope's building connectivity business. We remain encouraged by the company's strength across the many diversified segments of this important market. Over the long term, I'm confident in our strategy to expand our high-technology interconnect antenna and sensor offering both organically and through complementary acquisitions. This strategy has enabled Amphenol to capitalize on the many revolutions that continue to occur across the diversified industrial market. And thereby create further opportunities for the outstanding team working in this important market. The automotive market represented 14% of our sales in the fourth quarter and 15% of our sales for the full year. Sales in the fourth quarter grew by 12% in US dollars and 9% in local currencies and organic. And that was driven by relatively broad-based growth across automotive applications. In addition, we are pleased that once again, we realized growth in all three regions. Sequentially, our automotive sales were flat, but this was better than our expectations coming into the quarter. For the full year 2025, our sales increased by 8% in US dollars and 7% in local currency and organic. With growth in all three regions. As we look into the first quarter, we do expect a seasonal moderation in sales from this quarter's levels of approximately 10%. I remain very proud of our team working in the important automotive market. And while there are always areas of uncertainty in the global automotive market, our organization continues to be focused on driving new design wins with customers. Who are implementing a wide array of new technologies into their vehicles. We look forward to benefiting from our strengthened position in the automotive market for many years to come. Communications networks market represented 9% of our sales in the fourth quarter and 10% of our sales for the full year 2025. Sales in this market grew from the prior year by 120% in US dollars and 119% in local currency, as we benefited from the Andrew acquisition completed earlier last year. Organically, our sales were flat from the prior year. On a sequential basis, sales declined as expected by 13% from the third quarter. And for the full year 2025, our sales to communications networks increased by 134% in US dollars in local currency and by 13% organically as we benefited from the addition of Andrew as well as growth in our products sold into the mobile network operators and wireless equipment manufacturers. As we look towards the first quarter, we do expect a significant nearly 50% increase in sales as we benefit from the addition of the CommScope business which more than offsets the typical seasonal sales declines that we would see here. With our expanded range of technology offerings, following the acquisitions of both CommScope and Andrew, We are well positioned with service provider and OEM customers across the global communications networks market. Our deep and broad range of products, coupled with an expansive manufacturing footprint, have positioned us to support these customers wherever they may be. And as customers in this market continue to drive their systems and networks to higher levels of performance, We look forward to enabling them for many years to come. The mobile devices market represented 6% of our sales in the quarter and also for the full year, and in the fourth quarter, our sales moderated by 4% in US dollar local currency local currency and organic, as growth in tablets, wearables, and accessories was more than by some moderation in sales related to smartphones. On a sequential basis, our sales increased by 6% which was a bit better than our expectations coming into the quarter. And for the full year 2025, sales in the mobile devices increased by 5% in US dollar and organic, and that was really driven by growth across virtually all mobile device applications. As is typical in the first quarter, we do anticipate a seasonal decline of some magnitude roughly in the 30% range as we look into the first quarter. But, nevertheless, I'm very proud of our team working in the always dynamic mobile device market. As their agility and reactivity have once again enabled us to capture incremental sales in the quarter. I'm confident that with our leading array of antennas, interconnect product, and mechanisms, designed in across a broad range of next-generation mobile devices. We're well positioned for the long term. Finally, the IT datacom market represented 38% of our sales in the fourth quarter and 36% of our sales for the full year. Sales in the fourth quarter grew by a very strong 110% in US dollar and organic driven by continued strong demand for our products used in AI applications together with ongoing growth in our base IT datacom business. On a sequential basis, our sales increased by 8% from the third quarter which was substantially better than our expectations ninety days ago. This sequential increase was essentially driven by growth in AI-related applications. For the full year 2025, our sales in the IT datacom market grew by a very strong 124% in US dollars and organic. As we benefited from strong demand for AI-related applications as well as accelerated growth in our non-AI IT data business. As we look ahead, we expect a low double-digit sequential sales increase in the first quarter driven by the addition of CommScope. And on an organic basis, we're very pleased to anticipate that we will remain at these very levels in the fourth quarter. We are more encouraged than ever by the company's position in the global IT datacom market. I just can't emphasize enough what an outstanding job our team has done, not only in securing future business, on these next-generation IT systems, with a really broad array of customers, but in executing upon that demand here in 2025. It's no doubt that the revolution in AI continues to create a unique opportunity for Amphenol. Given our leading high-speed and power interconnect products. With now the addition of CommScope, we have the broadest range of high-speed power and fiber optic interconnect products all of which are critical components in these next-generation systems. This creates a continued long-term growth opportunity for Amphenol. Turning to our outlook and of course, assuming the continuation of current market conditions as well as constant exchange rates, For the first quarter, we expect sales in the range of $6.9 billion to $7 billion and adjusted diluted EPS in the range of $0.91 to $0.93. This would represent significant sales growth from the prior year of 43% to 45% and adjusted diluted EPS growth of 44% to 48%. I would note that our Q1 guidance includes $900 million in sales and $0.02 of adjusted EPS accretion from the CommScope acquisition. I remain confident in the ability of our outstanding management team to adapt to the many opportunities and challenges present in the current environment. While continuing to grow Amphenol's market position all while driving sustainable and strong profitability over the long term. Finally, I'd like to take this opportunity to first thank our customers for the trust that they put in us and also to thank the entire global team of Amphenolians for their truly outstanding efforts here in the fourth quarter and in the full year 2025. And with that, operator, we'd be happy to take any questions. Operator: Thank you, Mr. Norwitt. Question and answer period will now begin. Please limit to one question per caller. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. We have a question from William Stein from Truist Securities. Please go ahead. William Stein: Great. Thanks for taking my question. Congrats on the very strong results and outlook. First, I'd like to ask about the bookings, which was very strong. I think you highlighted a 1.31 book-to-bill. Adam, that I imagine, must have in it some extended duration orders in the backlog. And I wonder whether that's entirely concentrated or mostly concentrated in IT datacom. And also, if you can talk about what gives rise to that level of orders? Is it based on sort of a need for them to place this in order to get in line, from a sort of a lead time perspective? Or is this based, perhaps on sort of minimum order requirement in order to meet CapEx requirements that you have? Any color on that would be really helpful. Thank you. Adam Norwitt: Well, thank you very much, Will. Look. No doubt. We were very encouraged by the bookings as we came out of the year in 2025, and you know, I'll say a couple of things. I mentioned earlier that, in fact, our bookings were really broadly strong across all of our end markets with maybe I think, only one exception our book-to-bill was at or above one. And then in a few cases, significantly above one. And there was certainly the IT datacom market specifically related to AI investment was a primary driver of this 1.31 book-to-bill and record orders, you know, for the company. To achieve orders of more than $8 billion in the quarter was certainly a milestone for all of us. Look. I think that as I mentioned, and I think Craig alluded to, that we have seen customers open up their order window for in particular related to significant plans that they have of investments related to AI. This is not because of kind of getting in line so to speak. I mean, I think our team's done a fabulous job of ramping up, I mean, as evidenced by the extraordinary growth that we achieved last year, a 120% year-over-year growth. For the full year in IT datacom, there's no doubt that our team has done an amazing job of ramping up to our customers' needs. But at the same time, and we've talked about this in the past, you know, because of the technology involved in a lot of these next-generation products, really pushing the limits of these systems and pushing the limits of the products. You know, these products do require, in certain cases, more automation, which fortunately, we do the vast majority of that in-house, which has been an amazing competitive advantage for Amphenol through this time period. And so we've worked with customers because of these, you know, sometimes outsized investment requirements, and they're outsized plans that they provide to us, to somehow share the risk of those investments and we do that in a variety of ways. Those ways can include customers actually sharing some of the spending, contributing to the spending, and, otherwise, you know, giving us commitments that are solid commitments that give us the comfort to make those investments and drive the ramp-ups that ultimately meet those customers' demands. And so I think it's more not and you use the word minimum order. I wouldn't call it minimum order. But rather it's giving us the comfort through their own commitments to Amphenol that we should then make the commitments in capital and using Amphenol's hard-earned cash and the time of our team, to make those investments. And I think it's a great sign. It's a sign, number one, of our customers' intention and their plans, which are very robust. It's a sign number two of our customer's commitment and confidence. In the Amphenol organization. And so no doubt about it. I think it's a positive. And, you know, we look forward to continuing to drive great success in that market in the future. Thank you. Our next question comes from Amit Daryanani from Evercore ISI. Amit Daryanani: Please go ahead. Adam Norwitt: Yep. Thanks a lot. Good afternoon, everyone. Thanks for taking my question. Adam, post the CCS deal, can you just talk about the breadth of your offerings when it comes to serving these AI infrastructure customers? You folks have done really well on a stand-alone basis, but know, there's this view, I think, out there that Amphenol is driven more by And as we move more to optics and fiber, there's a risk here. So maybe hoping you can spend some time to help us appreciate the range of offerings you're gonna have post-CCS. And how do you see these offerings that you get from CCS really being complementary to what Amphenol has today? Thank you. Adam Norwitt: Yeah. That's it. Well, thank you very much, Amit. Look. There's no doubt about it that we have worked for a long time, and it's kind of ironic. Know, we just celebrated the twentieth anniversary of another foundational acquisition for Amphenol, which was the acquisition of the Chariton Connection Systems business twenty years ago which really catapulted Amphenol into a leadership position in high-speed copper interconnect products. I will tell you that at that time, you know, high-speed meant five gigabits. Maybe 10 on the outside. And over those twenty years, we've continued to double down on the excellent capabilities that TCS brought us the people most of whom are still with our team today, you know, there to celebrate that same twentieth anniversary. And that has put us in a real leadership position as our customers drive their systems to higher and higher speed. Now we have always been a player in fiber optics. I mean, going all the way back to, you know, the early foundations of what a fiber optic connector was you know, half a century ago or more. But there's no question that with CCS, just like at the time with CCS twenty years ago, CCS vaults us into a position of breadth and depth in the technology around fiber optic interconnect that is a real expansion. Of our capabilities. And so when we go to customers data center applications or when we go to communications networks, customers and talk about their next-generation network planning, We can now have that conversation across the entirety of the Internet of the interconnect spectrum. As they think about the various trade-offs that a customer goes through every time they think about their specific system architecture, You know, do they want to use a high-speed copper interconnect here? What's the power situation? How do they bring power? Into their system, into the rack, into a data center? Into a network? And then how did they use fiber optics, you know, which have, of course, fabulous traits in particular around high bandwidth, long-distance communications. And customers are making these trade-offs every day, And now with the CCS acquisition, what I'm so excited about is the unique position it puts Amphenol in as a company to be able to go in and talk to that entire spectrum. Of interconnect. Our customers just want to get a signal from a place to a place. And it's up to us to work with them to figure out the best way to do that. Whether they're getting a signal from a GPU to a GPU or from a central office home somewhere or anything in between. And I think now we were able to come to them with a total solution of leading interconnect products that ultimately allow us to have a seat at the table as a partner with those customers for many, many years and many generations to come. Thank you. Operator: Our next question comes from Luke Junk from Baird. Please go ahead. Luke Junk: Adam, maybe to bridge on the comments you just made, I'd just wondering if you could maybe speak to integration first steps at CommScope. And, you know, like you mentioned, the deal got closed a little sooner than you had expected. Just how important is that in terms of bringing this new fuller, broader portfolio to bear in data center, especially given how quickly this market's moving right now? Thank you. Adam Norwitt: Well, thanks very much, Luke. I'll answer the second question. I mean, know, you get one of these deals done. You gotta get a lot of approvals in a lot of different places. And I think our team did a great job of working with the various authorities to get those approvals a bit faster. And I'm really grateful also to the folks who sold us this company, and, you know, they've renamed their company now, and I wish them all the best. It was really a great experience, I think, for all sides, and we work really well together. To bring this deal to fruition quite a bit faster than, you know, we thought it was gonna be at the time that we originally announced the deal. I would say so the speed I don't think the fact that we closed it early in the quarter versus end of the quarter, that doesn't change our position in the marketplace. Obviously, as soon as we announce the deal, you can imagine that our customers around the world wanted to talk to us about what that meant for the long term. And so we've been having those conversations for quite some time already. In terms of the integration, I mean, you know, that word integration is not a word in the Amphenol lexicon. You know, there are two words we don't use, integration and synergy. And but what we do talk about is letting them evolve into the Amphenol family letting them be who they were because it's a fabulous organization. I mean, the leadership of the company is still the same leadership. The people are still the same people. We're not parachuting people in. We're not merging and morphing things into one or another, synergizing and restructuring. We're actually working with the team on day one to say what are the opportunities that now that you're part of Amphenol, you could hope to achieve that you maybe couldn't have done part of your former company. I was so happy, you know, on the first day of the acquisition that right after we announced it, I went really one of the nerve centers of the company. As you know, you know, the CommScope, we've talked about this. In many ways, it is a collection of extraordinary iconic businesses in its own right. The CommScope business that was founded nearly fifty years ago by Frank Drendel as a supplier into the broadband networks market. The Systemax business, which is an amazing iconic business selling into building connectivity. And the ADC Communications, which was a long legacy leader in fiber optic interconnect. And so I was really happy to go to Shakopee, Minnesota, which is really the nerve center of the fiber optic capability of this company. And meet with these engineers and the product managers and the folks leading that business. And I can tell you they're so excited to be part of Amphenol. And we broadcast a welcome around the world. And the just a kind of a almost a universal excitement to be part of this company called Amphenol, to become Amphenolians as they all now know that word. And so you know, the first steps is, you know, meet the people, get excited, find opportunities to go accelerate the business, and that's all well underway today. Luke Junk: Thank you. Operator: Our next question comes from Wamsi Mohan from Bank of America. Please go ahead. Wamsi Mohan: Yes. Thank you so much. Adam, I was hoping you could maybe parse the January IT datacom guide of flattish organically excluding CCS. Should within that, should we be expecting the traditional sort of you know, enterprise-centric market, double-digit and the AI workloads to grow. Is that the right way to think about it? And within the AI context, is that more programs for you, more units in existing programs? Any color you can share around, so what you're hearing from your larger AI customers in terms of just trajectory given especially your comments about very strong orders? Adam Norwitt: Yeah. Thanks very much, Wamsi. Look. I mean, it's hard for me to give too much of a parse of what that flat organic means. I mean, you're correct. Traditionally, the base IT datacom cycle would be down in the first quarter. So I think probably there's some of that here as well. But look, in terms of our ongoing growth in AI, I mean, I want to emphasize one thing, which is just the breadth of that business. You know, we have an enormous position with a lot of different customers up and down the stack of AI, you know, from the folks who are making the investments the big web scale folks, and otherwise, including, like, you know, the cloud, the Neo cloud, whatever you guys all call these folks. The equipment manufacturers, all the way down to, of course, significant companies who are designing the chips and the architecture around those chips. I mean, I will say that, you know, as we come out of 2025, that breadth is reflected in the fact that we didn't have any 10% customers in 2025. You know, we have significant customers, but we have also a lot of breadth around that business. And so as our customers think about the forward potential, of AI I mean, I think there's a few factors. Number one is their investment plans are all going up. There's no doubt that there continues to be a very robust plan of continuing to drive accelerated computing at a very strong level. And there's upgrades of the technology embedded in those data centers which requires a higher technology, more complex, higher content degree of interconnect. We're also very excited that not only are we participating, you know, as we have traditionally bringing the power in, power to the racks and the like, the data communication within racks, within adjacent racks, but also now with CommScope participating in the broader fiber optic opportunity, associated with those data centers. And, you know, there's no doubt that that also creates a strong opportunity for the company going forward. Wamsi Mohan: Thank you. Operator: Our next question comes from Samik Chatterjee from JPMorgan. Please go ahead. Samik Chatterjee: Oh, hi. Thanks for taking my question, and Happy New Year. Adam, I'm wondering when you mentioned the sort of opening up their order books a bit when it pertains to your IT datacom business. Are you seeing anything similar for the CC business the reason I ask is we saw what what are the competitors in the space currently announced agreement with Meta Securing Supply. So are you seeing hyperscalers customers on that front come to you to sort of engage in those discussions to secure supply and what that what that would mean for your investment proof, sort of support for this business. Thank you. Adam Norwitt: Yeah. Well, thank you very much, Samik. Yeah. Look. No doubt. We had very strong orders, and I would tell you that the CommScope business, as we call it now, we're not calling it anymore CCS, It has also had very strong orders. And for sure, I mean, there have been plenty of announcements and, you know, by really wonderful companies out there, and, you know, we're really proud to be considered in the same breath as some of these amazing companies that have also been in the public eye late. And there's no doubt that the CCS is participating. I mean, we've talked about the fact that their exposure into the data center, their strong growth that they've seen in that area. You know, I would also just point out, you know, at the time we acquired we announced the acquisition then of CCS, we talked about acquiring a company of roughly $3.6 billion in sales at a 26% EBITDA margin, and that, you know, implied a of just over 11 times that we paid for it. By the time we closed, we're now talking about a business of more than $4 billion in annualized sales. That is a great momentum, strong orders, positive book-to-bill, and all of that. And, obviously, implies as well that, you know, on a at least on a current year basis here in 2026, we're we the this is a great deal for Amphenol and really the high single digits in terms of an EBITDA multiple. So I think it's a great company with a great prospects and, yes, does see those those same trends. In terms of investments, I mean, look. I we don't see any, you know, significant abnormal kind of things vis a vis investments with CTS. But I will say this, and that's something we've talked about in the past. It's a different thing for CCS to be a part of a company that, you know, for very obvious reasons was somewhat balance sheet constrained. And now they're part of Amphenol where we're more than willing to help them stimulate the virtuous cycle that so many of our companies are on by making prudent investments that allow great returns and allow them to capitalize upon the opportunities in the marketplace. And so it's not that we're just going to give them all blank checks here. But you can imagine that it's a different environment for CCS in terms of their ability to grow into the upper opportunities as part of Amphenol than maybe it would have been in the past. Samik Chatterjee: Thank you. Operator: Our next question comes from the line of Andrew Buscaglia from BNP Paribas. Please go ahead. Andrew Buscaglia: Hey. Good morning, everyone. Adam Norwitt: Good morning. Andrew Buscaglia: Or good afternoon. Adam Norwitt: How are you? Good aft Andrew Buscaglia: Yeah. Maybe shifting away from the AI and IT datacom story per minute. I think another underlying trend this quarter or a positive thing we're seeing is the momentum in, you know, a lot of other areas in your in your markets are pretty beat up. And I'm thinking, like, industrial, automotive, mobile devices, specifically. Just seem to start the markets seem to be turning a corner. Where are you say that's most pronounced? Maybe what surprised you in the quarter, if anything? Where do you see some of these sort of battered end markets going in 2026? Adam Norwitt: Yeah. Well, thanks very much, Andrew. I mean, there's no doubt. I mean, we saw really broad-based strength as we through the year and as we finish the year. And I mentioned in my prepared remarks that we're especially encouraged in if you take automotive and industrial as two pretty broad global markets, that we saw growth organically in both of those markets across all of the territories that they operate in. And I would highlight there, in particular, Europe. I mean, you know, the world has been so down on Europe for so long. And I think we've started to see in our company, especially in the second half of the year, that our teams in Europe who have held their heads high through this whole kind of malaise, if you will, have continued to pursue opportunities to gain market share, to enable our customers who are doing really amazing things you know, driving now, you know, robust organic growth in Europe in automotive and in industrial for the full year. And I would even say that in the fourth quarter, amazingly, our strongest organic growth in automotive was in Europe. So, you know, that's definitely a different thing than we've been talking about and that the world's been talking about for some time. And I think we're excited about our continued position there. And mobile devices, you know, it's a different thing. I wouldn't call that as much of a regional market, but there's just a lot of innovation. Look. I always start the year at the Consumer Electronics Show in Las Vegas, and I think I even had the chance to run across a couple of you guys who are on the call here today. In the lobbies of the Venetian or wherever. And I go to that show always because I find it so inspirational. To see what folks are doing. And what I find so interesting is everybody is talking about AI, and the build-out of the networks of AI. And the capability. But what I find long term maybe even more exciting or at least equally exciting, is what's gonna come from that. What's it gonna mean that we're gonna have this ubiquitous Star Wars as we come to the almost fifty-year anniversary. Will we each have our own C-3PO that'll have great AI capabilities? Who knows? I mean, these kind of things are possible. And I think the places like in automotive with autonomous driving, in industrial where you see so many different things happening on the edge where things get smart, robotics, the like, and mobile devices. You know, those three markets that you mentioned, think each of those stands to have a fundamental step function in their capabilities and their potential because of what's happening today in the build-out of this AI network. And I think long term, that's something that I'm really excited about. And I think back on the other revolutions, the microprocessor, the Internet, the mobile Internet, and the like, And each of those had later on a carry-on benefit to those markets. Automotive, industrial, mobile devices, and the like. And know, I'd be surprised if we don't see something like that in many years to come. Thank you. Operator: Our next question comes from Steven Fox from Fox Advisors. Please go ahead. Steven Fox: Hi. Excuse me. Afternoon. I guess I just was curious, big picture, Adam. You've obviously just completed a really strong growth year and generate cash flows. But with the orders now that you're looking at, can you just sort of talk about sort of the management challenges? You mentioned adding more automation. And I'm wondering about, like, higher metals prices, supply chain constraints. How do you look at this in terms of new challenges, especially as your demand is broadening out? Thanks. Adam Norwitt: Yeah. Well, thanks very much, Steve. Sorry. I didn't save my Star Wars reference, for you. Look. This is not an easy thing to do to grow a company by 38% organically. Let alone those operations within the company who have grown by so much more than that. I mean, you can imagine we've got folks who more than doubled the size of their individual operations. But what sets us apart and what has always been the core of why we are able to do hard things. Is that unique operating culture of Amphenol. The fact that we rely on what is now a 145 or so general managers 16 operating groups. You know? The CommScope, we talked earlier about the quote integration. Well, there's not an integration. The CommScope team is you know, the person who ran it is now a general manager of Amphenol, and he's running his team as he ran it before. So the quote the management challenges and, you know, you list a couple of things, supply chain, the cost of metals, which are extraordinary. Know, there the geopolitics, you know, whatever, shipping. I mean, there's so many things. And I think we don't fixate on one or another of those things. What I fixate on is making sure that if you're a general manager in Amphenol, you've got all the authority to deal with whatever comes your way. And that empowerment and enablement of people to go figure it out. And, yes, if they need some help, we're here. We've got this amazing organization driving collaboration. Communication, across the company. But the end of the day, the buck stops in a 145 desks. And if that means doubling the size of your business figuring out how to set up factories in four different countries, doing things with technology that have never been done before, ramping up automation machines that we've never built before but now can build extraordinarily probably one of the world's best automation companies that exist. They make it happen. They make it happen. And so I think when I think about growing the company as we have, doubling the size of Amphenol really in the last four years, for me, the biggest singular focus is how do we do that while still preserving that entrepreneurial culture. And I'm so proud that we've done it. If you think about a big change in the company four years ago, which I'm not gonna say is the thing that created that doubling, but it certainly enabled it. Was when we moved to three divisions with three division presidents when we expanded the number of operating groups in the company, all with the goal of securing, strengthening, and scaling that unique entrepreneurial culture of Amphenol. And I don't think it's a coincidence. That we took that step four years ago, and now here we are four years hence celebrating doubling the size of Amphenol. And so I do believe that the management challenges which are countless, on every day, thousands of challenges that our people face, they're equipped to deal with them no matter what they are. And that gives me not only a confidence for the future, but enthusiasm for the future. Because whatever comes along, we know for sure the world is not predictable. But what I can predict is that Amphenolians will be there, and we'll make it happen regardless. Thank you. Operator: Our next question comes from Mark Delaney from Goldman Sachs. Please go ahead. Mark Delaney: Yes, good afternoon. Thank you very much for taking the question and Happy New Year to all of you as well. I was hoping you could speak a bit more on the margin outlook. The company sustained a record high EBIT margin again in the fourth quarter at 27.5%. There's a number of factors as you go into 2026. You have some big deals, like CommScope. You also alluded to, but metals are up quite a bit, but then the company is growing quite fast. So any color you can share on how to think about incremental margins this year and some of the key puts and takes? Thanks. Craig Lampo: Yes. Thanks, Mark. Appreciate the question. Yes. I mean, I'll start off by just really quickening quickly addressing metals. I mean, Adam just mentioned kind of a bit about it. But from a margin perspective, I mean, certainly, we're working hard. I mean, metals are certainly something that we have as part of our cost of sales not a significant cost that when you kind of take into account the significant value we create within the facility, but certainly, it certainly has an impact. I mean, it's like any other cost you know, that we work through, and the general managers do a great job of working through kind of offsets to those cost increases, through anything from design of products to things in the factory to working with vendors to a whole host of different things. So I wouldn't say that, at least as of now, we see having any significant impact on kind of our margin outlook as we're moving into '26 and certainly hasn't had any evident impact, certainly with these record, you know, operating margins that we've seen here in the fourth quarter and for the full year. You know, as we move into the first quarter, I mean, the main puts and takes here, I mean, organically, we have a slight sequential decrease in our sales, which is normal seasonality that we typically see know, during the first quarter. And we're converting kind of in the mid-thirties. Even the lower mid-thirties in, you know, in regards to that organic change. And that's typical given our profitability levels and kind of where I would expect. So the company is really doing a great job managing, you know, a seasonal sequential decrease. And, you know, the bigger impact on our margins in the first quarter really is just the impact of CCS. We talked about CCS being in the high teens for the full year, and from an operating margin base to kind of where we expect. I would tell you in the first quarter, because of the seasonality of their sales and their lower sales in the first quarter, that their operating margins are just a bit under kind of that high teens rate. So they're having you know, a bit over a 100 basis point impact on our margins in the first quarter. You know, as we progress throughout the year, we're not guiding in '26, but certainly, we expect normal kind of, you know, operating margins. We expect that kind of 30% you know, kind of targeted conversion margins that we target on incremental sales. getting up to over time. As we grow. And, you know, with CCS, again, we target that up to the company average, and certainly, that will be an adder over time to our operating margin potential. So I'm really, you know, happy with you know, our operating margins that we've achieved in '25 and certainly very optimistic to where we are in '26. Operator: Thank you. Our next question comes from Asiya Merchant from Citigroup. Please go ahead. Asiya Merchant: Oh, great. Thank you very much. Just know, given the strong order book momentum and, you know, the AI momentum that you guys also talked about. Just if you could just talk about CapEx and how we should thinking about investments into 2026? As a result of that? Sorry if I missed that earlier. Craig Lampo: No. No. Thanks for the question. No. We didn't talk about specifically earlier. Yeah. No. From a capital perspective and as we talk about in 2025, we were certainly spending at a bit higher level. But, honestly, with the growth we have seen, we kind of ended the year just a bit over 4%, which, you know, three to 4% we say is our historic range. We ended the year just a bit over that 4%. You know? And I would say as we go into '26 and we continue to see you know, certainly opportunities for growth, and certainly we've had strong orders here we talked about in the fourth quarter. We expect that capital spending to still be certainly at that upper end of that 4% range. And certainly, we have quarters that certainly exceed that 4% for capital spending into the, you know, into '26. So I think that, you know, the fact that we're still spending kind of in our you know, historic range and roughly there is really just a testament to the just the discipline of the organization, the ability to, you know, to spend wisely and really support the growth, the significant growth that we're seeing. Still with, you know, pretty reasonable spending, I think. So and then I think I would expect you know, more of the same in '26. And as we continue to grow, I think that three to 4% range will continue to be that. And I think as we these growth rates are a little higher, I would say that will be probably that towards the upper end of that 4% and, you know, give or take in the quarter. Operator: Thank you. Operator: Our next question comes from Joe Spak from UBS. Please go ahead. Joe Spak: Just a quick one for me. Relating to circling back to CommScope and that business. I know it's still early days in being the official owners, but any sense of how large their order book looks here? Going forward? Adam Norwitt: Yeah. Thanks very much, Joe. I mean, I think I mentioned earlier that CommScope's also had a nicely positive book-to-bill. Over the recent quarters. And so I think it has a positive order book from that perspective. Operator: Thank you. Our next question comes from Guy Hardwick. From Barclays. Please go ahead. Guy Hardwick: Hi. Good afternoon. Just a quick one on the order book. Obviously, it's fantastic result. $8.4 billion. Just how do we square that with the Q1 revenue guidance of $7 billion which obviously, the Q4 order book didn't include CCS, but I assume it assumed Trexxon. Is it the orders, the window that you talked about? And is that 8.4% really kind of a sustainable number over the next few quarters? Adam Norwitt: Thanks very much, Guy. Mean, look, I think I talked about the fact that we have seen customers extend their order window. Craig mentioned that as well. And in addition, as we continue to ramp up for our customers' new programs, particularly related to AI, there is that kind of confidence that we like to get before making investments. That our customers can give us in a variety of ways, including through orders. I'm not gonna guide to what our orders are going to be in a given quarter. I mean, can imagine our sales folks are out there trying to pursue every order. Possible. But these are really outstanding orders, and they will carry through longer than just here in the first quarter. Operator: Thank you. Operator: Our next question comes from Scott Graham from Research Partners. Please go ahead. Scott Graham: Hey. Good afternoon. Congratulations on the print. My question is about defense. Obviously, the current administration's thinking is that some point we need to push the budget up to $1.5 trillion. Is there any part of your defense sales that are maybe not subject to, you know, whether it's just an upgrade, next-gen technologies, the golden dome. I don't know how much how closely you've looked at some of the you know, some of the articles that have come out on this, but is there anything that you see that, you know, maybe doesn't give you maybe full dibs or most dibs on that? And then on the other side of it, are you concerned at all about the administration's you know, sort of negative rhetoric around with the with NATO? And what that might do to some of your international sales. In defense. Thanks. Adam Norwitt: Well, thanks very much, Scott. Look. I think as the leader in defense interconnect, I wouldn't tell you that we take that for granted. But do we have dibs on this market? We got dibs on this market. I mean and we have that because of a broad array of technologies. And deep investments that we have made I mean, the one thing that I think sets us apart in particular related here to we'll talk about The US and then we'll talk global. Is that we have continued to double down, number one, on technology innovation, and number two, on scaling our capacity to enable the defense industry to continue to meet the levels that they need to. And so whether that means, you know, today's budget or higher budgets in the future, I can tell you that the breadth of our offering coupled with the depth of our capacity and capability is something that puts us in a really strong position across really all programs. And, you know, you mentioned a few programs. Our folks deep into every program that is involved. I will also add to that. With the acquisition of Trexon, while only, you know, just under $300 million in sales, But it really does expand the prominence of our value-add interconnect capabilities which is an enormous additional opportunity and additional growth potential for the company long term. We've always been a leader in the discrete connector solution well, broad array of them. I mean, you cannot imagine how broad that array is. But now being able to support the value-add products across programs, across applications, land, sea, air, and everything in between. I think Trexxon really rounds out our position and expands the potential what we can do to support this growth. Now relative to your question around NATO and international, our approach as a company has always been not to be a sort of US flag in the front of our factory kind of an operation when we operate around the world. We operate you know, 350 factories across more than 40 countries around the world. And we don't have expats. Period. We operate our company as a local company. So when we're in France, we're a local French company. When we're in The UK, we're a local UK company. In Denmark, in Germany, in Italy, or wherever that may be. And that focus on being a local provider in the defense market. And, you know, our defense position in Europe is very, very strong. We've had really outperformance in Europe here for a number of years. In terms of the strength of our business. You know, I'm never gonna say that you're insulated from anything. But the way that we've structured our company, the culture around our company, how we interact with our customers. Is as a local partner in those places. And we do that in all of our That's just how we run the company. But I will tell you that in a geopolitically interesting world, that we are in today. The way that we've always operated, is a pretty good way to operate in today's world. And I think that will, in many ways, protect us from any politics that could inject themselves into this. Our customers, at the end of the day, want the best product, and they want it at the time that they need it. And if we can focus on continuing to do that and do it locally, I think our defense business has a great future. Operator: Thank you. Operator: Our last question comes from Joe Giordano from TD Cowen. Please go ahead. Joe Giordano: Hey. Thanks for getting me in, guys. Appreciate it. Adam, you've mentioned CES, and I think one of the things coming out of there was an ultimate move at some point towards, like, 800-volt power for data centers. And, you know, there's major implications on what that means for copper and what that means for the ability to do things at different dimension at different diameters. Just curious as your portfolio broadens out and you have these fiber capabilities, what does, like, the know, if you think through the potential positives and negatives for such a dynamic, like, how do you do you think that nets out for you guys? Adam Norwitt: Yeah. Look. I think what we care about, Joe, is that there's more of everything. And so as folks make changes, they go to different voltages. They go to different speeds. Of transmission. They go to more nodes. They go to more tokens. They go to more density, whatever it is. The ultimate what comes out of that is more complexity. And so for us, you know, whether it's one type or another, I talked earlier about the fact that we today, especially with the CommScope acquisition, have the broadest offering in the industry and the broadest ability to enable our customers as they face these really challenging technological trade-offs. And so I think we're in a really great position to be able to do that and even stronger than we were before pre the CommScope acquisition. And, you know, whether it's different voltages or different speeds or different densities or all the various things that our customers are looking at, I think we're gonna have a great seat at the table working with them to enable these exciting next-generation systems. Operator: Thank you. Currently have no further questions, so I'll hand it back to Mr. Norwitt for closing remarks. Adam Norwitt: Well, thank you very much. And again, I'd like to offer my gratitude to everybody here for taking the time with us today. And we look forward to seeing you in ninety days. And I hope you all, at least those of you who are not far from us here in Connecticut, hope you're able to stay warm. Thanks. Craig Lampo: Thanks, everybody. Operator: This concludes today's call. Thank you for joining. You may now disconnect your lines.
Operator: Greetings, and welcome to the GCC Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions] It's now my pleasure to turn the call over to Sahory Ogushi, Head of Investor Relations. Please go ahead. Sahory Ogushi: Good morning, everyone, and thank you for joining. With me today are Enrique Escalante, our Chief Executive Officer; and Maik Strecker, Chief Financial Officer. The earnings release detailing this quarter's results was released yesterday after market close and is available on GCC's IR website. This conference call is also being broadcast live within the Investors section at gcc.com, and both the webcast replay of the call and transcript will be available on the same site approximately 1 hour after the end of today's call. Before we begin, I would like to remind you that our remarks today will include forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are set forth in yesterday's press release and in our quarterly report filed with the Mexican Stock Exchange. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. With that, let me now turn the call over to Enrique. Hector Enrique Escalante Ochoa: Thank you, Sahory, and good morning, everyone. At GCC, we manage the company with a long-term view. Our markets are cyclical and can move quarter-to-quarter, but our strategy is firm and gives us flexibility to adapt to short-term conditions without changing our mid- and long-term view. We focus on disciplined execution, operational reliability and capital allocation across cycles. And this approach guided our decisions throughout the year. During 2025, we operated in an environment where external conditions influenced the pace and timing of customer decisions. As conditions evolve, we revised our expectations in the summer. From that point forward, our focus sharpened with an increased emphasis on cost management and operational discipline, and we delivered record sales for the full year of USD 1.4 billion, reflecting the strength of our operational model, disciplined execution across the network and particularly strong performance in the U.S. These results demonstrate the resilience and demand across our markets. From an earnings standpoint, it is also important to keep perspective. 2024 set a record benchmark for margins and returns, and that level remains the reference point for where we expect the business to operate over the cycle. While we did not replicate those record levels in 2025, we came very close, and we continue to position the company to move closer over time as efficiencies, cost actions, commercial initiatives and network investments take us to near records. The fourth quarter did not introduce new dynamics. Instead, it confirmed the trajectory we have outlined earlier in the year. Our operations were reliable, customer [indiscernible] the same mix and activity dynamics we managed through 2025 with improved execution translating into record quarterly results. Our people strategy remain a constant source of strength in 2025. We continue to invest in safety, training and leadership development, reinforcing a culture of operational discipline and accountability. Safety performance improved again in the fourth quarter and full year results reflected continued progress across key indicators with recordable incidents, including lost time incidents declining 10.5% year-over-year. Our continued recognition as a Great Place to Work further reflects the strength of our culture and employee engagement and the consistency with which we have integrated these values across the organization. Training is embedded across the company with structured programs aligned to specific plant and functional needs. Through the GCC Training Institute, we delivered more than 15,000 hours of training during the year. This investment supports reliability today and prepares our teams for the ramp-up of Odessa and the next phase of growth. Progress on our planet strategy continued steadily. In 2025, we increased blended cement production, expanded the share of alternative fuel in our fuel mix and continue to reduce our clinker factor. These actions support cost efficiency and operational resiliency while contributing to incremental progress in environmental performance. In addition, our Pueblo and Rapid City plants once again received ENERGY STAR certification, placing them among the top 25% of cement facilities nationwide for electricity efficiency. As we move into 2026, our focus remains on executing these initiatives pragmatically, prioritizing efficiency, reliability and long-term value creation. Turning now to our growth strategy. Our focus on execution and network strength is reflected in how the business performs across our key markets. In the United States, ready-mix was the primary driver of growth in 2025, supported by strong project activity. This project-led demand generated consistent downstream pull for cement and reinforce the strength of our integrated operational model. Ready-mix volumes reached record levels in 2025, increasing 31.5%, while cement volumes increased 2.6% during the year. As a result, we outperformed the U.S. cement market in 2025, driven by disciplined project execution and commercial management. Operationally, this translated into high utilization across our operations, supported by investments in mobile capacity and execution capabilities. Energy-related projects, including wind farm and associated transmission continue to provide volume support throughout the year. Infrastructure activity remained stable through the quarter and continues to provide visibility into 2026, supported by multiyear funding programs and ongoing execution at the state and local level. As we enter the new year, we remain proactive and focused in identifying project opportunities, reinforcing the depth and visibility of our commercial pipeline. Residential construction remain under pressure. Mortgage rates have not sustainably broken below 6% since September 2022. As a result, we do not expect a meaningful improvement in residential activity during the first half of 2026. Oil and gas activity softened during the year and continued to soften in the fourth quarter, reflecting the current oil price environment. This segment is expected to soften further in the near term before improving. While this affects mix, it does not alter our long-term positioning within the network as we rely on the flexibility of our plants to ship different types of cement and adapt to market demand. Throughout the year, our commercial focus remains on protecting margins and returns. While market conditions limited pricing momentum during 2025, the pricing increases announced entering 2026 reinforce our focus on offsetting cost inflation and improving profitability over time. In Mexico, fourth quarter performance was in line with our expectations. Residential demand and bagged cement continues to provide stability, supporting margins. The federal housing initiative is beginning to take shape in certain regions. And as projects move into execution, we expect to be able to quickly increase shipments as its impact materializes during the first quarter of 2026. Infrastructure in Mexico, it's an area of growing optimism. Historically, the first year following election is complex. But during the quarter, we saw projects advance with a more meaningful contribution expected in 2026 as execution accelerates. In addition, mining-related comparisons normalized in November, removing a headwind that affected volumes last year. We expect the segment to perform broadly in line with 2025 levels going forward. Industrial customers remain cautious, advancing projects gradually and using this period to prepare to move more decisively as visibility improves. We're cautiously optimistic about the industrial activity improving in the second half of 2026 as trade discussions become clearer. Capital allocation in 2025 remain consistent with our long-term priorities. We continue to focus on ensuring that recent investments in cement distribution and aggregate operations across our network reach their full potential, allowing us to ship product to more destinations, easing the pressure to rely on single markets with a larger volume. In parallel, the Odessa expansion continues to progress on schedule and within budget. Our M&A posture remains unchanged. We continue to evaluate opportunities that strengthen the existing network and meet our strategic and financial criteria while maintaining balance sheet strength and flexibility. As we look ahead, 2026 will be a pivotal year for GCC. With Odessa completing construction and entering ramp-up, the company moves into a new phase focused on integrating capacity, optimizing logistics and strengthening earnings power across the network. With that, let me turn the call over to Maik for a review of the financial results. Maik Strecker: Thank you, Enrique, and good morning to everyone. For the full year 2025, we delivered record consolidated sales of USD 1.4 billion, an increase of 3% year-over-year, driven primarily by volume growth in the United States. Fourth quarter sales totaled $360 million, up 7% year-over-year, consistent with the operating trends discussed earlier. During the year, the depreciation of the Mexican peso created some headwinds, which reduced consolidated sales by approximately $80 million on a reported basis. In the United States, ready-mix volumes increased by 31% for the full year and 27% in the fourth quarter, driven by strong activities tied to wind farm and infrastructure-related projects. Cement volumes increased 2.6% for the full year and 1.4% in the fourth quarter, supported by strong ready-mix activity and contributions from infrastructure and commercial projects across our network. Average cement pricing in the U.S. decreased by 1.2% during the year, reflecting product, project and geography mix dynamics. The aggregate business performed well and delivered the results we expected when we acquired the assets, contributing positively to our EBITDA generation and reinforcing the strategic rationale for advancing our aggregates growth strategy. In Mexico, cement volumes decreased 3% for the full year, however, increased 11% in the fourth quarter, supported by normalized demand in the mining segment and early execution of infrastructure and housing projects. On the cost side, full year cost of sales as a percentage of sales increased by 2.5 percentage points, reflecting factors discussed earlier in the year, including the absence of the natural gas liability benefit we recognized in 2024, higher fuel and power costs, a lower contribution from the [indiscernible] segment and increased transfer freight as we ship products to new terminals. In addition, during the year, we incurred higher freight costs as product was supplied from the Pueblo cement plant to support customers during the period in which the Rapid City cement plant was offline. While this resulted in higher transfer costs, it allowed us to meet customer commitments, preserve volumes and demonstrate the flexibility and competitive advantage of our distribution network. In the fourth quarter, cost performance benefited from disciplined inventory management, which offset the unfavorable inventory impact we recorded during the first 9 months of the year. SG&A expenses declined modestly as a percentage of sales for the full year, reflecting a reduction in consulting services as part of our cost and expense optimization initiatives, partially offset by higher operating expenses. As we move into 2026, we're placing renewed emphasis on cost discipline, particularly third-party spend, fixed cost and staffing optimization while maintaining our standards for reliability and safety. As a result, full-year EBITDA totaled $492 million with an EBITDA margin of 34.9%. Importantly, the fourth quarter delivered record EBITDA margins of 39.6%, up 3.4 basis points with EBITDA increasing to $142 million, reflecting improved operating execution as the year progressed. The depreciation of the Mexican peso reduced EBITDA by approximately $6 million on a reported basis during the year. Free cash flow for the full year totaled $349 million, representing a conversion of 71% of EBITDA with a strong fourth quarter contribution of $156 million, driven primarily by higher EBITDA generation. On capital allocation, we returned $45 million to shareholders through a combination of share buybacks and dividends. During the fourth quarter, we deployed $7 million in buybacks. We remain disciplined and opportunistic in balancing shareholder returns with investments for growth and keeping our financial flexibility. Strategic capital expenditures totaled $309 million in 2025, reflecting continued investment in our Odessa project and logistics across our network. As of year-end, we have invested approximately $600 million in the Odessa project and associated logistics capabilities with the remaining $150 million planned for 2026. We ended the year with a strong balance sheet with cash and equivalents of $969 million and a net debt-to-EBITDA ratio of negative 0.7x, preserving flexibility as we prepare for the next phase of growth and the ability to act decisively on future opportunities. In summary, 2025 reflects a year in which we delivered record sales, observed mix and one-off impacts, maintained strong operating discipline and continued to invest in strengthening our network. With that, I will turn the call back to Enrique. Hector Enrique Escalante Ochoa: Thank you, Maik. As we look ahead, our guidance reflects a year focused on stabilization and execution, consistent with our strategy. We are entering 2026 with a clear operating backdrop, a stronger network and defined levers within our control. In the United States, we expect cement volumes to grow at a high single-digit rate, driven primarily by the contribution from new markets and the initial ramp-up of Odessa. Cement pricing is expected to be flat, reflecting product, project and geography mix dynamics. In ready-mix concrete, volumes are expected to decline at a high single-digit rate, reflecting a high comparison base in 2025, while pricing is expected to be flat, reflecting product mix and the broader distribution of volumes across new markets. In Mexico, cement and concrete volumes are expected to grow at a low single-digit rate, supported by increased infrastructure and residential activity. Pricing for both products is also expected to increase at a low single-digit rate. At the consolidated level, EBITDA is expected to grow at a mid-single-digit rate, driven primarily by higher sales volumes. During the year, the one-off incremental logistics costs associated with the ramp-up will continue to weigh on margins, while cost discipline and efficiency initiatives will help manage the transition. Turning to capital allocation. Capital expenditures in 2026 are expected to be $270 million as the Odessa expansion nears completion, and we will continue with logistics investments across the network. Free cash flow conversion is expected to remain strong and consistent with historical levels. In closing, we remain focused on restoring margins towards the levels achieved in 2024, executing the Odessa ramp-up in a controlled manner and maintaining financial flexibility. While the pace of improvement will vary by segment and geography, we believe the actions we are taking position GCC to deliver resilient and improving performance through the cycle. Thank you for your continued support. We will now open the call for your questions. Operator: [Operator Instructions] Our first question today is coming from Alejandra Obregon from Morgan Stanley. Alejandra Obregon: Perhaps the first one is for you, Enrique. So you mentioned 2026 will be a pivotal year for GCC. And of course, Odessa plays a big role, and if you've provided a little bit of color on that. But just wondering if you can walk us through the different milestones that you think that will make 2026 a pivotal year? Is it kind of like a new distribution setup, savings, energy growth? Anything that you think we will be seeing throughout the next quarters? And so that's the first question. And the second one is perhaps for you, Maik, on CapEx. So you mentioned $150 million of strategic CapEx for, if I understood correctly, new investments on distribution. Just wondering if I got that right and if you can be a little bit more granular on where you think those $150 million are going in 2026. Hector Enrique Escalante Ochoa: Number one, in your question about 2026 pivotal comment. Of course, I mean, bringing a new cement line online in a challenging market is in itself a challenge, right? But we have a strong experience from what we did exactly under even worse conditions when we started up the Pueblo plant during the Great Recession. So we have to obviously manage initially, I mean, a good start-up of the plant. It's a challenging business. It's always -- there are always things in those big equipment that we need to be in control of, and we expect to do that successfully. So that's the first part of this pivotal change. And of course, as we ramp up, we need to have a very good coordination of how we start returning volume that Samalayuca is shipping into the region back as we start, I mean, switching customers, I mean, to the cement produced in the new country. And this, of course, also has to have a good coordination with the series of terminals that we're setting up in several cities and towns to precisely have a more controlled entry into the market, I mean, cautiously, slowly, but with a firm mid strategy of how we will position that increased capacity over time in different markets. So there's a lot of moving parts at the same time as we introduce the new Odessa line during the year. Maik Strecker: Very good. Alejandra, thanks for your question regarding the CapEx. So the $150 million, that is really primarily driven by the project, Odessa, and that's the heavy lift there. However, there's also some additional logistics capabilities that we're building out, starting at the plant level with rail and truck capabilities really to be able to ship that incremental volume and distribute that. That was always part of the scope, and it's now just the time to execute on that. And then what Enrique just said, right, we're looking at several markets where we plan to distribute the volume. And for that, we need some logistics capabilities as well, smaller terminals, access again to rail and so on. So that's kind of the scope of that $150 million for Odessa. In addition, as you saw, we guided for some additional growth CapEx as well. The total is $200 million, which is related to energy-related alternative fuels, continue to invest in the aggregates business to unlock potential there and so on. Operator: Your next question today is coming from Garrett Greenblatt from JPMorgan. Garrett Samuel Greenblatt: I was wondering if you could give a little more color on the regional demand drivers, specifically around U.S. cement volumes up high single digits as opposed to pricing flat. I guess just wondering how those dynamics play out and then for Mexico as well. Hector Enrique Escalante Ochoa: Garrett, yes, as I mentioned, I mean, in my answer to Alejandra, it's a challenging year with a lot of different market or segment performance, right? I mean we are relying on the infrastructure segment more than anything to offset further decreases in short-term in the Oil Well cement market as that industry, I mean, gets more stability and more visibility going forward. So that's one offset. That's why one is growing and the other one is decreasing and one is offsetting each other, right? Residential, as we mentioned, it's weak. It's continued at the same level, I mean, for us this year. There are some other segments like, I mean, obviously, everything that is commodities in the agricultural, I areas where we participate are having, I mean, a strong -- normal to strong, I mean, performance. So that's good for us that we have this mix of segments all the time. So we think that overall, I mean, there is going to be, of course, compensation from some segments with others. And that's why I mean we're basically projecting I mean a flat volume for the year. Mexico, on the contrary, we're seeing some increases overall, pretty much, I mean, driven by housing. The federal government initiative, it's taking off now. I mean it seems like there is clear, I mean, funding and direction to build, I mean, the houses on that federal program. And we're already experiencing projects in several of our locations in Mexico. And we're already shipping volume specifically for that segment. And as we mentioned, the mining segment, I mean, it's stable now. I mean we already stimulated. I mean, the volume loss from the couple of mines that ended operations, I mean, last year. So the conversion is, of course, it's going to be better. And at the local level, I mean, municipal projects, especially some state projects are taking off now. And obviously, I mean, with some growth over last year, it's also going to help, I mean, the improvement in the Mexican market. Garrett Samuel Greenblatt: Great. And maybe just a quick follow-up just on what you're expecting in terms of pricing in the U.S. Have you sent out any letters? Or do you plan to do midyear increases as demand trends progress through the year? Hector Enrique Escalante Ochoa: We are always, I mean, committed to recover at least our cost inflation through pricing in every market where we operate. We're very disciplined in that respect and very consistent. We announced an $8 price increase in the U.S. for January. There are always, I mean, conversations with the different individual customers about, I mean, their ability to take on, I mean, the price at this moment or delays a couple of months and then obviously, one-on-one conversations about, I mean, the total amount, I mean, to increase. Everything I will say, so far, it's going well in those conversations, pretty normal, and we expect, obviously, to execute the majority of that price increase in the first quarter of this year. So that's a very good news. Now in our case, specifically, I mean, we're not in our guidance reflecting directly that price increase that we're going to execute because of several factors that we alluded to during our comments here. Of course, we have a big -- I mean, mix effect here with, again, more cement going to construction segments and less to Oil Well cement, which obviously command different prices. And so that mix doesn't help in terms of the increase. We also have a lot of project work related to infrastructure mean that we mentioned. And in some cases, that project work also has, I mean, a lower pricing than the regular ready-mix precast, I mean markets that are usually very stable. And of course, I mean, there's one third, I mean, factor here that is geography, right? With the start-up of Odessa, and as I mentioned, we're going to do this, I mean, slowly and cautiously. Dispersing more cement to further away locations in smaller volumes, that commands higher freight, of course, and somehow that is reflected on a lesser, I mean, net price because one has to compensate on that incremental freight to be competitive in distant markets. So that's the third factor, I mean, that we have there. And finally, I think that we had, some one-offs in last year that affected in our pricing strength with some segments and some markets derived from things that we disclosed, I mean, last year with some problems in the Rapid Plant during the winter of last year to start up on time because of an accident with there and then an issue with the ball mill that were in the Odessa plant that also delayed us a little bit. So we needed to make some adjustments, I mean, to recover market share that we lost during those incidents. And we did that successfully, I mean, last year. That's why, obviously, we're running much better than the industry as a whole in terms of cement growth. And also comparing our own region, we accomplished that recovery of market share, and we got back basically to our normal levels of share. We're going to, I mean, now run constant there. I mean we don't see any more need to continue, I mean, pressing on prices because of that reason. That's already behind us. So with all that said, with all those -- a combination of all those 4 factors, that's why we're seeing a flat price in our guidance. I see -- I personally see this as a very positive, I mean, ironically because, I mean, I think that it takes us back to a very good solid platform, and it's only building up from this, what I call one-off because of all these reasons at the start of the first 6 months of 2026. So we're very -- I mean, pleased and confident that this is the right strategy for GCC and it's going to be successful for us. Operator: Next question today is coming from Carlos Peyrelongue from Bank of America. Carlos Peyrelongue: I joined a bit late, so I apologize if you have answered this already, but I just wanted to get a bit more color on the status for demand for cement from oil -- from the Texas, in particular, from Oil Well cement. If you could comment a bit on that would be helpful. Hector Enrique Escalante Ochoa: Yes, Carlos, thank you for the question. Yes, we already comment on that, as you were pointing out. I mean, obviously, we're seeing still more pressure in the Permian Basin on demand for Oil Well cement. I mean, given the uncertainty and lack of clarity of where, I mean, the oil price -- international oil prices and the segment is going to end this year. We believe, of course, it's transitory and cyclical as has demonstrated throughout history. And that's why we feel very confident that we really prepare a good, I mean, expansion of Odessa, taking those cycles into account and being able to capitalize on construction cement when the Oil Well demand is slow. So having said that, that's why we're shifting more to, I mean, infrastructure projects. That's where we're concentrating, I mean, for the rest of this year, I mean, as our driver for demand in the U.S. So it's work project, infrastructure, I mean, everything, I mean, related to that segment. And that's how we plan to set the decrease in Oil Well demand. Carlos Peyrelongue: Understood. And have you given some guidance as to your expectation to utilize the new capacity that you build in Odessa in terms of what's the expectation for this year or next year to get to higher utilization rates on that new capacity? Hector Enrique Escalante Ochoa: Yes. Definitely, we lower our expectations compared to what we planned when we were, I mean, planning I mean the construction of the plant. The market conditions are totally different. If you remember at that time, I mean, all U.S. markets were basically sold out and so the conditions were very different. And so that's why we're adjusting our ramp-up of the plant to a much more slower and careful introduction of the plant. The line is going to run at full capacity itself, the new line. So we capture there the decreases in variable cost compared to the current, I mean, [indiscernible] in Odessa. And of course, the line run at full capacity will substitute all that Oil Well cement that is produced currently in that plant, plus the imports that we're bringing from Samalayuca into the area. So that's a way of optimizing, I mean, our cost structure and our network. Where we're going to feel the pain, of course, of this slowdown is going to be in the Samalayuca plant that it's going to have to slow down its shipments to West Texas. And so we're, again, going slowly in the introduction based on those factors. But I think that's the best strategy for us at the moment. Operator: Next question is coming from Marcelo Furlan from Itaú BBA. Marcelo Palhares: My question is related now to capital allocation going forward. So you guys are guiding now for this $270 million of total CapEx for this year. So I'd like to understand if we could expect this level of CapEx, let's say, below the $300 million levels as the new normal for the company at least for the medium term. And my next question regarding to capital allocation is regarding M&A. You guys have provided some color that the likelihood of guys likely seeking M&As in the aggregates business in the U.S. and so on and so forth would be likely to be the main driver. So I'd like to understand if this strategy continues in terms of pursuing this type of M&As. And if you guys could give a little bit more color on potential size if you guys are expecting only small bolt-on acquisitions or if you guys could likely reach to larger M&A activities after due completion. So these are my questions. Maik Strecker: Yes. Thanks for the question. Regarding capital allocation, as I already mentioned, out of the $200 million growth CapEx, $150 million is really allocated to finishing Odessa and the related logistics capabilities. Then the remaining $50 million also already mentioned, but we have some very high-return projects around fuel and energy that we want to execute. Again, and that's in the context really to optimize these very important input costs for the company. A third element here is aggregates, right? We have the first year of the new aggregates business under our belt. We see some opportunities to optimize, to grow, to expand that will require some level of CapEx. And we have some, again, very high return quick projects to execute on. So that kind of comprises the $200 million in growth. And then the $70 million in maintenance, it's in line with our previous years to really keep the cement plants, the network in new light conditions to really perform well for the market that's in front of us. So that's on CapEx. Regarding M&A, yes, we are very active. We have a pipeline of more smaller midsized opportunities. I would call them bolt-ons to, again, the existing aggregates network that we now have within the cement network that we're operating. Again, those are small and midsized acquisitions similar to what we have done in 2024. And again, now that we know pretty well how these markets perform and where the opportunities sit, you will see us throughout the year '26 being very active and focused on that. That's kind of the most actionable part. Nevertheless, as we always stated, we remain very focused also on cement, looking at options for cement to grow the network across the United States, and that remains to be part of the focus as well. Operator: Next question is coming from Emilio Fuentes from GBM. Emilio Fuentes De Leon: First of all, congratulations on the results. I have 2 questions, if I may. First of all, on CapEx during the quarter, is it correct to assume that the downtick on CapEx is related to a postponement on the ramp-up of the Odessa plant given the current market situation? And second, is -- are the extraordinary weather events seen during the beginning of first quarter 2026 in the U.S. already reflected on the guidance? Or is there any downside risk to the guidance given the rough start to the year given related to weather? Hector Enrique Escalante Ochoa: This is Enrique. I will take your second question first and then turn it to Mike for the CapEx. I think that the weather, even though it's been very severe in the U.S., it's not abnormal for us. So no, it does not affect our guidance at all. I mean, for us, I mean, this is, again, in the regions where we participate, pretty normal, I mean, weather pattern. So we'll be fine in terms of our shipments for the quarter. Maik Strecker: Yes. Enrique, regarding the CapEx for the quarter, it's a little bit of timing. The reason we came in lower than kind of what we had expected and also the Q4 of 2024 was purely timing. We're -- from an Odessa perspective, we're in execution phase and everything is towards the defined time line to be completed kind of Q2 of this year. So you saw a little bit of timing effect there on the strategic CapEx in the quarter. Operator: Next question is coming from [ Azeem Tori ] from Anfield Investment Research. Unknown Analyst: Maybe first a question on the ramp-up of Odessa. So you're adding a lot of capacity in the local market. Is it fair to assume that you will try to address some of the big urban centers of Texas like the Dallas Urban Center or the San Antonio Urban Center? And if you -- when you're talking about like new distribution or new terminal center, is it new terminal that you would develop to support the commercial strategy of this Odessa cement plant? That would be my first question. And then second question on the price increase that you've announced of $8. Is it $8 price increase that you have announced in every single state, including Texas? And a last question around the cost inflation that you're expecting in your cement business. I think we see a lot of data center being built around the United States. They are consuming a lot of electricity. Do you see a risk of electricity prices going up in the coming years in the U.S. that could potentially impact your margin? Maik Strecker: Yes. Let me start with the question around the network and the additional volume from Odessa. As Enrique already kind of walked us through, the plan really is to distribute through several markets, small and bigger. North Texas is a market that we see a lot of growth. And yes, we plan to participate in that growth. But we also see good levels of growth for Odessa closer to home. In that part of the country, there are some very interesting data centers planned. So we'll participate in that. And then as mentioned, we're looking at kind of small and midsized markets to establish distribution points agile with some level of CapEx, but not heavy CapEx load. And I think through that distribution, the goal is to have that very focused and measured introduction of the Odessa capacity. So that's on that. Regarding cost of inflation, as mentioned also, we're taking some proactive steps. We're investing in capabilities around power with solar projects. We're investing in some additional capabilities utilizing more natural gas, pipeline infrastructure and burning capabilities. So all of those, we see as kind of a proactive step to manage the future cost dynamics around fuels. So that's key for us. And I think with that, we should be able to manage accordingly what's ahead to come. Unknown Analyst: And the price increase... the $8 price increase, is it everywhere in every state? Or is there a difference from one state to another? Hector Enrique Escalante Ochoa: The price increase was announced in all the regions where we participate, including Texas. Unknown Analyst: And so far, the discussion is encouraging and you would expect to get part of this during the first quarter. Hector Enrique Escalante Ochoa: We will. I mean that's evolving dynamic and fluid, and we expect to get the majority of that announcement. Operator: Our next question is coming from Enrique Soho from Fundamental Capital. Unknown Analyst: Could you give us some insights into your and the Board's thoughts into potential corporate action or financial engineering to further unlock value and decrease the valuation gap between you and peers? Maik Strecker: Yes. Thanks for the question. I think, first off, our goal is really operationally to perform and to unlock the value by improving our margins. Again, our benchmark is 2024, the 36.6% and to get back to that level and to show that we get back to those very attractive margin levels, number one. Number two, when you look at our kind of cash flow conversion, we maintain a very high level and push that hard, again, to show the value. And then as you have seen, we're looking at kind of the overall shareholder returns with buyback program. We're more proactive on that. You've seen the dividends continuously to be increased over the years. So all those are elements, how we demonstrate the value of GCC and where we push for further investments from shareholders. And yes, strategically, we get the question. We're looking at what long term from a corporate structure, we should consider to further enhance kind of the value of the company and the value to all shareholders. That is a conversation that we have on a regular basis with the Board, with the team. And these topics are, for us, very long term and it's part of the tools and the portfolio of how do we increase the shareholder value for all participants. Operator: Your next question today is coming from Alejandro Azar from GBM. Alejandro Azar Wabi: Just a quick follow-up and to clarify something on my end. Regarding the Odessa plant, the start of the plant remains second and third quarter of this year. What you are delaying is just the ramp-up or you are delaying the start of the plant? And can you give us more color on delaying the ramp-up for you guys, what that meant before? Were you planning to reach full capacity in '28, '27, and that's where you're delaying? That would be my question. Hector Enrique Escalante Ochoa: I think that, I mean, the -- I mean, it's not delay the start-up of the plant. The plant is going to start up on time. We continue to run the project on schedule. So we should be, I mean, ramping up in the third quarter basically of. We're testing many of the equipment for commissioning, I mean, a good portion of the plant already. So things are progressing well there. So I think that what we are referring to here is entering at a slower pace, not delaying it on time, but entering at a slower pace overall for GCC. And I'd like to reemphasize overall because for us, it's managing the whole network through the start-up of the Odessa new line. Again, I mean, I mentioned we plan to, I mean, as quickly as we can run the line at full capacity. That means probably shutting down both of the other [indiscernible] today at the plant in order to favor, I mean, running the more modern and efficient plant. And the effect of that because we cannot put all that cement in the market today, the effect of that is a slowdown in other parts of the network in GCC, more specifically the Samalayuca plant. So again, I mean, where we're going to feel the pain or take the burden of the start-up of the line in Odessa is going to be in Mexico and part of the shipment that, that plant was doing in West Texas and other markets. Alejandro Azar Wabi: That's very clear. Just another clarification on my end, and that's implicitly in the 5% growth in the guidance, right? Hector Enrique Escalante Ochoa: Yes, sir. Operator: Our next question today is coming from [ Matias Ostrowicz ] from Citibank. Unknown Analyst: I joined a bit late, so I apologize if you have already replied to this. But I'm just wondering about your price guidance in the U.S. market. Was your guidance relatively flattish considering your volumes are in the high single digits. Is it a mix situation? Or is it just softness in the market? Hector Enrique Escalante Ochoa: Well, I would say derived from the softness in the market, I mean -- and there are many factors that I already mentioned, Matias, of why we are going to experience a mix effect between segments. Again, I mean, more construction cement and less Oil Well cement that affects negatively the average price. And geography, with more shipments to further markets precisely of that new, I mean, production in Odessa going to further different markets in every direction. So we keep it a smaller impact in dispersed market. So that's, again, another factor that is affecting obviously our price, our average mix price to be competitive in longer destinations or further away destinations. And again, I already talked about, I mean, other effects, but it's basically, again, a mix and geography effect that it's putting pressure or that it's compensating the price increase that we're doing in every U.S. market. Operator: We reached the end of our question-and-answer session. I'd like to turn the floor back over to Ms. Ogushi for any further or closing comments. Sahory Ogushi: Thank you again for your time and continued interest in GCC. We look forward to speaking with you again soon. Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.
