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Operator: Good morning, and welcome to the Dollarama Fourth Quarter and Fiscal Year 2026 Results Conference Call. On today's call is Neil Rossy, President and CEO; and Patrick Bui, CFO. They will begin with brief remarks followed by a Q&A with financial analysts. Before we begin, please note that today's remarks may contain forward-looking statements about Dollarama's current and future plans, expectations, intentions, results or any other future events or developments. Forward-looking statements are based on information currently available to management and on reasonable estimates and assumptions made by management. Many factors could cause actual results, future events or developments to differ materially from those expressed or implied. You are cautioned not to place undue reliance on these forward-looking statements. Forward-looking statements represent management's expectations as of March 24, 2026. Except as may be required by law, Dollarama has no intention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You are invited to consult the cautionary statement on forward-looking statements and Dollarama's management's discussion and analysis dated March 24, 2026. All forward-looking statements on today's call are expressly qualified by this cautionary statement. In addition, Dollarama may refer to certain non-GAAP and other financial measures during the call. Please consult the non-GAAP and other financial measures section of Dollarama's with MD&A dated March 24, 2026, for definitions, reconciliations with the appropriate GAAP measures and other information. The disclosure documents related to this call are available in the Investor Relations section of dollarama.com and on SEDAR+. I will now turn the call over to Neil Rossy. Neil Rossy: Thank you, operator, and good morning, everyone. For fiscal 2026, we are pleased to have met or exceeded our financial guidance on all metrics, while we also advanced our growth ambitions. We generated same-store sales of 4.2% in Canada for the year and delivered strong earnings growth with EPS increasing nearly 14% year-over-year. Fiscal 2026 also marked a significant milestone in our international expansion with Dollarcity entry into Mexico and our acquisition of a national discount chain in Australia. In Canada, our compelling value continued to resonate in a economic environment that is weighed on consumer sentiment and discretionary spending. As Canadians face pressures on their household budgets, they turn to Dollarama for a year-round value and everyday convenience. Throughout the year, our full assortment contributed to solidifying Dollarama as a destination for affordable goods across our product categories. We experienced solid demand for general merchandise and seasonal items which speaks to the strength of our buying team and direct sourcing platform. We also saw continued sustained demand for consumable products, which speaks to our ability to offer strong value for sought after every day essentially. Unfortunately, the weather did hamper our fourth quarter performance, which was off to a good start. Unfavorable weather conditions across Canada directly impacted both store traffic and peak sale periods through to the end of January. However, we nonetheless generated 1.5% same-store sales growth in the quarter with basket growth driven by a positive seasonal performance. In Canada, we successfully opened an exceptional 75 net new stores in fiscal 2026. This brought our network across the country to 1,691 stores by the end of January. For fiscal 2027, we are returning to our historical cadence of annual net new store openings in the range of 60 to 70. This past February, we had another real estate milestone with the opening 1,700 store in Canada. We are making steady progress towards our long-term target of 2,200 stores by 2034. Reaching this threshold of stores requires us to grow our distribution and warehousing capacity in tandem. The development of our logistics hub in Western Canada is moving along well, having made significant progress building the structure. With everything moving along on time and on budget, we are on track to have our Calgary hub operational by the end of 2027. Having a 2-node logistics model support our long-term growth in Canada and bring added resilience to our logistics through redundancy. By applying our proven business model Dollarcity continues to generate strong top line momentum, margin expansion and footprint growth across our core markets in Latin America. This is translating into impressive year-over-year network and earnings growth. Consistent with the prior year, Dollarcity opened 100 net new stores in 2025 bringing into total store count to just over the 700 store threshold at year-end. This includes 11 stores in Mexico since entry last summer, where we are now building a new growth platform. Dollarcity is well on its way to achieving its store target of 1,050 stores by 2034. As a reminder, this excludes Mexico for which we have not yet set a long-term target. In fiscal 2027, Dollarcity will continue to grow in its first 4 countries of operation in LatAm with a focus on growth in Colombia and Peru. At the same time, we will be carefully scaling our presence and operations in Mexico. While it is still early days, we continue to be pleased with the team's execution and initial customer reception. Over the last few months, we have been firming up our plans in fiscal 2027 priorities for our multiyear transformation of our retail