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Operator: Good afternoon. My name is John, and I will be your conference operator today. I would like to welcome everyone to the KB Home 2026 First Quarter Earnings Conference Call. [Operator Instructions] The conference call is being recorded, and a replay will be accessible on the KB Home website until April 24, 2026. And I will now turn the call over to Jill Peters, Senior Vice President, Investor Relations. Thank you, Jill. You may now begin. Jill Peters: Thank you, John. Good afternoon, everyone, and thank you for joining us today to review our results for the first quarter of fiscal 2026. On the call are Jeff Mezger, Executive Chairman; Rob McGibney, President and Chief Executive Officer; Rob Dillard, Executive Vice President and Chief Financial Officer; Bill Hollinger, Senior Vice President and Chief Accounting Officer; and Thad Johnson, Senior Vice President and Treasurer. During this call, items will be discussed that are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future results, and the company does not undertake any obligation to update them. Due to various factors, including those detailed in today's press release and in our filings with the Securities and Exchange Commission, actual results could be materially different from those stated or implied in the forward-looking statements. In addition, an explanation and/or reconciliation of the non-GAAP measure of adjusted housing gross profit margin as well as other non-GAAP measure referenced during today's discussion to its most directly comparable GAAP measure can be found in today's press release and/or on the Investor Relations page of our website at kbhome.com. And finally, please note all figures are based on our quarter ended February 28, and all comparisons are on a year-over-year basis unless otherwise stated. And with that, here's Jeff Mezger. Jeffrey Mezger: Thank you, Jill. Good afternoon, everyone. We are pleased that our first quarter financial results were within our guidance ranges. Operationally, our divisions continue to execute well, and we achieved our highest community count in many years, contributing to year-over-year growth in net orders. Perhaps most importantly, we have returned to a mix of sales that are predominantly built-to-order, which we believe will enable us to achieve 70% built-to-order deliveries in the second half of this year. We have a renewed focus on this core strategy as a central component in strengthening our company going forward. With the lag between sale and delivery for built-to-order homes, we expect to continue growing our backlog. A larger backlog will provide many benefits, including greater predictability in our deliveries and higher gross margins than we achieved on inventory sales, typically in the range of 300 to 500 basis points. As to the details of our first quarter results, we produced total revenues of about $1.1 billion and diluted earnings per share of $0.52. We continue to have significant financial flexibility and remain balanced in our capital allocation, investing for growth while also returning capital to our shareholders. We repurchased 843,000 shares of our common stock at an average price below our current book value per share, which we believe is an excellent use of our cash, accretive to both our earnings and book value per share and a factor in improving our return on equity over time. Inclusive of dividends, we returned almost $70 million in capital to our shareholders in the first quarter. In addition, we continued to expand our book value per share compared to the year ago period to over $61. Consumers have been faced with a variety of challenges over the past 2 years, and the conflict in the Middle East that began at the end of February has added another layer of uncertainty. Against this backdrop and taking into consideration that our net orders in the first quarter were below the level we needed to hold our prior year -- our prior full year delivery guidance, we are lowering our range for the year. Rob McGibney will provide more color on this in a moment. Before turning the call over to Rob, I want to congratulate him on his promotion. As part of our long-term succession plan, Rob assumed the role of President and Chief Executive Officer on March 1, and I transitioned to Executive Chairman of the Board. Rob is a proven results-oriented leader with a deep understanding of our business gained over the past 25 years with the company. He began his career at KB Home in our Las Vegas division, historically our largest and most profitable, where he rose to Division President and then continued on in roles of increasing responsibility within the company. Rob has worked side-by-side with me during the past 5 years while running our homebuilding operations and both the Board and I are confident that he is ready to lead KB Home forward. With that, I'll turn the call over to Rob. Rob McGibney: Thank you, Jeff. I am honored to step into the role of CEO and excited about KB Home's future. With our distinguished brand, differentiated product offerings and industry-leading customer service, there are significant opportunities to create value for both our homebuyers and our shareholders. In addition, our strong financial position provides us with flexibility and the ability to support growth of our business over time. One of the traits that defined our operations in fiscal 2025 was consistency in our operational execution that led to meaningfully improving our build times and tightly managing our direct costs. We will continue to focus on these key areas in fiscal 2026 together with our renewed focus on our built-to-order strategy. We are confident the multiple advantages of our BTO model will ultimately result in a stronger company. We remain optimistic about the long-term housing market with favorable demographics supporting higher demand over time, together with the structural undersupply of homes. Near term, buyers continue to demonstrate the desire for homeownership and the ability to qualify, although tepid consumer confidence, elevated mortgage interest rates and affordability pressures have stifled underlying demand. More recently, the conflict in the Middle East has created more uncertainty for an already cautious consumer. In the first quarter, healthy traffic in our communities, a steady conversion of traffic to sales, the lowest cancellation rate we've experienced in the past 4 years and our higher community count drove a 3% year-over-year increase in net orders. While the growth in net orders is clearly a positive at 2,846, our sales were below what we needed to maintain our prior full year delivery guidance, as Jeff noted. The meaningful improvement in cancellations reflects high-quality committed buyers who are ready and able to purchase a home and also supported net orders at an average absorption pace of 3.5 per month per community. Although this pace was slightly lower year-over-year, we remain focused on our long-standing annual average target of 4 net orders per community to optimize our assets. Most importantly, our order mix demonstrates a deliberate and strategic shift in how we are positioning the business for the long term. We are returning to our core built-to-order model, a foundational element of how KB Home operates. This is how our teams are trained, how we manage our communities, and how we create value. While this will result in a temporary trough in deliveries for the first half of the year, as the higher level of BTO homes we are selling now will benefit our third and fourth quarter deliveries and we have intentionally slowed our inventory starts, it is a purposeful reset that positions us to be a stronger, more predictable company in the second half of the year and beyond. We are making considerable progress increasing our built-to-order sales. They represented 44% of our net orders in October, growing each month through the first quarter. We exited February at 68%. And in the early weeks of March, we are now above 70%. Built-to-order homes typically generate between 300 and 500 basis points of incremental gross margins compared to inventory homes and as a result, have a greater percentage of BTO deliveries will drive higher margins -- having a greater percentage of BTO deliveries will drive higher margins. As we increase our mix of built-to-order homes, we are building a solid backlog, a solid sold backlog that has not yet started construction. This backlog provides greater visibility into future deliveries and revenues, improves efficiency in our starts and production processes and gives our trade partners clearer line of sight into their upcoming workloads. In turn, this predictability supports better execution and over time, contributes to more favorable cost structures. We can leverage the pending starts into more favorable bids and keep our trade partners on our job sites, which is more efficient and further improves build times. Internally, our cost structure benefits from managing the even flow production. With the makeup of our net orders in the first quarter, together with our expectations for BTO sales in the second quarter, we anticipate reaching a turning point in the second quarter in growing our backlog relative to the prior year period. As a result, we expect to drive sequential increases in deliveries as we move through the back half of the year. More broadly, we view this as more than just a mix shift. It is a reset back to our core operating model that extends well beyond the current fiscal year results, which will allow us to operate with greater precision, less volatility and stronger alignment among sales, starts and deliveries. It reduces the need for speculative inventory, lowers our exposure to pricing swings and supports more disciplined capital deployment. Over time, we believe this will translate into a more durable and differentiated business, one that is better positioned to generate sustainable margins and returns across cycles. We also expect our deliveries in the second half of this year to reflect a more favorable regional mix with increased contribution from our Northern California businesses. Our communities in these markets have historically had higher ASPs and higher margins. More of these community between now and with deliveries projected in the third and fourth quarters and beyond, we expect to see the benefits in our financial results. Finally, with greater delivery volumes at higher ASPs in the second half of the year, we expect to regain operating leverage on the fixed cost component of our gross margin. Our ability to build homes more efficiently continues to be strong. We had already achieved our company-wide target of 120 days from home start to completion on built-to-order homes in the fourth quarter of fiscal 2025, yet we further improved in this critical area in the first quarter, with a sequential decrease to 108 days. This is an important factor in the value proposition of a BTO home from a customer standpoint relative to the time it takes to purchase a resale or an inventory home. Shorter build times also allow our customers to lock their mortgage rates more easily and cost efficiently. In reducing our build times, we have now meaningfully expanded our selling window within the year. Last year, it took us about 5 months to build a home, which meant early spring was the latest we could sell BTO homes for same-year delivery. Today, with build times closer to 3.5 months, we can continue selling BTO homes for same-year delivery into the summer. The result is simple. More of what we sell this year turns into deliveries and revenues by year-end, which improves both our volume and cash flow. We ended the first quarter with 276 active communities, the highest count we have had in many years, up 8% year-over-year. We achieved 37 grand openings in the first quarter, in line with our target, and project another 30 to 35 community openings in our second quarter. These new communities will contribute to a peak for community count sometime within our second quarter at the height of the spring selling season. With more communities, we are positioned to drive more sales and our new communities typically sell at a stronger initial absorption pace, benefiting from the newness and excitement of grand openings and supported by our disciplined community opening process. As we look beyond the second quarter, depending on the pace of sellouts, we expect the community count to step down somewhat in the second half of the year. Our production is in better balance today with a total of 3,353 homes in process, split between 70% sold and 30% unsold. This balance aligns with our expectation to increase our BTO deliveries to at least 70% of our total in the second half of this year. As to direct costs, we continue to benefit from lower trade labor expense in most markets, but there is some pressure on material costs from lumber. We are managing our lumber locks strategically and drawing on our deep supplier relationships to limit cost increases while also continuing to actively rebid our local and national contracts as well as value engineer our products and simplify our studio offerings to help manage our overall direct cost. Before I wrap up, I will review the credit profile of our buyers who finance their mortgages through our joint venture, KBHS Home Loans. Our capture rate remained high with 81% of buyers who finance their homes in the first quarter using KBHS. Higher capture rates help us manage our backlog more effectively and provide more certainty in closing dates, which benefits our company as well as our buyers. In addition, we see higher customer satisfaction levels from buyers who use our JV versus other lenders. The average cash down payment of 16% was fairly steady as compared to prior quarters, and equated to over $72,000. On average, the household income of customers who use KBHS was about $133,000 and they had a FICO score of 743. Even with 1/2 of our customers purchasing their first home, we are still attracting buyers with strong credit profiles who can qualify for their mortgage while making a significant down payment or pay in cash. 11% of our deliveries in the first quarter were to all-cash buyers. In conclusion, we continue to navigate market conditions with a focus on strong operational execution and disciplined adherence to our built-to-order model to drive results. We are confident that our personalized product offerings and transparent pricing approach are compelling for our buyers. Further, with an increasing number of communities in attractive submarkets set to open in our second quarter, and expected higher percentage of BTO deliveries as well as an anticipated regional mix weighted towards higher ASP, higher margin Northern California deliveries later this year, we believe we are well positioned for stronger results in the second half of fiscal 2026. And finally, as we continue to align our overhead to our delivery volume, we have taken steps to reduce our cost, including an unfortunate but necessary 10% year-over-year headcount reduction. While it takes a little time to see the impact of these measures in our financial results and our SG&A ratio is also a function of our revenue level, we do expect this ratio to be lower in the second half of 2026 as well. And with that, I will turn the call back to Jeff. Jeffrey Mezger: Thanks, Rob. We have a favorable lot position owning or controlling over 63,000 lots at the end of our first quarter, 41% of which were controlled. Our growth strategy remains primarily centered on expanding our share within our existing markets with the geographic footprint that we believe is positioned for long-term economic and demographic growth. Our approach toward allocating our cash flow remains consistent and balanced. We are achieving our priorities of positioning our business for future growth, managing our leverage within our targeted range and rewarding our shareholders through share repurchases and our quarterly cash dividend. We are maintaining our land investments at a level that will support our current growth projections and invested about $560 million in land acquisition and development in the first quarter with roughly 60% of our investment going toward developing land we already own. In closing, I want to thank our entire KB Home team for their commitment to serving our homebuyers and the discipline with which they've been executing our built-to-order model, which we believe will result in a stronger company going forward. Although market conditions remain challenging, we are focused on the appropriate levers to drive improved results, renewing our focus on built-to-order, reducing our build times, lowering our costs, opening new communities and staying balanced in our capital allocation. We plan to continue our share repurchase program in fiscal 2026 with between $50 million and $100 million of repurchases plan for our second quarter. Following the end of the spring selling season, we expect to have more clarity on our year. As a result, we anticipate providing margin guidance with our 2026 second quarter earnings announcement in June. We are committed to delivering long-term shareholder value, and we look forward to updating you as the year continues to unfold. Now I'll turn the call over to Rob Dillard for the financial review. Robert Dillard: Thanks, Jeff. I'm pleased to report on the first quarter fiscal 2026 results. As Jeff and Rob said, we continue to manage the business with discipline, with a focus on optimizing every asset by pricing to the market maintaining a healthy pace and delivering our built-to-order advantage. We expect that this strategy of providing a personalized home that the customer prefers will also benefit our financial performance as we shift the delivery mix towards higher-margin built-to-order homes in 2026 and beyond. In the first quarter of fiscal 2026, we were within our guidance range with total revenues of $1.08 billion and housing revenues of $1.07 billion, a 23% decrease on a year-over-year basis. We delivered 2,370 homes in the quarter. This result was near the midpoint of our guidance range as we continue to experience moderate demand from a cautious consumer. Deliveries benefited from a 22% reduction in build times for built-to-order homes to 108 days, a 9% sequential reduction. Lower build times increase capital efficiency and benefit volume, as Rob discussed. Average selling price declined 10% to $452,000 due to regional and product mix and general market conditions. Average selling price declined 3% sequentially due primarily to regional mix. Housing gross profit margin was 15.3% and adjusted housing gross profit margin, which excludes $2.2 million of inventory-related charges, was 15.5%. Adjusted housing gross profit margin was 480 basis points lower, primarily due to pricing pressure, higher relative land costs, regional mix and lower operating leverage. We continue to manage cost effectively and achieved an 8% reduction in total direct construction costs per unit. SG&A as a percent of housing revenue increased to 12.2% as lower costs were offset by a decrease in operating leverage. SG&A expense decreased 14% due to reduced selling expenses associated with lower unit volume and fixed cost controls. SG&A benefited from a favorable impact of an $8 million insurance recovery. While such recoveries occur from time to time, the absolute size and relative impact of this quarter's recovery was greater than usual. Homebuilding operating income for the first quarter decreased to $33 million or 3.1% of homebuilding revenues. Net income was $33 million or $0.52 per diluted share benefiting from a 13% reduction in our weighted average diluted shares outstanding. Turning now to our guidance. Our guidance for the second quarter and full year 2026 reflects the current uncertainty of the new home market, which we believe has been impacted by affordability concerns and recent geopolitical tensions. We continue to focus on controlling the controllables and have improved our operations with lower build times and lower costs. We believe that this operational improvement, combined with our strategy to shift to a higher mix of built-to-order homes will further benefit our financial results in the second half of 2026 and beyond, as Rob detailed in his comments. In the second quarter of 2026, we expect to generate housing revenues between $1.05 billion and $1.15 billion, based on expected deliveries of between 2,250 and 2,450 homes. Housing gross profit margin, assuming no inventory-related charges, is expected to be between 15% and 15.6% for the second quarter of 2026. Price will continue to be the primary driver for margin pressure as we balance price and pace for the remainder of the year. Margins are expected to be impacted by higher relative land costs, regional mix, and reduced operating leverage as deliveries are expected to remain below prior year levels. We expect to continue to partially offset this margin pressure with lower direct construction costs per unit. We continue to expect margins to improve in the second half of 2026, driven largely by positive operating leverage from typical seasonality and a more favorable regional mix with a shift to higher-priced, higher-margin West Coast communities as well as our strategy to increase the mix of built-to-order homes delivered. The second quarter 2026 SG&A ratio is expected to be between 12.4% and 13% due to expected reduced operating leverage despite cost controls. We had solid results, reducing both fixed cost and direct construction costs in the first quarter, and we expect this to continue in the remainder period of 2026. We expect our SG&A ratio to decline in the second half of the year due to lower fixed costs and increased volume. Our effective tax rate for the second quarter is expected to be approximately 19%. The tax rate is expected to trend higher in the second half of 2026 due to reduced impact of energy credits. For the full year 2026, we expect housing revenues of between $4.8 billion and $5.5 billion based on between 10,000 and 11,500 deliveries. This full year guidance is based on current market conditions. We anticipate refining full year guidance and providing additional details as we gain further clarity on the spring selling season. Turning now to the balance sheet. We continue to manage our capital with discipline. With a dual focus on funding growth and returning excess capital to shareholders with over $5.7 billion in inventories, a 1% sequential increase, we believe that we are well positioned to fund growth in the near and long term. We own our control over 63,000 lots, including approximately 26,000 lots that we have the option to purchase. We continue to invest in growth, as indicated by the $567 million we invested in land and development, while also exercising discipline through our rigorous underwriting standards, that resulted in abandoning contracts to purchase 3,400 lots at a cost of $2.2 million. We believe that this rigorous land process has improved the quality of our land inventory and will benefit future profitability. We're confident that we'll continue to identify and execute land opportunities, matching our consistent cash flow and considerable liquidity. At quarter end, we had total liquidity of $1.2 billion, consisting of $201 million in cash and $1 billion available under our $1.2 billion revolving credit facility. As with last year, the $200 million in utilization of our revolving credit facility is seasonal in nature. We have no debt maturities until June of 2027. We will continue to be thoughtful in managing our capital structure to ensure we capitalize on favorable market conditions to refinance any maturities. We continue to target a debt-to-capital ratio in the neighborhood of 30% to support our strong BB positive credit rating. We are comfortable with our current 32.9% ratio. Our strong balance sheet, combined with the returns from our operations has enabled us to return over $1.9 billion to shareholders in the form of dividends and share repurchases in the past 4.5 years. In this period, we have repurchased 37% of our shares outstanding, which we believe is the highest percentage of shares repurchased during this time among our peer companies. Returning capital remains a core part of our focus on delivering strong total shareholder returns in all market conditions. In the first quarter, we paid $17 million in dividends, representing a 1.8% yield, and we repurchased 843,000 shares for a return of capital of $50 million. We ended the quarter with $850 million available under our current repurchase authorization. We expect to repurchase between $50 million and $100 million of common stock in the second quarter. As we look ahead, our strategy is to enhance our results through increased operating rigor as we shift our delivery mix towards higher-margin built-to-order homes. We believe that this operating strategy when combined with our shareholder-focused capital strategy will maximize shareholder value over the long term. With that, we'll now take your questions. John, would you please open the line. Operator: [Operator Instructions] And the first question comes from the line of Matthew Bouley with Barclays. Matthew Bouley: So first, I guess based on the numbers you gave around inventory homes, it seems like the built-to-order orders really improved kind of beyond what you get just from cutting spec starts. So my question is, obviously, we talk about the sort of gross margin benefit, that's pretty clear. But when you talk about mixing the business back to built-to-order, maybe this will be a preview of your Investor Day a little bit. But what does that kind of more full and visible backlog do for your sales folks, your operators, what changes around your thought process on production and starts? Just any more color on why the business overall runs better relative to spec production. Rob McGibney: Sure. Matthew, thanks for the question. When we look at our built-to-order business, as I mentioned in my prepared remarks, it's really part of our DNA. It's how we set up things. It's how we look at the world, it's how we train our salespeople. So we're not surprised to see the shift to built-to-order. And part of it is just we haven't been starting the specs so we're not competing with ourselves in our own communities with both heavy spec load as well as build-to-order. But the benefits that it provides to the business in predictability. The first place I would go is that we've got this backlog of sold not started homes that we can leverage that gives us a cadence where we can operate on even flow production. That benefits all across the board, whether that's on our fixed cost or just managing to a consistent level of construction in our communities. Plus we can use that cash, if you will, of homes that we have sold not started because it also gives our trade partners visibility. And most of the markets that we're operating in right now, we're seeing starts are down pretty significantly year-over-year, and there are trade partners that are hungry for work. So that's the first place that we point to with this guaranteed sequence of starts that's coming up. You mentioned it, but one of the obvious ones is the big margin, incremental margin that we see within the same community, selling built-to-order versus the inventory. And from a customer's perspective, our view, my view is that we're creating something different. And it's not just treating a home like a commodity or a widget, where people take what's out there and available, but they're getting to create their own personal value by picking their lot, picking their floor plan, picking their elevation, going through the design studio process and really making that home their own and designing it to fit their needs and their lifestyle and fit their budget as well. Matthew Bouley: Okay. Got it. No, that's super helpful. Second one, just kind of jumping into the guide. So mean you talked about, I guess, removing roughly 1,000 deliveries from the full year guide. Q1 orders were up year-over-year. I know you mentioned that it wasn't the level you needed to hold on to the guide. What I'm trying to get at is, I guess, was that Q1 order number, the entire driver of the guidance change? Or is this -- should we also think you're trying to reflect any more recent shifts in the market in March or any other changes on kind of the progression towards built-to-order. Anything else that's kind of changed relative to when you gave this guidance in January? Rob McGibney: Yes. It's really the combo of the things that you mentioned. Part of it is the orders. Our orders while was a positive year-over-year comp, and we're pleased with the transition to more BTO sales, they were below our internal expectations that we had and how we built the plan for the year. As we get into the early part of March, there's a lot of noise out there. And we mentioned in our prepared remarks, this conflict in the Middle East that started right at the end of February. And we saw pretty good sales results in the first week of March. But the last couple of weeks have been a little softer than what we would like to see or what we normally get this time of year. And we just don't have a lot of visibility right now as I don't think anybody does into how long this conflict may go on, and how it's going to impact consumer psyche and confidence. But we feel that right now, it's weighing on the consumer. So those are really the 2 reasons why we adjusted the guide and provided a little wider range than we normally would for full year deliveries and revenue because of the lack of visibility we got into the short-term kind of acute nature of the market right now. Operator: And the next question will come from the line of John Lovallo with UBS. Matthew Johnson: This is actually Matt Johnson on for John. I appreciate the time. I guess, first, if we could just talk about gross margin a little bit. If I recall, I think last quarter, you guys had expected 1Q to be the low point for the year on gross margin. Now it looks like at the midpoint of your outlook, you're expecting 2Q to be down from 1Q. So can you guys just give us some more color on what's driving that kind of -- what's giving you guys confidence that margin will, in fact, ramp from 2Q to 3Q? And then just if you guys could give us some numbers, I think you gave some numbers on the mix of BTO versus spec orders, but if you give some numbers around the mix of BTO for spec deliveries in 1Q versus 2Q, that would be great. Robert Dillard: Yes. As we thought about the sequential mix on where gross profit is going to go, I think that we think it's actually relatively flat as we're guiding to a range, we're putting a range out there that we feel comfortable with. I think that if you think about the drivers individually between quarters sequentially, we don't expect meaningful changes in price, but we do expect to continue to get some delivery cost reductions. So I think there should also be some mix factor in there that's going to be driving it down before we see the ramp. As you think about the second half of the year, it's something that we've been talking about in the past, the shift of ETO should accumulate to an increase in gross profit margin. We do expect some seasonal unit uplift that we would -- that we've kind of -- that's implicit in the guide, that should have some uplift in margins. And then also further cost reduction should have a benefit as well. So it's really those 3 factors that we think are going to benefit the margins as we go through the year. We have pretty confidence in that because we're selling the houses now and marketing the houses now. And that's one of the benefits of the model is that we know the margins of the BTO house before we build it, whereas with the spec, you kind of never know until it's done. Rob McGibney: I'd add to that as we look out towards the back half of the year, I mentioned it in my prepared remarks, that we have a lot of things that are just structurally different that we see that are going to lift margins. And Rob mentioned the shift to BTO, leverage on fixed with greater scale. But a big one that I mentioned is the shift or the transition back to a bigger, better business in Northern California. So as we look to the back half of the year, we're getting deliveries from communities, from stores that are open in Northern California today that have a much higher ASP and have very healthy margins. And as those become deliveries, some of these average selling prices are between $1.2 million to over $2 million. So it has a big impact on the overall company margins, and we see that happening today. If you think about Northern California, we've gone through a little bit of a trough here with communities over the last couple of years. It used to be one of our biggest, most profitable businesses. And in that area of the country, it takes a really long time to bring lots to market. So we've been working on these things for years. They're finally here, we're delivering, and we like what we see, and it's going to provide a real tailwind for margins on the back half of this year. Matthew Johnson: Yes. That all makes a lot of sense. I appreciate all the color there. I guess then if I could just follow up on the direct costs, specifically, I think you guys said they were down 8% year-over-year, which is really strong, obviously, although it sounded like there are some puts and takes within that. So I guess if you guys could just talk a little bit more about the impact from materials versus labor within that? And then just any -- obviously, it's early days here, but any disruption from what's going on in the Middle East, just broader supply chain kind of what you're hearing from your suppliers in terms of potential price or availability impacts there? Rob McGibney: Yes. Overall, you noted the number year-over-year. We've made good progress with the things that we can control and value engineering our products and rebidding and renegotiating, reworking our national contracts. So that's all structural and will stand. Lumber has started to tick up here recently, and we've got various locks in a lumber strategy where we have different lock periods for different divisions. And there's potentially some tailwind or headwind coming from that as we relock some of these depending on what happens with lumber. But we think that our strategy is sound there, and I don't think that it's going to be a significant impact and likely it may just be an offset to further direct cost reductions that we'd otherwise be able to go out and get and achieve. As far as the impact from the situation in the Middle East, it's just really difficult to tell. With oil prices being higher, certainly, that can bleed into land development and vertical construction. And then a lot of the products that go into a home, there's petroleum that's involved in those products at some point. So potential cost increases there, we're hopeful that we can continue to offset that with some of the proactive things that we're doing, but it really is a total unknown at this point. We haven't seen it yet. It hasn't showed up yet in our cost. Operator: And the next question comes from the line of Stephen Kim with Evercore ISI. Stephen Kim: Yes, the move to BTO is very clear. It's obvious that there's some margin benefits there. With it, though, you're probably also going to see, you would think, slower backlog turns and maybe a temporary drag on cash flow. I'm trying to get a sense for what we should be thinking in terms of a going forward backlog turnover ratio in 2017 to 2019, pre-COVID, you were kind of running at like your exit rate of the year, your fourth quarter, which usually was your highest, was like kind of in the low 60s. I'm wondering, is that like kind of a reasonable level that we should be thinking about for the business to kind of return back to that kind of a level? Or do you think you can do better than that? I noticed you said your build time was like 3.5 months, that would imply a backlog turnover ratio of like 86%. So I mean just some guidance here or some color would be really helpful. Rob McGibney: We don't really think about the business that way. But I think somewhere between that 60% number and the 80% number is probably where we'll fall. The backlog turn that we've had has kind of been a false read versus what our typical business is because we're going into a quarter, and we may have 500, 600, 700 sales -- same-quarter sales and closings of inventory turn that weren't in that beginning backlog number. So it's pumping up that ratio. With our build times where we've got them, and we build the plan from the ground up when we do our quarterly and full year plans. And we're banking on the cycle time improvements, the build time improvements that we've gotten so far. But I think 70% -- 60% to 70% is probably a good target. Yes. Jeffrey Mezger: Steve, just to clarify one other thing. Our built-to-order approach is actually better with cash. If you think about carrying a couple of thousand spec homes that you have to sell and close, they're fully loaded and all the cash is out, and we're setting this up where it's real-time deliveries, the home gets completed, the loan is approved and the buyer goes and close. So it's actually better cash management. If you can just roll through the WIP sold at the percentage we're targeting. Stephen Kim: Got you, okay. That's really helpful. Then another side effect of moving to more BTO is that it potentially exposes you to higher cancellation rates. I know cancellation rates are super low this quarter. And it's -- one of the things I've been thinking about is that your customer deposits as a percentage of ASP are about 2%, which is pretty low even relative to other built-to-order builders, and I know you've traditionally run with some lower customer deposits than other builders. And I'm curious if you could sort of talk about why that is, why you adopt that as part of your strategy? And is that something that you might change going forward? Rob McGibney: Steve, I'd say it's something that we always evaluate, and we might change going forward depending on market conditions. When market conditions are really strong, it's easier to command a higher deposit. But today, with the way things stand, we don't want to let that deposit upfront be a major obstacle to somebody purchasing their home. And my view on it is that when somebody comes in and buys the personalized home and they go through that process that I described earlier, and they're creating their own personal value that's unique to them. That's as much of a hook is getting them to stay in the deal as the deposit is. So we don't anticipate that we're going to have real issue of cancellations. The backlog quality that we've got, the buyer profile is very healthy. They're creating their own value in their home. And we feel good about how we're positioned with that. Operator: And the next question comes from the line of Michael Rehaut with JPMorgan. Michael Rehaut: I wanted to first just revisit kind of the first quarter and March to date sales trends, which was obviously behind the guidance reduction? And also just better understand, if possible, how the year-over-year sales pace trended throughout the first quarter in terms of December, January, February? And if there's any incremental color in terms of at least on a year-over-year basis, how that kind of played into March. Rob McGibney: Sure. Our sales cadence or the order cadence progressed generally as we would expect seasonally, really improving each week as the quarter unfolded. And so we mentioned we delivered 3.5 sales per community for the quarter. And December was a slower start for us and put us behind on our year-over-year comp. Then we saw solid momentum through January and February and ultimately finished the quarter up 3% year-over-year. As to March, as I said, the last couple of weeks of March have been a little softer than we would have liked. And this conflict in the Middle East, I think, which kicked off right at the end of February, beginning of March, there's clearly some near-term pressure on the consumer psyche from that. And that's one of the things that's limiting some of the visibility in the short term. But as I mentioned before, we just -- we don't know how long that's going to go, or how long this will weigh on the consumer, but we've reflected that in, I think, appropriately in our guidance by taking a more measured approach with that, including a wider full year revenue and delivery range than we normally provide at this point. Michael Rehaut: Okay. That's helpful. I appreciate that. And I guess, secondly, with regards to the gross margin outlook for the back half. I know you talked about ASPs and the mix benefiting from California, more California in the back half of the year. I think it would be extremely helpful if there's any way to kind of size or give any type of rough degree of magnitude or range, 50 bps, 100 bps, 200 bps, however you want to characterize it, but any way to quantify perhaps the degree of magnitude of improvement that you're expecting in 3Q and 4Q gross margins relative to your 2Q guide. I think it would be very, very helpful for people to try and get their arms around, modeling and trying to anticipate what level of improvement you're thinking of at this point? Robert Dillard: Yes, Michael, there's a couple of key factors that we're thinking about that have been driving that second half margin uplift that are giving us a lot of confidence. The first one that we've talked about in the past is the BTO shift. And if you can just do the rough math around increasing BTO mix from where it is today to around 70% and then the 300 to 500 basis point differential in the margin there that equates to about 50 basis points of margin uplift as you get to that BTO mix and where we're targeting. Further, we've got regional mix in there, which is relatively meaningful. The difference in gross profit and some of those higher-margin communities can be as much as 1,000 basis points, and it's something that will have a meaningful impact just on that with the price. So things that you should consider there is that there will be a shift in the ASP that's just associated with mix, and there will be a shift in the profitability that's just associated with mix as well. Other factors are the reducing cost and then the uplift in units, which could have -- we're not really calling that, and that's the component that we're still thinking about, but that's anywhere historically in the range of 0 to 100 basis points. Operator: And the next question comes from the line of Alan Ratner with Zelman & Associates. Alan Ratner: Thanks for all the details so far. First, just on the pricing side and the strategy. Obviously, with the shift to BTO, I know you've also been focused on more of a base price model as opposed to a heavy incentive model. I'm just curious, as you look at your portfolio, obviously, there's uncertainty in the market and maybe there might need to be adjustments on the pricing side. What have you seen over the last month or 2 in terms of pricing at your communities? Do you feel like you've hit that point of where pricing has stabilized. I know you mentioned orders were a little bit below your expectations for the quarter. So are you still seeing a meaningful percentage of your communities where pricing is still drifting lower? Rob McGibney: Alan, as I always say, it's really a community-by-community story. Overall, pretty stable. About 70% of our communities during Q1 either had no change, or they had some level of small price increases. They were outpacing what our optimal projections are. We did have still about 30% of our communities where we've moved price down further and different degrees, depending on the community as we just work to find the market and optimize that asset. So changes from quarter-to-quarter. But again, that is a community-by-community focus, it changes, not just on a metro level, but a submarket level and then down to within the community, and degree of change, it can be anywhere from -- it might be a $2,000 change, or it might be $10,000 change. But we're making these incremental movements to try to hit the optimal pace to get the best return result out of each community. Alan Ratner: Got it. Okay. That's helpful. And then second, on your backlog, which is obviously growing here. I'm curious how you're thinking about the risk of higher rates now that rates are beginning to creep up again. And I guess what I'm trying to get at is, if you go back a couple of years ago, obviously, when rates surged, people that enter the contract expecting to close at a certain mortgage rate. You either had difficulty qualifying at that higher rate, or simply didn't want to move forward at that higher rate. And I know you're trying to get away from incentives and rate buydowns, but how are you thinking about the folks that might have written contracts over the last month or 2 when rates were 25, 30, 40, even 50 basis points lower than they are today. Is there a risk there? Are you working with those buyers to lock in a rate or a buy down a rate if necessary to get them to qualify. Just curious how you're thinking about that if rates do continue to move higher here? Rob McGibney: Yes, it's a good question. I'd say if you go back to what you were drawing the comparison to before in different markets, one of the things that was challenging for us there is the way that build times had expanded. And when you're getting up to 8 or 9 months from sale to close, you're exposed to a lot of rate volatility in that time period. And now that we're building in 108 days, we've got less time exposure there. Certainly, with rates being as volatile as they have been over the last couple of weeks, there's some exposure to a limited number of the homes that we've got in backlog. But generally, we're trying to get the buyers locked in with a loan before that home starts at least, if not before. So it's limited exposure to a subset of houses that we have in backlog, mostly in our sold not started yet universe. And if we need to and find that we have to, we're not so rigid on the no incentive approach that we're not willing to help out and do something to buy that rate down to keep that buyer basically in the same position. But it's something that we'll evaluate as we go. And rates have been bouncing around wildly from day to day. So when we hit the low spots, we're going to work to lock as many buyers as we can. Operator: And the next question comes from the line of Susan Maklari with Goldman Sachs. Susan Maklari: My first question is on the SG&A. You mentioned that you did some head count reductions. Can you talk about how comfortable you are with where the business is running today, and how we should think about that potential benefit and the flow-through of that coming in over the upcoming quarters? Rob McGibney: Well, Susan, I would say that the adjustments that we made were to adjust to the new reality of what our deliveries and our revenue and our production levels are. So as we look ahead, if the market were to improve and volumes go back up, I think there's some structural change in there that we'll be able to get the benefit of. But the moves that we've really made on headcount and other fixed cost changes are to rebalance and reposition things with where we now think revenues are headed for the year. Susan Maklari: Okay. All right. And then turning to land, can you just talk a bit about what you're seeing there? Has there been any adjustment on the land market? And what you're watching for to potentially start to ramp up some of your spend on that side? Rob McGibney: So we're still in the land market. We're searching every day for the right deals that fit our profile and that fit the return hurdles that we believe that we need to drive profitable growth over time. It's been a little more challenging on the land front to drive a lot of deal flow because the market has been pretty sticky with price. And there's patient land sellers that generally have not adjusted to the new reality of what's happened with sales prices and demand over the last year or so. As we look at our existing portfolio of deals or deals that we have under contract to purchase, we're having success with landowners in renegotiating terms. That's generally been the easiest thing to renegotiate, which is helpful on the financial side of things, too, because often, that means we're doing a structured takedown instead of a bulk purchase, or we're able to kick out the closing to tie back close of escrow on the land much closer to when we can start turning dirt in development of the lots or in some cases, actually going vertical on the houses. But overall, I think there's still some adjustment that's got to happen in the land market, to reduce the gap between the bid and the ask. At the same time, there are still sellers out there that have adjusted. And that's what we're really focused on is building up our portfolio with new deals that fit our return hurdles today based on current conditions and current pricing and costs. Operator: And the next question comes from the line of Mike Dahl with RBC Capital Markets. Stephen Mea: You've actually got Stephen Mea on for Mike Dahl today. I was hoping to dive more into the BTO versus inventory dynamic. The messaging of BTO typically being like 300 to 500 bps above inventory isn't really helpful. But I was hoping you could impact how this dynamic has been rolling through your most recent orders given all the adjustments to the base price you've had to make in all directions given the choppiness of the market but are you trending on like higher end, lower end, or is there any sort of potential expansion or shrinking of this delta like embedded within your outlook? Rob McGibney: Are you referring to the margin difference or the percentage of sales? Stephen Mea: The margin difference. Rob McGibney: I would say that, that stayed pretty consistent. We're able to -- we've got visibility on that on both the closing side as well as the sales side and haven't seen much of a change there. It's been pretty consistent in that we've got that 300 to 500 basis point delta where built-to-order margins are better than inventory. One of the things that I think we're starting to see now is as we have cleared out some of the inventory, and you don't have as much in a community, and there's buyers for that community that may want or need that quick move in because they've got an apartment lease or something that's coming up. So in communities where we've only got a handful of inventory, and we're primarily selling BTO, there's a little bit less of a reduction in the margin on those inventory sales versus where in the past, we've had quite a few to choose from, both in inventory that's completed as well as build to order. So as we're making this transition to the build-to-order, I think we're definitely getting higher margins on the build-to-order sales, and it will probably help somewhat on the inventory that we do have as well. Stephen Mea: Got it. That's so helpful. And then lastly, just a very broad question, just what you're seeing in your markets at a regional level, if you could speak to any notable pockets of strength and potential areas that are lagging just would be helpful to get a heat check considering all of the choppiness that's out there. Rob McGibney: Sure. Every market's got its own story. And there's places in each metro that are still doing just fine and selling very well, and there's places within the metros that are challenged. But from a regional perspective, we're seeing relative strength on the West Coast, including most of California, Seattle and Boise, Las Vegas continues to perform very well. Texas remains more competitive. Houston has held better with Austin and San Antonio, both grappling with higher inventory and just a very competitive market to secure those customers who are ready to transact. Florida is a little more mixed. Orlando and Jacksonville, I'd say are seeing better demand than Tampa right at the moment. But overall, pricing in Florida, I think, still has stabilized. It's just that the level of demand isn't quite producing the volume that we'd like to see. But every market's got its own story, and each metro has got those communities that are performing well and those that aren't. It appears to be maybe a little bit of a flight to quality with the top submarkets performing better than maybe some of the drive to qualify -- drive to qualified type communities, but that's not the bulk of our business anyway. Operator: And our final question comes from the line of Sam Reid with Wells Fargo. Richard Reid: Actually, I just wanted to confirm your start pace in the first quarter. I can back into that based on your homes in production, but maybe just wanting to confirm the number because I believe the math would imply something less than 1,000 units versus, say, the 1,800 that you started in Q4. And then maybe just piggybacking off of that, how start pace versus sales pace should look as we move through Q2, Q3 and Q4. Rob McGibney: Yes. So we've -- as we've mentioned, we've intentionally been pulling back on the spec starts and matching our starts to our built-to-order sales. So our starts were down, but it was right around 1,800. I believe it was 1,805 in the first quarter. So as we look ahead into Q2, we expect to generate more BTO sales and generate our starts from those sales. And right now, we've got a healthy backlog of homes that haven't started yet that are at the sold not started stage. And that's going to feed our starts over the next couple of months. Richard Reid: That's helpful. And then if it was already covered, I apologize. But maybe could you just give me the final expectation for Q2 on spec versus built-to-order. And any context on what spec versus build-to-order look like on orders for the first quarter? Rob McGibney: I walked through the cadence on that earlier. So I don't know, Rob, if you have the overall average. But we exited February at about 68% BTO. And January and December were slightly below that. But kind of looking at that as the rearview mirror. So as we go forward, we know we left -- we exited February 68%. Early March, we're tracking above 70%, and we think we'll maintain that or get at least 75% as we move through Q2. Operator: Ladies and gentlemen, thank you. That does conclude today's teleconference. We thank you for your participation. You may now disconnect your lines.
Operator: Good day, and welcome to the Noah Holdings Limited Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note today's event is being recorded. I would now like to turn the conference over to Dorian Chiu . Please go ahead. Dorian Chiu: Thank you, Rocco, and good morning, and welcome to Noah Holdings Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining me on the call today are Ms. [ Nora Wang ] Co-Founder and Chair Lady; Mr. Zander Yin, the Co-Founder, Director and CEO; and Mr. Grant Pan, the CFO. Mr. Yin will begin with an overview of our recent business highlights and strategic developments, followed by Mr. Pan, who will review our financial and operational results. After management's prepared remarks, we will open the call for questions. Before we begin, please note that today's discussion will contain forward-looking statements that are subject to risks and uncertainties, which may cause actual results to differ materially from those expressed in such statements. Potential risks and uncertainties include but are not limited to those described in our public filings with the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange. Nora undertakes no obligation to update any forward-looking statements, except as required by law. Without further ado, I would now turn the call over to Mr. Yin. Please go ahead. Thank you. Zhe Yin: [Interpreted] Good day to everyone, and thank you for joining us today. 2026 marks the 21st year since Noah was established. In a market environment defined by continuous evolution and restructuring, our strategic direction has never been clearer. We remain firmly focused on serving global Chinese high net worth and ultra-high net worth clients operating through licensed local entities to provide compliance, long-term wealth management services across multiple jurisdictions. More importantly, we are completing a critical transformation evolving from a wealth management institution primarily driven by product sales into a comprehensive platform, centered on asset allocation, global structuring and AI systems. In 2025, this transformation began to yield tangible operating results. This is not a really temporary business adjustment, but the fundamental reconstruction of our operating model. For Noah 2025 represents an important milestone. Looking at our full year results [indiscernible] quality of our profitability is improving at a faster pace than the stabilization of our revenue structure. For the full year, net revenues were RMB 2.6 billion, broadly flat year-over-year. However, operating profit was RMB 777 million, up 22.5% year-over-year with operating margin improving to 29.8% and non-GAAP net income increasing 11.2% year-over-year to RMB 612 million. Excluding the impact of nonoperating items, adjusted non-GAAP net income was approximately RMB 753 million. What matters most at this stage is not the absolute scale of our profitability but the improving underlying structure. This profit growth was not driven by one-off factors, but by optimized cost structure, enhanced operating efficiency and the ongoing shift in revenue mix toward investment-related businesses. This reflects how our profitability is shifting from cyclical volatility towards structural stability. This is a quantitative change, not simply quantitative growth. From a business perspective, while our domestic and overseas business segments are moving at different paces, they are pulling in the same direction. Investment capabilities are becoming the primary growth engine. Net revenues from our overseas wealth management business were RMB 550 million in 2025 and down 18.8% year-over-year, mainly due to a decline in insurance product distribution revenue. However, overseas AUA grew to USD 9.5 billion, up 8.6% year-over-year. Notably, transaction value of U.S. dollar-denominated private secondary products tripled year-over-year to USD 950 million. The number of overseas registered clients approached 20,000, up 13.2% year-over-year, of which active clients exceeded 6,200, up 12.4% year-over-year. Net revenues from Olive, the overseas asset management business RMB 550 million for the full year, up 26.3% year-over-year, mainly driven by higher management fees resulting from AUM growth. Overseas AUM reached USD 6.1 billion, up nearly 4% year-over-year, accounting for 30% of total AUM. Net revenues from Glory Family Heritage, our integrated services business were RMB 180 million for the full year, up 28.8% year-over-year. Despite a highly competitive market environment, we achieved breakthroughs in sales through new channels. Domestically, sustained recovery in the Asia market helped improve our performance. RMB-denominated private secondary products maintained growth momentum from the second quarter onwards, which helped partially offset the impact of declining management fees from maturing RMB-denominated private equity products. Noah Upright, our domestic public securities business recorded net revenues of RMB 570 million in 2025, up 15.9% year-over-year with transaction value for RMB-denominated private secondary products reaching RMB 11.2 billion, up 107.2% year-over-year. Gopher, our domestic asset management business recorded net revenues of RMB 690 million for the full year down 10.3% year-over-year, mainly due to lower management fees resulting from maturing RMB-denominated private equity products. In the primary market, Gopher completed RMB 5 billion of private equity asset exits and distributions in 2025. Glory, our domestic insurance business recorded net revenues of RMB 19 million for the full year, down 56.5% year-over-year. The decline in revenue was expected and aligned with our plans and ongoing strategic transformation. Overall, our performance clearly shows a business shifting toward investment and asset allocation capabilities. It is this long-term vision that has systematically rebuilt our overall structure over the past few years. What we have accomplished is not simply business expansion, but a fundamental reconstruction of our operating model. Today, we are building a global wealth management operational system composed of 3 core platforms, all operating under a unified management framework. ARK serves as the client onboarding and execution platform, with licenses in Hong Kong, Singapore and the United States, it operates compliantly within local regulatory framework. ARK is responsible for account management, trade execution, product distribution and AI wealth advisory services, providing clients globally with a consistent, seamless and compliant experience. Olive serves as our investment and asset management platform across Hong Kong, the United States, Singapore, Japan and Canada. It has the capabilities to source global assets, establish and manage funds across multiple jurisdictions and execute long-term asset allocation strategies. It is a key foundational piece for our long-term value creation and revenue stability. Glory serves as our asset structuring and risk management platform covering major markets, including China, Hong Kong, Singapore and the United States. It offers insurance, trust and identity planning services that deliver risk isolation and asset protection through structuring solutions and supports the long-term transfer of family wealth. Supporting these 3 core platform is our cross-jurisdiction compliance architecture anchored by our 4 major booking centers. Shanghai serves as a domestic client onboarding hub for RMB asset allocation, Noah Upright fund distribution and Gopher asset management. Hong Kong functions as the cross-border connector for securities and insurance, serving as the bridge between China and global markets. Singapore is our center for overseas asset allocation and family structuring and our primary pilot regions for AI wealth management. The United States serves as a key hub for BPC and capital markets activity. In particular, our investment capabilities in the technology sector are an important contributor to future revenue growth and innovation. I want to emphasize that all booking centers are independently operated by locally licensed entities and conduct business within their respective regulatory framework, cross-regional collaboration is primarily limited to research and information support with no direct cross-jurisdiction business activities. This strict compliance boundary is the institutional foundation for our steady growth. The [indiscernible] more visible in our operating result. So headcount declined by 11% year-over-year, while revenue remained stable, reflecting improving operational efficiencies. Over the long term, AI brings much more an improved operational efficiency, it is also reconstructing how we operate by embedding AI into key areas such as client engagement, content generation and operational processes, we have established [indiscernible] collaborative operational-driven model in certain regions. This reflects our transition away from headcount expansion to systems that drive both scale and service quality. Looking ahead to 2026, we will remain prudent, but highly focused on our clear strategic direction, while revenue may still fluctuate due to structural adjustments, the proportion of investment-related income is expected to rise as profit margins remain stable or improving gradually. Furthermore, our AI capabilities will evolve beyond system efficiency gains and scale into broader operational validation. We are still in the midst of our transformation, but the logic behind our long-term operational model is stronger than ever. At its core, this transformation is not about changing product form or expanding services. It's about fundamentally reconstructing what drives our growth. Historically, our industry has relied heavily on the individual capabilities of relationship managers. Today, we are building a human machine collaborative operational-driven model centered on asset allocation, where AI empowered relationship managers and our global platforms amplifying their capabilities. 2025 marks the starting point of this model, where it will gradually reflect in our operating results. The transformation is ongoing, but our strategic direction is firmly set. We will continue to execute this long-term strategy prudently and compliantly. Thank you. I will now hand the time over to CFO, Pan, to review our financial performance in more detail. Qing Pan: Thank you, Zander. And good morning, everyone, for the comprehensive strategic overview and good day to everyone, who joined us today. I would like to focus on 2 key financial messages. First 2025 delivered strong operating profit growth and structural margin expansion, driven by a clear shift in our revenue mix. Investment-related income increased significantly during the year, while we deliberately reduced our reliance on insurance-related revenue. This reflects our continued transition toward a more investment-led business model, with improving earnings quality and great margin resilience. Second, the Board has approved our dividend proposal, including a special dividend, bringing total payout to 100% of full year non-GAAP net income for the third consecutive year. This reinforces the consistency and visibility of our shareholder return policy. Together, these developments underscore our transition towards a more investment-driven, globally diversified and resilient operating model. For the full year 2025, net revenue was RMB 2.6 billion, broadly stable year-over-year. Operating profit increased to RMB 777 million, representing growth of 22.5%. Operating margin expanded to 29.8%, compared with 24.4% in the prior year. Non-GAAP net income reached RMB 612 million, up 11.2% year-over-year. This improvement was primarily driven by structural cost optimization and enhanced operating efficiency rather than short-term factors. In the fourth quarter, revenue was RMB 733 million, up 12.5% year-over-year. Operating profit reached RMB 258 million, representing a significant increase of 87.3% and operating margin expanded further to 35.2%. This reflects strong operating leverage as performance-based income starting to materialize, supported by a more scalable and disciplined operating structure. During the year, we continued to optimize our revenue structure. Investment products commissions increased by 79.7% year-over-year and performance-based income rose by 78%. At the same time, overseas revenue contribution increased to 49% of total net revenue. This shift towards investment-driven and globally diversified revenue streams has enhanced earnings quality and supported structural margin expansion. To provide a clearer view of our core performances, I would like to address 2 nonoperational items that affected our reported fourth quarter GAAP results. First, under income from equity in affiliates, we recorded a loss of approximately RMB 120 million. This was primarily driven by mark-to-market accounting adjustments related to share price volatility of a specific listed investment. It's important to emphasize that this represents accounting reflection of market movements and does not impact our core wealth management operations. Second, regarding the legacy Camsing credit fund arrangements, several cases reached procedural milestones this quarter as certain clients opted for arbitration. In line with our prudent financial policy, we recognize contingent expenses of approximately RMB 50 million. Total provisions now stand at RMB 505 million, representing about 63% of the unsettled principal. Based on current benchmarks and the progress of these cases, we believe the existing provision level is appropriate and covers a substantial portion of the potential exposure. Based on the information currently available, we do not anticipate significant additional provisions. If we exclude these 2 nonoperational items, adjusted full year non-GAAP net income would have been approximately RMB 753 million, which we believe more accurately reflect our underlying operational efficiencies. In terms of balance sheet, as of December 31, 2025, cash and short-term investments totaled RMB 5.0 billion. The asset liability ratio stood at 15% and the company carries 0, no interest-bearing debt. Our current ratio was 4.5x. This debt-free structure provides strong financial flexibility and reinforces the resilience of balance sheet. From a financial perspective, our AI strategy is centered on productivity enhancement rather than heavy capital expenditure. We are already seeing measurable results in our cost structure. In 2025, total headcount decreased by 11% year-over-year when net revenue remained stable at RMB 2.6 billion. This indicates a meaningful increase in output per capita. AI-driven tools now support a substantial portion of client engagement, automated reporting and routine workflow tasks that previously required a lot of manual intervention. In our view, AI functions as structural efficiency multiplier. It enables us to scale global operations while maintaining disciplined cost control and consistent service quality. As of year-end, shareholders' equity stood at about RMB 9.9 billion. At our current market capitalization, the company is trading at roughly 0.57x book value with operating return on equity close to 8%. When market valuation may fluctuate, our focus remains on building long-term intrinsic value through disciplined execution and continued global expansion. Our strong cash position and operating cash flow provide both confidence and flexibility to deliver attractive and sustainable shareholder returns across market cycles. Driven by our solid performance and healthy liquidity position, the Board has approved a total dividend of RMB 612 million, equal to 100% of 2025 non-GAAP net income. This consists of 50% regular dividend and a 50% special dividend. Subject to shareholder approval at the 2026 AGM, this will mark our third consecutive year of full payout. At current market prices, the implied dividend yield is approximately 11%, including RMB 50 million in share repurchase completed in 2025, total cash return yield reachs approximately 12%. This payout is fully supported by our core operations and strong balance sheet. It represents approximately about 80% operating profit and is covered multiple times by RMB 5.0 billion in cash and short-term investments. In short, we're rewarding shareholders for their trust while maintaining a fortress balance sheet that supports our continued global growth. In summary, revenue remained resilient throughout the year as we executed a deliberate shift towards more investment-driven income stream. At the same time, operating profit delivered strong double-digit growth, supported by structural margin expansion and continued improvements in efficiency. Our AI initiatives are now translating into tangible productivity gains, strengthening our operating leverage and scalability. In our industry-leading capital return policy highlighted by 100% payout and the introduction of special dividends also reflects both operational strength and confidence in the sustainability of our model. So with these foundations firmly in place, Noah has emerged leaner, more efficient and structurally stronger. We remain fully committed to disciplined execution and the creation of sustainable long-term shareholder value. Thank you. And we will now open the floor for questions. Operator: [Operator Instructions] Today's first question comes from Helen Li at UBS. Heqing Li: [Interpreted] I have 2 questions. The first question is on private credit risk. How much in third-party private credit product has Noah distributed today? Have you seen any client redemption in this area? How do you assess the overall risk profile of this product? One area of concern in the private credit market has been potential disruptions from AI given that a meaningful portion of the underlying portfolio companies are software firms. Noah maintained the investment team in Silicon Valley [indiscernible] how much direct investment or co-investment does Noah currently have in the private credit space. What percentage of the underlying assets are software companies and what percentage of those could potentially be vulnerable to AI-driven disruptions and how do you view the risk in this segment? My second question is on transaction value and onetime commissions. In the fourth quarter, onetime commission declined sharply year-on-year. Looking more closely at transaction value, both domestic and overseas insurance product sales weakened significantly, how do you see the run rate trend heading into '26? Amidst the recent capital market pullback, how has client sentiment towards investment products evolved? Are clients adopting the risk of [indiscernible] and reducing their allocation to investment products and finally, what's the current [indiscernible] in terms of the investment strategy for the remainder of this [indiscernible]. Zhe Yin: [Foreign Language] Zhe Yin: [Interpreted] Let me do the translation here. First of all, we must emphasize that the company doesn't run any or only own any asset that is related to the product that Helen just mentioned. So what we've been doing at Silicon Valley is mainly invested or partner with some key major name that's their PE product or in some VC funds. And that's why we don't see a much impact of our business because when we review the AUA here, those assets are only representing a low single-digit amount of our AUA. The company has been -- has a concern on the related asset class at a very early stage, that's why we have been advising our clients to have a proper position in a very early stage. And regarding the second question on our commission. So because we must emphasize that being in the wealth management business, we are not a single product sales driven business, but we've been trying to provide a safe and structural services for our clients. So yes, we do see the drop in insurance sales that we also believe that because a lot of our existing clients, they have already had enough coverage from insurance products. And that's why when we've been reviewing our business under Glory, what we've been emphasizing that we are providing a global solution to our clients, but not just selling single insurance products. And regarding the investment incentive among our clients, we don't see any drop in demand. We understand that there's risk in the market. However, we actually see clients, still have a very high interest in investing the wealth, particularly in AI-related products. So we will still keep an eye on that and do the right advice to the client. Jingbo Wang: [Foreign Language] Jingbo Wang: [Interpreted] Thank you, Chair Lady. So what we wanted to emphasize that is that Noah -- the company has established for many years, and we have substantial experience in handling different types of economic cycles. So for the recent situation, we were talking about this PE risk [indiscernible] alternative investment product related to social media assets, we can use an example from [Technical Difficulty] product. We look at it as -- I mean, under all the normal criteria is the return should be 5%, now it's over 93%, which is we have seen this situation in China, in Mainland China before, where -- that's why we've been taking early position to advise our clients. Depends on the risk appetite, whether they would prefer to have more midterm risk appetite? Or they are more risk reserve, now that we've been taking advice in an earlier stage. So since the beginning of this month, we've been -- we are advising our RMs to talk to different clients, depends on their asset allocation, and also their risk appetite. And we believe that our clients' experience is still a very prudent situation, and we don't see any [indiscernible] at the moment. And as we mentioned about our experiences within the Mainland market, we also one of our advantage or strength is that we know Chinese high net worth and these families charateristic and what they are vulnerable to and how they would like to treat their investment portfolio. And that's why we've been strictly choosing or strictly been allocating which PE we should go to. And that's why from the very beginning, the company has been providing rather more suitable to what our clients need when selling these type of products. And regarding your second question about our sales and insurance products, I think we do admit that in the past, the company is a more product-driven selling company, which when the investment product is very welcoming all the insurance product is very welcoming, then it becomes the key driver of the company's growth. However, what we want to emphasize is today, we have formed our global 3-layer systems, as what CEO mentioned in his speech, that we have all this in Glory. We are forming this platform, the ecosystem, being a wealth management company that we are providing total solutions. So now it's not about what to sell, but about how to help our clients to do the wealth management. So we are now providing plan. For example, if they have enough protection from insurance product, then what we may do is more about, could be the identity planning, could be providing trust services. So it's about wealth management being as a whole and with the support of AI, we firmly believe that we now have a very firm structure and is more enabled to perform better being a wealth management company, which -- that's why a simple answer is hard to just direct answer to say whether insurance product will be a lead or not. It is not the focus anymore. Operator: Our next question today comes from Calvin Leon with Citi. Calvin Leon: [Interpreted] This is Calvin from Citi. My first question is about AI. Can management share our strategy and investment on AI going forward? And how would this be reflected in Noah's operating or financial metrics? And my second question is on shareholder return. Noah has maintained a high payout ratio in 2025. And looking ahead, what is the plan and considerations on payout ratio and share buyback? Zhe Yin: [Foreign Language] Zhe Yin: [Interpreted] Let me do a translation here. So we must emphasize that we embrace AI not because this is propaganda, that is the trend currently. But it's really about how it's been able to enhance the efficiency of the company. So in the past, with our analysts when they review our business model, they may use a method to count how many RMs we hire and then just do a multiple and believe that, that is a growth engine. However, under the AI enhanced system. We believe that the -- right now, it's not about how many people we hire, take Singapore offices, for example, we've been adopting this AI method for 9 months now. What we see is our human resources have dropped, but at the same time, AUM has increased by 3x in the past 9 months. It's about efficiency. It's about quality that we've been able to deliver to our clients. And apart from that, with the AI in mind, we may also able to further develop our business by reaching to the EAM on the multifamily office business so that we've been able to provide a system to work with this independent third-party channel, just like what we've done with -- under Glory, we've hired different commission-based broker to do the insurance business since the second quarter last year. And to answer your question, maybe currently, it's not about if we've been able to use a financial indicator to show the efficiency or really quantitative return from using AI. However, we believe that the one key factor, you can look at is how many clients we've been able to cover. The company has a record of over [indiscernible] client on our record. We may not be able to cover all of them in the past. But with the help of AI, that has enhanced our efficiency. We believe that this is a very good opportunity that we've been able to talk to all our potential clients -- or who should be our clients on our list again. And -- but we must emphasize, the company is still very cautious about client's privacy. So when doing investment planning suggestions, we would be rather more prudent because we don't want to have any clients and privacy issues been a concern to the company. So at the moment, we will say it's more about efficiency, but I would say the company with [indiscernible] internally all the clients -- all our employees can use and also the AI RM, that is the translator for CEO just now, that providing -- already providing service to internally and externally to clients that we have already seen the efficiency that AI has been bringing to the company. And what we've been now promoting is a program called RM100, which -- what would -- about this program is that, we asked our RM to handpick around 100 clients, they would like us to serve intensively. And for the rest of the clients supposingly on their book, then they have to hand it out to our AI wealth management department, which the core belief behind this is that we hope that through the support of AI, we can enhance quality and which the RMs when they have handpicked their client, they can better serve his own clientele. And that ultimately is about the income can be increased and ultimately, that drives our profits in the future. So -- and to your question about buyback and dividend and shareholder return, because we have confidence in driving our future growth. And also, we know the financial industry very well and we also know how to best allocate our resources. And that's why the company believes that we have a very high confidence in continuing to return our -- or to reward our shareholders. Qing Pan: I just want to add up to the information that we actually have, since the repurchase program, we have repurchased about 4.3% of the total shares outstanding. And obviously, we have been very disciplined in terms of execution of dividend policy. I believe that with adding this year's dividend to the accumulated dividend out, the number is already crossed the RMB 2 billion threshold. So that's actually a very impressive return. I guess not just in Chinese ADR, but probably on many of the listed companies. So we are actually giving out about $1.32 per ADS this year. So that's something, as Chair Lady just mentioned, that we're pretty confident that we'll be able to generate the same level of cash flow and continue to reward our shareholders. Operator: And our next question comes from Peter Zhang with JPMorgan. Peter Zhang: [Interpreted] Thanks for giving me the opportunity to ask questions. This is Peter Zhang from JPMorgan. I have 2 questions. First is, we noticed that the fourth quarter revenue was mainly supported by the strong performance fee we wish to understand what's the drivers behind? And can this revenue segment to be sustainable into 2026. Secondly, given which management can help to describe what's the quarter-to-date operating trend for Noah, including client activity, client investment behavior, wealth management sales -- product sales volume as well as revenue trend. In addition, the market has been quite volatile in first quarter, we wish to understand whether this has any implication on your equity affiliate income items. Zhe Yin: [Foreign Language] Zhe Yin: [Interpreted] Let me do a simple translation first. Honestly, it's hard to precisely predict the trend in the future. However, we must emphasize that it's about the structure. We've been focusing in investing within PE in previous years and believe that with this structure, we've been promoting investment products, this should bring carry to the company in the future for long-term growth. And for your second question regarding equity in affiliates, yes, we do still see some pressure during Q1. However, we must emphasize that this is only a nonoperational impact. So it shouldn't be really affecting the cash flow or our operation. And for Q1 operation, if Pan would like to... Qing Pan: Sure. I just want to add a little bit more on the carry. I think Peter particularly mentioned about the Q4 carry income, 2/3 of the carry actually came from an exit from U.S. dollar-denominated funds in Silicon Valley. And the rest actually came from the domestic products, from the RMB private hedge fund. So I guess that's a pretty balanced return. But obviously, as Zander just mentioned, it's quite difficult to forecast a particular timing of carry, but we are seeing that the AUM accumulated rather good opportunities for continuous return performance fees, hopefully. And yes, I think for the first quarter, obviously, you cannot share too much information about the first quarter actual operations. But we're seeing, I guess, at least the stabilization of client sentiment toward investments, and two is, obviously in terms of the tension, I guess, especially Mid East, people are a little bit more risk-averse, and they tend to actually put items or investments in more liquidity position and a more diversified portfolio. And that's exactly our point of view that we'll try to market to our client diversify across asset classes and also regions. Operator: And our next question comes from [ Yumin Tang ] with CICC. Yumin Tang: [Interpreted] My first question is that we noticed a meaningful expansion [Technical Difficulty] operating margins. Could management provide some color on what the notable increase in our operating margin and moving forward, how do you view our capacity to maintain effective cost structure and my second question, what were the primary drivers behind the significant widening of investment losses from equity in affiliates in the fourth quarter? Qing Pan: So yes, I want to just give a little highlight on the operational margin. Obviously, one is as a result of continuing optimization in terms of cost of, obviously, human resources related in terms of salary and bonuses, especially in mid-back office streamlining, as we just discussed the utilization of AI as well as the continuing streamlining processes. So as a result of the reduction of headcounts, the total actual cost related to staffing decreased about 10% with the help of obviously, carrier income, we're seeing a pretty healthy margin. And 30% is actually the operational margin we always try to aim for. So that will continue to be reflected in our strategy in 2026. And also in terms of your question on the affiliated equity performance. We're obviously seeing a lot of pressure in the fourth quarter, but hopefully, it will be able to stabilize in the first quarter. Operator: Thank you. That concludes our question-and-answer session. I'd like to turn the conference back over to the company for any closing remarks. Dorian Chiu: Thank you. And thank you everyone for joining us today. And if you have further questions about the company, please feel free to reach out to the IR team here and have a good day, everyone. Operator: Thank you. That concludes today's conference call, and we thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.