Operator: Welcome, everyone, to UMC's 2025 Fourth Quarter Earnings Conference Call. [Operator Instructions] For your information, this conference call is now being broadcasted live over the Internet. Webcast replay will be available within 2 hours after the conference has finished. Please visit our website, www.umc.com, under the Investor Relations, Investors, Events section. Now I would like to introduce Mr. Michael Lin, Head of Investor Relations at UMC. Mr. Lin, please begin. Jinhong Lin: Thank you, and welcome to UMC's conference call for the fourth quarter of 2025. I'm joined by Mr. Jason Wang, President of UMC; and Mr. Chi-Tung Liu, the CFO of UMC. In a moment, we will hear our CFO present the fourth quarter financial results followed by our President's key message to address UMC's focus and the first quarter 2026 guidance. Once our President and CFO complete their remarks, there will be a Q&A session. UMC's quarterly financial reports are available at our website, www.umc.com, under the Investors Financial section. During this conference, we may make forward-looking statements based on management's current expectations and beliefs. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, including the risks that may be beyond the company's control. For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC and the ROC security authorities. During this conference, you may view our financial presentation material, which is being broadcast live through the Internet. Now, I would like to introduce UMC's CFO, Mr. Chi-Tung Liu, to discuss UMC's fourth quarter 2025 financial results. Chi-Tung Liu: Thank you, Michael. I'd like to go through the 4Q '25 investor conference presentation material, which can be downloaded or viewed in real time from our website. Starting on Page 4, the fourth quarter of 2025. Consolidated revenue was TWD 61.81 billion, with a gross margin around 30.7%. The net income attributable to the stockholder of the parent was TWD 10.06 billion and the earnings per ordinary shares were TWD 0.81. Utilization rate in the fourth quarter is stayed the same as the previous one, around 78%. For the sequential comparison, revenue grow 4.5% quarter-over-quarter to TWD 61.8 billion. Gross margin improved to over 30% to now 30.7% or gross margin of TWD 18.95 billion. And the non-operating income remained similar to that of last quarter. And the net income overall contributed to shareholder of the parent is around TWD 10.05 billion or EPS of TWD 0.81 in Q4 of 2025. For year-over-year comparison, on Page 6, revenue grew by 2.3% to reach TWD 237.5 billion for the whole year of 2025. Gross margin rate is around 29% or TWD 68.9 billion. And for the net income attributable to the shareholder of the parent for year 2025, is around TWD 41.7 billion or 17.6% net income rate. EPS for 2025 was TWD 3.34, which is a decline compared to that of TWD 3.8 in 2024. On Page 7, our balance sheet at the end of 2025. Cash amounts still more than TWD 110 billion, with total equity of the company is now TWD 379.8 billion at the end of 2025. For ASP on Page 8, you can tell for the last three quarters or four quarters, it pretty much remained similar level for our blended ASP for throughout the 2025. For revenue breakdown on Page 9. For quarterly comparison, the change is mainly showing in the increase in Asia and Europe with now North America represents about 21% in Q4 of last year. For the full year breakdown on Page 10, the change is similar. We see North America dropped from 25% in 2024 to 22% in 2025. For Page 11, IDM for Q4 revenue still represent about 20%, almost no change. But for the full year number on Page 12, IDM account for 19%, increased by 3 percentage points to 19% in 2025. For quarterly revenue breakdown by application, it remains almost similar quarter-over-quarter on Page 13. For the annual performance on the application breakdown on Page 4 (sic) [ Page 14 ] consumer increased by 3 percentage points to 31% from 28% in the previous year. And we continue to see 22-nanometer to be our key driver of growth for the recent quarters and also forward-looking as well. So 22 and 28 nanometers revenue in Q4 '25 now represent 36% of the total revenue pool. On Page 16. For the full year, the increase of 22 and 28 nanometers revenue is 3 percentage points, and we also show about 2 percentage point increase in 14-nanometer on a year-over-year comparison. Capacity remained flat on a quarter-over-quarter comparison base, but it will decline by roughly 1% due to the annual maintenance schedule. On Page 18, our latest forecast for 2026 CapEx plan is around USD 1.5 billion, which is slightly declined from USD 1.6 billion in the year of 2025. The above is a summary of UMC's results for Q4 2025. More details are available in the report, which has been posted on our website. I will now turn the call over to President of UMC, Mr. Jason Wang. Jason Wang: Thank you, Chi-Tung. Good evening, everyone. Here, I would like to share UMC's fourth quarter results. In the fourth quarter, our results were in line with the guidance with a flattish wafer shipments amid mild demand across most of the markets. The 4.5% revenue increase during the quarter was supported by favorable foreign exchange movements as well as a sequential growth in our 22- and 28-nanometer business, which continues to improve our product mix. With the 22- and 28-nanometer segment, 22-nanometer's revenue increased 31% quarter-on-quarter to a record high, accounting for more than 13% of total fourth quarter revenue. Looking at the full year, UMC delivered solid performance in 2025 with shipment increasing 12.3% and revenue in U.S. dollar up 5.3% year-on-year. Going into the first quarter of 2026, we expect wafer demand to remain firm. UMC is confident that 2026 will be another growth year as a tape-out on our 22-nanometer platform accelerate, and other new solutions continue to gain business traction. We have been working hard to lay the foundation for our next phase of growth, investing for the future in both capacity and technology. In 2025, we completed the new Phase III facility at our Singapore Fab 12i, which is already playing a central role in supporting customers to diversify supply chain. At the same time, we are striving to expand our footprint in the U.S. through an innovative yet cost-effective modes of partnership, such as our 12-nanometer collaboration with Intel and the recently announced MoU with the Polar Semiconductor. The leadership UMC has built over the past few years across specialty technologies, including embedded High Voltage, Non-Volatile Memory, and BCD, has and will continue to sustain stable business growth. Looking ahead to 2026 and beyond, we expect advanced packaging and silicon photonics to serve as a new growth catalysts, positioning UMC to address the evolving needs of a high performance of applications across AI, networking, consumer, automotive and more. Now let's move on to first quarter 2026 guidance. Our wafer shipment will remain flat. ASP in U.S. dollar will remain firm. Gross margin will be approximately in the high 20% range. Capacity utilization rate will be in the mid-70% range. Our 2026 cash-based CapEx budget will be USD 1.5 billion. That concludes my comments. Thank you all for your attention. Now we are ready for questions. Operator: Yes. Thank you, President Wang. [Operator Instructions] Now first question will be coming from Sunny Lin, UBS. Sunny Lin: So, I have a few questions. Number one, Jason, may we have your thoughts on overall market outlook for 2026. And then for semi versus foundry? And if UMC can continue to outgrow your adjustable market for this year? Jason Wang: Sure. Well for 2026, we expect AI-related segment remains as the primary growth driver in semi-industry. And furthermore, with the continuous commercial deployment of Edge AI applications, demand for chip using a general purpose server is also expected to rise. In contracts, the adverse effect of the memory supply imbalance could put some pressure on specific consumer electronics. But overall, the semiconductor industry is projected to grow by mid-teens in 2026. The question for foundry market, we believe that AI demand will remain strong and is the main contributor behind the low 20% growth projection in the foundry market this year. On the other hand, although the memory pricing may impact demand of the foundry market, at this time, we -- at UMC, we estimate that our addressable market will grow by low single-digit percentage. And UMC's growth was expected to outperform the average growth of our addressable market. Sunny Lin: Got it. So, then my second question is on pricing. Lots of discussions and obviously, Chinese peers are raising pricing. So how should we think about the pricing outlook for mature foundry and for UMC through 2026? Would UMC be able to start to reflect better value? And if yes, which product categories should we expect more upside from here? Jason Wang: Okay. Well, we do anticipate a more favorable ASP environment in 2026 versus 2025. This outlook really reflects our disciplined pricing strategy and the positive impact from multiple reasons, product mix optimization, loading improvement and reduced exposure to more commoditized market segment. As you're referring to China players, we expect the strong growth momentum in our 22-nanometer demand to support our product mix in 2026 as well. Overall, our pricing strategy remains consistent and is anchored to the value where we deliver technology differentiation and manufacturing excellence. So, we do think the 2026 pricing environment is more favorable now. Now the question about which product, and I mean, we don't comment pricing on specific product or any specific node. But in general, we do see the environment is more favorable now. Sunny Lin: No probolem. That's very helpful. And then a follow-up would be on the overall industry supply versus demand for the coming few years. TSMC on the recent earnings conference talked about the plan to optimize capacity for mature nodes to better support cloud AI demand in coming few years. So from your perspective, how should we think about the opportunity here? Are you starting to see more client engagement for new products in the coming few years? Jason Wang: We're always excited to see more customer engagement. So -- but more importantly is we need to prepare ourselves to cope with the market dynamics, and we welcome any opportunity to support our customers. So, we view this landscape shift as an opportunity to further optimize our product mix and gradually improve ASP and margin as well. Sunny Lin: No, got it. Got it. And then maybe lastly, just on your Singapore expansion. How quickly are you planning to ramp capacity in 2026 and in 2027? And how should we think about the differentiation of products that you have for Singapore versus the Taiwan capacities for 22- and 28-nanometer? And then with that, how should we forecast the depreciation in 2026 and 2027? Jason Wang: Well, first of all, for the year of 2026, the capacity increase will be around 1.2% year-over-year for us. And for our Singapore facility, the expansion will start in the second half of 2026. And with capacity deployment ramp from second half of 2026 will continue into the 2027. In terms of the node available in our Singapore facility, it's our strategy that we have a geographically diverse manufacturing booking between Taiwan, Singapore, Japan, U.S. and from a technology, no coverage standpoint, we would like to coverage most of the nodes. So the customer has a benefit of passing different sets of forecast. Chi-Tung Liu: As for the depreciation forecast, we are looking for some like low teen annual increase in the full year depreciation expenses. As for next year, we don't have the exact number here, but it's very likely to be the similar amount for 2026. So in a way, we will see the depreciation curve to peak either this year or next year with a very similar numbers. Operator: Next one, Haas Liu, Bank of America. Haas Liu: Congrats on the results. I would actually like to follow-up on the pricing. If we look at the like-for-like pricing environment, based on your current mid- to high 70 percentage of the utilization, if we strip out any of the consideration of the product mix improvement, are you able to improve or just to pass on your higher manufacturing costs or material costs to your customers at this stage? Or you still receive a meaningful pushback from your customers? Jason Wang: Well, I mean, the pricing discussion is always ongoing. The overall pricing strategy remains consistent, as I mentioned earlier. In 2026, we do see some market dynamic changes, so forth. Certain customers we do have some adjusted pricing upward. And so -- and for a certain customer, we still have some of the pricing -- I mean, the onetime pricing adjustment at the beginning of the year to support their market share expansion, as well as the competitiveness. So net-net, within the environment more favorable now in 2026. Haas Liu: Okay. Yes. So, when you talk about you are supporting your customers to gain market share by strengthening their cost structure. Do you mean you are actually adjusting down your pricing for those customers? Or is it actually up for this year? Jason Wang: We have a mix of that. For certain customers, we have adjusted pricing upward. And for certain customers, we will apply the onetime price adjustment downward, yes. Haas Liu: Okay. Got it. And then just on the near term, a couple of your Fabless customers recently talked about earlier and also stronger inventory restocking because of the memory price hike. I was just wondering what impacts your first quarter outlook here, if your customers are seeing stronger inventory pulling in the traditional low season. Why is your shipment for first quarter is still relatively flat? And then, what's your puts and takes for the first quarter overall business outlook? Just wondering whether -- which part of the business is actually relatively stronger and weak? Jason Wang: For Q1, by segment, we are actually in line with our addressable market seasonality. We didn't see a significant changes due to the inventory restocking. But if you're looking into by applications, we expect the revenue contribution from consumer segment to increase driven by the WiFi and DTV and set-up box, while the revenue from the communication and automotive will decline due to a softer demand of ISP and DDI products. Haas Liu: Okay. That's pretty clear. And then since you just mentioned about seasonality, are you expecting this year's seasonality to look pretty similar to the previous few years that first quarter could be relatively light and second quarter and third quarter, you will be able to see a relative strength into the year? Jason Wang: I can have -- probably provide you with this. If we look at the whole year, with the new project of a multiple specialty technology across the embedded high-voltage, non-volatile memory, power management, IC, RF SOI, it supports the end markets in communication, consumer, automotive and AI servers which will ramp in second half 2026. So, we're more looking at this year that our second half will outperform the first year -- first half, I'm sorry, the second half will be better than the first half. So that may be the deviate from the traditional seasonality. But as far as for us, we think the overall shipment for the year will be a growth year and as well as second half will be better than the first half. Haas Liu: Okay. Yes. And last question before I jump back in the queue is that, just based on the comment you had just now, what is the underlying market unit demand assumption you have right now? Is it smartphone -- is it the overall smartphone market will actually grow or decline based on your current base case scenario that second half will be better? Or it is actually already factoring a relatively more conservative expectation that smartphone TV, PC, this kind of consumer markets will actually see a unit decline? Jason Wang: Always with the current forecast from our customers. I mean, we do see gains on product segments, all applications. We do see some share gains on those applications. So right now, the forecast does show us that's more of a share gain in the market -- end market demand associated. Operator: Next one, Felix Pan, KGI. Junhong Pan: I just have a couple of questions about the future growth driver, particularly in the remarks, you mentioned about the advanced packaging and silicon photonics. So my first question will be besides the Interposer, what else we might have, some engagement for advanced packaging? And for Interposer, what's the capacity expansion plan for 2026? And my second question will be the silicon photonics, particularly in the Singapore fab, a lot of rumor about your potential customer. Is there any color, any client engagement or any contribution can generate from this segment? Any color will be grateful. Thanks. Jason Wang: Okay. A big question. So, let me see if I can cover -- cover that. And well, if I look back, I mean, I understand you asked for 2026. But let me look back this. We have delivered a very solid 2025 performance with a 12.3% shipment growth and 5.3% revenue growth, which outperformed our addressable market. This result is supported by our differentiated 22-nanometer technology and other specialty offering across both 12-inch and 8-inch amid a world-class market, a broad-based market demand recovery. And building on the 2025, we do view 2026 as a year of both continuity and evolution. We believe the UMC will once again taking shares and outperform its addressable market, and we will also see several positive inflation. First of all, as our guidance suggests, we are seeing a more favorable pricing environment. This will result of tighter supply globally as well as our differentiated technology and geographical footprint, which will drive our growth for the next few years. We are on track with our 12-nanometer cooperation with Intel, which should start see tape-out in 2027. Now that's the existing one. And your question about silicon photonics and advanced packaging. Secondly, we see 2026 as a pivotal year for those high performance, high potential opportunities such like the silicon photonics and advanced packaging. And we are making those deliberate choice, working with INEX to invest and scale them into a significant driver for our future. If you ask specifically about the advanced packaging. And there are two distinct opportunities for advanced packaging. One, we call enablers, the other we call 10 extenders. Major to explain this. I know it's long, but bear with me. So the fourth enabler, we are seeing the 2.5D and 3D packaging as well as the chiplet move well beyond just the data center and ultra high-end chip and start to spread across the broader market. Over time, we expect that advanced packaging to be adopted even on mature nodes. A good example is RF SOI. We have mentioned many times where we're already in production. In addition to the RF SOI, we are also exploring other applications with leading partners and believe we are at least 2 to 3 years ahead of our competition. What this really means for customers is better power efficiency, small form factor, and differentiated products. And for UMC, it is a strategic win-win. We believe our leadership in advanced packaging will enable us to capture more shares, sustain our higher ASC and drive better margin in many of our already established business in the long run. On the 10 extenders, we also believe that advanced packaging will help UMC address new opportunities. For example, customers are coming to us for AI-related applications. This is not necessarily just the XPU related, but we are adding value by stacking memory with the logic, adding DTC to the stack or selling the discrete DTC. We are also working with our partners to enable a total solution. Meanwhile, we are working with more than 10 customers in advanced packaging currently and expand more than 20 new tape-outs in 2026. We foresee revenue in 2027 will be a significant year for us. And the capacity question you have that capacity plan will be aligned with the customer ramp plan and market outlook. You also asked about silicon photonics. For silicon photonics, we are developing solutions, which includes ASIC, OIO, OCS, and CPO. Our collaboration with INEX allow us to deliver industry standard PDK to our customers in 2027. In addition to platform preparation, we also work with the customer on captive technology of 12-inch PIC aiming for possible product, which is expected to ramp this year. We will also combine our advanced packaging know-how with the silicon photonics as many of the applications require the integration and different substrates, process, technology and materials. Looking ahead to achieve 1.6T bandwidth and beyond, we're working with both customers and vendors for the test finding on heterogeneous material such as the TFLM. Those technologies could also be used in additional applications such as quantum computing. Again, we hope to integrate the new material the advanced packaging technology as well. So those are all integrated altogether. That's why I gave you a bit of a longer answer. I hope that explains it. Junhong Pan: Yes. Okay. But just -- let me just a quick follow up and rephrase my question. So for silicon photonics, what's the earliest timetable we can see the revenue contribution, like most likely? Jason Wang: For the 12-inch PIC, for the pluggable product, we'll be expecting to ramp this year. Junhong Pan: Okay. And about the -- because as I know about the Interposer, currently is the -- Interposer is also the bottleneck for our partner to expand their capacity. So, is there any color we can give -- how much capacity growth for the Interposer, like how much year-on-year growth or something like that? Jason Wang: Well, right now, the capacity planning will be aligned with the customer for the 2027 ramp. So, we will probably provide you some clarity when that comes. Right now, in 2026, we will focus on the tape-out. Operator: Next one, Gokul Hariharan, JPMorgan. Gokul Hariharan: Could you go a little bit deeper into that advanced packaging comment that you made? What is the involvement level of UMC in some of these advanced packaging solutions? Are you doing full stack? Or is it basically like previously where you were largely focused on the Interposer side of the equation? And in terms of the tape-outs that you have, what are the nature of these tape-outs? Are these mostly data center ASIC-related products? Or is this a much wider array of products other than just data center ASIC? Jason Wang: Sure. Well, first of all, we have reported in our advanced packaging space. We have building up some of the capability from wafer-to-wafer stacking and TSC as well as Interposer, the 2.5D and the many different capabilities. And then the way we see it, like I explained, for the enabler is we can apply those to many of the current products that we currently serve. And then -- and one example I mentioned is the RF SOI. So we have wafer-to-wafer hybrid bonding with the RF SOI solution for the mobile space already. And then, some of the capability can be built for the DTC for the stacking as well as some of the customers looking at discrete DTC already. And we are combining some of the capability into segments, the logic and the memory. Of course, we do not provide memory ourselves. So the customer will have to provide memory wafer to us. And so then we can provide wafer-to-wafer hybrid bonding on those. So on one hand, the way we see it is advanced packing is a capability per se, and it implies to the product and then we call it enabler and also expander. And the -- meanwhile, the product coverage is all the way from the mobile space, power management discussion, the AI-related -- AI-related product and also for the BCD application as well. So they were -- it's our belief is for a better reason or for the higher performance reason, and many different applications will start adapting the advanced packaging. So we think this is going to be a broad success on the advanced packaging space. Gokul Hariharan: Got it. And any plans to further expand your Interposer capacity? I think we had expanded, I think up to 6,000 and then kind of stopped it there. Now some of that demand seems to be kind of coming back for some of -- one of your customers in China. So, is there any plans to expand the capacity further? Jason Wang: There are discussions around that. Right now, if you look at the technology itself, we have some common tools in place already, which that we can leverage of our 40-nanometer capacity, of our 65-nanometer capacity. From those common tool space, we're already allocating to this area. Now for the unique tools, then we will put in the plan for the future expansion and for the customer ramp profile. And we believe that will probably happen in 2027. Gokul Hariharan: Got it. Understood. That's clear. Another question I had is on the -- just your expectations for the communication, consumer segment which is north of 70% of revenue, given all these concerns about smartphone, PC. How are you budgeting for this? Are your customers telling you that they are really concerned about this memory cost inflation? Or right now, you still don't really hear that from the customers that that's going to be a big issue from a unit perspective going through the year? Jason Wang: Well, we're also cautious about that topic. As of today, we have not observed any demand impact on our customers' forecast for the year, despite the recent surge in that price. And our technology predominantly supported customers addressing the higher end of the market segment, where the demand tends to be more resilient in the past and in the period of memory tightness. So, because the supply usually typically prioritize in such high-end higher-value device. While we remain attentive to the potential impact on the memory market and our current assessment is that any potential headwinds are probably manageable, and we will continue monitoring the situation properly with our customers together. Gokul Hariharan: Got it. My last question is on the geographic split of revenues. I think, could you talk a little bit about the Intel 12-nanometer progress? And any color on how you will be booking revenues or profits from this partnership given the fabless, Intel fab, while you are essentially the provider of customers and some degree of IP as well into it? And secondly, on the Xiamen's fab, what's the strategy for the Xiamen's fab medium to long term, given many of your semiconductor peers in Taiwan have kind of progressively exited capacity in Mainland China? Jason Wang: Well, for the 12-nanometer project with Intel, overall, the 12-nanometer cooperation project with Intel continues to advance smoothly. We remain on schedule to deliver the PDK and associated IP to customer in 2026. Furthermore, we anticipate the product tape-out will commence in 2027, making the significant step towards to commercialized deployment and future revenue growth. Right now, UMC and Intel are working closely to ensure successful tape-outs and an efficient ramp up for the mass production. As the project advance, it is expected to further strengthen USD position in the U.S., right, for customer as well for us. Because the geo diversification manufacturing. Right now, the application on the 12-nanometer cooperation, including products on digital TV, WiFi connectivity and high-speed interface products. In terms of the business model, and it's probably not available for us to comment. But it is a win-win strategy that we see and will be very synergetic for both parties as well as for our customers. And we have very high confidence this will be a win-win model. Gokul Hariharan: Okay. And any thoughts for the Xiamen capacity? Jason Wang: Yes. For the Xiamen, I kind of touched that earlier as well. I look at Xiamen, not just Xiamen itself, our core part of our competitive advantage is our geographically diverse manufacturing footprint. And the Xiamen play one of the important space for us and particularly for the local customer. So -- and at this point, the fab is actually at a full capacity. We are running at a full utilization as well. And we see -- we continue seeing many different engagements coming to this and we will across regionally optimize it from the customer engagement and product loading standpoint. Gokul Hariharan: Okay. Just one more on blended ASP. I think, Jason, you mentioned that the ASP environment is more favorable this year. But overall utilization is still in the mid-70s as of Q1, right? So do you expect that this year, we could see a scenario that we could see blended ASPs moving up meaningfully like 5% to 10% or something like that, like we have had in the past or that requires a much higher level of utilization that is probably not happening this year, given your low single-digit foundry growth expectation? Jason Wang: Sure. I mean, the high utilization is one of the important factors, but that's not the only factor. We want to make sure the pricing strategy is enabled not only ourselves and our customers to be competitive as well. So -- but we do see the pricing environment is getting more favorable to foundry because of the loading reason. And so -- but the magnitude of that, we probably have to continue to manage it. And if we have a clarity, we will share that with you. Operator: Next one Alex Chang, BNP. Alex Chang: I just have a very quick one. I just saw the company announced that they started the mass production of SuperFlash Generation 4. So just wonder how much revenue contribution from the non-volatile memory business in the past quarter or maybe past year? And also how much revenue is contributed by the power management ICs for the server-related applications? Jason Wang: I mean, we don't have a breakdown to provide. And the way that we break it down is based on specialty technology that includes the high-voltage and non-volatile memory and the PCB space. Right now, the specialty revenue representing about 50% of our overall revenue. And I can let you know the high voltage is about 30% of that. And the rest of that, I would say, is a combination of the non-volatile memory as well as the DCB. Operator: Next one is Laura Chen from Citi. Chia Yi Chen: I just want to follow up on the deterioration rate and also the gross margin outlook. Jason, you mentioned that the pricing environment seems to be improving more favorable. And together with firm shipment and better product mix as well as the utilization rate, so how should we think about the gross margin trend? You guided that will be high 20% for Q1. But with these favorable factors, how should we think about the margins throughout the year? That's my first question. Chi-Tung Liu: Yes. Gross margin can be highly dependent upon utilization rate, ASP, product mix, depreciation and foreign exchange rate. So there's a lot of variables. So beyond this quarter, it's difficult for us to give a firm outlook. For the first quarter guidance, which is high 20s, is mainly due to the higher cost, especially the higher depreciation expenses. As I mentioned, it will grow by low teens in the full year of 2026. As for 2026, we will continue to cope with higher depreciation expenses as well as the other inflationary pressure for our production, raw material and other costs. To mitigate and cope with the headwinds, we will continue with our cost reduction efforts and also all the activities to improve our productivity and drive operation efficiency. And these measures hopefully will help UMC to deliver a stable EBITDA margin and ensure our long-term financial resilience to remain intact. As a matter of fact, our 2025 EBITDA margin is actually a good improvement compared to that of 2024. Chia Yi Chen: Yes, sure. And also, I think for the advanced packaging and as well as the silicon photonics is one of the key things that UMC may have a great opportunity. We know that UMC has already working on advanced packaging, previously on Interposer, probably now we'll see more various different design. So could you share with us what's about the revenue contribution of your advanced packaging right now? And how would that look like in 2, 3 years? Jason Wang: Currently, the Interposer was exposed to very limited customer base and also narrow application. While we have engaged with more than 10 customers and expecting more than 20 new tape-outs in 2026, we do foresee that revenue of packaging -- advanced packaging growth in 2027 will be significant. Chia Yi Chen: So, significantly means that, could that be like 5%, 10% or higher? Jason Wang: I am expecting more than that. But I mean, if you're referring to the overall revenue contribution, we'll probably give you more guidance later. But if you're looking at the packaging itself, it's going to be significantly larger than what we're shipping today. Operator: Next, we'll have Bruce Lu, Goldman Sachs for questions. Zheng Lu: I want to go a little bit deeper for the silicon photonics. I mean, as you might know that your peers like GlobalFoundries, Taiwan Semi, pretty vocal about that. Can you tell us how big do you think the addressable market for silicon photonics for you guys in 2 years? And how do you win market? What is the competitive advantage for you in this business? I mean, other than working with INEX? Jason Wang: Well, I mean, the Singapore facility is not going to only serving the silicon photonics. Singapore facility is one of our important manufacturing site, they serve our worldwide customers, all different applications. And so it's part of our geographical diverse manufacturing strategy. So... Zheng Lu: No, no, no, my question is for silicon photonics, our business strategy? Jason Wang: The silicon photonics strategy in Singapore. Okay. Zheng Lu: No, no, no, no. I'm sorry, let me rephrase my question. So the growth driver for UMC, one of it is the CPO, I'm assuming having more business in the silicon photonics. In -- for your peers like GlobalFoundries or Taiwan Semi, they are pretty vocal about the silicon photonics and have meaningful revenue contribution already. For UMC perspective, what is your competitive advantage for UMC to win this business? And how much business you can win or how big is the addressable market for you in 2 years? Jason Wang: Got it. So, for the silicon photonics, our strategy is simple. Our cooperation with INEX allowed us to deliver the industry standard PDK to our customer in 2027, particularly in 12-inch. So many of our competitors is today at 8-inch and we are focused on this in 12-inch. And as we believe the 12-inch will have that advantage. And right now, we already have certain products that have proven that performance is a better and a pluggable product, and which we will expect to ramp this year. And meanwhile, we're also combining the silicon photonics with our advanced packaging know-how, so for many different type of applications then we can integrate that. So by doing that, we think we will be even providing even more value from advanced packaging combining with silicon photonics at 12-inch. I think that's where we believe we are competitive. Zheng Lu: But that's mostly for plug-in, right? Because if you don't have the EIC, the pure CPO product might not be your key growth driver? Jason Wang: You're correct. We're not looking at a completely CPO package. We're looking at particularly in the PIC and OIO and OCS. Zheng Lu: I see. I understand. That's very clear. Next one is -- and we see that the progress for the Intel project for 12 nanometers is pretty smooth. I just want to know what is the next step? I mean, when we can see a further collaboration in 10, 7 nanometers and beyond? I mean, obviously, whatever you said, the advantage at 12-inch, you can also use the same argument for 7-nanometer. What's stopping you to do that? Jason Wang: Well, you're also right on that. And our focus right now is on delivering the 12-nanometer platform to customers. In the future, should it make sense for both UMC and Intel as well as our customers, we will surely consider expanding our collaboration to other derivatives as well as the technologies. Yes. Zheng Lu: But what is stopping now? What is the show stopper now? Jason Wang: It's not -- I won't call it stopping. I think the focus is a focus on 12-nanometer. We have to deliver a 12-nanometer today, and make sure that we deliver that program. We execute it well. And I think anything that makes sense on that, unlike you said, I think there will be a discussion, yes. Zheng Lu: I see. Because we already assumed that you can deliver something in '27. So given that working for 7 nanometers, maybe you need 2, 3 years, we want to see the project kickoff as soon as possible. Operator: [Operator Instructions] Now we'll have our last question, [ Sappho ] Neuberger Berman. Unknown Analyst: It's been a while. And congrats on the progress you've made throughout this couple of years. I just have a few questions. The first one is, on the market dynamics, I think previously, Sunny has asked about the TSMC is shrinking or defocusing on this mature foundry process. And it looks like not just TSMC, but also the other foundries are -- seems to be doing some leading-edge logic foundry seems to be doing the same thing. And also Powerchip recently just reached agreement with Micron as well as Intel fab, which means they're trying to streamline and re-org some of the foundry process, too. So it seems like there's a lot of supply is kind of being taken away because of the rolling out effects from the AI and crowding out some of these older nodes. On the supply side, it seems to be that actually decreasing. And on the demand side, if you look at, I think, TI just to report overnight. I think it seems like that there's been more obvious recovery on the analog MCU space. So on demand side, that's also improving. But the supply side, that's actually decreasing. So it looks like supply-demand dynamics is moving to a more favorable situation. I think that's the point why you were mentioning the pricing dynamics favorable this year. So I'm just curious about your view, if we try to compare the current like the mature foundries dynamic situation right now versus, I mean, back in 2021 when there is a severe shortage back then. How would you compare this time around versus last cycle? Jason Wang: I mean, that's a really good question. I mean, we saw on the market movement, the changes. And we also deep dive on this demand and supply outlook. And we think whether this is short term or long term. If you look at the driver behind us, we see -- you mentioned this is truly more of the AI phenomenon ripple effect. And so we see that AI remains to be very strong, at least in the foreseeable future. And I think this momentum will continue driving the overall demand. And meanwhile, in many of this -- the capability -- AI capability we portfoliating to even the other end market devices in the Edge AI as well. So as in this will continue. And from an economic standpoint, building any of the mature facility is not justifiable. So we do think that this could last longer compared to the over time. And I think the situation could be more of a structure going forward. And -- but again, this is at a very early stage of this market movement. So we'll pay attention to it, and we'll continue monitoring the progress. Meanwhile, like I said earlier, I think it is more a favorable pricing environment. But more importantly is we need to prepare ourselves to cope with this market dynamic. So we are welcoming all the opportunity that for us to engage in supporting the customer. And -- but the important focus today is we have to get ourselves ready to capture those opportunities. Unknown Analyst: Got it. Another question I have is your earlier comments on the pricing. I think the -- you offer some of the annual -- maybe some discount to some of our strategic clients for their share again, but also net-net wise, also seems to be pricing is going up for a majority of the clients. So net-net, it's going to still be the -- ASP still be positive. But I'm just curious about, for those clients that you're offering some discount at the beginning of the year, when it down the road is, if the next few months or quarter situation has become tighter -- and would you be able to reprice with these customers? Jason Wang: Those discussions will be ongoing. We're always working with our customers to reflect the market dynamics as well as the cost increases. So I'm sure, and I believe this conversation will surely happen. It happened in the past, it will happen now and will happen in the future. So the pricing discussion will continue. And I think customers understand that. And we just have to continue monitoring the market dynamic and maintain our competitiveness on both the customer and ourselves. Unknown Analyst: Yes. Well, a thought on that because of some of the pricing that started to affect it on the January 1 this year, this was actually negotiated already in fourth quarter last year, right? Jason Wang: That's -- some alignment on that on both volume and the pricing. So if volume has changed, of course, that's a different topic. So, there are some volume dynamic in that as well. Unknown Analyst: Yes. My question is actually is that because a lot of the pricing that's effective on January 1, beginning of the year, it was actually communicated 1 or 2 months ago before that, toward the end of last year when the time that the supply demand dynamics haven't been really that tight as compared to some of the changes that happened in the just past couple of weeks. Am I getting that right? Jason Wang: Yes, you're right. Yes. But those also is on certain conditions. So given the condition has changed, the some of the pricing are dynamic. Unknown Analyst: Yes. Yes. Exactly, that is what I'm trying to discuss with you. Because we also saw a lot of the other different components, different subsectors within the tech or semi supply chain that such as memory, I think the pricing were still down in July, August, but all of a sudden, September prices going up. So I'm just curious about that because when you negotiate some of this discount months ago, the supply-demand dynamics was not the same as today. So things remain fluid, dynamic and it still continue to be flexible and it's going to be dynamic and open for changes down the road, if things are moving more favorably. Jason Wang: I think the core of the pricing strategy is that it has to be consistent, and it has to anchor with the value that we deliver and also the customers' competitiveness. That is the core. Then usually, that is how we're centering about the pricing discussion. So that core is not compromised. Now if the condition has changed, yes, they always have some flexibility to it. So, one is called pricing strategy and position, another is core pricing negotiation. So there will be some flexibility, yes. Unknown Analyst: Yes. And the condition has started to change now. Jason Wang: Yes. So we do think the pricing discussion will be more favorable now, yes. Operator: Ladies and gentlemen, we thank you for all your questions. That concludes today's Q&A session. I'll turn things over to UMC Head of IR for closing remarks. Thank you. Jinhong Lin: Thank you for attending this conference today. We appreciate your questions. As always, if you have any additional follow-up questions, please feel free to contact ir@umc.com. Have a good day. Operator: Thank you. And ladies and gentlemen, that concludes our conference for fourth quarter 2025. Thank you for your participation in UMC's conference. There will be a webcast replay within 2 hours. Please visit www.umc.com under the Investors, Events section. You may now disconnect. Thank you, again. Goodbye.