platform in Australia. We have several initiatives underway across 3 main pillars: merchandising, store experience and network growth and operational excellence. Deploying aspects of our model is impacting just about every facet of the business. In the near term and through fiscal 2027, this work will be both gradual and disruptive but it is a prerequisite to setting up our Australian operations for future success. Changing the merchandising strategy is the most important pillar of the transformation and the most complex to implement. We expect our first Dollarama in port SKUs to start hitting shelves during the second quarter of fiscal 2027, with imports primarily comprised of general merchandise and seasonal items. The target is to have about half of the Dollarama import SKUs sourced by the end of fiscal 2027. On the domestic side, which is primarily consumables, we are also looking at products SKU by SKU to deliver increased value to our customers. Under store experience and network growth, our goal is to renovate the layout and change fixtures in 60 to 80 stores this year, having done 4 last year. We also aim to open 15 to 25 net new stores, all with the dollar MLA out in fixtures, having opened 7 in fiscal 2026. On operational excellence, we are strengthening the IT infrastructure and optimizing various processes. Notably, we are working on migrating Australia's ERP system to ours to get all our business processes integrated to the same platform. On the logistics front, we are finalizing our plan to optimize operations and support long-term growth. We are also adding team members as we built the bench strength of the local team. Once a store feels like a Dollarama shop and reflects our value proposition through both the offering and open experience, we will convert that store to the Dollarama banner. By fiscal year-end, we will be in a better position to evaluate our progress on this front and initial customer reception. The objective is to build our brand equity in the market by introducing our strong and differentiated value and convenience position as we have done over time in all of our other markets. As you can see, the year ahead is shaping up to be both busy and exciting for Dollarama. Today, we have strong teams across 3 continents working to execute on their respective growth plans with each market bringing its own unique set of characteristics, priorities and opportunities. While the path may differ from one market to the next, the long-term vision guiding our efforts remains the same: to deliver unbeatable value to consumers in every market where we operate and to create long-term value for our shareholders. As we enter fiscal 2027, the macroeconomic and geopolitical backdrop is evolving rapidly and remains uncertain. Considering the current economic environment in Canada, we expect that consumers will continue to be cautious and deliberate in their spending. In this context, the importance of value is only increasing. And we believe that the value, convenience and affordability we offer will continue resonating with consumers. Looking at the broader geopolitical environment, the conflict in the Middle East is beginning to have ripple effects on transportation and production costs. Our business model is resilient and provides us with a number of levers to help mitigate these impacts in the near term. The key variable will be the duration of the conflict which will determine how persistent these cost pressures will be. As always, we remain highly disciplined as price followers. We will only pass on price increases were absolutely necessary and while staying true to our year-round value proposition. Across the business, our focus is on the disciplined execution of our plans maintaining our strong value proposition and leveraging the strength of our business model to deliver for our customers and our shareholders. With that, I'll pass it over to Patrick. Patrick Bui: Thank you, Neil, and good morning, everyone. Let's start with a brief overview of our consolidated results before turning to segment performance. Q4 sales, which included 1 less week compared to last year, increased by 11.7% to $2.1 billion. For fiscal 2026, sales increased by 13.1% to $7.3 billion positively impacted by contributions from Australia as well as greater number of stores and SSS growth in Canada. Diluted EPS increased by 2.1% in Q4 to $1.43. This included a positive $0.03 impact from Australia. For the full fiscal year, EPS rose by 13.7% year-on-year to $4.73. Our Canadian segment met or exceeded all financial guidance targets. SSS came in at 1.5% for Q4 over and above SSS of 4.9% in Q4 last year. The increase was primarily driven by demand for seasonal products, offset by 2 important factors. The first is a calendar shift caused by a 52-week fiscal year following a 53-week fiscal year. In the quarter, this resulted in one less historically strong pre-holiday sales week and an additional historically low sales week at the end of January. It also included 4 less pre-Halloween shopping days compared to Q4 last year, which we recorded in Q3. Excluding the calendar shift, SSS would have been 3.5%. The second factor was the weather. As mentioned by Neil, a high volume of weather events, including cold temperatures and precipitation impacted store traffic and resulted in lost sales. This is reflected in the 1.6% decrease in the number of transactions. Despite this, Basket growth was healthy, growing 3.1%, and we met our annual SSS guidance for the year coming in at 4.2%. While the weather