Operator: Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the BioStem Technologies Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] And I would now like to turn the conference over to Trip Taylor with Investor Relations. You may begin. Philip Taylor: Good afternoon, everyone, and thank you for joining our conference call to discuss BioStem's Fourth Quarter 2025 Financial Results and Corporate Highlights. Leading the call today will be Jason Matuszewski, the company's Chairman and Chief Executive Officer; Barry Hassett, the company's Chief Commercial Officer; and Brandon Poe, the company's Chief Financial Officer. Before we begin, I'd like to remind everyone that our remarks may contain forward-looking statements based on management's current expectations. These involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated. These risks are described in our filings with the OTC markets. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date made. The company undertakes no obligation to update them unless required by law. Finally, this call also includes references to non-GAAP financial measures. A reconciliation to comparable GAAP measures and related information can be found in our earnings release posted on the Investor Relations section of BioStem's website. With that, I'd now like to turn the call over to Jason Matuszewski. Jason Matuszewski: Thank you, Trip, and good afternoon, everyone. Today, I'll focus on the progress we made through the fourth quarter and more recently as we continue to diversify the overall business. The addition of BioTissue's surgical and wound assets in January has meaningfully diversified our business expanded our presence in the hospital-based settings and increased our exposure to commercially insured patient populations. We also reallocated our resources towards these sites of care reducing our exposure to CMS reimbursement changes that are impacting the physician office setting. As a result, BioStem looks profoundly different today than it did just a few months ago. To start is important to explain how we now think about our business in terms of sites of care that represent different customers that we serve. Our 2 focus areas consist of the hospital setting and the physician office setting. When we talk about the hospital setting, it includes hospital inpatient, hospital outpatient departments or HOPDs and Ambulatory Surgery Centers or ASC customers. When we talk about the physician office setting, it includes office and mobile wound care customers. Physician office made up the vast majority of our customer base prior to the acquisition of the BioTissue assets. We address these 2 settings differently and have established a commercial structure to serve these sites of care most efficiently and effectively. Going forward, you will hear us refer to the hospital business and the physician office business. In the fourth quarter of 2025, our revenue consisted only of sales to the physician office customers. It was a solid finish to the year with fourth quarter revenue of $10.1 million. Also, in the fourth quarter, we published top line results from our DFU clinical trial, demonstrating clear superiority of our bio retained process product over the standard of care. In the coming months, we expect to publish further analysis of the DFU trial and top line results for our VLU study. The results from our randomized controlled trials support the clinical effectiveness of our bio retained technology and position us extremely well across all sites of care as the market begins to focus on the clinical benefit of products rather than price. As expected, transition for the treatment of Medicare patients is underway in early 2026 as clinicians are adjusting their patient management protocols in response to the payment changes instituted by CMS on January 1, 2026 and the direct impact on practice economics as well as heightened documentation requirements and an ongoing threat of audits. As a result of these impacts to providers, physician office revenue will be significantly lower for 2026 versus 2025. The newly acquired product lines are performing as expected. Importantly, the demand we saw at year-end reinforces the underlying value of our clinically differentiated products, and we believe it is a positive indicator as patient flow in these settings works towards a new equilibrium. Now I want to provide our view of our recent acquisition and our focus moving forward in 2026. Consistent with our long-term strategy to expand the business and offer more products and more markets in the relentless pursuit of healing, we acquired BioTissue's surgical and wound assets at the beginning of the year. Importantly, this combination meaningfully expands our business by diversifying our opportunity across multiple sites of care growing our revenue streams with additional products and broadening our payer mix. I want to take a deeper dive into the test rationale for the acquisition and explore 4 core priorities that have shaped how we view the business, reinforcing our confidence in our strategic direction. First, we have significantly diversified our end markets. Our physician office business is the foundation on which BioStem was built. It encompasses our perineal tissue allograft products serving patients with chronic wounds, primarily diabetic foot ulcers, venous leg ulcers and pressure ulcers across physician office settings inclusive of mobile wound care. BioStem's next phase of growth is anchored in our hospital business with a clear focus on driving adoption across clinical specialties and expanding commercial payer coverage. This business includes products used in complex surgical cases across hospital inpatient, hospital outpatient and ambulatory surgery center settings, providing access to procedures that are more commonly reimbursed by commercial insurers. By deepening our presence in these settings and align with payer priorities, we are diversifying our revenue mix and unlocking new pathways for payer coverage. As we expand into additional sites of care, patient populations and procedural applications, we are also meaningfully reducing our reliance on CMS-driven reimbursement in the physician office and mobile wound care settings. This diversification is particularly important in today's evolving reimbursement landscape where commercial payer alignment and site of care flexibility are increasingly critical to sustain growth. Second, we have significantly expanded and differentiated our product portfolio. At the center of this acquisition, our 2 well-recognized allograft brands in surgical and wound care, the Neox and Clarix product families. These products are supported by a strong body of published clinical and technical evidence and are widely adopted by physicians across the country. Importantly, Neox and Clarix introduced a new category of proprietary cryopreserved wet tissue allografts to BioStem's portfolio. distinct from our existing dry tissue in the VENDAJE a product family, which is derived from our proprietary BioREtain technology. This expands our capabilities across multiple tissue formats and provides physicians with differentiated options depending on the clinical need, handling preferences and site of care requirements. The Neox and Clarix lines span a range of configurations designed to address the full spectrum of clinical need. Neox products are optimized for chronic wound care in complex hospital in surgical settings, while Clarix products are primarily used in reconstructive and surgical applications. Together, these product families expand our portfolio of placental and umbilical cord tissue allografts offered in cryopreserved lyophilized and room temperature form factors. The recently acquired portfolio additions boast more than 25 years of clinical experience and more than 1 million patients that have benefited from the technology. With the addition of BioTissue's processing technologies, BioStem now holds 3 proprietary platforms, BioREtaine, CryoTek and SteriTek positioning the company with a broader and more versatile technology stack across both dry and cryopreserve tissue products. Third, and one of the most important strategic elements of this acquisition is the immediate extension of our commercial footprint with access to the hospital care setting. Spearheaded by Barry Hassett, who was recently appointed as our Chief Commercial Officer, we are in a stronger place than ever to execute on our long-term goals. Our commercial model is evolving into a broader multichannel strategy as we are integrating BioTissue's experienced national sales force of more than 25 direct sales representatives and managers and more than 30 independent sales agents. In addition, the reassignment of major GPO contracts provides immediate access to the hospital inpatient, outpatient and ASC customers. While Barry will speak in more detail about how we plan to leverage this platform. At a high level, this expanded commercial infrastructure meaningfully increases our reach and positions us to compete in sites of care where we have historically had limited presence. Finally, this acquisition will allow us to scale our operational excellence. On the operational side, we have entered into a manufacturing and supply agreement with BioTissue for a minimum of 12 months post close of the acquisition. This ensures continuity of supply and quality as they will continue manufacturing the Clarix and Neox products for us during the integration period. Following that 12-month period, we intend to execute a technology transfer and bring manufacturing of the acquired products to our in-house facility in Pompano Beach. Importantly, the unit economics related to the tech transfer are extremely compelling for BioStem. Our gross margins on the acquired products during this 12-month supply period are expected to be approximately 60%. This gross margin includes the impact of a cost-plus markup of 23% for BioTissue. BioStem's existing manufacturing operations have historically delivered margins in excess of 85% among the highest in the industry for the past several years. As we bring these products in-house, we expect significant gross margin expansion on the production of Clarix and Neox products as we eliminate the markup and leverage our own vertically integrated manufacturing facility. This is expected to more than offset the future royalty payments and be an important driver of future profitability improvement as we scale the business. Now let me turn the call over to Barry, who will touch more on our growth drivers and our commercial strategy. Barry Hassett: Thanks, Jason. At this point, we are allocating substantially all of our internal commercial resources toward the hospital and related sites of care where reimbursement is heavily driven by commercial payers and there are stronger unit economics supporting the treatment of Medicare patients with chronic wounds. In parallel, we continue to partner with Venture Medical to serve the physician office and mobile settings that have been significantly impacted by recent Medicare payment changes as that market works through this transition. Following the acquisition, we now have a comprehensive product portfolio that positions BioStem with a strong foundation as well as the opportunity to expand into a number of high-value surgical specialty markets. including orthopedics and sports medicine, particularly foot and ankle, urology and colorectal surgery, women's health plus chronic wound care in the hospital outpatient setting. Together, these segments represent a combined market opportunity of approximately $23 billion, and we believe our expanded universe of end markets enhances our ability to drive long-term growth. To capture this opportunity, we have identified several key strategic initiatives that we believe will support the continued execution of our commercial strategy and position the business to drive rapid and sustainable growth. These initiatives include: expanding our sales force to broaden our geographic penetration, increasing medical education to accelerate adoption through peer-to-peer engagement, expanding payer coverage, and executing our product road map. Collectively, we believe these efforts will deepen market penetration, expand our customer base and drive long-term revenue growth. First, from a sales force perspective, we currently have more than 25 direct sales representatives and managers along with more than 30 independent sales agents, providing national reach and supported by major GPO contract coverage. Initially, this team will focus on hospital and surgical settings, where we are establishing BioStem's presence across key call points mentioned earlier. As the year progresses, we anticipate continued ramping of the sales organization to include at least 40 direct representatives and additional independent sales agents to expand geographic coverage and our ability to serve additional hospitals and clinicians. Second, with regard to medical education, we are launching a comprehensive initiative, including national physician symposium industry-sponsored professional society symposia, local dinner programs and online webinars designed to offer peer-to-peer education delivered by experienced clinicians. Third, increasing patient access to our BioREtain products. The publication of our DFU and VLU studies positions us to drive adoption of our products through value analysis committee approvals at the hospital system level. The DFU study is a Level 1 randomized controlled trial that demonstrated the statistically significant superiority of BioREtain processed allografts when compared to standard of care under a very rigorous patient selection protocol and endpoint evaluation. This is the type of rigorous data required by [ MACs ] to authorize purchases. Separately, we will be initiating efforts to utilize this clinical data to expand commercial payer coverage. Lastly, advancing our product pipeline. We will launch our BioREtain preserved dry products through the new commercial team in the second quarter of 2026, exposing that portfolio of products to the hospital customer base. We also expect to launch a new medical device product, pending clearance by the FDA, which is one of the key post-acquisition milestones that is part of our integration of the Neox and Clarix portfolios. In parallel with all these activities in hospital-based sites of care, Venture Medical will continue to serve the physician offices, mobile wound care and alternate site settings such as long-term care facilities, where they have deep relationships and proven execution as well as an ever-broadening portfolio of solutions to serve patients with chronic nonhealing wounds. Now I'll turn the call back to Jason for our 2026 outlook. Jason Matuszewski: Thanks, Barry. As you can see, we have taken meaningful steps to reposition the business, and we believe we are now operating from a position of strength with a clear and actionable path forward. The foundation we have built, including expanding commercial infrastructure, differentiating the product portfolio and continuing to strengthen our clinical evidence foundation positions us well to capitalize on this $23 billion opportunity. Turning to our outlook. Our hospital business is performing in line with historical levels of the acquired assets through our early integration activities. We believe there is a significant opportunity for growth in this business following the completion of the commercial organization integration and ramp in sales rep productivity as we execute our multifaceted growth strategy. In the physician office business, we believe the recent reimbursement changes will ultimately benefit BioStem. We are confident in our ability to gain market share with our clinically validated products over the long term. In the near term, the confusion in the market is indicative that this substantial transition will take time to be digested and operationalized by clinicians. In the meantime, this has led to significant declines in our physician office business to date in Q1 versus Q4 of 2025. We expect the physician office market to stabilize in the second half of 2026, paving the way for sequential revenue growth improvement. With that, I'll turn the call over to Brandon to walk through our fourth quarter financial results. Brandon Poe: Thanks, Jason, and good afternoon, everyone. Turning to our fourth quarter results. Our revenue totaled $10.1 million compared to $10.5 million in the prior period and $22.7 million in the fourth quarter of 2024. We're able to achieve revenue largely flat to the prior period despite continued competition from higher-priced products under the ASP plus 6% reimbursement model. Gross profit for the fourth quarter was $9.8 million, representing gross margin of 97% compared to $9.3 million and 88% in the prior period and $19.1 million and 84% in the fourth quarter of 2024. The sequential increase in gross margin was a result of a mix shift towards our products that do not carry a licensing fee. Operating expenses for the fourth quarter totaled $17.3 million compared to $7.8 million in the prior period and $10.6 million in the fourth quarter of 2024. The sequential increase was primarily driven by $8.8 million in potential uncollectible accounts receivable due from our distributor venture medical. During the fourth quarter, Venture saw a slowdown in payments from certain venture customers due to delays or denials in payments by CMS to those customers. Ultimately, this resulted in a slowdown in payments from venture to BioStem. In many cases, the amounts recorded for these potential uncollectible accounts are under active appeal. Our agreement with Venture allows for an extension of payment terms for those accounts that are under active appeal with CMS. And for accounts where CMS reduces or outright denies claims, our agreement allows for a reduction in payment amounts by Venture to BioStem. We continue to monitor very closely the efforts made by Venture to resolve these outstanding potential uncollectible accounts and will take steps to collect on this balance in the future. The fourth quarter allowance for uncollectible accounts is onetime in nature, and we do not expect additional significant uncollectible accounts that would materially impact future results. In other operating expenses, sequential increases in legal costs and commercial head count to support the BioTissue asset acquisition were partly offset by lower spend on our clinical trials. Moving to the balance sheet. Our cash balance was $29.5 million at the end of the fourth quarter compared to $27.2 million at the end of the prior period. Following the closing of the BioTissue asset acquisition on January 21, 2026, our cash and cash equivalents balance was approximately $16 million. Given that we are largely through the quarter, I want to add to Jason's comments and provide additional color on our outlook for Q1. In the quarter, the hospital business is performing in line with historical levels of the acquired assets. With the acquired assets being on track in Q1, adjusted for a January '21 start date and the physician office being down significantly, as Jason noted, we anticipate Q1 revenue to be in the range of $5 million to $6 million. In the second half of the year, after completing integration activities, expanding our sales force and beginning execution on our strategic plan, we expect to drive sequential and year-over-year growth in the hospital business. And with the physician office market expected to stabilize in the second half of the year, we see an opportunity for sequential revenue growth in that business. We are confident that our newly diversified business includes all the foundational elements to support market share gains and drive BioStem towards category leadership. I also want to provide a brief update on the status of our 2024 and 2025 financial audits. As you know, we appointed KPMG as our independent auditor in October of 2025 and they have been actively working to complete the independent audits for both fiscal years. We expect to finalize the audits in the very near future. This important step toward our planned NASDAQ uplisting is progressing as expected and we will provide updates as key milestones are reached. Lastly, from my comments, I would like to welcome Jodi Ungrodt brought to BioStem. Jodi has recently joined our Board of Directors and has stepped into the role of the Audit Committee Chairperson. Jodi is a seasoned adviser to life science companies and spent nearly 3 decades at Ernst & Young, working with companies through initial public offerings, business combinations and other transformative events. I am personally excited to have Jodi join the team, and I'm looking forward to working with her. Please refer to the press release that was published this past Monday for more information about Jodi's appointment. With that, I'll turn the call back to Jason. Jason Matuszewski: Thanks, Brandon. As I look ahead to 2026, the hospital business is positioned to represent a strong majority of our revenue, supported by growing adoption of the Neox and Clarix portfolios across our expanding hospital and ASC channels. Our focus remains on diversifying our end markets, differentiating our product portfolio and expanding our commercial footprint with access to the hospital care setting. BioStem has entered 2026 and as a more diversified hospital-focused business with increasing alignment to commercial reimbursement and reduced exposure to physician office and Medicare reimbursement dynamics. We will leverage our commercial strategy, including expanding our sales force to broaden our geographic penetration, increasing medical education to accelerate adoption through peer-to-peer engagement, expanding payer coverage and executing our product road map. With a broader product portfolio, expanded commercial reach and strengthened operational foundation, we believe we are well positioned to deliver more durable, sustainable growth and emerge as a market leader in advanced regenerative medicine. Operator, you may now open the line for questions. Operator: [Operator Instructions] And our first question comes from the line of Swayampakula Ramakanth with H.C. Wainwright. Swayampakula Ramakanth: This is RK from H.C. Wainwright. Jason and Brandon, so a couple of quick questions, the first one being on the BioTissue accretion part of it. With the BioTissue surgical assets generating about $29 million in 2025 and given -- considering the upfront cost and also you're bringing in 20 direct sales folks and integrating them, when in 2026 do you think that segment would be EBITDA positive on a stand-alone basis? Brandon Poe: Yes. RK, this is Brandon. I'll try and take that question. So I think we said previously that, that business, when you look at what we brought over from a revenue perspective, the $29 million you mentioned, along with the team we brought over, we felt like that was an EBITDA positive business as a stand-alone. Now that obviously doesn't include the support functions like finance or HR or other G&A type functions. So I think generally, we feel like that business really it currently is EBITDA positive based on what we brought over. And I think over time, we'll continue to leverage that to cover the fixed costs of some of those overhead components that I just mentioned. So that's kind of where we are. We're not really giving guidance for 2026, and we talked about Q1 simply because where we are, but that's how we think about the profitability of that business right now. Swayampakula Ramakanth: Okay. And then on -- just for a second question on the VENDAJE, now that the VENDAJE is placed in the 12-month status quo category, can you give us some idea of what would be needed for that to move to the covered status, let's say, in 2027 cycle. Just so that we understand you'll be able to get a better reimbursement number? Jason Matuszewski: Yes, I can take that, RK. Jason here. When we're looking at what was considered status quo or covered or not covered from an LCD perspective. that LCD ultimately was rescinded. And so we continue to go forward on our clinical trials, the DFU study as well as the LTU study. As we mentioned in the call, we're looking to publish full readout of that DFU study here near term in the next few months as well as top line results of the VLU study, that data, we feel strongly can support whatever the new potential LCD or NCD or coverage policy that CMS decides to create. But we also realize that, that process is going to require the full commenting period as well as previous LCDs. So we don't anticipate I guess, anything coming and LCD effective by year-end because we'll still need to go through that whole LCD approval process. But we also feel strongly that the data that was created and presented late last year on DFU as well as hopefully having VLU data, at least top line results mid to late this year. will support a status of covered versus status quo if that's even, frankly, an option by CMS. Operator: And our next question comes from the line of Jeff Johnson with Baird. Unknown Analyst: This is [ Dane ] on for Jeff. Maybe I'll go back to a little bit Brandon's comments about the outlook here and maybe I'll be a little bit more focused on the cash flow side. But talking about after the close of the BioTissue being at $16 million, obviously, it looks like gross margins will step down with those BioTissue assets being a greater percentage of the business and then investing more in the expanded sales force going direct and then potentially even the onetime $10 million payment, I believe, pending that FDA clearance. So just kind of where do you sit from a cash flow runway standpoint, where you sit right now? Brandon Poe: Yes. Jason, I can take that. Yes, thanks for the question. This is Brandon. Yes. So yes, you're right. We're $16 million -- we closed the deal on January 21. And I'd say we're -- by the end of Q1, we'll be a little bit below that. We're currently a consumer of cash generally, and that's largely due to the physician office business dropping off pretty significantly in Q1 due to the changes that we've seen through CMS and the reimbursement. And so I think you're going to see us consume cash here for the majority of 2026. So from a runway perspective, and I'm excluding the $10 million pay you just referenced. We've got cash certainly in the late Q3 or longer, certainly nowhere earlier than Q3. And the $10 million payment that we expect to make that's tied to me for those tied to the milestone for a 510(k) clearance. It's connected to our BioTissue asset acquisition. Our expectations right now is that will be later, probably second half of 2026, and that could call that could obviously change that situation. We're actively -- just so you're aware, we're actively looking at opportunities to bring cash into the business, one, to finance that $10 million payment, but really ultimately to drive the commercial growth that we referenced on the call about driving commercial growth, driving the hospital engine and really supporting and driving that business. And that's really where we're looking for some additional financing, but to answer your question directly, I'd say late Q3 right now is really where we expect our cash to run to. Unknown Analyst: Okay. That's helpful. Yes. And then maybe where you ended off there. I mean how do you guys see the cross-selling opportunity here between the hospital and the physician setting? And any early insights that you've gained just in the first 2 months here since closing that deal? Jason Matuszewski: Yes. We actually have Barry Hassett on the call as well today. So I'm going to extend that question over to Barry to address. But just on a high level, we've really seen initially some good success and excitement from the BioTissue team that came over in the transaction. And we feel there's a high degree of promise associated with it. If you guys remember backwards, the BioTissue team at the time of ASP plus 6 and some of the other reimbursement methodologies never had an access to sell a higher ASP product in the physician office segment. So they're somewhat constricted to the hospital segment as well as the ambulatory surgery center and the OR and what attracted us to acquiring those assets. And so when we look at kind of creating neutrality around pricing, it really lends to the relationships they've built in the hospital outpatient as well as the OR and ASCs to extend our existing product lines as well as the core Neox and Clarix product family to support adoption of those products in a physician office second. But I'll hand it over to Barry to add a little bit more color there. Barry Hassett: Yes, Jason, I think you hit on all the right points as far as the BioTissue team not really previously having the opportunity to sell heavily into the office setting because of where the price positioning was and now the market being neutralized there. So we view this very positively because they have a lot of relationships in that space. And we believe the 2 best technologies on the market to go out and go after that business. I think you need to consider, as we mentioned, the physician office space is down right now. That's across the entire segment. All of the all of the companies in this space are reporting that. And there's been a pullback on the use of skin substitutes in that space as it absorbs the new payment environment and kind of figures out how it's going to move -- how it's going to move forward. In the meantime, we're keeping an eye out for potential uptick in patient treatment in the hospital outpatient space, specifically with regard to chronic wounds because with the new CMS payment scenario, that outlook has actually improved as we switched over from 2025 to 2026. Operator: And our final question comes from the line of Bruce Jackson with Benchmark. Bruce Jackson: I wanted to go back to the gross margins with bringing the BioTissue products in-house. When do you think you couldn't have those products in-house. And then how do the gross margins expand from there? How long is it going to take to get back up to the 85% range? Jason Matuszewski: Thank Bruce, for your question. Brandon, I don't know if you want to jump in there? Brandon Poe: Yes. Yes, I can. This is Brandon, Bruce. Thanks for the question. Yes. So Jason mentioned on the call, 60% is gross margin is where we see it now. That's really impacted by the markup that we're paying for the service to buy a tissue to continue to manufacture the products that on behalf. When that goes away, not only do we recoup sort of that markup, but we also feel like we've got a vertically integrated facility. We know how to make these products. We're very good at it. We've shown it over the past. So not only we lose the markup, we also think that we can do it more efficiently. We know their COGS generally, and our COGS for very similar products are less, frankly. And so I think our expectation is that after 1 year, that's what the manufacturing of the tech transfer agreement allows us to bring that in-house. And we've got a little bit of work to do on our side, not a ton of work, but a little bit of work to bring that to our facility. Our expectation is that sometime mid-Q1 or shortly after the 1-year anniversary, we'll bring that in-house. And we've got expectations that we get back up to plus 80% for those specific products. That's the intent right now, and we're moving towards that. I mean the 1 thing that goes against us a little bit is there is a royalty payment on the back end that we've talked about. So again, the $15 million upfront, $10 million for the 510(k) and then there's an up to $15 million down that royalty payment. But even with that royalty payment, which at some point will go away, we still feel like we can get close to that 80% gross margin pretty quickly. Jason Matuszewski: And Bruce, I'll just add a little color. Just to add a little color on the operational side of things. So Andrew Van Vurst, our COO and Co-Founder, has already been hard at work in putting the team in kind of an operational mode to look at how do we start thinking about tech transfer and what are the processes in CapEx and requirements and things of that nature that we need for our facility to support manufacturing, the Clarix and Neox family products. And really working with the BioTissue team as well. We're looking to try to target that we have pretty much everything ready to set and go as soon as we hit that 12-month mark. And so that's kind of been our goal and why we already started just a month or so into owning the assets, started those conversations about tech transfer and looking at how do we from an operational perspective, execute on a successful tech transfer and accelerate as fast as we can to improve those gross margins. Bruce Jackson: Okay. Great. And then my follow-up on the VLU study, last quarter, you said it was recruiting a little bit faster than expected. When do you think you're going to have that one wrapped up? Jason Matuszewski: I think last quarter, we were seeing good enrollment in Q3. In Q4, we actually had a little bit of slower improvement in the VLU study. So most still targeting to try to get a top line readout here in the middle of this year. But we did see a little bit of slowdown in enrollment over the holidays in Q4. Operator: And ladies and gentlemen, that concludes our question-and-answer session and today's call. We thank you for your participation, and you may now disconnect.
Operator: Hello, and welcome to the Core & Main Q4 and Full Year 2025 Earnings Call. My name is Alex, and I'll be coordinating today's call. [Operator Instructions] I'll now hand it over to Glenn Floyd, Director of Investor Relations, to begin. Please go ahead. Glenn Floyd: Good morning, and thank you for joining us. I'm Glenn Floyd, Director of Investor Relations at Core & Main. We appreciate you taking the time to be with us today for our fiscal 2025 fourth quarter and full year earnings call. Joining me this morning are Mark Witkowski, our Chief Executive Officer; Robyn Bradbury, our Chief Financial Officer; and Brad Cowles, our President. Mark will start with a business update and review of our fiscal 2025 performance. Brad will then discuss the investments we are making to drive market share gains and margin expansion over the long term. Robyn will follow with a review of our financial results and outlook for fiscal 2026. We will then open the line for questions, and Mark will wrap up with closing remarks. Our press release, presentation materials and the statements made during today's call may include forward-looking statements. These are subject to various risks and uncertainties that could cause actual results to differ materially from our expectations. For more information, please refer to the cautionary statements included in our earnings release and in our filings with the SEC. We will also reference certain non-GAAP financial measures during today's discussion. We believe these metrics provide useful insight into the underlying performance of our business. Reconciliations to the most comparable GAAP measure are available in both our press release and in the appendix of today's investor presentation. Thank you again for your interest in Core & Main. I will now turn the call over to our Chief Executive Officer, Mark Witkowski. Mark Witkowski: Thanks, Glenn, and good morning, everyone. I'll begin on Page 5 with a brief overview of Core & Main and its market position. Core & Main is a leading specialty distributor of water infrastructure products and services in North America, supporting the repair, upgrade and expansion of critical water systems. Having a portfolio of more than 225,000 products, many of which are exclusive to our industry with limited distribution rights, we combine local expertise with national capabilities to provide water infrastructure solutions to municipalities, private water companies and professional contractors across municipal, nonresidential and residential end markets. Our footprint consists of more than 370 branches across the U.S. and Canada, which serves as a crucial link between 5,000 suppliers and a diverse base of more than 60,000 customers. Our end markets are balanced and stable, providing resilience through varying demand environments. Municipal projects represent 44% of our sales, generating steady demand from reliable funding sources. Our nonresidential end market, which represents roughly 38% of sales, benefits from a diverse project mix across commercial, industrial and infrastructure applications. Residential lot development represents approximately 18% of our sales. And while near-term dynamics in this end market remain challenged, we continue to view the long-term outlook as attractive, supported by population growth and a structural undersupply of housing. This diversification, combined with emerging growth drivers like AI-related infrastructure needs and treatment plant modernization provides a strong foundation for our business. Our competitive advantages, including local market expertise backed by our highly trained sales force, national capabilities and industry-specific technology, position us to lead an attractive $44 billion addressable market across the U.S. and Canada, up roughly $5 billion from last year with the addition of Canada. We estimate our U.S. market share at approximately 20% today with a small but growing share in Canada. This combination gives us significant runway to grow and capture additional share over time. Our ability to win in the market starts with the value we create for both our customers and our suppliers, which we've highlighted on Slide 6. It begins with our people-first culture, which empowers our associates to operate with an entrepreneurial mindset and build strong relationships in their local markets. For our customers, we provide a broad portfolio of highly specified products, deep technical expertise and a consultative sales approach that helps them navigate complex infrastructure projects. Our local teams understand the specifications, regulations and project requirements unique to each municipality and job site, allowing us to support customers through early project planning through delivery and installation. At the same time, we differentiate ourselves through our delivery capabilities and proprietary technology tools, which help simplify estimating, procurement and job site logistics. Combined with our national distribution network, this enables us to deliver materials reliably and efficiently, helping customers keep projects on schedule and within budget. For our suppliers, Core & Main serves as a critical channel to reach a highly fragmented customer base. Our expanded sales force and geographic footprint provide access to tens of thousands of contractors, municipalities and utilities across the country. We also help drive the adoption of new products and technologies by leveraging our local relationships, technical expertise and market insights. Underlying all this is our operating model, which combines local expertise with national capabilities and resources. Our local teams lead customer relationships and project execution, while our scale provides advantages in sourcing, distribution, technology and product availability. This combination allows us to deliver a high level of service to customers while also creating meaningful value for our supplier partners. Together, these capabilities form a differentiated value proposition that positions Core & Main to consistently gain market share and deliver strong, reliable execution. Turning to our recent accomplishments on Page 7. Fiscal 2025 was a year of disciplined execution for Core & Main. We delivered our 16th consecutive year of sales growth, a result that reflects the resilience of our business, the long-term strength of our end markets and the consistent performance by our teams across the country. We generated net sales of $7.65 billion, adjusted EBITDA of $931 million, adjusted diluted EPS of $2.97 and operating cash flow of $650 million. As we talk through the year, I want to frame our performance against the annual value creation targets we use to measure the business, which include end market growth, organic above-market growth, acquisitions, margin expansion and cash flow. First is our end market growth. Our annual target assumes 2% to 4% market volume growth. And in fiscal 2025, our end markets were roughly flat overall. Municipal volumes were up low to mid-single digits and continue to be a source of strength supported by steady repair and replacement activity and a healthy funding environment. While municipal demand remained resilient, it was not enough to fully offset softness in other areas of our end markets. Nonresidential volumes were relatively muted throughout the year. Growth from data centers, street and highway projects and multifamily developments provided support, but that strength was offset by softness in more traditional commercial lot development activity. Residential lot development declined low double digits as housing affordability and higher mortgage rates continue to weigh on demand. We expect residential will eventually return to growth to satisfy the significant undersupply of housing in the U.S. While end market trends are outside of our control, we have been proactive in repositioning the business to perform in this environment by strengthening our municipal business while remaining fully committed to the private construction markets. We've had a couple of years of softer-than-normal end markets. And despite near-term softness, we expect growth to resume in the medium term. Second is our organic above-market growth. Our annual target calls for 2% to 4%. And in fiscal 2025, we delivered squarely within that range. A big driver of that performance was our sales initiatives, which delivered robust results as we broadened our portfolio of solutions to address aging water infrastructure. Collectively, average daily net sales grew double digits in fusible HDPE, treatment plant solutions and geosynthetics. Average daily net sales for meter products grew 12% in the quarter and grew mid-single digits for the year on top of a strong prior year growth comparison of 32%. We also expanded our footprint during and subsequent to the year to make our products more accessible nationwide, opening 10 new branches in attractive markets. We have a pipeline of additional greenfield locations and expect to open additional locations as we progress throughout the year. Collectively, these sales and geographic expansion initiatives drove 3 points of organic above-market growth in fiscal 2025, reflecting continued share gains across our markets. We are confident in our ability to continue driving above-market growth through these sales, geographic and key talent initiatives in fiscal 2026 and beyond. Third is our growth from acquisitions. Our annual target is 2% to 4% growth from acquisitions, and in fiscal 2025, we delivered 2%. That includes contributions from acquisitions completed in fiscal 2024, along with 2 complementary acquisitions we completed in fiscal 2025, Canada Waterworks and Pioneer Supply. Together, these acquisitions added 5 branches to our footprint during the year. Canada Waterworks builds on the platform we established in Canada last year with the HM Pipe acquisition. With these additions, we now operate 7 branches in Ontario, including 2 greenfields opened earlier this year as we continue expanding our presence. Pioneer Supply expands our presence in Texas and Oklahoma, further extending our reach in attractive growth markets. Both businesses bring a strong reputation for quality and service that align with Core & Main's mission. Together, we're extending our reach and creating even greater opportunities for growth and value creation. More broadly, acquisitions and greenfields are complementary tools we use to expand our footprint and unlock new growth opportunities. In some markets, we establish a presence through greenfields, while in others like Canada, acquisitions provide an initial platform that we can then expand through additional investments over time. We are well positioned to continue driving growth through M&A. Fourth is margin expansion. In fiscal 2025, we delivered strong gross margin performance, expanding 30 basis points year-over-year, driven by higher private label penetration and disciplined purchasing and pricing execution. Our gross margin performance for the year reflects great execution by our local teams in challenging market conditions, coupled with the benefits of our national scale and initiatives. Flat end market volumes and flat pricing, coupled with higher-than-normal inflation on our operating costs, limited our ability to achieve SG&A leverage this year. Historically, we've offset these impacts with productivity and price increases and expect we will do that going forward. Our last value creation lever is cash generation. Every year, we target converting 60% to 70% of adjusted EBITDA into operating cash flow. We delivered $650 million of operating cash flow in fiscal 2025, which represents conversion at the high end of the range. Strong cash generation continues to be a differentiator for Core & Main, and it gives us flexibility to invest in the business, pursue strategic M&A and return capital to shareholders. As we look ahead, our focus is straightforward: extend the advantages we've built, compound market share gains and continue expanding the structural earnings power of the business. Beginning on Page 8, we'll cover the fundamentals of our end markets and why they remain attractive over the long term. Brad will then walk through why we have confidence in our ability to grow and improve profitability. We benefit from a large base of aging municipal water infrastructure that drives consistent repair and replacement activity, and that backdrop is complemented by strong local funding and incremental federal and state funding that expands the addressable opportunity. We also continue to see an increasing need for modernization projects, including treatment plant upgrades and metering conversions, which reinforce the multiyear nature of municipal demand. Our nonresidential end market is supported by a balanced mix between new development and repair and replacement activity, ranging from commercial and industrial construction to less cyclical infrastructure projects like road and bridge rehabilitation activity. As I mentioned earlier, we're seeing mixed demand across project types in the near term, but the long-term themes like onshoring and broader infrastructure investment are expected to support a steady pipeline of work as large projects move from planning to execution. Lastly is residential. While near-term housing activity can move with interest rates and affordability, the long-term demand drivers are structural. The U.S. has built fewer homes than household formations over the past 2 decades, which has created an undersupply and a long runway for future lot development. Importantly, residential growth can also provide incremental support to our other 2 end markets as communities expand into suburban and rural areas, commercial development follows. And all of that residential and nonresidential growth places a greater strain on local water systems, which drives municipal expansion, upgrades and repairs. We believe the release of pent-up residential activity supports residential, nonresidential and municipal growth. Next, I would like to welcome Brad Cowles, our President, who will walk through the investments we are making in our products, capabilities, footprint and people and how those initiatives are driving market share gains and supporting margin expansion. Go ahead, Brad. Bradford Cowles: Thanks, Mark, and good morning, everyone. It's great to be here with you today. Turning to Page 9. I want to share some insights on the sales initiatives and capabilities that are driving consistent above-market growth and market share gains. Building on the foundation of our core business and extensive branch presence, we're bringing additional value to our customers in 2 primary ways with a broader product offering to cover all of their project needs and by bringing complete solutions to their more complex challenges. Our key initiatives, meters, treatment plant, fusible HDPE and geosynthetics have combined to grow at an average annual rate of approximately 14% over the past 5 years, significantly outpacing underlying market demand. Two of these initiatives are focused on expanding our product offering, fusible HDPE and geosynthetics. These product initiatives require new supplier partnerships, specialized equipment and technicians as well as unique storage and logistics solutions. As we expand these capabilities across our branch network, we can bring these products to our current customers and also pursue new customers who specialize in the installation of these unique products. Fusible HDPE, for example, is used in water and sewer systems by our current municipal and contractor customers, but the same products, fusion equipment and technicians are also used in agriculture, energy, mining, landfill and other applications, often in the very same geography. Smart meters and treatment plant are sales initiatives focused on solving more complex problems and offering more comprehensive solutions to our customers. We do this by investing in national teams with very specific expertise who complement the efforts of our local branches. We help our customers understand the possible solutions. And in doing so, we often create additional demand. Smart metering is a great example of how our turnkey solutions are winning with the customers while bringing them solutions they had never imagined. We were recently awarded what we believe is the largest metering contract in U.S. history, reflecting our leading position in the market. We deliver solutions that help utilities improve billing accuracy, reduce water loss and enhance system visibility. These solutions combine metering and other sensor hardware, software, installation, project management and everyday maintenance for metering projects of any size. We are enjoying a high rate of success on large complex projects, and we take that as a sign that we're taking a larger share of the market as municipal customers look for a single partner to deliver end-to-end solutions. As a result, our smart metering business has grown at an average annual rate of approximately 14% over the last 5 years. Our National Critical Infrastructure Group specializes in complex water treatment and delivery projects consisting of pipes, valves, fittings and fabricated assemblies. Large capital investments are being made in treatment plants and water transmission lines across the country as demand increases from onshoring, data center construction and population shifts, and we are seeing above-market growth across these project types. That momentum, coupled with our differentiated product and service offering has helped drive this initiative to grow at an average annual rate of nearly 25% over the past 5 years. We also see opportunities to continue expanding our capabilities and product lines within water treatment, both organically and inorganically. As the projects get larger, the customer partnerships become more important and the demands for timely and high-quality execution gets stronger. Our focus on strategic customer accounts positions us to win business as these leading general contractors move across the country, performing work on the most significant capital projects. Geographic expansion is another important lever in our above-market sales growth. Our market mapping process helps us identify underpenetrated areas with attractive growth characteristics where our brand, product breadth and service model can differentiate us. Greenfields yield strong returns and provide a complementary path when acquisition targets are not available to us in a market we wish to enter. We completed 6 greenfield openings in fiscal 2025, and we expect to open a record 7 to 10 locations in the coming year. Even in markets where we already operate, we often have the opportunity to add and develop sales talent to strengthen our sales coverage. That includes building the right mix of outside sales, inside sales and product expertise so we can support larger and more complex projects, increase share of wallet with existing customers and capture more opportunities in the markets we already serve. With that as context, Page 10 highlights how disciplined M&A complements these organic growth levers. Our highly fragmented market creates a long runway for disciplined acquisitions. Over time, we've built a reputation as the acquirer of choice in our industry, grounded by our entrepreneurial culture and the resources we bring to help acquired businesses grow. Since 2017, we have completed more than 40 acquisitions, adding nearly 150 branches and over $1.8 billion of annual sales. Our pipeline is deep and actionable. We evaluate on average more than 50 opportunities each year with roughly a dozen opportunities in active evaluation at any time. When companies join Core & Main, they gain broader product breadth, industry-specific technology and national capabilities and resources that help them serve customers more effectively. They also gain shared administrative support, which reduces the burden on local teams and allows them to spend more time with customers. And we invest in people through best-in-class training and career development opportunities that help retain and grow talent. As we evaluate opportunities, we prioritize businesses that expand our presence in new or underrepresented markets, help us add products and service capabilities and bring in key industry talent. Looking ahead, we see a clear path for M&A to contribute 2 to 4 points of annual sales growth over time. Turning to Page 11. One of the things we are most excited about is the runway we have to expand margins, and this slide summarizes the levers that support that opportunity. Private label is a powerful driver of gross margin expansion. It includes direct sourcing of comparable products and also building differentiated brands. We've developed a meaningful private label capability that is supported by an internal master distribution network, and our private label brands are respected because we invest in quality and enhanced features while ensuring we meet required specifications. We also stay close to the field by soliciting feedback on quality, pricing and packaging and by prioritizing service levels and availability as we service our own branches. We've been investing in the infrastructure to scale private label adoption. Since the end of last year, we've added distribution capacity and expanded the assortment by more than 6,000 SKUs. Private label represented about 5% of sales in fiscal 2025, and we see a clear path to at least 10% over time. Sourcing and pricing optimization are another structural advantage. Our scale and buying expertise help us secure access to the most preferred products with favorable terms and improved net product costs. We foster strong partnerships with key suppliers to drive shared growth. At the same time, we leverage centralized resources and transaction data to help guide optimal price points while empowering our local teams with final pricing authority. Together, these capabilities allow us to capture the full value of our purchasing scale while maintaining the local responsiveness that our customers expect. Technology and innovation tie all these levers together, creating a meaningful opportunity to drive sales, margins and efficiency. We are broadening our agenda to ensure that Core & Main remains the industry's technology leader with continuous investment in step-change productivity and a better customer experience with AI-enabled solutions that reduce administrative burden and free our teams to focus on customers. We believe this creates a durable long-term advantage and supports Core & Main's differentiated value proposition. To wrap up, these product and solution initiatives are reinforcing each other and strengthening our ability to gain share, expand margins and scale the business with discipline. They help us accelerate greenfield contributions, and they maximize the synergies we can get from acquisitions. We are investing where we see the greatest opportunity, and we are confident in the path ahead. With that, I will turn it over to Robyn to walk through our fourth quarter and full year financial results. Go ahead, Robyn. Robyn Bradbury: Thanks, Brad. Good morning, everyone. I'll start on Page 13 with some highlights from our fourth quarter results. Net sales in the fourth quarter decreased 7% to $1.58 billion. As a reminder, we had 1 fewer selling week in the fourth quarter of this year compared to last year. On an average daily net sales basis, sales increased about 1%, driven by roughly 1 point of organic volumes. Pricing remained positive across nearly every product category with the exception of PVC pipe, resulting in roughly flat pricing overall. Sales in the final week of the quarter were also affected by severe winter weather that temporarily limited construction activity in several regions. Gross margin in the fourth quarter was 27.1%, an increase of 50 basis points year-over-year. The improvement reflects higher private label penetration and disciplined purchasing and pricing execution. Total SG&A for the quarter decreased 5% to $264 million. The year-over-year decline was driven primarily by lower variable costs from 1 less selling week, along with benefits from our previously announced cost actions. Sequentially, SG&A was $31 million lower than the third quarter, reflecting approximately $5 million of realized savings with the remainder due to reductions in variable costs. Over the course of fiscal 2025, we implemented approximately $30 million of annualized cost actions with roughly $6 million recognized this year and the remainder expected to flow through our results during fiscal 2026. Our approach continues to be measured. We are improving our cost structure without compromising customer service or long-term growth. At the same time, we continue to invest in targeted roles to support product line and geographic expansion. We are highly focused on regaining operating leverage by offsetting SG&A investments with productivity gains while maintaining the service levels and capabilities that support our growth strategy. Adjusted EBITDA in the fourth quarter was $167 million, down 7% versus last year, primarily reflecting 1 fewer selling week. Adjusted EBITDA margin was 10 basis points higher than last year at 10.6%. Turning to our full year performance on Page 14. For fiscal 2025, net sales grew approximately 3% to $7.65 billion. Sales growth was 5% when adjusted for 1 less selling week. We delivered roughly 3 points of organic market share gains, while our end markets were roughly flat overall with municipal up low to mid-single digits, nonresidential relatively flat and residential down low double digits. Our market outperformance was driven by our sales and geographic expansion initiatives, including metering, treatment plant, fusible HDPE and geosynthetics and investments to expand our coverage in priority markets. We also achieved 2 points of sales growth from acquisitions and prices were overall flat. Gross margin for the year was 26.9%, up 30 basis points from fiscal 2024, reflecting higher private label penetration and disciplined purchasing and pricing execution. Private label increased 100 basis points in fiscal 2025 to roughly 5% of sales. That mix shift was a meaningful driver of the year-over-year improvement. Total SG&A for the year increased 7% to $1.15 billion. The increase in SG&A was driven by inflation, acquisitions, volume-related growth and strategic investments to support sales growth, margin expansion and future productivity. While these factors pressured SG&A leverage in the near term, we remain focused on driving both growth and profitability and are confident the actions we have taken position us to return to EBITDA margin expansion over time. Adjusted EBITDA was $931 million, slightly ahead of the prior year, while adjusted EBITDA margin declined 30 basis points to 12.2%. The year-over-year margin decline reflects higher SG&A as a percentage of net sales, partially offset by 30 basis points of gross margin expansion. Adjusted diluted EPS increased 7% to $2.97. Growth was driven by higher adjusted net income from lower interest expense and the benefit of a lower share count from share repurchases. We exclude intangible amortization from adjusted diluted EPS because a significant portion relates to the formation of Core & Main following our 2017 leverage buyout. Turning to the balance sheet, cash flow and capital allocation. We ended the year with net debt of nearly $1.95 billion and net debt leverage of 2.1x, well within our target range of 1.5 to 3x. Liquidity was $1.45 billion, including $220 million of cash with the remainder available under our ABL facility. We generated $650 million of operating cash flow during the year, reflecting approximately 70% conversion from adjusted EBITDA. Our free cash flow yield was 5.8%, a level that is nearly 3x higher than our specialty distribution peers. We returned $155 million to shareholders through share repurchases during the year, reducing our share count by roughly 3.2 million. And subsequent to the fiscal year, we deployed an additional $39 million to repurchase 800,000 shares. Since our 2021 IPO, we have repurchased over 20% of our original shares outstanding, reflecting our commitment to return capital while continuing to invest in growth. Next, I will cover our outlook on Page 16. For fiscal 2026, we expect net sales of $7.8 billion to $7.9 billion, adjusted EBITDA of $950 million to $980 million and operating cash flow conversion of 60% to 70% of adjusted EBITDA. We are confident in the strength of the municipal market due to the stability of funding sources and the nondiscretionary nature of demand. We remain cautious on the private construction market given the heightened geopolitical volatility, including the developing Middle East conflict and ongoing tariff uncertainties, along with continued uncertainty around the interest rate environment and overall builder confidence. Despite this, we still expect our overall end markets to be roughly flat for the year. We do expect to drive above-market volume growth from our sales and geographic expansion initiatives. Drivers include continued strong performance across meters and treatment plant and opening a record 7 to 10 greenfields in attractive markets. Despite softer end market conditions and a neutral pricing environment, we expect to grow adjusted EBITDA margins as we continue to execute our gross margin initiatives and realize the benefits of our previously announced cost actions. We expect another year of strong operating cash flow, and our capital allocation priorities are unchanged. We will continue investing in the growth of the business, both organically and through strategic M&A while returning capital to shareholders through share repurchases. We remain confident in the strength of our business and our ability to execute. We have delivered consistent results through varying market environments, maintained disciplined pricing, expanded gross margins, generated strong cash flow that enabled us to reinvest in the business and return capital to shareholders and have continued to gain share across our markets. Our operating model is resilient, and our strategic priorities are clear. In the near term, our municipal end market provides stability. Over the medium term, we expect momentum to return in the residential and nonresidential markets, along with a return to a more typical pricing environment. As these dynamics improve, the structural earnings power we've built positions Core & Main to unlock meaningful long-term profitable growth and value creation. In the meantime, we will continue to drive volume through strong execution and above-market growth. With that, let's open up the call for questions. Operator: [Operator Instructions] Our first question for today comes from David Manthey of Baird. David Manthey: My first question is the one that I get from investors most frequently, which is the growth disconnect of Core & Main versus the corresponding segment at your largest competitors. And I know we've talked about this offline. I just was hoping you could maybe just address some of the differences in vertical end market influence and geographic and product mix and why you think there's a slight disconnect between your growth and your biggest competitor? Mark Witkowski: Yes. Thanks, Dave. Appreciate the question. Dave, I would tell you from an end market perspective, we feel really good about our presence and reach certainly across the municipal end market, nonresidential and the residential end markets. We clearly are, I would say, in every market that our other national competitor is in. We've got -- obviously, we both compete against a large volume of local distributors and regional competitors. So I think both us and our other national distributors are doing a really good job of taking share across the industry with certainly us driving a lot of good share growth with our smart meter business. Treatment plant is an area, I would say, that we've grown pretty significantly. I would say that's an area that they've been, I would say, a little ahead of us over the years, but we're rapidly, I would say, gaining ground in that area. And then I think certainly, as part of the data center construction that we've seen pop up, I would say they've been in a little better position in some of those markets, particularly the ones that are kind of in their backyard in kind of Northern Virginia area and Texas, in particular, are areas that we're investing in, I'd say, rapidly to kind of catch that. But what I would tell you is that what I like in terms of our position there is we're seeing more and more of these data centers pop up across the U.S. And given our geographic reach and our strong relationships we have in these local markets, we've seen a lot of good gains here over the last couple of years on those data centers as we've seen those expand much more broadly across the U.S. And I think our exposure there is going to continue to be helpful as we pick up that business. So we view it as a positive. I think our large national competitors having good results. We're seeing good share gains and good results on our side and feel that that's a good thing overall for the industry. David Manthey: I appreciate that color. The second question is on costs. So as we think about the cost-out program and the $30 million run rate, I think you said $5 million of the benefit hit in the fourth quarter that would imply that, I guess, we don't lap that fully until we get to the first half