Operator: Welcome, everyone, to UMC's 2025 Fourth Quarter Earnings Conference Call. [Operator Instructions] For your information, this conference call is now being broadcasted live over the Internet. Webcast replay will be available within 2 hours after the conference has finished. Please visit our website, www.umc.com, under the Investor Relations, Investors, Events section. Now I would like to introduce Mr. Michael Lin, Head of Investor Relations at UMC. Mr. Lin, please begin. Jinhong Lin: Thank you, and welcome to UMC's conference call for the fourth quarter of 2025. I'm joined by Mr. Jason Wang, President of UMC; and Mr. Chi-Tung Liu, the CFO of UMC. In a moment, we will hear our CFO present the fourth quarter financial results followed by our President's key message to address UMC's focus and the first quarter 2026 guidance. Once our President and CFO complete their remarks, there will be a Q&A session. UMC's quarterly financial reports are available at our website, www.umc.com, under the Investors Financial section. During this conference, we may make forward-looking statements based on management's current expectations and beliefs. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, including the risks that may be beyond the company's control. For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC and the ROC security authorities. During this conference, you may view our financial presentation material, which is being broadcast live through the Internet. Now, I would like to introduce UMC's CFO, Mr. Chi-Tung Liu, to discuss UMC's fourth quarter 2025 financial results. Chi-Tung Liu: Thank you, Michael. I'd like to go through the 4Q '25 investor conference presentation material, which can be downloaded or viewed in real time from our website. Starting on Page 4, the fourth quarter of 2025. Consolidated revenue was TWD 61.81 billion, with a gross margin around 30.7%. The net income attributable to the stockholder of the parent was TWD 10.06 billion and the earnings per ordinary shares were TWD 0.81. Utilization rate in the fourth quarter is stayed the same as the previous one, around 78%. For the sequential comparison, revenue grow 4.5% quarter-over-quarter to TWD 61.8 billion. Gross margin improved to over 30% to now 30.7% or gross margin of TWD 18.95 billion. And the non-operating income remained similar to that of last quarter. And the net income overall contributed to shareholder of the parent is around TWD 10.05 billion or EPS of TWD 0.81 in Q4 of 2025. For year-over-year comparison, on Page 6, revenue grew by 2.3% to reach TWD 237.5 billion for the whole year of 2025. Gross margin rate is around 29% or TWD 68.9 billion. And for the net income attributable to the shareholder of the parent for year 2025, is around TWD 41.7 billion or 17.6% net income rate. EPS for 2025 was TWD 3.34, which is a decline compared to that of TWD 3.8 in 2024. On Page 7, our balance sheet at the end of 2025. Cash amounts still more than TWD 110 billion, with total equity of the company is now TWD 379.8 billion at the end of 2025. For ASP on Page 8, you can tell for the last three quarters or four quarters, it pretty much remained similar level for our blended ASP for throughout the 2025. For revenue breakdown on Page 9. For quarterly comparison, the change is mainly showing in the increase in Asia and Europe with now North America represents about 21% in Q4 of last year. For the full year breakdown on Page 10, the change is similar. We see North America dropped from 25% in 2024 to 22% in 2025. For Page 11, IDM for Q4 revenue still represent about 20%, almost no change. But for the full year number on Page 12, IDM account for 19%, increased by 3 percentage points to 19% in 2025. For quarterly revenue breakdown by application, it remains almost similar quarter-over-quarter on Page 13. For the annual performance on the application breakdown on Page 4 (sic) [ Page 14 ] consumer increased by 3 percentage points to 31% from 28% in the previous year. And we continue to see 22-nanometer to be our key driver of growth for the recent quarters and also forward-looking as well. So 22 and 28 nanometers revenue in Q4 '25 now represent 36% of the total revenue pool. On Page 16. For the full year, the increase of 22 and 28 nanometers revenue is 3 percentage points, and we also show about 2 percentage point increase in 14-nanometer on a year-over-year comparison. Capacity remained flat on a quarter-over-quarter comparison base, but it will decline by roughly 1% due to the annual maintenance schedule. On Page 18, our latest forecast for 2026 CapEx plan is around USD 1.5 billion, which is slightly declined from USD 1.6 billion in the year of 2025. The above is a summary of UMC's results for Q4 2025. More details are available in the report, which has been posted on our website. I will now turn the call over to President of UMC, Mr. Jason Wang. Jason Wang: Thank you, Chi-Tung. Good evening, everyone. Here, I would like to share UMC's fourth quarter results. In the fourth quarter, our results were in line with the guidance with a flattish wafer shipments amid mild demand across most of the markets. The 4.5% revenue increase during the quarter was supported by favorable foreign exchange movements as well as a sequential growth in our 22- and 28-nanometer business, which continues to improve our product mix. With the 22- and 28-nanometer segment, 22-nanometer's revenue increased 31% quarter-on-quarter to a record high, accounting for more than 13% of total fourth quarter revenue. Looking at the full year, UMC delivered solid performance in 2025 with shipment increasing 12.3% and revenue in U.S. dollar up 5.3% year-on-year. Going into the first quarter of 2026, we expect wafer demand to remain firm. UMC is confident that 2026 will be another growth year as a tape-out on our 22-nanometer platform accelerate, and other new solutions continue to gain business traction. We have been working hard to lay the foundation for our next phase of growth, investing for the future in both capacity and technology. In 2025, we completed the new Phase III facility at our Singapore Fab 12i, which is already playing a central role in supporting customers to diversify supply chain. At the same time, we are striving to expand our footprint in the U.S. through an innovative yet cost-effective modes of partnership, such as our 12-nanometer collaboration with Intel and the recently announced MoU with the Polar Semiconductor. The leadership UMC has built over the past few years across specialty technologies, including embedded High Voltage, Non-Volatile Memory, and BCD, has and will continue to sustain stable business growth. Looking ahead to 2026 and beyond, we expect advanced packaging and silicon photonics to serve as a new growth catalysts, positioning UMC to address the evolving needs of a high performance of applications across AI, networking, consumer, automotive and more. Now let's move on to first quarter 2026 guidance. Our wafer shipment will remain flat. ASP in U.S. dollar will remain firm. Gross margin will be approximately in the high 20% range. Capacity utilization rate will be in the mid-70% range. Our 2026 cash-based CapEx budget will be USD 1.5 billion. That concludes my comments. Thank you all for your attention. Now we are ready for questions. Operator: Yes. Thank you, President Wang. [Operator Instructions] Now first question will be coming from Sunny Lin, UBS. Sunny Lin: So, I have a few questions. Number one, Jason, may we have your thoughts on overall market outlook for 2026. And then for semi versus foundry? And if UMC can continue to outgrow your adjustable market for this year? Jason Wang: Sure. Well for 2026, we expect AI-related segment remains as the primary growth driver in semi-industry. And furthermore, with the continuous commercial deployment of Edge AI applications, demand for chip using a general purpose server is also expected to rise. In contracts, the adverse effect of the memory supply imbalance could put some pressure on specific consumer electronics. But overall, the semiconductor industry is projected to grow by mid-teens in 2026. The question for foundry market, we believe that AI demand will remain strong and is the main contributor behind the low 20% growth projection in the foundry market this year. On the other hand, although the memory pricing may impact demand of the foundry market, at this time, we -- at UMC, we estimate that our addressable market will grow by low single-digit percentage. And UMC's growth was expected to outperform the average growth of our addressable market. Sunny Lin: Got it. So, then my second question is on pricing. Lots of discussions and obviously, Chinese peers are raising pricing. So how should we think about the pricing outlook for mature foundry and for UMC through 2026? Would UMC be able to start to reflect better value? And if yes, which product categories should we expect more upside from here? Jason Wang: Okay. Well, we do anticipate a more favorable ASP environment in 2026 versus 2025. This outlook really reflects our disciplined pricing strategy and the positive impact from multiple reasons, product mix optimization, loading improvement and reduced exposure to more commoditized market segment. As you're referring to China players, we expect the strong growth momentum in our 22-nanometer demand to support our product mix in 2026 as well. Overall, our pricing strategy remains consistent and is anchored to the value where we deliver technology differentiation and manufacturing excellence. So, we do think the 2026 pricing environment is more favorable now. Now the question about which product, and I mean, we don't comment pricing on specific product or any specific node. But in general, we do see the environment is more favorable now. Sunny Lin: No probolem. That's very helpful. And then a follow-up would be on the overall industry supply versus demand for the coming few years. TSMC on the recent earnings conference talked about the plan to optimize capacity for mature nodes to better support cloud AI demand in coming few years. So from your perspective, how should we think about the opportunity here? Are you starting to see more client engagement for new products in the coming few years? Jason Wang: We're always excited to see more customer engagement. So -- but more importantly is we need to prepare ourselves to cope with the market dynamics, and we welcome any opportunity to support our customers. So, we view this landscape shift as an opportunity to further optimize our product mix and gradually improve ASP and margin as well. Sunny Lin: No, got it. Got it. And then maybe lastly, just on your Singapore expansion. How quickly are you planning to ramp capacity in 2026 and in 2027? And how should we think about the differentiation of products that you have for Singapore versus the Taiwan capacities for 22- and 28-nanometer? And then with that, how should we forecast the depreciation in 2026 and 2027? Jason Wang: Well, first of all, for the year of 2026, the capacity increase will be around 1.2% year-over-year for us. And for our Singapore facility, the expansion will start in the second half of 2026. And with capacity deployment ramp from second half of 2026 will continue into the 2027. In terms of the node available in our Singapore facility, it's our strategy that we have a geographically diverse manufacturing booking between Taiwan, Singapore, Japan, U.S. and from a technology, no coverage standpoint, we would like to coverage most of the nodes. So the customer has a benefit of passing different sets of forecast. Chi-Tung Liu: As for the depreciation forecast, we are looking for some like low teen annual increase in the full year depreciation expenses. As for next year, we don't have the exact number here, but it's very likely to be the similar amount for 2026. So in a way, we will see the depreciation curve to peak either this year or next year with a very similar numbers. Operator: Next one, Haas Liu, Bank of America. Haas Liu: Congrats on the results. I would actually like to follow-up on the pricing. If we look at the like-for-like pricing environment, based on your current mid- to high 70 percentage of the utilization, if we strip out any of the consideration of the product mix improvement, are you able to improve or just to pass on your higher manufacturing costs or material costs to your customers at this stage? Or you still receive a meaningful pushback from your customers? Jason Wang: Well, I mean, the pricing discussion is always ongoing. The overall pricing strategy remains consistent, as I mentioned earlier. In 2026, we do see some market dynamic changes, so forth. Certain customers we do have some adjusted pricing upward. And so -- and for a certain customer, we still have some of the pricing -- I mean, the onetime pricing adjustment at the beginning of the year to support their market share expansion, as well as the competitiveness. So net-net, within the environment more favorable now in 2026. Haas Liu: Okay. Yes. So, when you talk about you are supporting your customers to gain market share by strengthening their cost structure. Do you mean you are actually adjusting down your pricing for those customers? Or is it actually up for this year? Jason Wang: We have a mix of that. For certain customers, we have adjusted pricing upward. And for certain customers, we will apply the onetime price adjustment downward, yes. Haas Liu: Okay. Got it. And then just on the near term, a couple of your Fabless customers recently talked about earlier and also stronger inventory restocking because of the memory price hike. I was just wondering what impacts your first quarter outlook here, if your customers are seeing stronger inventory pulling in the traditional low season. Why is your shipment for first quarter is still relatively flat? And then, what's your puts and takes for the first quarter overall business outlook? Just wondering whether -- which part of the business is actually relatively stronger and weak? Jason Wang: For Q1, by segment, we are actually in line with our addressable market seasonality. We didn't see a significant changes due to the inventory restocking. But if you're looking into by applications, we expect the revenue contribution from consumer segment to increase driven by the WiFi and DTV and set-up box, while the revenue from the communication and automotive will decline due to a softer demand of ISP and DDI products. Haas Liu: Okay. That's pretty clear. And then since you just mentioned about seasonality, are you expecting this year's seasonality to look pretty similar to the previous few years that first quarter could be relatively light and second quarter and third quarter, you will be able to see a relative strength into the year? Jason Wang: I can have -- probably provide you with this. If we look at the whole year, with the new project of a multiple specialty technology across the embedded high-voltage, non-volatile memory, power management, IC, RF SOI, it supports the end markets in communication, consumer, automotive and AI servers which will ramp in second half 2026. So, we're more looking at this year that our second half will outperform the first year -- first half, I'm sorry, the second half will be better than the first half. So that may be the deviate from the traditional seasonality. But as far as for us, we think the overall shipment for the year will be a growth year and as well as second half will be better than the first half. Haas Liu: Okay. Yes. And last question before I jump back in the queue is that, just based on the comment you had just now, what is the underlying market unit demand assumption you have right now? Is it smartphone -- is it the overall smartphone market will actually grow or decline based on your current base case scenario that second half will be better? Or it is actually already factoring a relatively more conservative expectation that smartphone TV, PC, this kind of consumer markets will actually see a unit decline? Jason Wang: Always with the current forecast from our customers. I mean, we do see gains on product segments, all applications. We do see some share gains on those applications. So right now, the forecast does show us that's more of a share gain in the market -- end market demand associated. Operator: Next one, Felix Pan, KGI. Junhong Pan: I just have a couple of questions about the future growth driver, particularly in the remarks, you mentioned about the advanced packaging and silicon photonics. So my first question will be besides the Interposer, what else we might have, some engagement for advanced packaging? And for Interposer, what's the capacity expansion plan for 2026? And my second question will be the silicon photonics, particularly in the Singapore fab, a lot of rumor about your potential customer. Is there any color, any client engagement or any contribution can generate from this segment? Any color will be grateful. Thanks. Jason Wang: Okay. A big question. So, let me see if I can cover -- cover that. And well, if I look back, I mean, I understand you asked for 2026. But let me look back this. We have delivered a very solid 2025 performance with a 12.3% shipment growth and 5.3% revenue growth, which outperformed our addressable market. This result is supported by our differentiated 22-nanometer technology and other specialty offering across both 12-inch and 8-inch amid a world-class market, a broad-based market demand recovery. And building on the 2025, we do view 2026 as a year of both continuity and evolution. We believe the UMC will once again taking shares and outperform its addressable market, and we will also see several positive inflation. First of all, as our guidance suggests, we are seeing a more favorable pricing environment. This will result of tighter supply globally as well as our differentiated technology and geographical footprint, which will drive our growth for the next few years. We are on track with our 12-nanometer cooperation with Intel, which should start see tape-out in 2027. Now that's the existing one. And your question about silicon photonics and advanced packaging. Secondly, we see 2026 as a pivotal year for those high performance, high potential opportunities such like the silicon photonics and advanced packaging. And we are making those deliberate choice, working with INEX to invest and scale them into a significant driver for our future. If you ask specifically about the advanced packaging. And there are two distinct opportunities for advanced packaging. One, we call enablers, the other we call 10 extenders. Major to explain this. I know it's long, but bear with me. So the fourth enabler, we are seeing the 2.5D and 3D packaging as well as the chiplet move well beyond just the data center and ultra high-end chip and start to spread across the broader market. Over time, we expect that advanced packaging to be adopted even on mature nodes. A good example is RF SOI. We have mentioned many times where we're already in production. In addition to the RF SOI, we are also exploring other applications with leading partners and believe we are at least 2 to 3 years ahead of our competition. What this really means for customers is better power efficiency, small form factor, and differentiated products. And for UMC, it is a strategic win-win. We believe our leadership in advanced packaging will enable us to capture more shares, sustain our higher ASC and drive better margin in many of our already established business in the long run. On the 10 extenders, we also believe that advanced packaging will help UMC address new opportunities. For example, customers are coming to us for AI-related applications. This is not necessarily just the XPU related, but we are adding value by stacking memory with the logic, adding DTC to the stack or selling the discrete DTC. We are also working with our partners to enable a total solution. Meanwhile, we are working with more than 10 customers in advanced packaging currently and expand more than 20 new tape-outs in 2026. We foresee revenue in 2027 will be a significant year for us. And the capacity question you have that capacity plan will be aligned with the customer ramp plan and market outlook. You also asked about silicon photonics. For silicon photonics, we are developing solutions, which includes ASIC, OIO, OCS, and CPO. Our collaboration with INEX allow us to deliver industry standard PDK to our customers in 2027. In addition to platform preparation, we also work with the customer on captive technology of 12-inch PIC aiming for possible product, which is expected to ramp this year. We will also combine our advanced packaging know-how with the silicon photonics as many of the applications require the integration and different substrates, process, technology and materials. Looking ahead to achieve 1.6T bandwidth and beyond, we're working with both customers and vendors for the test finding on heterogeneous material such as the TFLM. Those technologies could also be used in additional applications such as quantum computing. Again, we hope to integrate the new material the advanced packaging technology as well. So those are all integrated altogether. That's why I gave you a bit of a longer answer. I hope that explains it. Junhong Pan: Yes. Okay. But just -- let me just a quick follow up and rephrase my question. So for silicon photonics, what's the earliest timetable we can see the revenue contribution, like most likely? Jason Wang: For the 12-inch PIC, for the pluggable product, we'll be expecting to ramp this year. Junhong Pan: Okay. And about the -- because as I know about the Interposer, currently is the -- Interposer is also the bottleneck for our partner to expand their capacity. So, is there any color we can give -- how much capacity growth for the Interposer, like how much year-on-year growth or something like that? Jason Wang: Well, right now, the capacity planning will be aligned with the customer for the 2027 ramp. So, we will probably provide you some clarity when that comes. Right now, in 2026, we will focus on the tape-out. Operator: Next one, Gokul Hariharan, JPMorgan. Gokul Hariharan: Could you go a little bit deeper into that advanced packaging comment that you made? What is the involvement level of UMC in some of these advanced packaging solutions? Are you doing full stack? Or is it basically like previously where you were largely focused on the Interposer side of the equation? And in terms of the tape-outs that you have, what are the nature of these tape-outs? Are these mostly data center ASIC-related products? Or is this a much wider array of products other than just data center ASIC? Jason Wang: Sure. Well, first of all, we have reported in our advanced packaging space. We have building up some of the capability from wafer-to-wafer stacking and TSC as well as Interposer, the 2.5D and the many different capabilities. And then the way we see it, like I explained, for the enabler is we can apply those to many of the current products that we currently serve. And then -- and one example I mentioned is the RF SOI. So we have wafer-to-wafer hybrid bonding with the RF SOI solution for the mobile space already. And then, some of the capability can be built for the DTC for the stacking as well as some of the customers looking at discrete DTC already. And we are combining some of the capability into segments, the logic and the memory. Of course, we do not provide memory ourselves. So the customer will have to provide memory wafer to us. And so then we can provide wafer-to-wafer hybrid bonding on those. So on one hand, the way we see it is advanced packing is a capability per se, and it implies to the product and then we call it enabler and also expander. And the -- meanwhile, the product coverage is all the way from the mobile space, power management discussion, the AI-related -- AI-related product and also for the BCD application as well. So they were -- it's our belief is for a better reason or for the higher performance reason, and many different applications will start adapting the advanced packaging. So we think this is going to be a broad success on the advanced packaging space. Gokul Hariharan: Got it. And any plans to further expand your Interposer capacity? I think we had expanded, I think up to 6,000 and then kind of stopped it there. Now some of that demand seems to be kind of coming back for some of -- one of your customers in China. So, is there any plans to expand the capacity further? Jason Wang: There are discussions around that. Right now, if you look at the technology itself, we have some common tools in place already, which that we can leverage of our 40-nanometer capacity, of our 65-nanometer capacity. From those common tool space, we're already allocating to this area. Now for the unique tools, then we will put in the plan for the future expansion and for the customer ramp profile. And we believe that will probably happen in 2027. Gokul Hariharan: Got it. Understood. That's clear. Another question I had is on the -- just your expectations for the communication, consumer segment which is north of 70% of revenue, given all these concerns about smartphone, PC. How are you budgeting for this? Are your customers telling you that they are really concerned about this memory cost inflation? Or right now, you still don't really hear that from the customers that that's going to be a big issue from a unit perspective going through the year? Jason Wang: Well, we're also cautious about that topic. As of today, we have not observed any demand impact on our customers' forecast for the year, despite the recent surge in that price. And our technology predominantly supported customers addressing the higher end of the market segment, where the demand tends to be more resilient in the past and in the period of memory tightness. So, because the supply usually typically prioritize in such high-end higher-value device. While we remain attentive to the potential impact on the memory market and our current assessment is that any potential headwinds are probably manageable, and we will continue monitoring the situation properly with our customers together. Gokul Hariharan: Got it. My last question is on the geographic split of revenues. I think, could you talk a little bit about the Intel 12-nanometer progress? And any color on how you will be booking revenues or profits from this partnership given the fabless, Intel fab, while you are essentially the provider of customers and some degree of IP as well into it? And secondly, on the Xiamen's fab, what's the strategy for the Xiamen's fab medium to long term, given many of your semiconductor peers in Taiwan have kind of progressively exited capacity in Mainland China? Jason Wang: Well, for the 12-nanometer project with Intel, overall, the 12-nanometer cooperation project with Intel continues to advance smoothly. We remain on schedule to deliver the PDK and associated IP to customer in 2026. Furthermore, we anticipate the product tape-out will commence in 2027, making the significant step towards to commercialized deployment and future revenue growth. Right now, UMC and Intel are working closely to ensure successful tape-outs and an efficient ramp up for the mass production. As the project advance, it is expected to further strengthen USD position in the U.S., right, for customer as well for us. Because the geo diversification manufacturing. Right now, the application on the 12-nanometer cooperation, including products on digital TV, WiFi connectivity and high-speed interface products. In terms of the business model, and it's probably not available for us to comment. But it is a win-win strategy that we see and will be very synergetic for both parties as well as for our customers. And we have very high confidence this will be a win-win model. Gokul Hariharan: Okay. And any thoughts for the Xiamen capacity? Jason Wang: Yes. For the Xiamen, I kind of touched that earlier as well. I look at Xiamen, not just Xiamen itself, our core part of our competitive advantage is our geographically diverse manufacturing footprint. And the Xiamen play one of the important space for us and particularly for the local customer. So -- and at this point, the fab is actually at a full capacity. We are running at a full utilization as well. And we see -- we continue seeing many different engagements coming to this and we will across regionally optimize it from the customer engagement and product loading standpoint. Gokul Hariharan: Okay. Just one more on blended ASP. I think, Jason, you mentioned that the ASP environment is more favorable this year. But overall utilization is still in the mid-70s as of Q1, right? So do you expect that this year, we could see a scenario that we could see blended ASPs moving up meaningfully like 5% to 10% or something like that, like we have had in the past or that requires a much higher level of utilization that is probably not happening this year, given your low single-digit foundry growth expectation? Jason Wang: Sure. I mean, the high utilization is one of the important factors, but that's not the only factor. We want to make sure the pricing strategy is enabled not only ourselves and our customers to be competitive as well. So -- but we do see the pricing environment is getting more favorable to foundry because of the loading reason. And so -- but the magnitude of that, we probably have to continue to manage it. And if we have a clarity, we will share that with you. Operator: Next one Alex Chang, BNP. Alex Chang: I just have a very quick one. I just saw the company announced that they started the mass production of SuperFlash Generation 4. So just wonder how much revenue contribution from the non-volatile memory business in the past quarter or maybe past year? And also how much revenue is contributed by the power management ICs for the server-related applications? Jason Wang: I mean, we don't have a breakdown to provide. And the way that we break it down is based on specialty technology that includes the high-voltage and non-volatile memory and the PCB space. Right now, the specialty revenue representing about 50% of our overall revenue. And I can let you know the high voltage is about 30% of that. And the rest of that, I would say, is a combination of the non-volatile memory as well as the DCB. Operator: Next one is Laura Chen from Citi. Chia Yi Chen: I just want to follow up on the deterioration rate and also the gross margin outlook. Jason, you mentioned that the pricing environment seems to be improving more favorable. And together with firm shipment and better product mix as well as the utilization rate, so how should we think about the gross margin trend? You guided that will be high 20% for Q1. But with these favorable factors, how should we think about the margins throughout the year? That's my first question. Chi-Tung Liu: Yes. Gross margin can be highly dependent upon utilization rate, ASP, product mix, depreciation and foreign exchange rate. So there's a lot of variables. So beyond this quarter, it's difficult for us to give a firm outlook. For the first quarter guidance, which is high 20s, is mainly due to the higher cost, especially the higher depreciation expenses. As I mentioned, it will grow by low teens in the full year of 2026. As for 2026, we will continue to cope with higher depreciation expenses as well as the other inflationary pressure for our production, raw material and other costs. To mitigate and cope with the headwinds, we will continue with our cost reduction efforts and also all the activities to improve our productivity and drive operation efficiency. And these measures hopefully will help UMC to deliver a stable EBITDA margin and ensure our long-term financial resilience to remain intact. As a matter of fact, our 2025 EBITDA margin is actually a good improvement compared to that of 2024. Chia Yi Chen: Yes, sure. And also, I think for the advanced packaging and as well as the silicon photonics is one of the key things that UMC may have a great opportunity. We know that UMC has already working on advanced packaging, previously on Interposer, probably now we'll see more various different design. So could you share with us what's about the revenue contribution of your advanced packaging right now? And how would that look like in 2, 3 years? Jason Wang: Currently, the Interposer was exposed to very limited customer base and also narrow application. While we have engaged with more than 10 customers and expecting more than 20 new tape-outs in 2026, we do foresee that revenue of packaging -- advanced packaging growth in 2027 will be significant. Chia Yi Chen: So, significantly means that, could that be like 5%, 10% or higher? Jason Wang: I am expecting more than that. But I mean, if you're referring to the overall revenue contribution, we'll probably give you more guidance later. But if you're looking at the packaging itself, it's going to be significantly larger than what we're shipping today. Operator: Next, we'll have Bruce Lu, Goldman Sachs for questions. Zheng Lu: I want to go a little bit deeper for the silicon photonics. I mean, as you might know that your peers like GlobalFoundries, Taiwan Semi, pretty vocal about that. Can you tell us how big do you think the addressable market for silicon photonics for you guys in 2 years? And how do you win market? What is the competitive advantage for you in this business? I mean, other than working with INEX? Jason Wang: Well, I mean, the Singapore facility is not going to only serving the silicon photonics. Singapore facility is one of our important manufacturing site, they serve our worldwide customers, all different applications. And so it's part of our geographical diverse manufacturing strategy. So... Zheng Lu: No, no, no, my question is for silicon photonics, our business strategy? Jason Wang: The silicon photonics strategy in Singapore. Okay. Zheng Lu: No, no, no, no. I'm sorry, let me rephrase my question. So the growth driver for UMC, one of it is the CPO, I'm assuming having more business in the silicon photonics. In -- for your peers like GlobalFoundries or Taiwan Semi, they are pretty vocal about the silicon photonics and have meaningful revenue contribution already. For UMC perspective, what is your competitive advantage for UMC to win this business? And how much business you can win or how big is the addressable market for you in 2 years? Jason Wang: Got it. So, for the silicon photonics, our strategy is simple. Our cooperation with INEX allowed us to deliver the industry standard PDK to our customer in 2027, particularly in 12-inch. So many of our competitors is today at 8-inch and we are focused on this in 12-inch. And as we believe the 12-inch will have that advantage. And right now, we already have certain products that have proven that performance is a better and a pluggable product, and which we will expect to ramp this year. And meanwhile, we're also combining the silicon photonics with our advanced packaging know-how, so for many different type of applications then we can integrate that. So by doing that, we think we will be even providing even more value from advanced packaging combining with silicon photonics at 12-inch. I think that's where we believe we are competitive. Zheng Lu: But that's mostly for plug-in, right? Because if you don't have the EIC, the pure CPO product might not be your key growth driver? Jason Wang: You're correct. We're not looking at a completely CPO package. We're looking at particularly in the PIC and OIO and OCS. Zheng Lu: I see. I understand. That's very clear. Next one is -- and we see that the progress for the Intel project for 12 nanometers is pretty smooth. I just want to know what is the next step? I mean, when we can see a further collaboration in 10, 7 nanometers and beyond? I mean, obviously, whatever you said, the advantage at 12-inch, you can also use the same argument for 7-nanometer. What's stopping you to do that? Jason Wang: Well, you're also right on that. And our focus right now is on delivering the 12-nanometer platform to customers. In the future, should it make sense for both UMC and Intel as well as our customers, we will surely consider expanding our collaboration to other derivatives as well as the technologies. Yes. Zheng Lu: But what is stopping now? What is the show stopper now? Jason Wang: It's not -- I won't call it stopping. I think the focus is a focus on 12-nanometer. We have to deliver a 12-nanometer today, and make sure that we deliver that program. We execute it well. And I think anything that makes sense on that, unlike you said, I think there will be a discussion, yes. Zheng Lu: I see. Because we already assumed that you can deliver something in '27. So given that working for 7 nanometers, maybe you need 2, 3 years, we want to see the project kickoff as soon as possible. Operator: [Operator Instructions] Now we'll have our last question, [ Sappho ] Neuberger Berman. Unknown Analyst: It's been a while. And congrats on the progress you've made throughout this couple of years. I just have a few questions. The first one is, on the market dynamics, I think previously, Sunny has asked about the TSMC is shrinking or defocusing on this mature foundry process. And it looks like not just TSMC, but also the other foundries are -- seems to be doing some leading-edge logic foundry seems to be doing the same thing. And also Powerchip recently just reached agreement with Micron as well as Intel fab, which means they're trying to streamline and re-org some of the foundry process, too. So it seems like there's a lot of supply is kind of being taken away because of the rolling out effects from the AI and crowding out some of these older nodes. On the supply side, it seems to be that actually decreasing. And on the demand side, if you look at, I think, TI just to report overnight. I think it seems like that there's been more obvious recovery on the analog MCU space. So on demand side, that's also improving. But the supply side, that's actually decreasing. So it looks like supply-demand dynamics is moving to a more favorable situation. I think that's the point why you were mentioning the pricing dynamics favorable this year. So I'm just curious about your view, if we try to compare the current like the mature foundries dynamic situation right now versus, I mean, back in 2021 when there is a severe shortage back then. How would you compare this time around versus last cycle? Jason Wang: I mean, that's a really good question. I mean, we saw on the market movement, the changes. And we also deep dive on this demand and supply outlook. And we think whether this is short term or long term. If you look at the driver behind us, we see -- you mentioned this is truly more of the AI phenomenon ripple effect. And so we see that AI remains to be very strong, at least in the foreseeable future. And I think this momentum will continue driving the overall demand. And meanwhile, in many of this -- the capability -- AI capability we portfoliating to even the other end market devices in the Edge AI as well. So as in this will continue. And from an economic standpoint, building any of the mature facility is not justifiable. So we do think that this could last longer compared to the over time. And I think the situation could be more of a structure going forward. And -- but again, this is at a very early stage of this market movement. So we'll pay attention to it, and we'll continue monitoring the progress. Meanwhile, like I said earlier, I think it is more a favorable pricing environment. But more importantly is we need to prepare ourselves to cope with this market dynamic. So we are welcoming all the opportunity that for us to engage in supporting the customer. And -- but the important focus today is we have to get ourselves ready to capture those opportunities. Unknown Analyst: Got it. Another question I have is your earlier comments on the pricing. I think the -- you offer some of the annual -- maybe some discount to some of our strategic clients for their share again, but also net-net wise, also seems to be pricing is going up for a majority of the clients. So net-net, it's going to still be the -- ASP still be positive. But I'm just curious about, for those clients that you're offering some discount at the beginning of the year, when it down the road is, if the next few months or quarter situation has become tighter -- and would you be able to reprice with these customers? Jason Wang: Those discussions will be ongoing. We're always working with our customers to reflect the market dynamics as well as the cost increases. So I'm sure, and I believe this conversation will surely happen. It happened in the past, it will happen now and will happen in the future. So the pricing discussion will continue. And I think customers understand that. And we just have to continue monitoring the market dynamic and maintain our competitiveness on both the customer and ourselves. Unknown Analyst: Yes. Well, a thought on that because of some of the pricing that started to affect it on the January 1 this year, this was actually negotiated already in fourth quarter last year, right? Jason Wang: That's -- some alignment on that on both volume and the pricing. So if volume has changed, of course, that's a different topic. So, there are some volume dynamic in that as well. Unknown Analyst: Yes. My question is actually is that because a lot of the pricing that's effective on January 1, beginning of the year, it was actually communicated 1 or 2 months ago before that, toward the end of last year when the time that the supply demand dynamics haven't been really that tight as compared to some of the changes that happened in the just past couple of weeks. Am I getting that right? Jason Wang: Yes, you're right. Yes. But those also is on certain conditions. So given the condition has changed, the some of the pricing are dynamic. Unknown Analyst: Yes. Yes. Exactly, that is what I'm trying to discuss with you. Because we also saw a lot of the other different components, different subsectors within the tech or semi supply chain that such as memory, I think the pricing were still down in July, August, but all of a sudden, September prices going up. So I'm just curious about that because when you negotiate some of this discount months ago, the supply-demand dynamics was not the same as today. So things remain fluid, dynamic and it still continue to be flexible and it's going to be dynamic and open for changes down the road, if things are moving more favorably. Jason Wang: I think the core of the pricing strategy is that it has to be consistent, and it has to anchor with the value that we deliver and also the customers' competitiveness. That is the core. Then usually, that is how we're centering about the pricing discussion. So that core is not compromised. Now if the condition has changed, yes, they always have some flexibility to it. So, one is called pricing strategy and position, another is core pricing negotiation. So there will be some flexibility, yes. Unknown Analyst: Yes. And the condition has started to change now. Jason Wang: Yes. So we do think the pricing discussion will be more favorable now, yes. Operator: Ladies and gentlemen, we thank you for all your questions. That concludes today's Q&A session. I'll turn things over to UMC Head of IR for closing remarks. Thank you. Jinhong Lin: Thank you for attending this conference today. We appreciate your questions. As always, if you have any additional follow-up questions, please feel free to contact ir@umc.com. Have a good day. Operator: Thank you. And ladies and gentlemen, that concludes our conference for fourth quarter 2025. Thank you for your participation in UMC's conference. There will be a webcast replay within 2 hours. Please visit www.umc.com under the Investors, Events section. You may now disconnect. Thank you, again. Goodbye.
Operator: Good morning, everyone, and welcome to the National Bank Holdings Corporation 2025 Fourth Quarter Earnings Call. My name is Rachel, and I will be your conference operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I will now turn the call over to Emily Gooden, Chief Accounting Officer and Director of Investor Relations. Emily Gooden: Thank you, Rachel, and good morning. We will begin today's call with prepared remarks, followed by a question-and-answer session. I would like to remind you that this conference call will contain forward-looking statements, including, but not limited to, statements regarding the company's strategy, loans, deposits, capital, net interest income, noninterest income, margins, allowance, taxes and noninterest expense. Actual results could differ materially from those discussed today. These forward-looking statements are subject to risks, uncertainties and other factors which are disclosed in more detail in the company's most recent filings with the U.S. Securities and Exchange Commission. These statements speak only as of the date of this call, and National Bank Holdings Corporation undertakes no obligation to update or revise these statements. In addition, the call today will reference certain non-GAAP measures which National Bank Holdings Corporation believes provides useful information for investors. Reconciliations of these non-GAAP financial measures to the GAAP measures are provided in the news release posted on the Investor Relations section of www.nationalbankholdings.com. It is now my pleasure to turn the call over and introduce National Bank Holdings Corporation's Chairman and CEO, Mr. Tim Laney. Tim Laney: Well, thank you, Emily. Good morning, and thank you for joining us as we discuss National Bank Holdings' Fourth Quarter and Full Year 2025 financial performance. I'm joined by John Steinmetz, our Executive Vice Chair and Executive Managing Director of Strategic Initiatives; our President, Aldis Birkans; John Finn, our Chief Enterprise Technology Officer; and of course, our Chief Financial Officer, Nicole Van Denabeele. I'll begin this morning by extending a very warm welcome to our new Vista teammates who joined the NBH family earlier this month. Turning to the fourth quarter and full year 2025. While the fourth quarter was noisy, we ended the year having grown tangible book per share by 10%, and we grew our CET1 capital ratio to 14.89%. I'm pleased with our swift closure of the Vista Bank acquisition and believe our combined organization will produce powerful results, results that Nicole will guide us through when she presents. It was a noisy fourth quarter with onetime acquisition costs, the strategic sale of securities and a move to put any lingering problem loans behind us. Our goal was to enter 2026 with a clean slate and with a focus on profitable growth. I'll touch on 2UniFi later in the call, but share for now that we're pleased to have completed Phase 1 of the 2UniFi build. And we're joined by John Finn, who co-leads 2UniFi, and he'll cover our progress in detail in just a bit. Before I hand off to Nicole, I also want to complement our bankers on their deposit and loan pricing discipline, which led us to close out the year with a net interest income margin of 3.97%. I believe we are set up for a beautiful 2026. Nicole? Nicole Van Denabeele: Thank you, Tim, and good morning. Today, I'll review the fourth quarter and full year 2025 financial highlights and provide guidance for 2026. Our guidance reflects the combined organization, and consistent with past practice, excludes the impact of any future Fed rate decisions. In 2025, we executed on key strategic priorities. We announced and have now closed the Vista acquisition within 4 months, grew tangible book value by 10% and delivered a full year net interest margin of 3.94%. Fourth quarter's results were impacted by elevated provision expense and onetime items, including $4.1 million in after-tax acquisition costs and a $2.6 million after-tax loss on the strategic sale of investment securities to remain below $10 billion in assets at year-end. As a reminder, this action will preserve approximately $10 million in interchange income for 1 more year. Excluding onetime items, fourth quarter net income totaled $22.7 million or $0.60 of earnings per diluted share. As Tim shared, we addressed the specific set of problem loans during the quarter. This resulted in $9.1 million of provision expense related to charge-offs and specific reserves. For the full year 2025 on an adjusted basis, net income totaled $117.6 million or $3.06 of earnings per diluted share. Return on tangible assets was 1.3%, and return on tangible common equity was 12.2%. During 2025, we maintained a top quartile full year net interest margin of 3.94%, generated $1.6 billion of new loan originations, executed share buybacks and added to our robust capital base. We are pleased to have added a number of experienced bankers to our team through the Vista acquisition. We kick off the year with a combined loan portfolio of approximately $9.4 billion and are projecting 2026 loan growth to be approximately 10%. At acquisition closing, we added approximately $2.4 billion of earning assets from Vista to our balance sheet. As we optimize the total cash and investment portfolio mix, we project the combined bank to generate earning asset growth of 7% to 10% during 2026. Our goal is to hold approximately 15% of total assets in cash and investments and maintain a loan-to-deposit ratio of approximately 90%. Fully taxable equivalent net interest margin for the fourth quarter was 3.89% and was impacted by variable rate loans repricing well ahead of Fed rate cuts. However, we cut deposit rates in tandem with the Fed, creating a lag effect in our cost of deposits. Most of this has now worked its way through our balance sheet, and December's margin returned to a strong 3.97%. Similarly, Vista's December margin was 4%. As a result, we project 2026 fully taxable equivalent net interest margin to remain right around 4%, excluding the impact of future rate moves. Turning to credit. Our nonperforming asset ratio improved 11 basis points during 2025 to end the year at a low 36 basis points of total loans. The criticized loan ratio improved 73 basis points during the year. Net charge-offs were 34 basis points of loans for the year, and the allowance to total loans ratio ended the year at 1.18%, consistent with the prior quarter. We continue to hold $16.8 million of marks against our acquired loan portfolio as of December 31, providing an additional 23 basis points of loan loss coverage if applied across the NBH legacy loan book. We will be adding marks from Vista's loans during the first quarter of this year. We project the provision expense in 2026 to cover net charge-offs and new loan growth at a rate consistent with the current 1.2% allowance to total loans ratio. Fourth quarter noninterest income was $14.4 million and included $3.3 million in pretax securities losses. For 2026, we project total noninterest income to be in the range of $75 million to $80 million. Fourth quarter noninterest expense totaled $72.4 million, including $5.4 million of acquisition costs. Also included in the fourth quarter's expense were investments made in bankers in our resort markets. Full year noninterest expense was $265 million, including $7.2 million in acquisition costs and $22 million related to 2UniFi. For 2026, we project noninterest expense of $320 million to $330 million, reflecting a full year of Vista expenses. We project expenses during the first half of the year in the range of $165 million to $170 million. This means lower expenses in the back half of the year, reflecting cost savings from operational efficiencies generated by the combined organization following the completion of system integration. During 2026, we expect to incur onetime expenses associated with the acquisition and rebranding. In addition, we may recognize CECL day 1 provision expense depending on our final purchase accounting approach. As Tim shared, we are pleased to have completed the initial phase of 2UniFi in 2025 with the launch of our fully automated SBA loan offering last quarter. With the core technology infrastructure now in place, we expect a substantial reduction in capital expenditures for 2UniFi in 2026. This shift positions us to begin realizing operating leverage from the platform. For 2026, we expect $2 million to $4 million in 2UniFi revenue contribution, which is included in my fee income guidance. Importantly, we expect to maintain flat year-over-year 2UniFi expense, even with 2026 reflecting a full year of capitalized asset depreciation, which is approximately half of 2UniFi's 2026 expense. This means significantly lower cash spend in 2026. Turning to income taxes. The 2025 effective tax rate was 18%. With the integration of Vista and the resulting shift in the mix of taxable versus nontaxable income, we expect our effective tax rate to be approximately 20% for 2026. Capital levels remain strong, and we continue to grow our excess capital. We ended the year with a TCE ratio of 11%, Tier 1 leverage ratio of 11.6% and a strong common equity Tier 1 ratio of 14.9%. We project a 2026 share count of 45.8 million shares, reflecting the Vista-related share issuance. On a final note, bringing this all together, we believe we are well positioned to deliver earnings in excess of $1 per share in the fourth quarter of 2026, which sets the stage for full year earnings exceeding $4 per share in 2027. With that, I'll turn the call over to John Steinmetz. John Steinmetz: Thank you, Nicole, and good morning. On behalf of the Vista team, our state and our NBH family, I am pleased to have successfully merged our organization with National Bank Holdings Corporation and honored to be joining you on today's call. As the newest member of National Bank Holdings, I am fired up about the future of our combined companies. We have partnered with a dynamic, high-performing team and platform, and I believe there is a tremendous potential for our combined organization. It hasn't taken long to have my instincts confirmed that our companies are ideal partners for our shareholders and team members alike. With its strong leadership, consistent discipline around credit, and a vision to create one of the most respected and profitable financial institutions in the country, NBH has built a platform that is uniquely positions our company for strong continued organic and strategic growth. As a part of the NBH family, we are excited to have the opportunity to offer expanded services, such as wealth management and trust services and enhanced treasury management offering, added mortgage products, and a bigger balance sheet to support the growth of our valued clients. This broader product set will strengthen our relationships, deepen wallet share and enable our exceptional bankers company-wide to better serve our clients through their financial life cycle. We are also honored that Tim and the Board made the decision to adopt the Vista name as the go-forward brand in our diversified markets. It provides our combined teams a unified front and is a name that works well in both English and Spanish, further enforcing our commitment to taking the long view of better serving our clients in the future. With $2.7 trillion GDP, Texas is one of the fastest-growing economies, larger than most countries and consistently outperforming national averages. Texas' diversified high-growth economy provides unlimited opportunities for our combined organizations. That said, I'm also equally excited about the growth opportunities in the various resort markets we serve currently, such as Jackson Hole, Aspen, Vail, Telluride, and Palm Beach, Florida. Since the transaction, we have already added 3 presidents with over 45 years combined experience at their previous banks prior to joining NBH. These communities, once seen as primarily secondary home destinations, are now primary residents for wealthy baby boomers. This shift presents an opportunity to offer our white glove concierge private client and wealth management services, further setting our bank apart in a very crowded industry. Additionally, I am pleased to share with you that we are already seeing early momentum in our combined pipeline, fueled by the energy of our seasoned team members and enhanced capabilities, creating a clear path to value creation through relationship-driven profits. Equally significant is the cultural fit between our two organizations. Over the past several months, the Vista Bank and NBH teams have united around a shared velocity, putting people first, a focus on the value of teamwork and meritocracy, all while delivering exceptional results and building long-term relationships. These value drive results and further increase shareholder value. The legacy Vista team has been together for nearly 2 decades, and I -- and my commitment remains unwavering: To finance the American dream for those entrepreneurs brave enough to pursue it. We invest in our communities, and we compete to win and while striving to create the best place for our associates to call work. Having deep respect for Tim, Aldis and the entire NBH team have built, we couldn't be prouder to join the NBH family. I truly believe the best is yet to come. All that said, we are confident that our contributions will enhance NBH's growth profile, strengthen its market presence and further expand shareholder value. I'll close my remarks by thanking you for your trust and support. And now I'll hand off the call to my friend, Aldis. Aldis Birkans: All right. Thanks, John, and good morning. I'll begin by highlighting what was a strong loan production quarter. We originated $591 million in total loans, the second highest loan production quarter in our company's history. I believe that performance is a direct reflection of our franchise strength and capability of our bankers. What I'm most proud of is the composition of that production. $429 million of that came from commercial loan originations, a new record for us. This drove our commercial loan portfolio growth to nearly 8% annualized. This is high-quality, relationship-driven business that proves we are winning in our core markets. During the fourth quarter, we continued to see pressure on our commercial real estate loan balances. This decline was mostly driven by accelerated payoffs as clients move toward alternative funding like private credit, REITs and life insurance companies. As a result, we improved our nonowner-occupied CRE to capital ratio to a low 127%. And when we factor in the Vista balance sheet, we are starting the year comfortably below the 200% threshold, which gives us meaningful runway for growth moving forward. From a credit perspective, Tim and Nicole have already walked you through the actions we took during the fourth quarter, so I'll just simply add this. My expectation is that our asset quality metrics will continue their positive trends, returning to top quartile performance in 2026. I'm also very pleased to be working alongside John Steinmetz as we expand our footprint in Texas and key resort markets. And together, we expect to deliver our 2026 targets, driven by profitable and prudent growth. When you combine the Vista merger with our planned organic growth across all markets and recognize that we have reached our turning point for 2UniFi, the stage is set for a very compelling 2026. With that, I will turn it back to Tim. Tim Laney: Thank you, Aldis. I'll share a few thoughts on 2UniFi before handing off to John Finn. First, I want to congratulate the 2UniFi team on completing the Phase 1 build. Second, make no mistake. During 2026, there will be an intense focus on new client activation and growing revenue. And finally, our goal is before year-end to have entered into a partnership that will meaningfully reduce NBH's 2UniFi investment run rate. With that said, I'll turn the call over to John Finn. John? John Finn: Thank you, Tim. Today, I'm pleased to share more about the journey of 2UniFi as we unlock the future of small business banking. Last quarter, we reached a significant milestone with the launch of our SBA working capital loan, integrated seamlessly into our platform alongside our innovative business suite deposit account. This achievement is a key moment in Phase 1 of our multiyear strategy. Imagine a world where a small business owner can log in once and see their entire financial landscape, accounts, cash balances and lending options, all in 1 unified view. We are revolutionizing the client experience well beyond traditional online banking, creating a seamless platform that helps a small business owner manage financial products and services across multiple banks and fintechs. With our integrated digital passport, we have transformed the application and onboarding process. Clients can provide their information once and eliminate the need to reenter it for additional products, whether opening an interest-bearing account or applying for a loan. Our innovative passport will ultimately enable business owners to effectively shop for financial services across a broad set of financial service providers. Now that our foundational infrastructure is in place, we are shifting gears from constructing systems to activating services. We're launching with 2 essential capabilities that small business owners need, beginning with a convenient access to SBA working capital loans, as well as an automated nightly suite that earns interest on excess deposits, which is functionality typically reserved for larger mid-market clients. Our custom middleware and microservices architectures enables us to deliver advanced features like real-time event notifications and tailored communications. Clients receive faster decisions with clear and concise updates, saving time and reducing stress for business owners. Our vision has always been clear: To build an integrated and seamless technology platform, not just another digital bank. Operating with a full-service banking charter, our scalable and secure architecture is supported by industry leaders like [ Finxact ], [ Savana ], Visa and [ Marqeta ]. This ensures we have the best tools at our disposal to serve our clients effectively. Leveraging our technology with Snowflake and Microsoft Azure positions us to enable enterprise-grade data insights in upcoming releases. Our data architecture will support AI-driven, customizable data sets, enabling 2UniFi to provide valuable cash flow insights and proactive product recommendations based on clients' activity. This architecture also creates opportunities to develop new insight-based products and analytics-enabled services based on aggregated, anonymized data alongside deeper client analytics. As Tim has shared, we are optimistic about the formation of a partnership in 2026 that will accelerate our distribution and scale. Our full-service banking charter provides the partner with access to a tech forward platform, including the ability to offer FDIC and shared deposit solutions nationwide. As we move forward beyond Phase 1, our investment in 2UniFi will become more targeted with a step down in our capital expenditure run rate as the build phase gives way to more efficient operating profile. Importantly, we're scaling 2UniFi deliberately. We will onboard clients responsibly and optimize our controls, which we believe will translate into quality conversions and more durable relationships over time. We are prioritizing a high-quality onboarding experience with robust fraud mitigation because, as you know, building trust is foundational to long-term value creation. With a more efficient cost profile and a growing set of capabilities, we remain committed to building 2UniFi into a marketplace that we believe will compound value for small business owners and our shareholders alike. I appreciate the opportunity to provide this update on 2UniFi. I will now turn it back to Tim. Tim Laney: All right. Well, thank you, John. We've covered a lot of ground this morning. So Rachel, I'll go ahead and ask you to open up the call for questions. Operator: [Operator Instructions] Our first question comes from Jeff Rulis with D.A. Davidson. Jeff Rulis: Nicole, that was a whirlwind of updates. If I could just rattle through a couple. Just to confirm, you said 10% loan growth in '26 off the combined $9.4 billion balance, a margin for the full year near 4%, earnings over $1 in the fourth quarter and over $4 in '27. Is that right? Nicole Van Denabeele: That is correct. Jeff Rulis: Okay. And on the 2UniFi front, I think you said $2 million to $4 million in revenue this year. What was the cost again for '26? Nicole Van Denabeele: Yes. So that's correct, $2 million to $4 million 2UniFi revenue projection for 2026, and we will be holding 2UniFi expense flat in 2026, consistent with 2025, which was $22 million. Jeff Rulis: Got it. And then it sounds like the partnership developing to sort of reduce those investment costs. I guess the leverage of the model into '27 is a little bit TBD, but I guess the focus is as you scale it up, that's more of a breakeven-type climate in '27. Just -- I know that were -- all this is developing, but trying to get a sense for what the '27 economics look like? Tim Laney: Look, I think what we should share with you is that right now, we are incredibly focused on Phase 1 product activation with clients and driving revenue and really testing the market with those services. Number two, as I shared, we are very focused on working to establish a partnership that frankly could have the effect, amongst other options, of moving this off the NBH financials altogether, where we would remain a meaningful investor as shareholders, but it would be treated in a very different fashion financially. But I'll come back to the first point, which is our focus today is on client activation and scaling this business, and we'll come back to you. It's just too early to come back to you with any kind of definitive targets on '27. Jeff Rulis: Yes. No, that's helpful, Tim. Just the range of options, including moving the -- off the financials of the bank entirely, we'll stay tuned. Maybe the -- just to pivot on to the credit side, the 3 loans that made up the bulk of the net charge-offs. Could you kind of identify the sort of category and why that group? Any systemic -- it sounds as if you expect credit metrics to further improve in '26. Just trying to get a sense for what was charged off. Tim Laney: If you'll recall, at the beginning of '25, we literally were dealing with less than a handful of relationships that had emerged as problems. We really were in the belief that over the course of '25, they would work their way through the judicial process, and we would have them resolved, and that simply wasn't the case. The decision -- we believe a prudent decision was to address these as aggressively as we could in '25 and have a clean runway for '26. We're just not believers in letting problems like this linger. And the Board and I felt like this was the correct and prudent action to take, even though it obviously was painful to take here in the fourth quarter of last year, but it feels good -- very good to put it behind us. Operator: And we will take our next question from Kelly Motta with KBW. Kelly Motta: Maybe to kick it off with growth. I know we talked about 2025 year being -- working through some credits and impacted by some payoffs and refinancings, but it sounds like the outlook for '26 is really strong in part with your Vista partnership that you just brought on. As you look to, I think it was 10% loan growth, can you speak to the drivers of that growth, if that's significantly Texas and other markets where you're seeing opportunities just given the acceleration from what we've seen in the past several quarters? Aldis Birkans: Yes, this is Aldis. I'll kick off, and then I'll have John chime in. But yes, it's a combination of all the markets and certainly, the continuation of the strong production we saw in the fourth quarter. As I mentioned, it was our second highest loan production quarter for NBH stand-alone basis. In our company's history, we did really well on originating commercial loans. If you look at the C&I in the table, that grew north of 10% annualized. So we do see a very good momentum going into this year. And certainly, adding markets like Texas and the expertise and teammates that we are adding through this acquisition is great. And John, maybe you can add on that front as well as touch on the resort markets. John Steinmetz: Sure. Thanks, Aldis. And yes, Kelly, we're really excited about the future growth potential, not only in Texas, but the resort markets, in all the markets, candidly. I'm looking forward to getting to know the team members throughout all of the NBH markets. And we believe in Texas that this platform that was built at NBH provides us not only the balance sheet that we need to continue to grow with our valued clients, but support our exceptional bankers. And to Aldis' point, we also have always believed that NBH has an incredible opportunity in the resort markets. Resort markets that, again, were once seen as second homes, but are now becoming primary residents in places where people want to have their local bank. And I hope at this time next quarter, you'll see some performance-driven metrics and increase shareholder value around that. But the platform that we have at NBH as a team is going to provide -- not only allow us to support the continued 20-plus percent CAGR on deposits and loan growth that we've historically had, but it's also going to allow us to overcome a lot of the lack of fee income which Vista Bank has historically struggled with. Kelly Motta: Got it. That's really helpful. Maybe bouncing to a question on the margin. It was down this quarter a bit more than I had expected. With the loan yields, were there any interest reversals given what you had with credit? And I appreciate the guide in the mid-3.90s too is ex rate cuts, but just -- if you could refresh us on -- clearly, I think there was some initial asset sensitivity, so how we should be thinking through that? Nicole Van Denabeele: Yes. Kelly, this is Nicole. Yes, I'll just reiterate. So our December margin did come in at a strong 3.97%. We have managed, in our view, very well through 75 basis points of rate cuts in 2025. We experienced -- we drove 9 basis points of margin expansion even with those rate cuts this year. There wasn't any interest reversals in the fourth quarter, and the loans that we worked through were already on nonaccrual. But I will just -- just to reiterate, we've done a nice job with our deposit pricing for prior rate cuts. We cut deposit price -- we cut our deposit rates ahead of the Fed. This time, we held and we waited until we knew exactly what the Fed was going to do. And so that did cause that lag and drag effect, but we have overcome that and finished the year with a strong margin of 3.97%. Kelly Motta: Great. Last one, if I could slip in just one more. On the 2UniFi guide, the expense guide that -- flat at $22 million. I just wanted to confirm because you alluded to a potential partnership that could change the economics here, that, that didn't bake in any potential impacts of maybe offloading some of those expenses, one? And then two, with it flat, I imagine getting -- increasing the user base is an important part of driving those revenues higher. And so I'm surprised it's flat. So I guess, if you could kind of speak to how you guys are thinking about that line item, given that we're not really seeing a change from last year? Nicole Van Denabeele: Yes. I appreciate you asking that question. I think it's important to note, we see 2026 as a turning point for 2UniFi. And as I shared, we are seeing operating leverage from 2025 from 2UniFi in 2026. So the revenue guide is an increase from last year. So $2 million to $4 million revenue guide, positive impact from 2025. And then holding expenses flat, it's actually very significant that we're holding expenses flat because we will have a full year of capitalized asset depreciation in 2026. And so that expense flat includes that uptick in depreciation, which is half of the 2026 expenses. And then to your point on the partnership. So no potential -- the partnership really from a financial perspective is all upside, and none of that has been included in our guidance for 2026. Operator: And we will take our next question from Andrew Terrell with Stephens. Andrew Terrell: First one, just to clarify, Nicole. On the margin, was the 3.97% -- was that spot at the end of the year or 3.97% for the full month of December? Nicole Van Denabeele: 3.97% was for the full month of December. Andrew Terrell: Okay. And then do you have the -- it sounds like there was a lag here where assets reprice quite a bit quicker than deposits. Do you have where deposits, either spot or interest-bearing -- I mean, either total or interest-bearing were either in the month of December or on a spot basis at the end of the quarter? Aldis Birkans: Yes. This is Aldis. It was [ 182 ] is the spot deposit cost at the end of December for NBH. But I recall now starting in Q1 or starting now, obviously, we're incorporating all of the Vista deposit base as well. So it will change into Q2. But I think what you're getting at is how spot margin is around 4% if you incorporate all of the benefit from deposit bleed through in December. Andrew Terrell: Yes. Yes. Got it. Okay. If I could ask just around the 2UniFi, specifically the partnership. If I go back to October, Tim, when we talked about on the call, it sounded like you were maybe pretty close on announcing something from a partnership standpoint. It sounds like now, that's still likely but maybe delayed a bit. I guess I'm curious what's kind of causing a delay here or if there is a delay in your mind? Tim Laney: I may have made a mistake in sharing as much as I did at that point candidly. It perhaps even reflected too much optimism, and I could kick myself for that. I believe we were further along in consummating a partnership there. But frankly, when you're involving 2 parties, you can have different needs, expectations on either side that may not come together in the time frame that you expected. So what you need to hear from me today is that we are intensely focused on bringing the right partnership together and moving 2UniFi ahead. And frankly, we are proud to be targeting a $4 run rate in our earnings in '27. But imagine what that looks like if we're pulling those expenses of 2UniFi in all or in part off of our income statement. So we're highly motivated to see something happen there. Andrew Terrell: Yes. Got it. And last for me, was there any -- I appreciate that 2UniFi guide, but was there any revenue in the fourth quarter realized? And then just on the buyback that you guys announced, maybe Tim, if you could speak to kind of the appetite there? Nicole Van Denabeele: Yes. I can touch on the 2UniFi revenue question. So we did have some revenue related to 2UniFi in the fourth quarter, but it wasn't meaningful. And then the second part was the appetite for share buyback. Tim Laney: We have a strong interest in share buybacks. I believe, you know, we literally just announced a $100 million buyback authorization. And we have a -- frankly, we would consider it a priority at this point. Operator: And we will take our next question from Brett Rabatin with Hovde Group. Brett Rabatin: Wanted to -- I joined a little bit late, Tim, but I wanted just to go back to -- you guys have had really strong loan originations, particularly here lately. But again, obviously, the net growth has been limited due to payoffs. Can you talk maybe a little bit about what you've experienced -- or what you experienced during 4Q in terms of payoff activity and how that played out? And then just your confidence for '26, if I heard correct, 10% loan growth. Is there a net and gross assumption there? Or any thoughts on confidence on payoffs diminishing relative to what you experienced the past few quarters in particular? Tim Laney: Aldis did touch on what we were seeing with insurance competition in the private debt market. But let's be candid. All banks -- or most banks would be facing that competition. I'll tell you, there were just a number of situations where the kind of structures that were being put together and the pricing related to those deals just simply did not fit within our risk management framework. And so we're more than willing to let that business move along. But I think the broader context is the whole year, where we entered 2025 with, frankly, a risk-off mindset, having concerns about tariffs, having concerns about where the economy would land. And I would tell you that, that risk off position that we took was somewhat pervasive throughout the year to a point where when it was time to really turn things back on, I'm proud of the team's production, but I would tell you it was being done in a very, very conservative atmosphere. We come into '26 really with the combined forces of form a Vista and NBH. And as we lay out these growth plans that we shared for you, Aldis and John have expressed nothing but very high confidence that we will meet, if not beat them. So with that, I'll open it up first. Maybe you, Aldis, just for more detail on the fourth quarter. But then in terms of growth here in '26, John, Aldis, feel free to jump in on that as well. Aldis Birkans: Yes. Brett, what I would add is, looking ahead in 2026, one thing that is a bit different in addition to what Tim was mentioning in terms of, again, like transportation or trucking is a segment we definitely exited, and that was a headwind. We are where we want to be. So that's not going to be a headwind in 2026. The other thing I'll say is -- and again, this is on NBH's legacy book side, but we have approximately $0.25 billion to almost $300 million of less scheduled maturities this year than it was last year. So that's less of a, call it, headwind return that we have to overcome to again, grow even with the same production results. So John, anything that you'd add on from legacy Vista side? John Steinmetz: Sure. Well, Brett, thanks for the question. And let me say, I'm optimistic and very excited about '26. We have consistently put up a 23% CAGR in loan growth without the balance sheet that NBH provides us. And so we think that this was the perfect partnership. We see tremendous opportunities in these resort markets. But I am very confident and have always believed that the reason people first matters is because the best clients follow the best bankers, and we are committed to continuing to not only augment and support our exceptional team members at Vista and the entire NBH family, but also recruit and retain through the disruption that we see not only today, but throughout Texas. This was a merger of two incredible teams, and I'm incredibly optimistic and expect to win. And with respect to a question that was asked earlier, I believe, by Jeff with D.A. Davidson, I want you all to know that we take great pride in our credit quality. And for, I hope, our credit team that is listening today at Vista -- legacy Vista, I'm still getting used to this -- they know how much pride we take in pricing with credit quality second to none, and I have an extraordinary amount of confidence in Rick, Danny and the credit team at NBH. We did our reverse diligence and examined NBH's because I assure you, they did theirs on us, much like a proctology exam. And I am very proud to be partnering with this excellent credit quality minded organization because I don't think they kick the can down the road, and I'm fired up about '26. Brett Rabatin: That's really helpful. I'm sorry? John Steinmetz: I was just saying as a shareholder and team member. Brett Rabatin: Yes. Okay. That's all really helpful. And I think most investors are going to give you guys credit for the credit situation as being truly one-off. So I don't think anybody is concerned about that. The other question I wanted to ask you, John, was just I think you're kind of known as a recruiter and you got this deal with NBH, but there's been significant disruption in a lot of the markets of the core operating pro forma company. Just wanted to hear if you had offers out or if there was a hiring effort pro forma, or if it's too early, and you're just still trying to combine everything before you maybe go too much on offense with market share opportunities related to disruption? And just any thoughts on how you see that playing out? John Steinmetz: And Brett, I appreciate that question. And I'll tell you, this is my first public earnings call, and Tim told me not to make promises I can't keep, but I'll tell you this. We are actively recruiting, but I'll tell you, we are actively retaining. Like I said, most of our team members have been together for 20 years, and I take so much joy in knowing that we have the best bankers providing these. The opportunities and the inbound calls that we're receiving, not from recruiters, but from bankers at the organizations in Texas and beyond to be a part of a culture that puts their people first is something like I've never seen. And I'm excited for my friends in Texas that announced the deal today, but I can assure you, I am recruiting. And I think we all should be in this incredibly crowded industry, where we all eat out of each other's dog bowl. So I think that '26 could be a really good year if we're willing to dig in. And I'm excited about digging in with the team that we've had in the past, and more importantly, getting out and getting to know the NBH team that I have had a deep level of respect. This merger took place over 5 years of getting to know Tim, Aldis and the entire NBH team. And for -- if you would, Brett, just allow me to thank the team at Vista for their patience as we explore various opportunities. But we think this is a perfect partnership because of the way that they manage credit, much like we do. Operator: Thank you. And I am showing we have no further questions at this time. I will now turn the call back to Mr. Laney for his closing remarks. Tim Laney: I'll just simply say thank you for your time today. And if you have any follow-up questions, do not hesitate to reach out directly. Have a good day. Operator: And this concludes today's conference call. If you would like to listen to the telephone replay of this call, it will be available in approximately 24 hours, and the link will be on the company's website on the Investor Relations page. Thank you very much, and have a great day. You may now disconnect.