resulted in softer-than-anticipated SSS as weather conditions improved, so did traffic patterns. Store traffic continued to recover nicely as we entered fiscal 2027. Looking ahead to fiscal 2027, we anticipate generating SSS growth in Canada of between 3% and 4%. Consistent with our outlook last year, we continue to expect sustained demand for the compelling value we offer, which remains particularly relevant in the current environment. At the same time, we also remain mindful of the macro environment and the uncertainty it creates. Gross margin for the Canadian segment came in at 46.6% of sales in Q4 compared to 46.8% last year. The variance is primarily due to the 53rd week in fiscal 2025, with the 14th week in fiscal 2025, providing additional scaling benefits. Full year gross margin was 45.6% of sales, slightly exceeding the top end of our guidance. For fiscal 2027, our guidance range for gross margin in Canada is in line with last year at between 45% to 45.5% of sales based on our ability to actively manage product margins. Looking at early fiscal 2027 and given the current macro context, we are closely monitoring pressures in the global supply chain which may negatively impact gross margin during the year. SG&A for the Canadian segment in Q4 was 14.5% of sales compared to 14.7% last year. The improvement reflects the positive impact of scaling. Full year SG&A came in within guidance at 14.4%. For fiscal 2027, we expect scaling to help offset the impact of higher store labor and operating costs. As a result, our annual guidance range for SG&A in Canada is slightly better than in the prior year at between 14.1% and 14.6% of sales. Finally, CapEx for fiscal 2027 in Canada is between $420 million to $470 million. The year-over-year increase primarily reflects capital spend for our logistics hub project, a portion of which shifted over from last year. Turning to Dollarcity. Our share of their net earnings in Q4 increased by 22% to $70.5 million. For the year, our share reached $191.5 million, an over 47% increase. This was driven by SSS and store network growth, offset by the ramp-up of operations in Mexico. On a 100% basis, the Mexico business realized a net loss of USD 5.4 million and USD 11.7 million for Q4 and the full year, respectively. As the business is still in ramp-up mode, we expect a loss in fiscal 2027, consistent with the range provided last year of between USD 10 million to $20 million for 100% of the business. On February 5, Dollarcity declared a dividend of USD 125 million, with our share coming in at USD 75.1 million. The doubling of the dividend compared to the previous one declared speaks to Dollarcity's strong free cash flow generation with its profitable growth trajectory continuing to mirror Dollaramas. In early fiscal 2027, we made a capital contribution of USD 38 million towards Mexico expansion plans. This follows 2 USD 18 million contributions made last year. As with previous capital contributions, we allocated a portion of our share of the latest Dollarcity dividend. Looking now at Australia. For the approximately 6-month period since our acquisition in late July, the business had a neutral impact on consolidated net earnings for fiscal 2026. For perspective, looking at the full year and on a pro forma basis, Australia generated approximately $916 million in sales and a net loss of $10.6 million, all in Australian currency. Turning to fiscal 2027. It is expected to be an investment year as we ramp up the integration process. Neil spoke to our priorities across our strategic pillars. As a result, the Australian segment is expected to generate a net loss in fiscal 2027. These impacts are presented in our financial documents and in our investor presentation, which is available on the Event page, but I'd like to call out the main ones. First and most significant is the anticipated negative impact from the merchandise changeover and transition to lower-priced items. As you can appreciate, it is also the hardest to quantify at this stage of the transformation as it will depend on several factors. These include the timing of the product transition. The speed at which sales of incumbent higher-priced SKUs will be compensated by sales of the lower-priced Dollarama SKUs and impact on store traffic. That said, we anticipate a negative impact on sales for the year. The second is related to capital expenditures for store renovation and net new store openings. These are estimated at between AUD 400,000 and AUD 600,000 per renovated store and between AUD 800,000 and AUD 1 million per net new store. There is also a direct impact on sales during renovation related store closures. Third is P&L related. We expect to incur about $35 million to $45 million in incremental costs related to integration, IT transformation, additional head count and labor costs. These transformational changes are essential to set the business on a path for profitable growth. There's a lot of work to be done, but we are excited and motivated by the upside potential once we work through some of these major changes to the business. Our vision is to build a leading value retailer with a strong and favorable margin profile compared to global peers. The work we are undertaking in fiscal 2027 will represent a critical first step in our multiyear path to deliver attractive return on investments. Back to Dollarama, in terms of returning capital to shareholders, we repurchased over 4.4 million shares for cancellation during fiscal 2026 for a total cash consideration of $834.2 million. We also