of 2027. Can you just correct me on that if I'm wrong, that you'll continue to see year-on-year benefits from that cost-out program diminishing through the year, but still positive through 2026. Is that correct? Robyn Bradbury: Yes. Thanks, Dave. That's what we're expecting. We saw -- we completed all of the $30 million of cost out during FY '25. We got about $1 million of that benefit in the third quarter. We got $5 million of that benefit in the fourth quarter. So that remainder of that $30 million, we'll see all of that really hit in the first, second and third quarter of next year before we annualize those cost-out efforts. David Manthey: Got it. So if you're at $5 million in the fourth quarter, that implies a $20 million run rate. So there should still be positive, I should say, lower costs in the beginning of '27 as well. Robyn Bradbury: Perfect. Yes. Operator: Our next question comes from Matthew Bouley of Barclays. Matthew Bouley: So maybe just to address kind of the current market conditions around energy and commodity inflation following the Middle East conflict here. So maybe just kind of near-term diesel surcharges, et cetera, how are you expecting to deal with that? How should we think about modeling all that? And then over these past few weeks, kind of what are you hearing from suppliers around price increases? And how does that play into your guide for flat pricing for the year? Mark Witkowski: Yes. Thanks, Matt. I'll go ahead and take that one. I would tell you, we're obviously watching things very closely as they develop in the Middle East. We definitely have a direct impact as we see some of the increases in fuel with our delivery operating expenses and that sort of thing, but it's still relatively small, and we've got a lot of that embedded in the guide that we laid out. I would say more indirectly, we're watching closely the effects on the oil and gas market. We have seen that start to, I would say, impact the global resin prices that are out there. So there is some indications that we're going to start seeing some increases coming through on certain product categories related to that. And frankly, just all the -- if fuel and those prices continue to increase, I think we'll see some of that increase flow through some other product categories more broadly. But specifically, as those resin prices increase globally, we're starting to hear signs that we'll start seeing some increases related to products like PVC, HDPE pipe could definitely be impacted by that and definitely things that we're starting to hear about right now. So those are things that we'll watch closely as this continues to develop, but I view those as kind of positive signs for us as we look to see some stability with pricing in some of those product lines. So overall, I'd say we kind of view it as neutral to positive if this kind of disruption continues in the market from that standpoint. But obviously, any kind of uncertainty, the rising fuel prices within the global economy, we're definitely concerned that, that could create a little bit of uncertainty in the macro, just demand environment, which is part of why I think you saw the nature of the guidance that we put out there was just given a lot of that overall uncertainty that we could experience. Matthew Bouley: Got it. Okay. No, that's great color. And then secondly, kind of stepping back around some of the growth investments. I heard you saying you're focusing investments in areas like data center, maybe treatment plants as well, if I heard you correctly, sort of looking to close that gap versus your competition. I guess, number one, just any way to kind of quantify the investments you're putting in there? Just obviously, we're trying to dial in the SG&A outlook. But again, kind of stepping back, what are some of the specifics you're looking to do here, whether it's from -- in terms of your sales force, et cetera? What kind of needs to be done? And what would the kind of resulting impact be on, again, these large projects out there? Bradford Cowles: Yes, Matt, this is Brad Cowles. I'll take that. The initiatives that I highlighted kind of the biggest movers for us with the most attractive kind of growth dynamics, I'd put smart utility in there, but also the treatment plant. And the resources that we invest in to do treatment plant work adapt very well to all of the -- what I would just generally call higher capacity, more complex water delivery projects, which are on data centers or large plants, water transmission lines and actual water treatment plants themselves. And that structure that we put in place, one of those national complementary team structures that we use to kind of enhance the capabilities of the local branch, we're going to be investing upwards of another 30 people in that initiative this year, just to give you a sense of the scale. And those are resources that are kind of positioned both regionally and nationally to -- they're a little bit more mobile and cover a little bit more geography than a branch, which is serving generally kind of a fairly tight radius. And so they go where the work is. They follow these strategic national accounts, and they bring that level of expertise that really builds confidence and trust in us and accelerates the ability to win on those bigger projects. Operator: Our next question comes from Joe Ritchie of Goldman Sachs. Joseph Ritchie: So first question maybe for Mark. So you take a look at the guidance of kind of $950 million to $980 million EBITDA guidance for the year implies 2% to 5% EBITDA growth. I guess, how are you thinking about the kind of range of options here between the low end and the high end? And if we can maybe dig in a little bit on some of the main components, whether it's SG&A, gross margins, the investments that you're making, that would be helpful. Robyn Bradbury: Joe, it's Robyn. I'll take that one. Thinking about the guide and what we laid out here, obviously, it's an unusual time with a lot of uncertainty with what's going on in the macro environment. So we felt like we needed to be prudent with what's going on externally. So with the guide, we've got the market kind of flattish. We'll always deliver on that above-market growth. And we do have a little bit of M&A in there that we completed last year. Our -- what we've got embedded in the guide is expecting pricing to be about flattish for the year might look similar to what we saw in FY '25. Now obviously, with what Mark just mentioned on the price of resin increasing, we could see a little bit of lift there, and that's an opportunity for us. So if you think about the guide and what we've laid out and the opportunities that we have to perform on the high end of that or even outside of that, it's things like if we get a little bit of price that's going to be incredibly helpful for us on the top line, that will help us get more SG&A leverage. We're expecting the residential market to continue to be at the levels that it's been performing lately. So that will be a headwind in the first half of the year for us given where that activity is sitting today. But if some of the uncertainty settles out and we do see a little bit improvement in the markets, then that could obviously help us as well. Any extra lift we get on the sales side will help us hit those SG&A targets and help us get better leverage there. We have a lot of confidence in gross margin. Our private label initiative has been performing really well. We expect that to continue and expect to continue to deliver on gross margin initiatives. And then I think you asked also on the low end of the guide. Obviously, if there's higher inflation than what we're expecting, we did see a lot of inflation in FY '25. That was in the mid-single digits range. We typically expect to see that in the low single digit range, which is what we're expecting. But if any of that inflation comes in higher or if any of the markets are a little bit weaker, that would bring us in at the lower end of that guide. Joseph Ritchie: Super helpful, Robyn. And then maybe my follow-on question either for Brad or for Mark. Just on the M&A discussion. So you guys have had just an incredible track record of compounding the M&A over the last several years, you can go back to the HD Supply days. But like the -- when I look at this year, this year was a little bit lighter or the most completed year was a little bit lighter. How are you guys thinking about getting back to maybe that cadence of maybe 2 to 4 points a year? And then also, is that opportunity likely to occur this year? Like just help us walk us through kind of the 2027 expectations for M&A and your ability to maybe kind of get back to what the more normalized cadence was for the company? Mark Witkowski: Yes. Thanks, Joe. I'll take that. In terms of the M&A, I would tell you, I'm extremely confident in our capabilities there and the pipeline that we have. Even though 2025 for us was a lighter year, we still delivered on the low end of the M&A growth target that we put out from 2% to 4%. And there just has not been a lot trading in our industry, and we are incredibly well positioned with the relationships that we have with the opportunities that are out there. It tends to be choppy. We've had some lighter years in our recent history as well. So -- and we've had some years where it's come well beyond that range. So I do expect that it will be choppier. I do think we've got a really good pipeline of opportunities right now that we're looking at. So expect 2026 will be a year for us where we're kind of right in that range with plenty of opportunities that we're keeping a close eye on that could extend us beyond that. So I feel really good about the M&A that we've got. And then as you've seen in a lighter year, we're also opening up a record number of greenfields as well. So we've got both levers. We're well positioned to capture that share one way or the other and feel confident in our team's ability to go do that. Operator: Our next question comes from Matt Johnson of UBS. Matthew Johnson: I guess, first off, if we could just talk about the meters business a little bit. I think you guys have sounded pretty excited about this business for some time now. So I guess, can you guys just give a little more detail on what level of growth you're expecting for this segment in 2026? And also how much of a contribution you guys are expecting from the contracts that you guys talked about this past quarter? And just any kind of more color you could give on the magnitude and the timing of that contract would be great. Bradford Cowles: Yes. Thanks, Matt. This is Brad. I'll take that. This initiative is -- it's been an exciting area for us. We've just consistently delivered at least low double-digit growth year after year. We continue to invest, and I think we keep getting better. Those large projects that we win can represent in a given year between maybe 1/3 or a little more than 1/3 of kind of our volume. Keep in mind, we have a massive underlying base of municipal sales that drive kind of your more everyday repair and replace and upgrade meter projects. But those large ones have been quite interesting and more substantial as we've become kind of the preferred prime contractor, if you will, for that scale and complexity of project. In 2025, we had another incredible year. We were comping, I think, 32% growth from the prior year. So it was a bit of a stretch. But I think we're back on our stride. You heard Mark say we pushed a 12% growth in the quarter on the meter initiative. And I'd say early innings in 2026, we feel like we're back on stride even having swallowed that pretty large step change in '24 to 2025. So I'm pretty excited about it. We're investing additional resources there, much like we are in treatment plan to keep our coverage strong. We've got a good pipeline of additional large projects and expect to have that same kind of balance going forward in '26, where we still have a massive base of underlying municipal meter sales and then a nice third to slightly higher coming from those big projects. Matthew Johnson: That's great. Appreciate that. And then also if we could just ask to get a little more detail on what you guys are expecting for the resi end market this year. I think Robyn said expecting down in the first half before leveling off in the second half. So I guess any kind of color you can give on what level of declines you guys exited the year at? And then how you're kind of expecting that to shape up through the year would be great. Mark Witkowski: Yes. I would tell you, as we exited 2025, we felt that it was sequentially pretty stable but at low levels. And so we kind of work our way here into early 2026, we're definitely in a different position than we were last year at this time. You go back to the early part of 2025, and there was some optimism out there in the builder and development world. There were projects that were -- that we saw a lot of good bidding activity on, and we saw some good volume in the early part of 2025, which then definitely tapered off as we got into the second quarter and then into the back half. So I'd say sequentially, it's been stable, but we're definitely in a different position than we were last year at this time, which is kind of what's leading us to believe resi will be relatively soft year-over-year to start the year and should ease in terms of the comparisons as we get into the second half of 2026. Operator: Our next question comes from Mike Dahl of RBC. Michael Dahl: Can we just stick with the end market conversation? And Mark, let's just put a finer point on things. So resi was down low double digits for the year in '25 and clearly worse in the second half. Are we -- is this commentary to suggest that given the tough comps, resi is likely down something like mid-teens or worse in the first half of the year and still winds up down high single digits, 10%? I think people are just trying to bridge to the -- like more specifically, yes, the resi, but then also if we step back within the flat blended end markets, the quantitative build of what is resi, what is non-resi, what is muni. So if you could help dial that in. And maybe also just as part of that, quarter-to-date trends, if you could enlighten us a little on how that's shaped up, obviously, a lot of weather dynamics, et cetera. Robyn Bradbury: Yes. Mike, I'll take that. So starting with resi, the way that we're thinking about that is that we had a decent residential end market in the first quarter of last year. As -- like Mark mentioned, there was some optimism for the second half of the year and the homebuilders are still developing some lots during that time. So we saw some good activity in the first quarter. So we're going to be anniversarying that tougher comp in the first quarter. So expecting the first part of the year to be down in the low double digits to mid-teens range for residential and then sequentially improving throughout the year. So the second quarter could look something like down high single digits and then maybe it's flattish in the back half of the year. Really not expecting at this point that residential gets much better. There's nothing pointing to that yet. Obviously, there's some optimism there and there's some pent-up demand at some point, but the timing of that is uncertain. So a tougher comp in the first half of the year for resi and then that starts to improve and maybe we get to about flattish by the end of the year because those comps get easier. On the nonresidential side -- sorry, on residential, so we're expecting that all works out to be about -- down about mid-single digits for resi for FY '26. And then on the nonresidential side, we're expecting it to perform somewhat similar to FY '25, which is in the flattish range. There's a lot of project types within our nonresidential and there's some of those project types that are performing well, some of the data centers, some of the street and highway projects, multifamily and then there's a lot of that lighter commercial type of work that's been softer this year, retail, office space, some of those areas -- and we're not expecting a lot of change in what we've seen there. So expecting the nonresidential market to be flattish. And then on the municipal side, this is an area that's very steady, stable, strong for us, had a really good year in FY '25, expecting that to continue to perform well. In the guide, we've got embedded low single-digits growth there on the municipal side. But this is an area that's got ample funding at the state level, the federal level, at the local level. We feel like this is a really key and important market for us that we think is going to be strong and stable over the short, medium and long term. Michael Dahl: That's helpful and makes a lot of sense. On the -- just as a follow-up, -- just in light of the recent uncertainty and some of the early signals that you're seeing where certain categories could have to potentially take price. How are you thinking about inventory management? Because a lot of these categories probably have some slack where if you wanted to lean in, maybe you could buy ahead of some of this. But just curious to get your thoughts on how you're thinking about that. Mark Witkowski: Yes. I would tell you, that's something that we do really well here at Core & Main is managing kind of the ins and outs of those inventory investments, especially when there's some indications of price volatility. That's always been, I'd say, a really good driver of gross margin expansion for us and that ability to identify where and when we see those price increases and where and when to make those investments from an inventory standpoint. I think our teams do an extraordinary job of getting a lot of that product ahead of those increases and then working to get that into the market at the appropriate time. So I'd say that's been a standard part of our execution playbook and something that we generally do pretty well. Operator: Our next question comes from Nigel Coe with Wolfe Research. Nigel Coe: But just wondering if maybe you could comment on what you're seeing through the first quarter. Just given the comments from Robyn on the residential market, it looks like we might be below that 2% to 3% in the first quarter. Just want to make sure that's the case. And then when it comes to the end market outlook, I think it's obviously keeping a conservative stance here makes a lot of sense given the backdrop. I think a lot of investors are surprised that pricing is flat given the acceleration we've seen in inflation before this Iran shock. So just wondering, is it simply the PVC headwinds here? Or are there any other competitive kind of impediments to getting price here? Robyn Bradbury: Yes, Nigel, I'll touch on what we're seeing so far in the first quarter and then hit on the pricing part. In the first quarter, we've got a January 31 year-end. So we've been through February and not quite all the way through March yet. But I would say what we're seeing is pretty well in line with our guide. We are expecting the first quarter to be our toughest comp quarter. So we are expecting sales and EBITDA might be down a little bit slightly year-over-year and then improving as we go each quarter. And that's in line with what we were expecting. We did see about a $15 million to $20 million weather impact the last week of our fiscal year when there was a deep freeze and a lot of winter severe weather. We're getting a lot of that back in the first quarter. So we think all of that will just come back in the first quarter. Gross margins are performing strong. SG&A, we're seeing some of the cost-out impact favorability there. So feeling good about the first quarter, obviously, on soft markets and probably be down slightly year-over-year on the quarter, but it's coming in really in line with guide and expect it to improve as we get throughout the year. And then on the pricing side, all of our product categories were basically up in FY '25, except for PVC. PVC was down about 15% in the year. So there's a variety of different outcomes that we could see in FY '26, but we're not counting on a full recovery of PVC. Some of the oil increased prices could help either stabilize that or increase it. But what we're seeing today is PVC will have a -- as it's gone down all throughout the year, we're going to have a headwind at least in the first half to 3 quarters of the year on PVC, even if it stabilizes where it's at today. So that would be the puts and takes. We would expect price increases in all of our other product categories. Nigel Coe: That's really helpful. And then just a quick one on buybacks. I think from the K, it looks like you bought back about [ 7,000 ] shares in February, March. That's a decent chunk of shares compared to what you did in 2025. Just wondering if there's any intention to keep stepping on buybacks at these current share prices. Robyn Bradbury: Yes. Yes. Nigel, we did about $155 million last year, almost $40 million in the first quarter. Given where the stock price is at, we've got ample cash flow. We've got tons of cash to be able to reinvest in the business, M&A and do buybacks. So you can expect us to see continued buybacks. We've got about over $600 million still remaining on our authorization. So that will be a big part of our capital allocation going forward. Operator: I'll now hand it back to Mark Witkowski for any further remarks. Mark Witkowski: All right. Thanks for joining us today. As we wrap up, I want to leave you with a few key points. Fiscal 2025 was another year of disciplined execution. We delivered our 16th consecutive year of sales growth, drove 3 points of above-market growth through share gains and structurally expanded gross margins, all while generating strong cash flow. At the same time, we continue to invest in the product categories, footprint and capabilities that position us to compound these gains over time. Looking ahead, we see a clear path to growth and improved operating leverage. Our initiatives are working, our actions to address cost pressures are in place, and our end markets remain attractive over the long term. Over the last 12 months, I've spent meaningful time with customers, suppliers and associates across the country. Those conversations reinforce what differentiates this company, our people, our culture and our consistent focus on execution. I'm grateful for our teams and confident in the opportunity in front of us. Thank you for your continued interest in Core & Main. Operator, that concludes our call. Operator: Thank you all for joining today's call. You may now disconnect your lines.
Operator: Good morning, ladies and gentlemen. Welcome to Fennec Pharmaceuticals' Fourth Quarter and Full Year 2025 Earnings and Corporate Update Conference Call. [Operator Instructions]. As a reminder, today's conference call is being recorded. Now I'd like to turn the conference over to Fennec's Chief Financial Officer, Robert Andrade. Robert Andrade: Thank you, operator, and good morning, everyone. Thank you for joining us today. We are pleased to host Fennec Pharmaceuticals' Fourth Quarter and Full Year 2025 Earnings Conference Call during which we will review our financial results as well as provide a general business update. Towards the end of the call, we will conduct a Q&A session, hosted by myself starting with frequent questions that the company receives from investors, followed by our traditional open Q&A session. Joining me from Fennec this morning is our Chief Executive Officer and Board member, Jeff Hackman. I am also pleased to welcome our Chief Medical Officer, Dr. Pierre Sayad. Pierre is an accomplished industry executive with proven success leading global medical teams and oncology launches at companies such as Onyx Pharmaceuticals, Karyopharm Therapeutics, Oncopeptides and CTI Biopharma. Dr. Sayad is a graduate of the School of Medicine of Loma Linda University as well as a Harvard Business School alumnus. Since joining Fennec in the fourth quarter of 2024, Pierre has been instrumental in advancing our medical strategy and clinical evidence strategy, expanding engagement with leading institutions and key opinion leaders and strengthening the independent data foundation supporting PEDMARK. Later in the call, Pierre will speak to the substantial progress being made on the medical front and the importance of the medical team in the education process of CIO and PEDMARK. Before we begin, I would like to remind you that during this call, the company will be making forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ from the results discussed in the forward-looking statements. References to these risks and uncertainties are made in today's press release and disclosed in detail in the company's periodic and current event filings with the U.S. SEC. In addition, any forward-looking statements made on this call represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligation to update or revise any forward-looking statements. This conference call is being recorded for audio rebroadcast on Fennec's website, www.fennecpharma.com, where it will be available for the next 30 days. And with that, I'll turn the call over to our CEO, Jeff Hackman. Jeffrey Hackman: Thank you, Robert. Good morning, everyone. Thanks for joining us today on a very special earnings call. 2025 was a transformational year for Fennec. We delivered record net product sales of $44.6 million compared to $29.6 million in 2024. But most importantly, this growth was really driven by quarter-over-quarter expansion with our active patients as well as new and existing accounts. This reinforces the durability and demand and the effectiveness of our overall market development strategies. In the fourth quarter, given the positive momentum we saw in 2025, we made the strategic decision to further enhance our execution by increasing our customer-facing team and to try to achieve a much greater reach and frequency with our customers, so we can ultimately help more cancer patients protect their hearing. We expanded our capabilities to include new territories and high-prescribing targets in the AYA or adolescent and young adult market. We strengthened the company's financial health during the year with disciplined operating decisions and efficiency measures, including the closing of public offerings, raising over $42 million in net proceeds, which resulted in a full redemption of our debt. We were intentional on our capital allocation, focused on high-impact initiatives and continue to enhance our operating leverage as our business scales. This balanced approach in investing in growth while maintaining financial rigor has positioned us well for long-term value creation with the strongest balance sheet right now in the company's history. Our full service patient support program, I've mentioned before in the past, Fennec HEARS, which is designed to simplify access and support continuity of care by guiding patients through coverage, reimbursement and providing free product for eligible individuals as well as coordinating a nurse-led administration and at-home infusion services achieved a record performance in the fourth quarter. The program reached all-time highs in patient enrollments, prescribed and infused vials, active patients and conversion rates. In fact, conversion rates were up 70% in Q4 compared to 50% in the first quarter. These results reflect not only patient need, but the exceptional execution of our field organization and our operational infrastructure that we have built to ensure appropriate and efficient access for our patients. Now as we continue to increase the awareness and use of PEDMARK through our sales activities, our marketing team has been busy as well, expanding focus to activate young adult testicular patients, for example, on a broader scale. In the coming quarter, we're excited to launch an initiative around the Indy 500 race in May in close partnership with a testicular cancer advocacy group. Following that, we will also have a significant presence this year at the ASCO meeting in Chicago. We look forward to providing more updates on these initiatives and others in months ahead. Beyond commercial performance and our activities, we also made significant progress advancing our clinical evidence strategy. Shortly, you're going to hear from Pierre. He'll provide you much more details on the progress and how we are moving these forward in our medical affairs initiatives. Finally, top line results from our investigator-initiated Phase II/III, we call it STS-J01 clinical trial for PEDMARK in Japan is progressing well. This -- as you guys know, this is -- we believe it's still early, but this clinical milestone is very important for Fennec and reinforces the broader applicability of PEDMARK and the opportunity to expand our impact globally, partnering and registering this product in Japan and potentially broader in Asia. As a reminder, PEDMARK is currently approved for pediatric patients 1 month of age and older with localized non-metastatic solid tumors and is also recognized by the National Comprehensive Cancer Network or the NCCN with a 2A recommendation for use in AYA patients. Now I'd like to just take a moment to thank our dedicated employees for their focus this past year. Their resilience and their belief in our mission, it's been instrumental in driving our performance. We've built a very strong organization with strong revenue growth and notable milestone achievements during the quarter and the year further will validate our strategic plans and objectives and market development strategies and importantly Fennec's ability to execute our plans. Further, I'm proud of our executive team and each of their respective operating functions at Fennec. Overall, we have strong performance and strong foundation that we built in 2025 and that is going to propel us and propel Fennec into the next chapter of this organization. One is going to -- and this next chapter is going to be defined, as I mentioned, with execution, global expansion and sustained growth. So with that, let me turn it over to Pierre. Pierre Sayad: Thank you, Jeff, and good morning, everyone. I'm pleased to be joining today's call to share an update on the significant progress we've made across our evidence generation and medical initiatives. Over the past year, we have strengthened our medical affairs team significantly, building a high-performing organization capable of delivering on our strategic priorities. We expanded capabilities across clinical, field and real-world evidence functions ensuring that we can engage effectively with key opinion leaders in both academic and community settings while supporting new evidence generation initiatives in the U.S. and globally. This robust foundation positions us to execute efficiently and meaningfully in 2026 and beyond. Our 2025 efforts were focused on 3 priorities. First, key opinion leader development, engaging with influential clinicians to deepen understanding of our product's clinical value and real-world applicability. Second, institutional engagements partnering with leading academic institutions to advance independent research, generate new clinical data and expand insights across additional tumor types and patient populations. And finally, improving patient and clinician experiences, driving key customer enhancements, such as the revamp of our Fennec HEARS program, designed to simplify access, support adoption and ensure a positive experience for both the patients as well as the clinicians. These activities created meaningful traction in 2025 and into 2026 with multiple studies underway and strong collaborations forming with both academic and community oncology centers. The insights we have gained from KOLs during the year are highly encouraging. Clinicians report increasing confidence in our products, particularly in better understanding the mechanism of action of cisplatin and then recognizing the feasibility and ease of incorporating PEDMARK into routine practice without compromising cisplatin's antitumor activity. These discussions are not only reinforcing clinical confidence, but also supporting broader adoption and integration into guidelines and standards of care. For example, last month, Fennec announced that new data supporting the potential use of PEDMARK in adults with head and neck cancers were presented at the 2026 Multidisciplinary Head and Neck Cancer Symposium, that's the MHNCS meeting. It is worth noting that these are the first new data supporting the potential use of PEDMARK since the pivotal clinical program. The findings from the multi-institutional retrospective review of 15 adults with head and neck cancers show that PEDMARK could be safely given at 6 hours after cisplatin dosing and was easy to incorporate into the real-world care plan. This strict post-cisplatin timing is a validated approach intended to preserve cisplatin antitumor activity and no disruption to curative intent cisplatin-based treatment delivery was observed as part of the study review. These new findings are critical to demonstrating the feasibility, scalability and long-term value of PEDMARK beyond those studied in our pivotal clinical program. These findings also helped strengthen the case for broader clinical adoption in a sizable patient population at risk for permanent hearing loss. Additionally, as Jeff mentioned, at the start of 2025, we outlined a very focused strategy to expand and deepen the clinical evidence supporting our product via institution-led initiatives. Our objectives were clear. First, generate new data across additional tumor types and patient populations; second, validate and expand the product's real-world clinical value. Third, address unmet need in vulnerable groups such as AYA and adult patients. Next, strengthen guidelines and practice adoption through independent evidence. And then finally, deepen our collaboration with influential institutions shaping oncology standards of care. I am proud to report that we have made meaningful progress across each of these priorities. Within the last 3 months, we have announced the initiation of 2 new studies with respected academic and community oncology centers. The first is with City of Hope, one of the largest and most advanced cancer research and treatment organizations in the United States. City of Hope is evaluating PEDMARK for the prevention of cisplatin-induced ototoxicity, CIO, in adult men with Stage II-III metastatic testicular germ cell tumors. And our intention is to not stop here. Cisplatin has truly transformed outcome for patients with germ cell tumors, turning what was once a highly fatal disease into one of oncology's true success stories. However, as many as 4 out of 5 survivors are left with permanent hearing loss, which impacts the quality of life long after the treatment ends. And we are pleased to see that centers like City of Hope recognize that oncological care needs to focus on both the survival as well as the quality of life. The second study we announced earlier this month is with Tampa General Hospital Cancer Institute, that's TGH. TGH is initiating a study evaluating the real-world clinical utility at PEDMARK and reducing the risk of ototoxicity in AYA and adult cancer patients receiving cisplatin-based treatment. This evaluation will examine real-world clinical data and audiology monitoring that will help to reinforce the message that tumor efficacy is not compromised by the use of PEDMARK. Over time, this expanding data set will help to strengthen physician confidence and support the broader clinical adoption. Additional investigator-initiated studies supporting the use of PEDMARK have been submitted to Fennec and are currently under review. We continue to be very encouraged by the robust conversations and engagement we've had with key opinion leaders at some of the nation's leading oncology centers and look forward to sharing additional updates on evidence generation in the very near future. In summary, our medical efforts in 2025 laid a strong foundation for future growth through expanded evidence generation and meaningful KOL development in the academic setting. The combination of a robust organization, focused priorities and positive KOL feedback ensures that we are well positioned to continue driving clinical confidence and impact in 2026. With that, I will turn the call over to Robert to take us through the financial highlights. Robert Andrade: Thank you, Pierre, and a very big thank you to our entire medical team for their energy and strong momentum going into 2026. Now to the financials. Our press release contains details of our financial results for the fourth quarter and full year 2025, which can be viewed on the Investors and Media section of our website. My comments today will focus on some key financial results. For the fourth quarter of 2025, the company recorded a net product sales of $13.8 million compared to $7.9 million in the comparable period in 2024, representing an increase of approximately 75%. Fourth quarter demonstrated continued momentum in delivering PEDMARK to patients with net product sales up for the fifth consecutive quarter, since Jeff joined as CEO; and our new leadership team took stewardship. For the full fiscal year 2025, the company recorded $44.6 million in net product sales compared to $29.6 million in 2024, representing an increase of approximately 50%. The increase in net product sales is attributable to growth across both new and existing accounts with notable success and progress in conversion and adherence of PEDMARK patients. The company recorded $6.1 million in selling and marketing expenses in the fourth quarter of '25 compared to $3.9 million in the comparable period in '24. The increase in selling and marketing expenses in the quarter is largely related to increased payroll and additional marketing expenses as we focus on expanding our commercial team and augmenting our outreach to community oncology centers and the adolescent and young adult population. For the fiscal year '25, the company recorded $18.6 million in selling and marketing compared to $18.4 million in fiscal year '24. For the full fiscal year, selling and marketing expenses were in line largely as increased payroll and additional marketing expenses in the comparable period were offset by the elimination of European expenses after the announcement of the Norgine transaction in March of 2024. On the G&A front, the company recorded $8.9 million in the fourth quarter of 2025 compared to $4.2 million in the comparable quarter of '24. For the fiscal year 2025, the company recorded $28.8 million in G&A compared to $23.1 million in '24. G&A expenses across both periods, quarters and comparable fiscal years increased with higher intellectual property and legal expenses, increased payroll expenses as headcount increased and increased noncash expenses associated with equity-based remuneration. Noncash stock-based compensation increased about $2 million year-over-year. Cash and cash equivalents were $36.8 million as of December 31, 2025. The net increase in cash was primarily due to the approximately $42 million in net proceeds from equity offering and cash collected from net product sales offset by operating expenses and $21.8 million (sic) [ $21.5 million ] debt paydown in November of '25. As Jeff mentioned, the company has 0 in debt outstanding and has the strongest balance sheet in the history of Fennec. Importantly, we anticipate generating positive cash flow in the first quarter of 2026 as the timing of receivable collections impacted the Q4 cash flows, but on a positive note, we collected the receivables early in the first quarter of 2026 that will benefit our cash position in Q1 of 2026. Lastly, and the major milestone for Fennec, we are pleased to have announced last week the settlement of patent litigation regarding PEDMARK in the U.S. Under the terms of the settlement, Cipla will not enter the market with its generic sodium thiosulfate product until September 1, 2033 or earlier under select circumstances. We believe this settlement will save multiple millions of dollars in annual G&A that will largely be redeployed to help contribute to the expansion of the commercial team, and importantly, provide market exclusivity for many years as we continue to establish PEDMARK as standard of care for patients to be administered cisplatin. With that, we will now commence with a Q&A format by addressing top questions that we most frequently receive from investors within the categories of medical, financial and commercial. Robert Andrade: Starting with medical, Pierre. Number one, what is the biggest challenge or pushback from physicians or institutions when it comes to PEDMARK such as the notion that it interferes with cisplatin treatment? Pierre Sayad: Yes. Thank you for the question, Robert. It's an understandable concern, and it's an important question to address. The primary historical question from oncologists has been whether sodium thiosulfate could reduce the cisplatin antitumor activity. And this concern is understandable given the importance of maintaining such high cure rates in cancers where cisplatin is used. And I'll show 2 specific explanations. First, what has been encouraging is that long-term follow-up from both the COG and SIOPEL 6 trials continues to show preservation of survival outcomes while significantly reducing the risk of cisplatin-induced hearing loss. That evidence base has been critical in shifting physician confidence. In the COG ACCL0431 study, long-term follow-up approaching approximately 8 years has shown no difference in overall survival between the PEDMARK plus cisplatin arm, and the cisplatin alone arm. Similarly, the SIOPEL 6 study in hepatoblastoma has demonstrated consistent overall survival outcomes with follow-up extending beyond approximately 5 years while still showing a substantial reduction in hearing loss. So what this means is, importantly, if PEDMARK were meaningfully interfering with cisplatin antitumor activity, we would expect to see a divergence in those long-term survival curves. Yet, instead, the curves remain essentially overlapping, which provides strong clinical reassurance that the anticancer efficacy of cisplatin is fully preserved. Second, and aside from this long-term durability data, as physicians become more familiar with the pharmacology and the 6-hour delayed administration strategy, it's the mechanistic rationale, which becomes clear. Cisplatin has already entered tumor cells and has already formed the DNA adducts before PEDMARK is administered. We are seeing this discussion move away from skepticism and toward implementation logistics such as the institutional protocol and pharmacy workflow. As awareness grows, many institutions are recognizing that hearing loss is a lifelong toxicity and are becoming more proactive about [ prevention ]. Robert Andrade: Thank you, Pierre. Second question. What is Fennec's regulatory strategy for the AYA population? And are you speaking with the FDA regarding the revised or supplemental indications or working with NCCN regarding stronger guidelines placement? Pierre Sayad: Yes, Robert. As I mentioned earlier, we're building a robust evidence generation pipeline through recent data from our study in Japan, new real-world data supporting the potential use of PEDMARK in adults with head and neck cancers, 2 ISPs already underway and other ISPs in additional tumor types and patient populations, including AYA cancer have been submitted to Fennec and are currently under review. We are focused on expanding the clinical evidence base that demonstrates consistent protection against cisplatin-induced ototoxicity across additional tumor types and patient population. So stay tuned for more updates over the coming months. In parallel, from a regulatory standpoint, we maintain ongoing dialogue with regulatory authorities regarding the potential pathways for label expansion as the data package matures. From a clinical practice perspective, guideline recognition is a very important milestone. As the evidence grows across different disease settings that positions PEDMARK more strongly for future guideline inclusion for strengthened recommendations. The AYA population represents a meaningful opportunity because these patients frequently receive cisplatin-based regimens and face decades of potential hearing impairment if toxicity occurs. Our strategy is evidence first. Once the clinical and mechanistic data are sufficiently robust, we have a plan and look forward to regulatory and guideline pathways naturally becoming more achievable. Robert Andrade: Thank you, Pierre. Moving to financial. Question one, can you provide an estimate on cash operating expenses for 2026 versus 2025 in light of the commercial expansion and other awareness initiatives? With the growth of our commercial team territories and the strategic marketing initiatives to drive further awareness, specifically in AYA, we anticipate cash operating expenses to grow from approximately $35 million in 2025 to approximately $50 million in 2026. The increase in spending is across both commercial and medical. On the commercial front, we have increased headcount, expanded awareness initiatives, a few of which you heard today, and focus on execution. On the medical front, we expect additional ISPs commencing and enrolling, expanded advocacy initiatives and a focus on positioning Fennec for additional guideline recognition and expansion. Further, from a cash EPS perspective, we anticipate a clean P&L in 2026, with a similar gross to net drop down of approximately 85% of gross sales to net sales, COGS in the mid-single digits and noncash stock compensation in line with 2025. Important to note, the increase in spending is focused with rigor and accountability with specific [ curves ] to grow PEDMARK utilization and net product sales. We increased spending and expanded the customer-facing teams with the expectation that they will be making material contribution by the second half of 2026. We remain intent on growing cash flow from operations in '26 and we can expect the same cadence of spending with over 60% of total cash operating expenses to be spent in the first half of the calendar year. Question two. Can you provide an update on the Norgine partnership and ex U.S. progress? After our Norgine deal in March 2024, PEDMARQSI, the branded name for PEDMARK in Europe, was launched in the U.K. and Germany, just last year in '25 and was just approved in Switzerland last week. Importantly, Norgine is planning 8 to 10 launches in 2026 including some major EU countries in addition to the U.K. and Germany. Regarding pricing, the U.K. price was set in 2025 at approximately GBP 8,000. And the final pricing in Germany, we expect to be able to share more by the middle of this year and give you an update related to the potential milestones attached to that pricing. The key takeaway here is that Norgine is just getting started. We expect PEDMARQSI momentum to build meaningfully throughout 2026 as additional countries get launched and commercial activities expand and royalty contributions and related potential milestones impact Fennec's financials will really start to hit us in the second half of 2026. Final financial question. When will you provide revenue or EBITDA guidance in 2026? As a reminder, every additional 100 patients per year on PEDMARK has the potential to benefit Fennec's financials by approximately $30 million. That's 100 patients per year with an approximate addressable market in the AYA market segment alone of greater than 20,000 patients annually. The opportunity is significant as we ramp up our commercial teams presence in the field here in the first half of 2026. As the year progresses, we intend to evaluate the potential for issuing both revenue and EBITDA guidance as we monitor the impact of our growth initiatives. In addition, directionally in terms of EBITDA and free cash flow, every additional 100 patients, as mentioned, can add $30 million in net revenue, but with our fixed cost base has the potential to add an estimated $0.70 per share of free cash flow or cash EPS. Moving on to commercial. Jeff, question one. You've announced the recent field force expansion in Q1. Can you elaborate on these hires and how we should be thinking about the impact to sales? Jeffrey Hackman: Sure. Thanks, Robert. The expansion that we announced in the first quarter here was a very targeted step for our growth. These are really focused on building our territory managers and we've seen the productivity of our current territory managers to be significant, but limited in their reach and frequency. So our territory managers with our accounts that they have focused on high Tier 1 accounts and we're going to continue to see that with the increase of these folks that we brought in, so we will not only increase our reach, but we'll increase our frequency. These additional hires are going to be focused on expanding coverage in regions where demand and account density support incremental investment. We believe this approach will allow us to further penetrate these Tier 1 accounts while also supporting activation of high-potential new centers. Given the productivity that we've seen from our existing territory managers in 2025, we're confident that these hires will contribute new and continued growth and ramp up through 2026 throughout the year and in the future. Robert Andrade: Thank you, Jeff. Question two, you highlighted record enrollment and conversion rates for the quarter. To what extent is that program driving commercial demand versus addressing access barriers? And how should we think about its impact on revenues going forward? Jeffrey Hackman: Thanks, Robert. The primary purpose of our Fennec HEARS program is to address access barriers and to ensure that appropriate patients are able to start and complete their therapy rather than just to create demand. What we're seeing in the data is that this revamped program is functioning exactly as we intended it by helping physicians and patients navigate reimbursement and affordability challenges while also simplifying the overall access experience for PEDMARK. The record enrollments as well as prescribed and infused vials in active AYA patients are growing and they reflect both strong operational execution as well as growing familiarity with our providers and how to utilize this program efficiently. Most importantly, though, the demand for the product continues to originate from clinical adoption and physician decision-making. The patient assistance program supports that demand by removing friction from the access process as well as helping convert appropriate prescriptions into treated patients. From a revenue standpoint, we view that this program is an important enabler for our sustained growth going forward. By improving this patient and clinician experience and ensuring conversion and prescribed vials to infused vials, this helps us capture appropriate utilization, which might otherwise be delayed or even lost due to administrative and financial barriers. Robert Andrade: Thank you, Jeff. And operator, with that, we'll open it up for questions. Operator: [Operator Instructions] Our first question coming from the line of David Amsellem with Piper Sandler. Alexandra von Riesemann: This is Alex on for David. We wanted to dive more into the germ cell tumor and testicular cancer group of patients. Can you maybe refresh us on what you're seeing in the field from advocacy groups and the new field force? And how is penetration in this segment? And then also, are you seeing strong uptake in academic centers or community oncology practices or both? And what's the mix between pediatric patients and older segments at present? Jeffrey Hackman: Yes. Let me take the first part just real quick because I think it relates to some -- on the commercial side, and then I'll hand it over to Pierre. It's a good question. Germ cell tumors continue to be the largest opportunity that we see for PEDMARK. And while the efficacy of cisplatin is fantastic in a lot of these tumors, what we see is a significant amount of ototoxicity in these patients. And so we continue to focus ourselves there. We are partnering with advocacy groups. We have some initiatives throughout this year, and I mentioned a few in our call. But I think driving kind of a two-pronged approach, we have to educate our physicians on the importance of PEDMARK, but we also have to educate patients that they -- and by partnering with advocacy groups, this gives us an opportunity to be able to get that education out to our patients. The second part of that, I'll give it over to Pierre, if he would like to answer. Pierre Sayad: Thank you, Jeff, and thank you for the question. Certainly, we have seen a very substantial, I think, interest, if you will, from both the community as well as the academic settings in terms of driving PEDMARK research. And where this is coming from is maybe twofold. So on the one hand, frankly, it's our substantial medical team. So we had in the field, a group of trained MDs, PhDs, PharmDs, true experts, if you will, engaging daily with top KOLs and academic institutions as well as very important HCPs in the community setting. They are driving very deep and robust conversations. I think the second thing is how these conversations are actually unfolding. These conversations go extremely down deep into the mechanistic rationale first of cisplatin. How does cisplatin actually cause the damage to the hair cells inside the cochlea. We are really able to demonstrate through data, through science, what's happening with CIO and then on the backside of that is explaining the molecular mechanisms, the biochemistry of how PEDMARK prevents the ototoxicity. So you combine the talent of the team with these very mechanistic biochemistry, organic chemistry types of discussions, and yes, we are absolutely seeing an increase in KOL interest and I would say, enthusiasm for working with PEDMARK. Operator: Our next question coming from the line of Madison El-Saadi with B. Riley Securities. Madison Wynne El-Saadi: Maybe if we could double-click on the growth of the number of treated patients in 4Q, making certain assumptions about pediatric revenue, it looks like the AYA patient treated count rose materially in 4Q, at least by, say, 20% versus 3Q. Is that a fair assessment? And do you expect the slope to increase in the coming quarters? And then relatedly, are you seeing an increase in high frequency prescribers? Jeffrey Hackman: Yes. We'll continue to see that trend grow. You see a shift in our focus in our organization towards the AYA market. Obviously, it's much larger. I think Robert has mentioned on numerous occasions. It's 10x the size of the pediatric market. So where we're seeing the significant growth is in our AYA patients. That's where we'll focus. And that's where our efforts have been. That doesn't mean that you walk away from these pediatric institutions and the ability to be able to grow it there. We have some great relationships, and we continue those. In the institutions, you see it mixed, both in the academic and community settings for AYA. We see academic centers in certain areas of the country play a much more important role, but we also are seeing, and we've mentioned in the past that PEDMARK was put on formulary in a large community practice, oncology community practice, and we're going to continue to expand, and we have initiatives working with some very large community practices throughout the country. So stay tuned. We'd love to announce more in the future about how we grow our business in the community setting. Robert Andrade: And just to dive a little deeper, Mad, and maybe touching on your question in terms of some key prescribers. What we saw in Q4, and we expect to continue is a nice mix of both existing accounts and new accounts. And in particular, what got us very enthusiastic is the existing accounts growth. So not only growth in the amount of patients but growth in the amount of vials of PEDMARK administered. And so that's something that we're watching closely to keep that balanced mix between both existing and new. Operator: Our next question coming from the line from Ram Selvaraju with H.C. Wainwright. Raghuram Selvaraju: Congratulations on all the 2025 progress. The first question is from an international commercial perspective, and there are two parts. First, when would you expect during 2026 to start to see initial revenue coming from the Norgine partnership? And with respect to Japan, can you comment on when you would anticipate having a potential partner, local regional distributor in place and how that might relate to the time line for potential approval and market entry? And then lastly, I was wondering if you could comment on the current overall situation vis-a-vis generic filers in the wake of the Cipla settlement. Do you anticipate pretty much everything else to more or less fall in line with that settlement? To what extent is their remaining litigation pending? How many other generic filers do you expect? And any other information on that topic that you could provide that might be germane. Robert Andrade: Sure, Ram. I think I'll start with taking all 3. On the Norgine front, as I mentioned, there are a number of launches happening this year. And also really once we get the -- once Norgine gets the pricing in Germany, you're going to see Germany starts to take off. So we anticipate a material contribution to Fennec's financials in the second half of 2026 from Norgine. On Japan, front and center, as Pierre mentioned, we're really excited about the results that we announced in Q4, all very consistent with what we know that it protects your hearing and doesn't impact the efficacy of cisplatin. Those conversations and dialogues are ongoing. It's in our best interest to get a deal done sooner rather than later. We want to be with a partner similar to what we have with Norgine in Europe -- in Japan, so we can get the regulatory process kicked off. And we have a lot of enthusiasm, not only from strategic but from the investigators themselves in Japan to get PEDMARK approved there. Lastly, and thank you for the question on the settlement. It was many years in the work, lots of dollars spent. So we are very excited to have that behind us. We have no other outstanding litigations currently at this time. I think you're very familiar with the generic and the settlement process. Generally, it's one and the first one that you settle with. If it's two, it means that you have an enormous market or a sizable market. So to a certain extent, that's a good problem to have. But nevertheless, we are very excited to have resolved our only outstanding litigation with Cipla and look forward to establishing PEDMARK as the standard of care well into the '30s and go thereafter. So thank you, Ram. Operator: Our next question coming from the line of Chase Knickerbocker with Craig-Hallum. Chase Knickerbocker: I wanted to get your thoughts maybe and I think it would be helpful kind of however you guys kind of break it out internally, but potentially a number of kind of unique AYA accounts or prescribers. And then you kind of mentioned those accounts that are writing more vials in Q4 over Q3. Maybe just -- is that the exception is that the rule can maybe kind of elucidate that further as far as kind of how many repeat prescribers you're seeing in that AYA population? Jeffrey Hackman: Thanks for the question. We're seeing -- first off, let me take the last part of that question. One of the areas that is really sticky for us now and what we're seeing is prescribers prescribing again, right, and multiple times. And I think that's probably the biggest impact that you see on our growth if these prescribers now being comfortable with the regimen, being comfortable with using Fennec HEARS with using nurses coming into the home of the patient, being comfortable with getting reimbursement. One of the things I know you're interested in also is can the product get reimbursed in the AYA space. And the 3 top plans in the country, we're seeing upwards of 95% to 100% reimbursement rates for the product. So that's not limiting us either. All of those are factors that allow our physicians now to be much more comfortable with the product and use it multiple times. But one of the reasons why we wanted to increase the size of our commercial footprint was to get to more customers. There was just a limit to who we could call on with the size of our commercial team. We've now expanded that reach significantly. I believe that the size of our team now is good enough to get us to the future of where we need to go, especially with the expansion of the number of calls that we're seeing already with these folks in the field. And so that growth is going to be evident, and you'll see that really quickly start here in 2026. So while we don't kind of get numbers of new accounts, as you know, but the area -- the breakdown of both new existing accounts are very balanced right now. It's probably like what we'd like to see in the field is kind of a balance of both. I don't want to see physicians walking away from using the product because they didn't have a good experience, but we also want to see us reaching out to new customers as well. So it's a very balanced approach. Chase Knickerbocker: Maybe just being most of the way through Q1 here. You kind of called out that kind of per patient revenue is pretty significant, that does introduce a little bit of lumpiness, right? And so as we go into Q1, most of the way through the quarter, I think it would be helpful just to get some kind of goalpost or thoughts as far as kind of current trends? I mean you grew about 11% sequentially in Q4. Maybe just a goalpost there would be, do you expect that to accelerate in Q1? Or is there some seasonality in Q1 that we should be thinking about for the business? Jeffrey Hackman: Well, I'll let Robert comment on some of the numbers. But Chase, we've grown this business 5 straight quarters. My plan is not to slow down here. Robert, if you want to comment on. Robert Andrade: Yes, I'll just -- similar to Jeff's comments, we have a strong momentum into 2026. Importantly, we did add significant amount of FTEs and commercial hires and as well as medical hires. They don't contribute day 1. But as mentioned in my prepared remarks, we anticipate that material, call it, step up in the back half of 2026. So we're not going to stop here by any means in Q1 and Q2, but the material contribution that we've done from this expansion we believe is going to really start to impact our financials starting in Q3. Operator: Our next question is coming from the line up Sudan Loganathan with Stephens. Sudan Loganathan: Congrats on the great year and quarter. My first question, I just wanted to ask how are you thinking about the business development going forward, particularly in terms of priority and maybe potential areas of focus? And then the second one I have, you kind of touched on this a little bit on the prepared questions, but can you elaborate on how institutional-led research is expected to impact Fennec in both the near and long term over the long term? Robert Andrade: Yes. The first question, Sudan, was on business development. And I'll let Jeff add here. But as you know, our opportunity in PEDMARK is very, very large, 20,000 patients in the AYA alone with the opportunities that Pierre spoke to in potentially expanding both the initiatives into metastatic and into additional populations. So that being understood as we expand our sales team, there's always the opportunity to evaluate potentially late-stage assets or commercial assets. But with our team in place, we are very enthusiastic just about the opportunity to invest in ourselves and this opportunity in front of us. Jeff, do you want to add anything? Jeffrey Hackman: I'll just add, yes, I mean, now we're -- the scale that we've added now and the expertise, and I talked about this, Sudan, before, is now we've created and we're showing significant execution, 5 straight quarters in a row here. So this organization now has shown that it can deliver and execute on its strategies. And so yes, now it opens up some doors. So it's a good question. The second part of your question, I'll answer a little bit of it, and then I'll let Pierre jump in. But the growth in our partnerships in these medical institutions are kind of twofold, right? So you can start to think about the relationships that we build and the importance of these studies and the data that we're going to get from these studies, but having a partnership, for example, with City of Hope, as Pierre discussed earlier, is essential for the entire organization and our relationship with City of Hope, not just those physicians doing the study. And do you want to expand on that just a little bit? Pierre Sayad: Sure, sure. Thank you for the question. As Jeff is commenting, absolutely, you got City of Hope, TGH, they're critical academic centers that are going to help us drive our understanding into new patient populations, as previously mentioned, adults, metastatic disease, et cetera. And there's many more ISPs that we are currently reviewing. So stay tuned for some more press releases here hopefully very, very soon. All that to say is that as new data is coming in, that defines our regulatory strategy. Our immediate priority is expanding the clinical evidence base that demonstrates this consistent protection against cisplatin-induced ototoxicity, yet additional tumor types and additional patient populations will allow us to drive these regulatory conversations. So in terms of expanded labels, perhaps new guidelines, new relationships with NCCN, the new data coming in will help define that entire... Jeffrey Hackman: So in closing, what I -- yes, thank you for the questions, everyone. I think we'll close it here. And I just want a few comments here at the end for me on this. And I -- 2025 was a record-setting year for the company. It's -- we've come an incredible -- and we've overcome incredible things this past year in 2025, but we're not stopping here. We're set up to strengthen our commercial execution going forward. We've deepened our medical engagement. We've expanded our global reach. We're now seeing the impact of this focus and this disciplined execution focus in this organization. We've built real momentum going into 2026 with a revitalized and expanded team with clarity and purpose. We know exactly where the business is and where our efforts need to be focused. Our field and medical teams are deeply engaged. We're educating physicians. We're supporting our patients and we're expanding awareness of cisplatin-induced ototoxicity. The organization is aligned, and we are energized, and we're excited and we are hitting on all cylinders as we go into 2026. So I'd like to thank you all for your continued support and partnership and we're looking forward to a fantastic progress in 2026 and beyond. Thank you. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.