Alex Ng: Good afternoon, and welcome to Stolt-Nielsen's earnings call for the final quarter of 2025. As always, the earnings release and related materials are available on our website. We'll be recording this session and playback will be available on our website from tomorrow. Included in this presentation are various forward-looking statements. Such forward-looking statements are subject to risks and uncertainties, and we refer you to our latest annual report for further details. I'm Alex Ng, Vice President of Corporate Development and Strategy. Joining me today are Udo Lange, our CEO, and Jens Gruner-Hegge, our CFO. At the end of our presentation, there will be a Q&A session where we'll be taking questions in the room and online. [Operator Instructions] Thank you, and over to you, Udo. Udo Lange: Yes. Thank you so much, Alex, and welcome, everyone, here in London and of course, on the call as well, and thanks for joining us today for our fourth quarter results. The presentation will follow the usual format. I will begin with an overview of the group's results for the quarter and the full year, and then Jens will cover the financials before handing back to me to run through the performance of our divisions, our view of the market outlook and a few concluding remarks. In an unpredictable and challenging market context, I'm really pleased that overall, Stolt-Nielsen has delivered a solid finish to 2025, achieving EBITDA of $186 million for Q4. This completes the year with $776 million in EBITDA, which was at the upper end of our guidance and the second highest EBITDA result achieved in our history. We continue to communicate that Stolt-Nielsen is not a shipping company, but a logistics business. Non-Stolt Tanker operations account for 57% of our asset base and 45% of our EBITDA. We are building our non-tankers earnings base through our capital investment program to continue to grow long-term sustainable cash flow for our shareholders. For this quarter, while Stolt Tankers EBITDA fell 18% from the same quarter last year, the resilience of the other areas of our business resulted in a 13% drop for the group overall. Optimizing value creation from our portfolio is the driver of our M&A activities. In the period, we acquired 100% of Suttons, a U.K.-based ISO tank operator through which we can leverage the scale and flexibility of Stolt Tank Containers' global platform to expand our service offering for our customers. Aligned to our strategy to grow Avenir whilst preserving balance sheet flexibility, we have also very recently announced that we are in discussions to sell down a portion of our equity in Avenir. We also issued a new Norwegian bond. It was one of the tightest spreads for a logistics company achieved in the Norwegian bond market, showing our good access to markets and the credit investors appreciate our portfolio, and the master of the bond is in the room, Julian, thanks for the outstanding work there. You'll remember that last year, we evolved how we communicate our earnings potential, aligning our EBITDA guidance with our business model for the full year. In 2025, we came in towards the top of our range, and we hope you find our transparency in this regard helpful, and we are committed to continuing with this approach. Based on what we know today, we expect that our 2026 EBITDA will be in a range of $600 million to $750 million. Jens will elaborate on this more a bit later, but I wanted to flag a couple of key points here. We are excited about integrating Suttons into our core business. However, there will be some integration costs this year and positive EBITDA impact from the Suttons business is not expected until 2027. This also assumes that the de-consolidation of EMEA is completed in line with our announcement on Monday, and that is, of course, relevant for the like-for-like year-over-year comparison. And we expect to be able to refine this range as the year progresses. Let's now turn the page to review our financial highlights. I'm really pleased with the results achieved in the quarter in a complex market backdrop. Operating revenue was down 4% or $29 million year-on-year, which is predominantly on account of weaker freight rates in Stolt Tankers. EBITDA before the adjustment for fair value came in at $186 million, down $27 million on last year due to lower rates in Stolt Tanker and in Tank Containers, partially offset by performance in our Gas operations. Operating profit was down year-over-year by $35 million, mainly due to the performance in Tankers and Tank Containers, plus additional depreciation from the consolidation of the Hassel Shipping 4 and Avenir. Net profit was also down, driven by the same factors as well as higher interest expenses. Free cash flow was down EUR 38 million year-over-year, driven by higher CapEx, including from the acquisition of Suttons International and new building deposits in our NST joint venture. Net debt-to-EBITDA has increased to 3.12x as a result of the investments we have made over the year. I will talk more about how we are investing for long-term growth a bit more later. Over the page, we look at some of the key drivers of performance. Looking at the snapshot of the whole year, we have delivered a solid performance with the second highest EBITDA result in the company's history despite demand headwinds from a weak global chemical market as well as geopolitical uncertainty and tariffs impacting sentiment. We have remained focused on our strategy and on supporting our businesses to maintain their leading market positions. Stolt Tankers earnings were impacted by ongoing geopolitical uncertainty with lower freight rates weighing on performance whilst volumes remained stable. Over the last 18 months at Stolthaven, we are focused on optimizing for higher-margin business. This strategy has delivered success in certain markets, and we end the year with average utilization for the year up slightly, a positive outcome in a difficult market. Tank Containers have also been navigating a highly competitive market and performance here has been impacted mainly by lower transport margins. For the year overall, the mix of EBITDA generated outside of Stolt Tankers increased to 43% from 35% last year. This is $40 million more than last year as investments across our portfolio, help diversify our earnings. Our global teams are doing a fantastic job of working together to help our customers keep their supply chains moving in a safe and reliable way. And I want to thank all our people for their dedication across the year. They truly live our purpose of moving today's products for tomorrow's possibilities. In November, we announced the acquisition of Suttons International, a U.K.-based ISO tank operator. I wanted to give you a bit of additional color on the rationale for the acquisition and how it supports the Tank-Container strategy. We acquired Suttons in November, adding over 11,000 ISO tank containers to the fleet, growing our fleet by around 20%. The acquisition is aligned with our corporate strategy to accelerate growth in one of our asset-light businesses, leveraging Stolt Tank Containers' global platform to support customers with efficiency, reliability and flexibility across their supply chains. We have been investing in creating a scalable global platform for Stolt Tank Containers, driven by a strong focus on digitalization and efficiency, and we aim to drive sustainable growth, operational consistency and improve customer outcomes by leveraging this platform to successfully embed Suttons within our business. Suttons not only brings tank capacity, but also enhances our customer offering as we bring in specific expertise in gas distribution, domestic short sea and China domestic services. With an expanded fleet, global reach, a more comprehensive service offering and an improved digital experience, customers will benefit from our scale, efficiency and global network. As we talked about it on our Capital Markets Day, the ISO tank container market is highly fragmented. As you can see here on the chart, this transaction cements Stolt Tank Containers' position as a leading ISO tank operator and gives us potential for further profit margin growth. As well in this market, we see low levels of new tank production and ongoing capacity rationalization, which we expect to lay the foundation for an eventual market recovery and Stolt Tank Containers will be well positioned to take advantage of a potential upturn. Our strategy puts our three most important stakeholders at the heart of everything we do, our shareholders, our customers and our people. We focus on developing our people to continuously improve our customer experience and on value creation for shareholders through our unique market leadership across liquid logistics and other business investments. We paid an interim dividend of $1 per share in December, which takes shareholder distributions since 2005 to over $1.4 billion. Our commitment to balancing distributions, conservative balance sheet and investing into our business is key to delivering long-term shareholder returns. Our unique position in liquid logistics benefits customers as they build and optimize robust supply chains in uncertain and demanding markets. 70% of our top 50 customers use more than one of our service, and we continue to outperform industry norms with respect to Net Promoter Scores. This year, the average Net Promoter Score of our Logistics businesses was 52, up from 40 in 2024. Our people are the beating heart of our business and their passion and commitment drive our success. This year, employee engagement remains strong. Our employee engagement survey showed a sustainable engagement score of 86%, outperforming industry's peers in all benchmark categories with also a record response rate of 91%. We have created a workplace where our people want to stay and the average tenure for Stolt-Nielsen employee is over 9 years. To support our strategy, we have been making targeted investments to position our business for long-term growth and to ensure our Liquids Logistics Solutions remain compelling for the future. We spent approximately $500 million in 2025 and increased our asset base to $5.8 billion. In 2026, we have plans to extend this further by around $380 million investments. We strengthened our market position and customer value proposition in all 3 logistics businesses. In Stolt Tank Containers, we continue to invest in assets to maintain our network, acquiring the remaining 50% in the Hassel Shipping 4 joint venture and ordering 2 additional modern fuel-efficient 38,000 deadweight new-builds with our joint venture partner, NYK. At Stolthaven terminals, we started construction of a new terminal in Turkey, while our terminal in Taiwan advanced towards operational status. And we invested to expand capacity in the U.S., Korea and New Zealand. I touched upon the rationale for the Suttons acquisition and that investment sits in the FY '25 Tank Container figures in addition to new tanks in our core business. We also acquired the remaining shares of Avenir in 2025, reflecting our excitement in continuing to capitalize on the growing need for LNG bunkering as announced this week. We are now exploring a partial sell-down of this holding for an additional value creation opportunity while still having commitment to grow Avenir's fleet in the future. Based on project approved to-date, we will reduce our CapEx spend by around $130 million year-on-year while both sustaining our current operations and driving future growth opportunities and innovations. We will see the full impact of these investments over the coming months and years. And I'll now pass on to Jens for the financials. Jens Grüner-Hegge: Thank you, Udo. And great to see everyone. Good morning to those of you calling in from the United States, and good afternoon to everyone here. As Udo did, I will compare fourth quarter of '25 with fourth quarter of 2024. And just as a reminder, our fourth quarter runs from September 1 through November 30, every year. To reiterate what Udo has talked about, the company's performance is resilient in a challenging environment. But let's dive into the numbers. Now we talked about a lot of transactions that happened in the last 12 months. So since I'm comparing fourth quarter of '24 with fourth quarter '25, we have added a column here to take out the impact or to normalize the impact of the three major transactions, which was the acquisition of 100% of Hassel Shipping 4, 100% of Avenir and now lately also the Suttons acquisition. So comparing those to the normalized with the current -- with the last quarter last year, the drop in revenue was driven by Tankers, reflecting the lower freight rates, which were partly offset by a 6.9% increase in volume following additions to the fleet over the last 12 months. Terminals revenue was flat and STCs was down by about $5 million, excluding the Suttons impact, while Stolt Sea Farms revenue was marginally up. The reduction in operating expenses partly offset the reduction in revenue and was driven by lower TCE hire costs and lower owning costs in tankers. Excluding the impact of Hassel Shipping 4 and Avenir, depreciation expense was only marginally up, and that was reflecting really additional leases that we've taken on and additional terminal capacity that has been delivered and become operational. The equity income from our joint ventures was up substantially, and that was driven by a prior year impairment that we took at HIGAS of about $5 million and past operating losses at Avenir that has since now seen a significant improvement in the operations in the last quarter. A&G expense was up compared to last year, mostly reflecting annual inflation adjustments as well as a consequence of the weaker U.S. dollar because a lot of our A&G expenses are in non-dollar, Euros, Pounds and Asian currencies. Also, last year, we reversed an over accrual for profit sharing in the fourth quarter of last year, which had a negative impact of about $11 million. So you normalize for that, the increase is more normal. Adjusted operating profit for the quarter was, therefore, $88.5 million. That's down from $130.4 million in the fourth quarter last year. And as you can see from the difference between the reported numbers and the adjusted numbers, the acquisition that we talked about contributed about $7 million to that operating profit. And as you can also see, about 40% of the increase in the reported net interest expense was due to an increase in the net debt related to the acquisitions and other capital expenditures that we had during the year. While the rest was due to lower interest income as we reduced the holding of cash on hand compared to last year, and you will see that on the subsequent slide. Other relates to dividends from our equity instruments, so dividends that we have received on investments. And income tax was down, reflecting an insurance-related tax provision taken in the fourth quarter of '24 as well as prior year tax adjustment at terminals, offset by higher taxes at corporate due to improved profitability that we've seen at Avenir and Stolt Sea Farm. And consequently, the net profit for the quarter ended up at $59.6 million, as Udo said, with EBITDA of $186 million. Let's take a look at the cash flow. So cash from operations was down this last quarter, predominantly reflecting the weaker earnings, but still at healthy levels. If you compare to previous years, still a very strong cash-generating quarter. Dividends from JVs were down, but this was offset by positive working capital from the prior year and cash spent -- if we move to capital expenditure, cash spent on capital expenditure was substantially up, reflecting the acquisition of Suttons as well as increased progress payments on our new buildings and as well terminal capital expenditures for the ongoing expansions that we have. Offsetting this was the net cash receipts for repayments of advances from our joint ventures, as you can see. There was a lot of debt activity -- funding activity, and Julian has done a tremendous job in keeping the company with a very strong liquidity position. During the fourth quarter, we raised $297 million in new debt, and that was to refinance expiring facilities and as well to fund the capital expenditures that we have ongoing. And I'm tremendously grateful both to Julian and his team, to the rest of the company has been working hard on making this possible as well as to all our banks and financiers. After adjusting for FX, we had a reduction in cash of $16.1 million, and we ended the quarter with cash and cash equivalents of $144.6 million. If you look at the bottom right of this slide, you see our total liquidity position, which at the end of the fourth quarter was $477 million, that includes revolving credit lines of $332 million, committed lines that is and slightly up from last quarter. I mentioned the significant reduction in cash on hand last -- of the fourth quarter of '24, we had $335 million in cash, which, of course, generated a lot of interest income, and that's why you see that sort of half of the interest expense increase that we saw in the last 12 months. Talking about capital expenditures. During the quarter, it totaled $138 million. That was of course, led by the STC acquisition of Suttons also the ongoing terminal expansions and as well progress payments that we have ongoing on the new-buildings that we have. And therefore, overall, for '25, we spent $511 million on CapEx, slightly below what we had indicated at the previous quarterly earnings release as some of it has been pushed out to 2026. For this year, we expect to spend $383 million with the focus being on tanker new-buildings, terminal expansions, Avenir new-buildings and Stolt Sea Farm expansions. Now expect this to probably change somewhat as the year progresses as it normally does as we commit to new projects, but this should be a good indication of what we expect to spend. And it's slightly down from last year, but we're also coming out of 2 years, '24 and '25, where we had significant capital expenditures. And whereas we intend to continue to invest strategically in our businesses, we also need to focus on integrating our added capacity into our operations for maximized long-term benefit, not only for our shareholders, but also for our customers. Moving over to our debt profile. It here reflects the refinanced debt that is mentioned in the bullet at the bottom right. So there was about $86 million that we have repaid since the end of the fourth quarter. So our current balance for 2026 remains at $351 million. As part of this financing, we also -- since quarter end, since what I showed here in the financials, we also added $145 million in additional liquidity, which is available for further debt reductions, progress payments and other capital expenditures. So we continue having a very strong liquidity position going forward. You see the two orange blocks. Those are the 2 bonds that we have, one maturing in '28 and $150 million, the one that we just did in September maturing in 2030. And if you look at the bottom left of this slide, you can see the increase in gross debt in the first quarter reflects the consolidation of Hassel Shipping 4 and Avenir and then again, a slight increase in the fourth quarter of '25, reflecting the Suttons acquisition, and on average, our interest rates have come slightly down from 5.6% in the previous quarter to 5.39% in this quarter, reflecting general interest movements as well as tightening of margins that we have achieved on new financing. The continued steady performance of the company supports our covenants and covenant compliance. The increase in debt and therefore, net debt to tangible net worth as well as a net debt to EBITDA seen in the first quarter was really -- in the fourth quarter was really due to Hassel Shipping 4 sorry, in the first quarter was due to the Hassel Shipping 4 acquisition, and Avenir. And in the fourth quarter, you can see that same impact from the Sutton's acquisition. Debt to tangible net worth is now at 1.04x. That's well below our covenant limit, which is 2.25x. So we have plenty of headroom, slightly up from the prior quarter where we were at 1.01x. I mean with the lower EBITDA that we have seen in this last quarter compared to previous quarters, the EBITDA fell slightly to $788 million, and with that, we have seen the EBITDA to interest expense go slightly up to 5.6x and the net debt to EBITDA increased from 2.94x to 3.12x, as you can see at the bottom left graph here. So overall, we're in a very comfortable position relative to our covenants, a good liquidity position, a good balance sheet position. So the company is well prepared for what lies ahead. We gave today guidance of $600 million to $750 million and wanted to talk a little bit more about what that entails. So why are we doing this? Firstly, we want to offer insight into our outlook for the year, what we see ahead. We believe it is aligned to the nature of our businesses and our business model to promote a longer-term view of the company, not a short-term quarter-to-quarter, but really give you the longer-term view that we work towards. We also want to facilitate fair pricing of the company as a diverse logistics business rather than as a shipping company. So taking into account everything that we know today, what we believe will happen over the next 12 months, we expect EBITDA for the full year 2026 to be within a range of $600 million to $750 million. Now this guidance is underpinned by a number of key assumptions. As you can see some of them here on the slide, relating both to global macroeconomic picture generally and specific factors affecting the liquid logistics market. And particularly, that there are no substantial geopolitical changes versus what we see today. So we are expecting this to continue. More specifically, the guidance is before fair value of the biological assets, before any gains or losses on sales of assets and other onetime noncash items. And it also excludes any 2026 EBITDA contribution from Avenir LNG. We've taken that out because of the announcement that we made earlier in the week and the consequential de-consolidation that, that will have. So I just want to make sure that everybody understands the basis for our guidance. It does include, however, the potential Suttons integration costs that will be incurred during '26. As such, the guidance is provided -- that we have provided is subject to some uncertainty beyond our control due to the current operating environment that we're in. And with that, I would like to hand it over to Udo, and he will cover the segment highlights as well as the market outlook. Many thanks. Udo Lange: Let's first start with Stolt Tankers. The chemical tanker markets have continued to soften this quarter as the market uncertainty around geopolitics and tariffs continues unabated. Demand is there and spot volumes, in particular, are elevated, but freight rates are weaker than the prior year. Operating revenue declined by 14% as the rate decline was only partially offset by a 4% increase in operating days due to additions to the fleet. COA renewal rates were down in line with our expectation. And we expect to see the COA ratio increase over the coming quarters. Operating profit was likewise down, predominantly driven by the decline in spot freight rates for regional and Deep Sea, which was largely offset by lower trading expenses and lower time charter expense. However, further impacting the operating profit was higher owning expenses and depreciation and lower joint venture equity income. Maren and her team continue to work hard to navigate this highly complex and unpredictable macro environment with a laser focus on delivering for our customers, and I really want to thank them for all their efforts. Looking more closely at Tanker rates. We are seeing some early signs of rates beginning to stabilize. While the TCE for the quarter was around $24,500 per operating day, showing a decline of 19% year-over-year, on a quarterly basis, the gradient of decline has flattened and TCE was just 1% down versus Q3. As things stand today, we are seeing the usual winter strengthening in crude and product tanker markets, which could be supportive for spot rates within the chemical segments as well. However, at the risk of being repetitive, we are not just a chemical tanker business. We encourage the market to consider our performance across all the areas of our diversified portfolio. And I want to remind you that we have moved to full year EBITDA guidance for the business as a whole. Thanks to Guy and the Stolthaven team who have maintained steady utilization and kept operating revenue stable year-on-year in an uncertain market. EBITDA saw a modest decline of 4% with operating profit down 8% with these declines driven by investments in IT alongside some inflationary impacts and slightly less equity income from our joint ventures. Looking ahead, we expect the storage markets to remain stable, notwithstanding some caution and delayed decision-making on tank rental commitments from our customers. And so Stolthaven Terminals will continue to focus on optimizing margins and utilization. In response to the challenging demand drivers for storage, we are actively adopting our approach to specific market dynamics to better adapt to local conditions, and our investments in additional capacity at existing sites in the U.S. will start to come into play towards the end of the year. We expect to benefit from additional capacity in Houston and New Orleans coming online in a staggered fashion during Q3 ramping up and reaching full effect in 2027. The tank container market continues to be challenging. And in this context, Hans and his team have done a great job to drive revenue at Stolt Tank Containers up $5 million or 3%. This result has been driven by stronger shipment volumes, which offset the impact of lower ocean carrier freight rates. EBITDA and operating profit declined due to lower transportation margins and cost inflation. I now want to cover our view of the market and concluding remarks before we open for Q&A. This time last year, we spoke about the impact of geopolitical events on global trade flows. We highlighted a number of areas of macro uncertainty and discussed how these might play out through 2025. Today, the list of macro factors driving global uncertainty remains similar with the addition of two factors affecting our underlying markets. Geopolitical risk has not abated. Whilst we see some international players starting to selectively transit the Red Sea, there appears to be no clear resolution on events in the area, and we see new risks in international relations, especially in the Middle East. Risks and opportunities related to global tariffs and sanctions remain with trade policy changes impacting customer sentiment. The shadow fleet continues to impact around the edges of our markets and fluctuations in the crude oil market continue. We also continue to face a subdued global chemical market, which is struggling from production-underutilization. The timing of new build deliveries will also have a supply side impact over the next 2 to 3 years. In the face of these risks, we are well positioned to continue to deliver our value proposition for our customers across the supply chain. We are laser-focused on this, planning strategically and operationally so that we can be flexible and react with agility to macro events. We have strong relationships with our customers, and we are working closely with them to navigate these challenges and keep liquid chemicals moving around the world. Despite these market risks, supply and demand fundamentals are currently supported by a tight MR market. GDP growth is expected to be around 3%. Seaborne trade growth is expected to be muted this year with a return to growth expected in 2027. We are watching developments carefully with some caution, but we expect volumes to remain relatively stable year-on-year. MR rates have been trending gently upwards through 2025 and are predicted to remain at a high level, which has typically kept them operating in the CPP market, limiting the potential for swing tonnage in our market. As mentioned previously, we do expect some new-builds to enter the market in 2026 and 2027, and this creates some uncertainty on the supply side. However, the aging global fleet means that there remains high potential for retirements of vessels to manage global supply if necessary, with around 30% of tankers aged 20 years and older by 2027. To wrap up, we are focused on leveraging our diversified logistics businesses to steer them through global supply chain complexity and delight our customers by executing our liquid logistics strategy. To support both our core liquid logistics businesses and explore new opportunities and innovations, we are positioning ourselves for long-term growth through targeted strategic investments. We invested strategically through 2025 and will continue to do so through 2026. This disciplined capital allocation strategy translates into balance sheet flexibility and headroom to meet all our obligations. Our investments will convert into EBITDA-generating assets given time. And despite the market turmoil continuing, we expect the full year EBITDA to fall within a range of $600 million to $750 million. As we look to the year ahead and beyond, our strong strategic foundations position us well to navigate future challenges and opportunities. Our people, clear purpose and diverse portfolio provides the resilience and quality required to deliver long-term value for our shareholders, customers and other stakeholders. Thank you for your attention, and I will now pass you back to Alex for Q&A. Alex Ng: Thank you very much, Jo. So we will start Q&A with questions in the room. [Operator Instructions]. Thank you very much. And then we'll take questions from the Internet as well. Please? Unknown Attendee: Just on the guidance, you did mention on the '25 results, the split between tankers, non-tankers. You have a bit of a range in your '26 guidance. Can you give some color on your expected split and also perhaps on the sort of which segment is going to cause that variance in the range? Jens Grüner-Hegge: Okay. So if you look at the other businesses, the non-tanker businesses, they tend to be more stable. We know that there's a cyclicality in the tanker markets. Now looking at the performance that we've seen so far through the year, the third and the fourth quarter of 2025, we saw that was pretty stable from quarter-to-quarter. The reduction was really early in the year. Going forward, we mentioned also that we see that there is a certain short-term floor because we've seen the strengthening in the MR markets recently, which is lending some support. But I think it's worthwhile noting that as we get into the second half of 2026, you will see more of that order book that we showed being delivered. So we see more of a risk in the tanker market as you get into the second half than in the first half. And we know that these new-buildings will be delivered sort of second half '26 into first half of '27. So if you take that into consideration of what we saw in the fourth quarter, I would expect for the next few quarters that mix to be relatively stable with the exception of capital expenditures becoming operational. And that will be gradual. Again, I think most of that we expect to happen also towards the second half of the year when we're looking at the terminals business. So you'll probably start seeing more of a non-tanker growth in EBITDA in the second half of the year and potential challenges for the Tanker segment in the second half of the year. So you will start seeing that balance shifting towards more non-tanker business. Did that answer your question? Unknown Attendee: Yes, that's really good color. Also on the Red Sea, sort of -- this is a tricky one, but at what point do you expect to return? I mean there's a lot of talks about Maersk now entering the Red Sea again. What's sort of your point of action on entering the Red Sea? Udo Lange: Yes. So I can take that. So of course, chemical tankers is among the most risky vessel-type that you can navigate through the Red Sea, because a drone attack on that hitting the wrong tank has a significant bigger impact than when you have a conventional ship. So we are really very, very cautious, and we monitor that. So of course, it's good to see that Maersk is taking that effort, but we normally look really more towards the tail-end. And of course, what's currently going on in the Middle East and the U.S. fleet coming in. So we don't expect this to happen anytime soon. Alex Ng: Any additional questions in the room? Okay. Then we will move to the questions coming from those online. There's a couple of themes that maybe we can club together. I think the first one really goes to our liquid logistics strategy. So maybe one for you, Udo. How successful has the liquid logistics strategy been so far with customers? Udo Lange: Yes, I would say I'm really excited about how it latches more and more on. And that, of course, has to do with the increasing complexity globally. So if I take the amount of strategy sessions that we have now with customers versus 2 years ago, it's a complete different ballpark. But it has also to do with the capability that we are building in our own team. So of course, this -- remember, we come from very strong three divisions and now they need to collaborate more together, more and more people need to understand how do I really position all of Stolt-Nielsen in front of the customer. And that is really remarkable to see how deep that actually goes. So we have now not only sessions where we look at large customers, we also look at sessions that we have with medium, with small customers, and we do this around the whole world. So it's pretty exciting. The development is really exciting. And we are getting better and better at it and the customers appreciate it actually more and more. And we see most important, of course, it's not the activity, and we see business out of it. So we have met a customer that didn't have Tank Container business with us before talked about the whole portfolio, and we got Tank Container business. Met another customer we were very small on the tank container side. So the beauty is because we are market leading really in all 3 segments, each of the businesses is actually strong also with different customers. Sometimes it's the same, sometimes it's different ones. And it allows us to take our strong relationship and then introduce the other businesses as well. And don't forget what is also unique is, we are the only player who has end-to-end shipping where we have a deep sea fleet, we have regional fleets and we have barging fleets. And then we have terminals and then we have tank containers. And now the Suttons, we even have gas and short sea and China domestic. So that's just really beautiful because you just we have one page now where we put this all together and you sit in front of sea level. And they, of course, not necessarily know Stolt-Nielsen, but then they are like, "oh, that's really interesting. You're building a terminal right now in Taiwan, and we need to talk about our Southeast Asia logistics strategy". Maybe how can that all come into a hub-and-spoke system. And so that's really nice how the capability that we have, A, add value for the customer, gives us more business, but also how our organization is more and more capable to position this. Alex Ng: Questions for you, Jens, related to how we triangulated the EBITDA guidance. And the first one was, can you share any information from what the EBITDA contribution was from Avenir in 2025? Jens Grüner-Hegge: Yes. If you look at -- it's related to the guidance, it might be more relevant to us what we're expecting there. But '25 was a transition year for Avenir. As you will have seen in the comparison with '24 was that it was a -- 2024 was a drag. We've seen that turn into an improvement, a positive contribution. For '26, you're looking at about mid-$20 million EBITDA contribution that would be expected. And with this separation out, we are actually looking to be able to grow that faster than what possibly could have done on our own. So it is a -- it's about mid- $20 million in 2026 in the number if you want to have that in the back of your mind when you look at the guidance. Alex Ng: Thank you, Jens. And then another question related to guidance. You mentioned that Sutton won't contribute EBITDA until 2027. But do you expect it to be EBITDA-negative during '26 or just close to breakeven? Jens Grüner-Hegge: If we look at the year overall, our expectation is it won't be a drag. It will -- the benefit that we get from the additional volume, the additional tanks, there will be some integration costs as we -- as there always is with an M&A. But we expect a neutral impact in '26, and then we should see that really start taking off in '27. Udo Lange: Yes. I think on the base business, but of course, the integration cost year-over-year, it is a drag. Jens Grüner-Hegge: The cost is there, so yes. Alex Ng: A question related to strategy. Avenir is you announced the partial sale of that asset. Can there be any read across to whether Stolt Sea Farm will be on the table in order to clarify the strategy around liquid logistics? Udo Lange: No, these are completely two different strategic conversations. So you know we are since more than 50 years in agriculture. We are the market leader in the premium segment. And the business is developing quite nicely. We are investing. We are super happy with the returns that we are seeing. What is different on Avenir, remember, we had a joint venture and -- but we also realized that while we believe in the strong future of that market, that the other partners were -- for them, it was less strategic. So we then remember, we acquired 100% for Avenir, but well knowing that, that, of course, would have a significant capital expenditure exposure for us. So -- but we felt we believe we can grow in this market. But then at the same time, of course, we also looked at, well, now let's look for strategic partners where we then really can join forces and actually stronger lean into that market without actually dragging down our balance sheet too much. And so one of the key reasons, of course, you see also that our CapEx goes down year-over-year by $130 million is, well, we will benefit from the growth in the LNG market, but we are not as heavy exposed anymore in this segment. So two very, very different strategies. So Sea Farm is core to us and Avenir is an opportunity for us to capture a nice market together with a strategic partner. Alex Ng: And then the final questions we have on the -- for now relate to the CapEx that you talked about and the expansions, Udo. First question is related to Stolthaven. How should we quantify the investments in terminals in relation to added capacity and how it evolves over the year? Udo Lange: Jens, why don't you take the Stolthaven? Jens Grüner-Hegge: Yes. So we talked a bit about the different investments that we have ongoing in Stolthaven. We have the terminal in Taiwan, which is about to become operational, and that will have a positive impact as we go into 2026. We have the expansions that are ongoing in Houston and New Orleans, where we're adding about 170,000 cubic meters combined, and that will start coming on as we get into the third and fourth quarter of 2026. So you probably won't see much of an impact in this year, but it will come and be fully operational and have a full impact as we get into 2027. The other projects that we have sort of like the Turkey project, that's a long-term investment that will come in later years. It's a joint venture structure. So you will see that not necessarily in consolidated fashion, but more in an equity income from a joint venture in future years. Alex Ng: Thank you, Jens. And then the final question is, if we could share the delivery schedule for the new-builds in Tankers. Maybe I can just add a comment there. So we expect the first vessel to be delivered towards the end of this year. It's kind of on the edge of this year or next year, but it gives you an idea on that delivery. And then during the course of 2027, there will be a further additional 9 ships. And then in '28, there will be approximately 3 ships, and then the final one is due for delivery in 2029. So hopefully, good for your models. That concludes all of the questions. So thank you very much. We'll post a recording of this call on the website tomorrow. Udo, back to you. Udo Lange: Thank you very much for joining us today, and I look forward to talking to you again when we present our results in the first quarter of 2026 in April. We continue to be very excited about the business. We launched our strategy 2.5 years ago. We are executing nicely on the strategy. And I think you can see the benefits for our shareholders, our customers and our people as well. So thanks for all your support, and wish you a nice day.
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'd like to welcome you to the Provident Financial Holdings' Second Quarter of Fiscal 2026 Earnings Call. [Operator Instructions] I will now turn the call over to Donavon Ternes, President and CEO. You may begin. Donavon Ternes: Thank you, Colby. Good morning. This is Donavon Ternes, President and CEO of Provident Financial Holdings. And on the call with me is Peter Fan, our Senior Vice President and Chief Financial Officer. Before we begin, I have a brief administrative item to address. Our presentation today discusses the company's business outlook and will include forward-looking statements. Those statements include descriptions of management's plans, objectives or goals for future operations, products or services, forecasts of financial or other performance measures and statements about the company's general outlook for interest rates, economic and business conditions. We also may make forward-looking statements during the question-and-answer period following management's presentation. These forward-looking statements are subject to a number of risks and uncertainties, and actual results may differ materially from those discussed today. Information on the risk factors that could cause actual results to differ from any forward-looking statement is available from the earnings release that was distributed yesterday, from the annual report on Form 10-K for the year ended June 30, 2025, and from the Form 10-Qs and other SEC filings that are filed subsequent to the Form 10-K. Forward-looking statements are effective only as of the date that they are made, and the company assumes no obligation to update this information. To begin with, thank you for participating in our call. I hope that each of you has had an opportunity to review our earnings release that we distributed yesterday, which describes our second quarter fiscal 2026 results. In the most recent quarter, we originated $42.1 million of loans held for investment, a 42% increase from the $29.6 million that were originated in the prior sequential quarter. During the most recent quarter, we also had $46.7 million of loan principal payments and payoffs, which is an increase of 35% from the $34.5 million in the September 2025 quarter. Lower mortgage rates have driven stronger loan origination activity but also has led to higher prepayment activity. We are continuing to make prudent adjustments to our underwriting requirements within certain loan segments to promote disciplined, sustainable growth in origination volume. Our loan pipelines are moderately higher than last quarter, suggesting our loan origination volume in the March 2026 quarter will be within the range of recent quarters which has been between $28 million and $42 million. For the 3 months ended December 31, 2025, loans held for investment decreased by approximately $4.1 million with a decline in multifamily, commercial business and commercial real estate loans, partly offset by an increase in single-family and construction loans. Current credit quality continues to hold up very well. And you will note that nonperforming assets were just $990,000 or 8 basis points of total assets at December 31, 2025, a decrease from $1.9 million at September 30, 2025. Additionally, there were no loans in the early stages of delinquency at December 31, 2025, indicating an absence of emerging credit issues. We continue to monitor commercial real estate loans, particularly loans secured by office buildings, but are confident that based on the underwriting characteristics of our borrowers and collateral that these loans will continue to perform well. We have outlined these characteristics on Slide 13 of our quarterly investor presentation, which shows that our exposure to loans secured by various types of office buildings is $36.7 million or 3.5% of loans held for investment. You should also note that we have just six CRE loans, that total $2.8 million, maturing in the remainder of fiscal 2026. We recorded a $158,000 recovery of credit losses in the December 2025 quarter. The recovery recorded in the second quarter of fiscal 2026 was primarily attributable to a decline in the expected life of the loan portfolio due to lower mortgage interest rates. The allowance for credit losses to gross loans held for investment was 55 basis points at December 31, 2025, a slight decrease from 56 basis points at September 30, 2025. Our net interest margin increased 3 basis points to 3.03% for the quarter ended December 31, 2025, compared to the 3% for the sequential quarter ended September 30, 2025, the net result of a 5 basis point decrease in the cost of total interest-bearing liabilities net of a 2 basis point decrease in the yield of total interest-earning assets. Our average cost of deposits decreased to 1.32%, down 2 basis points for the quarter ended December 31, 2025, while our cost of borrowing decreased 20 basis points to 4.39% in December 2025 quarter compared to the September 2025 quarter. The net deferred loan cost amortization associated with loan payoffs in the December 2025 quarter compared to the average of the previous 5 quarters negatively impacted the net interest margin by approximately 5 basis points in contrast to no impact in the September 2025 quarter. New loan production is being originated at higher mortgage interest rates than the weighted average rate of the existing loan portfolio. The weighted average rate of loans originated in the December 2025 quarter was 6.15% compared to the weighted average rate of 5.22% for loans held for investment as of December 31, 2025. In the March 2026 quarter, our adjustable rate loans are repricing at interest rates that are slightly lower than their current interest rates. We have approximately $112.2 million of loans repricing in the March 2026 quarter to an interest rate that we currently believe will be 14 basis points lower to a weighted average interest rate of 6.85% from the current interest rate of 6.99%. However, in the June 2026 quarter, we have approximately $125.2 million of loans repricing to an interest rate that we currently believe will be 38 basis points higher to a weighted average interest rate of 6.49% from 6.11%. Many of these loans are already in their adjustable phase of the loan term with rate resets every 6 months. I would also point out that there is an opportunity to reprice maturing wholesale funding downward as a result of current market conditions, where interest rates have moved lower across all terms. Excluding overnight borrowings, we have approximately $109 million of Federal Home Loan Bank advances, brokered certificates of deposit and government certificate of deposit maturing in the March 2026 quarter at a weighted average interest rate of 4.12%. Additionally, we have approximately $79.5 million of Federal Home Loan Bank advances, brokered certificates of deposit and government certificates of deposit maturing in the June 2026 quarter at a weighted average interest rate of 4.15%. Given the current interest rate outlook, we would expect to reprice these maturities to a lower weighted average cost of funds. All of this currently suggests that there continues to be an opportunity for net interest margin expansion in the March 2026 quarter. Our FTE count at December 31, 2025, was 163 compared to 162 1 year ago. We continue to look for operating efficiencies throughout the company to lower operating expenses. Operating expenses were $7.9 million in the December 2025 quarter, an increase from $7.6 million in the September 2025 quarter. Operating expenses for the December 2025 quarter included a $214,000 pre-litigation voluntary mediation settlement expense related to an employment matter. For the remainder of fiscal 2026, we expect a run rate of approximately $7.6 million to $7.7 million per quarter. Our short-term strategy focuses on disciplined balance sheet growth by expanding our loan portfolio. We believe this approach is well suited to the stable economic environment and the ongoing normalization of the yield curve. During the December 2025 quarter, we were partly successful in the execution of this strategy with higher loan origination volume, but higher loan prepayments more than offset that growth. As a result, the overall composition of our interest-earning assets and interest-bearing liabilities were essentially consistent with the prior quarter. We exceed well-capitalized capital ratios by a significant margin, allowing us to execute on our business plan and capital management goals without complications. We continue -- we believe that maintaining our cash dividend is very important. We also recognize that prudent capital returns to shareholders through stock buyback programs is a responsible capital management tool and we repurchased approximately $96,000 of common stock in the December 2025 quarter. For the second quarter of our fiscal year, we distributed $906,000 of cash dividends to shareholders and repurchased approximately $1.5 million worth of common stock. Accordingly, our capital management activities represent a 170% distribution of the December 2025 quarter's net income. We encourage everyone to review our December 31 investor presentation that has been posted on our website. You will find that we included slides regarding financial metrics, asset quality and capital management, which we believe will provide additional insight on our solid financial foundation supporting the future growth of the company. Colby, we will now entertain any questions that others may have regarding our financial results. Operator: [Operator Instructions] Your first question comes from the line of Timothy Coffey with Janney. Timothy Coffey: Given the puts and takes that you just described on the loan portfolio, what is the probability that your portfolio is flat with -- the next 4 quarters? Donavon Ternes: Well, it's kind of a loaded question that I could answer if I knew what loan payoffs looked like for the next few quarters. What we've been focusing on is increasing our origination volume each and every quarter. We've been able to do so essentially for the last 5 quarters or so. We have pipelines that are built that suggest the March 2026 quarter will also be a higher origination-volume quarter, but it's very difficult to discern what loan payoffs look like, which will ultimately then drive what the loan balances look like at the end of the quarter and whether or not we grew those balances or essentially were somewhat flat. Timothy Coffey: Do you see the loans repricing in the June quarter as a potential headwind to loan growth? Donavon Ternes: Not necessarily, Tim. When we think about where those loans are repricing, and we compare to current market conditions with respect to new loan production, it looks like they're a bit higher than new loan production, but they're not substantially higher from where new loan production is coming in. So that could have an impact, there could be implications with respect to that. But ultimately, if they are not repricing substantially higher than current market conditions, I would not expect that driver alone to be the driver of accelerated loan payoffs. The other thing to think about, Tim, with respect to accelerated loan payoffs, it's kind of a double-edged sword. On the one hand, we obviously have trouble growing the loan portfolio to a large degree if those payoffs are higher or those payoff volumes are higher. But secondarily, those payoffs generally carry net deferred loan costs that get accelerated in as a debit or a decline to net interest income over the quarter. And the most recent quarter, those payoffs essentially impacted our net interest margin by a negative 5 basis points, in contrast to no implications or no impact in the September quarter, if we look at those net deferred loan costs on average for the prior 5 quarters. So the implications of loan payoffs are twofold, difficulty in growing loan portfolio and secondarily, there are implications to our net interest margin. Timothy Coffey: Right. Okay. And then the government -- federal government has recently discussed -- [ floated ] ideas on how to make housing more affordable. If some of those plans come through, would that be a net positive for your business? Donavon Ternes: Well, I think ultimately, if you look at -- particularly in California, where we lend, if you look at housing stock or available inventory, you find that there is much more demand than available inventory over time. And I think that has exhausted many would-be purchasers particularly as it relates to affordability. And what that housing stock pricing has done, even though pricing has slowed, it is still advancing a bit in the state of California, not at the rate that it was advancing, nonetheless, it's still advancing. Interest rates are a bit favorable with respect to affordability. As those rates come down, affordability goes up. But ultimately, in the state of California, available housing is far outstripped by demand. And so anything that is done, I guess, by local, state or federal governments that would expand available housing, lowering new construction costs and the like would be helpful. And that would ultimately drive more buyers, I believe. Operator: [Operator Instructions] And with no further questions in queue, I'd like to turn the conference back over to Donavon for closing remarks. Donavon Ternes: Thank you, Colby, and thank you, everyone, for attending our second quarter earnings call, and I look forward to the next call for -- with our third quarter earnings. Have a good day. Operator: This concludes today's conference call. You may now disconnect.