announced today that the Board has approved a 13.4% increase to the quarterly cash dividend, bringing it to $0.12 per share. Looking ahead, our priorities are clear. We will continue to allocate capital in a balanced manner as we pursue our profitable growth in Canada and LatAm and as we embark on the transformation of our Australian platform. Consistent with past practice, we also intend to allocate the majority of excess cash towards share buybacks and a dividend subject to quarterly approval. While the broader economic environment remains uncertain, the underlying fundamentals of our business are strong and our value proposition as relevant as ever. As we enter the next fiscal year, we are focused on disciplined execution to advance our growth initiatives across multiple geographies and support long-term value creation for our shareholders. With that, I'll now turn the call back to the operator for the Q&A. Operator: [Operator Instructions] Our first question is from Irene Nattell with RBC Capital Markets. Irene Nattel: I was wondering if we could spend a minute just unpacking that same-store sales number. You called out weather, you called out strong seasonal. Can you give us an idea of what the cadence was through the quarter, what the exit rate was, where we are quarter-to-date and what the demand is like across the store, please. Patrick Bui: Sure. Thanks for your question, Irene. Look, starting at a high level, we believe the overall consumer environment remains exactly the same, right? Canadians are faced with pressure on their household budgets and they turn to Dollarama for year-round value and everyday convenience. So if you look at it sequentially, we had strong momentum as we exited the third quarter. We had strong momentum as we started the fourth quarter in November. And then traffic then dropped off when we encountered unfavorable weather conditions in December and in January. But once those conditions were behind us, traffic resumed nicely in February and as we kicked off fiscal 2027. So it seems to suggest that the consumer environment that we've seen in the past few quarters, the past many few quarters is exactly the same that we're seeing as we start the new fiscal year. Operator: Our next question comes from the line of Brian Morrison with TD Cowen. Brian Morrison: The second focus, I think, this morning is Dollarcity leverage with your sales up 28% and equity income up 22%. But when you look at the disclosure, the Mexico loss, I think you even called that on the call, would the LatAm growth have been 30% to 35% illustrating leverage, Patrick. Is that correct? And I know there was a pricing structure in Colombia. It was a positive driver last year that will be lapped but looking forward, how should we think about leverage drivers at LatAm and what your breakeven store target is for Mexico? Patrick Bui: Sure. So it is true when you look at those numbers of top line of 28% and bottom line of 22%. That does include Mexico. And so if you were to exclude Mexico, I think you're correct in saying that bottom line growth is over 30%. You need also to consider that when you look at the top line growth, it includes sales from Mexico this year. and we didn't have those sales obviously last year. So you would conclude that the Dollarcity business, excluding Mexico is still benefiting from leverage and scale as we move in time. So to conclude that the business is still growing at a good pace, and there is still scaling benefits to come in the future. I believe before I forget, there was a second part of your question about Mexico, we've provided in our financial statements the loss for 100% of Mexico this year. We've also commented that Mexico, while we're very happy with the progress is still in ramp-up mode. So we do expect a loss similar -- a range similar to last year, so about USD 10 million to USD 20 million. After that, hopefully, EBITDA losses will shrink, but a little too early, Brian to be -- to have a clear view on when that business will break even. Operator: Our next question comes from the line of Chris Li with Desjardins. Christopher Li: Maybe just a 2-part question on Australia. First is, I know it's still super early, but for the stores that have been renovated so far, what's been the sales lift? And is it trending in line or better than your expectation? Patrick Bui: Yes. And just to take a step back. So what we're doing when we're converting stores, right? So we talked about renovating the layout of the stores, having the appropriate racking, lighting, flow of shopping as well. But it also provides us a higher density of products in the stores, which is an important condition when you're selling low price items and high-volume sales. And so one would expect a positive uplift. And even if all the products are currently all TRS products, if I could say, we did see a pickup in unit sales. That being said, the real power of the conversion is really when you combine the conversions with a good density of Dollarama SKUs, and we're not there yet. As Neil commented, we're going to start introducing some SKUs in the first part of -- the first part of the second half of the year. Operator: Our next question comes from the line of Mark Petrie with CIBC. Mark Petrie: Neil, you touched on this in your prepared remarks, but obviously, the macro picture has gotten significantly murkier in the last month or so. Can you just add some color to what you said already with regards to the impacts that you've seen on your supply chain, costing and consumer demand. And