Jason Honeyman: Thank you. Good morning, and welcome to Bellway's half year results. As usual, I'm joined by Shane and Simon. We've lots of our senior management team also with us today. If I could take you to the first slide. We delivered a good first half performance despite a softer selling period through much of 2025. Half year volume increased to 4,700 homes. That delivered an operating margin of 10.5%. We have an order book of 4,400 homes and a strong land bank largely unchanged at 94,000 plots. Now since the start of the calendar year, trading conditions have markedly improved with a notable pickup in both homebuyer interest and reservations. However, the ongoing conflict in the Middle East clearly has the potential to dampen customer demand and clearly increases the risk of higher inflation. That said, to date, we have not seen any material impact upon sales rates. And for FY '26, given our half year results and our order book, we remain on target to deliver operating profit in the region of GBP 320 million to GBP 330 million. The full year is likely to deliver a higher volume than previous guidance with an operating margin similar to the half year. And while margin headwinds may well continue delivering higher volumes will certainly drive cash generation, and that very much supports our program to be more capital efficient. I will provide the usual detail on ops and outlook later, but first, for our results and update on capital allocation with Shane. Shane Doherty: Thank you, Jason, and good morning, everyone. As Jason said, we've delivered a robust performance in the first half despite ongoing challenges in our industry, supported by the order book at the start of the year and despite subdued trading throughout the autumn, volume output increased by 2.7% to 4,702 homes. There was growth in both private and social output and the proportion of social completions was in line with prior year at around 21%. The ASP was up by 3.7% to just over GBP 322,000 and in line with expectations. The increase in the ASP was driven by geographic and mix changes with headline pricing remaining broadly stable. Turning to gross margin. There was a 20 basis point reduction to 16.2%. This slight reduction reflects the benefit of higher-margin land in the mix, which was offset by incremental incentive usage, the absence of any HPI and low single-digit build cost inflation. These factors are also reflected in our order book and combined with the expected contribution of bulk sales in the second half, we currently expect gross margin in FY '26 to be similar to that achieved in the first half. These margin dynamics, together with embedded cost inflation carried in our work in progress are likely to remain a headwind to margin, at least in the near term. And there are clear risks of potentially higher build cost inflation stemming from the ongoing conflict in the Middle East. We'll be in a better position to comment on the potential impact of FY '27 when we report in our June trading update. Looking further ahead, we are working through our WIP balance and growing proportion of our output will benefit from newer high-margin land. With a stable market supported by a more favorable HPI BCI dynamic as seen in previous cycles, we are well positioned to drive ongoing improvements in our margin in future years. In line with our strategy to invest across the group to deliver greater efficiencies and long-term growth, the admin overhead increased to GBP 86 million, and the full year number is expected to be between GBP 170 million and GBP 175 million. Our investments include our new timber frame factory, combined with strategic investments across IT and strength in commercial and finance teams, which means we now have the right structure in place to effectively deliver on all of our strategic priorities. We expect that, that level of increase will not repeat in future years, whilst obtaining operating leverage from it as we drive towards 10,000 units if market conditions improve into the medium term will obviously be a key focus also. The effect of the increased overhead investment, together with the movement in gross margin led to a 50 basis point reduction in the underlying operating margin to 10.5%. Underlying PBT was slightly higher at GBP 151 million, and I'm pleased to report that the interim dividend has been increased by almost 10% to 23p per share. This slide has covered the group's underlying performance. Adjusting items shown in more detail in the income statement in Appendix 1. These include GBP 300,000 to admin expenses relating to the previously announced CMA investigation. The other adjusting items relate to build safety, which I will cover later in the presentation. Turning to our balance sheet. It is robust and well capitalized with a strong land bank and WIP position at its core foundation. These are key focus areas for our capital efficiency drive and critical to our plans for increasing cash generation. I will cover this in more detail shortly as part of our capital allocation strategy. First, to highlight the key balance sheet movements, reflecting our largely land replacement only land strategy, the land balance of GBP 2.5 billion has reduced slightly by around GBP 38 million since the year-end. During the first half, we entered into new land contracts on deferred terms totaling around GBP 130 million, and settled line creditor payments of around GBP 180 million. This led to period-end land creditors of GBP 290 million, representing 12% of our land balance. As previously guided, and as part of our strategy to run the business with a more efficient capital structure, there will likely be an increase in the use of land creditors over the medium term. The range is expected to be between 15% and 20% of land value, which is similar to historic norms. Jason will cover our land bank in more detail later. The work in progress balance, which includes site WIP, show homes and part-exchange properties reduced by GBP 39 million to GBP 2.3 billion. Breaking that movement down into 3 component parts. Firstly, the value of show homes remained flat, reflecting our broadly stable outlet position. The value of part-exchange properties rose by just over GBP 20 million. Part-exchange is an important selling incentive for customers. And whilst its usage increased, it has remained disciplined and represents a relatively modest 6% of our completions. Finally, site WIP reduced by GBP 61 million to just over GBP 2.1 billion. And this highlights some good early progress with our capital efficiency drive, which we spoke about to you in detail last October. To finish on the balance sheet, as you will see from the bottom of the slide, our adjusted, our adjusted gearing, including land creditors, remains low at 10.3% and our net asset value per share has now risen to just over GBP 30. We've continued to make good progress on build safety, and I'm pleased to report that the overall provision remains broadly stable. With regards to movements in the provision, in addition to the GBP 6.5 million adjusting finance expense, which was in line with previous guidance, there was a very modest net increase of GBP 4.2 million in the build safety provision through cost of sales, which relates to the refinement of overall cost estimates. We have now completed the terminations on all of our legacy buildings in England and Wales in accordance with the joint plan. Our provision is based on robust assumptions and prudent cost estimates for both internal and external works on the 457 buildings in scope for remediation. We have started our completed work on 172 buildings with the majority of spend expected by FY '30. We've spent GBP 212 million on legacy build safety since the start of the program, including GBP 21 million in the first half of FY '26. The strengthened team at our dedicated Build Safety division is focused on completing works as promptly and as efficiently as possible. For FY '26, we continue to budget for total spend of over GBP 150 million, although I must caveat that this level of spend remains dependent on receiving requests for payment from the government for works carried out on our behalf for the build safety fund totaling around GBP 90 million. I think it's important to point out today that for prudence, our shareholder returns capital allocation modeling assumes significant disbursements around build safety over the next 3 years. The provision at the 31st of January '26 was GBP 507 million, and I'm confident that we are well provided for the remediation works required across the legacy portfolio. In terms of recoveries, we've recognized GBP 81 million to date. We do, of course, continue to actively pursue further supply chain recoveries. But as these are not virtually certain at the balance sheet date, no additional reimbursements have been recognized. Turning next, just to remind you of our priorities for capital allocation, which we covered in detail last October. In short, it is a flexible framework with our strong balance sheet and well-invested land bank as the foundations of the business, which support our balanced approach to continue to invest for growth and delivering enhanced returns for shareholders from increased cash conversion and generation. As part of our strategy, we are sharply focused on driving greater efficiencies and our WIP balance presents a significant opportunity for much greater cash generation, which I will cover next. We generated good operating cash flow in the first half. The cash flow bridge chart shows the movement from a small net cash position to ending the period with modest net debt at GBP 72 million, in line with our plans to run a more efficient balance sheet and increase returns to shareholders. To run through our key movements, you can see the decrease in total WIP that I referenced earlier amounted to GBP 39 million. In relation to land, the monetization of land through cost of sales was GBP 283 million. This was slightly lower than the cash spent on land and together with the movement in land creditors, this led to a GBP 38 million decrease in land on the balance sheet in the period. After other working capital movements and tax, the operating cash generated before investment in land, build safety spend and distributions to shareholders was GBP 314 million. As a result, the conversion of operating profit to adjusted operating cash flow was 2x. As I highlighted in October, we are aiming to maintain the conversion level at a minimum of 2x over the 3 years to FY '28. As I've said previously, adjusted cash flow is the fuel for future investment opportunities in the business and ultimately, greater value creation and returns for our shareholders. In this regard, we invested GBP 302 million in land, including settlement of land creditors and dividend payments and share buybacks totaled GBP 105 million. We also spent GBP 21 million on build safety, which I referenced earlier. After taking account of all of these disbursements, we closed the half year with net debt at a modest GBP 72 million. I will now cover our cash generation targets for the second half, which I think is important in the context of what we're discussing this morning and the tougher trading backdrop that may emerge, together with our longer-term ambitions in the context of driving shareholder value against this potential backdrop. As I've said many times, driving WIP efficiency is a key area of focus across all of our 20 operating divisions and a significant opportunity for the group to deliver cash generation. We've increased our volume guidance for the year by between 100 and 300 units on our original volume guidance of 9,200 units. And the combination of this increased monetization with tighter controls around WIP spend will see us increasing our operating cash flow conversion targets significantly year-over-year. As the chart shows, operating profit will grow by between GBP 20 million and GBP 30 million year-on-year in FY '26. But we expect operating cash flow will increase substantially more than that by between GBP 100 million and GBP 150 million year-on-year. This leaves the company in a strong position to drive future value for shareholders by continuing to drive volume appropriately against this tougher trading backdrop. This will provide greater opportunity to invest in more high-margin land and potentially returning more excess capital to shareholders. Overall, we are targeting adjusted operating cash flow of between GBP 750 million and GBP 800 million for the full year. Looking beyond FY '26, we have a greater proportion of units at an advanced stage of build than a couple of years ago, which should support a faster monetization of our WIP balance. This drive for improvements in WIP turn and to lower our WIP balance will enhance asset turn and support cash generation. This will help fund our build safety disbursements, further land investment and returns for shareholders. We'll maintain our underlying dividend cover of 2.5x, and this will be supplemented by returns of excess capital. In this regard, we are making good progress on our GBP 150 million share buyback launched in October with around GBP 64 million completed so far, and we have a clear intention of returning excess capital in future years. To finish my section, a summary of guidance for FY '26. We, of course, recognize the risks to inflation and customer demand from the ongoing situation in the Middle East. Notwithstanding this and supported by a robust first half and our current order book, we are well placed to deliver FY '26 underlying operating profit in the range of GBP 320 million to GBP 330 million. So for guidance, we are targeting volume of between 9,300 and 9,500 homes, the final outcome of which is dependent on completions from our bulk sales pipeline. The average selling price will be around GBP 325,000 with the increase over FY '25 driven by mix. It's important to point out when we give that guidance, we are not in any way giving that guidance in the context of any potential negative impacts that it might have on FY '27. It's all based on the strong work that we've been doing, monetizing our WIP and broadening the pipeline of opportunities that we see both in private sales and potential bulk sales. The admin overhead will be between GBP 170 million and GBP 175 million. We currently expect the operating margin to be similar to the first half level at around 10.5%. The finance expense will be around GBP 20 million, and adjusted operating cash flow is expected to be strongly ahead of prior year at between GBP 750 million and GBP 800 million. Finally, land spend is expected to be in the region of GBP 500 million to GBP 600 million, reflecting our largely replacement-only land strategy. Despite the headwinds facing our industry, I'm confident that our self-help and drive for capital efficiency will mitigate the impact on our strategy to increase cash generation and value for shareholder returns. I'll now pass back to Jason, who will cover the operational review and outlook. Jason Honeyman: Thank you, Shane. But now for trading. In the first half, we achieved a private sales rate of 0.47 with January being our strongest month at 0.6, and that momentum has continued to build into the start of the spring selling season. With regard to the mortgage market, improved affordability and changes to lending criteria have both contributed to those better trading conditions. That said, recent increases in mortgage rates due to the events in the Middle East clearly has the potential to impact upon future demand. And that brings me on to current trading. In the first 6 weeks since the 1st of February, we have achieved a private sales rate of 0.66 and bulk sales made an additional but modest contribution of 57 homes. And from a geographical and mix point of view, the picture hasn't really changed much with Scotland, the North of England and the Midlands all remaining stronger than the South. But those regional differences are quite pronounced with Midlands and upwards all delivering a strong sales rate of around 0.75, significantly higher than the 0.5 being achieved in the South. Headline pricing remains firm, although incentives are full at 5%. And we find that prices for houses are more robust or more resilient than those for flats. And as I referenced in my introduction, the last 2 weeks of our current trading period have coincided with the conflict in the Middle East. Both of those weeks have delivered a consistent sales rate of 0.65 or the equivalent of 155 private homes per week. We continue to progress bulk sales to support both this year and next. We are over 85% sold for FY '26, hold an order book of over GBP 1.5 billion or 5,300 homes as at the 13th of March. The next slide shows our land bank totaling some 94,000 plots, half of which are owned and controlled and half are strategic. Now I'm happy with the size and the shape of the land bank. It supports our short-term growth ambitions. We are still buying land but with caution. In the period, we contracted on 4,700 plots across 15 sites including 1 site in Scotland for 1,900 homes that was converted from our strat pipeline. And strategic land continues to play an important role in our growth ambitions. Within this financial year, we will have 80 strat planning applications or around 17,000 plots in the system. And to put that into context, that has increased threefold in just 2 years. And that is a significant change in our business. And these strat plots will support both margin recovery and outlet numbers from FY '28 onwards. Overall, we have detailed planning consent on over 95% of our plots to meet our volume for FY '27. And as a consequence, we've got good visibility on outlets. We're on target to open 55 outlets this year and a further 55 to 60 next year. And we expect average outlet numbers to hold at around 240 for both this year and the next with growth up to 250 in FY '28. With regard to planning, I would describe planning reform as positive rather than perfect. Overall, and outside of London, the planning environment is generally supportive. Moving on to costs. Overall, cost inflation remains modest at around 1% or 2% and we currently have no issues with regard to availability, either labor or materials. That said, we are very mindful of the heightened inflationary risk caused by the events in the Middle East. And as a consequence, our focus on being more cost efficient seems ever more relevant today. And I'll give you a few examples of our approach to saving costs to support margin. Firstly, we intend to phase out the Ashberry brand as it is proving too expensive to fund a separate brand to sell just 9% or 10% of our volume. We plan to adopt a single brand approach that will play on our 80-year history. It will be clearer to the customer, a digital-first approach, less expensive and without any overall impact upon outlet numbers. Secondly, we will shortly launch our new house type range, the Bellway Collection, which has been designed to be timber-frame friendly. And by that, I mean, optimize panel widths and ceiling heights to improve both speed and efficiency and also reduce waste in the process. And with our new house type range, our single brand approach, we have the perfect platform to personalize homes and offer extras and additions on a much greater scale to drive incremental revenue and profit growth. And thirdly, we successfully opened our timber frame facility, Bellway Home Space back in January. And we have already started delivering timber kits to our divisions. Our investment in technology that supports Category 2 closed panel systems is hugely important as I firmly believe that Cat 2 is a key part of the future of housebuilding. And one final point before outlook, build quality and customer service. I'm pleased to report that we are rated as a 5-star housebuilder for the 10th consecutive year. But more important is our position with HBF's new scoring system, which has been designed to be more challenging. Housebuilders are now measured by their customers at both 8-week and 9-month intervals and based upon both quality and service. Bellway have achieved an overall score of 4.38, the highest of any national listed housebuilder, a phenomenal effort by our ops teams and a direct result of their hard work. And finally, outlook. We're on track to deliver a volume of 9,300 to 9,500 homes. As you've heard from Shane, regardless of the wider backdrop, we have a sharp focus on improving cash generation, and we expect to deliver a significant increase in operating cash flow this year. And should we find ourselves in a prolonged turbulent period. Our business is in good shape. We have a flexible capital allocation framework and a strong and experienced management team and are well able to navigate our way through any challenges. Thank you. Now happy to take questions. Allison Sun: Allison from Bank of America. Two questions from my side. So first, if the -- let's assume the market activity will be muted given all the impact. Are you guys ready to give out more incentives or not? I think are we expecting maybe incentives will go beyond 5% for the rest of this year? And the second question is what type -- what kind of inflation assumption you put in your fire safety remediation work? Jason Honeyman: Sorry, I didn't get the second question. Allison Sun: The inflation assumption you have for the fire safety remediation work. Jason Honeyman: So I'll take the first and you take the second. With regard to incentives, it was our intention at the start of the year to tighten up that incentive level to support margin growth into '27. Today, that looks a little bit too optimistic. But no, I don't have any plans to increase incentives. They're at a level that we're happy with, and we're delivering a sales rate that we're quite comfortable with. Can I hand over to you? Shane Doherty: Yes, 3% on the inflation, [ build ] safety. Aynsley Lammin: Aynsley Lammin from Investec. Just two for me, please. Just trying to understand the change in guidance a bit more, more volume and obviously less margin. Is that driven by kind of changing view of the market, what you expect going forward? Or is it just more opportunities to do some bulk sales and you can release some of that WIP? Any color around that would be quite interesting. First question. And then just on the second question, I guess, a bit more color again last couple of weeks, have you seen any change in cancellation rates, the vibe on the ground in terms of the sales rates? Is it kind of beginning to feed through in confidence what we're seeing in the mortgage market? Jason Honeyman: Thanks, Aynsley. Shall I'll start with the last question and I'll hand back to you. No, sales rates, Aynsley, have held up and likely to hold up through March. And when I think about it in a little detail, it's probably not too much of a surprise. If you're planning to buy a home now, you probably made a decision a month or 2 ago, and you've already got the benefit of a mortgage offer, which probably looks quite good value Aynsley at the moment. So no -- we've seen no immediate impact. And I think our buyers and customers in the market have got a little bit of crisis fatigue. We've been through Brexit and pandemics and Ukraine and Middle East. So there's a bit more resilience amongst our buyers. But I would expect that sales rates to soften into April, not now because you'll see the impact of the margin increase. And I don't think it will be material. I just think it will dampen a little bit. And all that's caveated to what's going on in the Middle East. But you'll probably see a softening into April, but not significant. Shane Doherty: Yes. In terms of the guidance, it's probably along the lines and what we flagged when we came out in early February. It's very much probably reflective of what we were seeing in the first half of the year. It's probably easy enough to forget that now because I like the crisis fatigue. That's what it feels at the minute. But the run-up to the budget was a difficult time for everyone. And what we did in the run-up to the budget was we traded appropriately in relation to the value creation thesis that we set out last October, which is that we will drive pricing as appropriately as we need to. But sales rates in the run-up to Christmas were less than 0.5% across the sector. So what you're seeing is the margin uptick that we're seeing coming through is really just reflective of the fact that with good visibility with good forward order book coming into the year, sales rates have picked up. And whilst the kind of 50 basis point margin reduction seems quite significant, those margin reductions become exaggerated, unfortunately, in a market like this where there is very little HPI for the reasons that Jason has outlined and you have kind of BCI running even at 1% or 2%, that is going to hit you to the tune of about 50 basis points on your margin. So that's all you're talking about. It's probably GBP 2,000 per unit in overall terms. It's a pretty small number. The market has picked up quite significantly in the early part of this year across all of our divisions. And if that sales rate was to maintain, I think it's important to make that point, notwithstanding the caveat we put around the emergent situation, that sales rate was to hold at kind of 0.65. We will be looking at a kind of -- we never gave formal guidance into next year, but we did talk about the fact that we were going to get to 10,000 units. So if you storyboard that from the original guidance that we gave, 9,200, 96,000, maybe 10,000, we would have assumed off the current sales rates that we would still be forward sold to the tune of probably 35% of getting to a 9,000, so a flattish volume next year, notwithstanding the emergent situation. So that volume uptick that we're seeing is not at the expense of the overlying market growth opportunity that's still there. And it's very easy to kind of talk yourself into a doom loop because of what might happen at the moment. But the broad reality is as you look out beyond maybe whether it's the end of this year or beyond next year, the demand-supply imbalance still holds. Jason talked about the strat land margin coming through. There will be good, strong underlying margin progression coming through our business. And we've got good volume opportunity, and we've got 20 outlets. So really, what you're seeing at the moment is just us trading appropriate through what has been a challenging environment and emerging from that with little debt and the ability to return capital to shareholders. Zaim Beekawa: Zaim Beekawa, JPMorgan. The first is just to come back on the incentives. Can you give some indication on the cash, noncash portion? And then secondly, in light of the mortgage volatility you sort of alluded to and potential impact, what's your view on your own shared equity scheme like some of your peers? And then third, if I could go on the bulk sales, sort of any indication on the discount on those bulk sales compared to maybe a year ago or 6 months ago? Jason Honeyman: Should I start with? Shane Doherty: Yes. Jason Honeyman: Sorry, on incentives, it's mostly cash and some additions. I did want to set out a chart to show you the regional differences across -- because you can understand there's probably more in the South than there is in the North at the moment. But nothing surprising in what you see regarding incentives. And in terms of -- shall I do shared equity products. We don't think they're a big part of the market. I get a little bit frustrated because they can confuse customers when you've got a whole series of schemes across the industry. And I've always preferred a housing association on something government backed that people can trust and look into. So we look at it and watch with interest to see if that market moves, but I've got no ambition to bring out a bespoke shared equity product at the moment. Sales are good enough. Shane Doherty: What I'd say in relation to bulk is -- I'm not trying to dock the answer. What we do is we tend to take an NPV approach to bulk pricing, and that's kind of using a 10% hurdle rate because whilst you may need to reduce your baseline pricing, you will find savings in other areas, not least your sales costs will be lower and also your running cost as a site can be lower as well, and you may have forward funding opportunities. So looking at it through all those lenses, when we baseline that against private pricing and sales rates and if it has -- and using a hurdle rate of 10%, if that's NPV accretive, then we'll go after that deal. What I'd say in broader macro terms in terms of buyer appetite, it's a lot stronger now than it was 12 months ago, insofar as a lot of the indicative pricing that probably was coming back 12 months ago was reflective of where interest rates were, and you could be looking at maybe 20% discounts on pricing, which is not something that we'd be interested in. But certainly -- and it's not reflected in the numbers at the moment, but it's certainly reflected in our pipeline of opportunities. The gentleman sitting in front of you there is actually living and breathing it at the moment, the 2 actually. We've got a significant pipeline of bulk opportunities, and we'd be confident that we'll see some of that coming through between now and year-end. Jason Honeyman: Can I just add to that? So there's lots of questions here about incentives. But from a bulk point of view, we did about 600 homes last year. This year, we'll probably do something similar. It's not a major part of our business. And incentives across the board, we've got a strong order book. Our sales rates are good. We were very well organized as we come out into January in the new year. So we've maximized what opportunity is there in the market. And I've got no intention to start discounting properties and being desperate. We can make good decisions. We're in a good place. So I think we're fine at the moment. William Jones: Will Jones from Rothschild & Co Redburn. Three as well, please. First, around build costs, if that's okay. Just what you've heard from manufacturers since Iran kicked off, visibility you've got generally and whether you have any framing of how you might look at your build cost basket in an energy context, any sensitivities around that? Second, on the balance sheet and the returns, helpful guidance on the operating cash flow for the full year. Do you have any view at the moment as to how that might shake out, net cash net debt, please? And when you think about the ongoing buyback, hopefully, beyond the current year, how would you think about the sensitivity of that to -- broadly speaking, to a lower profit environment if it came through? Or do you think that actually continuing to optimize the assets would mean that, that buyback can carry on? And then the last one just around Ashberry, just a reflection there. What, I guess, proved different to your expectation to make it too expensive? And any implications do you think on sales rates as that winds down? Jason Honeyman: Okay. I'll pick up build cost in Ashberry and I'll hand back to Shane, Will, if that's okay. On build costs, most of our supplier agreements are fixed from the start of '26 and generally last for around 12 months. If it gets really bad, Will, that counts for nothing. We know that we've been through the pandemic. All we've seen to date is lots of suppliers asking for increased delivery charges, haulage costs, fuel surcharges, those sorts of things, which is all manageable. What has got our interest is where you've got high energy-dependent materials such as bricks, blocks, concrete chips and those sorts of things. So that's where we'll keep an eye on to see if there's any movement there. And like everyone, Will, we look every morning for a quick resolution to the problems in the Middle East to hope they don't transpire, but time will tell. So at the moment, mostly delivery and haulage costs is what's coming our way. And on Ashberry, we did a thorough review of our brands. And I don't want to suggest for a moment that a one-brand approach is better than a multi-brand approach, but it certainly is for Bellway because Ashberry, after our research, our customers were confused with the product. And some people in this room used to get confused when you ask me about what is Ashberry and what does it do? And I found that Ashberry was confusing our customers because it was asking for or selling the same product on the same site, and it was more expensive. So we decided to refresh that Bellway brand. We're going to offer 3 tiers of specification going up to Bellway premium. It's going to be very digital focused, both in our sales offices and on the Internet. And we think we'll make savings and be less confusing to our customers and deliver the dual outlets where we can. And you must remember, Will, we don't have lots of large sites. We've got handfuls of them where we can offer a dual outlet without making any sort of serious impact on outlet numbers. Shane Doherty: So in terms of net debt, I mean, I anticipate at the moment, like it's probably worth just saying stripping out the build safety component, if I just assume that's constant, even though I expect that might come in slightly lower, even allowing for that, I think our net debt figure is probably going to be in the region of GBP 100 million, GBP 120 million type range between now and year-end. And that would probably see the buyback running at probably close to maybe GBP 100 million, GBP 120 million by year-end as well. So you have a decent clip of that coming through within that. So we're in good shape from a cash perspective. The only thing, as I say, Will, I could bring that down would be if the build safety spend is lower. But I think it's important to talk about it in the context of it being at normal run rate. So I think that gives us a lot of confidence in terms of the fact that the capital allocation strategy is working against the backdrop of kind of 2 tough economic events running in the background and lower margins, we're still throwing off cash, and that is the underlying strategy going forward. We'll have plenty of cash to buy land. We'll buy land probably -- I won't quite say on a net replacement basis. We may make some incremental investment if we do it, though, it's because it's a compelling opportunity. So we'll be very much focused on the returns to shareholders, I think, in the context of the cash that we'll continue to generate. And the fact that we've identified between 100 and 300 units this year, that's effectively ring-fenced upside from an operating cash perspective, even if it's not necessarily coming through on profitability. But as we all know, the share price is trading at a fundamental discount at the moment to what its net asset value is. And we look at our strat land opportunity. We look at the land margin upside that's coming through. And so it's very compelling for us to continue to look at buyback opportunities in that context. Rebecca Parker: I'm Rebecca Parker from Goldman Sachs. Just 2 questions. In terms of your outlet opening program, just wondering if you could talk to a bit around why you're expecting, I guess, outlets to be flat into '27. And I think the guidance for '28 has slipped by about 10 outlets there. And then secondly, on that increased proportion of higher margin land coming through, when do you expect that contribution to have more of a material impact? Is that more into 2028? Or can we start to see that come through in '27? Jason Honeyman: Rebecca, I'll start on outlet numbers. The growth -- let's start with '28, we'll go back to '27. So the growth is a product of our strat land coming through the system. Those 17,000 plots. So if that comes good, we'll get a natural increase in outlet numbers. Outlets are flat this year and next, probably because we had a big jump back in '23, '24, where we opened 80 outlets in 1 financial year. And we've just been buying replacement land. So it's difficult to see how we can grow outlets without that strike coming through. So we've held them flat. And then as long as we get a decent run through the strat planning system, then we're likely to see a little bit of growth again. Shane Doherty: In terms of margin progression, again, it's probably easier to talk about that in the context of how we were planning this before. And we have to take note of what we're hearing at the moment in terms of all the stagflation risks that are there in terms of potential BCI risk and interest rates going up. But we know that, that can also change quickly. So therefore, I think to answer your question most effectively, it's probably worth just talking about what the underlying margin upside that we were seeing coming through on the land bank. So in simple terms, gross margin this year is going to be around 16.3%. We had in our head that, that could be probably getting up to 18%, maybe even 18.5% over the next 2.5 years as you get to FY '28. So you would have been looking at margin progression of probably 17% and then 18%. And I think the big question, Rebecca, that we're all asking is what impact is that 17% now coming under as a result of what's happening globally. I think the comfort that you can take today is that hedging, it seems to be order the day at the moment. Everyone is talking about hedging in the context of BCI and stuff like that. I think our land margin uptick that you're seeing coming through is an effective hedge for what's potentially coming down the track in terms of higher interest rates and potentially higher costs. So that's the most effective way I can answer that question at the moment for you. Jason Honeyman: Can I -- sorry, Rebecca, can I just add to that because we've taken a more sober view of the outlook. We take the view that even if the war stops in the morning, there's still going to be a ripple of cost inflation in the system. That's already in existence. It's unlikely that the trading environment is going to change from a deal led market. So there's no house price inflation in the market. So we've just taken a more cautious realistic view of what's happening in the world. And then we see margin progression probably feeding through back end of '27 into '28. That's a sensible view to take today. Alastair Stewart: Alastair Stewart from Progressive. A couple of questions, please. First, in terms of the trading over the last 2 or 3 weeks, I think we're on week 4 now from what I hear. But in terms of that, you've been clear in terms of the weekly sales rates been holding up. But in terms of anecdote from sites, if there is any reticence anywhere among your potential buyers, is there a trend? Is it more traders up are more comfortable than the first-time buyers? And is there a regional disparity in terms of comfort about the situation? That's the first question. In terms of the second, it's more of a sector-wide question. You're chasing the supply chain for recoveries. Everybody says that. But in terms of the bigger picture, are you and other housebuilders chasing -- do you see more upside in terms of recoveries from, say, big materials groups who have strong balance sheets, but also very strong lawyers? Or is it from the supply chain that probably have very little legal status, but no balance sheet to depend on really? Jason Honeyman: I'm just going to start recoveries with Simon, who can talk -- turn around without a microphone it would be fine. Simon Scougall: Hear me now? That's better. So it's aimed at not just the supply base and their insurance, of course, it is also aimed at the larger suppliers and manufacturers. So we're very actively considering our options there. And there's quite a bit going in that space. I can't say any more at this moment in time, but we are very determined to secure as much recoveries as we can from as wide a pool as possible. Alastair Stewart: But just if you had to take one side of the divide, the big guys, the small guys, who do you think you've got most chance to get? Simon Scougall: Well, it's a real mixed bag because even the small guys as it were, we're looking at them from their insurance position. So it's big guys behind them. So it's a real wide pool that we're looking at. But just to reassure, there's lots going on in that area. Jason Honeyman: And I'll come back to your trading point, Alastair. And I'm not sure I was surprised, but there's certainly resilience amongst our buyers because they have got crisis fatigue. It seems to be -- it's just too often, but I'm not naive enough to think it won't come and get them in the end, but everyone is very sensitive to the news at the moment. So I certainly think that March will continue with -- until we get to the end of March, there will be some decent sales rates we'll deliver. And there's new spring buyers coming to the market, there may be a little more caution where people take the view, well, I might just wait for this war to end because mortgage offers are going to -- mortgage rates are going to come down. So there will be more caution in the market. I don't think significant, but I think it will just take the gloss off the very good sales rates that people in this room have been delivering so far this year. Christopher Millington: Chris Millington, Deutsche. First one, just following on what you just said there, Jason. If we're going to see a slowdown in April, do you think you would have seen anything in inquiries, visitor levels? Is anything happening to that extent at the moment? Well, let's go one at a time. Jason Honeyman: Yes. We've just noticed visitor rates slowed down this week, which leads me to think that's not inquiries. It's what passing traffic. So serious buyers are still there, Chris. So just starting to moderate. And when you say sales start to slow down, I don't think we're going to move back to 2025. I just think the gloss will come off ourselves. We've been working quite hard to deliver that sales rate. But it seems to me it's a little bit inevitable unless something changes in the news, Chris, in the short term. That's my view. Christopher Millington: Next one is about buying land. I mean as you say, you're on replacement, but you're still expending a lot of money. How do you deal with kind of the price cost inputs when you're going through trying to work out whether or not you should be committing to this stuff in times like this? Jason Honeyman: I think that's a very good point. And last October, I spoke to you about we're going to adopt a replacement-only policy, Chris, for land because that was going to help Shane's capital efficiency program. I'm not sure we'll ever do that this year. That's the level of caution. And you're quite right, until I can understand what that ripple of cost inflation that is almost inevitable going to come into the market, it's probably best to buy as little as possible or just the good deals that you've got on the table. That's probably my approach. Christopher Millington: Sorry, I've got 2 more, but one is pretty quick. Affordable. Any sign that market is starting to wake up at all? Or is it still pretty? Jason Honeyman: Yes, murmuring. And certainly, the new grant round that comes into play now and next month has got the housing associations more active. I mean we'd like to materially move that market and start delivering more affordable homes and get building, Chris. But it's moving better. It was stuck. It's now got some life in it. Christopher Millington: And sorry, my last one. Just about this land bank evolution. You've hopefully given that slide about pre-'24 plots, post '24 plots. Perhaps you can give us a little bit of help with the margins in each category or just talk around kind of what benefit that would have given you. Jason Honeyman: Well what I was going to do in -- I might get Simon to do a presentation to you on strat land in October, so we can show in a bit more detail. But sometimes on strat land, there's lots of hope. So I'd like to see those 17,000 plots come through the system. So that crystallizes the land value and the margins, Chris. So certainly, it's margin accretive. I'm not sure we can spell out today what that all means. Can you add anything on that, Shane? Shane Doherty: Simon, do you want to? Simon Scougall: I'll add one quick one there. Back to the margin point that Jason was talking about. Strat land obviously has the benefit to us because you get a discount to market value in the option terms we agree. But the other benefit is that we're not agreeing land value until we've got planning permission, a detailed planning permission. So half of our land bank there hasn't got a land value yet ascertained, which clearly benefits from what we're talking about with the risk in Middle East and build cost inflation, et cetera. We'll agree a price relevance at the time. So it would be better margin protection as well as a consequence of that. Charlie Campbell: Charlie Campbell at Stifel. Just one actually, just on the WIP and obviously, well plans in place to reduce that. And as you said, you've made good progress. Does that get more difficult in a slower sales environment where buyers are more choosy, more careful and maybe want to see more finished stock on the ground. Just wonder how you juggle the WIP reduction in a more difficult market. Jason Honeyman: Can I start? May be you can look at the headlines. Yes. We put the properties on the market, Charlie, that are more advanced. So that's what's for sale. So we're not particularly selling anything other than stock. So we engineer what we sell on those sites. And I wouldn't describe today's market as bad. A selling rate in 2/3 of the U.K. at 0.75. It's not bad at all. It's in the South of England and the Southwest of England, where we're probably a little bit more sensitive to the investment in WIP and sales rate. Are you okay to talk about the headline numbers, please, Shane? Shane Doherty: Yes. Well, I mean, I think you've probably answered the bulk of the question insofar as, look, clearly, there's a volume correlation in terms of how many units you're selling. That's the tightest control you can have around WIP. But we have put a lot of hygiene -- additional hygiene controls in place around WIP spend in itself as well. So clearly, if we're in a situation where unit output wasn't where we anticipate it's going to be next year, that would actually have an impact on with monetization. But we are well set up to manage our WIP spend proactively in relation to that. And we can see that in terms of KPIs that we have in place around a number of foundations, number of unreserved production. All of those percentages are substantially lower than where they were a couple of years ago. So if we maintain those at that level and run our business that way, you will see a commensurate reduction in WIP spend vis-a-vis what you're monetizing. But clearly, the opportunity to get to 10,000 units and doing that without overspending on WIP is where the significant cash monetization opportunity is. Kate Middleton: A few from me, if possible. So Kate Middleton, Panmure Liberum. The first one is just on timber frames and vertical integration. So just wondering how many of the business units are currently utilizing timber frames and whether the rollout is phased or more discretionary and perhaps how that will link in with the new house types that you're bringing in? The second is on cancellation rates and if you've seen any movement on those since the beginning of this year? And just finally, I know you've alluded to no real house price inflation, but just wondering whether on a regional perspective, you're seeing any underlying variation in ASPs at all? Jason Honeyman: Okay. I'll do those. On timber frame, we've started on our journey, and we've got 7 divisions out of 21 feeding into our facility. And we'll -- until we get up to speed and more proficient at it, we'll keep it with just those 7 surrounding the factory. The next step for us was to scale it up within the factory, work 2 or 3 shifts in a day and possibly in the future, build another factory somewhere else in the U.K. That's our thoughts. In terms of cancellations, we've not seen anything yet. Who knows what's going to happen in the month of April? I certainly don't. And sorry, your third question was on. Kate Middleton: Whether you're seeing any regional underlying movements in ASPs? Jason Honeyman: No, we haven't. You always get a good site that's selling really well that you might be a bit braver on. I think the market is sensitive. It's deal led. Our next step won't be to push house prices. It will be to reduce incentives, which is sort of the same thing, but you're keeping your headline the same. So it will be in those better selling areas in Scotland and the North of England, we've discussed as a team, should we reduce incentives down to 2%, for instance. I'm not quite brave enough to do that just yet, but maybe across the spring, early summer. Is that okay? All done? Thank you very much, indeed. Thank you. Shane Doherty: Thank you.