Operator: Good day, and welcome to the WesBanco Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to John Iannone, Senior Vice President of Investor Relations. Please go ahead. John H. Iannone: Good day, and welcome to the WesBanco Fourth Quarter 2025 Earnings Conference Call. Leading the call today are Jeff Jackson, President and Chief Executive Officer and Dan Weiss, Senior Executive Vice President and Chief Financial Officer. Today's call, an archive of which will be available on our website for 1 year, contains forward-looking information. Cautionary statements about this information and reconciliations of non-GAAP measures are included in our earnings-related materials issued yesterday afternoon as well as our other SEC filings and investor materials. These materials are available on the Investor Relations section of our website, wesbanco.com. All statements speak only as of January 28, 2026, and WesBanco undertakes no obligation to update them. I would now like to turn the call over to Jeff. Jeff? Jeffrey Jackson: Thanks, John, and good morning. On today's call, we will provide an overview on fourth quarter performance and provide our initial outlook for 2026. Key takeaways from the call today are: successful execution on our growth-oriented business model, while maintaining strong credit quality measures. Full year pretax provision earnings growth of 105% year-over-year and full year earnings per share of 45% to $3.40 when excluding merger-related charges. Loan growth fully funded by deposit growth, both year-over-year and quarter-over-quarter, helping to drive our fourth quarter net interest margin to $3.61. Continued focus on operational efficiencies and cost control, as demonstrated by our fourth quarter efficiency ratio of 52%. 2025 was another strong year for WesBanco and a clear demonstration that our growth-oriented business model continues to deliver results while maintaining disciplined credit and expense management. For the full year, we generated pretax pre-provision earnings growth of more than 100% year-over-year and earnings per share growth of 45% to $3.40 when excluding merger-related charges. Importantly, that performance was driven not by onetime actions, but by core strategic execution, including loan growth, fully funded by deposit growth, expanded net interest margin and continued efficiency gains. For the fourth quarter ending December 31, 2025, we reported net income, excluding merger and restructuring expenses available to common shareholders of $81 million and diluted earnings per share of $0.84, which increased 18% year-over-year. On a similar basis and excluding day 1 provision for credit losses, we reported full year net income of $309 million and diluted earnings per share of $3.40. Furthermore, the strength of our 2025 financial performance was reflected in our fourth quarter return on tangible common equity of 16%. Nonperforming assets to total assets of 0.33%. Our capital position remains solid with a CET1 ratio of 10.3%, giving us flexibility to support growth and navigate the operating environment ahead. We also achieved several strategic milestones in 2025. Chief among those was a successful acquisition and integration of Premier Financial, transforming WesBanco into a $28 billion asset regional financial services partner. With this historic acquisition, we now rank among the top 50 publicly traded U.S. financial institutions based on assets. At the same time, we continue to invest in organic growth. expanding into new markets through the opening of loan production offices in Northern Virginia and Knoxville, launching our new health care vertical and optimizing our financial center network and digital banking capabilities, to support evolving customer preferences, and we will soon be celebrating the opening of a new financial center in Chattanooga, our first in Tennessee. Underlying all of this is the consistent focus on relationship banking that sets us apart from others. That approach drove record treasury management revenue of $6 million and a record total wealth management assets under management of $10.4 billion. Turning to operational topics. Disciplined execution remains the theme. Our dedicated teams, supported by continued strong customer satisfaction drove deposit growth that fully funded loan growth both year-over-year and quarter-over-quarter. Our third quarter deposit campaign delivered strong second half results with total deposits increasing 5% annualized or more than 6% for core deposit categories as we strategically allowed higher cost certificates of deposits to run off. We have continued to see a significant pickup in commercial real estate project payoffs, which totaled $415 million during the fourth quarter and over $900 million for the year, $100 million more than we had anticipated last quarter as developers continue to take advantage of the current operating environment for permanent financing or sale of properties. This increase in payoffs created a 4% headwind to loan growth for both the year-over-year and quarter-over-quarter comparisons. Despite these elevated payoffs, we delivered solid fourth quarter organic loan growth as total loans increased 6% annualized from the third quarter and 5% year-over-year, driven by our commercial teams converting pipeline opportunities. Since year-end 2021, we have achieved a strong compound annual loan growth rate of 9% without sacrificing credit quality as our key measures have remained consistent the last several years and favorable to the average of all banks with assets between $20 billion and $50 billion. As of both year-end and mid-January, our commercial loan pipeline stood at over $1.2 billion, with more than 40% tied to new markets and loan production offices. Despite anticipated elevated CRE payoffs through the at least first half of the year, we continue to expect mid-single-digit year-over-year loan growth during 2026, given the current loan pipeline and the strength of our markets. During the fourth quarter, our new health care vertical team refinanced a major skilled nursing provider in Virginia, serving as the lead bank in the syndication and sole lender for the working capital line of credit. This new relationship includes all operating reserve and payroll accounts for their properties as well as a 6-figure treasury management fee relationship. This win highlights the momentum of our health care vertical and the cross-team collaboration that helps us deepen relationships and deliver exceptional service. Before turning the call over to Dan to walk through the financials and outlook, I want to recognize our team members for their exceptional execution throughout the year. Their efforts were reflected not only in our results, but also in national recognition we continue to receive for soundless stability workplace culture and trust. Dan, I'll turn it over to you. Daniel Weiss: Yes. Thanks, Jeff, and good morning. For the fourth quarter, we reported GAAP net income available to common shareholders of $78 million or $0.81 per share. And when excluding restructuring and merger-related expenses, fourth quarter net income was $81 million or $0.84 per share. On a similar basis, when excluding the day 1 provision for credit losses on acquired loans, we reported $3.40 per share for the year as compared to $2.34 last year, representing an increase of 111% from the prior year. To highlight a few of the fourth quarter accomplishments, we generated strong year-over-year pretax pre-provision core earnings growth of 90%. We funded strong loan growth with deposits, improved the net interest margin to 3.61% and reduce the efficiency ratio to just under 52%. Our balance sheet reflects the benefits of both the premier acquired balance sheet and organic growth. Total assets of $27.7 billion increased 48% year-over-year and included total portfolio loans of $19.2 billion and total securities of $4.5 billion. Total portfolio loans increased 52% year-over-year due to the acquired PFC loans of $5.9 billion and organic growth of more than $650 million, driven by commercial teams across our footprint. Commercial real estate payoffs increased more than anticipated during the fourth quarter and totaled $905 million for the year, roughly $100 million more than we anticipated on our third quarter earnings call and 2.5x last year's level. Despite this headwind, though, we delivered solid organic loan growth for both the quarter and the year. We anticipate CRE payoffs to remain elevated during 2026 and currently estimate them to be between $600 million and $800 million for the year, but weighted more towards the first half. Deposits increased 53% year-over-year to $21.7 billion due to acquired PFC deposits of $6.9 billion and organic growth of $662 million which fully funded our loan growth. On a sequential quarter basis, total deposits increased $385 million due to the efforts of our consumer and business teams during the recent deposit campaign which more than offset the intentional runoff of $55 million of higher cost certificates of deposit and the pay down of $50 million in broker deposits. Turning to capital. Credit quality continues to remain stable as key metrics have remained low from a historical perspective and within a consistent range throughout the last 5 years. As expected, our criticized and classified loans continued to decrease during the fourth quarter to 3.15% and net charge-offs declined to just 6 basis points of total loans. The allowance for credit losses to total portfolio loans was 1.14% of total loans or $219 million consistent with the third quarter as increases related to loan growth were mostly offset by macroeconomic factors and reductions in qualitative factors. The fourth quarter margin of 3.61% improved 58 basis points on a year-over-year basis through a combination of higher loan and security yields and lower funding costs. The margin increased 8 basis points from the third quarter, which was above last quarter's guide of 3 to 5 basis points of improvement, primarily due to exceptional deposit growth which allowed us to replace higher-cost Federal Home Loan Bank borrowings with lower cost core deposits. Total deposit funding costs, including noninterest-bearing deposits declined 13 basis points year-over-year and 8 basis points quarter-over-quarter to 184 basis points. For the fourth quarter, noninterest income of $43.3 million increased 19% year-over-year due primarily to the acquisition of Premier and for the year, we reported record noninterest income of $167 million, once again, due to the acquisition of Premier and organic growth, including strong treasury management revenue. We again saw a nice improvement in gross swap fees, which increased $2.1 million year-over-year to $3.4 million in the fourth quarter and doubled to $10 million for the full year reflecting both the interest rate environment and traction within our newest markets. Trust fees were also at record levels for both the fourth quarter and the year. Noninterest expense, excluding restructuring and merger-related costs for the fourth quarter of 2025 was $144.4 million, an increase of 44% year-over-year due to the addition of Premier's expense base, higher core deposit intangible asset amortization that was created from the acquisition and higher FDIC insurance expense due to our larger asset size. On a similar basis, operating expenses were down slightly from the third quarter reflecting our focus on managing discretionary expenses. As I mentioned, our fourth quarter efficiency ratio came in just below 52%. I'd like to highlight here that we have updated our methodology for calculating our efficiency ratio to exclude both net security gains or losses from the denominator and amortization of intangibles from the numerator. This update makes our ratio more consistent with how our peers and other organizations calculate efficiency ratio and the ratios for all periods reported in our fourth quarter earnings release reflect this change and a reconciliation can be found in the non-GAAP measures section of the release. Turning to capital. During the fourth quarter, we redeemed $150 million of our outstanding Series A preferred stock on November 15 and $50 million of sub debt acquired from Premier on December 30, using the proceeds from our Series B preferred stock offering. As noted in yesterday's earnings release, preferred dividends reduced earnings available to common shareholders by $13 million, which represented the overlapping quarterly dividends on both the Series A and Series B preferred stock as well as the Series A redemption premium. Our CET1 ratio as of December 31 improved 24 basis points to 10.34% and we anticipated to build 15 to 20 basis points per quarter on a go-forward basis. Turning to our outlook for 2026. We are currently modeling two 25 basis point Fed rate cuts in April and July. Reflecting our exceptional fourth quarter deposit growth, which accelerated margin expansion, we anticipate our first quarter net interest margin to be roughly consistent with our fourth quarter margin of 3.61% and then increase 3 to 5 basis points in the second quarter and then modestly grow into the high 3.60% range in the back half of the year. This assumes, among other things, that loan growth is fully funded by deposits and a slightly steeper yield curve. Generally speaking, we modeled first quarter fee income overall to be consistent with the fourth quarter. Trust fees should benefit modestly from organic growth and influenced by equity and fixed income market trends. And as a reminder, first quarter trust fees are seasonally higher due to tax preparation fees. Securities brokerage revenue is anticipated to grow slightly from the range of the last few quarters due to modest organic growth. Mortgage banking should grow modestly over 2025 beginning in the spring, driven by improved market conditions and recent hiring initiatives and total treasury management revenues should see increases from 2025 as the compounding effect of our services continue to expand. Gross commercial swap fee income, excluding market adjustments, should be in the $7 million to $10 million range. Fully debt benefit income added $700,000 to the fourth quarter, which is not expected to repeat during 2026. And similarly, the fourth quarter loss on the sale of assets is not expected to repeat. We remain focused on delivering disciplined expense management to drive positive operating leverage and we will continue our efforts throughout 2026. As previously disclosed, we successfully closed 27 financial centers on January 23rd and the anticipated annual savings of approximately $6 million will begin to be realized midway through the first quarter of 2026 hoping to offset the impact of inflation. Occupancy expense should be flat to slightly down as compared to 2025 due to branch optimization efforts, while equipment and software expenses are expected to increase somewhat as compared to $25 million as we continue to invest in products, services and technology to improve the customer experience and drive revenue growth. Marketing is expected to increase approximately $800,000 per quarter due to targeting new customers, general campaigns to increase brand awareness in our newer markets and deepen relationships with existing customers with a focus on deposit gathering campaigns. Based on what we know today, we expect our expense run rate during the first quarter to be roughly consistent with the fourth quarter increase in the second quarter from midyear merit increases, revenue-producing hires and marketing initiatives and then grow modestly in the back half of the year from the full effect of annual merit increases and investment initiatives in revenue-enhancing technology. The provision for credit losses will depend upon changes to the macroeconomic forecast and qualitative factors as well as various credit quality metrics, including potential charge-offs, criticized and classified loan balances delinquencies, changes in prepayment speeds and future loan growth. Beginning with the first quarter of 2026, the dividends on our Series B preferred stock will be $4.24 million per quarter. And lastly, we currently anticipate our full year effective tax rate to be between 20.5% and 21.5%, which is slightly higher than 2025 due to a lower percentage of tax-exempt income to total income. And so overall, we were pleased with our growth during 2025 and excited about the opportunities in 2026 as we continue to execute growth initiatives to deliver shareholder value. Operator, we're now ready to take the questions. Would you please review the instructions? Operator: [Operator Instructions] Our first question comes from Daniel Tamayo with Raymond James. Daniel Tamayo: Yes. Maybe just to start off, Jeff, on the loan growth expectation and the payoffs expectation embedded in that. I guess if you're thinking about the -- I think you said $600 million to $800 million in '26 weighted to the first half of the year. I'm assuming that implies kind of a step down from the fourth quarter number, which was really elevated to $415 million. But maybe just walk us through how you're thinking about the pace of payoffs through the year? And what's driving that assumption in your modeling? Jeffrey Jackson: Yes, sure. So obviously, we had a tremendous amount of payoffs last year. We do think some of that will continue, especially in the first half of the year. What we've been seeing, as we've mentioned, is large CRE payoffs, whether they're selling or whether they're refinancing to the permanent market. The pipelines continue to remain really strong. So I think that will be an offset to the payoffs. But if you think about looking back when people refinanced projects when rates were much lower prior to rates getting elevated. Normally, we would do a construction loan and then it would become stabilized and then it would typically roll off our and all banks' balance sheets. I think what you had was because rates elevated and went up so quickly, these loans stayed on ours and other banks' balance sheets for a lot longer period of time. Now that you've seen rates slightly come down and permanent marketing is really opening up we've seen these elevated payoffs. We're no different than, I think, many other banks who do a lot of CRE. But as far as this year, we do believe, just based on our current forecast and talking to customers that it should slowed down, especially compared to fourth quarter. And with putting that together along with our pipelines continuing to remain incredibly strong on top of just the other opportunities we have, with the LPOs and health care, and I can get into that more later. But that's why we feel like loan growth should be in the mid single digits. And depending on how the back half of the year goes, could be even better. Daniel Tamayo: That's great. And you actually took my next question or you started to, which is perfect. Maybe you can give us some more details on that health care vertical. Jeffrey Jackson: Yes. Yes. It was a tremendous lift for us last year. The team, I believe, did around $500 million in new loans. We had a tremendous amount of deposits and fees. I believe they accounted for about $3 million of the swap fees that we did last year as well. So we feel like that will be one of the main growth engines of us for this year and feel like that is a great offset to many of the CRE payoffs that we should see in the first quarter even. Also kind of following up with the LPOs, those are really going well. Also, Chattanooga, Knoxville, Northern Virginia has really started to take off. And we're really continuing to look at other cities. I've mentioned Richmond before, but also looking at Atlanta and maybe even other southeastern cities as we move forward. We really kind of feel like we perfected the LPO strategy. And we're seeing it in our results, we're seeing it in our pipelines, and we're going to continue doing that, I would say, the rest of this year. Operator: Our next question comes from Russell Gunther with Stephens. Russell Elliott Gunther: I wanted to start on the expense guide. I appreciate the color there. It sounds like you're going to be flat in 1Q, step up a bit in 2Q. We had the branch closures kind of early in the quarter. So fair to say that that's all captured in this guide, the full savings from that. And then you guys tend to evaluate the branch network on an annual basis, typically in the back half of the year. Is that something that you would look to do again this year? And is any of that reflected in your 2026 commentary, Dan? Jeffrey Jackson: Yes, I'll take the branch piece. Absolutely. So as you know, we always evaluate the branch network, just throwing out that since 2019, we've closed about 93 branches. So I would anticipate us to continue to evaluate that. It is not in any of these numbers, just to be clear. But yes, I think it's safe to say we will definitely evaluate it, and that would be potential addition to reduce our expenses at some point in time this year. Russell Elliott Gunther: Okay. Excellent. And then just a follow-up question or second question for me, switching gears to the margin outlook. Maybe, Dan, if you could just address the puts and takes behind the cadence of the NIM, flat in the coming quarter, a nice step up 2Q and then the moderation. What's sort of underpinning your expectations for that glide path? Daniel Weiss: Yes. Sure, Russell. I think first, what I would say is if you think about the guidance that we've been providing 3 to 5 basis points of margin improvement per quarter. What we really saw here, and I mentioned this in the prepared commentary, in the fourth quarter was just extraordinary growth in deposits, particularly noninterest-bearing. And that deposit growth occurred pretty early in the fourth quarter and was at time $500 million plus intra-quarter. And so we were able to pay down Federal Home Loan Bank borrowings during a good maturity of the quarter, which kind of provided a really nice lift to margin. So that's how we kind of picked up 8 basis points of margin improvement or expansion over the third quarter versus kind of that 3% to 5% that we were projecting. But what I would say is we really kind of effectively pulled forward, I would say, the next 3 to 5 basis points that would have otherwise been projected for the first quarter into the fourth quarter, and that's how we get kind of a flatter margin just on a linked quarter basis when we look towards the first quarter. I would also tell you, typically, we see deposit flows like outflows in the early half or the first half, really the first quarter. And we've seen those. And so that's another like kind of what we see as like a headwind, something that normally would -- if it's very normal from history. But at the same time, whenever you've got as much deposit growth as we had intra-quarter throughout the fourth quarter and then kind of some of those deposits pulling back some for the first half of the first quarter, that also kind of -- you're borrowing for the Federal Home Loan Bank at 4% instead of holding noninterest-bearing assets or liabilities that are funding at 2%. So I think that's really what is driving for the most part, that flattish margin compared to the first quarter. But then whenever we look forward into the second quarter, kind of 3 to 5 basis points is what we're guiding to, recognizing once again kind of the benefit -- of the continued benefit and the grind of loan and security repricing, loan growth, et cetera. We continue to see and expect to see reduction in cost of funds. We'll continue to see quick kind of downward repricing of our short-term Federal Home Loan Bank borrowings. Of our $1.2 billion, $1.1 billion is kind of 6 weeks or less. And so that -- all of this kind of will help drive that margin improvement. It's happening in the background in the first quarter as well. It's just not as apparent. The other piece I would just say is that the CD book will continue to reprice, particularly it becomes more evident in the second quarter. We have about $2.1 billion in CDs that are going to be repricing here in the next 2 quarters. About $1 billion is repricing here in the first quarter from kind of 3.75% downward 25 to 50 basis points and then another $1.1 billion in the second quarter. And really, the repricing of CDs here in the first quarter from that 3.75% down into the, say, 3.25% range is where we also see some nice lift in terms of margin as we're going to continue to see funding cost accelerate downward relative to the reduction in loan yields. So I think that's kind of how we look at it. And then again, that continued grind into the back half of the year gets us as we model today, somewhere in the high 360s. Operator: Our next question comes from Manuel Navas with Piper Sandler. Could you just speak to. Manuel Navas: Could you just speak to within the NIM, if there's a little bit of back book repricing that is helping on the loan yields? I know that the floating rates will come down a bit. And also, what are kind of new loan yields coming in at? Just trying to get some more on the asset side dynamics in the NIM... Daniel Weiss: Yes, sure. So we do have about $400 million of loans -- fixed rate loans that will be repricing over the next 12 months off of -- with a weighted average rate of about 4.5%. And so I would anticipate those to be replaced or refinanced, et cetera, somewhere in that like low 6%, high 5% range. I would tell you that if you look at within the presentation, you can see that the weighted average yield on new loans originated in the fourth quarter was right around 6.15%. I would tell you the spot rate for the month of December was just above 6% to kind of 6.01%, 6.02%. So that's kind of where we're at and what we're projecting more or less here for the first quarter. The other thing I'll mention is just if we think about margin benefit longer term is the securities book continues to reprice as well. So we've got about $250 million of cash flows kicking off of that securities portfolio. Those yields are about 3.3%. And right now, we're investing at about 4.7% roughly. So picking up between 125 and 150 basis points in yield on $250 million of cash flows coming in. Manuel Navas: Is that $250 million per quarter? Daniel Weiss: Per quarter. Manuel Navas: Yes. Okay. And then shifting over to capital for a moment. I appreciate the commentary. Just shifting over to capital. As you build and TCE has gotten over 8%, CET1 is at 10.3%. Can you discuss your kind of capital deployment priorities, growth, but also just kind of where would M&A or buybacks fit in? Jeffrey Jackson: Yes, sure. First, we'd start with the dividends, obviously committed to the dividend. Then we would go to loan growth and making sure we can obviously fund the loan growth with our strong capital levels. Then I would put in buybacks. We've talked about our targets being 10.5% to 11% CET1 around those ranges, we would look to buy back. And then I would put M&A at distant fourth. Right now, there -- we don't see that happening this year. We're really focused on the first 3. And specifically, when it looks at growth, obviously, we have a lot of opportunities, but we are also seeing really tremendous opportunities to acquire bankers and talented individuals to come on our team. But those would be the capital priorities. Glad to dig into any of the 4. But once again, dividends, growth, buybacks and then fare distant M&A. Daniel Weiss: Yes. And I would just add on to that, that we're growing CET1 right now at about 15 to 20 basis points a quarter. So the print that we had for the fourth quarter, 10.34% CET1, that pretty comfortably gets us over that 10.5% by the end of the second quarter. And so that does offer, as Jeff said, some flexibility there as we think about where organic growth is relative to, say, maybe beginning to explore buyback to the extent that growth opportunities are slower. Operator: Our next question comes from Catherine Mealor with KBW. Catherine Mealor: One follow-up on the margin, and I apologize if I missed this, but any indication on just what you're expecting for the cadence of fair value accretion over 2026? Daniel Weiss: Yes. So I would say, I believe we had about 27 basis points of accretion here in the fourth quarter. And we were modeling about 25 basis points for the first quarter. And then as I've said in the past, it kind of -- it's a basis point or 2 per quarter, and it runs off over the next 6 years. Catherine Mealor: Okay. Great. That's helpful. And then the reduction in borrowings was great to see this quarter. How should we kind of think about the size of the balance sheet outside of loans and deposits kind of maybe growth in the bond book relative to what we should see from your borrowing base over the course of '26? Daniel Weiss: Sure, yes. So we're going to keep that bond book right around that, call it, 15% to 17% of total assets, it's 16% and we -- that's kind of where we feel is the sweet spot to maintain a nice level of liquidity, but also make sure that we're generating as much return on equity as possible through the higher-yielding loan book. Catherine Mealor: Okay. Great. And then maybe if I could slip one more in on just kind of big picture profitability. It feels like we've got some nice operating leverage coming into '26 6 with the revenue growth the NIM expansion and then growth in fees and your balance sheet, which kind of feels like more -- of a more stable expense base. Are there any kind of profitability target that you would look to as we move through '26? Daniel Weiss: Yes. I mean I would say at a high level, what we've continued to talk about is kind of that ROA being right around that [ 130% ] mark, average tangible common equity somewhere in the high teens. And so that's kind of what I would tell you, what we expect and what we're modeling. Operator: Our next question comes from Karl Shepard with RBC Capital Markets. Karl Shepard: My line cut out a little bit, so I apologize if you covered this. But just on the margin again, so the 3 to 5 basis points, are you saying that sort of burns out as we get later in the year and then maybe that high 3.60% range is kind of appropriate way to think about longer term without giving guidance for '27 or anything like that? Daniel Weiss: Yes, Karl. I would say '27 is a long way away, and it's probably -- it could be difficult to even project the back half of '26. But what we can see, and like I said, in the nearer term, is that continued 3 to 5 basis points of benefit in 2Q. Where it goes in the back half of the year is really going to be dependent on a number of things, including loan pricing, loan competition, deposit pricing, deposit competition, how well we're able to fund our loan growth with deposits and what the cost of those deposits are. So I think all of those things kind of play into the calculus here. So what we can -- we do -- we can see though that the back book, the assets are repricing upward, and that grind continues -- will continue to benefit margin. And like I said, we feel pretty comfortable based on everything we know today that we can get into that high 360s in that back half of the year. Karl Shepard: Okay. That's helpful. And then, I guess, maybe more of a strategic question. So the LPO strategy has been out there for a few years now. You're adding a financial center in Chattanooga. Can you just maybe talk about how these things mature and get to where you want to be and then just opportunity to continue to do new LPOs or, I guess, strengthen some of those markets with additional talent? Just kind of big picture, how you're thinking about that, Jeff? Jeffrey Jackson: Yes, sure. Very excited about the LPOs. So Chattanooga, we should open the first branch in Tennessee. We're anticipating in April. That group has done in over $0.5 billion in loans and has done really great job with full relationships, just to be clear, some deposits and different things, treasury fees, swap fees, et cetera. So what we typically look at is depends on the mass of the team we bring on, the size of the assets and those things. So my goal would be to continue to grow Knoxville in that similar range, add a branch there. Nashville, we're looking to add to that team, but we'll also be looking to add a branch once they get around that $0.5 billion. And then as it relates to future LPOs, once again, that is what we're really focused on this year. We are seeing a tremendous amount of opportunity based on the other M&A going on or leadership changes, et cetera. And so I think that's what you'll be seeing us do this year, expanding in other markets. But most likely, we would start with the LPO offices get a little bit of a loan balances, fee businesses going and then look to at a branch. Obviously, if we took on a much larger team potentially, then we would depending on where it would be, we could add a branch immediately. Obviously, funding for these LPOs is really critical. And having a single branch in those markets, we feel like it gives us a great advantage to add more funding when we start up these LPOs. But once again, I can't tell you what tremendous opportunities we have in some of these markets in the Southeast. And I think you'll be hearing more about that from us in future quarters. Operator: Our next question comes from Dave Bishop with Hovde Group. David Bishop: Jeff, you noted the loan pipeline holding up pretty nicely here. Now you're getting traction from the new production offices and the LTOs. Just curious, and you may not have this number here, but Jeff, any line of sight maybe into the deposit pipeline into the first half of the year, first quarter of the year and maybe what spot deposit costs were exiting the quarter? Jeffrey Jackson: Yes, I'll comment on the pipe and I'll let Dan talk about the cost. But yes, they're still pretty strong. Once again, as Dan mentioned, we kind of go back and look over the last several years. Seasonally, January usually is a down month for us in deposits, but then February builds back up. And usually, we finished with some nice growth at the end of March. So I would say the deposit pipeline still is very good. And for us, we're always looking to bring in full relationships and then our retail employees are doing a great job driving home those deposits as well. So I would imagine that we should still show pretty good growth this year in deposits based on everything I'm seeing. Daniel Weiss: I would just add spot deposit rates at least for the month of December relative to the full quarter's average. Full quarter average is right around 2.45%, December 2.38%, so down about 7 basis points relatively speaking. David Bishop: Got it. Appreciate that color. Then Jeff, maybe a follow-up. You talked about -- I appreciate the color on the new loan offices, especially in Tennessee and Northern Virginia. Are the types of loans you're seeing in those markets different than some of your core legacy markets, size, types of borrowers and such, especially in Northern Virginia, which is a big GovCon market. Just maybe speak to maybe the types of loans you're doing and size relative to the legacy market? Jeffrey Jackson: Yes, sure. Great question. They're pretty similar, to be honest. Once again, we have not changed our credit culture, any policies at all. So we're seeing some CRE, a lot of C&I, some health care. We did a big health care deal in Virginia. But yes, GovCon is part of Northern Virginia and D.C. area, but I can't really say we've done almost none of that. It's really been more CRE, C&I, health care, just similar things that we're doing in all our markets. The great thing that really helps our LPO strategy is we take our existing kind of credit culture and just get great talented bankers in all these markets that can operate within what we like to do, and it's working extremely well. Operator: Our final question today comes from Manuel Navas with Piper Sandler. Manuel Navas: I just wanted to follow up on the fee initiatives and the commercial lending team. You brought up the $6 million in treasury management. Swaps are doing well. And just kind of go into those in a little bit more detail in terms of what could be the growth next year? And what is the uptake in the Premier team using your fee products as well? Jeffrey Jackson: Yes. No, we're very excited about that. So I can tell you that 1.5 years ago, just starting with our treasury management fees, let me take you back a couple of years ago. So I believe in '23, we did about $2 million in treasury management fees. 2024, we did about $4 million. And then last year, we topped $6 million. I think that can continue to grow double digits this year. from a percentage perspective, if you just look at our purchase card, we basically had 5 customers back in, I believe, March of last year. Today, I believe we've got over about 130 customers with about another 45 in the pipeline. We've gone from, call it, $100,000 a month in spend to I believe we've topped $7 million a month in spend, and we think we can get it up to $10 million plus this year, as it relates to the purchase card -- commercial purchase card, multi-card. Then as it relates to swaps, I do believe we were around $9 million in just gross production last year. I think that could easily grow a good amount this year as well to be above $10 million plus depending on how the year goes and what interest rates do. So I think there is some tailwinds in both those fee businesses along with our wealth business, too. We just topped over $10 billion in assets under management when you combine our trust and securities business. So we feel like that's really going to be another driver for our profitability this year, and we could see some tremendous growth. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Jeff Jackson for any closing remarks. Jeffrey Jackson: Thank you. 2025 was another year of disciplined growth and strong execution for WesBanco. We strengthened our financial metrics, advanced our strategic priorities and position the company well to continue delivering value for our customers and our shareholders. Thank you for joining us today, and we look forward to speaking with you at one of our upcoming investor events. Have a great week. Operator: Thank you for attending today's presentation. The conference has now concluded. You may now disconnect.
Operator: Good morning, and welcome to Southern Copper Corporation's Fourth Quarter and Year 2025. With us this morning, we have Southern Copper Corporation, Mr. Raul Jacob, Vice President, Finance, Treasurer and CFO, who will discuss the results of the company for the fourth quarter and year 2025 as well as answer any questions that you might have. The information discussed on today's call may include forward-looking statements regarding the company's results and prospects, which are subject to risks and uncertainties. Actual results may differ materially, and the company cautions to not place undue reliance on these forward-looking statements. Southern Copper Corporation undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All results are expressed in full U.S. GAAP. Now I will pass the call on to Mr. Raul Jacob. Raul Jacob: Thank you very much, Gigi. Good morning, everyone, and welcome to Southern Copper's Fourth Quarter and Full Year 2025 Results Conference Call. At today's conference, I'm accompanied by Mr. Oscar Gonzalez Rocha, CEO of Southern Copper and Board member; as well as Mr. Leonardo Contreras, who is also a Board member. In today's call, we will begin with an update on our view of the copper market and then review Southern Copper's key results related to production, sales, operating costs, financial results, expansion projects and ESG. After this, we will open the session for questions. Our performance in year 2025 delivered new company records for net sales, adjusted EBITDA and net income. These milestones are a testament to the strength of our strategy, execution and commitment to sustainable growth. This strong performance was primarily driven by a rise in by-product production and improved metal prices for all our products. Mined zinc production rose 36% year-on-year, bolstered by an additional 52,500 tons from the Buenavista zinc concentrator. Mined silver production increased 15% in this year -- in last year primarily driven by higher production at all our mines. Molybdenum production was 31,200 tons in 2025, which was 7% above the figure in 2024. The combination of higher production volumes and better copper and by-product prices enabled us to achieve record sales of $13.4 billion. This is 17% more than in 2024, a record high for EBITDA of $7.8 billion, that's 22% on top of 2024 and net income of $4.3 billion, which is 28% higher than 2024. We remain firmly committed to enhancing productivity and cost efficiency driven by strategy anchoring in discipline and focus on achieving a long-term goal to produce 1.6 million tons of copper at the lowest possible most competitive cost per pound. Looking into the metal markets and prices. For copper, the London metal copper price increased 21% from an average of $4.16 per pound in the fourth quarter of 2024 to $5.03 per pound this past quarter. For the COMEX market, we saw a 22% increase, averaging during the past quarter $5.15 per pound. Based on current supply and demand dynamics, we're currently estimating a copper market deficit of about 320,000 tons for 2026. Copper inventories worldwide, the sum of the London Metal Exchange, COMEX and Shanghai and bonded warehouses, where as of January '26, this past Monday, approximately 14 days of global demand. Let's look at Southern Copper's production for the past quarter. Copper represented 75% of our sales in the fourth quarter of 2025. Copper production registered an increase of 1.4% in the fourth quarter of last year on a quarter-over-quarter terms to stand at 242,172 tons. Our quarterly result reflects higher production at our La Caridad, Toquepala, Cuajone and IMMSA mines, which was attributable to better ore grades and recoveries. These positive results were partially offset by a decrease in production at our Buenavista operations. For 2025, copper production decreased 1.8% to 956,270 tons. This figure is 1% lower than our 2025 plan of 965,000 tons. Our year-on-year result reflects lower production at our Buenavista and the Peruvian mines, partially offset by a rise in production at our IMMSA and La Caridad mines. For 2026, we expect to produce 911,400 tons of copper, which represents a decrease of 4.7% compared to 2025 annual trend. This slight drop was primarily attributable to lower ore grades at our Peruvian operations. For molybdenum, it represented 8% of the company's sales value in the fourth quarter of 2025 and is currently our first by-product. Molybdenum prices averaged $22.75 per pound in the quarter compared to $21.61 in the fourth quarter of 2024. This represents an increase of 5%. Molybdenum production increased 10% in the fourth quarter of last year compared to the fourth quarter of 2024. This was mainly driven by an increase in production at Toquepala and Cuajone mines due to higher ore grades at both operations. These results were partially offset by a decrease in production at the Buenavista and La Caridad mines. Molybdenum production increased 7.4% year-on-year in 2025 after production grew at Toquepala and Caridad and was partially offset by lower production at Buenavista and Cuajone. In 2026, we expect to produce 26,000 tons of molybdenum. For silver, it represented 9% of our sales in the fourth quarter of last year with an average price of $54.48 per ounce in the quarter, which is reflected in an increase of 74%. Silver is currently our second by-product. Mined silver production increased 15% in the fourth quarter of 2025 versus the same period of the prior year. This was boosted by production growth at all our mines. Refined silver production increased 10% quarter-over-quarter driven mainly by increased production at all our refineries. In 2025, we produced 24 million ounces of silver, which represents an increase of 15% over the 2024 production level. This was due to higher production at all our mines. In 2026, we expect to produce 24 million ounces of silver, a slight decrease of 2% compared to 2025. For zinc, it represented 4% of our sales in the fourth quarter of 2025 with an average price of $1.44 per pound in the quarter. This represents a 4.3% increase compared to the fourth quarter of 2024. Zinc is currently our third by-product. Zinc mined production increased 7% quarter-on-quarter and total 46,223 tons. Growth was mainly driven by higher production at the Buenavista zinc concentrator and by an increase in production at San Martin mine. Refined zinc production increased 2% in the fourth quarter vis-a-vis the fourth quarter of 2024. Zinc production for the full year 2025 increased 36% due to additional production of 52,500 tons from Buenavista zinc and an upswing in production at our Santa Barbara mine. This was partially offset by lower production at our Charcas and San Martin operations. For 2025, we expect to produce 165,500 tonnes of zinc. Financial results. For the fourth quarter of 2025 sales were $3.9 billion. This is $1.1 billion higher than sales in the fourth quarter of 2024. Copper sales increased 39% and volume was up 3%, supported by better prices. In the case of LME it was 21% higher and in the case of COMEX 22% higher. Regarding our main by-products, we reported higher sales for molybdenum of 6% due to an increase of volume of 10% and better prices. Zinc increased its value -- the value of sales in 23% due to higher volume for 21% and better prices. Silver increased its value in -- 106% due to an increase in volume of 11% and better prices. 2025 net sales hit a record high of $13.4 billion, topping the 2024 net sales by 17%. This expansion was mainly driven by higher sales volume for molybdenum, zinc and silver. Growth in sales volumes remain -- for copper, growth in sales volume remained stable in [ 2025 ]. Operating cost. Our total operating cost and expenses increased $282 million, that is a 19% when compared to the fourth quarter of 2024. The main cost increments were in workers' participation, purchased copper, inventory consumption and operation contractors and services. We have also, in the quarter, a onetime adjustment of $60 million for asset retirement obligations at the Mexican operations, mainly at the Buenavista one. These cost increments were partially compensated by labor -- lower labor costs at the Peruvian operations. The fourth quarter 2025 adjusted EBITDA was $2.3 billion which represented an increase of 53% with regard to the $1.5 billion registered in the fourth quarter of 2024. The adjusted EBITDA margin in the fourth quarter was 60% versus 54% in the fourth quarter of 2024. For the year 2025, adjusted EBITDA hit a record high of $7.8 billion, reflecting a robust 22% increase over the figure in 2024. The adjusted EBITDA margin in 2025 was 58% versus 56% in 2024. Cash cost. Operating cash cost per pound of copper before by-product credits was $2.29 per pound in the fourth quarter of 2025. This is $0.06 higher than the value for the third quarter of $2.23 per pound. This 3% increase in the operating cash cost was driven by higher cost per pound from the production cost, administrative expenses and lower premiums, which were partially offset by lower treatment and refining costs. Southern Copper operating cash cost including the benefit of by-product credits was $0.52 per pound in the fourth quarter of last year. This cash cost was $0.10 higher than the cash cost of $0.42 for the third quarter of 2025. Regarding by-products, we have a total credit of $920 million or $1.77 per pound in the fourth quarter of 2025. These figures represent a 3% increase when compared to a credit of $895 million or $1.81 per pound in the third quarter of 2025. Total credits have increased for zinc, silver and sulfuric acid and decreased for molybdenum. 2025 operating cash cost per pound of copper before by-product credit was $2.17 per pound. And this was higher than the $2.13 per pound that we reported in 2024. This is a $0.04 increase. Net of by-product credit 2025 cash cost was $0.58 per pound. This $0.31 reduction in the cash cost compared to the $0.89 per pound reported in the fourth quarter for the full year -- excuse me, for the full year 2024, and this was mainly attributable to a $0.34 increase in byproduct revenue credits. Net income in the fourth quarter was $1,038 million, which represents a 65% increase with regard to the $794 million registered in the fourth quarter of 2024. The net income margin in the past quarter was 34% versus 29% in the fourth quarter of 2024. 2025 net income hit a record high of $4.3 billion, which is 28% above the figure in 2024. These improvements were driven by an increase in net sales and by our strict cost control measures. The net income margin in 2025 was 32% versus 30% in 2024. Cash flow from operating activities in 2025 was $4.8 billion, which represented an increase of 8% over the $4.4 billion posted in 2024. This result, which was mainly fueled by higher net income, was partially offset by an increase in net operating assets, particularly accounts receivables. For capital investments, our current capital investment program for this decade exceeds $20.5 billion and includes investments in projects in Peru and Mexico. In 2025, we spent $1.3 billion on capital investments, which reflected a 29% increase year-on-year and represented 30% of net income in 2025. Given that there is a description of our main capital project in Southern Copper's press release, I'm going to focus on updating new developments for each of them. Regarding the Peruvian projects and focusing on the Tia Maria project currently under construction at the Arequipa region in Peru. This project represents a landmark investment for Peru and the Arequipa region. The current estimated capital budget is $1.8 billion. As of the end of 2025, the project was 24% complete. At current copper prices, Tia Maria will generate $20.2 billion in exports and $4.6 billion in taxes and royalties over its first 20 years of operation. The project has already created 3,589 jobs, with strong focus on local hire. When operations begin in 2027, Tia Maria will provide 764 direct jobs and nearly 6,000 indirect jobs, demonstrating our commitment to sustainable growth and long-term regional development. As of December, 31st of last year, the company had committed about $800 million to different project activities. Large-scale earthmoving works have mobilized 1.7 million tons of material from the La Tapada deposit. Purchase orders to acquire metallic structures for secondary and tertiary crushing has been issued for the dry area. At the SX-EW process level, state-of-the-art technology has been selected for our main equipment. Access roads and platforms as well as temporary contractor camp has been completed. Regarding energy supply, all earthworks for the electrical main substation has been completed. Foundation works are currently underway, and the transmission line is being built. Next efforts will focus on developing the main and secondary components of the project's dry and wet areas and setting up a temporary camp. For Los Chancas in Apurimac, as of December of last year, we continue to implement environmental and social programs in the communities of Tapayrihua and Tiaparo, which are located within the direct area of influence of the Los Chancas Mining Project. Despite these efforts, the presence of illegal miners within the project area has prevented the project from advancing. In this context, the company continues to take actions with the relevant authorities to regain control of the project area. For the Michiquillay project in Cajamarca, also in Peru, this is a world-class greenfield mining project that we expect to produce 225,000 tons of copper per year, with an estimated investment of about $2.5 billion. The comprehensive review of the geological information to estimate the project's mineral resources has been duly audited in accordance with the SEC's mining disclosure standards and the Regulation S-K 1300. Subsequently, the company intends to use this information to estimate mineral reserves and develop the corresponding mine plan. Regarding environmental, social and corporate governance, or ESG practices, the company in recognition of our efforts in the ambits of prevention and minimizing risk, our Buenavista mine in Sonora, in Mexico as well as our Toquepala and Cuajone mines in Peru, received the accreditation from The Copper Mark for compliance with the Global Industry Standard on Tailings Management set forth by the International Council on Mining and Metals. These accreditation guarantees that best international practices are followed to provide authorities, the community neighboring our operations and other stakeholders with assurances that operations are safe. For the SX-EW plant at the La Caridad Unit in Sonora, Mexico, this unit has been awarded with the Casco de Plata, the silver helmet, in the category of metallurgical plant with up to 500 workers. This is in recognition of its status as one of the country's safest operations. This recognition, which was bestowed by the Mexican Mining Chamber known as Camimex, it was handed during the opening ceremony of the 36 International Mining Convention in Mexico. And this attests to the company's commitment to risk prevention and employee safety. In the case of the Peruvian branch, Southern Peru was recognized by the Peruvian government as a mining company with the largest number of projects awarded under Public Works for Taxes in 2025. The company is currently rolling out 4 investments for a total of $28 million that would benefit more than 5,000 people. Over time, Southern Copper has worked on 40 projects through this mechanism and has invested more than $400 million in infrastructure to bridge social gaps. In 2025, also about 5,000 residents benefit from the health campaigns conducted in the communities near our mining operations and projects in the Peruvian regions of Moquegua, Arequipa, Apurímac and Cajamarca. Teams of specialists in internal medicine, ophthalmology, pediatrics, gastroenterology, among other disciplines, visited communities to provide comprehensive medical care. This is on the nearby communities of our operations. Regarding dividends, as you know, it is the company policy to review our cash position, expected cash flow generation from operations, capital investment plans and other financial needs at each board meeting to determine the appropriate quarterly dividend. Accordingly, on January 22, 2026, Southern Copper Corporation announced a quarterly cash dividend of $1 per share of common stock and a stock dividend of 0.0085 shares of common stock per share. This is payable on February 27 of this year to shareholders of record at the close of business on February 10. Ladies and gentlemen, with these comments, we end our presentation today. Thank you very much for joining us. And now we would like to open the forum for questions. Operator: [Operator Instructions] Our first question comes from the line of Timna Tanners from Wells Fargo. Timna Tanners: Wanted to start off with any updated thoughts on your cost guidance and how you're seeing that shape up in particular, given the currency inflation, your local currencies versus the dollar? Anything you can do to combat that. Raul Jacob: Well, we -- I think we have passed the most -- the worst part of the inflation that we had after COVID mainly. Our costs are currently being more affected by currency appreciation for the peso and the Peruvian sol than specific inflation from Mexico or Peru. Timna Tanners: Okay. Do you have any guidance on where we might see the cost before by-products shape up in the next quarter or the year ahead? Raul Jacob: Sorry, could you repeat it, please, Timna? Timna Tanners: Sure. Any guidance on how we could expect to see cost shaping up into the next quarter and the year? Raul Jacob: No. It's -- for operating costs, we believe it's going to be relatively flat on a per pound basis, since we will be producing a little bit less than last year, it may have some impact on that. And -- but then we have a very strong production of by-products, which is something that was considered as part of the -- as part of our mining operations for last year and this year. So that is going to help us on the credit for sure. Timna Tanners: Okay. Helpful. I'll ask one more and hand it off. This past year, you started out with a lower guidance for silver production and at the end of the year, we're able to exceed your expectations. And of course, silver has been quite hot. Any ability in light of these strong prices to maybe eke out some more tons of -- or ounces, I should say, of silver in 2026 than your initial expectations? Raul Jacob: Well, we already gave a guidance on the silver production for this year. Obviously, we would like to improve on that. But at this point, that's basically what we are expecting is -- it's in silver, about 24 million ounces. One thing that we have done in 2025, and we're still maintaining is that our new zinc concentrator of Buenavista that has right to -- the mine of -- the zinc area of the mine, we have found a pocket of very good ore grades for both zinc and silver and that has made us to focus this concentrator that can switch between copper and zinc to focus only on zinc. So that's one of the reasons why we have a much stronger silver production in last year regarding silver specifically and zinc. We're still working in that area. So that's why we were holding to a very good silver expectation on production and hopefully it could improve. Let me say, Timna, that if we were to have the prices that we're having for silver this year with the expectation of production that we have, silver may become our main by-product. Operator: Our next question comes from the line of Emerson Vieira from Goldman Sachs. Emerson Vieira: I have a couple of questions. First one on by-products, just trying to understand here better the reason why molybdenum production in 2026 should decline. I understand that you guys have been prioritizing zinc production at Buenavista zinc concentrator, but that production should also decline in 2026. So just trying to understand here the reason for the declining moly production for next year. That's the first question. And then I have a follow-up with the remaining ones. Raul Jacob: Okay. On the molybdenum production, you mean the production because it was a little bit cut when you speak, Emerson? You meant the molybdenum production? Emerson Vieira: Yes. I mean, yes, for 2025 [indiscernible]. Raul Jacob: We're getting into some areas of the operations where we have -- we have a lower ore grades for both copper and molybdenum. Usually molybdenum should -- could improve a little bit or -- usually in this kind of circumstances, we have a little bit more molybdenum but at this point, this is what we are forecasting. So hopefully, we will be improving on what I mentioned as our forecast for the year. Emerson Vieira: All right. And then second one on Cuajone's concentrator. Can you guys provide us with the latest update here? When you expect an investment decision to be made for instance? Raul Jacob: Well, we haven't -- we have to prepare all the information on a possible Cuajone expansion, and that has to be submitted to our Board. We haven't done it yet. We are still working on this project. We see it very positively, but we need to finish our work and present it to the board for a decision. Emerson Vieira: All right. And then the last one on Tia Maria. I mean the committed CapEx of $800 million. It's roughly the entire amount you guys should disburse this year. So just trying to understand here about the timing of this. Raul Jacob: I am so sorry, Emerson, there's some noise when you speak. If you could you repeat this? Emerson Vieira: Okay. I will repeat. On Tia Maria, you guys mentioned that there is already $800 million of committed CapEx, and that's roughly the amount you guys plan to spend this year at Tia Maria. So just trying to understand here the timing if this CapEx is more skewed towards second half of this year. And then in order to deliver the 30,000 tons in 2027, when should the construction be completed in your estimates? Raul Jacob: Okay. As I say, we are -- we have commitments of about $800 million of those. In terms of cash flow, we should be spending a little bit north of $500 million -- $508 million is our current forecast for cash out during 2026 related to Tia Maria. Construction should be finished by the end of the first half of 2027, and we are expecting to produce about 30,000 tons in the second half of 2027 and then in 2028 and on at full speed of 120,000 tons per year. Emerson Vieira: All right. So just to confirm my understanding here. You mentioned that you expect to disburse $500 million in Tia Maria in 2026. That's it? Raul Jacob: Yes. That's what I said, $508 million is our current forecast. Emerson Vieira: All right. And how does that compare to the roughly $900 million that was disclosed in the preliminary guidance? I mean what's the reason for this CapEx in about half? Raul Jacob: I'm so sorry, Emerson, could you repeat it, please? Emerson Vieira: Yes. I mean you mentioned that you guys plan to disburse $500 million for Tia Maria in 2026, right? But looking at the company's presentation, the prior guidance, you mentioned that it was expected to disburse almost $900 million actually instead of the $500 million. So just trying to understand what is the reason? Why the lower disbursement? Raul Jacob: We did -- when we put the specific purchase orders, which are the commitment of $800 million, we obtain better payment terms than what we were expecting initially, and that's why we have this positive reduction in our cash out for next year. In Tia Maria, obviously, the budget hasn't changed significantly. So we will be spending that money in [ 2027 ]. Usually, you kept a portion of your budget for final payments once the vendors has -- or once you have confirm that the equipment that you have acquired are producing what was offered at the time of the sale. Emerson Vieira: Right. And this doesn't imply any postponement of the projects start up, right? I mean it's just the cash outflow that is being delayed, where construction will follow at another pace, a faster pace, I would say, right? Raul Jacob: We're in line with our -- the pace of the investment. We believe it's going to be finished, as I say, basically a midpoint of 2027, we should be charging material to the system of Tia Maria and start producing in the second half about, as I say, about 30,000 tons of refined copper for that year and then 120,000 tons, which is the full capacity of the project. Operator: [Operator Instructions] Our next question comes from the line of Alfonso Salazar from Scotia Bank. Alfonso Salazar: I have 2 questions. The first one is going back to the cash cost question. If -- correct me if I'm wrong, but if production falls some 5% in 2026, then before by-products, we should expect an increase in cash cost by right now similar to that number, right? And the second is, can you remind us how much of your cost in the Mexican mines are in Mexican pesos and same for Brazil -- sorry, for the Peruvian mines, how much is solutions? Just to have a sense of how much it could impact the depreciation of the weakening of the U.S. dollar. And the second question is regarding your long-term production guidance. If we look -- first of all, it says that it will be updated in January, the last that you have already in the website. Just want to make sure that you have any of that or we can continue to work with this one. Raul Jacob: No, we are doing -- let me answer your questions as you did them. In terms of -- yes, we are having a reduction in copper production this year. So that will increase our -- yes, that alone should have an impact in the range of the 5% that you mentioned for our production cost. We are doing -- we're taking certain initiatives for us to control cost and, if possible, reduce maintenance expenditures and contractor services at both the Peruvian and Mexican operations, that should help. In terms of cost control, as you know, we are quite keen on maintaining costs under control. The cash -- the cost in Mexican pesos is 39% of our cost and the cost in Peruvian sols is 10% of our cost. So we have about 51% of our cost in U.S. dollars denominated. Okay. The next one is... Alfonso Salazar: Yes, regarding the guidance. Raul Jacob: Yes. The guidance is basically -- we are updating it. For this year, I already mentioned it's 911,400 tonnes. For 2027, a little bit north of 900,000 tons. We are being affected by lower ore grade simultaneously at Toquepala and Cuajone. In the case of Toquepala, it's a temporary thing. That's why we are expecting this to correct over time. In the case of Cuajone, we are considering an expansion of the Cuajone operation, so we can bring back the lower production that we're having given the current installed capacity of Cuajone. For -- I'm going to give you the forecast for the next 5 years. So 911,400 for this year, a little bit north of 900,000 about -- I believe, about the same that we're doing for 2026. In 2028, we will have the full year of Tia Maria that will bring in 970,000 tons of forecast. In 2029, 1,060 million tons and 2031 same number, 1,060 million. Alfonso Salazar: Around 160? Okay. That's helpful. Just one quick question. In your previous guidance, we can see that Buenavista and Caridad, the production in those 2 mines were in a downtrend. Is that going to continue after 2030? Or what are you expecting in these 2 mines? Raul Jacob: No. We will be taking different actions to put back on track our production on both sites. In some cases, it's finding new reserves, which is very likely the Caridad circumstance. And in the case of Buenavista, we may consider also an expansion of the capacity of the operation. But these are things that are still under review. So no -- nothing that I could -- we could report on that at this point. Operator: [Operator Instructions] Our next question comes from the line of David Feng from China International Capital Corporation Limited. Tingshuai Feng: Congratulations on the strong results. My first question is from a capital management perspective. With a much stronger cash inflow based on current copper price, is it possible to boost your growth plan with the extra cash? Or is it more likely for you to increase the portion of cash dividend over stock dividend? I'll come back with my second question. Raul Jacob: I think that in the case of dividends, it's up to the Board. The Board has been increasing the cash portion of the dividend as prices and results are coming in. And I guess that they may increase the cash portion of it if we have more better results, but that is up to them. So I can't comment on that much. Your next question, please? Tingshuai Feng: Okay. My second question is with the much higher copper price, for projects like Los Chancas, we know on one hand, the higher price will allow you to leverage more resources to solve issues related to the project. But on the other hand, the higher prices also provide stronger incentives for illegal miners to continue or even enhance their operations. So overall, does the higher copper price make the project development like for Los Chancas easier or more challenging? Raul Jacob: Obviously, you want to have better prices than worse prices to go with projects, but we have made this -- all of our projects has been evaluated with the prices significantly lower than the ones that we're seeing nowadays. I think that in general, we're happy of having very good returns with prices that I'd say it's more like an average long-term view for us. In the cases -- the specific case of Los Chancas, we have had some progress. We had some initiatives taken by the government that will be -- illegal mining. But so far, we haven't -- we don't have much to report at this point. We believe that the government -- the Peruvian government will take action and allow the company to move on with this important project. Operator: [Operator Instructions] Our next question comes from the line of Matheus Moreira from Bradesco BBI. Matheus Moreira: My first question is on copper markets. I just wanted to get your overall view here on copper markets. We've been seeing, of course, very supportive price environment for copper, right, with prices holding of near historical highs. However, demand in China appears to be deteriorating at a relatively fast pace, right? So just wanted to see how do you view these dynamics going forward? Do you expect the current price momentum to be sustained? So that's my first question, and then I'll come back for the second one. Raul Jacob: Okay. On the copper market, we are expecting a deficit of about -- we're expecting a deficit in the market. And that 320,000 tons is our current -- the view of our commercial team. In terms of price, it's hard to know. We are seeing that the copper demand is being hold by electric vehicles, artificial intelligence, power centers. And at the same time, we see that -- well, in several places, particularly in China, the real estate market is not doing well. So that -- those are the factors. We were not forecasting copper prices. That is not our business. Our businesses to focus on controlling costs and producing as much copper as we can on a competitive base and with high returns for our shareholders. That's our business. Matheus Moreira: Okay. Perfect. That's clear. And then my second question on the Buenavista concentrator. I mean I understand you continue to prioritize on the zinc production over copper given the stronger zinc grades in the areas you're currently mining. Should we expect the strategy to remain in place for 2026, especially considering these copper prices at these levels? And maybe the question here, is there a copper price level that would incentivize you to shift back your production towards copper? Raul Jacob: Okay. Just for knowledge of everybody on the call, we do have 2 concentrators in Buenavista. One is the concentrator that is -- that are producing a pure copper. Those are copper concentrator. And the other one is -- there is one zinc concentrator that can switch between zinc and copper. In this case, we did an analysis at a certain point at the beginning of the year, and with the prices that we have had and the prices are still holding in terms -- in relative terms between zinc, silver and copper. And we found that it was on the best interest of the company and our shareholders to focus on zinc production with more silver content coming with the zinc. Just to be clear, we do have 2 concentrators that produce -- that are copper concentrators and one zinc concentrator. I believe that I skip that when I explain this matter. So we're doing this on an ongoing basis. If there is a significant change in the relative prices between zinc, silver and copper, we will review our strategy. But for now and particularly on the areas that we are at the zinc production areas of the mine of Buenavista, it still makes sense to be producing silver and zinc rather than copper. But if there's a change, we'll do it in a way that we produce the best value for our shareholders and the corporation. Operator: [Operator Instructions] Our next question comes from the line of Alex Hacking from Citi. Alexander Hacking: Raul, I just have one question. Could you maybe discuss the cadence of your copper production next year? Should we expect 1Q to be the strongest and 4Q to be the weakest with grades in Peru kind of falling through the year or it's going to be more even than that? Raul Jacob: It's going to be more even, Alex. We will be reporting on that. But that's basically -- we're getting into low ore grade patch for Toquepala. Cuajone is more or less stable at the level that it is now. And the reason for that is that Cuajone has a new structural ore grade, which is lower, that's why we're considering an expansion on this operation. Operator: [Operator Instructions] Our next question comes from the line of Myles Allsop from UBS. Myles Allsop: Great set of numbers. Just maybe on Tia Maria to start with. How -- what is the lead time for an SX-EW operation and what do you see as the key risks in terms of achieving the time line of first production mid-2027? Raul Jacob: Well, the -- we do have about 5 SX-EW operations in the company currently that are -- that we're working with them. Obviously, where we have selected the newest and best technology that is available for SX-EW operations right now. Basically, we are expecting to have the whole plant assembly in operation at the second half of 2027. That's a little bit more than a year from now. We think that -- well, at this point, we don't want to have any delays on getting the production that we're looking for 2027. Our expectation is to have everything assembled and ready to initiate the tests by May or June of 2027. And with that occurring, we will be putting charge in the equipments and start producing refined copper, which is the final product of SX-EW operation. Myles Allsop: And does -- how is the sort of mood on the ground? I mean there's a few small process, I think, in December. I think there's some more planned for March ahead of the elections. I mean, what's the sense on the ground in terms of going full steam ahead with the project? Raul Jacob: You mean on the Peruvian elections? Myles Allsop: Actually around Tia Maria and obviously stepping up production aggressively given what happened last time and the disruption you suffered? Raul Jacob: Well, no, we believe that the work that we're doing with the local groups, the population in the area, it's -- well, we mentioned that we have -- our initial expectation was to have about 3,500 workers in Tia Maria. Now we do have more than that. 3,589 jobs have been created. We believe that the right number now is more in the range of having 5,000 workers when the project is at full speed in terms of construction. This has been very well received by the local population. I think we made our -- the points that this project is not going to be a problem for them, but a big opportunity for the people at the province of Arequipa. And what we're seeing is that they understand this and are focusing on getting either job opportunity or a business opportunity related to the company or the programs that the company has. As I mentioned, the company has been investing using the tax for works mechanism in Peru very heavily. $400 million has been invested using this mechanism plus all the other programs that the company has. So I believe that we're bringing in good news to the population and the locals are understanding that correctly. Myles Allsop: That's encouraging. Maybe just a couple of other small questions. In terms of percentage of COMEX sales, has that changed meaningfully since last year? Or is it broadly unchanged? Raul Jacob: We don't make comments on that, I'm so sorry. Myles Allsop: Okay. And maybe last question then just on Mexico and the ability to get licenses to move projects forward, has the atmosphere improved? Is it looking more probable we'll see investments in the mining industry in Mexico being announced during 2026? Raul Jacob: We're seeing a better -- generally speaking, a better environment in our relationship with the Mexican government. And I think that this is going to be also reflected in the speed that we can move on with projects. But so far, there's nothing specific to report. Myles Allsop: And have any open pits been approved over the last 12 months or last few years? Raul Jacob: I'm so sorry, I couldn't get what you said. Myles Allsop: So any open pit projects being approved in Mexico over the last few years? Raul Jacob: Well, there are some projects that have been moving on. And we have our own El Arco and some other projects that we will keep working on them. But so far, on this matter and on our projects, we have not much to report at this point. Operator: Thank you. At this time, I'm showing no further questions. I would now like to turn the conference back over to Mr. Raul Jacob for closing remarks. Raul Jacob: Thank you very much, Gigi. With this, we conclude our conference call for Southern Copper's fourth quarter of 2025 and full year results. We certainly appreciate your participation and hope to have you back with us when we report the first quarter of this year 2026 results. Thank you very much for being with us today, and have a nice day. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good day, and welcome to the Nickel Industries Limited December Quarter Activities Webcast. [Operator Instructions] And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Justin Werner, Managing Director, Nickel Industries Limited, to begin the conference. Justin, over to you. Justin Werner: Thank you, and thank you, everyone, for attending the Nickel Industries December 2025 quarterly results call. If I could ask the moderator to please move to the next slide. Pleasingly safety for the 12 months work till the end of last year, 17.7 million man hours without a single LTI occurring, so it's a tremendous achievement. The company was awarded the Excellence in Sustainability Leadership award by CNBC Indonesia, highlighting our leadership in ESG implementation and environmental management and our contributions to the development of sustainable nickel in Indonesia. Also, our solar project, which we will be an offtaker of, it achieved financial close and it is on track to be the largest solar project in Indonesia, 262-megawatt peak with 80-megawatt battery energy storage system. And it will allow ENC to reduce its carbon footprint but also, the power offtake agreement is at 25 years at a fixed rate with no inflation escalation. So we think that's a big positive in that we've been able to lock in a big part of our power costs at very attractive rates. If we could just move to the next slide, please. Frustration during the quarter of meeting our RKAB limit of 9 million wet metric tonnes, which did mean that most of our mining operations were halted for majority of the quarter. There was a number of positives during the quarter, which includes record EBITDA margins from HNC, which bodes well for ENC; and the approval of our AMDAL, which will support our current application of moving from 9 million to 19 million wet metric tonnes. Adjusted EBITDA from operations was USD 37.3 million. And RKEF nickel metal production was slightly up, so the RKEF plans continue to perform well. EBITDA was down, driven mostly by higher costs. And with the Hengjaya mine being unable to supply the RKEFs for a majority of the quarter, that resulted in the requirement to buy cost at the third-party ore so that did slightly push our costs up. HPAL HNC continues to operate well above nameplate capacity, delivered USD 17.2 million in EBITDA, which was a 32% increase on the September quarter. Mine sales, we received approval to restate our operations on the 12th of December with an increased RKAB for 2025 to 10.5 million tonnes. And so in the last 19 days, we were able to deliver close to 1 million tonnes. So I think what's pleasing there is the operations despite being out for almost 2.5 months, we're very quickly able to ramp up, and we're currently tracking very well in January looking at delivering 1.4 million tonnes. The standby costs and the lack of any ore sales or mining unfortunately did deliver a loss, USD 14.9 million EBITDA loss for the quarter. But as I said, things are trending very strongly so far for January and this quarter at the mine operations. So if we could just go to the next slide, and then the following slide after that on RKEF operations. RKEF operations increased 1%. As I mentioned, cash costs slightly higher, higher nickel ore costs. However, that was offset by lower electricity costs. The NPI contract pricing of $11,100 broadly in line with the previous quarter. However, the current spot NPI price is around $13,200. So at the moment, currently, almost 20% above the December quarter average. So we've had a very strong start to the year. particularly around nickel pricing. And so that does bode well for this quarter, and we believe for the remainder of the year. If we could just go to the next slide, please. I mentioned real EBITDA, EBITDA per tonne margins at an HNC. You can see they increased from $629 a tonne in Q3 to over $8,000 to $812 a tonne for the December quarter. And MSP contract prices increased by 18% to $17,110 a tonne. Current LME spot is over $18,000 a tonne and obviously compares very favorably to the average LME price for the whole of 2025, which was 15,162. So we've seen a significant increase in the nickel price, as well as cobalt. Current cobalt spot prices are over $55,000 a ton a tonne. The average for 2025 was around $39,967. So again, this bodes extremely well for the imminent ENC commissioning, which if we could just move to the next slide, please. Pleased to give an update on the ENC project. We're starting some unit testing and wet commissioning in anticipation of final commissioning targeting end of this quarter. The installation of crystallizers to produce nickel and cobalt sulfate has been completed and has been integrated with the rest of the circuit. And the refinery, the cathode and nickel sulfate refineries will look to ramp up production once the HPAL smelter commences commissioning. In terms of the HPAL itself, we've begun purchasing sulfur and testing has commenced on the first line of the sulfuric acid plant. Mechanical tests have commenced on the countercurrent decantation, circuit thickness, precipitation tanks, slurry storage tanks, reagent storage tanks. And so really all of the key equipment, we've started all the mechanical tests. And then there's been allocation of additional resources just to ensure that we can complete the slurry pipeline, which will take off from the Hengjaya mine to ENC and also return the tailings to dry stack tailings storage facility. I would encourage people, if you had already seen it. There is a link to a video in the quarterly, and you can really see the size and the scale of ENC and just how advanced it is at the moment. If we could just go to the next slide, please. Mine operations, as I mentioned, unfortunately, impacted by RKAB delays. So as a result, that did result we moved from a $32.8 million EBITDA in the third quarter to USD 14.9 million EBITDA loss. But as I said, January is looking very good. Approval of the AMDAL was a significant milestone, and we do still remain very confident of achieving an increased RKAB to $19 million for this year. I think that was sort of well supported by the fact that at the end of last year, we were able to go from 9 million to 10.5 million. So I think that bodes well, as I said, for the increase this year. If we could just go to the next slide, please. Development of the Sampala project continues to track very well. The ETL feasibility study has been submitted some time ago, and we're hopeful of receiving approval for an RKAB at the end of 2026. The initial target from ETL will be somewhere around sort of 6 million tonnes per annum. At the ANN IUP, we've just completed a feasibility study. That feasibility study will actually incorporate a slurry plant, the same that we have at Hengjaya mine for any future potential sales of limonite ore. And in terms of the haul roads between ETL and ANN, the 72% complete. And during the quarter, we drilled about 18,000 meters of exploration drilling, a mix of exploration and infill drilling to support detailed mine planning. If we could just go to the next slide, please. We're very pleased to announce the acquisition by Sphere Corp of 10% of the ENC project at a valuation of USD 2.4 billion, so at a premium to the USD 2.3 billion that NIC has invested it. Sphere is the South Korean KOSDAQ-listed premium alloy and precision materials manufactured manufacturer for the global aerospace industry. They're one of only 5 global key vendors to SpaceX and they recently announced a 10-year supply contract of significant value, and this is to support SpaceX's rapid growth. Funding of that transaction expected to collect Q1 2026. We see this as a significant endorsement. It represents our entry into Western supply chains and particularly the aerospace and aeronautical sectors, which demand the highest product quality and have the strictest qualification standards. And so we think this is a strong endorsement of the quality of ENC. Not only that, it does access and open up opportunities to supply to additional North American aerospace end users. So we're very happy with the transaction. If we could just go to the next slide, please. That reduces the quarterly results presentation. As I said, despite the frustrations of the a number of positives, including a very strong LME nickel price and NPI price at the moment, which bodes well for a strong quarter. Mining operations are back up to where they were. We remain confident of an increased RKAB. and as I said, with HNC margins over $8,000 a tonne. It bodes extremely well for the commissioning of ENC at the end of this quarter. So with that, I hand over to questions. Operator: [Operator Instructions] And your first question comes from the line of [ CW Mu ] from [ Arken ]. Unknown Analyst: Can you hear me? Justin Werner: Yes. . Unknown Analyst: So I just wanted to get a little bit more clarification on the RKAB I guess, quota, right, so for this year, for '26. So it hasn't been announced, right, this year? And I think in the previous presentations, you've kind of guided to or kind of expecting million tonnes, right, versus kind of 10.5 that you have currently. We've seen headlines and industry news that the RKAB aggregate for Indonesia is actually, I think, down 1/3 year-over-year. So I guess like I'm just trying to figure out what's the risk of you guys not getting to the 19 million tons that you guys are expecting? That's number one. And then number 2 is the 19 million tonnes, I think gets you guys 100% self-sufficient, including ENC. So what is the actual number to get you guys 100% so sufficient completely? Justin Werner: Yes. So look, the first question, the government has announced its intention to reduce the RKAB quota from last year. We've shown that they will be favoring those that have integrated operations, of course, which we do. We have a number of RKEF lines. We have ENC as well. I think the evidence that we were able to go at the end of last year from $9 million to $10.5 million supports the fact that the government is supportive of increasing our RKAB. And looked at there's always risks. But given that we've had an environmental study that's been approved for the 19 million tonnes, we still remain confident of achieving it. Where will the RKAB cuts come from? I think it will -- what we're hearing and seeing is that it will come from a lot of the smaller producers that don't have any integrated RKEF or HPAL operations, of which there is many. And a lot of those smaller producers don't have the best environmental reward. And so again, I think this is just a way of ensuring that those who are operating properly. We believe there shouldn't be too much risk on the RKAB. And then sorry, your second question was? Unknown Analyst: What level of cutoff -- the cutoff level for us achieving self-sufficiency across our operations. Justin Werner: So the 19 million will get us to 100% self-sufficiency of limonite ore for ENC and it will get us very close to 100% or self-sufficiency at our RKEF operations, which is 8 lines within the IMIP. Unknown Analyst: So does that -- so okay, so maybe dig a little bit deeper on this, I'm sorry. So you guys are operating at overall like 25% to 30% above nameplate, right. And so when the government kind of takes into account of kind of your integrated kind of midstream processing capacity. Are they looking at nameplate? Or are they looking at kind of what the run rate that you guys are producing at because that's kind of different by almost 30%, right? So like I think 19 gets your 2 sales are sufficient on the nameplate? Or is that 100% on nameplate plus 30% is kind of my question? Justin Werner: Yes, it's 100% self-sufficiency on nameplate, which is about 11 million to 12 million tonnes. And so obviously, with '19, there's a significant buffer there if we're offering operating significantly above nameplate capacity. Operator: [Operator Instructions] And there are no further questions at this time. So I'd like to hand back to management for closing comments. Thank you. Justin Werner: Thank you, everyone, again and as I said, we look forward to hopefully providing the market and investors with an update on our RKAB in the coming weeks as we continue to work closely with the government to secure it. So thank you, everyone. Operator: That does conclude our conference for today. Thank you for participating. You may now all disconnect.