obviously, as you said, the longer this goes on, the higher the risk is to affecting costs more materially. But what's the sort of over under on when you would expect this to affect your outlook and guidance. Neil Rossy: So it's still early days. And unfortunately, higher energy costs will permeate throughout the supply chain for all retailers and for consumers over the next few months to a year. The duration of the conflict will decide the scale of the effect. But certainly, inbound costs, outbound costs production costs, raw material costs are all being affected by the increased cost of oil. And that will eventually make its way down the supply chain. Our job as low-cost retailers and value retailers is to ensure that we're price following and to ensure that we are offering the best value -- relative value in the market that we can. But I don't believe that any retailer will be -- will escape the reality of global economics. And we just -- we all hope for the consumer and for the world, I would go so far as saying that the conflict ends as quickly as possible. Operator: Our next question comes from the line of John Zamparo with Scotiabank. John Zamparo: Perhaps a follow-up or 2 on that same topic. I wonder if you can elaborate on the ripple effects you've seen. It would be helpful to get a sense of some magnitude on how impactful you expect this to be? In other words, what the gross margin guide would have been prior to the start of the war? And just to clarify, have you seen any deceleration in same-store sales subsequent to the start of the war? Patrick Bui: Yes. Look, I mean, as Neil alluded to, this is early days, right? So we are seeing some increased costs in transportation. We're seeing some cost increase and even product costs. But if we're under the context of this is short term, all of this is -- some of it is included in our guide, right? So if you look at our guide, we're saying 45%, 45.5% million same as last year, recognizing that there might be some incremental costs that we're seeing right now. But very important is to Neil's point, if this is prolonged and/or deepens, well, there will be potentially over time, consequences on gross margins that we may or may not be able to pass on. But generally speaking, we have a resilient business model and we're in a good position to offset some of those costs. So I would say we've included some of what we're seeing in the guide. But obviously, if this gets prolonged and gets worse, well then there might be negative consequence on our gross margins and frankly, ripple effects throughout the whole industry and the whole economy. Operator: Our next question comes from the line of Etienne Ricard with BMO Capital Markets. Etienne Ricard: Patrick, to circle back on Mexico. If you look at your experience in other markets for Dollarcity, at what level of scale from a store count perspective, do you typically reach breakeven levels in a given country? Patrick Bui: Every -- I would start out by saying we're following a recipe in all countries we open. So this is arguably the fifth time, but there are some nuances, right? Like certainly, in this case, Mexico is a bigger country, so does might take bigger investments to start off with. And so it's hard to compare with other countries. But just to give you some elements, think of the pace at which we're ramping up Mexico to be pretty much in line with the experience that we've had in a country like Colombia or Peru. So it gives us -- we'll give you a sense of what we're thinking in terms of ramp-up and related to that and a little bit to an earlier question, we're not breakeven. We weren't breakeven last year. We don't expect to be EBITDA positive next year. So maybe in the following year, we might be starting to curb EBITDA losses, but this is not bottom line, right? So you would need incremental time to derive a breakeven on the net income. But like I said, a little too early to say, have a look at the other countries, we'll give you a sense of direction but every country is slightly different. That's all we could say on that. Operator: Our next question comes from the line of Ed Kelly with Wells Fargo. Edward Kelly: I wanted to dig in on Australia. I've heard you say a couple of things this morning around -- it sounds like a little bit of a comp headwind. You're going to be doing remodels. There's some transition costs. I'm not sure about the gross margin opportunity. But when you put all this together for a business that, I don't know, maybe it was a small loss in fiscal '26. Does the loss in this business grow to a range of sort of $30 million to $40 million in EBIT? I'm just kind of curious if you could help us frame that because it does look like maybe could matter from an earnings perspective. Patrick Bui: Sure. So let's take it piece by piece. As we think about the potential impact to fiscal year '27. So first point is the business on a stand-alone basis, so without transformation from Dollarama, you look at last year on a full year basis, what had a loss of AUD 10.6 million. So you need to start from that base to which when you look at the 3 pillars that we've laid out in our investor presentation, there are incremental integration costs. So we talk about $35 million to $45 million that you would need to factor in. Then you move to -- and I'm moving from third bucket and coming to the first, but the second bucket is a lot about CapEx. So we provide some color in terms of store renovations and new stores. There is a small P&L impact for the period during which we're going