Operator: Ladies and gentlemen, welcome to the Drägerwerk Full Year 2025 Earnings Call. I'm Moritz, your Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Stefan Drager, CEO. Please go ahead, sir. Stefan Dräger: Very good afternoon, and thank you for joining our conference call on our financial results for the fiscal year 2025. I have with me today Gert-Hartwig Lescow, CFO, as well as Tom Fischler and Nikolaus Hammerschmidt, both Investor Relations. We would like to take you through the results with the presentation that we made available on our web page this morning. Following the presentation, we will open the floor to your question. Let's get started on Page 5 with the business highlights. In 2025, we continued our successful course and generated the highest net sales in our company's history. Both divisions and all regions contributed to this. At around EUR 3.5 billion, net sales were slightly above our last forecast and around EUR 25 million above the level of the exceptionally strong coronavirus year 2020. Unlike during the pandemic, this is a new record that we achieved entirely without a special economic situation. Thanks to the operating momentum, our earnings before interest and taxes also developed very well. EBIT rose by more than 20% to around EUR 233 million despite difficult conditions. The EBIT margin increased by roughly 1 percentage point to 6.7%, also exceeding our last forecast. This shows that we are making progress in improving our profitability. Order intake also developed very well as with net sales, both divisions contributed to growth. This underlines the continuing demand for our Technology for Life and gives us a positive outlook for the future. Positive is also the key word with regard to our cash flow development, which Gert-Hartwig Lescow will explain later. We have also performed well on the stock market. Last year, our common shares rose by more than 1/3, while our preferred shares even increased by almost half and were included in the TecDAX. This means that we are once again one of the 30 largest listed technology companies in Germany. This listing increases our visibility on the capital market and could make us even more attractive to investors. In mid-January, we published our preliminary business figures for 2025 and our forecast for 2026. Our shares then rose significantly again and reached their highest level since July 2017. This shows that investor confidence in Dräger is higher than it has been for a long time. Our first goal remains to increase profitability such that our EBIT margin is the same as the last digit of the calendar year as we have more goals that are strategic to steer the company. We are strengthening our innovative power and expanding our competence in the systems business and further expanding our services and recurring business. In our Medical division, we are particularly driving forward the marketing of network solutions. To this end, we launched a large marketing campaign in 2025. Our goal is to strengthen Dräger's position as the leading provider of connected solutions in the hospital sector. That said, we are also launching a big wave of SDC-based solutions. That is service oriented device connectivity, the new standard for interoperability of medical devices according to IEEE 11073. It creates new functionalities and therefore, added value. With our new Silent Care Package, for example, we contribute to solving one of the biggest problems in the ICU by reducing the alarm noises. In the Safety division, connectivity is becoming more important, too. Our fire ground monitoring system, for example, helped us to win the Paris Fire Department as a new customer in 2025. Speaking of firefighting, we also received the important approval for our PSS AirBoss SCBA, in North America, reaching a milestone for strengthening our position in this key market. In addition to our core business, we are consistently investing in new business opportunities in areas such as clean tech and defense. Last year, our defense business grew significantly. We are well on track to triple our defense sales to more than EUR 300 million by 2028. I will talk about the other highlights on the past fiscal year, the dividend and the outlook at the end of our presentation. I would first like to explain in more detail on Page 6, what challenges we had to overcome last year. So Page 6, headwind compensated. Ladies and gentlemen, 2025 was a very successful year, particularly in light of the difficult condition. In 2024, we have benefited from positive one-off effects from the sale of a nonstrategic business activity that was the smoke and fire alarm systems in the Netherlands and some real estate loss in the United States. This has boosted our EBIT by around EUR 22 million. In the past year, we missed these effects and also faced strong headwinds from tariffs and currency. The tariffs imposed by the U.S. government had a negative impact of roughly EUR 26 million on our EBIT. Around EUR 21 million out of this was attributable to the Medical division and around EUR 5 million to the Safety division. In addition, EBIT was impacted by currency effects initiated from the White House and propagated over the world totaling to around EUR 45 million. Thereof, EUR 28 million were attributable to the Medical division and around EUR 16 million to the Safety division. So overall, we had to compensate opposing effects of more than EUR 90 million. The fact that we even overcompensated these effects is a clear proof of our resilience. We were, therefore, able to improve our profitability even under difficult conditions. Let's take a look at the margin development of recent years on Page 7. Following the significant loss in '22, we have shifted our focus from net sales growth to earnings growth. We have thus set ourselves the goal of increasing our EBIT margin by an average of 1 percentage point per year from 2024. The focus on profitability in accordance with our corporate objective #1 has worked well so far. After the strong turnaround in '23, we were able to improve our EBIT margin by roughly 1 percentage point in both '24 and '25. While positive one-off effects, in particular, contributed to the improvement in '24, the improvement in '25 came mainly from the operating business. This is a development that we very much welcome. And we have our strategic, our corporate objective 2 is innovation and our corporate objective 3 is systems business and recurring business. Now I would like to hand over to Gert-Hartwig to explain our business development further. I will then turn back with the dividend and the outlook. Gert-Hartwig? Gert-Hartwing Lescow: Thank you, Stefan. I would also like to extend a warm welcome to everyone joining this conference call for our results for the fiscal year 2025. Please turn to Page 6 for a view on the Dräger Group. As usual, I will be stating currency-adjusted figures, and I will be referring to growth rates. As Stefan mentioned, demand for our Technology for Life remains strong. Overall, orders increased by 7.7% to around EUR 3.6 billion. In Q4, orders rose by 5.6%. Both divisions contributed to growth in both reporting periods. Net sales climbed by 5.3% in the full year and by 8.7% in the fourth quarter. This was due to good development in both divisions and all regions. Like for orders, the Americas region and the EMEA region were the biggest growth drivers. At around EUR 3.5 billion, net sales -- reached 2025, the highest level in the company's history. In addition to the high order intake, this was mainly due to the strong year-end business. Benefiting from the record net sales in December and the margin improvement in the Medical division, our group's gross margin rose slightly by 0.3 percentage points to 45.2% in the full year. Functional expenses rose by 4.6% in 2025 after they had been positively impacted by one-off effects of around EUR 32 million in the prior year. These effects included the net sale of a nonstrategic business in the Netherlands and the sale of real estate in Spain and the U.S. Excluding these one-off effects, the increase in functional expenses in 2025 was only 2.5%. This increase is attributable to higher personnel expenses, which went up due to collective wage increases in Germany and higher number of employees, among other things. Despite the missing positive one-off effects in '24 and the negative currency and tariff effect in '25, our EBIT increased by more than 20% to around EUR 233 million. Consequently, our EBIT margin rose from 5.8% to 6.7%. The mentioned headwinds were overcompensated by the high order intake, the strong net sales momentum and the improved gross margin. In addition, the strong year-end business contributed to the resilient development. Our EBIT improved by around 37% in the fourth quarter, while the EBIT margin declined to 13.7% from 10.6% in that period. The full year EBIT development is in line with our medium-term goal to increase the EBIT margin by 1 percentage point per annum on average. Guided 2026 EBIT margin includes an additional margin improvement on the higher end of the guidance range. The result of the strong increase in earnings, our DVA in 2025 improved by roughly EUR 36 million to around EUR 9 million. Let us now take a closer look at the development of the 2 divisions, starting with the Medical division on Page 10. Following a slight increase in the prior year, our order intake in the Medical division rose by roughly 9% in 2025. This was primarily due to the high demand for our anesthesia machines, ventilator services and consumables. In addition, we received a major multiyear order for hospital infrastructure systems for Mexico, which significantly supported the above-average growth in the Americas region. Demand also developed positively in the other regions, particularly EMEA. In the fourth quarter, order intake rose by 2.2% as the decline in APAC and EMEA was overcompensated by significant growth in Americas and a high demand in Germany. Driven by growth in all regions, net sales in the Medical division increased by 7.4% in 2025 after decline in the prior year. In Q4, net sales rose by 13%, thanks to considerable growth in EMEA, Americas and Germany. Net sales in the APAC region were around 3% below the prior year level. Our gross margin in the division rose by 0.6 percentage points to 43.6%. The negative currency and tariff effects were overcompensated by the favorable product and country mix. In Q4, on the other hand, the gross margin decreased by 0.6 percentage points due to higher inventory write-downs. Functional expenses climbed by 5.7% in 2025, having been positively impacted in the prior year by one-off effects of around EUR 15 million from the sale of real estate and the adjustment of the product. Without these effects, the increase in 2025 amounted to only 3.7% with higher personnel expenses being the main cause. The EBIT of the Medical division doubled to EUR 57 million after a decline in the prior year. Consequently, the EBIT margin rose from 1.5% to 2.9%. In Q4, the EBIT increased significantly to by around 40% to roughly EUR 80 million, thanks to the strong year-end business. As a result of the strong increase in earnings, our DVA in the Medical division improved considerably in 2025 from around minus EUR 50 million to minus EUR 23 million. I will now turn to our Safety division, which delivered another good performance. We are now on Page 11. Our Safety business continues to grow. Order intake rose by more than 6% in 2025. This was primarily due to the high demand for engineered solutions and gas detection devices. In addition, respiratory and personal protection products as well as alcohol and drug testing devices contributed. The EMEA and Americas regions recorded a significant increase in orders, while the APAC region also developed positively. In Germany, demand declined after we had received a major order for NBC protection filters in the prior year. However, industrial demand in Germany is also generally restrained at present. Net sales increased by 2.6% in the fiscal year, driven by positive development in the EMEA and APAC regions. In Germany, net sales were roughly on par with the prior year, while the Americas recorded a decline. In Q4, net sales rose by just under 3% as the decline in the Americas and Germany was overcompensated by the growth in EMEA and APAC. Our gross margin in the division remained stable at 47.3% in 2025 with the negative currency and tariff effects being offset by the more favorable product mix and price adjustments. In Q4, the gross margin slightly decreased by 0.2 percentage points. Functional expenses went up by roughly 3%, having been positively impacted from the prior year by one-off effects of around EUR 17 million from the sale of a nonstrategic business area and from the sale of real estate. Excluding these effects, functional expenses fell by 0.4%. The capitalization of development costs led to a reduction in functional expenses in the reporting year. The EBIT of the Safety division increased in 2025 by 6.4% to around EUR 176 million, while the EBIT margin rose from 11.3% to 11.9%. In Q4, the EBIT climbed by around 33% to roughly EUR 77 million as a result of the strong year-end business. The EBIT margin also improved significantly by 4 percentage points to 16.5%. Our DVA in Safety division increased by around EUR 9 million to around EUR 113 million, coming from around EUR 104 million in the prior year. All in all, a very positive development in our Safety business. Let's move on to some key ratios on Page 12. Thanks to the strong growth in earnings, our cash flow from operating activities improved significantly by around EUR 71 million to around EUR 238 million in 2025. At the same time, outflow from investing activities rose from just under EUR 55 million to around EUR 98 million. Among other things, this was due to a supplier loan granted and the purchase of further shares in an investment. Moreover, the sale of our fire alarm systems business in the Netherlands and the sale of the property in the U.S. have led to a considerable inflow in 2024. All in all, our free cash flow amounted to around EUR 140 million, which is a considerable improvement of around EUR 60 million compared to the prior year. Since free cash flow was on par with net profit, the cash conversion rate amounted to 100%, the level we also expect for the current year. As a result of the decrease in free cash flow, cash and cash equivalents rose significantly by about EUR 22 million to EUR 282 million. This led to a considerable decline in net financial debt by around 25% to EUR 123 million. That said, the ratio of net financial debt to EBITDA declined from 0.5 to 0.3, keeping our leverage at a very healthy level. With regard to net financial debt, we expect the figure to increase in the current year. A large distribution center is currently being built in Lübeck where we intend to consolidate various logistics warehouses in the future. Dräger will rent the property on a long-term basis, which under IFRS results in a higher lease liability. This, together with higher investments is in turn a key driver for the higher expected net debt in 2026 with an increase of around 4% to EUR 1.7 million capital employed -- EUR 1.7 billion capital employed rose much lower than our EBIT. Therefore, our 12 months return on capital employed went up from 12.1% to 14.2%. Net working capital was around 2% higher than in the prior year at around EUR 755 million. Due to the good business development, in particular, our equity ratio stood at around 52% as of December 31, coming from roughly 50% at the end of the prior year. Let's take a closer look at our EPS on Page 13. With the increase in earnings since 2022 that Stefan Drager mentioned at the beginning of his presentation, our EPS has also improved continuously over the past years, coming from around minus EUR 3.50 per share in 2022, earnings per common share climbed to more than EUR 7.40 in 2025. At the same time, earnings per preferred share rose from around minus EUR 3.40 to roughly EUR 7.50 per share. Again, this clearly underlines the progress we are making in improving our profitability. Now I hand back to Stefan Drager for the outlook, starting with our dividend proposal on Page 14. Stefan Dräger: Thank you, Gert-Hartwig. Well, in line with our dividend policy, we intend to distribute around 30% of our net profit to our shareholders. Since our net profit has increased significantly, we will also increase the dividend significantly again for the third time in a row since 2023. We intend to propose a dividend of EUR 2.21 per common share and EUR 2.27 per preferred share for our Annual Shareholders Meeting in May. Our equity ratio is clearly over 50%. Provided that the equity situation remains as positive as it is now, we will continue to distribute at least 30% of our net profit in the coming years. That said, let's move on to our outlook for 2026 on Page 15. Ladies and gentlemen, with good demand, record sales and significantly improved earnings, 2025 was a very successful year. This is even more apparent when you consider the headwind from a difficult economic environment. Our operating business is showing good momentum. Both order intake and order backlog are at a high level. We, therefore, want to increase net sales again in the current fiscal year. In 2026, we expect an increase in net sales from 2% to 6% of net of currency effects at an EBIT margin between 5% and 7.5%. Both divisions are likely to contribute to net sales growth and a positive EBIT. We will continue to counter the U.S. import tariffs by raising prices. In the past fiscal year, we developed a package of measures to compensate for some of the customs duties. We expect this compensation to be more effective during the course of the 2026 fiscal year than before. For '26, we expect the level of custom duties at group level to be similar to the prior year overall. The burns in the Medical division are likely to be significantly higher than in the Safety division where we have more possibilities to concentrate and forward with improved prices. The corporate planning, therefore, the net sales and EBIT forecast for '26 are based on the assumption that custom duties will remain at the level of the reporting date for the annual financial statements. However, when we recall the Greenland discussion over a certain weekend in this spring, this is not guaranteed and it motivates us to further pursue increased profitability to be able to live through the challenges and uncertainties. When it comes to the war in Iran, we do not see any material impact on our business so far. We are present in the Middle East with our own Dräger people in Saudi Arabia and Dubai. Our local employees are doing well so far. In general, the region remains a growth market for us. Risks from the war depend heavily on its duration and regional extent and its impact on the global economy. We are able to mitigate this through our high level of diversification. We are very broadly positioned in terms of markets, products, geographies, business mechanics and customers. This strengthens our resilience and gives us a positive outlook to the future. With this, I would like to end the presentation and hand over to the operator to open the floor for your questions. Operator: [Operator Instructions] And the first question comes from Oliver Reinberg from Kepler Cheuvreux. Oliver Reinberg: Firstly, just on the Middle East situation as you just confirmed that you don't expect any kind of larger impact. Can you just confirm that there's also not any kind of expected impact from the developments basically in terms of supply chains and inflation? That would be question number one. Secondly, can you just provide an update on the ventilation market? We have seen quite some changes basically with Mindray -- I am sorry, with Medtronic and Bayer actually exiting the market. And I think Mindray is now entering in the U.S. market. I mean it's also a high base. Do you continue to expect actually significant growth in this market segment? Any update on the developments here would be helpful? And then thirdly, as you called out corporate objective #3 to increase the kind of recurring business at Dräger, can you just provide some kind of flavor where do you stand these days percentage-wise? And any kind of targets that you can share in that regard? Stefan Dräger: Well, on the Middle East, yes, I confirm that we do not see a material impact of the war on our business at the moment in the foreseeable future. Including the supply chain, there is no -- not to our knowledge, a significant impact on any specific component of production that we can see so far. We have taken some measures in the past to work with our suppliers more carefully with whom we work and have some reasonable stocking levels for our inventory for components. So we, of course, cannot compensate for all seasonal effects, and we will remain interdependent from the world and the supply chain. However, I confirm there is no impact that we can see from the current conflict in the Middle East. What I do see though is that the energy prices will remain worldwide on the current level and not return to the level they were like 6 weeks ago, including the electricity gas and fuel at the gas station. However, our sensitivity to energy in real is quite limited. So that has no material effect on our outlook and prognosis. Your second question, Mr. Reinberg, on the ventilation. So yes, there are 2 major players have exited the market. And, yes, Mindray is there. We, on the other hand, we do not see a significant effect or even, I would say, threat from Mindray having a more comprehensive offer in the U.S. Where we see more and we see they are more active is in Africa in remote regions where they have also political -- Chinese government has political influence in financing some of the African governments or very obvious direct influence and control on government and purchasing decisions. There, we are out. On the more developed markets I won't say it is a significant new development or a threat. On a global scale, yes, it is a good copy of Dräger with similar offerings and a similar portfolio on both the geographical scale and portfolio. So it is a very viable market companion, not only on ventilation, but in many modalities to watch geographically mostly in Africa. Your question on our corporate objective #3, which is developing the business model further from transaction-based device selling towards interoperability and systems business competence and actually doing, including recurring businesses, services based on contracts instead of transactions. Yes, we can say that last year, we crossed the EUR 1 billion threshold in services and some countries in Europe, our sales, the majority already is in services more than in devices, including our home market in Germany, but some other European countries as well, services sales is greater than devices. Oliver Reinberg: And can you share any kind of targets like where you want to go with this kind of offering? Stefan Dräger: Yes, the goal is to grow this further as it is a good way to defend our business over a business that is purely on cost like some of the business mentioned from Mindray in Africa where the decision is not alone, they have a larger share of mind, they are more deeply entrenched with the customer in offering the service. It is -- we have a better understanding of the customer needs and it's more challenging to replace the assets on a pure device that is -- the trend is that it may become a commodity. Operator: And the next question comes from Harald Hof from mwb research. Harald Hof: As we talked about the Iran conflict already, just 2 questions left from my side. The first one is talking about the tariffs. The situation has changed significantly. So what does this mean for Dräger? And will you apply for reimbursements? And the second question is how has the defense activities developed so far in 2026. Gert-Hartwing Lescow: Happy to. So firstly, there is a couple of developments firstly, the court decided that the tariffs that the Trump administration has put in place is not legal. And we have, in fact, also filed for a reimbursement. As of today, it is open, how fast the courts will decide and when or if we will in fact be paid out. And secondly... Stefan Dräger: It's not part of the plan. Gert-Hartwing Lescow: It's not part of the plan at this point. So if there was a significant payment that would be upside, so to speak and the signals have been mixed, how quickly that can happen. I think you've read the news, to courts as far as I remember, have decided they are not allowed to delay it, but so far, nothing has happened. So there is a chance that we can recollect some of our tariffs. Having said that, given that the previous tariffs have been declared illegal, the Trump administration has put in place another set of tariffs which are a little bit lower by 5 percentage points, but there are in fact for full year instead just 2/3 of the year. And if that is -- when those run out after 150 days, there are other potential tariffs to be enacted the one that may run. The so-called Section 122 tariffs may be replaced by Section 301 and Section 222 and we would expect that, that will actually take place in the second half of the year. So when it comes to effective tariff burden, we still assume that they will remain in place. And as we have seen earlier this year, and as Stefan Drager pointed out, sometimes, there is even a discussion about additional Greenland tariffs or not. But so far, we expect actual tariff burn to be of the same magnitude as last year. Stefan Dräger: Okay. And your other question on the defense business. Well, in general, we benefit in both divisions. The medical also benefits if there is the need, for instance, to additionally serve 1,500 wounded soldiers that come per day from the Eastern front. They're currently preparing and planning for that needs capacity in the German hospital system or the field hospitals or hospital war ships. But that is regular medical equipment. But we say we would not directly classify that as defense business. What we do call such is part of the safety portfolio that can be specific products for personal protection like the classical gas mask for a soldier or gas detection equipment, filters for military vehicles to protect those who protect us in our freedom to operate our democracy. And last year, around the same time of the year, we predicted that would actually more than triple until the year 2028 to approximately EUR 300 million. Well, already last year, we saw a good development, and we crossed the EUR 100 million threshold with these elements of the portfolio. And we confirm that we think in 2028, it can be EUR 300 million because there are quite some opportunities out there. Harald Hof: Just a quick follow-up. When talking about tariff reimbursement, do you communicate volume? How much is the figure that could be reimbursed? Stefan Dräger: We communicated that we paid the EUR 26 million. Gert-Hartwing Lescow: That's actually the net effect. So to the degree that it will be the net effect, it will be in that order. The gross effect is in turn higher runs around EUR 30 million, and that would be the impact if we get full reimbursement without the need to pass on anything to customers in that context. And as I said, at this point, we view that as perhaps not speculative, but we have not received a clear indication that we should account for that in the near future. But we'll keep you posted, obviously, when that situation changes. Operator: And the next question comes from Pierre-Yves Gauthier from AlphaValue. Pierre-Yves Gauthier: My question relates to your capital spending. You had quite a big surge in '25. Is that likely to last? Or is it some sort of a bump that we will not see in '26, '27? Gert-Hartwing Lescow: The part of the higher investment are due to a loan, which actually has to be accounted for to one of our suppliers, which have to be accounted for under IFRS as an investment. I'm not sure whether that is -- that actually was one of the reasons for the bump. And that we do not expect in '26 nor later. We do, however, as I pointed out in the presentation, have to account for an investment for a rental agreement. Again, that's due to the statement. So all in, we expect an increase in the investment volume from around EUR 103 million to EUR 110 million to EUR 130 million. And the substantial portion is, in fact, the long-term rental agreement, which is as these things are not cash effective for the full amount in the period of '26, but over the course of the rental agreement. Operator: And we do have a follow-up question from Oliver Reinberg from Kepler Cheuvreux. Oliver Reinberg: Three, if I may. One on China. Can you just provide an update what you see there on the ground? I mean, it's not a huge market, but any kind of pickup would be helpful to just get the latest dynamics here. Secondly, I think Q1 nearly comes to an end. Any kind of light you can share how you started into the year? And then last question, just on currencies. I mean, if -- I think in the last call, we guided for quite a significant impact. If currencies stay where they currently are, can you just give us any kind of flavor what kind of isolated margin impact you have? Stefan Dräger: I can -- Stefan speaking. I can pick the start in '26, where we started with a good order backlog after the order intake at the fourth quarter was also very good. And so with this, we had a good start in '26 and the order intake and sales at this moment is according to our expectations and planning. So it's on the way to deliver on our forecast and prognosis. Gert-Hartwing Lescow: And with regards to the FX development, in addition to the headwind that we had in '25, we overall see a further deterioration, but not by another similar amount. Our currency headwind when we look at net sales is around 1 percentage point. And when it comes to the EBIT margin, it's between 30 to 60 basis points. Stefan Dräger: I think Mr. Reinberg, this is important to figure in when you compare our actual '25 result, in particular, the EBIT margin and the prognosis for '26 because the prognosis for '26 and the whole planning for '26 is based on less favorable exchange rates. So if these develop and they would be the same as last year's actual exchange rates, then the outcome, of course, would be better than the current forecast and prognosis. But it's -- from our perspective, not safe to assume that it would be the same. So we have our best guess included into the planning. And that is the major reason if you wonder why our forecast does not show a stronger improvement because our goal is to improve our profitability by 1 percentage point per year. So on average, that is unchanged. Oliver Reinberg: China? Stefan Dräger: Yes, China, we didn't touch China. There is no relevant news on that. That is relatively stable and continues to be on a much lower level than it used to. Operator: [Operator Instructions] So it looks like there are no further questions. So I would like to turn the conference back over to Stefan Drager for any closing remarks. Stefan Dräger: We thank you very much for all of you being with us today during our annual results conference for '25. Thank you for your questions and the interaction. We look forward to meeting you again either online or preferably at some point in time in the not-too-distant future in person. Have a pleasant afternoon and evening. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect. Thank you for joining, and have a pleasant day. Goodbye.
Operator: Good morning, and welcome to Cadeler's Third Quarter 2025 Earnings Presentation. Presenting today are Mikkel Gleerup, Chief Executive Officer; and Peter Brogaard, Chief Financial Officer. Please be reminded that presenters' remarks today will include forward-looking statements. Actual results may differ materially from those contemplated. The risks and uncertainties that could cause Cadeler's results to differ materially from today's forward-looking statements include those detailed in Cadeler's annual report on Form 20-F on file with the United States Securities and Exchange Commission. Any forward-looking statements made this morning are based on assumptions as of today, and Cadeler undertakes no obligation to update these statements as a result of new information or future events. This morning's presentation includes both IFRS and certain non-IFRS financial measures. A reconciliation of non-IFRS financial measures to the nearest IFRS equivalent is provided in Cadeler's annual report. The annual report and today's earnings presentation are available on Cadeler's website at cadeler.com/investor. We ask that you please hold all questions until the completion of the formal remarks, at which time in you will be given instructions to the question and answer session. As a reminder, this call is being recorded today. If you have any objections, please disconnect at this time. Mikkel Gleerup, you may begin. Mikkel Gleerup: Thank you very much, and thank you to everyone dialing in to listen to our presentation this morning/afternoon. Yes, I will ask everybody to read through the disclaimer in the presentation. So annual report 2025 and first, taking you through the highlights of 2025. Financial performance in Cadeler in 2025 were above our expectations. We ended at the top end of the range that we guided last year, ending the year with a robust contract backlog of EUR 2.8 billion, which really gives us that earnings visibility into the future that we have been discussing with our investors over the course of the last couple of years. We had 4 newbuilds scheduled for delivery in 2025, and they were all delivered on time and on budget. We added Wind Keeper to the fleet to support Nexra and our partners and really this new O&M service platform. We continued exceptional execution with significant progress made towards the delivering on the Hornsea 3 project. Wind Keeper upgrade successfully completed and multiple campaigns supported with vessel swaps. We have had strong utilization with vessels operating across the world in markets as Europe, U.S. and in APAC. Commercial highlights for the financial year '25. Scylla continued to work in the U.S. on Revolution Wind for Ørsted and have since shifted over to Sunrise Wind. The Wind Orca has been mobilizing for the Hornsea 3 project for Ørsted, where she will be executing the secondary steel scope. On Wind Osprey, we have been mobilizing for the EA3 turbine installation, which is a project we do for ScottishPower Renewables. On Wind Mover, we will shortly be commencing the turbine installation on the Baltic Power project, where she is taking over from another vessel that we previously had working on that project. The Wind Maker stays in Asia. And as we have announced over the course of the last couple of weeks, we'll be executing O&M campaigns for clients in Taiwan this year. Wind Pace came back from the U.S. after having supported the Vineyard Wind project and is also now mobilizing for the EA3 turbine installation project for ScottishPower Renewables. Wind Peak will continue to install turbines on the Sofia project for Siemens Gamesa. The Wind Keeper has been delivered to the client on an up to 5.5-year contract and is currently installing on the He Dreiht project for Vestas. Wind Ally is completing the last phase of the mobilization in Europe in Rotterdam and is preparing to go to the U.K. to start putting in monopiles for Ørsted on the Hornsea 3 project. And the Wind Zaratan project, for her 2026 is a transition year. We have decided to do some upgrades to Wind Zaratan, do some O&M work in Asia and then take the vessel back to Europe to start working both on O&M, but also on support jobs for foundation projects. At a glance, we now stand at 362 office-based employees, more than 800 seafarers. We have now installed more than 1,700 wind turbines, more than 900 foundations, a number that will go up significantly during this year due to the Hornsea 3 project and also have been working on more than 275 locations for operations and maintenance. So all in all, very busy and continuing to grow the business in the industry that is also growing with us. We have been discussing a lot with our investors and other stakeholders in the company, the transition to full scope T&I campaigns for the foundation work. And we have prepared a few slides to go through where we are now on the Hornsea 3 project and where we are as a company on the transition to taking on these full scope T&I campaigns. The company came from a charter-based day rate model where we could add services as requested by the client to now having a more integrated project delivery and construction platform, as we say, it's a solution-based offering to the clients. We have -- we used to have a very compact organization and moderate complexity in the organization, but also in the offerings we were offering to the clients. And now we are going into a much more complexity -- complex environment and really also where the organization has to deliver many different scopes from transport on heavy lift vessels to handling equipment in port, offloading, unloading very, very large pieces of equipment, storing them safely, Q&A on these products while we have them in our custody for the clients. We came from a utilization-driven model with a higher relative percentage margin to an execution driven with a higher absolute return and upside model on the T&I scopes. The vessels in the previous model was the primary revenue stream and where we today see vessels as strategic enablers to capture more scope as we take on these bigger projects for our clients. On Hornsea 3, trying to give you an overview of the time line for the first full T&I scope that we have embarked on. The project was signed in early '23, a very busy year for us signing both that project, but also working on the merger with Eneti, preparing for taking delivery of the vessel, a lot of supplier scopes starting to transport monopiles and secondary steel, starting to install monopiles and secondary steel and then also embarking on installing 50% of the turbines on the project and then commissioning and closing the project somewhere in '27. It is a very, very complicated project and something that we go into with a great deal of humility. But I think that I'm pleased to say that we are exactly where we want to be. And the Wind Ally delivered early, we were able to mobilize her in China directly from the newbuild yard and have taken her successfully back to Europe, finalizing mobilization now in Rotterdam before, as I said, starting to put in monopiles in April this year. Hornsea 3 really requires a lot of coordination. And we are also now experiencing being in the middle of the project, the complexity of the project and also the benefit of having built up the team and having worked close with our clients in terms of what was required to execute this because a project like this never goes to plan, I think it's fair to say. And we have also been met with requirements from our clients to change different things as we have worked since '23 and until today. But I'm pleased to say that we have taken on these challenges with our can-do attitude in the company, and we are exactly where we want to be in terms of being ready to install the project from April of this year. And a total capacity of 2.8 gigawatt when it's installed, 197 monopiles, 60 office-based staff working on it, 120 port and construction staff working out there for us in somewhere where there's a yellow dot on this map. We have 10 vessels in total, 3 from Cadeler working on the project. We are transporting more than 400,000 tonnes of material on the project. We have 10 ports involved and 12-plus partners involved in this. So in all fairness, a very complicated project, but also one where we are learning a lot. We've taken some pictures from the project to also demonstrate the scale of this project because I think it's hard to understand the size of these monopiles. All of them are the same size as the Los Angeles class submarine, and we are installing 197 of those in the U.K. from April this year and until 2027 and into 2027. We have also been working with our client to do a mockup trial of the secondary steel. These foundations are TPless, meaning that they don't have a transition piece on top. And that means that all the secondary steel is being installed by a tool that is being carried on board the Wind Orca that carries storage towers for secondary steel and then she's lifting the secondary steel on board on to the foundation in one lift with this tool. And together with our client, we build a mockup for this, a full-scale mockup in the port where we were able to test this tool and the functionality of this tool before going offshore. And it's been a pleasure to work with our client on these mockups and really refining the whole rehearsal of concept before we go into the actual execution offshore. And we have added some pictures on that as well. As we have been discussing, the changes in the project time line has led to increased, but delayed revenue for the foundation T&I. So Cadeler will earn more money on the Hornsea 3 project compared to what was originally envisaged when we signed the project. Not due to things that have happened on the Cadeler side, so to speak, but because our clients have had to change what they originally anticipated in terms of, for example, monopile delivery, whereas the monopiles coming from. Originally, we expected two fabrication yards, today we are working with four fabrication yards. That all means that we are receiving the monopiles in a different pace, but it also means that the project is stretching over a longer time and that we will be involved with some of the suppliers that we have on the project for a longer time. So what it means is that it's an increased revenue and an increased margin to Cadeler, but the project will stretch over a longer period of time. In terms of our commercial pipeline across the globe, I think I have to say that we are still continuing to grow, and we are still involved in a lot of projects and a lot of bidding on projects globally. Obviously, the European market is really the front runner in terms of new projects that we are working on. And as you can see from this slide, we are working on more than 50-plus open commercial opportunities in the market, and we are discussing projects with our clients, both for '27, '28, '29, 2030, but also well into the next decade, which gives us a very great deal of confidence in the market as such, but also a positive outlook for where we are going as an industry. And I'll come back to that a little bit later in the presentation. Asia continues to perform as well. We see new markets opening in Asia as we progress the ongoing market, which is Taiwan, Korea and Japan. We see also development now in the Philippines, but also development in Australia. And all in all, we are active where our clients want us to be active, and we are continuing to bid for projects in the region -- in a region that I would say is developing as expected. The U.S. market, it is what it is, and we have discussed it many times before. We don't see any short-term opportunities in the U.S. market, but we are still executing in the U.S. market. We sent the Wind Pace back to Europe from completion on Vineyard Wind, and we are now installing with the Scylla on the Sunrise Wind project. All in all, we expect to be busy in the U.S. for the years to come. And also, we are happy to engage with our clients for new projects in the U.S. region when that time is coming. We still sit on a significant backlog. Our backlog year-on-year has grown. We are standing at EUR 2.8 billion in backlog, which, as I said, really provides the earnings visibility that we would expect and also what we have communicated to our clients. We have things also that we are working on here that we have discussed in the market where we are preferred supplier on a foundation project that is not counted in our backlog, and it's also not sitting in our vessel reservation agreements because it has not reached that stage yet. But we still have work that will hit the backlog, and we are sure that in the coming quarters that we will have positive announcements around backlog development. As I said, the backlog stands at EUR 2.8 billion at the moment and 80% of the total backlog has reached FID. And we have discussed that before. And I think that that's really a sign of the quality of the backlog where we know that 80% has already been approved for the final investment decision at the client side, meaning that, that project has also reached a contractual milestone that is important for us. And as I said, we do have a preferred supplier agreement, a sizable preferred supplier agreement. And one of the things that we discussed around our Q3 announcement was that we had some projects in the site that we would like to secure. And one of them is what we have now a preferred supplier agreement on. It's for a significant foundation project in Europe and one of the projects that was important for us for our 2028 campaign. And I'm pleased to say that we have been moving ahead as we expected on that one with our client and that we are also now in the negotiation with the client to make this preferred supply agreement into a real contract. And on '27, '28 that we discussed at length in the Q3 presentation, I'm happy to say that in '27, we consider ourselves fully booked now. We are currently working with the yard to potentially deliver the Wind Apex slightly earlier because we have a client that is ready to take the vessel straight from the yard and into a project, meaning that we are -- with a few white spaces we have left in '27, we do consider that time that we want to keep available for clients should they run into some sort of supply chain issue and really have built a solid '27 for ourselves. In '28, we are also much more positive now than we were in Q3 due to the fact that we have secured the preferred supplier agreement on this large-scale foundation project and overall are seeing positive momentum for the '28 campaign overall. In terms of the progress on the newbuilds, Wind Ace, we are at 94% completion. The naming ceremony for the Wind Ace, the official naming ceremony will be on the 15th of April, and we are looking to deliver the vessel on time. On the Wind Apex, as I said, we are 34% completion, and we are currently discussing with the yard to do up to 1 month early delivery due to the fact that we have a client who would like to take that vessel straight from the yard and into a project for a sizable project on turbine installation. In terms of the progress from the yard, a few pictures as we always have. I think that I can say that on the Cosco shipyard side, things are progressing as planned. Not many surprises there and really pleasing to see that the collaboration we have with Cosco Shipyard continues to develop, and we are very, very pleased to work with Cosco Shipyard, the quality partner for us and for the development of the company. The fully delivered Cadeler fleet as it stands today with an average fleet age of 5 years, which I believe is a very good number to have, and really also shows that we have been building a young fleet that is ready to take on the positive developments of the future. Now, I will hand over to Peter for the financial highlights of 2025. Peter Hansen: Yes. Mikkel Gleerup: Peter Brogaard... Peter Hansen: Thank you very much. Yes, the financial highlights for '25. It was really a strong year seen from a financial and operational point of view. As Mikkel said, we ended in the high end of the range that we have guided revenue of EUR 620 million as compared to EUR 249 million. Equity ratio is now at 44%. It's a decrease as compared to last year. But it's also where we see it bottom out, the equity ratio and starts to increase again. Utilization also very high, 88.9% adjusted utilization as compared to 75% last year. And that is -- the adjustment is where we say, okay, we take out what is planned dry docking and transportation from the yard. We think that is a meaningful number to look at when we get all these new vessels delivered. Market cap of EUR 1.8 billion. EBITDA, EUR 425 million as compared to EUR 126 million last year. Net profit, important number for the shareholders, of course, EUR 280 million as compared to EUR 65 million last year. And as elaborated on a backlog of EUR 2.8 billion. Three months daily average turnover EUR 7.1 million on the stock exchanges. If we first look at the last 3 months of the year, Q4 '25, very, very strong quarter, EUR 167 million in revenue, an increase of EUR 82 million compared to Q4 '25, '24 and with the adjusted utilization of 87% cost of sales is, of course, going up with the delivered vessels. And SG&A also is up because of the ramp-up that we have talked about at previous releases where we build up the organization to be able to manage these foundation projects with increased complexity. Finance net isolated for Q4 is EUR 20 million, and that is a shift you see here in Q4 finances because we have capitalized borrowing cost to a greater extent while we had more vessels under construction. Now that the vessel has been delivered then a bigger part of the finance interest is going to the P&L, and that is something you will see in '26 as well. Of course, it's the same cash outflow, but it's just whether it's in P&L or it is in CapEx. EBITDA, I think very, very strong, EUR 104 million in a quarter where Ally and also Mover were not in operation as such, but in transport to first project. That was Q4 isolated. For the full year, some of the same remarks that we had in Q4, but also what we have seen during the year, it's fair to say everything has played out exact to plan. Revenue in the higher end of the guidance. Cost of sales, everything is as according to plan. SG&A the same. So we are very, very pleased with the financial result for '25, but also the underlying operation where we have control of the important things. EBITDA, EUR 425 million. Vessel OpEx per day is EUR 36.3 million, a small increase towards last year and I think also under control. Headcount onshore average 307. The consolidated balance sheet, now we have an equity of EUR 1.5 billion. an increase of nearly EUR 300 million as compared to last year. And we see the equity ratio of 44%. I think that is something we have all along said that approximately there where we will bottom out. And of course, it's a natural consequence of taking delivery of the vessels where your assets go up and your liabilities also go up correspondingly. We still have a CapEx program now on the Wind Ace and the Wind Apex, these installment with the yard that we show here. We have signed commitment for A Class Wind Ace and we are also having ongoing RCF facility of 148 million. So together with what we expect to raise of financing on the Wind Apex, we are EUR 637 million of total financing. We are in advanced discussion with Apex and are confident that we'll be able to sign that during '26. As you may recall, it's delivered in late Q2 '27. So we have really had the goal of signing a facility -- sign commitment 1 year ahead. So we are not paying unnecessary fees in commitment fees and so forth. Interest from banks are strong. So is it from the ECA. So it will be on similar term as you have seen on previous transactions. Cash, EUR 152 million. And you can see with the A Class payments we have outstanding, that's still a significant cash surplus. This is the financing overview. You can see here that we have the RCF A and B, we have not drawn up fully yet. And since Q3, September, we have signed a Holdco financing, a second one with HSBC and Clifford Capital unsecured loan, EUR 60 million with an accordion of EUR 0 million, and it was made on very similar terms as the original Holdco with HSBC and Standard Chartered. With Apex, I have talked to that, but that is progressing according to plan. We are very confident on that financing. Then there is the outlook for '26. I think what we guide is in revenue, EUR 854 million to EUR 944 million, and EBITDA, EUR 420 million to EUR 510 million. We have put up the comparison here, of course, '25 includes revenue that you are supposed to get in '28, but was postponed and we got termination fees for that. So of course, that should be adjusted for in the comparison, but a very strong outlook for '26. What is important to understand about the outlook in '26 is exactly what Mikkel has talked about earlier in the presentation. First of all, it's a transition year for Wind Zaratan, so isolated on '26, you could argue it is financially a transition year, but it will improve the returns in '27 and onwards. So it's actually a good year for Zaratan as it is an investment year. Wind Ally and Wind Ace will be delivered in Q3 '26, but will not go on any contract and have any contractual revenue in '26 simply because we will sell direct to first projects EA2 North. We have seen in the past that on some of the wind turbine installation vessels that we can do some work before first project, but it's simply not possible on a foundation project. And it's -- again, it's a good sign because the customer wants us to be at the site as early as possible. So we are simply doing everything that we can to arrive as early as possible we can in '27. And then this Hornsea 3, when -- Hornsea you can't look at Hornsea 3 isolated in one year. First of all, it's a project where you have revenue across several years we already had in '24, '25. But as illustrated by the slide, maybe the precent, we now see that the revenue on the project goes up due to changes on the project, not due to Cadeler-speific things, but due to something designed by the developer. But that means for Cadeler, two things. The total project goes up, earnings goes up, but the timing is different. So some is pushed into '27. So when you look at '26 and the outlook, you should also remember that. [indiscernible] evaluating that year. And back to you, Mikkel. Mikkel Gleerup: Thank you, Peter. As this is something that still remains very important between '24 and '25. We are -- we have been working on biofuel -- fuel blending in our fuels, and that has been successfully introduced across the fleet in 2025, together with our clients and our sustainability team. We have developed a new circularity strategy. We have more than 30% women in leadership, and that was achieved in 2025. We have set a new target of 40% women in leadership by 2030, and also on governance, the CSR leadership group established to execute key ESG priorities. In terms of our path to zero, we have set a target of a net zero target in 2035 and a 2030 target of 50% intensity reduction. Obviously, we are going up in intensity in the beginning, and that's largely due to the fact that we are delivering lots of vessels that are still burning fuel. But we have a path towards achieving our targets here, and we have maintained our targets. And it is as -- what is described on this slide, it's adoption of green fuels, it's enabling electrification, optimizing energy consumption, which we believe is one of the big things because really education and training of teams on board and clients is one of the real big savers here. And that is how we will achieve the first part of this journey. Second part of the journey is continuing to enable electrification and again, optimizing the energy consumption. And also as we start to see it, getting the green fuels on board, which will form a larger part in the second part of this journey. At the moment, the reality is that the green fuels are not available to us. So although we have a portion of our fleet on the newbuilds that can burn these green fuel types, we are not able to buy them at the quantity that we need them, and it would more be an R&D project at the moment. So we believe that the second part of the journey will have a greater availability of this fuel type, and that is something that we at least will support that with the demand for these green fuel types when it is available to us. In terms of commercial outlook, which, of course, is important because I think in all honesty, we are coming from a 2025 where we were facing a very negative narrative in general in the industry due to a lot of factors. We are seeing milder winds blowing over the offshore wind space and also continued growth of the industry and the deployment of offshore wind globally. And as we say here, after '28, '29, we expect a very strong growth towards the end of the decade. Europe has been raising the bar and as declared by the North Sea Summit, the 9 member states of the North Sea Summit have declared a target of 15 gigawatts per year outbuild between 2030 and 2040, and we are very, very pleased with a target like that, because that is, in our opinion, how you build a supply chain that you actually set a target what should the supply chain be able to push out per year in this region. And this is not the entire European target. This is for the member states of the Green Sea -- the North Sea Summit, sorry. So in all Europe will be a higher number than this. Outside the fact that there's an annual outbuild target, there's also a financial plan to how to achieve this. And that is also what has been lacking in the more arbitrary targets that were more setting a target for 2040, 2050 in the past. So all in all, we really are pleased with seeing these targets, and we believe that, that's a very strong data point for the future and also for the demand situation for the future. Another very real data point is the U.K. auction round 7, where the U.K. government awarded record volumes. Really, it was 70% above what was expected and the budget went up to 200% of what was the original budget. So also a very strong data point. But another strong data point is that the U.K. auction round 8 has already been shifted forward, so we can expect that already to happen in July 2026. And these are projects that are happening towards the end of this decade and the beginning of the next decade. So already today, we are in dialogue with clients for work that is taking place in '29, 2030, 2031, 2032, 2033 and so on. So that is a very, very positive data point for us. And then we also do see a lot of private capital coming back into offshore wind, Apollo committing USD 6.5 billion to acquire 50% of Hornsea 3 and KKR forming a joint venture with RWE for offshore wind projects, and there are many, many other examples of this. Altogether, strong growth in the space and in the industry. And as we have said, a much better feeling about the '28 situation for Cadeler, although we still recognize that for the industry, '28 for some can be a difficult year, then we say today that we have a much better feeling about 2028. We still believe that there will be an undersupply of capable vessels in the market, and that will start in '29, 2030. We believe that, in particular, on the foundation side to begin with, of course, because they go in first and then secondly, on the VTG side. It happens for a multitude of different reasons. It's efficiencies. It's the efficiency on the larger turbines. It's the more complicated projects. It's the raw efficiencies in terms of how many turbines and foundations these vessels can transit with, but it's also the fact that there are a lot of vessels that are reaching the end of the useful life in the beginning of the next decade. So vessels that are counted today because they, in theory, can install a turbine, they will not be counted after the beginning of the 2030 because simply they are falling out because they are coming to end of useful life. As the fleet stand today, Cadeler still sits on the largest fleet in the world, and we believe we have the most versatile fleet of really the Tier 1 assets that can support our clients with the targets they have for continued outbuild of offshore wind. We have also decided to distribute this slightly different and first look at which vessels do we believe are able to efficiently install 15-megawatt turbines, and the picture looks somewhat different here. And with the targets that are being set in the North Sea Summit by European government, by Asian governments at the moment, then we believe that there is still a significant undersupply as we come into the next decade of the capable vessels that will always be chosen first by the clients. And if we look on the foundation side, the picture is even more problematic if we want to deliver the targets that are currently being set and also backed up by auctions in many different countries around the world. A few words on Nexra, our business platform for the aftermarket services in offshore wind. We believe that the O&M market will continue to demand -- the demand increase will continue to grow, and we believe that the market is shifting towards long-term agreements. We have seen that with our agreement on Wind Keeper with Vestas, and I think there are other examples in the market as well. So we believe that the whole O&M story and strategy for Cadeler is an important strategy because it will create a longer and more transparent revenue stream on part of the fleet and also it will be able to generate utilization on the installation fleet if there are small gaps between installation projects. And that is important because we have always talked about the importance of keeping a high utilization. And hence, that is something that we really believe is a strong advocate for the whole development of the Nexra business platform. We also believe that Nexra will grow as a business and also at some point in time, potentially even be a bigger business than the installation business, but that is in the years out in the future. But of course, every time we install a turbine, the whole ecosystem for turbines installed grows, meaning that there are more work to do for the Nexra platform to service our clients with -- as it stands today, mainly -- the main component exchanges that we do from a jack-up. In terms of the development of Nexra and an update on that, I think that we saw it and have always seen it as a very strong market, a market that can stand on its own 2 feet, a market that is profitable and it's also a diversification of income streams for Cadeler. We signed the first contract for an O&M campaign in Taiwan and showing that when a vessel is sitting in a region that is complicated to transit back to, for example, Europe from, then you can do these O&M campaigns in the spot market and still upkeep a very healthy financial year for the asset. And I think that, that is something that is important because after this, we have also announced another project yesterday morning in the same region for the same vessel. There's a dedicated team for Nexra today, we are continuing to build the team. I think that it's also fair to say that we get positive feedback from our clients and the fact that we are now having a dedicated team to discuss aftermarket services with them because they have dedicated teams to handle that part of the value chain for them. We believe that as we grow, we will also be better at understanding the needs and the execution requirements and really a very, very strong mandate from all over this company here and from top to bottom to grow Nexra into the strength vehicle we believe it can be. We did strategic fleet expansion in Nexra last year with the acquisition of Wind Keeper, we believe that we did a very, very strong deal and executed very, very fast on this, but also was able to pin a contract -- a commercial contract to that vessel very, very soon after the acquisition of the asset. We took the vessel back to Europe. We did the modification to the vessel that we believe was necessary, and we are now working with the client on a project with the vessel and very pleased to see that. And O&M services in 2025 forms around 1/5 of our total revenues, and that also shows the significance of what we already are doing in O&M. Continuing the growth journey, as we have said, we are in an industry that growth and as we're also saying to you today, we are more positive and have a very positive and optimistic view about the years out in the future. And that is also why that we are looking at continuing the story of Cadeler. We evaluate opportunities to expand into attractive and synergetic systems -- segments, sorry, like, for example, the strategic O&M offering. We are open to both organic and nonorganic growth. We believe that scaling the organization and have a bigger, more versatile, more flexible offering to our client is something that the client is willing to pay a premium for and something that will also secure that Cadeler will always take more than our proportional share of projects in the industry simply due to the derisking of our clients' projects that we can provide. In terms of regional expansion, we are where our clients want us to be, and we are working with the projects that we believe in and the projects that we believe will go from development to FID and to finally execution. That is how we look at it. That's how we have always looked at it, and that's how we'll continue to look at it. We are monitoring and applying new technologies, and we believe that efficiency still will be driving a lot of the value in the industry and also a lot of the sustainability in the industry. So we are very open to discussing efficiency gains with our clients. And we are also willing to do our part in what was the North Sea Summit, which was really trying to make a more competitive offshore wind industry by being more efficient with what we do. And we believe that, that is definitely something we can do if we work together in the whole value chain. And then strategic partnerships have been one of the foundation and one of the pillars that Cadeler is standing on really making sure that we are developing structure -- strategy to strengthen our key strategic partnerships with our clients, including the long-term agreement that we believe is out there and also doing the scopes with the clients that, that they are asking for. So really trying to understand, be early with our clients, trying to understand what it is that they require from us and then be able to deliver that quality-wise and safety-wise when they need it. That is very important. In terms of key investment highlights, largest and most capable and versatile fleet. We believe that, that means redundancy for our clients. And as I already said, that is something that our clients are willing to pay a premium for and also what we believe will secure a more than proportional share of market to Cadeler. We believe that strong relationships and partnerships and our industry-leading position is also something that will be continuing to support the whole growth of the company. We have global reach and experience. We have worked in all key markets, and we are happy to continue to work in all key markets if our clients want us to do so. We believe there's a structural undersupply and an increasing market demand, and we are already starting to see signs of very, very, very strong demand as we move into the next decade. We have a strong track record and backlog, and we are very, very much looking forward to continue to work with our clients in the future. With that said, I think that we are moving into Q&A. Operator: [Operator Instructions] Our first question comes from Martin Karlsen from DNB Carnegie. Martin Karlsen: I understand that -- can you hear me okay, sorry, it was some... Mikkel Gleerup: We can hear you, yes. Martin Karlsen: I think I heard during the prepared remarks that you said the Wind Apex would be delivered early and do turbine work. Could you talk a little bit about the background for using the vessels for turbines and not foundations and the decision process behind that? Mikkel Gleerup: Yes, that is a good question. The reason we are discussing it directly that we are looking at delivering the Wind Apex early is because we have been asked whether we were looking at potentially delivering her late. And just to make clear that that is not a thought at all, it's the opposite. We have evaluated opportunities in the industry and the best opportunity, we believe, for Apex right after the yard is to embark on a turbine installation project. The reason for that is that working with the client on a turbine installation project potentially opens up opportunity for other things. And hence, we have decided that here, the best use of the capacity we do have available, as you also heard in my presentation, I said that we consider ourselves fully booked in '27 now. So basically, what we have available for clients now is becoming limited. And this is the opportunity we have for the client, and hence, we have decided to go with the client because we believe that it's the best overall decision for Cadeler to start with a turbine installation project. It doesn't mean that Apex will stay on turbine installation projects, but the first project will be a turbine installation project. So what it means is that she will earlier generate revenue compared to if we did a foundation project. And with the long -- duration of the contract we're looking into, that will also run into a significant part of 2028, but also a potential for something coming on the back of that with the same client. Martin Karlsen: Could you remind us about how much time and cost there would be to get it back to foundation mode? Mikkel Gleerup: So there is a mission spread, but that is typically part of the project. When you sell a foundation project, the client is contributing to the mission spread there. And typically, it would take somewhere around 2 to 4 months to put her into foundation mode with mobilizing all the equipment on the vessel. Martin Karlsen: And for 2028, you definitely came across as more optimistic, but it seems to be more Cadeler specific than for the industry as a whole. Can you talk a little bit to why Cadeler have been more successful than the industry for '28 and what has changed since last quarter? Mikkel Gleerup: Yes. I think that what we do say, when we talked about '28 after the Q3 announcement, we also said that it looked like a year that could be challenging for the industry. And what we are saying now is that we -- that is still the case. We believe that there are still some companies that will have challenges in 2028, but that we today feel much better about '28 than we did around the Q3 because there were still some things that we believed in at that point in time, but that had to happen. And now we are saying that we are seeing that, that is happening. And hence, we are much more confident on 2028. And one of them is, of course, the preferred supplier agreement on a large-scale foundation project. That is important for '28, but that's not the only thing. It is also how other things we are working on have progressed. So all in all, we are much more positive about '28. But it doesn't mean that everybody else will have the same feeling. But for Cadeler, that is the case. But I also think there is a progression from the Q3 call to now where we are saying today that 2027, we can say we're fully booked now. Martin Karlsen: And last question, you're about to get into a real cash-generating mode with all the newbuilds and delivered. Could you talk to how you look to allocate capital ahead between shareholder returns, delevering, and you also spent some time in the presentation today talking about growth opportunities. Mikkel Gleerup: Yes. I think that, as we have said before, capital allocation ultimately is a Board decision. But I think it's realistic to believe that we will be spending our capital in 3 buckets. One is to delever the company. One is to continue to maintain the position we have in the industry. And then the last bucket is, of course, returning capital to shareholders in some shape or form. And I think that if we look at where we are moving in terms of generating capital, all 3 buckets are possible at the same time. And I think that, that's where I will land it at this point in time. Operator: Our next question is from Jamie Franklin from Jefferies. Jamie Franklin: So firstly, I just wanted to clarify on Hornsea 3 and appreciate the useful slides in the presentation. If I look at Slide 12 specifically, as you understand it correctly, essentially, we're now going to have a much more progressive ramp-up in revenue through the year from that project. So it's going to be very back half weighted. And it looks like the expectation is first turbine installed around 3Q. So if I assume that the margin and EBITDA contribution should really start to sort of kick in from the second half. Is that a fair assumption? Mikkel Gleerup: Yes. I think overall, what you're saying is a fair assumption. And as we are saying that -- and of course, this is what is complicated to sometimes explain when you have projects and calendar years because overall, Hornsea 3 for us is a more value-creating project today than it was when we signed it. But the way the revenues and profits are stretched over time is different. And I think that, that is what we are trying to explain today, and it's due to decisions that have been made by others than Cadeler, but where -- it's in our interest, but also where we are contractually obligated to deliver on this new method. And I think one of the key things on the project without diving too much into the detail is that the flow of the foundations when they come into the project is slower. So we are not building up the buffer we had in the beginning. So the monopile delivery is over a longer period of time, and that is out of Cadeler's control. And it's due to things that is related to the fabrication yards on the monopile foundations. Jamie Franklin: Okay. Got it. And then secondly, just on operations and maintenance. So obviously, you've announced a few shorter duration awards to Nexra platform recently. And as you mentioned, there's been this 10-year O&M contract announced by one of your peers. Could you give us a sense of how you expect to balance the sort of longer-term agreements with the shorter-term contracts? Is the idea to sort of keep Zaratan and Scylla available for more spot O&M while Wind Keeper kind of takes the longer-term contracts? Or could we see you enter into a longer-term contract with a specific one client on those assets? Mikkel Gleerup: The question is, yes, that could be expected that, that would happen, but it all depends on the project economics. There are limits where we believe that it's better to stay in the spot market rather than to sign up to a long term. And for us, that is an internal evaluation that is happening between us and the team that is dealing with the clients on these long-term opportunities because obviously, there are benefits of having a long-term contract, but the benefit of that can be outweighed by, let's say, what you're sacrificing in terms of annual revenues. So for us, it's a balance. And if we believe that we can generate more money by having the vessel in the spot market and being available to our clients when they need us, then that is the decision we will go for. And I think we have discussed it before as well that one of the real benefits of being, let's say, active in the O&M market is the social capital you're building with your client because when they have problems, if you are able to come and help them and fix them, that is something that is very much appreciated and also where you're able to generate stronger relationships and partnerships with your clients. So I -- per se that the long-term agreement is not just what we are aiming for, but of course, if they are good enough, if they live up to our criteria, then we are happy to enter into them. Jamie Franklin: Okay. Very clear. And finally, there was a wind turbine installation vessel order announced by shipyard Hanwha Ocean for about $530 million last month, very high price tag, obviously, relative to what you paid for your newbuilds. Is there anything you can say in terms of what is driving those higher vessel prices? Is it simply a function of kind of shipyard capacity or material inflation? Any thoughts there would be helpful. Mikkel Gleerup: I think the reality that we are looking at today is that the shipyards are incredibly busy. So even if you wanted to deliver a vessel in short time, you were not able to. I know that this vessel is it looks on paper like a short time line, but that is mainly because they have been working on it a long time before they actually announced it. It's a vessel targeting the domestic Korean market with a lot of Korean companies going together in that vessel. It's a repeat M-Class vessel more or less that they have paid $530 million for. I think that the underlying practice for the price is a real tightness in the yards, but also in general, what it costs to build a jack-up today. And I think that there are, let's say, that is -- if you look at the price for ordering one vessel, I think that, that is -- you're probably seeing significantly increased prices to what we built at back in -- when we ordered our vessels. Operator: Our next question comes from Anders Rosenlund from SEB. Anders Rosenlund: Could you break down the order backlog indicatively on '26, '27, '28 and '29 and beyond? Mikkel Gleerup: Unfortunately, we don't do that, Anders. We only give guidance 1 year ahead. So we don't give guidance year-by-year on the backlog. Anders Rosenlund: Also, do you expect to see more of your competitors to place newbuilding orders for '29 and 2030 or beyond delivery given the outlook comments that you coming with today? Mikkel Gleerup: I believe that based on the supply and demand balance we are looking into in the beginning of the next decade and the tightness in the yards that I would be surprised if there were not several companies already looking in the yards. Operator: Our next question comes from Daniel Haugland from ABG Sundal Collier. Unknown Analyst: This is [indiscernible] from China Securities. And thank you for taking my questions. I have 2 questions. The first question is about the foundation installation business. And I noticed that actually the foundation business includes quite large preparation works and it has larger amount. And could you please share with us what's your target of the foundation business in the future? Would the volume or the amount be higher than next year? You just mentioned that next year, the future revenue would be -- maybe would be higher than the installation revenue. So could you please share with us about the foundation business in the future? And your target or your strategy? This is my first question. And the second question maybe for... Mikkel Gleerup: Can we take them one by one. Can we just take them one by one. Unknown Analyst: Okay, okay. Mikkel Gleerup: Thank you. I think that to answer your question, we have had a humble approach to the full scope foundation C&I projects. And in 2026, we will be executing the Hornsea 3 project. In 2027, we will be embarking on the EA2 project with ScottishPower Renewables. So we are on a journey here where we are building up together with our clients, two of the biggest developers in offshore wind worldwide. And together with them, we are building up these capabilities to ensure that we do this safely and with the quality that both we and they expect fairly. But our long-term target is, of course, to execute several foundation projects in parallel in a year. That is how we have built the fleet, and that is how we are building the team and, let's say, the protocols around this. So let's say, we have a fully delivered capacity three A Class vessels that are targeting the foundation market. And we would certainly expect that these three A Class vessels would all be doing foundation work in parallel at some point in time in the future. But when I address the fact that I believe that the O&M market could be as big as the installation market, it is because with the outbuild targets that we are seeing in the industry, there will be a lot of requirements for O&M. And hence, we say this, but we cannot say when it will happen or whether they will inflect or whatever. But we do believe that there will be a case for the fact that the O&M market as such will be a very value-creating market to be in and also potentially bigger than the installation market. Operator: Okay. Great. And the second question is about the financial expenses. And I noticed that in 2025, the financial expenses are a little bit higher. Could you give us some color about the financial expenses in the near term or in the 1 to 3 years? Because with our 2 vessels delivered in 2026 and 2027, these expenses cannot be go into the -- cannot be capitalized and this should be go to the P&L. And could you give us some colors about that? Peter Hansen: That is absolutely correct, and also what I talked to in Q4 where you saw net or -- finance net was around EUR 20 million. And that is what you should expect to see going forward and then less and less goes to CapEx when we get one vessel delivered here in '26, then it will be less '27, we get the last one delivered and then it will be to current plans, nothing that we can capitalize. So that is the picture we see. So Q4 is more representative for '26 than the full year. Unknown Analyst: Okay, great. Thank you so much. That's very helpful. Thank you. Mikkel Gleerup: Thank you. I don't know whether we missed Daniel from ABG. Operator: Yes, we have a question from Daniel. Daniel Vårdal Haugland: I was a little bit back in the line there. So I have a couple of questions on 2027 that you maybe can kind of enlighten me on because I think you now say that 2027 is getting fully booked from your perspective. So what type of utilization level are you kind of targeting or at least some kind of range when you're talking about kind of fully booked this because I think based on announcements, it looks like there's a lot of white space, but obviously, you guys have looked it through. So... Mikkel Gleerup: Yes, so I think... Daniel Vårdal Haugland: Any commentary on that would be helpful. Mikkel Gleerup: Yes. No, that's a totally fair question. I think we have guided from the beginning of the journey of utilization between 75% to 90%, and that is also the target in 2027. And that is an adjusted utilization because, obviously, to assume that a vessel is busy when it's transiting from Asia and back to Europe, for example, that is not possible, even though we would love to install turbines all the way. But -- so that's how we look at it. And then as Peter also said, when he went through his numbers that we exclude planned dry dockings and stuff like that. So the adjusted number, we are expecting between 75% to 90%. And for '27, yes, it is correct that we are considering ourselves to be at the moment fully booked. Daniel Vårdal Haugland: Yes. And just to clarify, then you kind of include this potential contract that you talked about for the Apex. Mikkel Gleerup: Yes, that's how we have to do it because there is a potential contract that is negotiated. And -- but of course, nothing is firmed before it's signed and there's ink on paper. But of course, when we are in a process where we believe that this is something that will materialize, then it's also something where we are saying with what we know today, we think that we are in a situation where we don't have much other stuff to sell. Daniel Vårdal Haugland: Okay. And one question on the Orca. It seems like that will be working together with the Ally on Hornsea 3 on secondary steel. It seems from the slide that you kind of indicate that going through Q1, maybe into Q2. Is that kind of correctly assumed? Mikkel Gleerup: Yes, it's correct that Orca is starting almost side by side with the Ally being mobilized now for the campaign to go to -- on to Hornsea 3, sorry. It was a valuation we did when we secured the project because it was our option to either go with an offshore construction vessel or with one of our jack-ups. There were benefits in the jack-up in terms of the weather downtime during the winter and hence, the progression on the project. And that's why -- and with the project economics, of course, that we were able to provide to our -- one of our own assets that we decided that the O Class vessel was the best option for the task. Operator: Thank you. That's all we have time for today, and thank you for your participation. I will now hand the floor back to Mikkel Gleerup for any closing remarks. Mikkel Gleerup: Yes. Thank you, everybody. And if we did not have time to take your questions, then you all know where to reach Peter and myself or Alexander. And we are, of course, happy to take offline discussions with all of you. But thanks a lot for taking the time to listen to us today. We're looking forward to catch up with you as we move ahead. Thank you.