Operator: Good morning, and welcome to the Perseus Mining Investor Webinar and Conference Call. [Operator Instructions] I'll now hand over to Perseus Mining, Managing Director and CEO, Craig Jones. Thank you, Craig. Craig Jones: Yes. Thanks, Nathan, and welcome to the Perseus Mining quarterly webinar to discuss our December quarterly report. And I'm joined here today with Lee-Anne, our CFO. Let me start by acknowledging the tragic loss of two employees of our haulage contractor, Binkadi, who work at our Bagoé mine, and they are involved in a tragic off-site vehicle accident 2 weeks ago. These deaths have been incredibly sad for the team at Perseus and particularly our Sissingué operations, and we've been supporting the families of both individuals, as well as the entire team at Sissingué since the accident incurred and will continue to do so in this very difficult time. We've commenced an internal investigation into the accident and cooperating fully with the relevant Ivorian authorities to ensure appropriate processes a following. Nothing is more important to Perseus than the safety and well-being of the people that work for us and with us. And this remains our highest priority across the group. We are committed to the rigorous application and oversight of our safety systems and to ensuring that all employees and contractors carry their work in a safe and responsible manner. This tragic loss reinforces the need for constant vigilance in all aspects of our work, including travel associated with remote operations. As we turn to our operations through the December quarter, our performance reflected a period where all of our sites transitioned into new mining areas, transitioning to new mining fronts introduced as new complexities to mining operations. And despite this, we delivered a strong operational result and continue to generate robust cash flows at the same time as making meaningful progress on our growth initiatives. Our gold production for the quarter was 88,888 ounces at an all-in site cost of USD 1,800 per ounce. The increase in our all-in site cost to USD 1,800 per ounce, versus Q1 FY '26 is primarily driven by higher royalties linked to the increased gold price achieved during the period and an additional 2% royalty paid on revenue at Côte d’Ivoire. The payment of the additional 2% was done in good faith as part of ongoing negotiations between the mining industry and the government of Côte d’Ivoire in relation to formalizing a revised fiscal arrangement, which takes into account their inequitable distribution of profits in the current high gold price environment. A total of $20 million was paid in FY '26 Q2 in relation to the additional royalty of which $4 million related to the current December quarter, $5 million related to September quarter and $11 million related to half 2 of FY '25. So just to reiterate, the Q2 FY '26 all-in site cost in this report only includes the additional royalty paid in this quarter. Combined gold sales from all three operations totaled 86,607 ounces sold at an average sale price of USD 3,437 per ounce, delivering a robust cash margin of USD 1,637 per ounce, capitalizing on strong market conditions. The notional cash flow for the quarter was USD 145 million with the quarter ending with a net cash and bullion of USD 755 million. For the December half, the group produced 188,841 ounces of gold at an all-in site cost of USD 1,649 per ounce and an average sale gold sale price of USD 3,241 per ounce, generating notional cash flow of USD 301 million. Yaouré produced just over 32,000 ounces of gold for the quarter, which was down 42% on the previous quarter. The quarter-on-quarter decrease in production is primarily due to lower mill head grade resulting from a higher reliance on lower-grade stockpile material than planned, along with the planned transition in all sources from the CMA open pit to the Yaouré open pit. The implementation of improved grade control practices at Yaouré along with higher strip ratios during the period resulted in lower direct mill feed from the Yaouré pit, and the need to supplement lower grade stockpiles in greater proportions. The grade control process is now well established at Yaouré and mining rates have substantially improved, resulting in increased direct fee of the Yaouré open pit ore. This, along with the addition of higher grade -- the higher-grade CMA underground in half two is expected to result in higher grade mill feed. Production cost for the quarter was USD 1,574 per ounce at an all-in site cost of USD 2,092 per ounce. The jump in all-in site costs versus Q1 was driven primarily or predominantly by lower gold production, resulting in higher fixed cost per ounce, as well as higher royalties and timing related increase in sustaining capital as a result of the timing of the life of mine tailings pipeline relocation. We sold 34,000 ounces of gold from Yaouré at a weighted average sale price of USD 3,243 per ounce, which delivered an average cash margin of USD 1,151 per ounce. National operating cash generated by Yaouré for the quarter was USD 37 million. Reconciliation between the block model and the mill for the last 3 months is 20% positive on tonnes and 11% negative on grade for a 13% increase in contained gold ounces. This continues to trend from the previous quarter with higher mine tonnage offsetting lower grades through the -- though the overall metal reconciliation has slightly improved. The upper levels of the Yaouré open pit is continuing to yield more gold as grade control drilling extend mineralized structures. Edikan delivered a strong quarter with 38,000 ounces of gold produced at an increase of nearly 17% on the previous quarter. Production cost for the quarter was USD 1,097 per ounce and the all-in site cost of USD 1,535 per ounce, which was down 4% on the previous quarter. We sold 37,000 ounces of gold from Edikan at a weighted average sale price of USD 3,700 per ounce, resulting in an average cash margin of USD 2,165 per ounce, and national operating cash generation of USD 83 million. Mill time and recovery were 89% and 87%, respectively, largely in line with the targeted key performance indicators. Reconciliation between the block model and the mill for the last 3 months is 9% positive on tonnes and 3% negative on grade for a 5% increase in contained ounces, which is a substantial improvement on the last quarter. This improvement in operating outcomes for the quarter is largely due to full mining access being available at the Nkosuo pit, allowing the mining sequence to be restored and improving mining conditions. Edikan's gold production is expected to continue to increase over the next 2 quarters as grade from Nkosuo continues to climb. Plan to mine cutbacks of Fetish and Esuajah North pits are currently progressing with applications submitted to the relevant regulators for approval to commence mining in both areas. During the quarter, the Sissingué complex produced 18,000 ounces of gold, which was up nearly 60% on the September quarter. This Sissingué complex results are attributed to mining and processing operations at Sissingué Gold mine, together with satellite mining operations comprising of the Fimbiasso gold mine located approximately 65 kilometers from Sissingué processing facilities and the newly developed Bagoé gold project located approximately 137 kilometers from Sissingué processing facilities. Both the Fimbiasso and Airport West pits were completed during the quarter, and ore is now being sourced from the Sissingué Main Pit and the Bagoé Antoinette deposit. Mining at Bagoé commenced during the quarter at the Antoinette deposit following the completion of the Fimbiasso operations. Production cost was USD 1,545 per ounce, and an all-in site cost was USD 1,044 per ounce. The improvement in the all-in site cost is largely driven by -- driven following the introduction of the high-grade ore from the Bagoé Gold project, partially offset by higher royalties resulting from higher realized gold prices and the additional royalty payment to the government of Côte d’Ivoire described earlier. We sold 14,000 ounces of gold from Sissingué at a weighted average sale price of USD 3,227 per ounce, resulting in an average cash margin of USD 1,383 per ounce and a national operating cash of USD 25 million for the quarter. Mill run time improved to 97% from the previous quarter, 91% the previous quarter is 91%, and gold recovery was steady at 89.5%. A reconciliation between the block model and the mill for the last 3 months is 18% positive on tonnes and 17% negative on grade for a 2% reduction in contained ounces. The lower grade performance is the result of mining narrow variably mineralized structures at Sissingué Main, Fimbiasso West and Airport West Pits with higher-than-anticipated dilution in several benches. Operational controls, including blast design and refinement and improvement -- improved ore mining control initiatives remain in place to minimize dilution and maintain alignment between the model and mill outcomes going forward. As mining is now focused on the Antoinette peak at Bagoé and the Sissingué Main pit as the primary mill feed sources, mill feed grade is expected to increase for the remainder of the year with the introduction of the higher grade ore from Antoinette. Looking ahead for FY '26, our production guidance remains unchanged. Group gold production in the range of 400,000 to 440,000 ounces with production weighted to the second half of the year. The group all-in site cost guidance range has increased from USD 14.60 and USD 16.20 per ounce to USD 1,600 and USD 1,760 per ounce. The group all-in site cost increase in guidance has been updated to reflect increased gold price assumptions and the result in increase in royalty costs. We've also allowed for the 2% royalty increase in Côte d’Ivoire for Yaouré and Sissingué, whilst we discuss fiscal arrangements with the Ivorian government that result in fair and equitable distribution and mining proceeds at these unprecedented gold prices. As we've discussed previously, our gold production is weighted to half 2 of FY '26 with the inclusion of the new high-grade ore sources at Edikan and Sissingué that are included as part of our mine plan. However, due to the performance of Yaouré in Q2 FY '26, it is expected that Yaouré will produce in the lower half of its guidance. Before I hand over to Lee-Anne, I just want to briefly discuss growth. During the quarter, we progressed our organic growth strategy, which focuses on resource to reserve conversion at our existing mines, brownfields exploration and development of greenfields exploration portfolio. We're progressing our update to our mineral reserve estimates for our existing mines with an update -- updated estimate for Nyanzaga anticipated in quarter 3 of FY '26 in the March quarter, followed by an update to Yaouré towards the end of the financial year. Edikan will follow towards December 2026. These updated estimates are focused on extension of mine life of our existing assets. From an inorganic growth perspective, Perseus progressed an offer to acquire the remaining shares of predictive discovery during the quarter. Perseus first acquired a stake in predictive in August 2024 for a total investment of just under AUD 90 million, initially securing a 19.9% stake in the gold explorer and were later diluted down to 17.9%, whilst we remain as predictive largest shareholders. This has been a great investment. And at our current share prices, the investment is now valued at more than AUD 400 million, more than 4x what we paid for it. Our decision to make an offer to acquire the remaining shares of predictive was supported by our knowledge of the asset and Perseus' strategy to build a superior portfolio of African gold assets. At the end of the day, Robex revised matching offer full predictive was ultimately deemed superior by Predictive forward and resulted in the rejection of our offer. While at this stage, we have no plans to revise our position on Predictive, we will continue to monitor the market conditions. In terms of inorganic growth, we're constantly assessing the best ways to execute our growth strategy and provide best value outcomes for our shareholders. Now I'll pass over to Lee-Anne to speak on some of the financial aspects. Lee-Anne de Bruin: Thanks very much, Craig, and hello, everyone, and happy New Year. I just thought it's too late to be doing that. The quarter delivered a very strong closing cash and bullion balance of USD 755 million, which was down $82 million on the previous quarter. And this is built up as a result of the contribution from our operating margin of USD 132 million. We continue to invest strongly in our capital investment programs, about $60 million went into that, which included development capital for the Nyanzaga Gold project of about $28 million and the CMA underground of about $14 million during the quarter. We will continue to make contributions to our host governments with $30 million paid in taxes during the quarter. Perseus balance sheet remains strong with increased liquidity, we're looking forward to further strong forecast cash flows through the fiscal year. We also, as you would have seen in December announced that we refinanced and upsized the debt facility, replacing the existing $300 million facility. The amended facility has been increased to USD 400 million plus a USD 100 million accordion option. It has a 3-year term plus an option to extend for 2 years. So this takes it out to 2031. We achieved very competitive pricing through strong demand, resulting in a total margin reduction of 125 basis points from the existing facility. Amendments were made to provide Perseus with more flexibility across a range of terms, including our financial covenants, and this really reflected the continued enhancement of Perseus' credit profile. And I'd like to thank Nedbank and Citi for their assistance and all the banks that have come on board through the process and our continued support of our financiers. Shifting our head to hedging. In this current rising gold price environment, Perseus has continued to ensure the hedging strategy evolves, ensuring we remain focused on measured downside protection, whilst always maintaining as much upside opportunity as possible. During the quarter, we further reduced the committed hedging position from 14% to 11% of our 3-year production rolling off a large number of the fixed forward contracts. We continue to protect against the downside -- downside with -- and this is obviously to ensure that as we make investment decisions for all life of mine extensions across all our operations, had some level of downside protection, and we have about 215,000 put options, which are all uncommitted in place at an average price of $2,619 per ounce. As always, to provide for clarity reconciliation between the all-in site costs used by Perseus to the all-in sustaining cost metric with the key variances relating to produce versus gold sold as the denominator and corporate administration costs. The average all-in site cost for the quarter, as Craig has mentioned, was USD 1,800 per ounce, which is higher than the Q1 FY '26 restated all-in site cost of USD 1,516. This increase in the -- in this quarter-on-quarter is largely attributable, as Craig spoke to, is to the higher royalties driven by increased gold price achieved during the quarter and the additional 2% royalties paid on revenue in Côte d’Ivoire. The additional 2% was paid to the government of Côte d’Ivoire despite how our stability afforded to Yaouré and Sissingué, and the Sissingué conventions. Agreement was reached with the government to pay an additional 2% for FY '25 in a good phase as part of our ongoing negotiations between the mining industry and the government of Côte d’Ivoire and in relation to formalizing a revised fiscal arrangement, which takes into account fair and equitable distribution of profits in the current high gold price environment. We'll update you as we go through that, but we are appreciative of the nature and the style in which we're engaging with the Ivorian government and which the industry is working collectively together to get an outcome that is -- that works for both industry and the Ivorian government. I'll now hand over to Craig. Craig Jones: Thanks, Lee-Anne. And then we'll move on to our organic growth projects. We'll start with Nyanzaga. So Nyanzaga remains on budget and schedule with first gold anticipated in January 2027. Construction activities on site continued during the quarter with several key workfronts achieving significant progress. A total of $262 million has been committed up to the end of December, which is half of the approved budget, and of the USD 262 million $161 million has been incurred. The resettlement housing project is closing in on completion with the final 10 homes expected to be delivered before the end of January. Fabrication of the SAG and Ball mill continued during the quarter, the construction and installation of which are on the current project schedule, critical path and are progressing well ahead of schedule. The camp construction progressed to 70% complete with 32 senior rooms occupied and a further 30 rooms expected to be handed over by the end of January. And the tailings storage facility remains ahead of schedule with clearing and topsoil removal. Detailed design is complete and procurement is well advanced. Importantly, the pre-strip activities for the Tusker deposit have commenced. At our CMA underground development at Yaouré, Q2 FY '26 saw strong progress with all four declines under development and a total of 800 meters of development achieved to date. We achieved a major milestone this month with -- this is in January with the first ore mine from the Blika portal. First ore was achieved through development mining and the stoping operations are anticipated to commence in Q4 of FY '26. Project development is progressing to plan with USD 44.8 million incurred up until the end of December 2025, and commercial production remains scheduled to be reached in Q3 FY '27. The CMA underground total development capital has increased by $9 million from the approved $172 million to $181 million due to the requirement for remediation of the eastern wall in the CMA pit to medicate access risks from ground instability. Alongside our financial and operating performance, Perseus continues to deliver tangible value to our host communities and governments and this slide captures the breadth of our contribution. In the quarter, our total economic contribution reached USD 269 million across our host countries, and this included $167 million in local procurement, which directly supports national supply chains and local business development. We also contributed $85 million in taxes and royalties and $1.5 million in community contributions as we continue to support local development funds and key community initiatives. Our workforce is overwhelmingly comes from the regions in which we operate with 95% of employees coming from our host countries. This is a reflection of our commitment to building local capability and building the skills base that our future growth depends on. Although our safety indicators reflect very strong safety performance with a TRIFR of 0.83 and an LTIFR 0.00 up until the end of December. The reality is that the true safety performance is ultimately reflected in human outcomes not statistics, and our recent fatalities at Sissingué are a testament to this. Sustainability is at the core of our purpose and guides how we deliver results, creating value and building resilience, and that's what makes Perseus as a trusted partner in achieving its mission of creating material benefits for all stakeholders in fair and equitable proportions. Before I hand over to any questions, I want to acknowledge the hard work and commitment from our teams across the business. The quarter reflected a challenging period as all of our sites transition to new primary ore sources. The teams completed this challenge at the same time as continuing to improve operating practices and discipline. Despite this, we continued to deliver solid operating performance, generate strong financial returns and progress our strategic growth projects. or while maintaining high sustainability standards. With a strong balance sheet, high-margin operations and a clear growth path, we believe we're well positioned to continue delivering long-term value for our stakeholders and shareholders. Thank you. Now I'll open the floor up to questions. Operator: [Operator Instructions] Your first question comes from Richard Knights at Barrenjoey. Richard Knights: Just on Yaouré, can you give us a feeling as if -- are you still feeding the plant with stockpiled ore? Or are you now getting all the ore from the Yaouré pit? How should we think about the grade going forward over the next sort of 6 months to end the year? Craig Jones: Yes. So we're predominantly feeding expert or moving forward for the rest of the year. So a lot of that's dependent on stockpile is behind us. Richard Knights: Okay. Any -- can you perhaps be a little bit more explicit with that in terms of a grade range or... Craig Jones: So if you look at -- I mean, the Yaouré grade, I think, is in our mineral reserve estimates. So that will give you an indication on grade from Yaouré. And then obviously, in the second half, we're starting to bring in the CMA underground ore and with the stoping, so the bulk of the ore really in that fourth quarter is when you'd expect to see the bulk of the underground ore starting to be delivered. Richard Knights: Okay. And maybe just one on the new fiscal regime in Côte d’Ivoire. Can you give us an indication about the kinds of things being discussed? Is it just an increase in royalty rates? Or are there other elements being discussed as well? Craig Jones: So I think -- I mean with gold prices the way they are. Obviously, governments are looking to maximize their sort of recovery of revenues as a result of high gold prices. So we're discussing just general taxation and how governments take their share of proceeds from the operations. So basically, we're having broad conversations at this point in time on that. The reason we decided to pay the royalty in good faith is we wanted to be having a productive conversation on how to best achieve the desired outcomes of both ourselves and the government. And we didn't want to be talking about penalties and all these other things. So that's why we took the decision to do what we did. But the conversation is productive and proactive between industry more broadly and the government, and we're continuing about those conversations. Richard Knights: Yes. And do you have a feeling in terms of the sort of time frame to finalizing the new fiscal region? Craig Jones: No, not really. I think these things are -- they're complex conversations and could take a little while. Lee-Anne de Bruin: Yes. I mean the Ivorian government is obviously formalizing the new mining code, which is understood. So they're wanting to finalize it before they release the new mining code so that they can capture it in that. I think just importantly, it is important for you just to emphasize, we do have stability agreements. But we are -- we do understand the government's position that in these high gold prices, they don't necessarily have the structures in place that they feel can give them an equitable share. To answer your original question, just in terms of are we only talking about royalty, I think we're trying to steer the government to other mechanisms like increases in corporate income tax and other things that we think are sort of more effective in distribution of profits. But it's been a very collaborative engagement, and I probably in my history in mining, I don't think I've ever seen the industry working so well together as we have been in Côte d’Ivoire, so we are looking forward to getting an outcome that's supportive for both the government and industry and ongoing investment in Ivory Coast. Richard Knights: Yes. Okay. Is there any risk that it could be retrospective in nature? Lee-Anne de Bruin: No. I mean, I think just as a bit of background, remember, last year, the Ivorian government implemented this 2% additional royalty into the Finance Act, which doesn't apply to companies that have stability agreements. So that's -- so effectively, the only way it's going to be applicable is in that we've paid the FY '25 with them in good faith and as part of negotiations given that the average gold price for the year was about $3,500 an ounce last year, spot price, remembering that in Ivory Coast, you pay royalty on spot price, not on sales price. And so no, so there's very low likelihood that it's going to be retrospective. The Ivorian government are, in my experience, very -- they do understand investments and they have got a lot of projects ongoing and being developed in Ivory Coast that any sort of retrospective change would be pretty detrimental to those projects. Operator: Your next question comes from Levi Spry at UBS. Levi Spry: Maybe can we just follow up on the royalty piece. So maybe just a refresher or around the grounds on what rate is included in your cost guidance across the 3 sites and the development site? Lee-Anne de Bruin: So hopefully, I'll answer your question correctly. So just to backtrack. So the royalty that was included in the $1,800 that's been reported, for example, includes only the 2% relative to that quarter. So if you talk about the December quarter, yes, we've got -- we've included that. In terms of the guidance, similarly, we have guided conservatively because we don't actually know the outcome of this, but we've included the 2% royalty in the guidance that would apply to the period. So it would apply for -- from 1st of July 2025 to 30 June 2026. We have included a 2% royalty assumption for that period. We have not included in that what we paid for Q3 and Q4 of FY '25. Does that makes sense? Levi Spry: I think so. But can I just confirm the absolute number that you're budgeting to pay in Ghana, in Côte d’Ivoire and then... Lee-Anne de Bruin: So the Ghana royalty is the 5% that we -- plus the 3% GSL. So we've got -- so they've got a 5% royalty and then something that they call a global sustainability levy, which is 3%. So we're paying a total of 8% in Ghana. And then in Ivory Coast, now Ivory Coast has got a scaled royalty, but at current gold prices, you're going to be paying -- we've assumed 6% plus a 2% additional royalty across all of the sites in Ivory Coast. Levi Spry: Yes. Got it. And maybe just moving to PDI. So like can you just flesh out intentions now and the potential to recycle that capital going forward? Craig Jones: We have no plans at this point in time with PDI. So we'll just continue to watch and monitor how that develops. In terms of our position in PDI, there's been no decision on any changes to that position. So I mean, we've -- it's been a pretty good investment for us. So we'll continue to sit on that at this stage. Levi Spry: Okay. And then just Nyanzaga, obviously, big value driver, a key project. Just a bit more detail around next steps as we think about first production only 12 months away? Craig Jones: Yes. I think we've obviously continue to work through the construction phase. So it's really moving into tank erection now. Steel erection will be starting shortly. The concrete is progressing well. We have -- the bulk earthworks are predominantly done, and it's really now start to pre-strip and get ready for all presentation and commissioning in the back end of the year. Levi Spry: And just -- you probably mentioned it, but just confirming critical path sort of type items. Craig Jones: Yes, mainly through the mills. Operator: Your next question comes from David Radclyffe at Global Mining Research. Okay. Looks like there's some mic issues there. There are no further questions at this time. So I'll now hand back to Craig for closing remarks. Craig Jones: Okay. Thanks, Nathan. Well, as I said, at the end of my presentation, it's -- I really do want to acknowledge the hard work and effort by the teams in Perseus. I think they're what make the business tick. And it was a challenging quarter as we went through quite a lot of change in the business, and they performed well and to get through that process, and we're really looking forward to delivering the second half of this year and continue to build on the value that we've created as an organization and progress our growth projects towards commissioning and ultimately production.