to close a source for the renovation. So we would need to factor that potentially a little bit of DNA. And then the first bucket is really the most uncertain. So this is about transitioning the products, and we talked about all the factors. But this one, as you might appreciate, we barely have a Dollarama product in the country. And so to start guessing the impact of the transition is a little dangerous at this point. But certainly, once we get greater clarity there, we'll be happy to share with you. But that's how I would think about framing the net income loss for this year. Operator: Our next question comes from the line of Mark Carden with UBS. Mark Carden: I wanted to touch quickly on the competitive backdrop. Are you guys seeing any shifts in intensity, particularly from some of the mass merchants? And then population growth has also pulled in meaningfully any shifts in how you approach unit growth placement going forward in same-store sales, just given the change in dynamics there? Neil Rossy: No. I think the market in Canada is quite stable. Competition remained stable. There's no real new entrants to talk about. Overall, I would say it's business as usual in Canada. Operator: Our next question comes from the line of Martin Landry with Stifel. Martin Landry: I would like to touch on your same-store sales guidance for fiscal '27. I would like to know a little bit what assumptions you've used in terms of traffic and basket size? And also if you can talk a little bit about price increases quantify maybe what you've done in terms of price increases in '26? And what's implied in your guidance for '27? Patrick Bui: Yes. Taking from a high level, the 3% to 4%, if you recall, it's the same guidance as we provided last year. And so to an earlier comment, when we think about the economic and demand side, it's a very similar setup than what we have seen last year. The slight nuance perhaps compared to last year is towards the end of fiscal '26. We started seeing some price increases from the domestic side, which will trickle into fiscal '27. So there's a little bit of an uplift when we think about the beginning of fiscal '27 but other than that, we expect a context that is very similar to this year. So the last year, sorry. I mean certainly, as we start the year, there's a lot happening out there and a lot of unknowns. And so we think it's prudent to start with the same guide as we've had last year at 3% to 4%. Operator: Our next question comes from the line of Zhihan Ma with Bernstein. Zhihan Ma: I wanted to circle back on the Australia side. I think initially, you were kind of saying that it probably takes 3 to 4 years in that range to turn profitable in Australia. I'm wondering if that's still the right time line to think about it? And I'm assuming that probably means you'll have enough time to convert all the merchandising in stores, but probably not remodel the stores. How should we think about what does it take to turn profitable on the ground? Neil Rossy: Yes. Thanks for the question. So consistent with what we said in the past, this is a multiyear transformation, i.e., 4 years. And what the 4 years takes into account is think of the conversions being an important part of this transformation. So 400 stores, going at an average clip of 100 per year, that takes 4 years. So for us to say the transformation is complete. We need to make sure that we're well advanced, if not completed on the conversion side. And one is, hopefully, what we'll see in 4 years is that we'll have our stores converted and a strong assortment of Dollarama SKUs in the stores. And so yes, we remain consistent with that 4-year time line. Operator: Our next question comes from the line of Luke Hannan with Canaccord Genuity. Luke Hannan: Patrick, you touched on the first bucket as it relates to the Australian business transformation as being the most important and talked about refreshing the assortment through the balance of this year. Just curious to know how did you target that initial cohort of SKUs that you're looking to swap out and put in your own? Are they concentrated within any particular price points or category as we think about your assortment? Neil Rossy: So the initial study was on, of course, Dollarama's strongest SKUs, taking into account, of course, the SKUs that are transferable to Australia since they have different compliance rules different standards and different products, different voltages in their electricity grids, different sizing in their note pads that they follow a U.K. standard on things in the stationary lines. So barring the exceptions that are different between Canada and Australia. The balance of the items we started with a focus on compliance first and foremost, the items that we were able to do compliance quickly on because the Australian compliance centers are entirely different from Canada. So an entire compliance study has to be done on every single SKU that goes into the country. But the goal is to get all dollar and the SKUs into Australia within the next 2 years or so. The priority started with our best SKUs and the most transferable SKUs. Operator: Our next question comes from the line of Corey Tarlowe with Jefferies. Corey Tarlowe: Great. Patrick, you made a comment that around a $10 million loss from Australia and then, I think, building to like $35 million to $45 million as an investment or starting point I think that's like $0.15 to $0.25. Can you just clarify kind of the glide path on that and on the investments, I just wanted to double click on