Operator: Ladies and gentlemen, welcome to the 2025 Results and 2026 Outlook Conference Call. I am Mathilde, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Stefan Weber, CEO. Please go ahead. Stefan Weber: Thank you, Mathilde, and good afternoon, everybody in Europe. Good evening, everybody in Asia, and good morning and early 6:30, have a good starting to the day from Dana Point, California. As usual in the past years, we are spread over the world. The only person right now in our Milan offices is the CFO as he should be. He's sitting on the money that we need to spend in the upcoming period. Our Chief Medical Officer, Ravi Anand, is right now preparing for the SIRS, Schizophrenia International Research Society Conference that starts tomorrow. And I am attending the conference of ROTH Capital at Dana Point. So welcome to this call. I hope you have had a chance to download the slide deck that we are going to guide you through, and I will start with Slide #4. So if we look back at the last 15 months and the period that we are reporting about, and I will then do the outlook for '26 and hand over to Ravi for the new science and R&D progress and then to Roberto for the financials and the AGM EGM that is upcoming. If we look back, this has really been a period that couldn't have been much better. We practically hit all the quick points. We made all the milestones. But what I want to tell you already now is that for the upcoming 12 to 15 months, we might see even better outcome. So be prepared for that. If we look back, and that is all about evenamide and schizophrenia for the moment. We have to start with the deal that we signed in December 2024, the validating deal with EA Pharma from the Eisai Group. We did that deal with one of the top 10 Japanese pharma groups with a CNX experienced company, and there were some reasons. We wanted to validate our unique mechanism, the only drug that modulates glutamate in schizophrenia. We wanted to validate being the first add-on therapy in schizophrenia. We wanted to validate our claim that this is the drug that is the only one that qualifies to work in the vast majority of schizophrenia patients who are poor responders or treatment resistant to the current medication. We wanted to get an indication of the intrinsic value of that compound, which by analysts was after that deal was signed, estimated to be more than EUR 1.5 billion. And finally, we wanted to get the cash to perform our Phase III study because at that time, the markets were very challenging on equity. We got all that and since we signed the deal, and that is the starting point of the 2025 success story, we collected EUR 48 million, which was exactly the money we needed to advance our evenamide into the decisive pivotal study program called ENIGMA-TRS. And as you know, that is split in 2 studies. One is ENIGMA-TRS 1, that is a 600 patients, 1-year double-blind placebo-controlled study, which was finally enrolling first patients in August after we had gotten the approval for the overall program in May. This study is right now actively enrolling on all target continents, and Ravi will give you more update on the status. Importantly, in December then, we could start ENIGMA-TRS 2, the second pivotal study. So 2 shots at target even if 1 sufficiently positive study should do to get this drug approved. We started ENIGMA-TRS 2 in the U.S. study centers with UCLA and since then have added Johns Hopkins and the other studies centers are ready to initiate, and we have submitted the documentation in all the other countries in which we want to enroll patients. So this study is up and rolling now. And again, Robbie will give you an update. And then importantly, just by the beginning of this year, 2026, we could inform markets that also our partner, Eisai Group has initiated their Phase III program. So right now, I can say this is the most advanced clinical program in schizophrenia. We are right now running 3 pivotal studies in total with more than 1,300 patients in the world. And as you will hear later on, we expect results from the 12 weeks readout within this very year. Now we did have absolutely thrilling. I'm moving to Slide 5. We did have absolutely thrilling 1-year results from a study in treatment-resistant schizophrenia when evenamide was added to best-selling antipsychotics. And we did have the first highly statistically significant efficacy results from Phase III study called 8A, but there was plenty of questions given the new mechanism and the new positioning. So it was very important that all the clinical results of the past have by now been peer reviewed and published in the papers. We have presented them at numerous conferences. All the space is now being educated about the benefits of this drug in those patients in which today's medications just don't do good. But it was very important last year in August that Pittsburgh University came up with a piece of research, which could explain for the first time why in the pivotal -- why in the Phase II and Phase III studies, we saw that ever increasing efficacy, doubling, tripling responder rates by 1 year, 50% patients no longer qualify as treatment resistant and for the first time ever, treatment-resistant patients being reported to be in remission for 6 months. We didn't know why and how our drug would do that. And I think Pittsburgh has provided substantial explanation how this drug does so by qualifying schizophrenia as a disease that is substantially caused a hippocampus, a section of the brain where today's drugs simply don't hit, and that is why they do not improve negative symptoms, neuro cognition and why they only have limited benefits in symptoms. So that work of Pittsburgh now peer-reviewed and substantial support for the positioning of our compound and the explanation of the benefits we have shown. Again, starting this year, early 2026, we got another validation that is on a new composition of matter patent on crystalline forms of evenamide, which has the potential to extend our exclusivity to 2044. That would be 17 years post the expected approval of our compound, which we expect by end of '27. This patent has been submitted a year before, but ahead of time, the European Patent Office declared their decision to grant this patent in Europe in early January. The same patent is right now in the process of being reviewed, and we expect it to be approved also in all the other key territories, importantly, including the United States, where, again, this would give us exclusivity until 2044 and thus 17 years post the expected approval of this drug. On the corporate ends, moving to Slide 6. All the excitement about our results and the initiation of the U.S. study triggered 3 U.S. analysts to start covering Newron and the fourth one joined from Europe. So we got plenty of new coverage. We saw doubling or tripling liquidity in the stock. We are right now trading between 0.7% and 1% of the stock every day, which is clearly showing us that we get better coverage around the world and more people looking at our stock. This is a process that must be continued and even further improved. Very importantly, we also resolved 2 key issues on funding. Number one is that with existing shareholders and new shareholders from Europe and Asia, we signed a funding agreement in February this year, which will give us access to up to EUR 38 million, of which EUR 15 million are already in the bank, EUR 11 million will come before this year is over with no milestones attached and then the EUR 12 million remaining will come conditional to positive results of our pivotal studies by end of the year. That money being in the bank, we now have the funds to complete our ENIGMA-TRS 1 and 2 studies to the 12-point readout. So we will have all the money to report on the primary endpoint after 12 weeks and the secondary endpoint, and we will be able to advance our drug into NDA submission, and we will have a number of months of reserves beyond that point in time. And the second component of improving our financial situation was that we reached agreement with the European Investment Bank that all future payments under our loan agreement would be delayed at least by 2 years and a quarter to not before June 2028. So we are now in a very good financial situation. We have 3 pivotal studies rolling, and we have all the cash required to get to read out. On the corporate end again, our Board of Directors is already 1 year that Chris Martin has become our new Chairman. And I have to say that it is a marvelous cooperation between management and Chris, very much appreciated. He succeeded Ulrich Kostlin who was our Chairman for the 12 years before. In order to now complete the new setup of our Board of Directors and have completely independent directors on the Board, both Patrick Langlois after 18 years of service on the Board and Luca Benatti, after 12 years of service on the Board. Luca was the last founder of the company, have declared they will not stand for reelection in this year's shareholders' meeting. And I think we can say that we have found 2 outstanding new candidates for the Board, George Garibaldi, who is a highly respected industry [indiscernible] with years of experience and Paolo Zocchi, senior ex-partner in the top 4 audit company who are proposed for election by our shareholders as independent nonexecutive directors in the upcoming shareholders' meeting. So what should we expect for this year, 2026 and early 2027? And I'm moving to Slide #7. I think it is worth to start from the end. If you look at where we want to be in the end and you remind yourself what are our peers. And the peers, the latest companies with one product nature in schizophrenia were Karuna and Intra-Cellular. And Karuna was acquired once they had submitted the NDA for their 1 product company -- for their 1 product to the FDA. They were acquired for $14 billion by Bristol-Myers and Intra-Cellular were acquired after they had launched their own compound in the United States, commercialized it for a few years up to $680 million sales with a market cap of $9 billion. They were then acquired by J&J for $15 billion. We are now the most advanced follow-up to those companies. So what are we missing? Well, to be fair, we are missing positive results from our Phase III program, and we will be getting to those results in the next 12 months. Then what they had, what we do not have, they were listed on NASDAQ. And that is something we cannot ignore because as we have lately seen again, about 2/3 of the global biotech money is traded in the United States. So clearly, if you want to have full access to capital markets and you want to get a fair price, you should also have your shares listed on that largest stock exchange. So what we need to do is we need to work the path towards the results of our pivotal program. We need to prepare our NDA dossier. The initiation of the work must start way ahead of the results. Then something which is important that evenamide does not only work in schizophrenia, but like all the other compounds like Intra-Cellular's drug that has gone big in bipolar. This drug will also work in additional indications, and I'm also thinking of the elderly patients with dementia and psychotic episodes. This should be a perfect drug for those patients. And that is where additional indications should be pursued and Newron should start working on those. Clearly, on the corporate side, we should strengthen our institutional shareholder base, and we are working with a number of supporting agencies to do that. And now this all takes us to the shareholders' meeting of April 2023 of this year because there is things that we can do on our own with the means we have and the tools we have and there's steps where we need the support by our shareholders, and we need to get the tools from our shareholders. And you have probably seen the agenda of the shareholders' meeting. There's the usual household stuff like approval of financials, then there's the important elections of the Board. And then you will see that we have also put on the agenda of the shareholders' meeting a capital increase authorization for 15% of the capital. I do believe this is a moderate request, and it's clearly a compromise between aggressive strategy and the wish of some shareholders not to see any dilution. Clearly, the intention is that those shares would be used to advance evenamide in indications beyond schizophrenia and to support us towards submitting the NDA dossier and getting our drug approved. Clearly, also those shares might be used for a listing of our shares on a U.S. stock exchange like NASDAQ. And these are all procedures that need months and months of preparations. So what we are asking our shareholders for right now is not to approve a capital increase that will be put in place tomorrow, but what we ask them for is to give us the tools and the instruments that we need to start preparations and execute transactions at the right time, which also clearly means at the right share price to the right parties. So if the question is, is an IPO and uplisting of Newron stock to NASDAQ an option today, the answer is probably not because we are missing key ingredients, including share price results and other components. What we ask our shareholders for is support, providing us the tools and allowing us to initiate the process. So your question might well be, so is it worth? What is the opportunity, and that takes us to Slide #9. What we have to offer today is truly the opportunity to transform schizophrenia treatment with evenamide. This is the first compound that offers glutamate modulation in schizophrenia, and we start understanding how much more important it is to go beyond the dopaminergic pathway drugs that have dominated schizophrenia in the last 70 years. This is a huge market opportunity. We talk about 1% of the global population, but the vast majority of patients is not well treated by today's medication. The vast majority of patients is poorly responding or treatment resistant. So what it needs is a completely new mechanism of action, that is what we offer. And what we need is the first ever add-on treatment to be approved in schizophrenia. What we need is the option for doctors not to change the current medication, but to add a drug with no additional side effects of relevance, but with additional incremental benefit. No risk of relapses, reduced risk of hospitalization, suicidality. That is the promise of such a new mechanistic drug, an add-on to the current medications. As evenamide is the first and so far only drug that qualifies as an add-on to any antipsychotic of relevance, including importantly, including clozapine, and Roberto will talk to that. What we offer is highly exciting 1-year Phase II results of evenamide as an add-on to antipsychotics as well as highly statistically significant first Phase III results in a 4-week study in poorly responding patients. What we have seen is excellent tolerability, the most prevalent side effect being nasal pharyngitis in the Phase III study. I have already spoken about the potential of evenamide beyond schizophrenia that must clearly be evaluated. And we have also covered the topic of the strong IP protection. Right now, we have a Composition of Matter in the U.S. of 2035 and Process Patents to 2042 -- this new Composition of Matter 2044, that would be 17 years of a truly innovative treatment in schizophrenia, protection and market exclusivity post approval. That all said, it's my pleasure to hand over to Ravi on Slide 10 for the update on science and clinical. Ravi Anand: Thank you, Stefan, and good morning and good afternoon to everybody else. So I think I'm going to start with Slide 10, and I think this is a schematic presentation of how we currently view schizophrenia. And this has been brought out by the University of Pittsburgh and some of the universities. Contrary to common belief, the schizophrenia symptomatology does not begin in the basal ganglia, but in the hippocampus. The hippocampus controls the rate of abnormal firing from the dopamine receptors in the basal ganglia. When it's not working, there is hyperfiring from the dopamine receptors, and that leads to some of the symptoms of schizophrenia. What has also become very clear is that the hippocampal nuclei control negative symptoms, control cognition. So you need to have a drug working there. All current antipsychotics work at the level of the basal ganglia where you have the dopaminergic receptors. And therefore, they will never be able to reach the hippocampal nuclei, and that is one of the reasons why we don't see any benefits in negative symptoms or cognition with currently available drugs. Evenamide at the level of hippocampus, it has no activity at the basal ganglia at all. And the data that I'll show you will convince you based upon the work done by Pittsburgh University that it works on all these facets. I'm moving now to the next slide, Slide #11. So this is the experiment done. I'm very briefly describing this experiment. You should really take the effort to read the paper, which is fully published and it's on the Newron website. In this experiment, what was done by Pittsburgh University Research is they take rats, they give them a DNA alkylating agent called MAM. MAM changes the brain structure, changes the cytoarchitecture. The progeny, which are born basically show many of the symptoms and signs of patients with schizophrenia. So it's a neurodevelopmental hypothesis model of schizophrenia. You see hyperactive firing from the hippocampal pyramidal neurons, and that is reduced in this -- that this model creates and then basically get reduced by evenamide. What we see is the ventral pigmental area, dopamine neuron population activity is hyper and again, that is normalized by evenamide. Some of the most important findings are that the effects of evenamide outlast its presence in the brain and there's no way to explain it because the drug has a very short half-life, and this is way beyond that. This suggests that we are having the induction of long-term plasticity, which would be a very welcome thing for patients with schizophrenia. And then as I said before, you will see data which suggests that basically evenamide improves cognition and improves negative symptoms in these animal models and likely, we'll be able to do that in patients. If I move to Slide 12. This is a wonderful experiment, a little difficult to understand, so you need to just concentrate on it. If you look at the first bucket, that's looking at the effects of neurons. We're looking at the active dopamine neurons per track and how they're firing. If you look at the first 2 bars, there's no difference because it's only normal animals, so there's no effect of evenamide. The next 2 bars, you see the black bar, which is high up. That's because that's showing you increased abnormal firing in the MAM-treated animals. But the same MAM-treated animals, when they get evenamide, you can see there's a significant reduction. This is within 1 hour and the drug half-life is about 25 minutes. If you look at the second hour, there's no drug remaining. The drug has no active metabolite. There's no sequestration. But you see that the activity is actually increasing. The difference between the black bar and the blue bar is increasing. So even when the drug is not there, it's producing a benefit. And if you look at the third hour where there's no chance even of getting the drug around, the effect of evenamide is going on increasing. It's reducing further and further the abnormal dopaminergic file. Nobody is able to explain this. We can't really fully explain this, except that this is a very welcome finding because what it suggests is that patients will continue to benefit from this drug for long periods of time. Moving on to Slide 13. Now negative symptoms are present in all patients with schizophrenia. Even when patients improve from positive symptoms, negative symptoms don't improve. And one of the main reasons why patient functioning does not improve is because of the presence of negative symptoms. Now in this model what you're seeing out here, we have a rat in the middle. The rat has a choice to go to a toy chamber where there's a toy or to a social chamber where there's a real rat. Rats are very inquisitive animals. They love to interact with each other. So therefore, what will happen? Next slide, if you see now what is in the next slide is happening is, we are looking at the MAM-treated animals. There, there is no difference between the toy chamber rat, the time spent sniffing or the real one. But if you look at the second -- the third and fourth bar, you can see the MAM-treated animals are not able to distinguish between the toy, whereas the evenamide-treated animals recognize, which is a real rat and they're spending a significantly more time on that. And this is not because there's any effect on locomotion, which is shown by the other graphs, but because the animal now which is socialized. Any socialization is a prominent feature in patients with schizophrenia. And this suggests that this drug will improve social interaction. If I now move to the next slide. This is now looking at novel object recognition. This is a test of cognition. We take the rat, we give it an object. It familiarize it cells by sniffing. We then take it away, 1 hour later, we introduced the old object and the new object. The rat which is inquisitive, will memorize that, oh, this is the old object. I'm not interested. I want to go to the new object. Does this really happen? In the non-treated animals who have lost a lot of the neural architecture, there is no difference between the vehicle and the evenamide-treated animals -- in the evenamide treated because there's no deficit. But if you look at the non-treated animals, cognitively, these animals are impaired. The amount of time they spent on the wrong model, which is the Toy, the old object has gone down. Evenamide is able to protect against that, and there's a significant improvement. So you're seeing an improvement in negative symptoms, you're seeing an improvement in cognition. We've already seen an improvement in firing rates. All this leads us to the clinical data, which is shown in the next slide. And then basically, I will walk you through that. So what have we seen until now? This is Slide 18. Evenamide has shown efficacy in virtually every study performed, whether it be a 4-week study, in early patients, a 4-week study in patients who are inadequate responders and a 1-year study in patients with treatment-resistant schizophrenia. In all these studies, it was given as an add-on treatment. The benefits of our ranging, they are seen on positive symptoms, they are seen on negative symptoms. The drug is very well tolerated. The attrition rate is less than 5%. The most common adverse event is nasopharyngitis, which means missing and the same incidence as placebo. What we've seen in the first Phase III study that we did in patients with inadequate response more or less confirm the results that we saw in the open-label study in treatment-resistant schizophrenia. It's one of the very few first times that I've ever seen that I -- all efficacy endpoints came out significant in the Phase III study, which is the 8A study, and this is published also. All the endpoints reach statistical significance. And basically, what we are seeing is the side effect profile is so benign that you cannot tell the difference. Now we are basically looking at this, these results and the animal results because we are doing a 1-year study, where you expect to see efficacy continuing to improve over 1 year. Just to remind everybody, in schizophrenia, we generally have improvements in 3 weeks, 4 weeks, but rarely after that. That's why the FDA advises the sponsors nowadays to limit the study to 4 weeks because after that, there's no real improvement. I move on to Slide 19 to show you the study 8A, which I talked about, the potentially pivotal study, which has now been published everywhere. It's a 4-week study done in 11 countries, 291 patients were patients who are on second-generation antipsychotic, received either 30-milligram bid of evenamide or placebo. All second-generation antipsychotics were allowed in this study, and the patients had to be psychotic. The design is shown on the next slide. What we did in this study is at the very beginning of the study, we took blood samples to make sure that patients were really poor responders and noncompliant patients. We had the blood samples analyzed to make sure the concentration of the antipsychotic was at the right level to be able to ensure that they were getting a therapeutic dose. 30% of the patients had no measurable plasma levels, which tells us that they were noncompliant rather than inadequate responders. This study took us much longer to do because of this of the difficulty of finding patients who are compliant with medication. Ultimately, we got 291 patients. And as you can see, the study went up to 4 weeks, which was the endpoint of the study. The drugs that were allowed in the study, the second-generation antipsychotics are listed at the bottom, and they constitute about 90% of all second-generation antipsychotics in the market. Slide 21 shows you the side effect profile of the drug. If you just look at the bottom part of the table where you see preferred term, the most common adverse event is nasopharyngitis. The incidence is almost the same as placebo. Again, then headache, which seems to be more -- almost the same as in placebo. What is more important is what you do not see [indiscernible]. You do not see any extrapyramidal symptoms. You don't see tremor, you don't see rigidity, you don't see akathisia. You don't see weight gain, you don't see diabetes. You don't see sexual dysfunction, no abnormal changes in the ECG or in the liver function test or kidney function test. No blood pressure changes at all. No severe sedation, no severe excitation. So it's a remarkably silent drug, which is ideal as an add-on treatment. If we now go to the next slide, Slide 22. This gives you the primary results for the study. In line with the expectations from FDA and from ICH requirements that the primary measure should be the PANSS total score. So we designated the PANSS as the primary estimate for the study. The analysis are done in the ITT population. And as you can see from the fourth row, the null hypothesis, meaning there's no difference between drug and placebo is rejected with a p-value of 0.006. And the core secondary measure, which is the CGI of severity, meaning clinical global impression of severity is also significantly reduced with a p-value of 0.037. But that's not all. If you look at the next slide, this is showing you now the slope of the curve over a 4-week period of time. Obviously, this is not long enough. But you can imagine that if this study were to go on longer, the placebo group will keep on flattening, the drug group keeps on improving. And based upon this, we have designed the next studies. This is the next slide is showing you the simulation in which we are imagining what would happen at week 12 and what would happen at week 26 and 24. What you can see is based upon the data from the previous studies, it seems like at week 12, we would have about a 10 to 14 point difference -- a 12- to 14-point difference from baseline, that is likely to be highly significant. Similarly, if you go to 26 weeks, we expect that basically we'll have a difference between 14 and 19 points compared to baseline, and that's likely to be highly significant. Now I'm showing you some very interesting data. These have been published again. We looked at what happens to other antipsychotics when evenamide is added. Firstly, to our surprise, the clozapine patients, clozapine is the most effective antipsychotic. And even those patients when they get evenamide improved by about another 3 points compared to clozapine alone. But more surprising than that is olanzapine. Olanzapine is probably one of the most effective antipsychotic, has never come out second to any antipsychotic in the trial. And those patients, when they receive evenamide, they improve by about 5 points more than they get olanzapine alone. And this difference is statistically significant. Overall, it looks like whenever you get patients receiving evenamide on top of a second-generation antipsychotic, they improve. And this leads us to believe that this could be a drug which could help all patients who are not doing well on their current medication. But what are the other results like in this study? So you can look at this, Slide 26, where basically we're showing you the PANSS responder analysis, clinically significant. In other words, 20% improvement, which is considered clinically significant in treatment-resistant patients with poor responders. You can see the effect is increasing over time and at day 29, which is significant. This rate, if it continues, you can imagine at week 12, we will have a very large difference between patients who are responders on current treatment as well as those who are current treatment and evenamide. But it's not only on the PANSS, we now look at the CGI of change. This is an analysis, which looks into account -- takes into account only those patients who show much improvement, not minimal improvement, only much improvement. And once again, by day 29, you can see almost a doubling of the number of patients who are responders on evenamide. Again, a very nice outcome. And if we continue this projection forward to week 12 and 26, we will have a very significant outcome. Now I'm now going to just very briefly mention the pivotal ENIGMA trials which are currently ongoing. And I'm now on Slide 29. This is the TRS 1, the treatment of schizophrenia 1 study. This is a 52-week study. The first study ever done in treatment-resistant patients, which is placebo-controlled and 52 weeks. All patients have to be on treatment -- have to be diagnosed as treatment resistant. They are -- we confirm this by taking blood samples at the beginning, 3 times in 42 days to make sure that they are really taking their medication and even then they are not responding. Then the data are going to an independent eligibility committee, which really decides that these patients are actually treatment resistant. Then only the patients get randomized to 15 or 30 milligram of evenamide or placebo add-on. And the study is very tightly monitored, and we will look at the primary results at 12 weeks and the next results at 26 weeks and the last results at 52 weeks. And these results are the basis for which we will get the registration. The 12-week endpoint is really necessary for showing the drug in an antipsychotic and will be the basis with which we file for regulatory approval, the first regulatory approval, both in CHMP in Europe as well as in the U.S. The second TRS study is a shorter study. It's a 12-week study that is currently ongoing also, but that study has only got 400 patients into the 600 patients. And that study has just started. It's got approval in virtually all of the countries that we wanted to. And then basically, we expect that this study will also complete fairly quickly. We expect the TRS-1 study to complete enrollment by the end of August, which will provide us results by the end of the year and lead to hopefully to an NDA filing around the first to second quarter of next year. The TRS study will come in close behind that, so we will be able to include the results in that package. With that, I turn it over -- we have done a lot of congresses this year, sorry. And you can see that on the Slide 32, we have a listing of all the congresses that we are presenting at. It's been a very busy season for us. Everybody is recognizing the value of evenamide and making up to a new mechanism of action. And all this paper, we have published a lot of papers, which you can also get from there. With that, I turn it over to Roberto. And thank you for your attention. Roberto Galli: Thank you, Ravi, and good morning and good afternoon to everybody else. So I'm on Slide 34. As you know, Newron is listed at SIX since December 2006. And since June 2019, we are also traded at Dusseldorf Stock Exchange, et cetera. By the end of the year 2025, we had 20 million -- around 20 million shares outstanding. Currently, they are EUR 20.8 million because of the capital increase Stefan was mentioning to you before. And always at the end of December 2025, we have outstanding call option and derivative or warrants, if you prefer, of up to 1.6 million, of which 50% more or less were related to call options and the remaining 50% were the warrants that we granted to EIB. Let me welcome 3 new U.S. banks among our analysts, and I'm talking about Wainwright, ROTH Capital and Lucid, and they are on top of the already existing ones, so Baader, RX Securities, ValueLab, Edison and Octavian. I'm now moving to Slide 35. Let's just talk about a few numbers. License income decreased. But of course, in 2024, we booked the downpayment of the Eisai deal. So no surprise here. And the value you can see are mainly related to the Myung In deal down payment and certain milestones that we got from the TRS 1 study progression. The other income, even if it's not a big amount, I want to talk about those because I'm referring the R&D tax credit benefit that we were able to book after 4 years of no additional benefit. And I'm talking about a couple of million, so EUR 1.9 million. What I want to tell you on top of this R&D tax credit is that accumulated, so since 2025, we got EUR 25 million of benefit. And so far, we have used EUR 22 million. The financial results net decreased by about EUR 3 million. And the main reason is a technicality and IFRS technicality because according to IFRS, we are supposed to evaluate the warrant fair value and this value because of the increase in the share into increased by EUR 2.5 million. Please note that there is no cash impact related to this effect. On the very last, I want to talk about the income taxes. Last year, for the very first time, we paid income taxes, while this year, the amount you see are only the withholding tax paid on the milestone and now payment received from the deals I was mentioning to you before. In Slide 36, so I'm showing you the balance sheet on the left and the cash flow on the right. So let me start from the balance sheet. What you see in the current asset in 2024 that is EUR 51 million is mainly the receivable related to the 8A Pharma deal that became cash. And this is why you see the increase in cash in 2025. While in the liabilities, the EIB loan last year was booked mainly in the noncurrent liabilities. And this year, you see everything in the current liabilities. But as Stefan was mentioning to you before, 1 week ago, we obtained from EIB the chance to delay the debt till end of -- sorry, till June 2028. On the right, you can see mainly the bar on the working capital and the green -- it's green because it's generating cash and it's exactly the effect that I was mentioning to you before. So the cash in -- the cash we received in January and of the revenue that we booked in December 2024, partially compensated by decrease in brand and other payables. If we move to the last slide. So on April 23, 2026, at 10 a.m. CET, we will have our general meeting. In the agenda, in the ordinary part of the agenda, the first point, as usual, is the approval of the financial statement. The second point is the approval of the new member of the Board of Directors. Stefan has already thanked both Patrick and Luca for being with us for so many years. And let me reiterate this concept because we really well appreciate their work and then I'm also willing to introduce to you, George Garibaldi and Paolo Zocchi as new nonexecutive directors. On the extraordinary part, we will amend -- slightly amend, let me say, the bylaw in a few articles, and this is due because after 20 years and COVID, a few laws have changed and so we are willing to align the text of our bylaw to the new and amended shareholder laws. The second and the third point are a capital increase. On the second point, we are asking shareholders to grant 5% for option plans of capital increase. And in the third point of the agenda, we are asking for 15% of capital increase also potentially for an uplisting at NASDAQ and the point 4 is strictly related to point 4, 3 because the creation of ADR serves for the NASDAQ listing. Everything has been already uploaded or will be uploaded in our website. So if you want to look for additional information, please do not hesitate to visit the website. And with that, I think I'm done. Stefan Weber: So I guess it is time for the Q&A session. I hand over to Mathilde from Chorus Call to introduce us to the questions by the parties who have registered for such. Operator: [Operator Instructions] The first question comes from the line of Ram Selvaraju from H.C. Wainwright. Raghuram Selvaraju: Congratulations again on a landmark year in 2025. You really are to be congratulated on how many fronts Newron advanced on. Firstly, I wanted to ask about your feelings regarding additional indications for evenamide beyond schizophrenia. In particular, we have seen evidence that other antipsychotic drugs, while perfectly serviceable in schizophrenia, actually turn out to be even better in other indications that are ancillary to schizophrenia that may constitute even larger markets. So I was wondering if you could perhaps comment on this. If there are other indications in which you believe evenamide is particularly well suited to have a therapeutic effect, what might these be, whether that would be bipolar disorder, patients with mixed depression and schizophrenia symptoms or others? Ravi Anand: Thanks, Raju. You basically took my hands away from me. I would expect this drug to be highly effective in patients with bipolar disorder. Secondly, I think I would definitely like to go for treatment-resistant depression with psychotic features. And lastly, patients who have behavioral symptoms of dementia but cannot take second-generation antipsychotics. There, I think this drug, because it doesn't affect any neurotransmitter system will be very well tolerated and not have the increase in mortality that we see with all the other drugs. Raghuram Selvaraju: That's very helpful. And I think we're all familiar with the intracellular therapies example that demonstrated just how large a market opportunity there could be for an antipsychotic with applicability beyond schizophrenia. Secondly, I wanted to ask about the information you presented regarding the ability of evenamide to augment the efficacy profiles of multiple second-generation antipsychotics. And if you could perhaps drill down on that a little bit further for us and give us a sense of whether there is a particular subclass of those second-generation antipsychotics that you consider evenamide to be particularly well suited to be combined with? And if so, what might be the kind of your top 1 or 2 choices? Obviously, you furnished a lot of information, in particular on clozapine, but I was wondering if you had additional granularity to provide. Ravi Anand: Sure. I think clozapine because it's the most obvious candidate because when you talk about treating schizophrenia and clozapine, all the drugs, even though it's not used that much. Second, I think what has really been surprising for me and not just in 1 study, but in almost 2 to 3 studies has been the effect in combining it with olanzapine. And as you know, olanzapine and clozapine share certain features. So then the question comes up, really, is it basically because of the fact that both of these drugs are affecting D2 and D1. And -- but then what we see also is that is also affecting risperidone. It's also improving patients with aripiprazole. So I think this improvement facet is probably unrelated to the neurochemistry. It's a generalized effect on brain where it is acting in a way it's more like an antidepressant and produces some degree of configuration change in the brain receptors, which makes them amenable to treatment with the other drugs. I think we are monitoring this very carefully now in the Phase III study, and we're trying to collect plasma levels to exclude pharmacokinetic interaction as a reason for this. Raghuram Selvaraju: With respect to the effect you showed of evenamide kind of having a long-term persistent impact even when the drug is no longer necessarily biologically circulating in the system. I was wondering if you could comment on, first of all, the long-term strategic plans at Newron to potentially explore the possibility of developing a long-acting injectable of evenamide. And if that is the case, how this information indicating long-term persistent effect of evenamide might dovetail with those efforts? Ravi Anand: No, absolutely. I think as you probably know, some of the companies in Europe, which have been led the charge to develop formulation changes, especially in France and for TEVA, for instance, we are going to be in early discussion with them soon. I think to me, it's really a mystery almost that a drug which has only got a half-life of 25 minutes is affecting changes beyond 3 hours. But also in patients, we have a short half-life of 2.5 hours, but the effect seems to persist for more than 12 to 14 hours. So I think a long term, a depot formulation would have to be a very different type, but it would be a fantastic thing because a drug which is very well tolerated, doesn't produce EPS, doesn't produce sexual dysfunction could be ideal for giving long term, not only to the confirmed schizophrenia patients, but to those patients who are early on in their career, like the first episode patients or the at-risk patient population, that would be the way to go for those new formulations. And we would definitely explore that once we are done with the NDA. Raghuram Selvaraju: And I think it's well documented that the long-acting injectable segment of the schizophrenia market is by far the fastest growing and at this point, probably the most lucrative. One last question from me. When do you expect U.S. office action on the COM patent that was already granted in Europe that would extend protection to 2044? Ravi Anand: Stefan? Stefan Weber: Yes. Ram, thank you for joining. Thanks for the questions. So we are right now in discussions with one of the leading U.S. IP consulting firms, and we are in discussion with the leading expert on crystalline form and solid formulations in the United States. We are discussing the strategy. As you know, there is 2 ways of getting a fast-track treatment of the Composition of Matter application in the United States. We are right now evaluating both. And I guess we will take a decision within the next few months. Depending on that decision, we might well see this patent being treated and decided upon before this year is over. And that means we might get that same patent application approved in the United States as per our expectation in this year still, which would be remarkable. Operator: The next question comes from the line of Joris Zimmermann from Octavian. Joris Zimmermann: Joris Zimmermann from Octavian here. Two from my side. The first one on your cash reach guidance throughout 2027. You mentioned that this includes EUR 50 million already received from the new financing plus another EUR 10 million that you expect later in the year. Question is on the remaining, I think, EUR 12 million from that new financing that is not reflected in this guidance. So that would provide you a further extension of the cash reach. And also in terms of the amended European Investment Bank repayment schedule, I would assume that this is already included in the guidance. Roberto Galli: Okay. So let me start from EIB. Yes, EIB is absolutely included in the guidance, of course. As per the additional EUR 12 million, I am a very cautious CFO. So given that we are talking about something that is related to the data, I have kept this upside from these projections. So if data will be positive, most likely, we will see an additional injection of EUR 12 million. And this will, of course, increase the availability of cash in Newron most likely till the end of 2027. So this will give Newron additional, let's say, 6 to 9 months of time to strike the most appealing deal because of the positive data, yes. Joris Zimmermann: One more question on the potential new indications and also a bit on the funding in that regard. You outlined the potential indications where you expect most benefit of evenamide. So in terms of your plans, how would that likely impact funding in the near to midterm? Is that already something in the plans? Or is that still to be decided upon? Ravi Anand: I think it largely is still to be decided upon, but some initial activities are already included in the plans. Operator: We now have a question from the line of Arron Aatkar from Edison Group. Arron Aatkar: Just two for me here. First of all, I just wanted to confirm that the ENIGMA-TRS 2 top line readout will also be in Q4 '26. I think I've seen some approaches where it's specified and others where it's not mentioned. And for this as well, would this come simultaneously with ENIGMA-TRS 1 if so, or will they be separate announcements? Ravi Anand: Okay. Let me answer this. I think ENIGMA-TRS 1 is very, very, very, likely to be within this year. ENIGMA-TRS 2 is a borderline case, whether it's towards December or early January, things of this time. But both of them would be available to be included in the filing for regulatory approval. The announcements would definitely be separate. Arron Aatkar: Okay. Perfect. And my second question, I think you kind of covered it, but I was just looking at the licensing income of EUR 8.6 million. It sounds like that includes upfront payment from Myung In Pharma and also some milestone payments from both partners. Just wanted to clarify if you could provide like a breakdown on how much of the licensing income was upfront versus milestone payments from the 2 partners. Roberto Galli: Yes. So the EUR 8.6 million are more or less 50-50, let's say, 30% related to Myung In and the remaining part related to additional milestone coming from EA Pharma. Sorry, I cannot be much more precise because I cannot disclose the final figures. But these are more or less the percentages. Arron Aatkar: Okay. That's very helpful. My other questions have sort of been covered off already. So no more from me. I just wanted to say congratulations again on the recent progress. Look forward to following the story. Operator: The next question comes from the line of Joseph Hedden from Rx Securities. Joseph Hedden: Just wondered if you could say a little more on recruitment into the ENIGMA studies. Any information on how many patients today or progress in terms of are you on track with where you expect to be? Ravi Anand: Yes. That's always a challenge. As you know, the regulatory process has become very prolonged nowadays especially the one in Europe, which takes forever and then the contracting progress though. So at present moment, I would say that 75% of the sites that we wanted to have initiated have already initiated. And we are basically just about coming up to where we should be. We have over 300 -- approximately 300 patients who have been enrolled in the program in the TRS 1. The TRS 2, as I said, has just got approval. So it's a little bit behind. But I think keeping the progress of TRS 1 in mind, I think we're very, very confident that we should be able to complete the enrollment on time for TRS 1 and then subsequently, the effort for TRS 2. The TRS 2 is a shorter study. It's only a 12-week study, and it's a smaller number of patients, only 400 patients compared to the 600 plus for TRS 1. So we should be okay with the enrollment time lines. Joseph Hedden: Okay. And then on the BD side, just wondering what you think the likelihood of any other regional deals ex U.S. for the ENIGMA results later this year, what's the likelihood do you think? Stefan Weber: Thank you, Joseph, for the question. This will clearly depend if any interested parties will be willing to pay fairly and dearly for the new patent life that we have just added. And we understand that some parties might want to see the patent being granted first. But at the same time, clearly, with the European patent office decision to grant our patent, our expectations have increased. And as we have no cash urgency or lack at this point in time, we would be confident to go full steam ahead towards the results from both pivotal studies and then decide on how to deal with all those territories at the maximum value for our shareholders. So that's the good news after getting all the funding done. We do not depend on income from licensing. But if there are fair offers, we will absolutely consider them. And yes, there could be other deals, but conditional to fair value, including the new patent life. Operator: [Operator Instructions] Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Stefan Weber for any closing remarks. Stefan Weber: Thank you, Mathilde. Thank you all for joining this call. I hope we have been able to explain to you why we believe this was an extraordinary 15 months in the past. But let me be clear, you please should stay tuned for the next 15 months because this could be much more exciting even than what we have seen in the last 15 months. This is really the opportunity to turn this company into a completely different size of company with a drug that might be approved and with a drug that we might decide ourselves to commercialize to get to the peak value for our shareholders and to secure the sustainable future of this company. So please stay tuned. We are happy to keep you updated. Looking forward to the next opportunity. Have a great day. Goodbye. Ravi Anand: Thank you. Roberto Galli: Goodbye. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Hello, ladies and gentlemen. Thank you for standing by. Welcome to Hesai Group's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note that today's conference call is being recorded. I will now turn the call over to our first speaker today, Yuanting Shi, the company's Head of Capital Markets. Please go ahead. Yuanting Shi: Thank you, operator. Hello, everyone. Thank you for joining Hesai Group's Fourth Quarter and Full Year 2025 Earnings Conference Call. Our earnings release is now available on our IR website at investor.hesaitech.com as well as via Newswire services. Today, you will hear from our CEO, Dr. David Li, who will provide an overview of our recent updates. Next, our CFO, Mr. Andrew Fan, will address our financial results before we open the call for questions. Before we continue, I refer you to the safe harbor statement in our earnings press release, which applies to this call as we will make forward-looking statements. Please also note that the company will discuss non-GAAP measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under GAAP in our earnings release and SEC filings. With that, I'm pleased to turn over the call to our CEO, Dr. David Li. David, please go ahead. Yifan Li: Thank you, Yuanting, and thank you, everyone, for joining our call today. I'd like to start by taking a step back and looking at what we accomplished over the course of the year. 2025 was a defining year for Hesai. We achieved a milestone no other lidar company has reached, industry first full year GAAP net income of RMB 436 million. This was not just a year of growth, it was the year our technology leadership, operational scale and execution converged to set new standards for the industry. On the product front, we continue to lead the way. According to Gasgoo, ATX, our flagship ADAS lidar, largely contributed to our #1 position in 2025 with over 40% share of the long-range automotive lidar market. Meanwhile, our JT series entered mass production and shipped over 200,000 units in its first year alone, establishing clear leadership in Robotics as well. At the same time, we reinforced our financial position through a successful USD 614 million dual primary listing in Hong Kong, further strengthening our robust balance sheet and enhancing our capacity to support long-term growth. As we enter 2026, we are carrying significant momentum across markets. With demand accelerating across various key applications, we are raising our 2026 lidar shipment outlook to between 3 million and 3.5 million units. This reflects the massive scalability and resilience of our business. Now let's take a closer look at our business highlights, starting with our progress in the ADAS market. Currently, lidar is rapidly becoming what we call the invisible airbag, essential, affordable and increasingly standard. Over the past year, we have been a key force behind the broader rollout of lidar across the industry. We achieved 100% lidar adoption on best-selling models from partners, including Li Auto and Xiaomi, while also breaking into the sub RMB 100,000 price segment with Leapmotor. This marks a fundamental shift. Lidar is no longer a premium add-on, but a core safety feature in mainstream vehicles. Our momentum is also reflected in the strength and breadth of our partnerships. we have secured 2,026 design wins with key partners, including Li Auto, Xiaomi, BYD, Leapmotor, Great Wall Motors and Changan, many on an exclusive basis. Additionally, leading automakers such as BAIC and FAW Bestune are joining our SOP roster. Altogether, we have now secured ADAS orders from every one of the top 10 OEMs in China and have secured ADAS design wins with 40 automotive brands across more than 160 vehicle models, reinforcing our position as the partner of choice for world-class automakers. This leadership allowed us to go beyond a key milestone we first envisioned almost a decade ago, enabling 1% of all vehicles worldwide with 3D perception. With over 2 million cumulative ADAS lidars delivered, we are capturing over 40% of ADAS long-range lidar demand. This gives us significant manufacturing leverage and drives a powerful flywheel of innovation. To support accelerating growth at scale, we launched our revamped version of ATX lidar last November at our Tech Day event. Powered by our in-house FMC500 500 SoC, integrating MCU, FPGA and ADC; the revamped ATX features up to 256 channels, delivering enhanced performance, reliability and cost efficiency. With an order backlog exceeding 6 million units, it positions us strongly for the next phase of mass adoption and is expected to begin SOP in April 2026. While Level 2 drives volume, Level 3 is the value multiplier. In China, the regulatory environment has reached a pivotal inflection point. With Level 3 models now approved for public road deployment in cities such as Beijing and Chongqing, the industry is moving decisively from testing into real-world deployment. As responsibility shift from the driver to the OEM, zero failure has become a mandatory requirement. To manage complex driving scenarios, Level 3 systems need broader coverage with more lidars. This is where our FTX blind spot sensors come in, enabling full 360-degree perception. At the same time, Level 3 also demands better lidars, raising the bar on performance and reliability. Our ETX ultra high-performance long-range lidar is purpose-built for these demands. It offers around twice the detection range of ATX and will incorporate our proprietary SPAD, which eliminates the false triggers commonly seen in traditional SPAD architectures. ETX is expected to begin SOP by 2026. With recent multi-lidar design wins from Li Auto, Xiaomi and Changan, with SOP planned for 2026 to 2027, along with several late-stage Level 3 discussions underway with additional leading Chinese OEMs; we are seeing a meaningful increase in lidar content per vehicle as multi-lidar models typically feature 3 to 6 lidars per vehicle. This mirrors the evolution we saw in smartphone cameras, where increasing sensor count drove a steady expansion in total system value. We believe ADAS lidars is now entering a similar value creation cycle. Internationally, our business has also reached a critical inflection point. We are pleased to announce a strategic partnership with Grab, Southeast Asia's leading super app. With Grab as our exclusive regional distributor in Southeast Asia, we are combining Hesai's global lidar leadership with Grab's unparalleled local network to aggressively scale our footprint across the region. More significantly, we have been selected as the primary lidar partner for NVIDIA's DRIVE Hyperion 10 platform, which we view as a true game changer in how we scale globally. Historically, international expansion in automotive was a slow OEM by OEM process, often taking years of validation and negotiations. Integration into the Hyperion ecosystem enables a fundamental shift in our go-to-market approach from individual engagements to a scalable turnkey model. This positions Hesai as the default gold standard lidar choice for OEMs building autonomous driving systems on the NVIDIA platform. Additionally, we have joined NVIDIA Halo AI Systems Inspection Lab to further advance safety in autonomous vehicles and robotics. Building on our momentum, our exclusive multiyear design win with a top European OEM is progressing well, with sample deliveries firmly on track. More importantly, we've achieved a key breakthrough, unifying our high-performance lidar architecture across China and global markets with the ET series as a prime example, enabling a single platform to scale seamlessly worldwide. This unified architecture eliminates redundant development while combining China's operational agility and cost advantages with the most stringent global quality standards. In fact, Hesai is the only Asian lidar manufacturer with German VDA 6.3 process audit certification, a globally recognized benchmark for the industry's most rigorous production and quality standards. The result is a structurally advantaged one platform model, delivering superior cost, speed and global scalability that is extremely difficult to replicate, putting us firmly in the driver's seat of global expansion. Looking ahead, 2026 is going to be a pivotal year for the evolution of intelligence. As NVIDIA's CEO, Jensen Huang, described at this year's CES, we are entering the ChatGPT moment for physical AI, a shift from digital chatbots to kinetic work bots operating in our factories, streets and homes. If 2025 was the year AI learned to reason, 2026 is the year AI gains a body. However, for AI systems to truly reason about the physical world, it requires a grounding in geometric truth. While cameras provide the context or the what, lidar provides the sub-centimeter spatial accuracy, the where. This makes lidar an indispensable bridge between the carbon-based world and silicon-based intelligence. Without the spatial intelligence, physical AI remains blind to the loss of physics. This structural shift plays directly to our strengths and the results are already very encouraging. According to GGII, Yole Group and Frost & Sullivan, we now rank #1 across multiple major robotics lidar submarkets, spanning humanoid and quadruped robots, robotaxis, robovans and robotic lawn mowers. For example, our JT128 lidar showcased this leadership at the 2026 Spring Festival Gala. During China's largest broadcast, which peaked at 400 million viewers, dozens of unitary humanoid robots delivered a complex synchronized [ kung fu ] performance. By providing 360-degree blind spot-free precision perception and ultra-high reliability, JT128 lidar outperformed competing offerings, seamlessly integrating with [ Unitree ] AI algorithms to achieve ultra-low latency and eliminate cumulative motion errors, ensuring absolute stability. Beyond human robotics, we have also established a strong market position in robotic lawn mowers. We have secured orders from clients, including Dreame and MOVA, representing a backlog of over 10 million lidar units with strong follow-on potential as deployments scale. In Robotaxis, we now work with nearly every leading player, including Pony.ai, WeRide, Baidu Apollo Go, DiDi and others across North America, Asia and Europe. In Robovans, we have almost achieved full coverage of key players like Zelos, Neolix and Meituan. Beyond these segments, we are actively expanding lidar applications. Recently, we secured a design win for NIU Technologies next-gen electric 2-wheel model featuring our FTX lidar. With over 10 million electric 2-wheelers sold annually in China, this brings automotive-grade 3D perception to a massive market and unlocks a new intelligent category. Together, these fast-growing segments put us right at the heart of the robotics ecosystem, helping bring physical AI from concept to real-world action. After shipping nearly 240,000 robotics lidar units in 2025, we expect that volume to at least double in 2026. Lastly, I'd like to share what's next for Hesai over the coming decade and why we are genuinely excited about the opportunities ahead. The physical AI revolution is accelerating at an unprecedented pace, but many of its critical building blocks are still in their early stages, such as sensing, motion control, integrated AI-driven decision-making and full system orchestration. These gaps represent enormous white space opportunities, and they are exactly where we believe the next wave of transformative growth will unfold over the coming decade. Hesai is uniquely positioned to lead this next phase. We bring decades of expertise in lidar, automotive and robotics-grade hardware. Today, we are doing far more than building components. We are evolving into the key enabler of physical AI, digitizing the real world and redefining how humans and robotics perceive and act. This positions us at the forefront of the AI-driven fourth industrial revolution and perhaps more importantly, opens the door to a decade of exponential opportunity. Let's now move on to something more immediate. In the next few months, we will launch two groundbreaking products, each targeting an addressable market worth trillions of RMB. One is the eyes of physical AI, enhancing perception and situational awareness beyond what is currently possible. The other is the muscles, delivering precise powerful motion control for robots and autonomous systems operating effectively in the real world. Together, these products are expected to become Hesai's second growth engine. We anticipate initial revenue contributions beginning as early as 2026. Within 5 years, this business has the potential to rival or surpass our lidar segment and within a decade, to scale another tenfold. This is more than a product portfolio expansion. Guided by our mission to empower robotics and elevate lives, we are entering the next chapter of our growth story to become the key enabler of physical AI. If 2025 was a year of market validation and record performance, 2026 will be a year of acceleration and transformation. The opportunity ahead is massive, and we are ready to lead the way. With that, I will now turn the call over to Andrew to discuss our financial performance and outlook. Andrew, please go ahead. Peng Fan: Thank you, David, and hello, everyone. Let me start by walking you through our full year operating and financial performance and share our thoughts and outlook for 2026. To be mindful of the length of our call, I encourage listeners to refer to our earnings release for further details. 