Operator: Hello, everyone, and thank you for joining the UMB Financial Fourth Quarter 2025 Financial Results Conference Call. My name is Gabrielle, and I will be coordinating your call today. [Operator Instructions] I will now hand over to your host, Kay Gregory. Please go ahead. Kay Gregory: Good morning, and welcome to our Fourth Quarter 2025 Call. Mariner Kemper, Chairman and CEO; and Ram Shankar, CFO, will share a few comments about our results, then we'll open the call for questions from equity research analysts. Jim Rine, President of the holding company and CEO of UMB Bank; along with Tom Terry, Chief Credit Officer, will be available for the question-and-answer session. Before we begin, let me remind you that today's presentation contains forward-looking statements, including the discussion of future financial and operating results, benefits, synergies, gains and costs that the company expects to realize from our acquisition as well as other opportunities management foresees. Forward-looking statements and any pro forma metrics are subject to assumptions, risks and uncertainties as outlined in our SEC filings and summarized in our presentation on Slide 50. Actual results may differ from those set forth in forward-looking statements, which speak only as of today. We undertake no obligation to update them, except to the extent required by securities laws. Presentation materials are available online at investorrelations.umb.com and includes reconciliations of non-GAAP financial measures. All per share metrics refer to common shares and are on a diluted share basis. Now I'll turn the call over to Mariner Kemper. J. Kemper: Thank you, Kay, and good morning, everyone. We will share some brief comments about our results, then open up for questions. We reported another strong quarter to close out 2025, with the successful acquisition of Heartland Financial, the opening of our first branch location in Utah and another year of record earnings. We posted significant improvements in our profitability metrics, as we continue to build scale, deliver profitable growth on both sides of the balance sheet and maintain our unwavering focus on strong asset quality metrics. A few fourth quarter metrics that I want to highlight are: Return on average assets of $120 million compared to $104 million in the third quarter, return on average common equity of 11.27% up from 10.14% and an efficiency ratio that improved to 55.5% from 58.1% in the third quarter and 51.8% in the period a year ago. I'm incredibly proud of our associates for delivering strong fundamental and financial performance in 2025, while providing outstanding customer experience to our existing and newly acquired clients, all of which continue to drive our exceptional results. Reported net income available for common shareholders for the fourth quarter was $209.5 million or $2.74 per share, an increase of 16.1% from the third quarter. For the full year, we earned $684.6 million or $9.29 per share. Fourth quarter included $39.7 million of acquisition expenses compared to $35.6 million last quarter. Excluding these, and some smaller nonrecurring items, our fourth quarter net operating income was $235.2 million or $3.08 per share. Fourth quarter net interest income totaled $522.5 million, an increase of 10% from the third quarter. This was driven by double-digit growth in loans and DDAs, along with the impact of lower rates on our index deposits benefited net interest income. Our fee businesses continued their strong performance in the quarter, while our total noninterest income was impacted by several market-related variances. New business activities from our fund services and private wealth teams continue to drive results, which contributed $4.5 million or 5.1% linked quarter increase in trust and securities processing income. During the quarter, we exited substantially all of our position in Voyager shares. While we can't predict the future success in our private investment business, our pipeline remains strong, and we're likely to see periodic monetization going forward. Looking at the balance sheet, we posted 13% linked quarter annualized growth in average loans and 5.6% in average deposits. Quarterly top line loan production reached $2.6 billion in the quarter. We are seeing positive activity across our footprint, and I'm excited about our additional opportunities in our acquired markets post conversion. C&I was again our strongest contributor this quarter with 27% annualized growth over the third quarter average balances. The rate of net payoffs and pay downs as a percentage of total loans was 3.9%. Looking ahead into the first quarter, overall loan activity and pipeline remains strong. Our loan growth has continued to outpace many peer banks. Banks that have reported fourth quarter results so far have posted a 4.9% median annualized increase in average loans compared to our 13%. Total net charge-offs for the fourth quarter were just 13 basis points. For the full year of 2025, net charge-offs were 23 basis points, below our long-term historical average of 27 basis points. Total nonperforming loans were $145 million or 37 basis points of loans, while total criticized loan levels improved 9.1% from the prior quarter. Industry-wide NPLs for the banks reported so far were a median of 55 basis points. Our total losses levels will fluctuate from quarter-to-quarter as we manage our book. We're quick to recognize trouble, take action and address any issues. This proactive management has been consistent and historically, we've seen very little migration to loss as evidenced by our charge-off history. We are incredibly proud of our history. As I mentioned, for the 20-year period ending with 2025, our annual losses have averaged just 27 basis points. Over that same period, average loan balances have increased from $3 billion to $36 billion through market and vertical expansion, including our recent acquisition. This equates to a median annual growth rate of 10.4%. We've achieved these results through our focus on risk management and the continuity that comes by having the same team in place managing credit together through all of these cycles. We continue to build capital with December 31 common equity Tier 1 ratio of 10.6%, a 26 basis point increase from September and ahead of the time line in which we noted in our announcement of our acquisition. Our capital priorities remain the same, with organic growth at the top of the list. Many bank management teams have received questions on their fourth quarter calls about their M&A stance, and I'd like to proactively address that topic. As I said many times, we don't need to do M&A. We have a strong, proven ability to generate assets, and we continue to take share and grow organically at a pace ahead of our peers as you saw us demonstrate in this past quarter. And we do that with exceptional asset quality metrics that we are really proud of. We expect these trends to continue, especially given the opportunities we see for penetration in our newly acquired markets and expanding in our existing markets. Organic growth is and always will be our top capital priority. At the same time, we also feel that we are adept at evaluating and integrating acquisitions to bolster our organic growth. We're still answering our phones, building and maintaining relationships and we expect the tuck-in acquisitions that make financial and strategic sense can be part of our ongoing strategy. We've also been asked about the size of potential deals. Without giving specific parameters, we would be wary of transactions that would put us close to the $100 billion mark. We are in the early stages of assessing what the threshold means to us. And until we are ready, our appetite for any M&A will continue to be measured. While many believe thresholds may move under the current administration, we are operating as those rules still remain in place. We believe that we've built something very special here at UMB, including one of the best teams in the business. We are not going to put that at risk by pursuing a deal that might dilute our culture, our business model, our organic momentum or our strong balance sheet. Finally, as we look into 2026, we're excited to continue the momentum we saw in 2025 and capitalized on the opportunities in our newly acquired markets. As always, our primary focus will be on positive operating leverage no matter what the economic or geopolitical environment brings our way. Now I'll turn it over to Ram for more details. Ram Shankar: Thanks, Mariner. Our fourth quarter results included $52.7 million in net interest income from purchase accounting adjustments, $12.3 million of which was related to accelerated accretion from early payoffs of acquired loans. The benefit to net interest margin from total accretion was approximately 33 basis points. On Slide 10 is the projected contractual accretion, which is estimated at $126 million for the full year '26 and $92 million for '27. These totals do not include any estimates for accelerated payoffs. Slides 12 and 13 include some key highlights and drivers of our quarter-over-quarter variances as well as breakout of onetime costs by expense categories. Noninterest income for the quarter included $2.2 million in net investment security gains, comprised of $6.3 million of gains on various equity investments, partially offset by a $4.8 million linked quarter market value loss on Voyager stock. As Mariner noted, we sold substantially all of our Voyager position in the fourth quarter. Since its IPO, our net gain on our investment in Voyager was approximately $17 million on an initial investment of $6 million, translating to an internal rate of return of 30% and a nearly 4x multiple on invested capital. Fee income, excluding these valuation changes was $196.2 million, a decrease of $11.2 million from the third quarter. The largest drivers were $9.2 million in market-related variances in both COLI and BOLI income and a $2.9 million decrease in derivative income from elevated 3Q levels as noted on Slide 12. And as previously disclosed, we had a nonrecurring benefit in the third quarter of $2.5 million related to a legal settlement. Partially offsetting these decreases was the $4.5 million increase in trust and securities processing income that Mariner mentioned, driven by solid performance in asset servicing and private wealth. Our fund services and custody teams added a total of 15 new fund families in 2025 with a total of 109 new funds. On the expense side, we have $39.7 million of merger-related costs compared to $35.6 million in the prior quarter. As shown, the largest portion of these costs in the past 2 quarters have been for contract termination and conversion expense that were heavily weighted in the back half of the year. Excluding the impact of merger and other onetime costs, operating noninterest expense was $391.8 million, up 1.8% compared to the third quarter. The largest drivers included an additional $10.5 million in incentive comp expense related to our strong fourth quarter and full year outperformance, increases of $3.4 million in additional charitable contributions and $1.1 million in marketing expense, which included some retail advertising campaigns in our new regions. Deferred compensation expense, as shown on Slide 12, was $1.6 million for the quarter. Excluding the deferred comp impact, the recalibration of incentive compensation for the fourth quarter outperformance and the additional $2 million in charitable expenses or normalized quarterly expenses were approximately $380 million. Looking ahead, we would expect first quarter operating expense to be in the $385 million to $390 million range. This includes an estimated additional $15 million increase in FICA, payroll taxes and 401(k) expense, driven both by typical seasonal resets and timing of bonus payments as well as normal inflation in medical and other costs and other investments. Offsets will include day count impact and post-conversion synergies. After the first quarter elevated levels, we would expect FICA and other payroll taxes to decline by approximately $10 million in the second quarter. As Mariner noted, we expect to achieve positive operating leverage in 2026, notwithstanding an estimated $38 million in lower contractual purchase accounting accretion benefit and approximately $30 million benefit from our investment in Voyager and other investment gains recognized in 2025. Turning to the balance sheet and margin. Reported net interest margin for the fourth quarter was 3.29%. Excluding the 33 basis points contribution from purchase accounting adjustments, core margin was 2.96%, increasing 18 basis points sequentially. The primary drivers of the linked quarter increase in core NIM included a nonrecurring 4 basis points benefit from interest recapture on nonaccrual loans that became current during the quarter and a bond repayment, favorable basis risk between Fed target rates, which impact our funding costs and 1 month SOFR, which impacted our loan yields, benefits of a favorable mix shift in both earning assets and deposits, including the 24.9% linked quarter annualized increase in DDA balances, repricing of index deposits from the December 10th rate cut and higher loan fees, partially offset by lower benefits from free funds. Total average deposits in the fourth quarter increased 5.6% on a linked quarter annualized basis. While we expected DDAs to rebound from seasonal lows in the third quarter, the outsized growth was driven in large part by new customer acquisitions in our Corporate Trust business as well as the often episodic nature of these deposit inflows. As previously noted, we have very limited line of sight into these movements. This balancing mix, coupled with the impact of rate cuts, drove our cost of total deposits down by 29 basis points to 2.25% while cost of interest-bearing deposits declined by 33 basis points to 3.03%. We realized a blended beta of 76% on interest-bearing deposits for the quarter, driven by favorable mix shift as well as outperformance for repricing on our soft index deposits. On Page 27, we disclosed our current composition of deposits by rate sensitivity along with our interest rate simulation that shows us positioned as essentially neutral. Relative to the fourth quarter, adjusted margin of 2.92% that excludes accretion and the nonrecurring 4 basis points from interest reversals on nonaccrual and the bond prepayment that I mentioned, we expect first quarter margins to be relatively flat as pricing on variable rate loans with monthly resets catch up and are offset by positive churn in fixed rate loans and bond reinvestments and day impact. We have not assumed any upside to margin from additional rate cuts in the first quarter based on current implied market probabilities. Actual margin and NII results will depend on levels of DDA growth, levels of excess liquidity, any SOFR movements and mix shifts within the lending and funding portfolios. Finally, our effective tax rate was 20.3% for the fourth quarter and 19.7% for the full year. This compares to 18.5% for the full year 2024. Looking ahead, our effective tax rate is expected to be between 20% and 22% for 2026. Now I'll turn it back over to the operator to begin the Q&A session. Operator: [Operator Instructions] Our first question is from Jon Arfstrom from RBC Capital Markets. Jon Arfstrom: Maybe Mariner or Jim, just can you give us a little more detail on the drivers of the commercial loan growth in the quarter, pretty strong, but if you can give us a little more detail on that? And then as a follow-up, just curious if you can talk a little bit more about the Heartland contributions to the growth? You flagged that last quarter about how, post conversion, it could be a little bit stronger. J. Kemper: Yes, Jon. Thanks. It's Mariner. I'd say, fortunately, the story remains the same as it has been for -- I've been CEO 22 years now. I would say it's the same as it's been. We're seeing it across really all markets are performing well. Really all verticals is kind of a broad win for us in the quarter as it continues to be. As we've talked before, our growth really comes from -- 50% of our growth comes from new customer acquisition, and that 50% largely comes from market share gains. And that story continues to be the same. A few trends. Energy continues to be strong and the sort of M&A, family office, transactional work continues to be strong across the footprint with the companies being acquired by private equity firms or family offices or looking for growth capital or transition ownership capital and -- but otherwise, I'd say pretty broad. Jim, anything? James Rine: Yes, I would agree. We've had some real bright spots through the HTLF acquisition. Our franchise lending group has been additive to what we're doing. We've also seen nice growth from the team out in California as it relates to our ag business, which has been a real bright spot. But again, the C&I has been, across the board, the real drivers, as Mariner had mentioned. J. Kemper: And it's early still with Heartland. Good -- all good signs, but still early. We converted on Columbus Day. So we think that the benefit from Heartland is still significant and forward looking. We've got a -- we'll see that benefit in the coming years just accelerate as time goes on. Jon Arfstrom: Okay. Good. Tom, a quick one for you, certainly not worried about credit, but can you touch on the NPL increase and just any likely updated time line for working through some of the acquired credits? Thomas Terry: Yes. The increase was specific to one credit that is fully secured. We don't anticipate any loss from that one. As it relates to the overall portfolio of the NPLs and the watch list, that's a process and it takes time. We're having a lot of success. I would take you back to our historic charge-off numbers, and we expect the historical norms to remain the same as we go forward. So with what we know today, we still feel positive and good about the portfolio, and we're working through them. But again, our report card really net charge-offs, and we believe with what we know today, we're still going to trend towards that historical norm. Operator: Our next question is from Jared Shaw from Barclays. Jared David Shaw: Maybe just looking at deposits, some really good growth in DDAs there, both average and end of period. And I know that there's moving parts that can impact that at any given day. But as we start off the year here, how should we think about maybe average DDA growth quarter-over-quarter? Is that a -- is there an opportunity for that to grow? Ram Shankar: Yes, I would say it probably picks up a little. If you just historically look at what happens between fourth quarter and first quarter that there's a slight pickup. And then public funds, this is not interest-bearing -- or noninterest-bearing only, it's slight pickup. And as I said in my prepared comments, we did have some new client acquisition, particularly in our corporate trust group. We're excited about the prospects from our newly acquired teams from -- on the CLO side and other corporate trust teams. And then looking at the public fund side, we had about $1 billion of inflows coming in, in December, continues to build in January. And then in the second half of February, you'll see about $1 billion go away on the rest of the deposit story. J. Kemper: Due to tax payments. Ram Shankar: Yes. Yes. Jared David Shaw: And then on the -- how are early trends on the HSA side with the benefits from the budget bill, have you been able to look a little more at the potential market impact there? And is there any appetite to maybe do a deal to add in that space specifically? J. Kemper: I'll take that high level, and if I miss something, Jim, can jump in. But I think that's pretty much business as usual for us, nice steady growth through the enrollment season and continuing to sell into our customer base. I think the benefit of the Heartland footprint and customer base will be additive to our ability to sell direct there. But I wouldn't say anything elevated one way or the other. It's a nice steady addition to the book. Operator: Our next question is from Chris McGratty from KBW. Christopher McGratty: Just going to -- on the expenses, I hear you on the first quarter and then the normalization thereafter. I guess, are all the cost saves realized? And then I'm interested in kind of where incremental dollars are being put back into the business. You're generating operating leverage, but where are you investing to grow the company? Ram Shankar: Yes, definitely 100% of the cost saves that we identified at the time of the announcement of the transaction have been realized as of today. So post conversion, after a little while, there were the terms, there were contract terminations that are happening right now. You saw a part of our onetime costs in the fourth quarter as well. So as we sit today, all those have been acted upon in part of our run rate going forward. And then the other side is just normal inflation, as I said in the prepared comments about medical costs, obviously, in the first quarter because of the timing of our bonus payments and resets of FICA, 401(k) match and payroll taxes, the elevated spike us being a larger company and all that, but that should also recede in the second quarter by about $10 million. J. Kemper: And I would just add that I think the thing to focus on, and we've demonstrated it and we'll continue to is that we're disciplined. And so the operating leverage is where we're focused. As it relates to expenses going forward, you shouldn't expect to see anything other than coming from whether we're successful with sales activities as has been in the past, our expenses can be elevated because of the activities from the sales side of the business. Otherwise, really, we ought to be able to get investments that we make in the business out of business as usual levels of commitment. Christopher McGratty: Okay. Great. And as my follow-up, the trust and securities processing line has been a really big source of growth. I mean admittedly, I keep undershooting the growth rate. But can you help us on -- it's a big line item, there's a lot of stuff in there. Can you help on like what would a reasonable growth rate for that business? J. Kemper: Well, I think looking backwards, we don't give guidance. Institutional Banking year-over-year had a 12.8% growth rate. And I would just say that the momentum and tailwinds remain strong. And as far as the pieces and parts, our fund services business and largely coming from the alternative side, which would be the private equity and hedge funds, et cetera, kind of the alternative space leads the way there as it does in the marketplace really and then our Corporate Trust business. So those are the 2 -- it's coming from all of the businesses that we're in, but those are the 2 largest drivers with the biggest tailwinds. Operator: Our next question is from Ben Gerlinger from Citi. Benjamin Gerlinger: I appreciate the color on the GAAP versus core margin. But kind of -- and I guess the commentary for 1Q. I know you don't give a full year. So I was just kind of thinking just kind of philosophically, if the curve stays the same, and there is no more cuts, is the growth you're adding dilutive or accretive to the core margin? Because your growth is great. I'm just trying to think like new money coming on either both sides of the balance sheet together. Would you expect to drift higher or lower on the core margin? Ram Shankar: Generally, I would say the margin will be stable, all else being equal, right, without rate movements, without mix shift in DDA, our earning assets. It depends on what happens on the steepness of the curve. Obviously, we're in a pretty good environment where short-term rates, which drive our funding, are coming down. Maybe they won't come until June. That's kind of our internal forecast. And then the long end, where the reinvestment yield, they've held up pretty well, right? If you look at the last couple of months, they've averaged between 4.25% and 4.40% on bond versus -- bond investments versus the roll-off of 3.60%. So those are all tailwinds from the margin that can offset any repricing risk that might happen on the loan book or the shape of the yield curve stays the same with no additional leverage on deposit pricing because the Fed is not cutting rate, I think our margin will be generally consistent with where we are right now. J. Kemper: I might add, environmentally, SOFR has been kind of a tailwind the way it's been priced in recent periods. So that has been a tailwind. So if that continues, it would... Ram Shankar: Yes, that's a great point. Yes, if you just look at since the Fed started tightening this cycle since September, Fed target has come down 75 basis points. And one month of SOFR, which tends to lead that, has come down only 68 basis points. So between that and the steepness of the curve, we've seen the benefits that we're seeing in our margin in the fourth quarter and outlook forward as well. Benjamin Gerlinger: Got you. That's really helpful color. And then the second question, I know you guys have kind of shied off on whole bank M&A. But given the market disruption pretty much throughout your footprint, considering it's a pretty large footprint, is there opportunities for increased higher throughout '26 via disruption or even team lift out? I'm just kind of curious on what you guys are approaching as a third party to M&A. Is there anything that's on the table that be considered low-hanging fruit? J. Kemper: So you touched off on a few things there. So I guess I would -- pure M&A, I'd revert you back to my comments in the script, which are just that we're focused on organic growth. And the phone line is open, and we maintain relationships otherwise on the M&A side, looking for possibly some tuck-ins along the way, but certainly focused on organic growth. Then you touched on other ways to add things that emulate M&A, I guess, so lift-outs and teams and things like that. So again, a similar kind of comment. We love to find good teams, whether they're corporate trust teams or a couple of lenders that are just disenfranchised somewhere in a market where we think that can be additive. So we take those calls. We look for those opportunities always. But that's how I'd say M&A is secondary to organic growth and then lift outs, we're always looking for those. This is a people business, and if we can find high-quality talent, people will talk to them all that long. Operator: Our next question is from Brian Wilczynski from Morgan Stanley. Brian Wilczynski: I wanted to go back to the opportunity with Heartland. I was wondering if you could talk about some of the potential revenue synergies on the fee income side in terms of offering capabilities that UMB has that Heartland did not. Is there anything that you're seeing already today? And how should we think about that progressing over time? J. Kemper: Great question. I'll touch on this as the quarters have rolled on. The main areas would be mortgage. On the fee side, they didn't really have a mortgage product. We have a really fantastic custom mortgage product. And so we -- with the private banking across the footprint, we really think we can excel there in a big way. Credit card, they didn't offer a credit card. So we've already launched that. Again, it's very early, but the signs are good. The activity is good. And then our Corporate Trust business is a very local business. We talked about this before. It's kind of lawyers to lawyers, local. So having more signs and more offices across our footprint will help the ability to feel an act local in a lot of these markets and expand into, in particular, California, a big market opportunity for us, and some of the other markets that we didn't have a footprint in, whether it be New Mexico or Wisconsin or Minnesota. So those are really exciting. Treasury management, they had a kind of a basic treasury management platform. So they'll benefit -- we'll be able to benefit from larger corporate opportunities in their footprint. And then lastly, some obvious stuff that's sort of an uptick, which would be our legal lending limit, some deals where they were participants now we can leave. And we're seeing some really nice -- Jim mentioned earlier, the franchise lending. That's a perfect example where they would take a 25% piece of a really nice high-quality franchise opportunity. And we've already seen 4 or 5 deals just in the last handful of months where we go from being a participant to a lead or taking the whole thing. So we see those kinds of opportunities already pretty frequently. So very, very excited about all of that. And so those would be the main. The other one, which we -- this is the thing I'd say all the time about UMB. Because of the complexity of our offering what we've been able to bring the Heartland officers along to understand is that when you're at a cocktail party, every single person of that cocktail party is a target where it isn't the case of most other banks. So whether you're a private equity -- you work at a private equity firm or you work in the government or you work at a law firm that does Corporate Trust and Bond Council stuff, we can do business with literally anybody at a cocktail party. So that's another benefit for them as you're out networking your community event or you're going somewhere after church or you're a holiday cocktail party, everybody is a target. Brian Wilczynski: That's really helpful color. And then as my follow-up on the loan growth, another quarter of record production. If I look at Slide 31, the line utilization over the past few quarters has been relatively flat. I know that chart goes back about a year or so, but I was just wondering if you could provide some additional context where you are today versus historical levels, what you're seeing and how you expect that to play out over the course of '26? J. Kemper: That's a great question. High level, it remains relatively flat and can bump a little bit one way or the other from quarter-to-quarter. You would think and we would think that it'd be slightly more elevated just because of the environment that we've had for many years now with the supply chain issues, et cetera. But I think the answer to that for UMB largely is the high-quality nature of our borrower. So we have a borrowing base on the C&I side that has a strong net worth and a really strong earnings power, which just sort of tamps down the overall line utilization, and it stays pretty thing steady surprisingly, regardless of what the environment is. Operator: Our next question is from Brian Foran from Truist. Brian Foran: I have one small one. Just one small one and then maybe one bigger picture one. So the small one, I'm looking at Slide 36, I definitely understand this business has great momentum. There was a small tick down in AUA, at least in like the top netted out totals. Was there anything to note there, why the quarter-over-quarter decline in AUA for the overall business? J. Kemper: Yes, Brian, this is Mariner. I saw that in your early note and we all sat around trying to figure out where you came up with that because it is in the category of transfer agency, we did have a quarter linked quarter slight decline, but I would say that's just a nuance. It pops around a little bit. I would focus you on the top line instead of the transfer agency line because it can move around from quarter-to-quarter, number of client activity, inflows, outflows. So really the better way to think about that is the total assets under administration, which is up on a linked-quarter basis. So nothing in there on the trend side. The business has tremendous momentum. Brian Foran: Perfect. And then on the M&A commentary, I wonder if like maybe you could look back with Heartland almost a year under your belt, key lessons learned that maybe inform any future transactions? Are there 1 or 2 things you really felt went great and got right that you'd want to replicate in any future deals? And then conversely, anything that you would have done different or would do different as you think about targeting sourcing, integrating any, just big picture, having done this one of the bigger transactions, I guess the biggest, the first one in a while, what was the top 1 or 2 lessons learned? J. Kemper: Yes. I got to say, I feel incredibly lucky to be surrounded by probably the best team in the business, and we picked up some fantastic people who know how to do these transactions in Heartland as well because they had done a bunch of deals themselves. So we have just -- I know, I'm almost speechless about it. The transaction went so well, incredibly well, flawlessly. You have a little tiny lessons learned along the way, but it was a pretty much flawless transaction, mainly because we have a super committed, dedicated, hard-working, very smart team. We were super committed to a concept called "do no harm," which we communicated a ton. We had ambassadors from UMB that were tied to locations and individuals across the company who were there for the conversion, were there to answer questions and help them through the customer interactions and experience to keep that where it needed to be. So just all in all, I mean, I pinch myself right now as I'm talking to you, it was a fantastic deal. And as far as lessons learned, I mean, gosh, we modeled some deposit runoff, as I think everybody does when they do these deals. We grew our deposits. And then overall, we exceeded our expectations on growth so far on a combined basis. And we got all of our synergies, got all of our dollars out of the deal. And we've been very -- received very well in the communities that we're in. And like I said, I just pinch myself. I wish I could give you something other than it was fantastic because it feels unrealistic to tell you there weren't any big lessons. But I don't know you guys want to add anything? James Rine: And this is Jim Rine. The only thing I would add that was a real positive coming out of it was there's a lot of built-up muscle memory. The team has a process that has been proven. And Mariner nailed it. We -- it couldn't have gone any better, quite frankly. But the #1 rule in any of these is going to be culture. And I think that would be something that -- not that we wouldn't have before, but just to make sure that we know what we're getting into as it relates to culture and that, that needs to be the right fit. J. Kemper: Yes. I think one of the things we did in this particular case, which is what we would do if we ever did another deal is that it would be small enough that we would maintain control of everything, culture, management Board, and that was very helpful and would be always the case for us. And yes, I mean, the only thing I would say being candid and lessons learned would be in smart really is that between close and conversion, expectations should be more muted for growth out of the acquired company. And we witnessed that. So UMB outperformed during that period. And so we, on a combined basis, really had great results. But you should expect a somewhat more muted growth out of the acquired company, I think, than -- now I'm just pontificating philosophically with you, but it was a fantastic transaction. I wouldn't wish for anything different. And I just would echo that people, people, people. We just have a fantastic team that's super committed working around the clock, and I feel lucky. Operator: Our next question is from Janet Lee from TD Cowen. Sun Young Lee: If I were to -- just want to make sure that I understand your commentary around NIM correctly. So basically, through 2026, you're pretty neutral to changes in interest rates. So as long as you could maintain that beta on deposits, you could be able to hold that NIM fairly -- core NIM, ex [ NE ] that 4 basis points one-off impact in the quarter, relatively flattish. And I guess another question would be that, that 76% deposit beta in the quarter was pretty outsized. Do you think you'll be able to maintain that? Or what was that in a different outsized quarter? Ram Shankar: Yes, I'll take that, Janet. Yes. So we are pretty neutral as you look at our interest rate simulation that we disclosed in our pages. So if you look at it, based on fourth quarter results, $33 billion of our earning assets are variable. So that's about 51% of our total earning asset base. And if you look at our funding deposit mix, 50% our deposits are indexed, right? So we run a pretty matched both on the asset side and the liability side. So any changes in NIM from quarter-to-quarter will largely be predicated on what happens with changes in DDA balances, interest rate, mix of deposits or when the Fed rate cut happens, right? So if your situation plays out where we don't have any more rate cuts, as I said in my prepared comments, there's potential upside if the June rate can happen. So our internal view based on market probabilities is still 2 more rate cuts, one probably at the end of the second quarter and one probably in the fourth quarter. There's additional upside for margin from that because our index deposits will reprice down. But then there's always a catch-up in loan yields for the following period, right, based on how they reset. So at this point out to answer your first question, yes, generally, we would expect our NIM to be plus or minus where our core NIM was in the fourth quarter adjusted for that 4 basis points. I forgot your second question already. Can you repeat that second one? Sun Young Lee: Just the beta of 76%, is that sustainable or outsized? Ram Shankar: For the rate -- if the rate cuts happen, yes, our expectation, the team did a great job outperforming on the soft index deposits, like we said on the prepared comments. So if our outlook is for no more rate cuts, the leverage on the deposit cost side is fairly limited until that happens, right? Index deposits are largely formulaic in the fourth quarter. Reacting to the September, October and December cuts, we passed along a good 76% of it to our existing clients. So it really comes down to when the rate cut happens. We are looking at the back book, but as you look at our slides, only 30% of our deposits are really non-index deposits outside of DDAs. So there's fairly limited leverage on that side to keep doing betas until we have another Fed cut. Sun Young Lee: Got it. And just one follow-up. Philosophically, should we think of -- in terms of your loan and deposit growth, should we think of as like deposit growth, you're going to fund your loan growth with deposit growth in the same ballpark by dollar amount? Or would you -- so basically, would you -- yes, what would be the ideal sort of loan-to-deposit ratio? Would you have that going up a little? Or do you want to maintain at this level? How should we think about that? J. Kemper: So I would say think about it differently. The way we think about loan and deposit ratio is that the value of a bank's -- of a franchise in the banking industry is in its deposits. And if we are always focused on bringing in raw material that is cost-effective, core and granular as possible and not limiting that in any way, shape or form, you let the loans end up where they end up. So at the end of the day, it's really -- we don't guide that. We expect to have exceptional loan growth and exceptional deposit growth. We are fully comfortable at a higher level of loan-to-deposit ratio. We've been as high as 75% before, very comfortable there. But we're not aiming there, we don't give guidance. We're comfortable at higher levels. But really, the focus is on building the franchise through high-quality loans and high-quality, granular core deposits and as much as we can in both and we let the chips fall where they may. Certainly, we don't want to be overly lent up. And so without giving guidance that we certainly wouldn't want to be in the '90s. That will be uncomfortable for us. Ram Shankar: And the flexibility, just to add to that, the flexibility of our balance sheet on Page 25, right? We have $2.2 billion of cash flows coming from our bond portfolio. We are intentional about that. So those are all -- in the past, we've used that to fund our loan growth if we see excess opportunities coming out of Heartland. So there's always an opportunity. But as Mariner said, deposits is where the focus is. J. Kemper: And there's no -- the thing about our franchise and the success of our deposit-generating capabilities, we keep, what, $20 billion off balance sheet? Ram Shankar: Yes. J. Kemper: We have $20 billion off balance sheet for clients that we put into money markets and earn 12b-1 fees on. We can bring that on whenever we want based on what kind of loan growth we have if we pay market rates on it. So deposit generation is something we do very, very well. And so we -- as an asset generating machine, we are also a deposit-generating machine. So this is something we don't worry about. Operator: Our next question is from David Long from Raymond James. David Long: On the growth expectations from the HTLF franchise, I understand you're fully in one organization now. But when you just look at the HTLF growth that you're expecting from that organization, does it come mostly from the current HTLF team or the legacy HTLF team? Those bankers growing into the UMB model? Or do you guys have to bring in more veteran bankers from larger institutions in those locations? J. Kemper: The answer is both. So we think there is a lot of opportunity with the middle market team and small business team that they've built. And then I would say, in places like California, Minnesota, Milwaukee, some places where they are more -- they are smaller and have not been there as long, et cetera. We have the opportunity over the coming years to add talent. And so it's a combination. David Long: Got it. And then a follow-up for Ram. As you look at the cost of deposits, I think you said all in, was about 2.25% noninterest-bearing and interest-bearing for the quarter. Do you know where that ended the year at, at December 31? Ram Shankar: I don't have that, Dave, but using any particular month or period end doesn't work for us because of the nature of inflows when the timing of the inflows happen, right? We could have $3 billion, $4 billion of deposits come in and change the average for any month or a period end. So it's hard to judge what that is. But I would say, for the December 10 rate cut, based on that 76% beta, there's still some juice left to squeeze on the deposit cost side because it's not fully baked in for the fourth quarter. So that will still happen. But I don't have specifics, and it's not relevant really, just to give you 1 month for us. Operator: Our next question is from Nathan Race from Piper Sandler. Nathan Race: Mariner, the rate of -- or the level of gross loan production stepped up in each of the last few quarters and even going further back as well. Just curious, when you look at the existing capacity across the team and the runway for growth that you've described in the past, do you think that can continue to step up in this year? Or would we need to see some hiring to see maybe a step change function in that gross loan production level? J. Kemper: No, I think we try not to give too much guidance there other than a quarter forward look, which we do. And so I would say the first quarter looks to be as strong as or near the fourth quarter for production. And then I would just kind of -- you've got your -- we're sitting around this table with the guys that have been doing this with for 30 years together. And if you look at Page 42 in our deck, it's a 13% 20-year CAGR for loan growth. And that's from grabbing market share and having consistency and continuity and tenure. We don't turn our team over. And we have a huge, huge runway in most of our markets where we still have low penetration. So there's a significant penetration opportunity as long as we keep our people and build our pipelines. So I have no expectation that we can't keep doing what we've been doing and do that on an even bigger base. So our base has gone from -- on an average basis from $24 billion in loans to $36 billion in loans. And I don't have any expectation other than we keep doing what we're doing on a bigger base. Nathan Race: Okay. Great. That's helpful. And then maybe for Ram. I appreciate the expense guide for the first quarter. And then I think you mentioned you're expecting about $10 million in terms of the step down from the seasonal increase in the second quarter. Are there any other kind of offsets in terms of where you're investing around other areas of expense growth that would mitigate that relief in the second quarter? Ram Shankar: Yes, the $10 million, just to be clear, is only on those seasonal expenses like FICA payroll and 401(k) match, right? No dramatic change in our expense trajectory. We would go back to operating leverage. So to the extent that revenue growth exceeds our expectations or exceeds quarter-over-quarter, you might see additional step-up in expenses on commissions paid on widgets sold, but nothing otherwise in terms of dramatic investments. J. Kemper: We're a disciplined team and we'll stay focused on making sure those -- the intersection is there between what we spend and what the leverage on it is. Nathan Race: Understood. That's helpful. If I could just sneak one more in. I appreciate that the focus is on organic, and you're less inclined to do any depository type acquisitions. But just curious what the opportunity set may be out there, what the appetite is to maybe acquire a non-bank entity that could augment some of your less capital-intensive fee businesses to maybe get that fee income proportion up close to the historical levels around 35% plus the total revenue. J. Kemper: Well, you kind of asked 2 questions there. I think when it comes to -- I think, I'd point back to, we sold -- if you remember, we sold Scout. And when we sold Scout, that reduced our fees by over $100 million in 1 year. We replaced all of that through organic growth in 12 months. So I think the way to think about fee income growth for us is not percent of total, but absolute loan growth of the group itself. So if we can maintain a growth rate of our institutional businesses as I mentioned earlier, 12.8% there and overall fee income of 7%-plus, which we've demonstrated, that is more important than its percent of total because with interest rates changing from 1 year to the next, one -- that mix can change just because of where the interest rates are. So we're more focused on making sure the momentum and the strength is there for the businesses themselves as opposed to what the percentage of total is. I do think and expect, just because of that momentum that it gains back some of that share of total revenue over time, but we have no design aim for where that ends up. So on the other one, just a pure M&A question, I'd just point you back to my comments. We're focused on it, the organic growth. Our phones are open, the conversations and stuff with people continue, but we're looking for tuck-in smaller additive deals. And most importantly, if we find those, you got to understand we don't want to give up any kind of controls if we do anything at all. So.. James Rine: Nate, this is Jim Rine. The only other thing I would add to that is what you've seen from us on the institutional side has mainly been through talent, acquiring great people in those markets to accelerate that fee income. And I think that's what you should probably expect in the immediate future. J. Kemper: Yes, lift-outs in Corporate Trust and other places like that. We keep an eye out for a little. We do them all the time. You guys don't even see them really. We do little announcements, small, tiny little acquisitions, lift-outs for our institutional teams. But the pure dollar level of those are immaterial, so they don't really show up on the radar screen, but they're always additive. Operator: Our next question is from Timur Braziler from Wells Fargo. Timur Braziler: Hi. Can you hear me now? Ram Shankar: Yes. Timur Braziler: Just one more for me on loan growth, a 2-parter. I guess, first on the Heartland piece. Is that now firing on all cylinders? Or is there still ability to add capacity there in terms of overall production? And then similarly, on loan payoffs, that's been stepping up over the last couple of quarters. I'm just wondering if we're reaching a plateau there or if there's, you think another leg higher as rates move lower? J. Kemper: On the Heartland loan growth capacity and capability. I've touched on that a little earlier. We -- it is -- it's early days. They -- the traction is good. We think we can get a lot out of the team that exists. And then in some of the markets where they're newer and smaller, we think over time, we can add some talent and accelerate that growth. But there's a lot of energy. We're seeing a lot of activity in loan committee. I feel very good about what we're going to see from them and are seeing early from them from the team. And so then the second question about payoffs, there was a slight elevation, but if you look at the combined number of all of those items was paydowns or payoffs from third quarter to fourth quarter it remains kind of in line. And so as rates come down, if they come down, there is some expectation that, that could accelerate some. We saw on the combined category of all those numbers together in the fourth quarter went from 3.3% to 3.9%. So there was a slight tick up, but I would say that doesn't -- that movement doesn't send a lot of directional or trending to us. But certainly, there's a possibility that, that could accelerate. There's some pent-up demand for that for things to go into the secondary market from the construction book. But we haven't seen it yet. And as we look at what we know right now as we look into the first quarter for talking to the teams and doing the work we do to project forward, it looks still in line with what we saw in the fourth quarter. Operator: We currently have no further questions, so I will hand back to management for closing remarks. J. Kemper: Yes. I've got just a couple of things I want to end on because we're pretty excited about where we are coming off the heels of our acquisition and how well it performed. I just want to remind you all, I'm sitting around the table here with Tom and Jim, myself, a few others, but the 3 of us have been working together for 30 years together, Tom 40 years. I'm at 31, Jim's at 32. We've been leading this -- particularly the credit efforts of the company, in my case, for 22 years at the helm. I've been doing these calls for 22 years, approaching 100 quarters of doing this with you all. And I know the one thing that I've learned from the investor community is you hate surprises, and you hate being alarmed. And so what I'd like to do is take you momentarily to my favorite section in our deck, which is the long-term performance trends 41 through 47 in our deck. And just to remind you of a couple of things of what's happened over the last 20 years for UMB with his team to put you at ease around being surprised an alarmed. We do the same thing year in and year out. So if you look at net interest income over the last 20 years, the CAGR is 12.1%, revenue 20 years 9.4% CAGR. Net loan growth 20 years CAGR 13%; deposit growth 20 years, 12.6% CAGR. Charge-offs less than 27 basis points over the last 20 years. And particularly during the crisis, you can see from '08 to '12, our line forms the bottom of the chart where the rest of the industry looks like a shark fin. And you fast forward to where we are with $38 billion in loans in the fourth quarter, and we had 13 basis points of charge-off compared to 20 years ago with $2.7 billion of loans, we had 22 basis points charge-offs with 27 -- $2.7 billion of loans against our $38 million today and 13 basis points of charge-offs in the fourth quarter. And then you could go to the dividend, for those of you who care about the dividends, 273% -- 274% growth in our dividend over the last 20 years. And in this last year, a 5.5% increase year-over-year. And then risk-weighted, risk-adjusted returns, you can see that on Page 45. So not only do we do it, but I think as a company, we live at the -- we breathe rarefied air at the intersection of industry-leading growth and industry-leading quality. And really, the point of all that as it translates into the last page there, and you see our 20-year compound annual growth rates. So our diluted earnings per share of 7.9% over the last 20 years against the KRX of 4.1%, peer median at 3.2% and the industry at 3.5%. And then our tangible book value per share, 6.8% over the last 20 against 4.7% for the KRX, 3.7% for the peer, and 4.7% for the industry. So at the end of the day, I guess, the thing that I get from all of you the most is, you hate being surprised, you hate being alarmed and you like quality. So if you just spend a few minutes on those pages and reflect on that and you think about the future, and you've got the same team telling you when we say something we're going to do, we do what we say and we say what we can do and we've been doing it for a long time. So you can count on us to keep delivering. Thanks for the time. We're really excited about the future. We're excited about what we've done, and I love working with this team, and we love talking to you guys. So have a great day. Kay Gregory: Thanks, Mariner. As always, if you have follow-ups, you can reach us at (816) 860-7106. Thanks for joining us, and have a great day. Operator: Thank you all. This concludes today's UMB Financial's Fourth Quarter 2025 Financial Results Conference Call. Thank you for joining. You may now disconnect your lines.
Operator: Good afternoon, and welcome to the Hargreaves Services plc Interim Results Investor Presentation. [Operator Instructions] Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO, Gordon Banham. Good afternoon to you, sir. Gordon Frank Banham: Yes. Good afternoon. Good afternoon, everyone. Pleased to have such a high attendance. Thank you for taking the time to listen on how the story is developing at Hargreaves. Quite a lot to tell you about today. I think most of you know me after the last 20 years. I think, again, some of you have known Stephen as Group FD. And obviously, we've got Simon, my successor, who has been with us nearly 12 months now, just under. So we'll talk about that in a bit more detail through the presentation. So I'd just like to hand over to Stephen, who will just talk through the financial highlights in the last 6 months. Stephen Craigen: Thanks, Gordon. First slide here really talks through the key highlights of the last 6 months, and it's been a really busy and exciting period of time at Hargreaves. First thing to pick out on here is we sold the first tranche of Renewables back in October. This is something we've trailed for quite a while. We highlighted -- we realized value of these Renewable energy assets, and we've done so. First tranche sold for upfront cash of just under GBP 9 million with a trail of additional payments coming out through September 2029 of up to -- anywhere up to GBP 5 million. This is in line with the valuation we got from Jones Lang LaSalle and that Renewables tranche sale has helped us to end the period with high cash, GBP 37 million in the bank as at the end of November. I would highlight that number is somewhat swelled by some beneficial working capital movements and that is not our normal cash levels. That high level of cash and the Renewable sales led us -- led the Board to make the decision to return up to GBP 15 million back to shareholders by means of a tender offer that will be tendered at between 12% and 15% premium to share price, and we expect to make that transaction in April. So doing what we said we would do, returning capital back to shareholders once we complete these sales of Renewable assets. Elsewhere in the group, the services business has traded exceptionally well, 41% growth in revenue, improvement in PBT. We've seen good growth across our work at HS2 and Sizewell and other major infrastructure projects and tellingly also AMP8 is starting to ramp up, which has seen increased revenues across our water services businesses. That's collectively led us to improve our forecast for FY '26, the current year we're in and next year, which are reflected in broker notes. This improvement in profitability and cash flow has led the Board to increase the dividend over and above what we had out in the market. So 5.5% increase to the dividend, getting it up to 19.5p for the half year, an intention for that to be 39p for the full year. So beating inflation on our progressive dividend. And last but by no means least, we announced the succession of the CEO. So Gordon, who you'll hear from later and have already heard from and many of you know very well, has been with the business over 20 years, led the business, been integral to this story thus far and is stepping away from his role as CEO and stepping off the Board, leaving the business in good health for Simon Hicks to take over. Simon is our current Chief Operating Officer, and he will take over from Gordon on the 1st of August this year. The great part of this news, though, is Gordon is not leaving the business. He remains employed by the group, and it will lead the German joint venture and importantly, the group's new zinc processing plant investment, and Gordon will talk about that in a lot more detail in a future slide. The next slide is just a reminder really of what the group's strategy is. So the group is organized into 3 main pillars: services, Land and our investment in HRMS. So the focus on services is growth, growth into our investment into the infrastructure market more generally, particularly within the U.K., focusing on high-quality contracts that are inflation-resistant with blue-chip clients. That's seen us be successful over the last 5 to 6 years of growth. And in the current year, we've seen revenues growing by over 41%, maintaining margins at 7%. This is really the engine of what we do. This is where everyone is employed, delivering the dividend for shareholders. In terms of the Land pillar, we've got GBP 80 million of cash tied up in Land, all in at historic book costs. And the strategy behind this is to realize particularly the larger schemes and deliver off cash of between GBP 60 million and GBP 80 million, run that business to a smaller, leaner strategic land and specific Land Development Business, delivering between GBP 3 million and GBP 4 million of PBT per annum for that GBP 20 million cash remaining. And then in terms of HRMS, the focus is to repatriate cash up from Germany for that business. In the current year, we've received a GBP 4 million dividend from them thus far. That's a partial payment, and we expect that to be up to GBP 7 million by the year-end. And that business continues to trade reasonably well and Gordon will focus on the exciting opportunity in zinc in a future slide, as I've said before. So if we focus on the specifics of the numbers for the last few years, I think certainly, with the news of Gordon stepping away, it's quite a nice time to reflect on where the business has been and where it's come to because you can often lose sight of that. And whilst that doesn't look forward, it's important to see the trajectory. So all of these graphs are moving in the right direction. We're going upwards. Dividend per share, as I said, has increased by 5.5% in this period. And when I wrote this slide, it was a 6% yield. We've had a good result for the share price thus far. So that will come down somewhat. But nevertheless, an improving and progressive dividend beating inflationary growth. Our return on capital employed is up at 7.5% currently. The services business on its own is higher than that, but the group in general still has high capital in the Land business and HRMS, which suppresses the overall group's return on capital. But nevertheless, over the last 5 years, significant improvement on that front. And then for services revenue and services profitability, we've seen growth year-on-year for the last 5 years, revenue growth of 25% per annum and profit growing at nearly 40% per annum. So not only are we growing our volume, we're also improving our margins within that services business over that time which takes me now to the current year. What have we seen in the first half? Well, we've seen an increase in services revenue from GBP 121 million to GBP 171 million, 41% growth. What's driven that? Several things. First of all, increased presence on major infrastructure projects, but particularly at Sizewell, but not just delivering earthmoving, which we've done on HS2, we're also bringing other skills to that project, particularly aggregate sourcing, low-carbon aggregate sourcing and civil engineering, which is a subcontracted service. Additionally, I mentioned previously the water services business has improved as AMP8 has come on stream. So that's all led to that revenue growth. In terms of the margin for the services business, we were at 7.3%, we're now at 6.8%. So broadly in line. The reason why it's ever slightly down is because the aggregates work and the subcontracted civils has a lower margin, just the risk profile of that operation. So we're still very happy those margins are above or certainly in upper quartile for the sectors in which we operate in. In terms of Hargreaves Land, the revenue has gone from GBP 4 million to GBP 12 million. That's reflective of the first sale we made at Blindwells this financial year. Those of you who were tracking our sale of the Renewable energy assets might wonder why the revenue is not higher. And that's because the sale of the renewable assets was a fixed asset disposal and doesn't affect revenue, but it does affect profit. And if you look further down there, you'll see profit from Hargreaves Land of GBP 4 million compared to a loss of GBP 1.4 million last year. Last year, we didn't have any major sales in the first half. This year, we've had 2 major sales, one at Blindwells, plus the sale of the Renewable energy assets, which yielded a profit of GBP 3 million on its own. Moving down, profit after tax for HRMS, which is our German joint venture, has improved from what was a breakeven position to a nice little GBP 1 million profit in the first half. I'll touch on how that breaks down between the trading side and the DK Recycling side in a moment. Corporate costs are slightly increased, but broadly in line, brings us to a profit before tax of GBP 14 million. After tax, that's a profit for the year of GBP 11 million and an EPS of 33p. The dividend I've already touched on, but one thing I would highlight is the EBITDA has increased by 23%, demonstrating the cash generative nature of this business. Just over the page, quick review of the balance sheet. If I take it from left to right, just to show where the cash is allocated. The services business overall, equity invested there is only GBP 0.5 million. I would stress this is not a normal level. The working capital, as I mentioned earlier, we received a payment just before the half year, which really suppressed that. A more normal level is somewhere between GBP 10 million and GBP 15 million in terms of total capital employed. If you compare that balance sheet, though, to the equivalent balance sheet from the year-end or the prior half year, you'll notice that the fixed assets, this is plant and machinery increased up to GBP 62 million and the leasing debt, finance lease debt has also increased up to GBP 43 million. That investment is what has driven the growth in the revenue and therefore, the growth in the profit within that services business. In terms of Hargreaves Land, the capital employed is GBP 84 million, just under, and it's laid out there as to where that's sitting. The top line relates to our renewables assets and another long-term investment we have up in Scotland. That renewables asset value has come down because of the first sale of the Tranche 1 renewables. Elsewhere in the balance sheet, the other big number is the inventory, which includes GBP 45 million in relation to the Blindwells site. Blindwells site, we sold a plot earlier this year, and we have another plot that we expect to sell in the second half, all built into broker numbers. So the scheme is where we want it to be, and we'll see cash realizations coming from that scheme over the next 3 to 4 years as we run that down to a GBP 15 million to GBP 20 million capital employed business, delivering GBP 3 million to GBP 4 million of PBT from strategic land and specific developments. In terms of HRMS, total capital employed has increased from GBP 68 million to GBP 72 million. That's just a reflection of the profitability that's been made in that business plus a bit of a movement on FX. The reason why it hasn't come down is because the dividend they paid us, they didn't pay until January 2026. So whilst we received the cash, it wasn't in time for the half year. So it's merely a timing thing, and we've got the money in the bank now. On the unallocated column, not really anything to pick up other than to just remind everybody, the group has no bad debt. We have no debentures and that GBP 37 million worth of cash was in the bank at the half year. Moving onwards. Just a quick reminder for those who are fairly new to the story of Hargreaves around some things to look at when considering valuation. So a sum of the parts feels appropriate given the different nature of the 3 strands of the business. Services business on the left there, high contract bank, contract selectivity, good visibility, good pipeline, some sort of multiple is a sensible place to start, and we've listed revenue, EBITDA there as in line with broker forecasts. So take your choice out of those. In terms of Lands, as I said earlier, GBP 80 million in the balance sheet is historic cost. There's no profit built into that number whatsoever. As we realize that value over time, there will no doubt be a profit that comes out of those assets. And then we've also flagged previously the renewables uplift. So the renewable assets of which we've sold, the first tranche has a hidden profit in there of around about GBP 20 million, some of which we've realized already and have yet to return to shareholders, but we will do in April. And then on HRMS joint venture, book value is GBP 70 million. I think historically, we've said just treat that as book value, although Gordon will give you reasons to think why we could get better, the zinc project being one of those reasons. However, in the meantime, we're getting paid a dividend of between GBP 6 million and GBP 7 million per annum, all of which paid from the trading entity, and we've received GBP 4 million thus far this year. If I move on to the cash flow, this is the simplest one that I've ever had to present in terms of the cash flow. We started the year with GBP 23 million in the bank. We had an EBITDA of GBP 18 million, which was on the previous slide, fairly straightforward. Working capital, slight movement inflow of GBP 2.2 million, negligible movement on interest and taxation. And then we've got net CapEx, which is an inflow of GBP 9.3 million, and this is because of the sale of the first tranche of the renewable energy assets which brought in just under GBP 9 million and a few other small modest sales. All CapEx has been funded by leasing debt, which doesn't affect our cash position. The lease payments of GBP 10.4 million neatly match off with the GBP 10.6 million depreciation, which is exactly what you'd expect if we're depreciating in line with the term of the finance lease, which is what we should be doing. So that nets off. And then we've got the dividends paid, which reflects the final dividend from FY '25 of GBP 6.2 million, which brings us to the closing position of GBP 37 million. And then the final slide for me, just we've had this a few years in a row now relating to a bit more detail on HRMS because it's a joint venture, you don't get that visibility necessarily from the statement. So the dark blue line highlights the revenue in the HRMS trading business. Revenues in there are down GBP 20 million. This is predominantly due to volume reductions as Germany continues to be a bit of a difficult trading environment. But despite that, they will be able to obtain positive commodity pricing and in general, has put an extra EUR 1 per tonne on to their margin, which has meant that in the lighter green box, you can see HRMS has maintained its PBT despite the reduced revenue. So margins on that have increased as a percentage. Turning to DK, which is the steel waste recycling facility. Revenue is broadly in line, but what we're seeing is the loss before tax has actually improved by GBP 2 million -- apologies, EUR 2 million. That has improved as a result of an improvement in zinc pricing and also securing good quality and lower prices of input materials such as coke, which we've seen previously. You might ask what is made a loss in the first half. Why is that a positive thing? Well, DK would typically make a loss in the first half of the year due to the seasonality of it. Within the summer months, we have a shutdown where it's nonproductive and therefore, loss-making during that period. It's profitable in the second half of the year. So we expect DK to come back full year to be a small profit for the full year, which would be an improvement on the breakeven position it had last year. And with that, I will hand over to Simon to talk you through services. Simon Hicks: Thank you, Stephen. If we can just flip to the next one for me, Hargreaves Services, a business providing contracted services into infrastructure and industrial assets. What's key, and this is a quick reminder of our operating model that we introduced into the Capital Markets Day back end of last year, November, for me, it's about getting the right people in the right place, doing the right things at the right time. So we've got it under 3 pillars: inspire our people, which means getting more people and investing in our own people and developing that talented pipeline of skilled individuals are going to deliver for our customers. Back end of last year, I think it was in October, we brought Rachel Ovington into the business as our Chief People Officer. She's going to be driving that work stream forward so that we make sure we've got the right folk in the business, and we're investing in our folk. Shaun Hager, who you met at the Capital Markets Day, he's going to be driving the excellence stream that it's getting the right standards, enhancing our reputation, which is already very good in the marketplace, starting to innovate and develop different services and different solutions for our customers. And that positions us right square and center into the market where we'd like to win, which is in connecting people, delivering clean energy for the country and the environment. If we flip over to the next slide. Let's not forget that we're building off a very firm strong base here. We've got a base of 70-plus relationships and contracts that we've built up over the last 15, 20 years, some really long-term relationships with some blue-chip customers. What does that mean? It means we can be selective in how we enter into new contracts. We can make sure that we're not taking unnecessary risks. We can make sure the business and contracts we pick are inflation resistant. They give us limited credit exposures and that top line revenue, which is the driver of the EBITDA is resistant, and that gives us that opportunity to grow. In the first half, we're very pleased to see the margin is holding up 7% in the services business, really strong free cash flows and an excellent return on capital employed. The markets we're focused on connectivity, as I said, connecting people, which is ports, airports, rail, roads and indeed data centers. Across our footprint, we're active in many places in Asia where we're moving into operating on projects potentially in the airport, connecting people there. In the East Coast, we're operating ports and terminals, really good presence there. And in the infrastructure space, HS2 still there. We keep saying another 2 seasons. That keeps moving forward. You'll notice I'm going to come on and talk about a little bit about Lower Thames Crossing and our position there and Heathrow coming towards us and the government's recent announcements for Northern Powerhouse Rail. So connectivity, we still see a build there. In the clean energy space, we're building the temporary construction area supporting Sizewell in that construction with our earthmoving business. We can see SMRs and nuclear fusion coming towards us as we clear the ash fields at West Burton. And we've got a very strong presence supporting the energy from waste operators, not only supporting them in operating their existing assets, but also moving the waste into the plants using our logistics business and our environmental business, which supports in sourcing waste and diverting waste and blending that waste to make sure it's suitable to go into energy waste assets. So Renewables, we'll talk about in the Land business and energy storage, we'll talk about in the Land business and things like carbon capture and the great grid coming to waters. And of course, since we last spoke, the government announced Wylfa and Hartlepool as investments. Environmental space, Lincs and Fens reservoirs, we've already done some trial pits on the Lincs reservoir, and we'll be doing the other one in the spring. AMP8, we're now starting to see that move. It's taken a little bit of time to get that moving for the water companies, but we're starting to see that move, and we're having good conversations over the strategic reservoir for Thames talks about our waste management services, really strong land remediation business up in Scotland, where we're taking biosolids, and Sean talked you through this at the Capital Markets Day, how we're taking waste biosolids up to Scotland to remediate our land bank. And our minerals business has seen some good progress in finding secondary aggregate projects to take into some of these infrastructure projects. What we thought we'd do now is show you how that flows out in terms of time. At the left-hand side, the projects we're active in. We're active in the AMP8 cycle. Our land remediation process is moving forward and will continue for a number of years, and we're actively looking for -- to increase that land bank to extend that project there. As I said, we've started some trial digs for reservoirs, and we've been on the enabling works at Sizewell for some time now. Carbon capture coming towards us, great grid upgrade coming towards us. Lower Thames Crossing, I'll talk about on the next slide. Heathrow and Luton a bit further ahead and HS2, we're on and continue to see those volumes moving forward. And beyond that, of course, Northern Powerhouse Rail. So I think for me, if you look at where we are now, 2025, 2026, move forward to the late 2020s, 2030s, real strong pipeline of opportunities in infrastructure for us to take advantage of. Lower Thames Crossing, the roads north of the Thames in the Southeast of England. We've been working with main client there since 2024 on some of the advisory services. We believe the first works will commence very shortly into quarter 2 2026, and we are in agreed terms. We haven't signed a contract yet, but we're in an agreed position with Balfour Beatty on those enabling works. The future of that project moves forward. We'll see potentially if we're successful in this space, 150 items of our plant deployed and up to 200 personnel from Blackwell, our earthmoving business. So a really exciting project for us to be part of. It suits us in terms of timing, really works well as we come off HS2 and move down to lower terms crossing. So we're really well placed for that and really enthusiastic. And really importantly for us is the credentials on ESG for this project. It's our first scale deployment of battery electric heavy earthmoving equipment, which is driving us in that direction towards carbon-free earthworks. By 2040, and we're sourcing low-carbon primary aggregates to support that project. So really positive direction in ensuring that we're delivering against that pipeline of opportunities. In the next slide, what we've tried to do here was demonstrate to shareholders the strength and depth of our customer base. So if you look at this, we've got really a strong base of customers. Our customer concentration, as you would expect with those scale infrastructure projects is a top 5 of our customers account for 65% of those top line revenues contracted in long-term contracts with high-quality customers. If you move across to the top 20, that covers 80% coverage, and that's delivering around about 70% of our revenues, but a long, strong tail of customers underneath that, delivering that core business. So a good long tail of 30 customers delivering the balance of those revenues, those 30% revenues. Another interesting thing to look at, especially proud of for us is the length of the relationship we have with customers. So if you look at those that we've known for 3 years or more, 2/3 of our business is long-term relationships with customers that we've known for 3 years or more, and they typically award contracts an average duration of 4 years, 3.9 years. So we're seeing strong secured customer base from which we will build. And looking into FY 2026, we've got a 90% order coverage on what we have on our books and into 2027, FY '27, 55% coverage. And really importantly, as we've mentioned before, we've said this a few times, we thought we'd put a number to it, 94% of those contracts provide us with inflation protection. So a really strong base of customers and a good outlook for this business, which is testament to all the hard work that our teams are putting in across the land. So on that, I'll hand back to Gordon. Gordon Frank Banham: Thank you very much, Simon. So as everyone knows, Simon is coming to drive the Services Business I think, to be honest with all of you, as shareholders, I think he'll do a much better job than I do. That's what he's good at. I've transitioned us from coal to this point in time. And therefore, I think it's right that it will take, and it will be really fascinating to see how he develops the business from this platform. But in the meantime, the two other areas of the business I want to focus on are Hargreaves Land and Germany. Both have very clear strategies, very clearly measured deliverables. So remember, the first one is Hargreaves Land. So let's talk about that. So Hargreaves Land effectively has 2 parts -- well, 3 parts actually, if you can Renewables. So there's -- we've been this master developer, tied up a lot of capital. We've done bespoke commercial development. And that's where you can see in the balance sheet that Stephen mentioned earlier, about GBP 80 million of cash tied up. We've said to people though, the plan is to move that to much more your planning promotional work. Now that will have about GBP 20 million of capital employed, making about a 20% return on capital. So we're moving to that. What does that mean? Well, that means that you've got GBP 20 million left in, let's say, 5 years' time. So we're going to throw off GBP 60 million of cash from the land business plus the profits because remember, all that land is just held at cost. So as shareholders, you'll see GBP 60 million of cash is our plan over the next 5 years coming to you plus the profits. And then we'll be to a planning promotion business with about GBP 20 million tied up, delivering about 20% ROCE. Alongside that sits the renewables, and I have a separate slide to talk about that, and I'll pick that up in a second. So this next slide, these key events. So we did sell that first renewables tranche. Important point, we sold it at the value that was in Jones Lang LaSalle, so that should reassure you. We got upfront the nearly GBP 9 million, GBP 5 million deferred out to 2029. So we did what we said we were going to do. We are in negotiations to look at selling the next tranche, and we're hoping to deliver something to shareholders in the current calendar year. Blindwells, this is a big site now, over 450 people living there. It's a place where people want to live. It's just on the outskirts of Edinburgh. And again, as it builds out, you'll get your cash coming back, and that's part of this flow of GBP 60 million. Now this is the project pipeline. And this is really just a KPI for you to understand that, yes, it's easy to see how you're releasing all that cash, but are you getting that pipeline of GBP 20 million tied up that's giving you a return of about 20%. And this shows that, that pipeline has grown by 17%. So hopefully, it reassures you that not only will we harvest all the cash from the business that we promised to do, but then we'll be able to deliver this GBP 20 million of cash tied up, delivering about a 20% ROCE. People have said to me, God, why did you do Blindwells? Why did you do that master development? Why did you tie up capital? Well, if you think about it, we had to prove concept that we were good at this. It's now very credible to talk to people about developing their own land banks, having done the exemplar projects we've done. For instance, when we talk about Blindwells, it's the first new town in Scotland since 1966. So our skill sets are there. They're very credible. And we're now very much an established property developer. So that's really pleased to see. So Renewables, remember, Renewables is a finite resource. So when we talked this time last year, we'd have said GBP 28 million was the valuation. We've got that GBP 13 million for you, so tick, okay, some of it's deferred. And there's GBP 15 million left to go at. And we're having a go at getting that turned into cash for you over the next few years. We hope to announce something in this calendar year. But below that sits another 800 megawatts of assets that are being built on our sites if they get planning. So they're in the process, they're probably 5 or 6 years away. Their book value is negligible now because we've taken all the book value out on the previous assets. So some people are attributing a value of -- but remember, it's 6 or 7 years away of about GBP 15 million or further. Look, they've got to get planning. So let's be clear. But if they do and they get developed, then there's another potential upside, which isn't in the books. So when you add all of land together, you're going to end up with a GBP 20 million business delivering a ROCE of about 20% and then you're going to get cash of GBP 60 million plus the profits plus the renewables realizations. So I think that's quite exciting, and that's the business you'll end up with a much smaller land business, and it's a land services business. So I'm very confident that it will integrate very well into the business that Simon has. So Germany, so I think most of you know us, but again, we're getting followed by a lot of people who haven't seen us before, two businesses, DK Recycling and the Trading business. They work in combination. So we trade lots of material and we trade around that asset, but I'll talk about each individually. So the first one is the Trading business. Fantastic team that I've worked with over 15 years. Now I have been told, will this carry on forever. The trading team I've known personally, I trust them very much. But when they retire, my suggestion to the Board is we then close the business down, liquidate the balance sheet. Now they haven't told me when they want to retire. Simon jokingly said, if you're over there in Germany a lot, they'll probably want to retire earlier. But the plan is that I will work alongside that team, keep the checks and balances. They're a great team. When they decide to close, as I said on the Capital Markets Day, they usually have about 3 months inventory in flight. So let's say, we decided on the 1st of January to close it down. There'll be 3 months of inventory, which isn't in the books. That has, as you can see, about EUR 1 million a month profit that would deal with all of the closure cost redundancy. And then you just liquidate the stock in that process. So you can see very easily that you get your money back from that business. So the next side of it is DK Recycling. So most of you again know this, but for new people, we take coal and coke, iron ore. We combine it with steel dust. Now steel dust is getting less over time because as they close the blast furnaces in Europe, there'll be less and less dust. So that's one driver. We're okay at the moment. But longer term, it's a pressure. The opposite side was pig iron, zinc and energy. So energy means we produce our own energy from our own power station. So we're insulated from spikes in energy. Zinc prices are very good. We hedge it, very happy with the proceeds we get for our zinc concentrate. But pig iron has been on the floor, all to do with Trump and tariffs, et cetera. But we believe it's reached the bottom. And actually, we said to everyone, we'll start to see prices move on, driven by 2 things, which I explained at the Capital Markets Day about CBAM and the embargo on Russian imports. We're now starting to see the prices move up. For every -- so today, let's say, pig iron has a price of EUR 450. For every EUR 10 increase, you add EUR 2.5 million to the bottom line. So we're now starting to see the uptick. So this business is getting back to where it should be. Key issue, of course, is always a blast furnace. So you always got to manage that correctly. So there's operational challenges, but the markets we work in have reached the dip and now they're moving back up. So we think the outlook is quite positive, except for the slight caveat of there will be less and less dust over time, which takes us over the page. So really fascinating this area, and this is the reason that I decided to step down to spend the time in Germany because my job is to deliver value. As I said earlier, Simon is much better at running the services business than I am delivering a lot of value. So I will step down, but I will report to Simon. So my job is to commercialize this Zinc Recycling. Now the Zinc Recycling Project is going to cost us as shareholders about EUR 18 million. But fortunately, German government has already given us a EUR 2 million free grant. They've also agreed to give us a state guarantee, which we're just negotiating, which is another EUR 4 million. So as shareholders, the maximum risk is if this all blows up in our face, it's going to be EUR 12 million is going to cost us. And that's it. Nobody is going to put any more in. We're not going to run the risk. It's -- that's the number that I've agreed with the Board that we will get to. So we spend that money. When do we start spending it? We start spending it in March when we start building the building. And we've made it very transparent. So this is consolidated into the group's numbers. It's 86% owned by the PLC, 14% by local management. And Stephen and Simon, after July, we will keep reporting on this every 6 months to tell you on progress. This is a very exciting opportunity. So the risk of the downside, you know, it's EUR 12 million. There is no recourse to the rest of the PLC on the state loans or anything else. So that's your downside. Your upside, if it works, is that this plant takes zinc from electric arc furnaces, blends it with well, chemicals, the leaching process that's patent pending and you get out zinc oxide and waste dust. Now it's very fortunate because the low barrier to entries, we're building it on the DK site, so we've got all the permits, et cetera, et cetera. With the decarbonization of steel, there's some huge electric arc furnaces being built, which I did explain in the Capital Markets Day. And there they're producing a dust, which is 8% zinc, too high for DK, which runs on typically 3%, but too low for the technology for existing electric arcs, which are called voltaic kilns. So this sits in the sweet spot. And if it works when we turn it on, and I can guarantee you the first day we turn on, it won't work because these things never do. But if it does work and we make a success of it, we can not only deal with the new electric arcs of which we have a queue of customers want to fill our capacity but also I can deal with existing ones. And that gives us a business which conservatively, we're saying a 20% ROCE. So you do the math and you go, okay, you're spending EUR 18 million. So it's going to make EUR 3 million to EUR 4 million is what we think once it's running, subject to it working. We've been working on this project for 3 years. So we've had it stress tested by Imperial. We've had it stress tested by professors. We've had it stress tested. We run it through a pilot plant. It's now all about -- so the chemistry works, will it work at scale? I've now recruited the guys who are going to run the plant. I trust them very much. I'm going to be working very closely with them. It's going to be a lot of late nights and spanners and fixing things when we start it. But if we can prove concept, we will then have to very quickly build 2 more plants because we have a pile of customers, and then this can be taken to other parts of the world as well. So it's a really exciting opportunity. And to be honest, and I've always prided myself, I've been honest with you as shareholders, this is a moment for you to think about, if it goes wrong, and it might do, I disappear with the damp squib and it costs you EUR 12 million, cost me personally 8% of that number. If it succeeds, people have given indicative valuations of GBP 100 million or significantly higher of that. So that's your risk profile. I believe it's the greatest opportunity to in front of the group in the short term. So that's why I made the decision to step down our focus. So my focus will be here where I think I can deliver best value and Simon will do a much better job than I do in the U.K. So just let's tell us what we're doing. So next, Stephen, thank you, outlook. So hopefully, and I always welcome the opportunity to engage with retail shareholders, please, you're just as important as the people we meet in the city. So you can always contact Stephen, Simon and myself for any feedback even outside of this. So please don't sit there and wonder about something, ask us and if we're allowed to tell you, we will. So group outlook, I think I jokingly say at the start of this presentation, you saw 3 smiley faces. I think you understand why there was 3 smiley faces at the start. We have a very strong outlook. This is the start of the cash repatriation. It's GBP 15 million of cash. But if you do the math on what I've said, if everything executes as planned, there's about GBP 150 million to come over the next 5 years. So significant opportunity to repatriate cash to the shareholders. Dividend is important to some of you. So remember, when we do this tender offer, that will reduce the number of shares in issue, which will concentrate up the dividend. But as Stephen has already said, we've got this progressive dividend where we plan to beat inflation for you as we deliver that, hopefully, GBP 150 million of cash. Services, every faith in Simon, I'm backing in with my own money. Land, remember, as I said, you've got the GBP 80 million turning into GBP 20 million. You've got the renewables profit, you've got the profit on the sale of the land, easy. And it's on a 5-year time horizon, we've set a target. In Germany itself, we think the moving up of pig iron prices will help the U.K. the really interesting thing is DK zinc. One of the things I didn't mention earlier is it then produces a waste product, which can go into DK. So it helps replace some of the steel dust that may disappear in the next few years. So I think that's a great opportunity and exciting. So finally, again, for new people really, you have an experienced Board. You will still have me as a shareholder, and I will still maintain my 8% share because I believe in this business. So that's a strong message to you. I will be reporting to Simon, but I'll still be here. So I'm not running away. And one of the joking things I do say to shareholders down here is, if I appoint -- if I appoint Stephen as the CEO, you'd have many problems as he jokingly said. But Simon has come in and looked at the business and said he's happy with what's there. So again, you're not going to have that transition when the new CEO comes in and goes, oh, it's a part of rubbish and we have a reset. We've unfortunate -- or I have unfortunately put him in a position where he's had the opportunity to cry wolf. He hasn't found anything hidden anywhere. So I think that should reassure you that everything is clean in our balance sheet. And on that note, I would close and hand over for questions, which will come through Stephen. So Stephen, if you could pass the questions to us. Thank you. Stephen Craigen: Thanks, Gordon. We've got a handful in. There's one pre-submitted one, which I think we answered in the statement, but I'm going to read out anyway for completeness. What's the plan for the return to shareholders of the proceeds from the recent renewables disposal? That was sent through to us yesterday before the announcement went out this morning. So I hope we've cleared that up. In the announcement. But for completeness, GBP 15 million tender offer back to shareholders in April is what we are doing to deal with that one. Next question is from Peter. He's asking about the Unity scheme. Given that Unity is one of the largest infrastructure schemes in the U.K., why has there been so little mention of it by Hargreaves in the last 12 to 18 months of announcements? Gordon Frank Banham: [indiscernible] you take that do you want to take it? Stephen Craigen: I'm happy to take it. Gordon Frank Banham: Yes, of course. Stephen Craigen: I think on Unity, the reason we haven't announced too much is because we haven't completed too many sales in there, to be honest with you. And Gordon talked about in his slide, although you saw of skipped over a bit on the market outlook. Whilst the market for real estate has improved somewhat. It's not back to where it was. We've seen success in Blindwells in particular on sales, but Unity has been a little bit quieter. But in terms of what's happening at Unity, we have a website and LinkedIn feed, so you can see progress there. We've recently seen the opening of a McDonald's, a new McDonald's has opened there. There's construction starting on Starbucks, both of which were sales made by the joint venture. And we made a sale 3 or 4 years ago to TJ Morris, who are currently building out a large distribution warehouse there. So if you do drive fast, you'll see that going on there. So in terms of RNS and market adjusting announcements, we haven't made many. But in terms of the website and updates the general productivity we have done. So focus on the future is around getting residential interest in the site. We've seen an element of that, but it hasn't hotted up in the same way as we've seen at Blindwells. Positive thing about Unity is it's not going anywhere. The land is still there. It's on our books, net book value is around about GBP 5 million or GBP 6 million. So scalability, it's not the same scale as Blindwells, but it is still sizable and something that we're looking to realize. No concerns from the Board over realization. It's just a little bit slower than maybe it had been, and it's indicative of the market more generally, I would say. Gordon Frank Banham: And I think my comment to yourself would be one of -- you know how big that site is, and it's only on -- half of it's on our books at GBP 5 million to GBP 6 million. So I think you know that there's some problem coming when it moves. We're not in distress. We have cash. So we're not going to give it away. We're going to harvest the money when it's appropriate, yes. Stephen Craigen: So the next question is from Christopher, which I'll take this one. Thanks for the results for the foreseeable future. Are you committed to the AI market? The short answer to that is, yes, we are. There's no discussions currently, no ideas to shift marketplacing at all. AI has been good to us. It's allowed the business to grow, transition, as Gordon has outlined, from where we were to where we are now and giving us a really solid platform for growth in the future. So the Board sees no reason to move at the moment and remains committed to the market. Next question, I think, Simon, it's probably one for you from David. Can you comment on how landfill tax and the government's habit of increasing landfill taxes at intervals impact upon the business? How do we try and manage this? Simon Hicks: So landfill tax, of course, is the government and regulator trying to avoid putting stuff to landfill, which for me, having been involved in this sector for many years is the right direction of travel. What does it mean for us? We do quite a lot of movement of waste. We do movement of sewage sludges. We do movement of hazardous waste. We do movement of materials that are difficult to deal with unless they go to landfill. And the more increasing landfill taxation becomes, the more it pushes customers, our customers to solve those problems and more it pushes us as Hargreaves to help and support them find solutions. We're already on that journey. We're investing in pieces of equipment, particularly in the central belt of the country where we can provide things like a bail and wrap service or a shredding service or blending service where we can use material that's pushed out of landfill and blend it in and make sure that it goes to the right home, it's disposed of in the right way, some will go to incineration or indeed driven up in terms of recycling. And some of the co-products we're getting into our aggregates work stream is material that's being recovered from those lines of waste that would have ordinarily gone to landfill. So I think personally, it's the right direction of travel for the industry and Hargreaves are there to support and provide solutions in the long term for the customers that are impacted by that. Stephen Craigen: The next two questions are from Ilvana, both sort of related. I think you joined the session a little bit late, which is why you've asked the questions, but they're quite long. First one is around about the Renewables in terms of the price that we achieved. So you've asked what price did we get versus what the independent valuation is and what do we expect future valuation to be. So if I can just quickly cover because we have already done that. We received valuation -- the cash we received is in line with what the third-party valuation is, albeit some of it is deferred over the next 4 years. And then in terms of future valuation of the remaining near-term Renewable schemes. We've got an independent valuation of GBP 15 million on that, which is in a previous slide. Given our past experience, no reason to believe we won't achieve at least that, not in a position to say we'll do better than that at the moment. And then you're also asking around timing. We will time it when we're able to maximize or optimize the value. I'd expect the next tranche, as Gordon mentioned previously, to occur within the next 12 months or so, but we'll maximize value for shareholders rather than grabbing the cash as quickly as possible. And then Eldar has also asked where -- what the source of the GBP 150 million cash is. So again, some of it is the land sales. I think Gordon outlined GBP 60 million to GBP 80 million coming out of the Land business. And then the remainder of the, I guess, the other GBP 70 million to GBP 80 million is coming out of the German business. So effectively realizing the land assets and then realizing the HRMS investment, which is either through an organized wind down or a disposal of some sort in the future would be what generates that return of cash. So next question is possibly for you, Simon, from Brian. Good to see sustainability piece at place in the current business. What are the plans of the management team to move into the next phases having North Sea Wind, Alliance, biofuels, green methane, ammonia, hydrogen, et cetera? Simon Hicks: I guess we provide -- particularly in our services, we provide the service to our customers who are investing in many of those things. It's important for us to be across that providing a service when it's necessary and following ESG of decarbonization of our customers or being ahead of it. For example, we run biofuel vehicles in the Northeast for moving one of the County Council's waste around. We've got renewable assets on our facilities. We're moving petroleum coke around for P66, which goes into batteries and into EV cars. So we're following other people's decarbonization journey. What we're encouraging in the teams is to anticipate that and innovate and provide solutions in advance. So if biofuels for instant biosolids can't continue to go to land as we talk about landfill, it's up to Hargreaves to work with itself and its partners to find solutions for our customers so that they can modify or invest in their assets. Absolutely, lots going on in that space, and we're across lots of it. So that's where we add the value in a sustainable way to our customers. Stephen Craigen: And we've only got one more question left, which is from Jagdish. Why not do share buybacks rather than a tender offer? I'm happy to take. The challenge is we have such a wide shareholder base. Some shareholders want a buyback, some would like a tender offer, some would like a special dividend. So we have to land at some sort of a balance. The benefits -- the challenge of doing a buyback with the shares in Hargreaves, we have a challenge around liquidity, which you may or may not have noticed in the market, getting hands on Hargreaves shares. If we do a buyback, what we risk hoovering up some of those liquid shares and parking them and further damaging liquidity. So the view is the tender offer gives all shareholders the opportunity to equally participate rather than us hoovering up loose shares in the market. So on balance, the Board felt the tender offer was the fairest approach, but we're not doing that in isolation. Don't forget, we've also increased the dividend by more than inflation and more than brokers had in their forecasts. So we're trying to treat shareholders as equally and fairly as possible whilst acknowledging we have quite a wide base of shareholders. So that's the main reason we kept that decision. Operator: That's great, Stephen, Gordon, Simon, if I may just jump back in there as you have addressed all those questions from investors today. So thank you very much indeed for that. And of course, the company can view all questions submitted today, and we will publish those responses on the Investor Meet Company platform. But Gordon, before we redirect investors to provide you with their feedback, which is particularly important to the company, could I please just come back to you for some final comments? Gordon Frank Banham: I'd just like to say, look, thank you to all the people that have supported me and the company over the years. We've had an interesting journey, I think, for those that have been with us long term. I welcome new people to the story because obviously, that's important. We are a very approachable management team. We see the value in retail investors. So please feel free to contact us any time. In terms of -- I think it's really exciting. I think with Simon's leadership, we've got some great opportunities to take forward. I will still be here at the full year because I'm responsible for this year, we're delivering the numbers. So I hope to go out on a high and hand over in a good place to Simon, but then I also hope to come back some time and go out on a high for you with the zinc project. But I'm sure everyone will keep you aware of progress on that over the next couple of years because in a couple of years, it will either be going or it won't. So it's going to be a big focus for me. But look, thank you for taking the time to listen to us, and have a good evening. Operator: Fantastic. Thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the Board can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of Hargreaves Services plc, we would like to thank you for attending today's presentation, and good afternoon to you all.