that. Patrick Bui: Yes. Sorry. Part of your question I cut off. But yes, you're starting from that $10 million base just as the business operating as normal. And then you would add on top of that $35 million to $45 million of incremental integration cost. And then I also talked about the 2 other buckets, the impact of the store opening. So there is some incremental P&L impact there, but that's mostly CapEx. And then you would need to factor in something. We're guiding that it will lead to a net loss in sales. So that would have an impact on your bottom line but you would need to add all those pieces. And so all of that transformation, especially when you think about integration costs, have started as we kicked off the new year, and the team is working very hard to transform the business, but also as a necessary condition are also incurring incremental costs. Neil Rossy: And I just wanted to add that clearly, the Dollarama team feels strongly that in the long term, this is a very exciting project and that bringing value to the Australian consumer has merit, both for the consumer and for our shareholders. So while this is a 4-year project, once you've established a low-cost retail platform in Australia with -- by that point, over 500, 600 stores, we feel very confident that being the 800-pound gorilla in the market will play very well for our shareholders. Operator: Thank you. And I'm showing no further questions at this time. This does conclude today's call. Thank you all for your participation. You may now disconnect.
Operator: Good evening, and good morning, ladies and gentlemen, and thank you for standing by for 17EdTech's Fourth Quarter 2025 and Full Year Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I'll now turn the meeting over to your host for today's call, Ms. Lara Zhao, 17EdTech's Investor Relations Manager. Please proceed, Lara. Lara Zhao: Thank you, operator. Hello, everyone, and thank you for joining us today. Our earnings release was distributed earlier today and is available on our IR website. Joining us today are Ms. Sishi Zhou, Chief Financial Officer; and myself, Investor Relations Manager. Sishi will walk you through our latest business performance and strategies and I will discuss our financial performance in more detail. After the prepared remarks, Sishi will be available to answer your questions during the Q&A session. Before we begin, I'd like to remind you that this conference call contains forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties or other factors, all of which are difficult to predict and many of which are beyond the company's control. These risks may cause the company's actual results, performance or achievements to differ materially. Further information regarding these or other factors -- other risks, uncertainties or factors is included in the company's filings with the U.S. SEC. The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise, except as required under applicable law. I will now turn the call over to our Chief Financial Officer, to review some of our business development and strategic direction. Sishi? Sishi Zhou: Thank you, Lara. Hello, everyone. Thank you all for joining us on our fourth quarter and full year 2025 earnings conference call. Before we begin, I would like to note that the financial information and the non-GAAP numbers in this release are presented on a continuing operational basis and in RMB, unless otherwise stated. Let me begin with our latest business update. In the fourth quarter of 2025, we continued to deliver steady progress in our core business with top line growth on a year-over-year and quarter-on-quarter basis. Our school-based subscription model business continued to expand, contributing a growing share in total revenue, emerging as a key contributor during the quarter. Meanwhile, we successfully launched our new consumer-facing product, [ ETIC, ] which is closely aligned with the National AI plus education initiative. Leveraging the brand recognition and user trust cultivated over the past decade. Our new AI membership products have achieved strong presale orders and received highly positive market feedback since its launch, demonstrating its robust growth prospects in the quarters ahead. Notably, the robust preseale demand for our new products generated a significant increase in free cash flow. At of quarter end, we maintained a healthy cash balance of RMB 407 million, reflecting the promising trajectory of our new AI-powered offering and the positive expectations for future cash flow. Now let me go into more details. In the fourth quarter of 2025, we recorded net revenues of RMB 38.9 million an increase of 94.6% on a quarter-on-quarter basis and a 6.4% growth on a year-over-year basis, driven by the growing contribution of recurring revenue under subscription model as well as our consistent commitment to cost control. Gross was restored to a normalized level of 46.1% in Q4, a 12.5 percentage point increase on a year-over-year basis, benefiting from sustained efficiency improvements, our net loss narrowed by 16.8% year-over-year. We also generated positive net operating cash inflow in the quarter driven by the strong momentum of our new [ CN ] business and continuous improvement in operational efficiency. During the quarter, our school-based subscription model business maintained positive progress, contributing a growing share of total revenue. The increase in net revenues from this segment reflects its recurring nature as it continues to scale effectively. The steady progress of our