2025 was a pivotal year for Hesai, marked by remarkable progress in both our financial performance and operational execution. We delivered record net revenues of over RMB 3 billion or USD 433 million, representing an increase of 46% year-over-year. This performance was underpinned by a substantial ramp in our production volumes, with total shipments exceeding 1.6 million units, more than tripling from last year, including nearly 240,000 units from robotics lidar. This expansion reflects both robust demand across markets and our ability to execute consistently and reliably at scale across a broad range of applications from passenger vehicles, humanoid and quadruped robots to robotaxis, robovans, robotic lawn mowers and many more. Together, these have reinforced our position not only as a global volume leader, but also as the partner of choice for high-value, mission-critical applications. Beyond strong top line growth, we also significantly improved the quality of our financial performance. Gross margin remained healthy at over 40%, while operating expenses, excluding other operating income, came down RMB 88 million or USD 13 million despite substantial revenue growth. This reflects strong operating leverage supported by our disciplined cost management as well as efficiency gains enabled by AI across R&D, manufacturing and operations. These improvements flowed directly to the bottom line, enabling Hesai to achieve industry-first full year GAAP profitability with net income of RMB 436 million or USD 62 million. Full-year GAAP net income, excluding after-tax gains from equity investments of RMB 148 million or USD 21 million was RMB 288 million. or USD 41 million. On a non-GAAP basis, full year net income reached RMB 551 million or USD 79 million, with the difference from GAAP net income mainly driven by stock-based compensation. Excluding after-tax gains from equity investments, full year non-GAAP net income was RMB 403 million or USD 58 million. Kindly note that we have already delivered GAAP net income for 3 consecutive quarters and non-GAAP net income for 5 consecutive quarters, demonstrating the sustainability of our earnings performance. Just as importantly, this profitability was paired with strong cash generation. We delivered positive operating cash flow of RMB 117 million or USD 17 million during the year, marking our third consecutive year of positive operating cash flow, while our net assets grew to around RMB 9 billion or USD 1.3 billion. Today, we operate with the most robust income statement and balance sheet in the global LiDAR industry, reflecting our ability to scale technological leadership while maintaining a solid financial foundation. Building from this position of strength, we are entering 2026 with a dual focus, scaling lidar leadership while proactively expanding into new growth opportunities. We expect our core lidar business to deliver shipments of 3 million to 3.5 million units in 2026. This expanded scale will reinforce our operating leverage, supporting sustainable profitability and steady cash generation. At the same time, we expect to maintain resilient gross margins through ongoing innovation and disciplined operations. Additionally, and perhaps most excitingly, 2026 marks the beginning of commercialization for our new state-of-the-art products, which we believe will become the second growth engine for Hesai in the next decade. As we invest to advance these strategic priorities, we expect to drive a strong and resilient bottom line as we scale in 2026. For the first quarter of 2026, we expect net revenues to be between RMB 650 million and RMB 700 million or USD 93 million to USD 100 million, representing year-over-year growth of approximately 24% to 33%. We also expect revenue momentum to strengthen progressively each quarter throughout the year. To conclude, 2025 was a pivotal year that enhanced the quality and scale of our business. Building on this momentum, we are positioning to become the key enabler of physical AI, digitizing the real world, redefining how humans and robotics perceive and act. As we scale, our goal is clear: to build a globally competitive technology leader grounded in innovation and financial rigor, creating sustainable compounding value to our shareholders and the broader ecosystem. This concludes our prepared remarks today. Operator, we are now ready to take questions. Operator: [Operator Instructions] Your first question comes from Tina Hou with Goldman Sachs. Tina Hou: Congratulations on raising the volume guidance. And also, look forward to the new product launch. So my question is mainly focused on the Robotics business. Wondering if management can give us more details about the different verticals, including robotaxi, robovan as well as humanoid robot. How do you see the businesses pan out in 2026 and then beyond? Peng Fan: Thank you, Tina. It's Andrew here. I will take this question first. As David just quoted Jensen Huang's speech at CES, 2026 marks the ChatGPT moment for physical AI, where our lidar provides the crucial sub-centimeter special accuracy, serving as the indispensable bridge between the carbon-based world and silicon-based intelligence. Because of this structural shift, our Robotics business is truly blooming everywhere. We are incredibly proud to share that according to industry trackers, Hesai is now ranked #1 across major robotics lidar submarkets. Let me take a moment to walk you through the key Robotics verticals that may be of interest to our investors. First, humanoid and quadruped robot. We see humanoid and quadruped robotics as a significant long-term opportunity. At the core of this vision is the need for precise perception and action as any robot interacting dynamically with the physical world relies on accurate sensing. This makes lidar a critical and ultimately standard component for positioning, navigation and obstacle avoidance. We are currently ranked #1 in humanoid and quadruped robot segment according to GGII and have secured orders from leading players, including Unitree, HONOR Robot, Galbot, Magiclab and Vita Dynamics. We expect annual shipment in this segment to reach 5-digit levels in 2026. Our JT128 lidar was deployed across Unitree's robot at the 2026 Spring Festival Gala and was selected for its superior range and reliability, enabling large-scale synchronized movements with high precision and stability. Second, robotaxi. Hesai is the world's largest robotaxi lidar supplier according to Yole report. Our main and blind spotting lidars are widely deployed among Chinese leading players, including Pony.ai, WeRide, Baidu Apollo Go, DiDi and Hello. Globally, we have secured a supply agreement with a wide area of top autonomous driving companies across North America, Asia and Europe. In short, we collaborate with nearly every key player worldwide, an important differentiator from our peers. Whether ADAS or mechanical lidar solutions are selected by robotaxi customers, our revenue model scales with their fleet size, number of lidars per vehicle and ASP. As leading operators accelerate large-scale deployments, we expect exponential fleet growth to drive rapid revenue expansions for Hesai. For robotaxis, we anticipate 5 to 10 lidars per vehicle to ensure a full 360 degrees coverage. Thirdly, robovan. The robovan sector is undergoing a major transformation. No longer limited to closed campuses, robovans are increasingly operating on complex urban rails. Supported by favorable government policies and proven business models, the market is projected to scale from 5 digits to 6 digits of robovans in 2026. Each robovan typically features 2 to 6 lidars. Hesai is ideally positioned to capture this growth. We are the core LiDAR supplier for leading robovan players globally, including Zelos, Neolix, and Meituan and DoorDash, serving as the sole supplier for many. GII recently ranked Hesai #1 in lidar design wins for this sector. Several players that previously relied on competitors' products are switching to Hesai this year, underscoring our role as the go-to hardware partner in the accelerating commercial robovan market. Fourthly, robotic lawn mowers. The robotic lawn mower market is a major growth opportunity for our Robotics business. Global annual lawn mowers sales reached about 20 million units, yet lidar-equipped robotic lawn mowers account for just 1% to 2%, highlighting a huge untapped market as consumers adapt smarter, hands-free yard care. Hesai is moving aggressively to capture this space. Since launching the JT Series 3D lidar at CES 2025, cumulative deliverables have already exceeded 200,000 units by 2025, supported by strong global partnerships with leading brands, including Dreame, MOVA and Nexlawn. We recently secured a milestone agreement to exclusively supply 10 million JT lidars to Dreame and MOVA, ranked #1 globally by Frost & Sullivan for lidar robotic mowers in 2025. This record-setting order signals a fundamental industry shift, establishing lidar as the standard for high-end smart yard products and ushering in a new era of outdoor robotics perception. As a quick summary, across these diverse applications, our Robotics business sits at the heart of the ecosystem, consistently delivering relatively higher ASPs and strong margins. After shipping 200,000 Robotics lidar units in 2025, accelerating momentum across these segments gives us full confidence that volumes will at least double in 2026. In the long term, new types of robots will begin to adopt lidar. For example, new technologies, 2-wheel scooters recently integrated our FTX lidar for autonomous operation. The robotics market could have a TAM several times larger than ADAS. After all, you can drive only one car, but in the future, 10 robots could be working alongside you. Tina, that's my answer to the question just raised. Operator: Your next question comes from Tim Hsiao with Morgan Stanley. Tim Hsiao: This is Tim from Morgan Stanley. Congratulations on the strong results and sustained industry leadership. I just want to have a quick follow-up questions also about robotics market because the market is apparently very interesting, exciting and highly focused by investors. But we noticed that the founders of Hesai have also invested in a company called Sharpa, which has been gaining a lot of attention recently. So just want to understand how should we view the relationship between Hesai and Sharpa? And is there any opportunity for business cooperation with Hesai within that year? And how does management view the future technology and supply chain synergies between the two entities? That's my question. Yifan Li: Thank you, Tim. Thank you for the question. And it's actually a great topic, and I also wanted to offer from my side. First, I want to clearly define the structural relationship. Hesai and Sharpa are two fully independent operating entities. There is no relationship of equity subordination or operational control between them. What were the co-founders of Sharpa were responsible solely for strategic guidance at Sharpa as a core shareholder role, and we do not hold executive position for actual operational growth. Our primary and full-time identities remain the CEO, CTO and the Chief Scientist of Hesai, and our focus and energy are dedicated to Hesai. Sharpa possesses its own mature and independent team. While looking ahead, we remain open to future collaborations where it makes strategic and commercial sense as it can create an actually compelling win-win dynamic. Both companies can apply their technologies in real-world scenarios while benefiting from shared insights and industry-leading expertise. For example, as an AI robotics company, Sharpa may utilize Hesai's products while Hesai as a hardware innovator may explore deploying humanoid robots in its automated production line over time. At the same time, Sharpa's progress in AI could broaden the perspective of founders and the Hesai team and potentially inform our long-term innovation road map. That said, I want to emphasize that the coordination, if any, in the future; will be conducted strictly on fair and market-based terms with the objective of maximizing long-term value for Hesai's shareholders. Based on our preliminary estimate of the future humanoid robotics market and the growth of Hesai, such operation will only contribute a small portion of our business. As Hesai continues to evolve into a key enabler of physical AI, digitizing the real world, redefining how human and the robotics perceive and act, we remain focused on executing our core strategy. This includes strengthening our leadership in lidar, advancing our next-generation eyes and muscles product portfolio and driving sustainable long-term growth by building out the Hesai ecosystem. We believe the addressable market we're targeting over time expand well beyond the traditional lidar segment, and we're truly excited about the journey ahead. This is hopefully helpful information to help you understand what Hesai and Sharpa each are trying to do and the possible synergies and the collaborations between the two entities. Thank you, Tim, for the question. Operator: Your next question comes from Jeff Chung from Citi. Ming Chung: This is Jeff from Citi. First of all, congratulations, fantastic results. So my first question is that we have the first quarter revenue guidance. So could you give us more color on the first quarter volume guidance? And separately, we recognize Hesai did a great job with the sequential OP margin improvement in the past 4 quarters. Could you give us more color on the first quarter and the full-year GP margin and OP margin guidance? Peng Fan: Thank you, Jeff. I will take this question, and I'll try to address our 1Q and the full year guidance for 2026 to the extent I can. For the first quarter of 2026, we expect the total revenues to be between RMB 650 million to RMB 700 million, representing a solid year-over-year growth of approximately 24% to 33%. On the volume side, we anticipate total shipments to be in the range of 400,000 to 450,000 lidar units, including around 100,000 units from Robotics. We have delivered GAAP net income for 3 consecutive quarters and non-GAAP net income for 5 consecutive quarters and expect to maintain this momentum. It is important to note that due to typical automotive industry seasonality and the timing of the holidays, we do expect a sequential decrease in deliveries compared to the seasonal high we saw in the fourth quarter last year. This is entirely consistent with our historical patterns. However, the fundamental demand for our lidars remains exceptionally strong in 2026, and we expect both revenues and shipment volumes to increase sequentially over the course of 2026. We are highly confident in our accelerating momentum and our ability to maintain a healthy financial profile as we execute our 2026 road map. Looking ahead to 2026, we see it as a true inflection point. On one hand, we anticipate strong demand for lidar in both passenger vehicles and robotics, which is expected to drive meaningful increase of our full year 2026 revenues. Correspondingly, we are raising our shipment guidance to a record 3 million to [ 3 ] million units for this year, with both ADAS and Robotics lidars expected to roughly double year-over-year. While volume is scaling rapidly, we do anticipate a potential decrease in blended ASP. That's mainly due to, first, modest volume-based pricing and standard annual decline for our larger order strategic OEM customers. That's mainly for the ADAS products. And secondly, a shift in product mix towards certain lidar products with a relatively lower unit prices, such as the AT series, FT series and JT series, typically around 1 to couple of hundred U.S. dollars each. Though these products will account for a larger share of deliveries and revenue compared with our traditional high ASP Robotics products such as Pandar and XT Series. That said, we are highly optimistic about our top line and margin resilience because of several strong positive catalysts accelerating in 2026 and 2027. First, lidar is rapidly transitioning from an optional add-on to a standard configuration, successfully penetrating the mass market for vehicles priced between RMB 100,000, which will continuously drive up overall the penetration rate. Second, Level 3 vehicle deployment in China will drive multi-lidar setups, pushing lidar content per vehicle to as high as $500 to $1,000 range. We have already secured multi-lidar design wins with our core customers, including Li Auto, Xiaomi and Changan, featuring 3 to 6 lidars per vehicle, with SOP planned for 2026 to 2027. Third, our overseas ADAS business is expected to start contributing in as early as 2026, marking the beginning of global ADAS lidar mass adoption with international ADAS programs typically carrying higher ASPs. We expect our partnership with NVIDIA to roll this game forward. Fourth, our Robotics business continues to gain momentum across diverse applications and customers, and it typically carries a relatively higher ASP and margin compared to ADAS. Finally, our newly second growth engine, the eyes and the muscles of physical AI, will serve as a powerful new driver for our long-term growth. Stay tuned for two new products that we plan to launch in the coming months, each targeting at RMB 1 trillion TAM. On the profitability front, through continued cost optimization across ASIC design, supply chain and manufacturing and with the launch of our FMC500 SoC to improve cost structure in ADAS products, we expect our group blended gross margin to remain resilient in 2026, despite a strong increase in ADAS lidar shipments. As a result, we are confident that the profits from our core lidar business will continue its solid growth trajectory. Additionally, and perhaps most excitedly, 2026 marks the beginning of commercialization for our new state-of-the-art products, which we believe will become the second growth engine for Hesai in the next decade. In short, we are entering 2026 with accelerating shipments, robust revenue growth, a highly disciplined margin profile, solid bottom line increase and exciting new growth engines. Jeff, that's my answer to your question. Thanks for that. Operator: Your next question comes from Aaron Wang with Jefferies. Weijie Wang: This is Aaron from Jefferies. I just have a quick question on our guidance. Last year, we had a profit guidance for the full year. I was wondering if the company will also provide a full year net income guidance for 2026. Peng Fan: Thank you, Aaron. Given the differences in compliance requirements and listing rules between the U.S. and Hong Kong market, as you know, we just listed in Hong Kong, and to align with the best disclosure practices for dual listed companies; we have decided not to provide specific full year net income guidance at this time. However, I want to emphasize that this adjustment in disclosure does not reflect any lack of confidence in our business. On the contrary, underpinned by our solidified customer base, undisputed industry dominance and a disciplined cost structure, we are fully confident in maintaining our growth trajectory of revenues, shipments and profits in 2026. At the same time, we highly encourage investors to look forward to our new business initiatives. We are investing strategically in these areas, and they are expected to become Hesai's second growth engine. Aaron, that's my answer to your question. Operator: Your next question comes from Nora Min with UBS. Nora Min: This is Nora from UBS. Thank you for trusting me with the most exciting question. So what is the master plan behind this non-auto, non-lidar new product? Would you share with us a bit of timeline, a bit of progress, a bit of more detail? Peng Fan: Thank you, Nora. Our guiding mission has always been to empower robotics and elevate lives. We have never defined ourselves solely as a lidar company. So as Jensen Huang and David repetitively mentioned, we believe 2026 will be the ChatGPT moment for physical AI. We are entering an era where AI will truly understand the rules of the physical world and learn to interact with it, which will trigger a big bang in robotic applications. The physical AI revolution is accelerating at an unprecedented pace, but many of its critical building blocks are still in their early stages. These gaps represent enormous white space opportunities. Hesai is repositioning its role in the new era as a key enabler of physical AI, digitizing the real world, redefining how humans and robotics perceive and act. In the next few months, we will launch two groundbreaking products, each targeting a mass trillion RMB market. First, the eyes, enhancing perception and situational awareness beyond what is currently possible; and second, the muscles, delivering precise, powerful motion control for robots and autonomous systems. Regarding the financial outlook of these two new products, we anticipate initial revenue contributions from these new products beginning as early as 2026. Within 5 years, we expect this business to rival or even surpass the scale of our current lidar segment. Within a decade, it has the potential to scale another tenfold lidar -- larger. As we expand into the broader physical AI ecosystem with our upcoming eyes and muscles products, our core advantages come from strategic foresight and a decade of lidar mass production experiences. We tackle challenges head on, refining our products to lead in performance, quality and cost simultaneously. Building the muscles of physical AI naturally extends our expertise in materials, simulation, design and precision manufacturing, backed by our proprietary ethics, in-house production and rigorous quality management to deliver reliability, scalability and extreme performance at scale. For the eyes, our strength comes from world-class software and algorithm capabilities seamlessly integrated with our hardwares. Years of R&D in 3D risk construction and rendering recently earned us an award at the September 2025 SIGGRAPH Challenge, a premium global event showcasing the pinnacle of computer graphics. We are truly excited to bring these best-in-class algorithms to life in our soon-to-launch hardware tools. Together, all these capabilities let us push physical boundaries and raise performance ceilings, supporting our new positioning as Hesai evolves into a key enabler of physical AI, digitizing the real world, redefining how humans and robots perceive and act. Nora, that's my response to your question. Operator: Your next question comes from Jessie Lo with Bank of America Securities. Yu Jie Lo: This is Jesse from Bank of America Securities. Congrats on the great results. So my question is surrounding the NVIDIA cooperation. So following the announcement of us selected as the partner for NVIDIA DRIVE AGX Hyperion 10, what are the next steps? Or what could we expect to see in the coming years? And what differentiates us from the peers in this collaboration? Yifan Li: Yes. This is David. Maybe I will offer some insight and our interpretation of such a collaboration. So first of all, I wanted to just help people understand the NVIDIA -- the platform is beyond only the computational hardware. It's the full stack solution, meaning it's the hardware, the software and the data. And then we are the selected partner for lidar. What that means is that, obviously, in the end, NVIDIA has customers and the customers will ultimately decide the vendor. But as we are already selected by NVIDIA. It just makes this process a lot easier in the following way. And the first is that the system, the sensor setup, the computation is already a complete system, and that's proven. Obviously, let's say, somehow you wanted to pick a different vendor who's not on the list, it just make it harder for you to verify that. And then that's actually the smaller part of the problem. The much bigger problem is the rest, including training the model and also data collection and the verification of such a system, right? You can imagine for NVIDIA to provide such a full stack solution to all the robotaxis and the Western OEMs that they're working with you need a large amount of data they already have for the project we already have with NVIDIA, that's with Hesai lidar. So now let's say, for whatever reason, obviously, I will not understand or support, but they have to use a different lidar. And then you immediately have to face the challenge that what do you have to do with the model we train and the data we collected for the past actually years of collaboration. So it's not impossible, it just make it very inefficient if you had to do that. So -- and that's one of the reasons that we are super excited and definitely honored to be in this program. And we're also motivated to work alongside with NVIDIA when they are working with customers globally, promoting such a unified solution. And to me, this actually is the smartest way to push the autonomy because in the end, it's less important if you have different components. It's important that if you have one solution that works and then try to utilize and not reinvent, we will utilize the same solution with all those customers. And I do believe NVIDIA also shared the same vision, and that's why we are now working very closely with them in supporting them with our latest sensors and in qualifying them in different parts of the world and try to develop and accelerate the programs they already have and the new programs that they will be signing. Operator: Your next question comes from [indiscernible] with CICC. Unknown Analyst: This is Dani from CICC. Congrats on your strong results last year. I have two questions for you. The first one is about the price. What's your outlook on the trend of your ASP decline? And my second question is, could you please share more color on your methods for further cost reduction? Peng Fan: Thank you, Dani. We wouldn't suggest our investors read too much into total and blended ASPs. It's really just a simple math, and the decline is mainly driven by product mix. ADAS lidars, which are generally lower priced than our Robotics lidars, are taking a bigger share. As Level 3 ramps up, our blind spotting FTX lidars, which are lower priced than long-range ATX lidars, will push blended ASP down further. So this isn't really about price, it's mostly about mix. That said, ADAS lidars follow the typical annual automotive price declines. For example, ATX is expected to carry a price tag around $150 in 2026, which is already near an optimized cost structure. So we expect the future declines to narrow. Over time, this will be offset by structural growth, more lidars per vehicle and high-performance, higher-priced L3 products like ETX as well as expansion beyond China. Looking ahead, we see clear and durable pathways to further reduce lidar costs driven by scale, technology and manufacturing excellence. First, scale is a powerful lever. After delivering 1.6 million units in 2025, tripling year-over-year, we are guiding 3 million to 3.5 million units in 2026. This step-change in volume will meaningfully dilute fixed costs and strengthen our supply chain leverage. Secondly, our proprietary technology, chip technology is structurally lowering our BOM. With 100% in-house development of core modules and our FMC500 SoC integrating MCU, FPGA and ADC functions, we are replacing costly discrete components with a highly efficient single-chip solution, reducing cost while improving performances. Meanwhile, our in-house fab integration is expected to ramp by 2026, further improving our cost structure. Finally, our highly automated in-house manufacturing drives compounding efficiencies. By standardizing core architectures and continuously improving yields, we expect to maintain a healthy margin profile in the future. Thank you, Dani. Operator: Your next question comes from Frank Tao with CMBI. Ye Tao: I'll add my congrats on the upbeat shipment volume guidance as well. Could management share with us your outlook for the operating expenses in the year of 2026? Peng Fan: Thank you for raising this question. We are very pleased with our progress in expense management, as we guided at the beginning of last year. For year 2025, our operating expenses actually came down by RMB 88 million despite our substantial revenue growth. This clearly reflects the strong operating leverage in our business, supported by our highly disciplined cost management. A key driver behind this is that AI is at the heart of how we work. We firmly believe that any company not fully embracing AI in 2026 will inevitably be left behind by the market. Because of this, we will continuously and aggressively embrace AI to boost our operational efficiency, transform our workflows and strengthen profitability. So far, this proactive approach has already delivered tens of millions of renminbi in measurable cost savings and significantly improved our productivity. Looking ahead to 2026, we anticipate a modest mid-teen increase in overall OpEx, primarily due to RMB 200 million invested in new eyes and muscles products in R&D. Otherwise, excluding new business spend, OpEx is expected to be well managed, flat or even down in single digits in 2026, demonstrating our discipline and AI adoption. Thank you. Operator: That concludes our question-and-answer session. I'll now hand back to Yuanting Shi for closing remarks. Yuanting Shi: Thank you once again for joining us today. If you have any further questions, please feel free to contact our IR team. This concludes today's call, and we look forward to speaking to you again next quarter. Thank you, and goodbye.
Operator: Hello, ladies and gentlemen. Thank you for standing by for LightInTheBox's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded. I will now turn the call over to your host, Ms. Serena Huang. Please go ahead, Serena. Serena Huang: Thank you, operator. Hello, everyone, and welcome to LightInTheBox Fourth Quarter and Full Year 2025 Earnings Conference Call. The company's earnings results were released via Newswire services earlier today and are available on the company's IR website at ir.ador.com. On the call from LightInTheBox today are the CEO, Mr. Jian He; and the CFO, Mr. Suhai Ji. Mr. He will provide an overview of the company's strategies and highlights, followed by Mr. Ji, who will go over its financial results. Following our prepared remarks, we will open the call to questions. Before we proceed, please note that today's discussion may contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from the company's current expectations. To understand the factors that could cause results to materially differ from those in forward-looking statements, please refer to the company's Form 20-F filed with the SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Please also note that LightInTheBox earnings press release and this conference call include the discussions of unaudited GAAP financial measures as well as unaudited non-GAAP financial measures. Please refer to the company's earnings press release, which contains a reconciliation of the unaudited non-GAAP measures to the unaudited GAAP measures. Now I'd like to turn the call over to LightInTheBox CEO, Mr. He. Please go ahead. Jian He: Good morning, and good evening, everyone. Thank you for joining LightInTheBox's Fourth Quarter and Full Year 2025 Earnings Call. We are pleased to report excellent results for the fourth quarter and full year 2025, marking a key milestone in our transformation into a global consumer lifestyle company. In 2025, we delivered consecutive profitable quarters with record quarterly profit in Q4 and a remarkable full year turnaround. Despite a challenging e-commerce environment, we regained positive year-over-year revenue growth in fourth quarter, up 9%, while achieving a record net income of $3.3 million for the quarter and $8.3 million for the year. Our strategy of evolving the LightInTheBox online platform into a consumer lifestyle company is clearly working. By capturing consumer preferences and sentiment, we offer differentiated products that drive consumer engagement through deep emotional resonance. The LightInTheBox online platform now focuses on festivals, holidays, and special occasions, offering highly customized, non-standard products that address consumers' sentimental and lifestyle requirements rather than purely functional needs, thus allowing us to command premium pricing. To further complement and strengthen our positioning as a consumer lifestyle company, we also adopted a brand matrix strategy by launching three proprietary apparel brands successively since 2024 in women's fashion, golf apparel and light party dress. These brands build around the social attributes of women aged 30 and above, delivering emotional value and a more relaxed, enjoyable lifestyle experience across scenarios such as vacations, social golf, and parties. Together, the LightInTheBox online business and the new brands create powerful synergies, tugging on heartstrings and forging emotional connections with our core customers. Such two-pronged unified approach towards consumer lifestyle positioning has yielded great results. In 2025, our branded apparel business grew over 143% and already accounted for 17% of total revenue, up from just 6% in 2024 helped by higher pricing power and the growth of our branded apparel business. We achieved a full-year gross margin of 65% in 2025, the highest level since becoming a public company in 2013, along with positive operating cash flow of $6.2 million. In addition, we have fully embraced AI to capture the real-time marketing trends and drive operational efficiency across all aspects of our business, such as product design, photographic style, marketing channels and customer service. End to end AI automation has contributed to a workforce optimization of 58% since 2023, thus further improving our profit margin and financial results. 2025 was indeed a milestone in our history as a public company, as we navigated through challenging and intense competitive e-commerce environment, executed a business turnaround and return to profitability. Looking ahead to 2026, we remain committed in our continued transformation to becoming a global consumer lifestyle company and are confident in our ability to deliver overall revenue and profit growth. With that, I will now hand the call over to Suhai to go through our financial results. Suhai Ji: Thank you, Mr. He. Good morning and good evening, everyone. Before we go over our financials, please note that unless otherwise stated, all figures are presented in U.S. dollars. As our CEO mentioned in his remarks, indeed, we delivered excellent financial results last year. In the fourth quarter, our total revenues were $63 million, up 9% year-over-year. Compared to the year-over-year decrease in previous quarters, this marked our renewed top line growth as we have successfully engineered a business turnaround, not only on profit, but also on revenue. The fourth quarter gross profit was $39 million, up 16% year-over-year. Gross margin improved to 63% this quarter from 59% year-over-year. This is largely driven by our higher-margin proprietary product lines and bespoke offerings like French on-demand apparel. Total operating expenses in the fourth quarter increased 8% year-over-year to $36 million, of which fulfillment expenses increased by 7% to $4 million, reflecting the growth in top line revenues. Selling and Marketing expenses increased by 15% to $26 million, while General and Administrative expenses decreased by 15% to $5 million. Total operating expenses as a percentage of revenue remained roughly unchanged at 57%. Largely due to the top line revenue increase and gross margin expansion, our net income in the fourth quarter reached $3.3 million compared to just $0.5 million in the same quarter last year, marking a record quarterly profit since 2022. Moving on to full year 2025 results. Total revenues decreased 12% year-over-year to $224 million, mainly due to our pivot to focus on profitability with declines moderating significantly from the first quarter of 2025 to the third quarter and the fourth quarter regaining positive growth. The full year gross profit was $146 million, down 5% year-over-year. However, gross margin increased to 65% from 60% year-over-year, which was at the highest level since we became a public company in 2013. This is mainly driven by the successful introduction of higher-margin proprietary product lines. Total operating expenses in 2025 decreased by 11% year-over-year to $138 million, of which fulfillment expenses decreased by 12% to $17 million. Selling and Marketing expenses decreased by 8% to $103 million and General and Administrative expenses decreased by 24% to $20 million. Total operating expenses as a percentage of revenue remained roughly unchanged at 61%. Largely due to gross margin expansion and enhanced operation efficiency, we achieved a net income of $8.3 million in 2025 compared with a loss of $2.5 million in 2024, showcasing a remarkable profitability turnaround. In addition, we generated a positive operating cash flow of $6.2 million in 2025. The details of cash flow statements can be found in our 20-F, which will be filed in the next week or so. Overall, we had a remarkable turnaround year in 2025, and the financial results last year provide us with tremendous momentum and confidence going into 2026, which we believe will be another successful record-setting year. So this concludes my remarks. We are now open for questions. Operator, please continue. Operator: [Operator Instructions] Your first question comes from Joe Ramelli with Ramelli Asset Management. Joe Ramelli: A couple of questions. One is, do you expect this next year to be a growth year? And then I'll ask a second question. Suhai Ji: Joe, thanks for the question. Yes, next year, we remain quite confident that we will deliver another year of growth, not only on profit, but also on revenue. We have not officially given the guidance yet, but we are deliberate that until probably the first quarter. Joe Ramelli: Great. And then my second question is, can you describe your shareholder base? What percentage do insiders hold? And are there any other large investors? Suhai Ji: Yes. I think together, insiders and the directors hold roughly 70%. So only 30% roughly is in the public float. And the total share base is roughly 18 million ADS. Each ADS is about 12 common shares. Joe Ramelli: Great turnaround story. Pretty amazing job. Operator: [Operator Instructions] There are no further questions at this time. I'll now hand back for closing remarks. Serena Huang: Okay. Thank you once again for joining us today. If you have further questions, please feel free to contact LightInTheBox Investor Relations through the contact information provided on our website. Have a great day. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Good afternoon, ladies and gentlemen. Welcome to the Glass House Brands Fourth Quarter and Full Year 2025 Earnings Call. Matters discussed during today's conference call may constitute forward-looking statements that are subject to the risks and uncertainties relating to Glass House Brands future financial or business performance. Actual results could differ materially from those anticipated in those forward-looking statements. The risk factors that may affect results are detailed in Glass House Brands' periodic filings and registration statements. These documents may be accessed via the SEDAR+ database. I'd also like to remind everyone that this call is being recorded today, Wednesday, March 24, 2026. On today's call, we have Kyle Kazan, Co-Founder, Chairman and Chief Executive Officer of Glass House Brands; and Chief Financial Officer, Mark Vendetti. Following prepared remarks, management will open up the call to analyst questions. Also joining for questions is Graham Farrar, Co-Founder and President. And with that, I'll turn the call over to Kyle Kazan. Kyle Kazan: Thank you, operator, and a hearty hello to all of you for joining today's call. For greater detail on results, please refer to our fourth quarter and full year earnings press release and full year financial filings. I am pleased to be speaking with you today. 2025 was a year of great progress and achievement for the U.S. cannabis industry and our company. It was also a year of challenges due to the events of this summer. Our entire team continues to rise to meet those challenges. And because of that, I am confident that we have built a stronger foundation for future growth. I am excited for the days to come. Our first half 2025 results and particularly those of the second quarter represented a new high watermark of execution across numerous key metrics, including biomass production scale, cost of production and operating cash flow yield. This strength provides a blueprint of achievable results for this company, and those results are just the beginning. 2025 was also the first full year of our strategic pricing model. This model is highlighted by our everyday out-the-door $9.99 price, including tax for a Farm Fresh 1/8 oz of our Allswell branded flower. The pricing model, combined with our team's strong execution, allowed our retail stores to consistently outperform the California market with same-store 10% year-over-year sales growth versus a 5% state decline in sales according to headset. Meanwhile, Allswell became the top-selling flower brand in California by volume. California remains the world's most fiercely competitive cannabis market. So our strength in flower and particularly our Allswell brand is something that we take great pride in. No one anywhere matches Glass House flower on price and low-cost quality. In 2025, we took steps to solidify our balance sheet and improve our financial flexibility and future cash generation. In March, we secured a new $50 million 5-year senior secured credit facility to replace our existing higher interest debt, while in July, we refinanced our high interest rate Series B and C preferred equity with the creation of a fully subscribed Series E offering. The Series E preferred equity carries a 12% interest rate paid annually, which replaced the 22.5% cumulative rate for the Bs and the Cs inclusive of the payment in kind function. In total, these financings meaningfully derisked our balance sheet without diluting investors and ensured that future capital raises would only be for strategic additions to the business. We also commenced a collaboration with the University of California at Berkeley to explore hemp-related research with aims that include the development of novel medicinal products. To our knowledge, this is the first and only collaboration of its kind in the industry, and we will leverage the experience gained as we proceed with our commercial hemp strategy and participate in any future CBD reimbursement programs. Unfortunately, our second half and full year results were impacted by unexpected events and the ongoing response to those events. As most on this call are aware, 2 of our farms were raided by federal agents on July 10 as part of a broader immigration crackdown for the California agriculture industry. In response to those events, we made the hard decision to completely revamp hiring and staffing practices for both employees and third-party labor contractors moving forward. We did this voluntarily and the resulting practices go well above and beyond what is required by both federal and state law. As outlined in prior calls, changes made and the resulting temporary staffing shortages prompted our scaling back of new planting and production in the second half of the year. Inclusive within the production, we had to delay some processing, which resulted in deteriorated product being available for sale. In the fourth quarter, we sold off the last of this older inventory. Fourth quarter and full year results reflect the impact of this temporary scale back. Fourth quarter revenue was $39 million, while in line with guidance and our expectation, this was down meaningfully from $53 million last year during the same period. Full year 2025 revenue was $182 million, down from $201 million in 2024. For both the fourth quarter and full year, the wholesale segment was where we suffered the significant drag to results as we produced reduced volumes and quality of biomass per sale. For the fourth quarter, we produced 159,000 pounds of biomass ahead of expectations, yet down from the 165,000 last year. For the full year, we produced 666,000 pounds, roughly 20% below where we were tracking at the start of July. Average fourth quarter selling price was $146 per pound, down from $220 in the fourth quarter last year, while full year average selling price of $177 per pound compared with $245 in 2024. I refer to our glasshouse selling price in these comments. It's important to note that while California pricing remains challenged, year-over-year declines in state pricing moderated in the second half of the year. So the weaker sales prices I referenced reflect our deteriorated product being available for sale and an unfavorable shift in our genetic strain mix. When we turned the farms back on for planning, our strain selection criteria was focused on those that we could quickly scale and not our usual eye on yield. For 2026, our post-harvest processing process has returned to normal levels. Meanwhile, these temporary conditions also caused an elevated cost of production. Fourth quarter cost of production was $129 per pound, up from $110 last year, while full year 2025 cost of production was $111, above our annual production cost target of $95 per pound. Lower selling prices and higher cost of production in wholesale dragged on our overall margins, resulting in a total reported gross margin for the fourth quarter of roughly 35% and an adjusted EBITDA loss of $3.3 million. Both were well below seasonal and recent levels. For the full year, gross margin was 42%, while adjusted EBITDA was approximately $17 million. For comparative purposes, at the end of the second quarter on a full year basis, our full year results were tracking well above our 2025 guidance at the time of $225 million in revenue with an adjusted EBITDA in the mid-$40 million range level. Looking ahead, Mark will provide explicit guidance, but I am pleased to say that these short-term hurdles are today largely behind us. We anticipate very strong growth in 2026 with progressive revenue scaling during the course of the year. Growth comes before factoring in the potential benefit of any sales outside of California for our cannabis plants, something that we continue to believe is achievable in the near term or any contributions from hemp sales. We have hemp plants growing and anticipate an initial harvest in the second quarter. We ended 2025 fully planted in each of our legacy greenhouses and with the first 1/3 of greenhouse 2 planted, giving our cultivation team the most acreage planted in Glass House's history. That acreage is now yielding at nearly full capacity, and you will see the full benefit of that scale reflected initially in products sold within the second quarter of 2026. The cultivation team led by Graham Farrar, has done a remarkable job of getting the greenhouses back on track to full capacity in a short period of time. In the 3 months following the raid, the number of cannabis plants in the greenhouses dropped 60%. Since bottoming out in early October, we have now roughly 20% more plants compared to early July, thanks to Greenhouse 2 and expect to add another 40% when Greenhouse 2 is fully planted by the end of the second quarter. In addition, we accelerated expansion plans with the build-out of the remaining 2/3 of Greenhouse 2 and the CapEx light retrofit and build-out of Greenhouse 4, our first commercial hemp endeavor. With current planting, we will harvest at roughly 1/3 capacity for Greenhouse 4 and will expand in the second half of this year. The second 2/3 of Greenhouse 2 will contribute to second half results while Greenhouse 4 is now planted. We expect the first crops to be available for sale this summer with plans to supply international hemp and smokeable CBD markets in the second half of this year. We are in active discussions with customers. And while we are not ready to provide explicit guidance on hemp contributions this year, we are confident that product will be sold at favorable prices relative to those currently achievable with California cannabis. Long term, we plan for greenhouse 4 production to be an eventual supplier to the reimbursable CBD market while also planning for the development of our final greenhouse, which is Greenhouse 3. Meanwhile, even with the staffing changes and more stringent controls we've implemented, our long-term cost structure remains intact. There has been a learning curve for both new employees and third-party labor contractors, but staff gain valuable experience every day. And based on the progress seen, we do not foresee a meaningful change in the cost of labor moving forward. I remind you of our $95 long-term annual target level for cost of production. We expect to be below that level in total for the final 3 quarters of 2026. Our low-cost production capabilities stem from our consolidated scale of capacity, the skill of our seasoned leadership team and favorable weather conditions in California. We will never have to pay the high and growing energy bills of indoor peers nor do we rely on third-party water supply. It is these benefits that have sustained us despite challenging California cannabis market conditions and will further separate the company whenever prohibitions are removed to open new markets. In addition to our operating results, there were many positive developments in our industry during 2025. On December 18, President Trump signed an executive order to reschedule cannabis to a Schedule III classification and authorize the development of a pilot program for reimbursable TBD products for Medicare participants. This order represents the most significant progress on drug policy reform in the past 50 years and reflects a longer overdue common sense acknowledgment of the beneficial medical and therapeutic properties of the cannabis plant. We are extremely pleased with these advancements as rescheduling and the reimbursable CBD program will permit greater normalization for the industry. Importantly, it should allow us to sell California grown production outside the state for the first time, greatly expanding our addressable market and allowing us to achieve more favorable pricing dynamics. As we continue to await Attorney General Pam bondi's final execution of this change, we are actively preparing for the opportunities ahead. We have meaningfully expanded our total cultivation capacity. We understand the reclassification of cannabis to Schedule III under the current administration can provide opportunities to export medical cannabis into international markets. As such, we have signed an agreement with a good Agriculture and Collection Practices or otherwise known as GACP consultant and are progressing towards a compliance audit. We anticipate that GACP will be a requirement for producers supplying the growing EU medical market and see it as a place where we can be strategically well positioned. We are also in active discussion with distribution partners in a number of countries for cannabis and hemp. Also in anticipation of the final ruling on rescheduling, we have established a special committee within our Board of Directors. The committee consists of Graham, Directors, Jay Nichols and Jocelyn Rosenwald, along with the newest addition to our Board, Alison Payne, the CMO of Heineken USA, along with me. The committee is tasked with oversight of new product and business opportunities beyond our legacy California cannabis business and immediate expansion areas, including the development of ongoing and future partnerships with companies in more traditional industries, including tobacco, alcohol and cosmetics. We believe widespread adoption of cannabinoid products within traditional consumer product industries is coming, and we are in active discussion to ensure that whatever form that takes its Glass House produced cannabinoids inside ensuring greater distribution and speed to market. With that, I'll turn the call over to Mark Vendetti, our Chief Financial Officer, to discuss our financial results for the quarter in detail. Mark? Mark Vendetti: Thank you, Kyle, and welcome, everyone. As Kyle highlighted, fourth quarter revenue was $38.9 million compared to $53 million in the same period last year. The decline stems from wholesale segment challenges that came as a result of stepback decisions made in the third quarter. We finished near the top of our revenue guidance for the quarter of between $37 million and $39 million, and would have exceeded it, but unexpectedly had to switch our CPG distributor in December, which decreased sales for several weeks and hurt revenue by between $0.5 million and $1 million. In addition, we had a loyalty program points adjustment in the quarter, which decreased retail sales by approximately $0.5 million. These decreased gross margin by a similar amount. For full year 2025, revenue was $182 million compared to $200.9 million recorded in 2024 as we produced at a lower overall scale. We produced 159,000 pounds of biomass in the fourth quarter, ahead of our 145,000 pounds of guidance, but down from 165,000 in the prior year period. For the full year, production was 666,000 pounds, up roughly 10% from full year 2024 levels, but down meaningfully from the 800,000 pound level we were tracking to going into the summer. Because of the reduced production volume and related inefficiencies, production cost per pound was $129 in the fourth quarter, roughly flat sequentially, but up from $110 last year. For the full year, cost of production was $111 per pound. We sold 155,000 pounds of wholesale biomass in the quarter, down from 165,000 pounds in the same period last year. For the full year, we sold roughly 643,000 pounds, up from 568,000 pounds in 2024. The average fourth quarter selling price for biomass sold was $146 per pound versus $220 last year, while the full year selling price was $177 per pound. Year-over-year price declines reflect continued California pricing challenges. However, more significantly, the sequential decline can be attributed to an unfavorable mix shift from flower to trim within the production mix and the product quality issues Kyle mentioned. For the full year, flower mix was in the high 20% range, while under normal conditions, it would have been expected to be in the high 30%. As a reminder, we have been selling higher levels of trim this year on account of improved cultivation practices which allow us to harvest and sell trim material that would have previously been disposed of. This has the effect of lowering our ASPs as the additional material is predominantly trim, which garners lower average selling prices. The greater trim volumes though were exacerbated in the second half of last year due to deterioration in product that was available for sale because of delays in processing as we faced temporary staffing shortages. As we move forward and bring on Greenhouse 2, we expect a new normal flower percent of sales in the mid-30% range. Fourth quarter consolidated gross profit was $13.2 million and gross margin was 34%. The gross margin compared to 43% in the fourth quarter 2024 with declines stemming from the lower average selling prices and higher production costs in the wholesale business. Gross margin within our retail segment improved year-over-year as a reflection of continued strong execution with our retail stores and despite a loyalty true-up. For the full year, 2025 gross margin was 42%, down from 48% in 2024, which equals the level we were tracking to heading into the summer. Fourth quarter adjusted EBITDA was negative $3.3 million, in line with the prior quarter, but down from $9 million in the fourth quarter last year. Adjusted EBITDA reflects the factors that impacted our gross margin performance as well as a modest increase in operating expenses. For the full year, adjusted EBITDA was $17 million, less than half of 2024 reported adjusted EBITDA and the mid-40 level we were guided in reporting first quarter results. Fourth quarter operating cash flow was negative $3.7 million, while for the year, operating cash flow was $11.4 million. Turning to the balance sheet. We ended 2025 with $23.4 million in cash and restricted cash compared to $29.8 million last quarter and $36.9 million at the end of 2024. Inclusive in cash spending was roughly $2 million in CapEx, which funded the continued build-out of Greenhouse 2. Additionally, the final cash number included approximately $2 million raised from the use of our outstanding ATM and $2 million received from ERTC tax credits. In addition, we paid roughly $2 million in federal income tax. For the full year, we received roughly $10 million in ERTC tax credits and have roughly $3 million in anticipated receipts outstanding. We do not have clarity on the timing of any subsequent ERTC tax credit receipts. In December and early January 2026, we completed our outstanding ATM receiving net proceeds of approximately $22 million. The shares were primarily issued to existing long-term investors with proceeds from the raid primarily going to fund the build-out of the remaining 2/3 of Greenhouse 2 and our greenhouse 4 expansion. Turning to guidance. As Kyle discussed, we ended the year back to being fully planted with legacy greenhouses and planted the first 1/3 of Greenhouse 2, giving the cultivation team the most acreage planted in Glass House history. The expanded cultivation and production will begin to be reflected in results during the first quarter, and thereafter, we are posed for meaningful growth based off our increased scale. Additionally, results will reflect incremental contributions from the final 2/3 of greenhouse 2 within the second half of the year, while we will also see initial contributions from our hemp commercial initiative with initial hemp plants expected to be harvested in late second quarter and contributing to results beginning in the third quarter. I remind that in total, Greenhouse 2 is capable of producing at roughly 300,000 pounds annually of biomass once fully operational. Our hemp greenhouse, greenhouse 4 will produce at a lesser scale given our prioritization of speed to market over greater efficiency. In time, we will further enhance the greenhouse to enable greater production capacity. We anticipate first quarter revenue to be approximately $39 million as we produce approximately 138,000 pounds of biomass, reflecting typical winter seasonality and the partial first quarter contribution of ramp scale. First quarter average selling price for wholesale biomass is assumed to be approximately $167 per pound, down from $192 last year, while cost of production will be approximately $161 per pound versus $108 last year. As Kyle referenced, starting in Q2, we anticipate our cost of production will be below our long-term annual target level of $95 per pound over the remainder of the year. As a result of the higher cost of production and lower sales price, we anticipate Q1 gross margin to be approximately 29%, which compares to 45% last year. Full year 2026 revenue is forecasted to be between $235 million and $245 million. While importantly, we note that for the second half of the year, we anticipate the company will be operating at almost a $300 million annual revenue run rate. Full year gross margin is projected to be roughly 48% this year and full year adjusted EBITDA is projected to be in the high $40 million range. Within our assumptions, full year wholesale biomass production is forecast to be approximately 1 million pounds of biomass, which is a 48% increase to 2025. We expect Q2 production to increase high single-digit percent versus Q2 '25 and production in the second half of 2026 to be more than double the second half of 2025. With the increased production, we expect the cost of production of approximately $100 per pound, which is a 10% decrease to 2025. Full year average selling price is expected to improve to the mid-180s per pound from $177 in 2025 as we expect quality and mix to improve versus 2025, particularly the second half of the year when compared to 2025. I remind you that anticipated hemp contributions are incremental to our forecast at this time, we are still deciding on the appropriate end market for supply. We anticipate no matter the end market, pricing dynamics for hemp to be favorable to the cannabis prices achieved in California. We expect first quarter ending cash to be approximately $27 million, while we forecast 2026 full year ending cash to exceed $50 million as we generate meaningful operating cash flow in the final 3 quarters this year. The forecast includes approximately $20 million CapEx to complete the full retrofit of Greenhouse 2, including adding new high-efficiency low-energy lighting and a CapEx-light retrofit of Greenhouse 4 for the hemp production. It also assumes we continue to pay the dividends associated with the preferred equity Series D and E totaling $11.6 million in 2026. And with that, I turn the call back to Kyle for his closing remarks before opening up the call to Q&A. Kyle Kazan: Thank you, Mark. As many of you know, last year, we lost George Raveling, a valued member of Glass House's Board of Directors, the Glass House family and someone who had a measurable impact on my life. While I could not be happier with the initial contributions from our newest Board member, Alison Payne, I miss Coach Dearly. Coach joined the Board when we went public in 2021 and brought with him extensive experience in marketing and corporate governance learned during his Hall of Fame basketball coaching career and time as a senior executive at NIKE. Additionally, Coach had a long and sought-after career as a motivational speaker and one of his favorite topics was resiliency and the importance and power of having a team or workforce that can be steadfast and productive in the face of challenge. I think of this topic as I reflect on the incredible effort put forth by the entire Glass House family to come back from the events of last summer and to expand in scale and business capacity. We could not have done it without each and every one of you from our team members and workers to customers, business partners and investors. I thank you for your support and look forward to the days ahead. While we applaud President Trump's signing of the executive order to reschedule cannabis, we appeal to him to pardon those many people sitting in federal prison right now for nonviolent cannabis offenses. As President Trump pardoned our current partners are Alice Marie Johnson and signed the first step Act into law, we believe that he will give these people their lives back. I am proud to work with my friend, Weldon Angelos and his Project Mission Green to release Parker Coleman and Ali or otherwise known as Jose [indiscernible] Jr., among many others. Finally, I remind everyone that we once again are planning to hold our annual investor session at the Camarillo Farm. This year, we have scheduled the event for Thursday, June 18, and I genuinely hope you can make it and we can meet you in person at the farm. Thank you again, and I will now ask the operator to open the line for questions. Operator? Operator: [Operator Instructions] Your first question comes from the line of Frederico Gomes with ATB Cormark. Frederico Yokota Gomes: I want to ask about the opportunities you have outside of California. You mentioned hemp, you mentioned smokeable CBD, you're trying to get JCP compliance. So there's a lot going on. Can you help us frame those opportunities, starting with, I guess, what is it that you can do today? And what is it that depends on regulatory changes with rescheduling or even the intoxicating hemp ban and the framework there? Just so we understand what is it that the immediate opportunity that doesn't rely on regulatory catalysts and what is it that relies on those catalysts happening? Kyle Kazan: So Frederico, thanks for always asking those good questions. We've got a lot of optionality. Graham, you want to jump in on this one? Graham Farrar: Sure. Yes. Frederico, thanks a lot for the good question. And you're right, there is a lot going on right now. It's a part of the challenge and also part of the excitement. So right now, what we're growing just for clarity in greenhouse 4 is smokable CBD flower. So that is flower that is compliant with California, existing federal farm bill as well as would continue to be compliant if the new, I'll call it, the McConnell language in November comes into play. So it will be at 30 days pre-harvest less than 0.3% total THC. So compliant across the board, both today as well as if the more restrictive regulations are put in place. Target for that is predominantly -- or it's exclusively outside of the U.S. I don't think there's a domestic market for smokeable CBD, but there does appear to be a good market predominantly in Europe for CBD flower. I think they do a number of things over there. Some people use it as a tobacco alternative, some people fortify it by adding hash and other components to it. Pricing, we're investigating. We've got our first crop in the greenhouse right now. Expect to harvest towards the end of April, early May with product -- finished form product by the end of May, early June is probably the time frame we're looking at. Predominant target for that is really just to figure out and explore the markets there. Obviously, you're talking about Switzerland at 1%, Spain, U.K., Germany, all our markets over there. That is green light regulatory point of view from today forward. And again, even if the farm bill language gets more restrictive, would still be compliant. The other things we're looking at is potentially what happens with the farm bill if those regulations get put out -- pushed out as there some rumoring there are. We're not expecting that counting on that or planning on that. But if it does happen, we have continued to express our interest in THCA flower markets both domestic and rest of world. Then you have the Schedule III stuff, which we're also all waiting and watching for. In that world, I believe that there would be a path from California to other medical markets. Obviously, some steps in the middle there, and that's something outside of our control. So if you come back to it, you look at smokable CBD flower we're doing now, eyes on the THCA or farm bill market, looking at Schedule III and then the final one is the Medicare CMS projects. Some information just starting to come out on that. The way that, that would work is that we could be a supplier to accountable care organizations of products that meet the farm bill requirements. So another place where what changes in the farm bill has an impact. We've got a BOM that we are really liking or getting fantastic feedback on, I think it could be helpful for those seniors. So getting that into that framework and/or other tinctures that are compliant with the farm bill either today and tomorrow are the targets there. Kyle Kazan: And Frederico, following up on that, you can imagine just from what you heard from Graham, we see a lot of different options depending on how things go. If things don't go our way, we still see options, just fewer, but it should not impact our ability to continue to grow in greenhouse 4. Graham Farrar: And a reminder, as Mark mentioned, nothing in any of our numbers include any contribution from greenhouse 4 or hemp. So whatever happens there would be accretive above the forecast we provided. Frederico Yokota Gomes: Got it. I appreciate that color. And then just a second question for me. Just your perspective on California pricing potentially improving. It doesn't seem like it's meaningfully priced into your guidance. So I guess it would be upside to that. But do you see that pricing -- a potential improvement in pricing this year or maybe next year? I mean, how are you looking at the outlook for pricing in California? Kyle Kazan: I think a lot of this is -- it's our best estimation, and I would always rather underpromise and overperform. Because, as you know, some of this is a little bit of kind of sticking your finger in the air. You just -- you don't know what you don't know. And in the past, we've been surprised where it shoots up. We're rarely surprised when it doesn't move up. So I think we're just being cautious, but we're hopeful that we will start seeing some improvements. A little bit of that is TBD, what happens with the Strait of Hormuz moves and inflation and things like that. So there's a lot going on in the economy in California and everything. So I think it's better for us to just be cautious and hopefully underpromise. Operator: Your next question comes from the line of Luke Hannan with Canaccord Genuity. Luke Hannan: I wanted to follow up on that topic of pricing, Kyle. I know you mentioned a lot of it is just you sort of stick your finger in the air and see where the wind is blowing. But can you frame up for us, I mean, what -- I know in the past, you've talked about how long these sort of down cycles last and then also have talked about Canopy that's exiting the market. Has there been any abatement in the pace of either the price declines or Canopy exiting the market? Kyle Kazan: I would say that was quarter 4 pricing. Mark, question about licensing, do you want to take that because I know that's something you track just for fun. Mark Vendetti: Yes, sure. Luke. Kyle Kazan: Real quick. By the way, Luke, I always love talking to you. Notice you didn't say anything about congrats on our big hockey win. Luke Hannan: Nor will I. Kyle Kazan: Too soon. I apologize, Luke. Go ahead, Mark. Mark Vendetti: So we've -- I'm going to say the second half of 2025 and just looking at the first 2 months of 2026, the number of active licenses in cultivation has actually remained pretty stable. And so I think we're at a point where the big shakeout has happened and the people who are left competing in California are the better operators. And at this point, it feels like we're in a bit of an equilibrium at this point. So I don't think we'll see significant decreases in the number of active licenses going forward, and we're not thinking that happens. So we're planning on, again, a tight market and a market that -- I'm going to say our numbers don't anticipate a rebound. And if they do, as Kyle said, it should be upside. Kyle Kazan: And one more thing, Luke, I would add, part of the reason why we are so focused on greenhouse 4 and watching different legislation breaks. If we get a few of those breaks, I would imagine that we're going to step on the gas in exporting outside the state of California. We certainly appreciate the results we've been able to accomplish in a pretty -- I mean, in an extremely difficult market. But that's one of the main excitement. One of the things that makes us most excited are the opportunities that we're seeing outside of California. So -- but I think you got your answer from Mr. Vendetti. Luke Hannan: I did, and then so if we frame up just 2026, super high level then as it is, if we think of the delta between '26 and '25, it's basically all driven by just more biomass production. You talked about the lower cost of production also for the final 3 quarters of the year being -- basically in our model, I think we basically have to get down to $90 a pound. I mean, is it fair to say that that's kind of your new long-term sort of target now after you've done all the work to change your cultivation? Kyle Kazan: Well, I would say real quick. I would say if you think of one of our big investors Mr. Codes named our grower, Michael Jordan. Michael Jordan was never satisfied with 4 titles or 1 title or even 5 titles. And I would tell you that M.J. and his team, I don't know if I would say, hey, this is where we hope to go at the end of the day. Remember, right now, we grow -- I'll let M.J. tell you how many strains we grow, but in a much more national marketplace, it's highly unlikely that we're not growing just 1 or 2 strains to really launch efficiency. So we're not at that point with interstate commerce in a big way at this point. But you'd have to think that there -- wherever M.J. is now, there's more titles ahead in a much more focused agriculture market. M.J., do you want to throw in? Graham Farrar: Sure. Thanks, Coach. Yes. So I think we really had kind of 3 targets. One is you can't get good until you get going. So we want to get back on our feet, get all the greenhouses replanted after 2025. We finished 2025 with all that square footage replanted and actually we have the most acreage under cultivation that we've ever had in Glass House history. We started harvesting through that in kind of week 6, week 7 of this year, so partway into Q1. And then at the same time, we launched into finishing the expansion of Greenhouse 2, which adds roughly another 700,000 square feet. That's the second 2/3 of that. And then we also planted Greenhouse 4, our first hemp greenhouse. It's about 300,000 square feet, and we're working on retrofitting the remaining 14 acres in that greenhouse as well. So then the next step is to bring back the efficiencies. So first, we rebuilt the labor team. We've got the greenhouses replanted, and now we're bringing the efficiencies back to get us back to where we were. And then we'll look at using and leveraging that scale to get even better than that in the future. Operator: The next question comes from the line of [Mark Cohodes] with [indiscernible]. Unknown Analyst: So I could take this a number of ways, but let's start with the changes in anticipation of Schedule III you guys have made, whether it's negotiations, work on uplisting, partnerships, international changes and things you've implemented and worked on since the December 18 executive order, then we'll move on from there. Kyle Kazan: So thanks for your question, Mark. Number one, when we -- and we announced it, but we put together that Board committee with Jay, Alison and Jocelyn. I would tell you that it's bearing results better than we'd hoped. So we're super excited about that. We have signed up some folks with deep Rolodexes in Europe, in hemp, hemp testing so that we have aligned interest in folks based on our success. So we're really excited about that. I'll let Graham talk about some of the great things that he's doing at the farm since the executive order announcement. Graham, do you want to -- or should I say, Michael? Graham Farrar: Mark, thanks for the question. Yes. So obviously, the announcement on the 18th was really exciting on a number of fronts. The fact that we had a President in the Oval office talking about the medical value of cannabis is something that all of us have been waiting for a long time. We're a decade in the glass house now, and that was always the thesis that the truth was going to happen. So even just to see those words uttered was a big deal. Of course, having the President Direct Pam Bondi and company to reschedule things from Schedule 1, which means no known medical value to Schedule III, which means it does have medical value and a low potential for abuse is huge. Looking forward to her actually putting that into effect. We're doing all the work that we can now to be ready for that to happen. Those are the things like Kyle mentioned, the GACP, which stands for good Agricultural and Collection Practices certification. That's a feed into what they call GMP or good manufacturing processes, and that allows you to feed into medical markets potentially in the U.S., but probably first in the rest of world where they already have approved medical cannabis. I think we fit in real well as a producer under the Schedule III rules or existing framework. I don't see any reason that we can't be registered as a bulk manufacturer under the DEA rules. Probably it would be a Form 225 registration that would allow us to work within that model and then export outside the U.S. into other medical models. Also, of course, a reminder of our partnership with Berkeley, where they have quite a few strains that are specifically targeted around minor cannabinoids, CBD, CBDV, THCV, EBG, lots of things that are not on the tip of people's tongues, but when you start talking about Medicare and therapeutic uses and improved outcomes for patients, a lot of things there that have a lot of value, both on a kilogram basis as well as to improving people's lives. So we're working on getting those set up. And then, of course, we've got the things coming outside with hemp and the other potentials in those markets where some of those products are already allowed. So we might be able to develop things that could be both used for Medicare here in the states as well as exported into other countries that already permit their use. So a lot of exciting stuff, and we're trying to lay the groundwork for everything soon any of those lights turn green, we're ready to jam on the gas. Kyle Kazan: And Mark, one other thing in those -- for those noncannabis companies that are in other industries that are looking over their shoulders knowing cannabis is coming. The nice thing is what we've built over the last 10 years is actually the world's biggest supply chain. And as cannabis becomes a normalized industry, we are in the unique position to be able to expand that supply chain, both outdoor and in greenhouse. And those companies recognize that, and we can do it at prices where you'd expect that those industries are used to commodity kind of pricing, and that's what we can absolutely deliver. So those conversations are really exciting, and it's nice to be in the position that we've been waiting so long for. Graham Farrar: Yes. actually want to build on that one more second, Mark. One of the things as we've been talking, as Kyle mentioned, to these other companies is historically, I think we've looked at California a little bit as a box, right? We're limited to California. But if you look around and think about where things are potentially going with cannabis, all of a sudden, that turns into a strategic advantage, right? A number of these companies the Sanofi and whatnot of the world, they cannot currently play with THC. We live in the world's largest THC market anywhere on the planet in the form of California, a $4-plus billion market where we can deliver high concentration THC to consumers with customer demographic data that would make a typical CPG company jump up and down, right, where we're actually looking at license registration level data, right, being able to say, here's the best thing for people who are 6 feet tall and 42 years old. Here's their favorite product, right? We have that ability and the ability to lead that market by being able to develop products that can handle THC before the broader market can, I think, is a real advantage that we can work with. We've got a product development platform that is better than anywhere else in the world here in California with our chain of 10, 11 and possibly growing retail stores. that's something that any CPG company will value who's looking towards the future and wanting to have products that exist when these lights turn green rather than just start working on them when the lights turn green. Unknown Analyst: Okay. Final 2 questions are, where are you guys in working on uplisting when the green light on Schedule III happens, i.e., how fast can that happen for you? And two, could you talk about the range of pricing you're seeing and expect to get in hemp, both out of state and overseas? Kyle Kazan: So I'll take the first one, and I'll let Graham talk about the second because it's the second one is pretty exciting. The first one, what I would tell you, Mark, is that there are a few companies, if everybody on this call does a ChatGPT to see what a company needs to do to qualify to be able to uplist to the NYSE or NASDAQ in regards to pricing, market cap, all that kind of good stuff. You'll see there are a handful, including Glass House that do qualify. And while it's not explicit as to whether the New York Stock Exchange and NASDAQ will take us, I would tell you that the good thing that we all know is that NASDAQ and NYSE are in good competition with each other to list companies and neither of them want to miss out on this industry if the other one goes ahead and takes them. So we are excited at the possibility. And at that point, I'll leave it at that. Unknown Analyst: And the pricing? Graham Farrar: Pricing, I mean, really, what we're doing here is market research. So we've got pricing all the way from better than California to really exciting. The real piece that we're working on now is actually having some product in hand to explore those markets. We've talked to a number of folks who are interested in willing to basically contract all the supply we expect. That's not our plan on this is because we want to see and do some price discovery out there. So once we have this first harvest sometime kind of mid-late June, I think we'll have a better resolution on that, but there definitely does seem to be a market. We're exploring how big it is, and then we'll be able to scale to fit that. We'll also redirect future planning based on the genetics and form factors that people are most interested in. But where I was somewhat skeptical on the CBD -- smokable CBD market, I've become more convinced based on the conversations that we've been having and excited to learn more about it. Kyle Kazan: And Mark, for what it's worth -- sometimes it's nice just to see words and actions. Graham and I are booked to -- in April to be at ICBC in Berlin and Spannabis in Spain. And so we are taking our time to -- and making the effort to go to Europe because we absolutely see an opportunity there. Operator: There are no further questions at this time. That concludes our Q&A session and today's call. Thank you all for joining. You may now disconnect.