Per Hillström: Good morning, ladies and gentlemen, to this presentation of the SSAB Q4 report. My name is Per Hillström. I'm Head of IR at SSAB. And presenting today, we have our President and CEO, Johnny Sjöström; and CFO, Leena Craelius. And if we look at the agenda, Johnny will start with an overview of the year and the quarter. Then Leena will cover the financials more in detail and then Johnny at closing with the outlook and the summary. And at the end, we will have good time for questions. So by that, the floor is yours, Johnny. Johnny Sjöström: Thank you very much, Per, and good morning to all of you. I will start by going through the summary of 2025. First of all, if you look at our safety performance during 2025, we can see that we had, again, an improvement in our lost time injury frequency, so we came down to the level of 0.56 which is, according to me, a good achievement. I think also, I want to point out that the total recordable also reduced, and that's also a work that we've been focusing on for quite some time. Now going over to the revenues. The revenues were slightly lower than they were last year, if we look at the full year outcome, then again, the market has been weak. So it's understandable. There's been a lot of turbulence related to the geopolitical situation, tariffs, et cetera, that has created a lot of uncertainties. Hence, one of the reasons why we ended up on a slightly lower revenue level. Then if you look at the operating result, we came out on SEK 6.1 billion for the full year. I think that even though the market has been very weak, first of all, we have a very strong geographical diversification with significant production in United States as well as Europe. But also, I think that our premium strategy, selling unique products, generating unique customer value is supporting us when times are a little bit tougher than they usually are. And then, of course, I think that especially the SSAB Europe worked on the cost side, and we're able to improve the financial performance slightly. We also came out the net cash position for the end of the year ended up on SEK 11.6 billion. I think that's also a good achievement based on the fact that we have a lot of investments ongoing. We have a very strong balance sheet. I think also I'm very happy with the financing package that Leena was able to put together that strengthened our situation and our position. Then also the Board has proposed that we should have a SEK 2 dividend per share that will be decided in the AGM meeting further on this year. Speaking of premium strategy and the direction we're heading, there are a few things that I want to point out. Continuously, we develop new grades for certain applications or environments. One of the grades that we have developed recently is a grade called Hardox HiAce. It is designed for wear assistance in application where you have sort of a corrosive environment, targeting the stainless steel grades. It comes with a superior hardness, but also a superior wear resistance in aggressive environment, and it's very, very cost competitive because it's much leaner compared to stainless steel. I also want to point out the investment ongoing in Mobile to increase our capacity of unique grades. Not long ago, we extended the [indiscernible] furnace giving us more capacity, but we are also currently investing in what we call a tempering loop to be able to produce more of the advanced steel grades. Even though we had some turbulence last year when it comes to tariffs and the challenge to import material from Sweden into United States, we were still on a higher level when it comes to advanced high-strength steel to the automotive segment. So I think we came out pretty much on the same level as 2024. We haven't seen much of the reduction of volumes being sold in the United States so far. I think also that one of the things that I want to point out is that we have developed tailor-made steel grade for the automotive segment, which is the Docol high edge, which comes with a high edge ductility. So when it's stamped or processed, if we have edges, which are much, much more leaner and not -- we don't have those kind of shipments you can get for advanced high-strength steel. So tailor-made for certain applications in the automotive industry, highly appreciated by the market. And then also, we launched a new complex phase deal. It's a collaboration together with Gestamp. I think what's unique in this case is that we're sort of targeting to increase the strength in the chassis, which is quite new, actually. So the chassis will then have a higher strength, and with the high strength, you can actually reduce the thickness of the sheet material, making the car lighter, but also you consume less material, which is also good for the environment, but also good from a cost perspective. And then last, but least -- not least, I want to point out that we have for our color-coated side produced by SSAB, but then further processed and sold by Ruukki Construction that we are now continue to develop our sort of environmental offer to the market. And here, we were able to produce a coating using sort of what we call a rapeseed oil, which is quite unique, and it makes it very, very bio, very much environmental friendly, which is also an area we are continuously working on. So very pleased about that. So there has been a lot of talks about the tariffs and the turbulence we have related to it. It creates a lot of uncertainties on the markets, of course. But once again, I just want to highlight that we have significant production in the United States, and we have significant production in Europe. And that makes us less vulnerable to these kind of initiatives. I also want to point out that CBAM was implemented in Europe from the 1st of January, that will have a positive impact. It increases prices, but also will change some of the trade flows because there will be difficult for some of the countries to actually export to Europe. And then again, we also have on the table of the European Parliament to decide on the safeguards and that will also, what we believe have a positive impact on the European market. I also want to highlight the transformation projects that we have ongoing. What you see on the picture to the right is the transformation project in Oxelösund. Here, we are replacing old blast furnaces with a new electric arc furnace. And the building you see to the right is actually the electric arc furnace building. It is developing really well. I think that we have done a good job when it comes to project completion. And we have planned a production start-up in the beginning of 2027. And then if we look at the Luleå project, which is a larger project, it is also a way for us to reposition SSAB Europe to produce and sell more of the unique premium steel grades, primarily for the automotive industry. So we have done the groundbreaking ceremony. We got the environmental permit, and we also continue with agreements with both customers as well as suppliers. One thing I want to point out is the sort of the agreement to get our hands on high-quality scrap and one of the things that we signed during 2025 is the Volvo Car agreement, which is also seen as a highlight for both parties for them more the circularity, but for us, it's more getting our hands on the premium scrap material. Then going into the divisions, looking at Special Steels, we believe that the shipments, even though they were somewhat lower in Q3, then again, we had a very extensive maintenance outage during Q4 in Special Steels that had a big impact on our ability [Technical Difficulty] material, but still, I think that we delivered on a higher level than we did Q4 last year when we had the same situation. Special Steels can also see some improvements in the activities on the European market. I think that's quite positive. The market has been quite -- on the lower side for quite some time. And now gradually, we see some positive signals on sort of the European market, and that has been identified by Special Steels, particularly. And of course, we have an increasing demand for protection steel because of the market situation. The operating result came in on an expected level. Then again, I mean, if you have a maintenance outage, it comes with a cost and it comes also with higher unabsorption. So we -- this was expected. So nothing strange. We also have to say that prices went down a little bit, but we also have some exchange rate effects on that. Leena will get back to that in her presentation. And then if we move into SSAB Europe. I think that, first of all, they marketed for SSAB Europe is weaker. They are more sensitive to the spot market and the hot-rolled coil prices than other divisions. But despite that, I think they had delivered above our expectations when it comes to shipments, and they had higher shipments in Q4 compared to Q3. And we were a little bit concerned about their operating results, but they did a lot of measures, first of all, cost saving measures, but they also improved the capacity utilization hence, giving us a better performance than we expected. Looking at SSAB Americas. I think that also they came in -- we had a maintenance period as well as SSAB Americas and normally the sort of the shipments goes down. But I think that they had a great achievement, especially in December, shipping out a lot of material. They've had a strong order intake; hence, they were able to sort of fulfill the demand and ship out as much as they could, a great achievement by the whole team in Q4. And they ended up now on expected result level. And I think that they have been suffering from a weaker U.S. dollar, if we translate this into Swedish krona; otherwise, the outcome would have been much better. And then for our 2 subsidiaries, supporting the business plan for SSAB Europe. We can see that the shipments for Tibnor were slightly higher than Q3, but it's still a very weak market, and we also have a very strong seasonality into North, just like we do in Ruukki Construction. And of course, the operating result came out on a lower end. We were expecting the volumes to be higher; hence, it has a negative impact on the result and that's exactly the same situation for Ruukki Construction, where both the volumes and the volume -- the lower volumes has a big impact on the operating result and that's mainly due to the weak market conditions. But we have high hopes for 2026, where we hope that and think that the construction segment is going to improve. So once again, I want to highlight our strategic direction and also the uniqueness of our grades. This is an application, not a big application, but it shows that our grades are unique. So this application is for power booster to charge cars and if you are on a sort of remote side on the country side where the sort of power lines are maybe not as strong, you're not able to actually charge the car very, very fast. But with this power booster, you can actually gradually use the power to transform it into kinetic energy. So you have a rotating part inside of this container. It rotates extremely fast. And with these loads and with this velocity, you need a material that has a very good fatigue strength, and that's exactly what our material can offer; hence, the reason why they choose our material. I think in this case, it was pretty much the only material that they can use; otherwise, they would have fatigue cracks very, very, very fast. But it shows that we are selling into unique applications, but also that our products are unique and creates a lot of unique customer value. With that, I leave the word over to you, Leena. Leena Craelius: Thank you, Johnny. On the fascinating product description to fascinating financials. Let us start by looking at the shipment volumes first. Q4 performance was 1,515 kilotonnes, and it was actually improvement compared to Q3 as also illustrated by Johnny already. The improvement was 49 kilotonnes and 3%. And then comparing to previous year Q4 improvement was even further 67 kilotonnes and 5%. And if we reflect against the guidance we gave for Q4, we were actually spot on with Special Steels and Europe division and even slightly better in SSAB Americas. If we then continue to analyze the revenues, the Q4 revenue performance, SEK 22.1 billion, compared to previous quarter, a reduction of 4% and compared to previous year Q4 reduction was 6%, and this is indicating that the prices have developed downwards. And I will dive into that more in detail shortly. EBITDA performance. Q4 SEK 1.8 billion, a reduction compared to Q3, which was at SEK 2.9 billion. However, improvement compared to previous year Q4, which was SEK 1.6 billion. And in relative terms, this means that the Q4 '25 was 8% improvement compared to previous year level of 7%. Let us walk through the analysis related to operating result, and this is now comparing Q4 with the previous quarter. Q4 operating result, SEK 756 million compared to SEK 1.9 billion during previous quarter. And here illustrated in the graph, we have a negative impact with the price development. On average, prices were 3% lower. And the biggest contribution here coming through Europe division, with just over SEK 0.5 billion negative impact, followed by Americas SEK 240 million and Special Steels SEK 165 million. Tibnor prices were flat and Ruukki Construction prices slightly lower. And as already Johnny mentioned, here, we also have a slight impact with the FX and also with the product mix. But that's illustrating rather the seasonality during Q4. Volumes were 3% higher and positive impact, a net SEK 115 million. Europe division, 41 kilotonnes higher; Americas 10; and Special Steel volumes were flat quarter-on-quarter. Variable cost positive impact. Raw material costs were lower. However, we have offsetting effect here with the maintenance outage cost. And also maintenance outage costs impacting the fixed cost. But to remind that these are also seasonally higher during Q4 compared to previous quarter, which was the vacation period. And also to highlight that, yes, we did have saving actions both in Q4 and Q3. So perhaps the year-over-year is illustrating better the savings performance. But here, the net effect is SEK 570 million negative impact on EBIT. During Q4, the production activity was higher and thus the positive impact related to capacity utilization. And this is mainly now related to the Europe division rolling performance. Maybe to remind that during Q3, the maintenance outages were in Raahe, Borlänge and Luleå. And during Q4, the maintenance took place in Oxelösund, Mobile and Hämeenlinna and the cost of the maintenance was quite much higher during the fourth quarter. Similar comparison, but now year-over-year. Q4 performance '25 over Q4 '24. Performance Q4 '24 was SEK 487 million. And the only negative impact coming through with the prices, while all the other elements having a positive impact. Prices were 8% lower. Europe division, Special Steel division, both contributing over SEK 600 million negative impact, while Americas had a positive impact. But as already mentioned, the FX did have a big significant negative impact in prices. Total FX impact in this analysis is SEK 840 million negative, which, on the other hand, is having a positive impact in the variable cost side but on a lower level. Volumes already mentioned, 5% higher. And here, the biggest contribution coming through Special Steel division, 17 kilotonnes higher volumes followed by Europe division, 28 kilotonnes and Americas 12 kilotonnes. So all steel divisions performed better year-over-year. Variable costs, positive, SEK 345 million; raw material costs were lower, but this partially offset by the maintenance cost. And this year, it was slightly higher than the previous year. And already mentioned the saving actions and here illustrated well that the fixed cost year-over-year were lower, SEK 430 million. We had the time banks in use and a lot of saving actions throughout the organization and the outcome illustrated here in this graph. Production activity was higher and a positive impact with the capacity utilization and the revaluated balance sheet items also just below SEK 70 million positive impact. Cash flow. If we firstly look at the quarterly performance over previous year Q4. EBITDA, as already described, slightly higher than last year. Very similar trend when it comes to working capital, a positive impact during both years. And here to remind that we have the seasonal impact, we have winter stocking taking place during Q4. So rather large raw material invoices posted to Q4, which will be paid out in Q1, which will then lead that Q1 will be seasonally negative impact. R and C CapEx, maintenance CapEx, slightly higher but well in line with our guidance, just below SEK 3 billion the full year. The other line here is related to the CO2 emission allowance transactions. During Q4, it was a positive. Financial items here. As you can see, during this year, we do have the cost related to Luleå financing, the prepayments and premiums being paid out. This has a cash flow negative impact. However, we are activating these to the balance sheet, so not the same effect in the P&L. And of course, also the cash position is slightly lower compared to previous year and to remind that the interest rates has also developed lower when it comes to interest rate on cash. Strategic investments, significantly higher. And here, of course, the driver being the Luleå investment project. And on full year level, to remind that the dividend was during '25 lower and '25 Q1, we still had the share buyback program ongoing, which we didn't have during '25. This leads to net cash position, SEK 11.6 billion at the end of '25. And this is still very well in line with our financial target when it comes to net debt equity ratio plus/minus 20% as the outcome is minus 17%. If we do a short bridge over previous year, end cash position versus the outcome this year, we start from the SEK 17.8 billion, and then we add the cash flow from current operations, SEK 6.5 billion and then we subtract the strategic investments, SEK 7.2 billion, the dividend SEK 2.6 billion, then we need to take into account the revaluation of U.S. dollar-related items. As Johnny already mentioned, the Swedish crown has developed during '25 around 20% stronger versus U.S. dollar. So that does have an impact in the net cash position as well. And the proposed dividend is SEK 2 per share, and that will be proposed to the AGM and then paid out in Q2 '26. Raw materials prices, market prices have been developing slightly downwards during second half of '25. And that is also illustrated in our savings in variable costs. We don't foresee that the prices would develop upwards, rather remain stable and our consumption cost as well or slightly even downwards. When it comes to iron ore, to remind that the lag in the cost impact is 1 quarter and with coal -- coking coal, it is slightly longer, it is 1.5 quarter. It's a bit different view with the scrap prices. They have remained flat during the second half, but have started to increase towards the end of '25, and we have seen that they have continued to increase. So they will have an impact in the margins for the Q1. Maintenance cost. This table is illustrating the plan for '26. The outcome '25 was SEK 1.410 billion and on the similar level planned to be '26. The difference with the '25 and '26 is the schedule when it comes to U.S. mills. During '25, we were maintaining Mobile mill; while during '26, the plan is to maintain Montpelier mill, thus a bit different spread over the quarters 3 and 4, but on a very similar level. And then the guidance, CapEx guidance. This we have already presented during our Capital Market Day. The performance during '25 was just above SEK 10 billion. That was well in line with what we have been guiding for this year. Strategic CapEx landing on a level of SEK 7.2 billion and maintenance just below SEK 3 billion. Plan is to have similar maintenance CapEx for '26; however, increase the strategic CapEx, which will be SEK 10.5 billion for '26. And if I split this SEK 10.5 billion to major strategic projects, just below SEK 3 billion belongs to Oxelösund, around SEK 6 billion to Luleå and just below SEK 2 billion to other strategic projects. And also refer to the emission allowance plans for '26. Our estimate is that the cash flow impact will be very similar during '26 as it was during '25. The impact during '25 was this SEK 724 million and around SEK 740 million, we have estimated to be the impact on '26. And we also want to point out that we have started our digital renewal project to modernize our IT landscape. Of course, this is needed. And also this is supporting the strategic investments, especially Luleå minimal investment. We started during '25 to do the design phase for these digital projects and now we are progressing with the build phase. And these projects will be followed under the Other division, and they will be posted as operating cost. We cannot capitalize all of it. And our estimate is that on annual level, the increase in the operating cost when it comes to Other division is around SEK 200 million. This is the annual estimated impact of these projects. But with this, I give it back to Johnny. Johnny Sjöström: Thank you very much, Leena. And I will try to give you a short outlook for 2026, and I will start by going through the customer segments. I think besides this, I think the largest impact on the European steel industry is going to be the safeguard decision done by the European Parliament as well as, of course, the CBAM, which is already implemented. But besides that, I think for SSAB, we believe that the heavy transport segment is going to sort of remain neutral for us. We believe that there is some strong upside in the shipbuilding not only here in Europe, but also in the United States. So that is clearly a sign, but also we see the rail transport in the United States is stable or maybe a little bit stronger than stable, that's what we see. And then we have the Automotive segment. We know that our advanced high strength steel sales are increasing. And now when we might need to move some of the sales that we do ship material from Europe to United States that might be moved to European customers as well. Since we have a limited capacity, we will be able to sell this to European customers, I'm not so concerned about that because there is an interest for advanced high-strength steel where they are able to make the cars much lighter, so there is sort of a demand for it. But of course, so the red part of it is uncertainty regarding the tariffs and the turbulence related to United States and the timing here. And then we have the Construction Machinery. We see some improvements in North America. It's been also a very turbulent and production being moved from Mexico to United States and so on. And a lot of our customers are a little bit confused, but it's stabilizing right now. We see sort of increased demand, and that's also helping us. I think material handling, which is mainly related to mining, that is a very strong segment, it has been strong for quite some time. It is a very important segment for us and also especially for Special Steel, where I think that maybe more than 50% of their sales is related to sort of mining in some -- one way or another. And that is -- and it's upgoing with the gold prices, the silver prices, rare earth metal prices going up, new mines are being opened up everywhere. So even though it says neutral here, I think it's on a higher level. And then we have the Energy segment where we see a strong demand, especially United States, we see -- we've never had as much pipe orders as we have right now, mainly related to oil and gas. But we also have energy transmission, which is also very, very strong. And here in Europe, we have sort of the renewables, wind power, et cetera. The Construction segment is on the lower side. We are carefully thinking that the segment will improve second half of 2026. But it's -- right now, we -- it's rather low activity. And then the service centers, they have a low inventory level in the United States. It's likely that they will be restocking, which is the seasonality that we see, the pattern that we see. And to some extent, the inventory levels in Europe are somewhat high. I think that a lot of service centers took opportunities to buy some extra material before the CBAM and potentially also the safeguards. But of course, those inventories will not last forever. So what we're guiding for, for Q1 2026, and here, we have a very strong seasonality. So we're quite confident when we look at the shipments, same pattern as last year that the shipments will be significantly higher for Special Steels. It will be higher for SSAB Europe and then somewhat higher for Americas. And prices remain stable for Special Steels, but we expect the prices to somewhat increase a year for Q1 and then the same thing in the Americas. Remember that there are some lead times to order intake price and then when we actually get the invoiced price increase. And then to conclude, we have a weak market situation, we had for some time, but we are mitigating it with our strategy, our very clear strategy to develop and sell more premium strategy, more focusing on generating unique customer value. But we also have a geographic diversification that supports us when there are tariffs, let's say, in the United States. And we have done cost measures that resulted in a positive outcome. We have had a strong focus on safety and that also given results. And we had stable earnings, especially in SSAB Special Steels that continue to develop even if the market is sort of tough. Our strategic investments are according to plan. And then last, but not least, the Board are proposing a dividend level of SEK 2 per share. So with that, that's my conclusion, my summary. Per, so I'll leave the word over to you. Per Hillström: Thank you, Johnny, and thank you, Leena. We can then prepare for the Q&A. [Operator Instructions] So by that, operator, please present the instructions for the Q&A. Operator: [Operator Instructions] And now we're going to take our first question, and it comes the line of Kaleb Solomon from SEB. Kaleb Solomon: First, maybe on your price guidance for Americas. It was somewhat higher for Q1 despite sort of a significant currency headwinds given that the dollar has continued to weaken this quarter. So can you just clarify, is that based on USD spot prices, meaning does that exclude translation effects? Leena Craelius: In the price guidance, we don't speculate with the FX impact. So we are discussing in that aspect only, the underlying pricing activities. So no speculation on FX. Kaleb Solomon: Okay. That's clear. And on Nucor's call yesterday, they sort of mentioned the EFA ramp-up costs totaling around $500 million for '25. And I know that's across a few projects, but can you give us any sort of indication of what that figure could look like for Oxelösund? Per Hillström: You mean a specific cost for the ramp-up phase, is that what you refer to? Kaleb Solomon: Yes. Per Hillström: Yes, we've been talking about a little bit double manning, but we haven't specified... Johnny Sjöström: We -- yes, we have a clear plan. We know exactly where the costs are going to be, but that's not something that we go out with public. It's a part of our sort of cost structure where we will have some double manning. We run the blast furnace as well as electric arc furnace for a period of time. So we have a clear plan for -- we also know exactly the impact of it that was taken into account when we did the budget for 2026. But we haven't really published any numbers related to it, and we prefer not to do it either. Operator: Now we're going to take our next question, and the question comes from the line of Adrian Gilani from ABG Sundal Collier. Adrian Gilani Göransson: Yes. Just starting off with a follow-up question on the Oxelösund transition, not so much on the cost, but rather the time line. How long do you expect to actually -- for it to take to ramp up the electric arc? And how long do you plan to run the 2 furnaces in parallel? Johnny Sjöström: No. I mean, I think the difference between other projects is that we're only replacing sort of the melting part, the primary part of the production. So it's replacing the blast furnace with electric arc furnace. Hence, the other processes doesn't need to be qualified. As long as the chemistry is right, the qualification period is going to go pretty fast. So we have -- it's -- can I say how much time we're planning for or is that something, we can... Per Hillström: Yes, yes, we can indicate... Johnny Sjöström: So the plan we have is 6 months for the total qualification of the new grades. And for the grades that we are producing in Oxelösund, there are not a strict customer qualifications. So it's more what we can promise to the market. So it is easier than it normally is to other sort of segments and applications. So hence, the reason why we're very confident on the time frame here. Adrian Gilani Göransson: Okay. Understood. That's helpful. And then another one more short term on the Q1 guidance for Europe, where you guide for 0% to 5% higher prices. Just looking at the market indices and factoring in your typical lag effect, it doesn't seem like you're realizing the full uptick on the market price in -- at least in your guidance. Can you say a few words about why that's the case? Johnny Sjöström: I think what you said as well is just the delay and the lag. So normally, when we enter Q1, most of the orders has already been planned for. We have already agreed with the customers. We have a lot of quarterly pricing and so on. So hence, the reason that the effect will be postponed, so we will rather see a bigger impact in Q2. Leena Craelius: And as Johnny mentioned, we have these quarterly contracts and annual contracts, so those are not priced according to spot pricing. So not the full spot price development can be impacting the Europe division. Operator: Now we're going to take our next question, and the question comes from the line of Alain Gabriel from Morgan Stanley. Alain Gabriel: Back to the Q1 guidance, on the Special Steel pricing, you're talking about flat Q-on-Q, which -- and I guess, which reflects also the weakened markets that you've touched on. But can you give a bit more color on why prices are not following the upward trends in European HRC? And is that a mix effect as we head into Q1? That's my first question. Johnny Sjöström: Yes. I think for the Special Steel pricing, it doesn't really follow the hot or cold pattern at all. It's more related to what kind of segments you're planning to sell to and kind of geographies you're planning to sell to. Special Steels is different compared to the other 2 divisions because they have global sales and active in a lot more segments. And so I think that the indications that we've given now for Q1 is because we believe that we will be selling in sort of other geographies that we know that the average prices have been somewhat lower. So that gives you some explanation. But we believe that we do have some potential to increase prices both in Europe and also in the United States going forward. But for Q1, we pretty much know what's going to happen. Alain Gabriel: Okay. And then my second question is on the Oxelösund start-up as well. I think the wording in your statement is heavily caveating the power connection and the appeal process. Should we interpret this as suggesting that you are less confident about the start-up date as compared to last quarter, for example? Johnny Sjöström: I mean, first of all, I just want to address that the project is following and developing according to our time plan. And we're doing a great job with that. But we are dependent on getting the power to the site. We're depending on the company erecting this power line, which is 72 kilometers long. And we can only listen to what that company tells us. And they tells us that it's according to plan, and that's all we know for the time being. We know also that there has been some appeals for the -- some of the permits, and that's also what we included in the report. The consequences and effect of that, we cannot really assess at this point. So we thought it was vital information, so we added it into our report. Operator: Now we're going to take our next question and it comes from the line of Reinhardt van der Walt from Bank of America. Reinhardt van der Walt: I just want to go back to your comments around inventories. So you mentioned that inventories are somewhat higher. Can you just give us any details around which specific grades and products you're seeing those elevated inventories in? And then can we also just get a read on what you're seeing in January so far? And whether the inventory build you think has been more CBAM related? Or is this maybe some kind of demand anticipation? Johnny Sjöström: Our interpretation at least is that it's probably more CBAM related, especially in some areas and from some geographies, we can see that there was a massive pickup of inventory. One of the areas I want to point out is the color coated. We saw a significant amount of color coated material coming in from especially Korea to Europe because they knew that the CBAM would have a negative impact on the prices and so on. That's just one example, but we could also see that on hot-rolled coil, to some extent, cold-rolled as well, especially in Italy for some of the countries delivering where they will be concerned about what's around the corner. But I guess that's all I can go into right now when it comes to details. Otherwise, it's going to take too much time. But like I said, the inventory will not last forever. So this is probably a quarterly effect or a quarterly consequence. Reinhardt van der Walt: Yes. That's fair. And can I just check on construction. You mentioned a neutral outlook. We have seen some of the leading indicators in the construction industry pick up and in some cases, quite sharply. So is the neutral 1Q outlook just because of some lags, some delays in that activity coming through? Can you maybe just give us any sort of read on at least where you see the trajectory of construction activity maybe as the year goes on? Johnny Sjöström: Now well -- especially for Q1, we have a hard time to see that there's going to be any great improvements for Q1. However, with the German infrastructure project and so on, there are a lot of things ongoing. There are a lot of things around the corner and things are about to pick up. And when I speak to the CEOs of big construction companies here in Sweden, they are more pointing at that it's very likely that things will start to happen more in the second half of this year and that is also what we are sort of hoping for or seeing as well when we're assessing the market. But for the time being, we don't think there's going to be any rather -- any pickup in Q1 at least. That's our take on it. Operator: And the next question comes from line of Tom Zhang from Barclays. Tom Zhang: So both on the U.S. The first one, just on your raw material cost guidance. And I guess you've guided 0% to 5% higher raw material costs, but we've seen scrap sort of add $50, $60 year-to-date basically. So is that 0% to 5% higher raw material costs already baking in spot scrap prices or was that set maybe a little bit earlier because I would have seen scrap up at least 10% already? Per Hillström: Yes. Sorry, Tom, there is no -- when it comes to the percentages that refers to the prices; when it comes to raw material, our commentary is a bit more loose and it's not related to these percentages. So just a start there, it can be a little bit deviation from what you see on the price guidance, which is much more stricter. Tom Zhang: Okay. Okay. But still, you're saying cost of raw materials are expected to be somewhat higher compared to prior quarter and spot scrap is up 13%. I guess my question is, is somewhat higher raw material costs in Americas consistent with what you're seeing in spot scrap markets? Johnny Sjöström: For the quarter, I would say yes. And what we do is we look at reports and make a lot of assumptions based on those reports. And then we have the seasonality. Typically, the scrap prices in United States goes down in Q4 and then it goes up again with the demand in Q1. The scrap market is very supply-and-demand sensitive like most of the business in the United States, and the demand is now increasing, hence, the reason why the prices are going up. Tom Zhang: Okay. Fair enough. And then just on U.S. pricing and plate pricing. So you flagged a bit of demand now coming back in energy. You flagged low inventories in the U.S. I guess, imports have started to come off in Q4. So the pricing dynamics that we've seen, I guess, kind of makes sense to pay prices coming up. But then it looks like it's mostly just been offsetting these higher scrap prices so far. Do you see the room for actual plate spread expansion through the next couple of quarters? How quickly do you think that can come or do you think demand is still just a bit too muted? Johnny Sjöström: No, I think there's room -- we have room to increase the spread. I think that when we announced our price increases we were not aware that the scrap prices were going to go up as they did. So I think that we're going to work on pricing going forward. I think there is room for us to sort of increase our spread. That's what we think at least. Operator: And now we're going take our next question, and it comes from the line of Igor Tubic from DNB Carnegie. Igor Tubic: I just wanted to ask you about Special Steels. In the Q3 guidance, you indicated that both prices and raw material costs would be somewhat lower, but given that volumes were relatively flat in Q4, margins still declined. So could you please elaborate a little bit around the drivers behind this and what we should expect going forward? Johnny Sjöström: Yes. I think Special Steels is probably the division has the longest sort of lag between purchase price and consumption price. So it's extremely long. It's maybe -- sometimes it's 6 months, 7 months before we buy raw material and then the consumption price. So -- and it's -- when we do this kind of guidance, we're looking at sort of the purchase price compared to -- and I guess that's where it gets a little bit confusing, but that's really what it's related to. Igor Tubic: Okay. And the other question is, have you seen any -- with regards to the CBAM, has there been any impact on volumes? or would you say that import levels remain broadly unchanged compared to before? Johnny Sjöström: I think imports level now in the beginning, at least, have slightly being reduced. There's a lot of confusion on how to do it. And also, if you're qualified and get also the approval for sort of importing into Europe. Hence, the reason why the import level has reduced somewhat. I mean, eventually, of course, importers will learn and they will understand how it's done. But we also strongly believe that the import supply chains will change significantly, and there will be some countries that will go down to almost nothing. It's very, very likely. So there will be a time now where supply will change -- the supply flows will change, also some time for importers to understand how it's done. And also, how do you pay for it at the end, when do you buy the certificates. A lot of confusion right now. And that's, I guess, beneficial for the European steel producers. Operator: And now we're going to take our next question, and the question comes from the line of Anders Akerblom from Nordea. Anders Akerblom: So firstly, I wanted to ask just high level on EU safeguards. If we see the sort of reduction in the magnitude that might be expected, could you share anything in terms of what market share gains you expect to have versus competitors? And also, how quickly you can adjust production to sort of capture these volumes? Johnny Sjöström: First of all, SSAB's utilization level has always been quite high. I think European utilization in general has been rather low. I think it is communicated to be around 60% to 65%. We are way much higher than that, which means that if, let's say, that this decision is made and the safeguards are in place, of course, we will be able to ramp up a little bit, but we already have a high utilization level. I think the big impact will be the price changes and the supply and demand change. So there will be a period of time where the demand will be high and the supply will be limited because during the last 2, 3 years, blast furnace has been closed down, capacity has been closed; hence, there's going to be a gap between supply and demand in the beginning and hence, the reason why we believe that there's going to have an impact on prices. And that, of course, is going to be very beneficial for SSAB. I think -- did I cover all your questions there or your question? Anders Akerblom: Yes. Yes, you did. And with regards to a lot of tariff questions, but in the U.S. Section 232 tariffs, could you share anything on your sort of long-term plan for Docol AHSS exports to U.S. automotive? Will you continue sharing costs with customers, requalify with European OEMs, develop domestic U.S. capacity? So anything there would be interesting. Johnny Sjöström: Yes. So we're looking at all of those options, of course. And first of all, when it comes to this continuous [indiscernible] that we have, where we can actually produce these unique products, it has been pretty much fully utilized for the last 4, 5 years. We have decided to sell this capacity into United States or some of this capacity into United States because the margins has been -- have been higher. But it's not like we have to. There is a demand for it also in Europe. So there is a list of potential customers that we are now talking to and has -- we also been qualified to supply to them. So when there is a sort of lower demand from the United States, we will shift it over to supply to European customers instead, and that is sort of in the making as we speak. And then, of course, there is still a demand for our products. So it's -- and we don't really understand where they're going to get these products from because you cannot produce it locally. So they either have to downgrade or, I don't know, some other solution. We are, of course, looking at all options, but the volumes are not big enough to do any large initiatives, especially if you can sell these capacities to someone else. Yes, we're looking into all options and see what we're going to do on that. Operator: And now we're going to take our next question, and it comes from the line of Cole Hathorn from Jefferies. Cole Hathorn: Just 2 my side. The first one is on the order books for your plate business in the Americas, and we had Nucor talking about a substantial improvement in the order books. I just love comments around what are you actually seeing in your order books there? And then secondly, it's just a follow-up on how do you think the wider industry is going to adapt to the import quotas? I mean you've been quite clear that you've got higher operating rates versus the industry, and you're going to benefit from the pricing. But if we're going to need an incremental 10 million tonnes of domestic European production to displace imports over time, where do you think those 10 million tonnes of production is going to come from? Is Europe in a position where we can ramp up the volumes to meet that need? Johnny Sjöström: Yes. And -- I mean, if you go back 10 years ago, for sure, we had that capacity in Europe. And then some of the factories and some of the blast furnaces have been idled. And I honestly don't know if they can be restarted again. It's likely they could. But I'm thinking that there will be a delay. There will be a gap. It's going to be hard to fill that you still need to import some volumes into Europe. I don't -- I'm not so sure that we will be able to ever fill the full gap because of the time that we've had with limited prices or margins to support sort of some of the production in Europe that we've had, to answer that question. I think your first question was related to... Per Hillström: U.S. order book. Johnny Sjöström: U.S. order book, okay. And for just to say, and maybe I'm revealing something that wasn't in the quarterly report, but we have been fully utilized in the United States in our 2 factories. And our utilization levels are extremely high. So of course, we are continuously working on operational excellence, we're working with AI to optimize our output and we have been quite successful during last year, enormously successful, I have to say, to get more material out from the factory that we are using. I think the difference between us and Nucor is that they have a new factory where they have sort of a lower utilization. For them, this will sort of have make a difference. I think, again, coming back to what I said about Europe, I think what is the main driver for us is the price increase that we will see around the corner. Operator: Now we're going to take our next question, and the next question comes from the line of Maxime Kogge from ODDO BHF. Maxime Kogge: So first question is on the cold weather conditions in the U.S. I was wondering what kind of impact it would have on your shipments and your scrap procurement in Q1? If all of that was already incorporated in your guidance? Johnny Sjöström: No, I think that we learned a little bit last year where we had some impact from extreme weather that had an impact on transport of scrap to Montpelier. The consequence was only for a few days. But since we have sort of this lean concept and try to keep the inventory levels as low as possible, I think we learned from that and we built up a slab inventory that was much, much higher than it usually is. And that was a safeguard, just to be on the safe side, just in case something happened. So to answer your question, we are more prepared for this year than we were sort of last year. Maxime Kogge: Okay. Fair. And the second question is on the defense business. If we take stock of 2025, how are volumes compared to 2024? Are you perhaps going to increase transparency on the volumes the same way as you do on auto for this business because there's a lot of market expectations on this topic? And yes it's just related to your recent Rheinmetall contract, are you facing any limitations in terms of quality due to the use of green steel? That would be my second question. Johnny Sjöström: Yes. We haven't decided yet whether we're going to reveal the volumes and be that transparent on it. And we also need to be a little bit cautious because we don't want to say to potential tariff or whatever, where we produce and how much we produce, it might have a negative impact. However, we know that companies like Rheinmetall, [ KDW, ] we also have Patria in Finland and Hägglunds in Sweden, they have tripled their capacity just to be able to supply what the market needs. And even if they've done that, they still have very long lead times. This will have a positive impact on us going forward. But it's -- the delay and the lag here is much longer than you might think. It takes years until we actually start supplying to these kind of projects because they want to secure that they have cabling, semiconductors, computers, all of that before they start ordering the steel plates. And I think they've had some challenges in the past. I think it's been resolved a little bit right now, but if you ask me in 2 years, the situation is going to look much, much better when it comes to deliveries and a major increase, I guess, in protection steel compared to now, but even though it's better than '24, we believe it's going to be much better in a couple of years. Per Hillström: Operator, just reminding of the time. We have time for 1 more question. Operator: Yes, of course. And now we're going to take our final question for today, and the question comes from the line of Bastian Synagowitz from Deutsche Bank. Bastian Synagowitz: Just maybe a quick one on Specialties. Just from the demand you see in the customer conversations you have, would you be confident enough to say that 2026 will be the year when you will get back on the growth track you are aiming for the business? Or is it just too early to say? That would be my first question. Johnny Sjöström: No. I mean, I've learned after Russia attacking Ukraine and after the pandemic and after the tariffs, I've learned, that's really, really hard to predict what's going to happen in the future. But if there aren't any geopolitical issues or topics then I'm very optimistic that we will have a growth. And this growth can come fast. It's just a stability on the market, then the growth will come fast. Bastian Synagowitz: Okay. Great. And then one more question on the FX side where we've seen significant volatility and maybe one for Leena. But from the presentation, it seems like we have not seen much of the effect in your results yet. But from [Technical Difficulty] you provide, I guess, this could be more than a SEK 1 billion impact given that it's mostly a dollar market, and there would obviously be some impact from translation. So could you please help us to understand how far you are hedged short term? And how we shall expect the FX to flow through your numbers? Maybe also, can you help us to understand how your commercial approach works, particularly in the business like the Specialty Steels business where you're obviously doing a lot of, I guess, overseas business. So which percentage of your invoicing here is actually in dollars and euros versus krona? That would be very helpful. Leena Craelius: I don't have the percentage to give you, but you're absolutely right that Special Steels sales currencies are sort of in U.S. dollars, euros and also other exotic currencies. And we do hedge the net cash position with accounts payable and receivables. So we are hedging, but we don't do, for example, equity hedging. And as already mentioned, the benefit with the prices or the negative impact of FX in prices is to some extent then offset by the positive or negative impact in raw materials because we are purchasing a significant amount of raw materials in U.S. dollars. So the combination of all these then is sort of the hedging policy that we have. Bastian Synagowitz: And what is roughly the duration in these hedges? Is this the 6 months, is it a 12-month rolling or... Leena Craelius: No, we do it on an ongoing basis. Bastian Synagowitz: And -- but how long, like for example, we have like obviously roughly an 8% move in the currency in the course of the fourth quarter. So how long would it typically take then until we see this coming through via the translation effect? Leena Craelius: I don't have that kind of answer to give you. Johnny Sjöström: I think what Leena also said in her statement is that, I think the biggest impact comes from the natural hedging, which is that we purchase so much in U.S. dollars, we purchased U.S. dollar for the European production if you talk about iron ore or coal or whatever it is, all of that is purchased in U.S. dollar. But then for Europe, we sell in euro. So we have a very strong natural hedging. Bastian Synagowitz: And the fact that you're guiding for stable input factor prices, I guess, dollarized or SEK terms for iron ore and coal, obviously, have been down 16% to 24%, so are you fully hedging the raw materials as well? Leena Craelius: No. No, we don't. We have very small portion of commodity hedging, but that's very, very limited. So I would not even mention it. Johnny Sjöström: Yes. And hedging comes at a cost as well. So yes. Bastian Synagowitz: But then why are you guiding for flat cost in Q1? Johnny Sjöström: Because most of it we have already purchased and agreed on. Leena Craelius: Yes. It is the consumption cost that we have for the inventory. Per Hillström: Exactly, Bastian, is the estimated consumption cost, you can say, slab cost now looking into Q1. Leena Craelius: Yes. Per Hillström: Okay. Thank you. And that concludes today's conference. Thank you, Johnny. Thank you, Leena. Thank you, the participants. And we wish you a nice day.