Operator: Thank you for standing by, and welcome to the Tuas Limited Half Year Financial Year 2026 Results Call. [Operator Instructions] I would now like to hand the conference over to Mr. Richard Tan, CEO. Please go ahead. Richard Tan: Good morning, and thank you for joining us. I'm Richard Tan, Chief Executive Officer of Simba Telecom, the principal operating entity of the Tuas Group. Also on the call today are Mr. David Teoh, Executive Chairman of Tuas Limited; and Mr. Harry Wong, Chief Financial Officer of Simba Telecom. It's a pleasure to present the financial results for Tuas Limited for the half year ending 31st January 2026, covering the period which started 1st August 2025. Let me briefly outline today's agenda as shown on Slide 2. We'll begin with Harry, who will walk through the financial performance and key metrics for the year. I'll then provide an update on our operational progress, status of M1 acquisition and outlook for FY '26. We'll conclude with a Q&A session to address any questions you may have. Please note that all financial figures discussed today are denominated in Singapore dollars. With that, I will now hand over to Harry to take us through the numbers. Harry Wong: Good morning, everyone. My name is Harry Wong. CFO of Simba Telecom. I'll be presenting the financials of the Tuas Group. On Slide 3, you'll see that we achieved a notable improvement in the financial results during the first half of FY '26 when compared to that of FY '25. Revenue for the half year is $91.9 million, up from $73.2 million for the same period last year. Pre-acquisition costs amounting to $10.5 million was incurred. Excluding this, the underlying EBITDA increased 27%, up from $33.1 million to $42.1 million. We achieved a half year positive statutory net profit after tax of $8.2 million, which is a significant improvement on the prior period's profit of $3 million. Next, we look at the revenue and EBITDA on Slide 4. Revenue for the half year ending 31 January 2026 increased 26% compared to that of FY '25. With increased scale of the business, EBITDA margin has improved to 46% of revenue. Gross mobile ARPU for the year was 9.61%. The key driver of the EBITDA uplift is the increased subscriber base for both the mobile and broadband products. Our mobile plans include generous roaming data at every price point and broadband plans provide exceptional value including premium Wi-Fi 7 routers and home phone lines as part of the package. Slide 5 shows our sustained mobile subscriber growth since FY '23. As of 31 January 2026, we had about 1.412 million subscribers, representing a 13% increase over the past half year. Slide 6 shows the broadband subscriber base. As of 31st January 2026, we had approximately 46,000 active services. We have gained traction in this segment, and we have added 20,000 subscribers over the past half year. We proceed on cash flow on Slide 7. We continue to show positive cash flow. Opening cash and term deposit balance was $80.7 million. Net cash generated from operating activities was $50.1 million. The main cash outflow comes from acquisition of plant and equipment and intangible assets of $18.9 million, largely mobile network and some fixed broadband infrastructure. We raised funds from capital markets of $260 million in support of the M1 acquisition. This brings the ending cash and term deposits to $478 million as of 31st January 2026. Again, positive cash flow after CapEx for the year is a welcome achievement. I should note that pre-acquisition costs that have been accounted for in this half year has not become liable for payment during the first half or since then. This explains a good portion of the positive cash flow outperformance compared to EBITDA. With this, I will let Richard proceed with the business updates. Richard Tan: Thank you, Harry. Singapore's mobile market remains highly competitive. And over the past financial year, Simba has continued to focus on delivering stronger value across all price points. This strategy has clearly resonated with consumers, as reflected in our robust subscriber growth. We have further enhanced our mobile offerings by adding 2 popular roaming destinations, Japan and Australia as inclusions in the APAC tier to our higher-value plans. This enhancement is an important part of supporting our continued growth in the mobile segment. To serve our expanding customer base, Simba continues to invest in network coverage and overall user experience. I am pleased to share that we have achieved another significant milestone. We have surpassed IMDA's regulatory benchmark of 95% 5G outdoor coverage, well ahead of the 31st January 2026 deadline. Slide 9 highlights the reasons behind the strong momentum in our fiber broadband business. The accelerated growth is driven by a clear, simple and compelling value proposition through 10 gigabit per second symmetrical speeds complemented by a premium Wi-Fi 7 router, modem and the home phone line included as standard. We are also proud to share that Ookla has awarded Simba, both the fastest download speeds and most reliable speed titles for the second half of CY '25. Most listeners would have used Ookla to do a speed test on your connectivity and they are widely regarded as an accurate global leader in Internet testing and network intelligence. This recognition is a testament to our engineering excellence and our unwavering commitment to delivering the best possible service experience for our customers. Moving to Slide 10. We appreciate shareholders' patience as we await IMDA's decision on our proposed acquisition of M1. This is a significant transaction involving critical national infrastructure and on a combined basis, it will create Singapore's second largest mobile customer base. Both Keppel and Simba continue to work diligently through the regulatory process and we remain fully committed to securing the necessary approvals. And finally, the business outlook. The first half of the year has established a solid platform for us with sustained growth across both our mobile and fiber broadband segments. In line with this expansion, Simba's stand-alone CapEx for the full year is expected to range between $50 million and $55 million. We will continue to prioritize margin optimization and maintain disciplined cash management as we scale. I'll now hand back to the moderator for the Q&A session. Operator: [Operator Instructions] Your first question comes from [ Raj Ahmed ] from Citigroup. Siraj Ahmed: It's Siraj Ahmed. Can you hear me okay? Richard Tan: Yes. Siraj Ahmed: Just I have maybe 3 questions. The first one just on the -- maybe a multipart question on subs momentum. Pretty strong pickup in momentum in the half. Just keen to understand what drove that from your perspective, especially given your advertising and marketing spend is actually down year-on-year? Richard Tan: Okay. So obviously, the momentum has been strong for the first half. And in part, I think, it was -- you could say that it was due to our announcement of the M1 acquisition because people are seeing us in different light. They know that we are a serious player and we are here to stay, and we have been delivering very good value for -- across all of our service plan. So this has resonated obviously across the -- our customer base as well as people who have not come aboard yet. So we saw a very strong momentum for the first half of the year. Siraj Ahmed: And Richard, just because I'm into the stock as well, just in terms of first quarter versus second quarter, is there some seasonality or some sort of events that supports 1Q? I know 1Q is quite strong. 2Q is strong as well, but it was down quarter-on-quarter. Is this something that impacts from like a seasonality perspective? Richard Tan: This is the typical seasonality effect because, as you all are well aware, the November and December traveling period is always very strong in terms of people leaving Singapore for their holidays. So a lot of people will sign up prior to that. And then they will return. Everyone goes back to work and school back in January. So you are obviously noticing the seasonality effect. Siraj Ahmed: Right. Actually, that's a good segue for my question on -- just in terms of the current environment with fuel and everything like that. And given that traveling is a big part of your value prop as well. Are you seeing any sort of -- anything that you can call out based on current trends that you're seeing on that impacting... Richard Tan: The trends will be very similar to previous years. And we expect second year to -- second half of the year to continue to exhibit good growth as well subject to the usual seasonality effects that we have seen over the past 3 to 4 years. Siraj Ahmed: All right. Helpful. Last one. In terms of just the gross margin, it seems like the network, the COGS has gone up quite a bit. Gross margin is down year-on-year. And is there some one-off in that, that we should be considering? Richard Tan: Well, the -- what we have been focusing on more is the EBITDA margin and the EBITDA margin has actually grown by 1 percentage point. So I think that's the main thing to focus on. Operator: Your next question comes from Darren Odell from Peloton Capital. Darren Odell: Congratulations on a strong result again. Just in relation to -- on the cost, the $10.5 million one-off cost in relation to M1 acquisition. I was just wondering -- it was quite large. I was just wondering if you're able to break that down in more detail, please? Richard Tan: We are not providing any breakdown as of now, but it is a mixture of legal due diligence, tax due diligence, financial due diligence and financial advisory. So I think in the -- considering the size of the transaction it is actually very, very reasonable. Darren Odell: And just in relation to just broadband connections, which have obviously been very strong in the last half. What's the sort of backlog look for that? Or do we expect the same sort of momentum to continue in number of subscribers or to be increasing? How should we be thinking about that in the future? Richard Tan: What I can say right now is that we are working very, very hard to build on the momentum that we have established and the fact that Ookla has given us the award, puts us in a very, very good position to build on that momentum. Operator: Your next question comes from James Bales from Morgan Stanley. James Bales: I guess I'd like to build on those questions about the acceleration in mobile and the strength in broadband subs. You talked about it being a question of brand awareness, durability, value that is in the consumers' mind. Should we extrapolate that the acceleration that you've seen in the first half is sustainable throughout the year and into FY '27. Richard Tan: So to be specific, are you referring to mobile or fiber broadband? James Bales: Well, I'm referring to both. So I guess I'm a bit surprised on broadband, where there's a 2-year term. It's a commoditized product, all selling the NetLink service. How you've managed to scale that so fast and whether we should expect that, that continues in the same sort of way. Richard Tan: So I think you will have seen that our value proposition is very strong. We have included a lot of value and the router that we are offering, it's a really good relative product, no compromises because, for example, it has a true 10 gigabit a second Ethernet port. And we have also added home phone line as well. So with the awards that I've mentioned from Ookla, that puts us in the very good position and people have been signing up through word of mouth. They have experienced very, very good service from both Simba, and the performance has been great. And obviously, we've been spending on marketing as well to ensure that the awareness is built up across the board. So with that with that foundation laid, that has put us in very good standing in terms of continued growth for broadband. Mobile, I think we are very well established across all segments. And we have seen good gains in these different segments, which I have alluded to, and these include, for example, the mass market and foreign [ router ] segment is something that we have always been very strong in. So without a doubt, our penetration is now deeper. Our growth is more broad-based, so that gives us also a good foundation for continued mobile growth. James Bales: That's really good context. And then I guess the other question I had was around M1 deal completion. This has taken a lot longer than you thought. Can you help us understand the -- in your mind, what's changed? And you would have expected that this deal completed last year or in January when you first announced it. Can you help us understand why it's taken longer and whether your confidence in closing it has changed at all? Richard Tan: Well, as I've indicated in my presentation it is an important transaction. What I did not say for example, is that this is the first time that the market is undergoing consolidation. So obviously, there are all aspects of the matter that IMDA will need to weigh upon. So I'm not surprised, and we are -- both parties, meaning Keppel and Simba are working diligently to gain regulatory approval as we go through the process. Operator: [Operator Instructions] Our next question is a follow-up from [ Raj Ahmed ] from Citigroup. Siraj Ahmed: It's Siraj again. Just, Richard, just on a follow-up to James' question on the time line. Is there any sort of indication that's been given to you on potential completion time lines? Or is it just open-ended from your perspective? Richard Tan: I don't think it's appropriate for us to set any expectations with regards to the time line. All I would say right now is that the engagements on a joint basis with the regulator, they are ongoing. So I think that's very important in terms of keeping the dialogue going. Siraj Ahmed: Okay. Got it. On that as well, there was a -- I think there's a 6-month sort of agreement with Keppel in terms of the deal completing. Is that -- I'm guessing that's -- I think that in sort of end of March, I think, I'm guessing that's been extended. Is that fair, given both of you are talking with IMDA? Richard Tan: We are aware of it, and both parties are working to extend it. Siraj Ahmed: Okay. Last one, just on CapEx. I know that sometimes there is seasonality. I think first half was only $19 million. You're reiterating the CapEx guidance. I'm just wondering whether -- is it sort of -- you're keeping the second half seasonality because of the deal -- impending deal? Or is it just timing related? Richard Tan: A lot of it is timing related because we initially spent more on CapEx, for example, building out our 5G coverage. But obviously, we are keeping in mind the need for us to continue to support our growth, and that is why we're keeping to the $50 million to $55 million CapEx expectation for the financial year. Operator: Thank you. There are no further questions at this time. I'll now hand back to Mr. Tan for closing remarks. Richard Tan: Thank you all for your time and for engaging in our business update. The Board and management of Tuas Limited deeply appreciates your continued support. We look forward to delivering further value and growth in the months ahead. Thank you. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Laurence Tam: Good morning, everyone, for those who are based in China and Hong Kong; and good evening for those based in the U.S. This is the 2025 WuXi AppTec results call. My name is Laurence Tam. I'm a China health care analyst at Morgan Stanley. We're honored today to have the full team from WuXi AppTec to present the 2025 results in English. The format of the call will be 2 parts. First, I'll let management go through their prepared remarks. You can refer to the slides on the webcast. And then the second part will be a Q&A session. [Operator Instructions]. With that, let me now pass it on to the Head of IR at WuXi AppTec, Ms. Tang Ruijia, to introduce management and to start the prepared remarks. I'll pass it on to you, Ruijia. Ruijia Tang: Okay. Thank you, Laurence. Welcome, everyone, to WuXi AppTec's 2025 Annual Results Conference Call. We released our financial results last night and have posted the latest on our company website. During today's call, we will make forward-looking statements. Although we believe that our predictions are reasonable, future events are uncertain, and our forward-looking statements may turn out to be incorrect. Accordingly, you are strongly cautioned that the reliance on any forward-looking statements involves known and unknown risks and uncertainties. In addition, to supplement the company's consolidated financial statements presented in accordance with IFRS, we provide adjusted IFRS financial data. We believe the adjusted financial measures are useful for understanding and assessing our core business performance, and we believe that investors may benefit from referring to these adjusted financial measures by eliminating the impact of certain unusual and nonrecurring items that are not indicative of the performance of our core business. However, these adjusted measures are not intended to be considered in isolation or as a substitute for the financial information under IFRS. All IP rights and other rights pertaining to the information and materials presented are owned by WuXi AppTec. Audio recording, video recording or disclosure of such materials by any means without the prior consent of WuXi AppTec is prohibited. This call does not intend to provide a complete statement of relevant matters. For relevant information, please refer to the company's disclosure documents and information on Shanghai Stock Exchange, Hong Kong Stock Exchange and the company's website. As usual, in today's call, there will be a Q&A session after our presentation. Please kindly share with us your name and institution before asking questions. With that, please allow me to introduce our Co-CEO, Dr. Minzhang Chen, to present our 2025 annual results. Minzhang, please? Minzhang Chen: Thanks, Ruijia. Good morning, and good evening. Thank you for joining our 2025 annual earnings call. We will begin on Slide #5. In 2025, WuXi AppTec beat full year guidance and achieved record performance in both revenue and profit. Total revenue achieved RMB 45.46 billion. Notably, revenue from continuing operations grew 21.4% year-over-year to reach RMB 43.42 billion. Our adjusted non-IFRS net profit grew 41.3% year-over-year to RMB 14.96 billion with non-IFRS net profit margin further improved 5.9 percentage points year-over-year to 32.9%. Next slide, please. The company remains focused on enhancing our core capabilities and capacity to better meet customer demand. With continuous capacity expansion by end of 2025, our backlog for continuing operations reached RMB 58 billion, growing 28.8% year-over-year. This does not include business operations we sold or discontinued such as clinical research services. Next slide, please. Slide 7 shows our diversified revenue streams of continuing operations. Based on customer headquarters, revenue generated from U.S. market grew 34.3% year-over-year. Japan, Korea and other regions grew 4.1%. Europe and China saw some decline, mainly due to fluctuations in project delivery timing. This diversified revenue structure reflects our global footprint and capabilities to enable health care innovations. We believe it will continue to underpin the stability and the resilience of our performance. Slide 8, please. So as an enabler of innovation and a trusted partner and contributor to the global pharmaceutical and life science industry, the company continues to drive sustainability, embrace initiatives with sustained recognition by leading global ratings. In 2025, we achieved our first MSCI AAA and CDP Climate Change A Rating, maintained CDP Water Security A, and EcoVadis Gold rating, and were included in the S&P Global Sustainability Yearbook for the fourth consecutive year. And meanwhile, our near-term greenhouse gas emissions reduction targets have been successfully validated by SBTi. As a committed UNGC participant and PSCI supplier partner, we actively embrace global initiatives and are dedicated to integrating sustainability into our business strategy and operations. Next slide, please. For over 2 decades, WuXi AppTec has remained steadfast in our commitment to safeguarding customers' IP and adhering to the highest standards for quality and compliance. In 2025, we completed 741 quality audits and inspections from global customers, regulatory authorities and independent third parties as well as 60 information security audits by global customers. This means, on average, we welcome 3 quality audits per day and over 1 information security audit per week, all with no critical findings. Currently, 20 of our main sites are ISO and IEC 27001 Certified, covering all main sites in China. IP is a lifeline for both our company and our customers. We uphold integrity as our foundation and enforce a zero tolerance policy against any infringement. This is our core value and our highest responsibility and commitment to our customers. Now let's move on to the segment performance. So please turn to Page 9. WuXi Chemistry's CRDMO business model drives continuous growth. In 2025, WuXi Chemistry revenue grew 25.5% year-over-year to RMB 36.47 billion, benefiting from continued process optimization and enhanced capacity efficiency driven by the growth of late-stage clinical and commercial projects. Our adjusted non-IFRS gross profit margin steadily improved 5.9 percentage points year-over-year, reaching 52.3%. Our Small Molecule Drug Discovery (R) business continues to generate downstream opportunities. In 2025, we have successfully synthesized and delivered over 420,000 new compounds to our customers. Meanwhile, 310 molecules were converted from R to D in 2022 (sic) [ 2025 ]. As we continue to strengthen the capabilities of our integrated CRDMO platform, we consistently enhance the internal conversion of molecules at different stages. Our Small Molecule D&M business remains strong, and the Small Molecule CDMO pipeline continued to expand. In 2025, Small Molecule D&M business revenue grew 11.4% year-over-year to RMB 19.92 billion. Meanwhile, the company continued to build small molecule capacity. In 2025, our Changzhou, Taixing and Jinshan API sites all successfully passed FDA on-site inspections with no single observation. By year-end, total reactor volume of small molecule APIs reached over 4,000 cubic meters. WuXi TIDES, our New Modalities business, sustained rapid growth. With the sequential ramp-up of new capacity released in 2024 and 2025, TIDES' revenue almost doubled to reach RMB 11.37 billion in 2025. As of year-end, TIDES' backlog grew 20.2% year-over-year. TIDES' D&M customers increased 25% year-over-year and its number of molecules increased 45% year-over-year. In September 2025, we completed Taixing peptide capacity construction ahead of schedule. The company's total reactor volume of Solid Phase Peptide Synthesizers has reached over 100,000 liters. Next page, please. So driven by Following the Molecule and Win the Molecule strategies, WuXi Chemistry's Small Molecule CRDMO pipeline efficiently converts and captures high-quality molecules and delivering sustained business growth. This reflects our customers' strong trust in our technical capabilities, our service efficiency and our quality system. In R stage, we delivered more than 420,000 new compounds in 2025, representing a significant scale. At the same time, the complexity of these molecules continue to increase, demonstrating the sustained demand from early-stage R&D customers for high-quality services. Building on this strong foundation, we continue to enhance the synergy between our R and D capabilities by strengthening the conversion of molecules from R to D. The new compounds synthesized in R stage serve as a continuous funnel, driving downstream demand for our D&M services. Moving to the D&M stage, we added 839 molecules to our pipeline in 2025 with 310 of them converted from R to D. As of year-end, our Small Molecule D&M pipeline reached 3,452 molecules, including 53 (sic) [ 83 ] commercial projects, 91 in Phase III, 377 in Phase II and 2,901 in Phase I and preclinical. Notably, commercial and Phase III projects increased by 22. As our late-stage pipeline grows, the complexity and the quality of molecules continue to grow. This deepens our collaboration with customers and lays a solid foundation for sustained long-term growth. Next page, please. Our TIDES business has maintained rapid growth over the past few years. So in 2025, TIDES' revenue grew a strong 96% year-over-year to reach RMB 11.37 billion, nearly double. We have been continuously enhancing our capabilities and capacity to better meet customer demand. Now I will hand over to our Co-CEO, Dr. Steve Yang, to talk about WuXi Testing and WuXi Biology. Steve, please. Qing Yang: Thanks, Minzhang. Please turn to Slide #14. In 2025, WuXi Testing revenue returned to positive growth, increasing 4.7% year-over-year to RMB 4.04 billion, of which revenue from drug safety evaluation service grew 4.6% year-over-year, maintained its leadership position in Asia Pacific. Adjusted non-IFRS gross profit margin declined year-over-year as the impact of market pricing were gradually reflected in revenue through backlog conversion. However, with our differentiated capabilities and enhanced operation management, margins continue to improve sequentially quarter-over-quarter. We actively enable customers in global licensing deals, supporting nearly 40% of the successful out-licensing projects from Chinese customers since 2022. Our new modality business continued to expand with revenue contributions exceeding 30% in 2025, maintaining a leading position in multiple areas. Meanwhile, we continue to advance automation. Our DMPK team launched a proprietary all-in-one compound identification software solution, improved efficiency by 80% (sic) [ 83% ] in spectral interpretation and metabolite identification for nucleic acids and peptide test articles. Finally, in 2025, our Suzhou and Shanghai facilities successfully passed multiple regulatory inspections by FDA, by OECD, NMPA and PMDA. This underscores the high quality of our GLP operations and our quality systems. Let's turn to Slide #15, please. WuXi Biology follows the science, strategically builds differentiated capabilities in emerging areas, and we actively expand our global customer outreach. This allows us to efficiently generate downstream opportunities for our CRDMO model, continuously contributing more than 20% of our new customers. We efficiently enable global customers through our integrated in vitro and in vivo drug discovery capabilities for biology, the cross-regional collaboration, end-to-end point in emerging areas. WuXi Biology revenue resumed positive growth in 2025, growing 5.2% year-over-year to RMB 2.68 billion. The adjusted non-IFRS gross profit margin was 36.9%, down 1.9 percentage point, reflecting market pricing dynamics. We closely follow market conditions with a flexible pricing strategy, maximize our value in generating downstream opportunities. Our revenue growth was driven by advancement in our comprehensive in vitro screening platform and enhanced in vivo pharmacology capabilities. Our non-oncology in vivo business maintained a competitive edge, serving as a key growth contributor to WuXi Biology. Our new modality business continued the momentum with the revenue contribution exceeding 30% in 2025, supported by rapid new customer expansion in multiple areas. Now I would like to turn the call to our CFO, Florence, to discuss our financial performance. Florence, please? Florence Shi: Thank you, Steve. Let's turn to Slide 17. We would like to recap on the company's financials. In 2025, we beat our full year guidance and achieved record high performance in revenue, profit and cash flow, all aspects. Thanks to the visibility provided by our CRDMO business model, we proactively planned our capacity and capabilities. As new capacity ramped up efficiently quarter-over-quarter, we timely supported the growing demand from late-stage clinical and commercial projects. Meanwhile, we continued to drive quality growth, strengthen our technological expertise and improve operational efficiency. In 2025, our adjusted non-IFRS gross profit reached RMB 21.89 billion. Adjusted non-IFRS gross profit margin expanded to 48.2%, up 6.6 percentage points year-over-year. Adjusted non-IFRS net profit grew 41.3% to RMB 14.96 billion. Correspondingly, adjusted non-IFRS net profit margin improved by 5.9 percentage points to reach 32.9%. Net profit after deducting nonrecurring items grew 32.6% to RMB 13.24 billion and net profit attributable to the owners of the company surged 102.6% (sic) [ 105.2% ] to RMB 19.15 billion (sic) [ RMB 19.19 billion ]. Building on our robust business growth, we sharpened our focus on the CRDMO core business and continue to enhance our investment management capabilities. This resulted in pretax investment gains exceeding RMB 8 billion in 2025. further boosting our net profit attributable to the owners of the company. Consequently, our diluted earnings per share reached RMB 6.61 (sic) [ RMB 6.63 ], more than doubling year-over-year. Please turn to Slide 18. With sustained business growth, particularly the rapid increase in late-stage clinical and commercial projects, combined with enhanced operational efficiency and financial management, our 2025 adjusted operating cash flow reached a record high of RMB 16.67 billion, growing 39.1% year-over-year. This fully demonstrates the sustainable momentum driven by our high-quality molecules and projects. We continue to actively advance our global capacity expansion as planned with CapEx payment of RMB 5.54 billion in 2025. Now I'd like to hand over to Minzhang to share the company outlook. Minzhang, please. Minzhang Chen: Okay. Please turn to Slide 20. Okay. We remain focused on our unique integrated CRDMO core business, accelerating the growth of our global capabilities and capacity. We provide highly efficient and exceptional services to our customers, benefiting patients worldwide and driving long-term growth. We will also drive the O in our CRDMO model operations. By driving optimized management and operations, we aim to continuously improve, improving efficiency and strengthen organizational resilience to navigate dynamic market conditions. With customers' ongoing demand for enabling services, our CRDMO business model and management execution, the company is confident to sustain rapid business growth. We expect total revenue to reach RMB 51.3 billion to RMB 53 billion in 2026, with continuing operations revenue growing 18% to 22% year-over-year. By continuously driving quality growth, realizing scale efficiency and enhancing operational excellence, while proactively managing new capacity ramp-up and exchange rate challenges, we are confident in maintaining a stable and resilient adjusted non-IFRS net profit margin in 2026. Finally, CapEx for 2026 is expected to reach RMB 6.5 billion to RMB 7.5 billion. Along with business growth and efficiency improvements, we expect adjusted free cash flow to reach RMB 10.5 billion to RMB 11.5 billion. Next page, please. While accelerating the growth of our global capacity and capabilities, we remain committed to rewarding shareholders and actively upholding the company's value. The Board proposes a cash dividend distribution plan totaling a record RMB 5.7 billion in 2026. Specifically, we plan to maintain the 30% annual cash dividend payout ratio, expecting to distribute 2025 dividend of RMB 4.71 billion, while continuing our interim dividend plan of RMB 1 billion in 2026. To continuously attract and retain top talent, we proposed the 2026 H-share incentive Trust plan. Under this plan, no more than HKD 1.5 billion worth of H-shares will be granted if 2026 revenue reaches RMB 51.3 billion. An additional HKD 1 billion worth of H-shares will be granted if revenue reaches RMB 53.0 billion or above. This aims to strengthen management resilience and align our team for long-term shared growth. Importantly, all underlying H-shares will be purchased in the open market at prevailing market prices with no dilution to existing shareholders. Thanks for your attention, and we are now open for questions. Laurence Tam: Thanks a lot, Minzhang Chen, Steve Yang, Florence and also Ruijia. We will now enter the Q&A session. [Operator Instructions] So let me start off with the first question. First of all, let me congratulate management on a fantastic 2025 and a very positive 2026 guidance. Obviously, this year, there's a lot of uncertainty in the markets and also, we have experienced a lot of volatility. Despite that, the company delivered a very positive 2025 and a continuing operations revenue growth range expected for 2026 of 18% to 22%, which means that the midpoint is 20% growth in 2026 for continuing operations, which gives investors a lot of visibility. One of the key concerns this year from investors for the CXO industry is the exchange rate. Year-to-date, the U.S. dollar has depreciated against the RMB. So the first question is, in the context of this renewed guidance, how does management think about the impact of currency exchange? And what is your outlook or guidance for each of the 3 business units? Ruijia Tang: Yes, thanks. We do consider the FX movement and the challenges. So I also would like to appreciate everyone who recognize, even with not only the FX, but with all the complexity and the volatility in the macro environment we are navigating, every company is navigating today, we still provide a very clear and narrow guidance range of our total revenue, which is only about like 3% of our top line, at the beginning of the year, which is pretty consistent with our historical practice. Basically, that reflects the strong visibility in our CRDMO business model and our confidence in our execution capabilities, same as the management capabilities on the FX movement as well. Laurence Tam: Thanks a lot, Ruijia. So the second question is a little bit on geopolitics. Obviously, the situation in the Middle East has escalated in recent weeks, and investors are worried about the rise in oil prices and the impact on raw material costs. Your margins improved significantly last year. And this year, the guidance is that margins would be stable. How would you think about the impact of geopolitics and oil prices on your margins going forward? Florence Shi: Yes, I will comment on the cost fluctuations that could be impacted. So first of all, our global operations are running smoothly as usual, okay? We acknowledge there are potential risk to certain upstream raw material costs, but it takes time to transmit through the broader supply chain. We haven't seen any direct or quantifiable impact on our operations or cost, but we will closely monitor the situation and the market dynamics as everyone did. We have mature and diversified procurement network in place in past 25 years. On top of that, we are constantly optimizing our manufacturing process, driving operational efficiency, which helps us focus on the certainty of meeting the customer demands in need and remain committed to deliver exceptional services. Laurence Tam: Thanks, Florence. So we get to sell-side and investor questions now. So I will first start with 2 questions from Goldman Sachs, Chen Ziyi. So his first question is the company continued to be highly committed to TIDES' CapEx. So he would like to understand a bit more on the pipeline behind the CapEx budget beyond injectable peptides, which has been a key driver in the past 3 years? And what would be the next key modalities that could potentially be the new focus, for example, siRNA, antisense oligos, oral peptides or any new modalities that biopharma is thinking about at the early stages? Minzhang Chen: Well, so right now, there are many modalities. It's a combination. So there is no single modality that can replace all. So we have small molecules, we have peptides, and we have oligos, and we have all kinds of conjugates. But currently, the demand for peptides itself is so high, so we continue to build the capacity and to meet the market demand for the peptides. At the same time, we're also seeing oligonucleotide is growing. And although the market is still small, but we see that there are many, many molecules in the pipeline, and also it's going from rare disease now to a very broad to general disease. So the growth will be fast. And also small molecule. Now the molecules became more and more complex. So to manufacture, in large scale, very complex molecules, needed very technical capabilities as well as manufacturing capacities to meet the market demand. So we are doing all this. Laurence Tam: Thanks, Dr. Chen. So Ziyi's next question is there's been some debate on what will be the impact of pharma's announced big CapEx on building internal capacity, particularly in the U.S.? What is WuXi AppTec's view on that? Have you sensed any change on client outsourcing strategy in the past 6 to 12 months? Minzhang Chen: Yes. So in the pharmaceutical industry, historically, all the API drug products are manufactured internally. And then some of the work is done by the CMO, CDMO. And so this has a long history. So it's nothing new that the large pharma is also manufactured internally, nothing new. But we just committed continuously to improve our capabilities and to invest in capacities and provide the best service and meet the customer needs. Laurence Tam: Thanks, Dr. Chen. So the next few questions are coming from Michael Luo of CLSA. His first question is, can WuXi AppTec give us some color on the current utilization rate of the company's 4,000 cubic meter small molecule API capacity? And also, do you still have any plan to expand capacity in this area this year? Minzhang Chen: Yes. Our current capacity is highly utilized. And we have the -- well, because we don't really talk about the capacity for the -- we are building the capacity for small molecules, but actually, we have the land and we continuously build the small molecule capacities to meet the demand. So we grow double digit, over 11% last year, to almost RMB 20 billion for the Small Molecule D&M. So that means a lot of capacity. And this year, we expect accelerated growing from the Small Molecule D&M. So there will be more capacity. So we continue to build new capacity for small molecules. And if you go to our Taixing site, we have the land and we continue to build the new plants all the time. Laurence Tam: And his next question is, beyond obesity and diabetes-related projects, can management highlight any pipeline products or areas that may become meaningful contributors to revenue growth in the next 3 to 5 years? Minzhang Chen: Yes. So our business model is a CRDMO business model. So we have a very broad pipeline. So for example, currently, our D&M pipeline for small molecules, we have more than 3,000 molecules. And so, as a funnel, we continuously have the project moving to the late phase and the commercial projects. And many of those projects are very high-quality molecules. Clearly, GLP-1 right now has the most demand in terms of volume. But also, we have quite a few very promising high-quality molecules into the late phase and the commercial stage. For example, the PCSK9 molecule, autoimmune molecule, pain, neuroscience. So we have a number of that. Just the number I gave in the Investor Day last year, 2024, the Drug Hunter named top 10 molecules, and we work on 8 of them. Again, just a few days ago, they published 2025 top 10 molecules, and we work on 7 of them; and the best-selling small molecules, the top 10, we work on 4 of them. So we work on many of the high quality as big large volume molecules. But of course, right now, GLP-1 is still the #1, no doubt about that. Laurence Tam: Thank you. His next question is, can management share how you're thinking about CapEx allocation this year, in particular, which business areas or capacity building are likely to be the key focus going forward? Florence Shi: Yes. I think the CapEx spending really reflects our business model and our global expansion strategy. So a majority of our CapEx spending will be put on the CDMO capacity expansion, because our business generates more and more downstream D&M projects. And also, we're accelerating our global expansion in U.S., Europe and also the Middle East in future. But at the same time, we are also expanding the capacity for both small molecule and new modalities in China as well. Laurence Tam: Okay. Thank you, Florence. His last question is, given the recent volatility in the Middle East, has the company's strategic approach to the region changed in any way? And also which types of business or operations, if any, do you see as potentially suitable for the Middle East over time? Qing Yang: Yes, our global capacity and capability building is our long-term strategy. Clearly, that will continue. And we have announced a memorandum of understanding with government agencies with Saudi Arabia late last year. And our strategic initiatives in Saudi Arabia continue to proceed. We are engaging with relevant stakeholders and develop tactical plans for the next step. So that continue. Our CRDMO business model and our globalization of our capacity and capability is really the key to our continued growth, and we will continue to build the global capacities. In terms of what suitable area in Saudi Arabia, we are going through a deep dive with the advisory of local strategic advisory firms to understand local regulatory requirement and what are the suitable capabilities we should localize. Based on our preliminary feedback, clearly, there are lots of opportunities. We will likely start in the discovery space and then gradually expand to other part of our global platform. Laurence Tam: Thanks, Dr. Yang. Next, we have 3 questions coming from CICC's Wanhua. First question is, what is the current capacity utilization rate of the company's solid phase peptide capacity, which now exceeds 100,000 liters? What level of utilization does the company expect to reach in 2026? Are there any plans for further capacity expansion? Minzhang Chen: Yes. The peptide capacity currently is highly used. So as a result, actually, we just started 2 new TIDES buildings, so for both peptide and oligo, we just started 2 TIDES building construction in our Taixing site. In the meantime, we also built a new plant in Singapore for TIDES. So in short, yes, our capacity is highly utilized right now, and we are building new capacities to meet the growing demand. Laurence Tam: Thank you, Dr. Chen. Her second question is, what is the progress of U.S. and Singapore sites? And is it currently in line with expectations? How will these new facilities coordinate with the company's domestic capacity? And has there been any change to the expected time line for commencing operations? Minzhang Chen: Both projects are on time, on schedule and on budget. So our U.S. plant, which is in Middletown, Delaware, is for drug products. So it will have both oral solid dosage and injectables once completely operational. So hope Q4 this year, we're going to start the operation of the oral solid dosage, and a year later, Q4 next year, we're going to start the injectable business. Yes, this is the U.S. plant side. For the Singapore side, it's also on schedule and on budget, and the first plant will be operational next year, '27, and that is for API. So this way, then we will have a dual supply chain for the customers, so they can either get made in China or made outside China, which is in Singapore, for API. On the drug product, U.S. side is mainly for the U.S., North American market customers. And we also have a drug product facility in Switzerland, which is mainly for the European market. Laurence Tam: Thanks, Dr. Chen. Her last question is, the company has seen a significant increase in inventory. Is this mainly related to stocking for large orders? When are the corresponding orders for these inventories expected to be recognized as revenue? Florence Shi: Yes. I think this truly reflects our business model of our CRDMO business. Our inventory is being built based on the orders in hand. At the same time, as we have the capabilities to capture the high-quality molecules, which is more complex and takes longer manufacturing process, so that's why the inventory growth is higher than the revenue growth. I think that's a further validation of the high-quality growth trajectory of our business. Laurence Tam: Thanks, Florence. So next, we'll go back to Ziyi Chen from Goldman Sachs. He has a question on AI. So in the past 2 months, U.S. CRO company share prices have been hit hard by concerns on AI and how it could pose competitive pressure on pricing or volume for lab services and clinical services. What is WuXi AppTec's view on the impact of AI, particularly on its Testing and Biology segments? Qing Yang: So first of all, our Biology and Testing business remain robust, both in terms of the return to positive growth, as we reported, and also our outlook for 2026. We actually believe AI in combination with human intelligence could be a huge enabler, not only for our industry, but specifically for our company, and help us to increase efficiency, at the same time, increase our ability to anticipate and forecast the future in terms of customer needs and in terms of capacity utilization. This is an area we have invested heavily in terms of our ability to using operational data to make our animal room scheduling, study scheduling, reactor cleaning as well as other aspects of work become more efficient. The example we cited during the presentation on spectral resolution and interpretation for our DMPK team is a good sign. That situation is obviously very different from as we have seen in other sectors such as in enterprise software. Secondly, we do believe our wet lab capabilities to generate massive data and with high quality and consistency is actually very important for companies who are interested to build a new model and algorithms to increase their prediction capabilities. And we had opportunity to work with many leading companies in this space. And so while they may have models that have the potential to generate new hypothesis, at this stage most of those models require high-quality data, and we are uniquely positioned to provide those data. So this is actually a driver to more business for our Biology and Testing business. And finally, we believe, for our CRDMO model, with more advancement in ability to unlock either target space or come with new hypothesis to design molecules, it will only accelerate the flow of new ideas into project start, and that will ultimately benefit the funnel, the CRDMO funnel, in a world where research and discovery become even more globalized and decentralized. Laurence Tam: Thanks, Dr. Yang. So now we have 2 questions coming from Chen Chen of UBS. First, U.S. FDA has announced that it plans to drop the standard requirement of 2 Phase III or pivotal trials. Instead, the FDA's default position will be for Phase III trial for drug approvals. Do you think that it would accelerate drug approvals and benefit your new orders growth? Qing Yang: I will start and then invite Minzhang for additional comments. So first of all, any regulatory streamlined process will benefit from patients. Secondly, any acceleration in clinical development potentially will drive more demand and more timely demand for drug substance and drug product to supply clinical trial. And if that shortens clinical development time frame, it will help actually accelerate the commercialization drive. So we think all of those initiatives that shorten the time to patients will be beneficial for our CRDMO model. Minzhang, any additional comments? Minzhang Chen: No, I think that's well said. Laurence Tam: Thank you, Dr. Yang, Dr. Chen. So her next question is, one of your biggest clients announced a 10-year plan to invest USD 3 billion in expanding its oral dosage supply chain in China, focusing on oral GLP-1 manufacturing. And one of your peers, a CDMO, has received part of this investment, actually USD 200 million initially. Do you think you can also benefit from this multinational investment in China and to what extent? Minzhang Chen: Well, so we all know that GLP-1 drugs, no matter it's peptide or small molecule, has a huge demand and so this announcement, this investment just further proved that, yes, the demand is very high for the molecule. So because the demand is very high, and we are the major player in this field, so we believe we will benefit from the opportunities. I don't want to comment on the specific partnership or collaborations, but -- so the USD 3 billion investment, right now it's only USD 200 million, so we have to spend the rest. Laurence Tam: Thanks, Dr. Chen. So the next question comes from Huang Yang of JPMorgan. What is WuXi AppTec's positioning in oral small molecule GLP-1 CDMO business? Minzhang Chen: Well, we had a double-digit growth last year, and we are accelerating the growth for the small molecule this year. And part of the contribution of this growth is from the GLP-1 small molecule. Laurence Tam: Okay. And his next question is, it seems that Small Molecule D&M business will have better growth in 2026 versus 2025. What would be the main drivers for that? Minzhang Chen: Well, it's just demand, high demand, because the drug will be approved this year, I believe. Laurence Tam: Okay. Next, we have 2 questions coming from an investor from Franklin Templeton. "Hi, this is Harry from Franklin Templeton. Congrats on the robust performance. So firstly, what is the revenue breakdown? What is the mix do you see? And how do you see the geographical mix changing? Growth, obviously, is very strong in the U.S., while Europe and China are showing some recovery." So let's first address this question. Minzhang Chen: Florence, do you want to comment on the mix? Florence Shi: Okay. Yes. I think because we follow the customer, follow the molecule, and follow the science. So the geographic revenue growth really demonstrates where the innovation comes from, where's the customer need, our capabilities and the capacities. We do see the strong growth from across all the regions, and we believe that we can better deliver and execute in 2026. Minzhang Chen: Thanks, Florence. Yes, we see the PO growth across all the regions for 2025. So we believe that's growth for all the regions in 2026, but particularly the growth was strong last year in U.S. So that's why the percentage of the other regions relatively becomes smaller, but we expect the growth for all regions this year. And the small decline in China and Europe last year was mainly due to the delivery schedule of some large projects, but the growth momentum is there. Florence Shi: Yes. I think that's basically proof we have very good position everywhere. And we continue to see the strong growth in U.S., in China, and Europe and all the other regions. Laurence Tam: Okay. And his next question is on the TIDES business. How do you see sustainability of its growth? Minzhang Chen: Yes. So the largest product that we are making, the demand will continue to grow in the next many years by market forecast. So the demand will continue to grow. We also are working on quite a few late phase, very promising projects, which potentially could be big products as well. One more step back, we are a CRDMO, so we have a very big pipeline, not only in small molecules, but also in peptides and also in oligonucleotides. We have a pipeline and that pipeline continues to funnel the projects into the late phase and commercial projects. And that's where our sustained long-term growth comes from. Laurence Tam: Okay. And on oligonucleotides, what is WuXi AppTec's differentiation from the other oligo CDMOs or manufacturers? Minzhang Chen: Yes. So like all other modalities like peptides small molecule, if you can find a place that has quality, speed, cost, technical capability and the capacity, you tell me. So I think it's the same. So we put all this together, and I think that's our unique advantage. Laurence Tam: And his last question is, can you give us some color on the general time line that it takes for a new facility to be built and to contribute in a meaningful way to earnings? Minzhang Chen: So in China, we can do that in less than 12 months from start to fully operational. Laurence Tam: So we have 2 questions next coming from Nomura's Zhang Jialin. So firstly, what is the range for the TIDES business gross margin? Do we calculate over 60%, is this about the right range? And how should we think about the margin trend for TIDES? Minzhang Chen: Well, I don't believe we disclose the margin for TIDES. Florence, can you answer that? Florence Shi: Yes. We don't disclose the specific margin. But I think the margin naturally reflects our capabilities, the capacities and the value creation to the customers. Laurence Tam: Okay. His next question is, how is the current Middle East situation or conflict impacting the company's investment view in Saudi Arabia in the midterm? Qing Yang: As I already mentioned earlier, we don't see any near-term disturbance changing our long-term strategy. Our long-term strategy is strengthen CRDMO model, build global capacity wherever there is a customer need. And we're continually engaging with stakeholders in Saudi Arabia and proceed with evaluation of different localization options. Those continue to proceed based on our plan. Laurence Tam: Thanks, Dr. Yang. So next, we'll go to Citi's John Yung. You initially guided continuing operations revenue to grow 10% to 15% for 2025, and you delivered 21% plus. Now the same guidance for 2026 is a range of 18% to 22%. Should we also expect this guidance to be prudent and that you are confident to beat it? Florence Shi: Rather than calling our guidance prudent, I would view it as responsible to the market, right? And I appreciate you track our records. We are navigating a lot of the complex and volatile macro environments today, but we do have the confidence to execute the guidance we provide to the market. Of course, we will closely monitor and give the updated time line to all the investors if we see any different situation. Laurence Tam: Thank you, Florence. So next, we'll go back to Ziyi Chen's question. So 2026 guidance has been very clear and exciting. He would like to understand the growth sustainability a bit more. What is the reasonable growth expectation beyond 2026, when the TIDES business will be slowing down given the large base and key product cycles. What could be the key growth driver beyond 2026? Florence Shi: I think we have the confidence to keep the sustainable growth. And basically, we follow the molecules, and the CRDMO model really gives us the confidence. We will continuously capture the high-quality molecules and follow the science. And we do have the capabilities and capacities to better serve our customers. Laurence Tam: Okay. And going back to Nomura's Zhang Jialin, he has a follow-up question. Can management help us understand the competitive landscape of siRNA CRO space and the growth outlook? How much will it contribute to the current TIDES segment? Minzhang Chen: Yes. So there are many players out there that have provided the CDMO service on the oligonucleotides, specifically, I think siRNA. And also siRNA has a very large percentage in our pipeline as well. Like I said, we continue to focus on the service we provide, and we continue to focus on both the quality service, the capacity, the speed and the competitive cost. So I think with our unique advantage, we just focus on providing the best service and win the competition in the end, just like we do in every modality in our business. Laurence Tam: So next, we have an investor question. WuXi AppTec has RMB 42-plus billion of backlog expected to be converted in 2026, but you're guiding for RMB 51.3 billion to RMB 53 billion of total revenue. So that means roughly an extra RMB 9 billion to RMB 11 billion will need to come from new orders signed and delivered within the year. In the current environment, with trade policy uncertainty, how confident are you in that year booking assumption? And has Q1 2026 order activity remained consistent with that trajectory? Florence Shi: Yes. I think you're right. You noticed. Actually, in our total backlog, it is expected to convert -- like 70% of our total backlog is expected to convert into the revenue in 2026, which is within the next 12 months. I think our ability to convert orders into revenue with speed and efficiency actually reflects our strong execution capabilities across our whole organization. And if you compare with the historical number, actually the percentage is significantly improved, which also demonstrates we have more and more late-stage clinical and commercial projects on hand. That really enhances the near-term visibilities and the certainty of our growth trajectory. As I mentioned, with all the efforts we are making, we do have the confidence to deliver our guidance. And of course, we always try to beat it, right? So I don't see there is any big concern about the new orders coming in the conversion. Laurence Tam: Okay. Great. Thanks, Florence. So last question, let me wrap up by touching a bit on geopolitics. We haven't really talked about the 1260H list from the U.S. Pentagon. Obviously, it was released shortly in February and then withdrawn within like an hour. And a lot of investors looked at that list and saw WuXi AppTec being on there together with a lot of big Chinese companies. Does the company have anything to say on that? Obviously, Sino-U.S. relations were moving in a positive direction in the months prior to that with obviously, the BIOSECURE bill not naming the WuXi companies. What is the company's view on relations between the 2? Qing Yang: Yes, I'll take that question. So as you mentioned that we have seen that in February the list was put on and withdrawn. So at this time, the final 1260H list for 2026 has not been officially published. And there's no definitive timetable at this time as to when this is going to publish, no one actually knows, and we won't make any prediction or speculations for the timing of the U.S. government's actions. At the same time, they are very confident that WuXi AppTec shall not be included in the 1260H list. We are a publicly traded company listed in Hong Kong and Shanghai with a transparent corporate governance. The company is not owned or controlled by any government or affiliated with any government or military organization. So at this moment, the company will continue to monitor the situation and take all necessary actions to correct any misinformation and clarify any misunderstandings. And in terms of BIOSECURE Act, you mentioned that -- we all know that the bill was passed as part of the NDAA at the end of last year. Since then, there's no recent development on the implementation. So we'll continue to monitor. Laurence Tam: Thank you very much. So we're coming up to the time limit. So let me pass it back to management to do concluding remarks. Minzhang Chen: All right. Thank you all for joining today's earnings call. So 2025 is the 25th anniversary of WuXi AppTec. So for the past 25 years, WuXi AppTec has been dedicated to lowering the barriers to R&D and advancing health care innovation worldwide. Entering 2026 with a sharpened focus on our core CRDMO strategy, we are accelerating the growth of our global capabilities and capacities, further improving production and operational efficiency and delivering greater value for customers and shareholders. Staying true to our founding aspiration, we will remain committed to doing the right thing and do it right, enabling our partners to deliver life-saving therapies to patients in need and advancing our vision that every drug can be made and every disease can be treated. Thank you all. Laurence Tam: Thank you very much to WuXi AppTec's management and the IR team. This will conclude the presentation. Thank you all for joining. Florence Shi: Thank you. Ruijia Tang: Thank you. Qing Yang: Thank you. Laurence Tam: Bye.