school-based subscription business has not only strengthened our financial health, including gross margin and other key metrics, but also helped us reach a broader base of potential users and enhanced brand influence, laying a solid foundation for the launch of our [ CN ] business. In response to the national initiative of embedding AI throughout the entire educational process and guided by our mission to make learning a wonderful experience, during the quarter, we successfully rolled out AI personalized learning membership product, [ ETIC ] targeting [ CN ] users. Levering to the user trust built over years, strong brand endorsement from our district level and school-based projects as well as mature smart hardware capabilities and solid AI foundation with new AI membership product has garnered a strong market enthusiasm and a robust preorder volume. In the design of this product, we are committed to enabling users to achieve a more personalized, effective and enjoyable learning experience in less time. It deeply integrates our hardware and software capabilities together with the exclusive content resources we have built over the past decade. Our Smart Pen captures full process writing data while respecting traditional play and paper habits. It efficiently digitalized handwritten notes and exercise responses, visualizing users thinking process rather than simply uploading final answers. By visualizing these thinking patterns, we are able to deliver personalized learning diagnostics, generate AI-powered customized practice nodes and intelligently recommend similar learning exercises, enabling highly efficient and focused learning practice. Users' own notes taken with this [indiscernible] with support for custom tag, categorization and quick search. As a result, users can quickly identify their learning areas for improvement without spending extra time manually organizing paper notes comparing practice notes or searching for relevant problems. In addition, our AI panel provides study supervision based on personalized diagnostics and over tailored learning plans aligned with the local learning schedules and individual progress. This allows users to focus on their growth areas and improve efficiently. These personalized practice and planning capabilities are backed by our 10 years of deep insight into local learning profiles supported by massive data from large-scale regular full scenario usage across our platform. The product also features interactive tools, including AI Q&A and AI transmission, et cetera, along with a suite of value-added learning resources. Notably, we have introduced Toby Smart Rabbit, an intelligent learning companion that provides emotional support through natural voice interaction. It reminds users to study, offers encouragement and makes the learning experience warmer and more engaging, helping users stay consistent with the personalized learning journeys. Looking ahead, we will continue to explore innovation practices in AI plus education and steadily reiterate and upgrade our products. Our business segments, serving [ GN, BN and CN ] users will grow in synergy as we further strengthen our brand influence and enhance user value. The above concludes the business update. Now I will turn the call over to Lara to walk you through our latest financial performance. Thank you. Lara Zhao: Thanks, Sishi, and thank you, everyone, for joining the call. I will now walk you through our financial and operating results. Please note that all financial data I talk about will be presented in RMB terms. We are pleased to announce healthy financial results for the first -- for the fourth quarter of 2025 with top line growth of 94.6% on a quarter-on-quarter basis. Gross margin for the fourth quarter of 2025 was 46.1%, representing a 12.5 percentage point increase on a year-on-year basis compared to the same period last year. Meanwhile, our continued focus on operational efficiency resulted in narrowing losses in the fourth quarter and the fiscal year of 2025. Despite an increase in sales and marketing expenses in support of the launch of our new AI-powered consumer business, we achieved a reduction in total operating expenses for the fourth quarter and full year of 2025 by 10.9% and 24.3%, respectively, resulting in narrowing losses by 16.8% and 20.0%, respectively, on a GAAP basis. Next, I will walk you through our fourth quarter financials in greater detail. Net revenues in the fourth quarter of 2025, we recorded net revenues of RMB 38.9 million compared with RMB 36.6 million in the fourth quarter of 2024, representing a 6.4% increase on a year-on-year basis which was primarily due to the increase in net revenues from the school-based subscription model business, which is demonstrating its recurring nature as it continues to scale. Cost of revenues for the fourth quarter of 2025 was RMB 21.0 million, USD 3.0 million, representing a year-over-year decrease of 13.6% and from RMB 24.3 million in the fourth quarter of 2024, which was mainly due to the fewer district level project deliveries for our teaching and learning SaaS offerings as a result of a new -- as a result of growing proportion of recurring revenue and the subscription model that requires fewer hardware and software deliveries. Gross profit for the fourth quarter of 2025 was RMB 17.9 million, USD 2.6 million compared with RMB 12.3 million in the fourth quarter of 2024. Gross margin for the fourth quarter of 2025 was 46.1% compared with 33.6% in the fourth quarter of 2024, representing a 12.5 percentage point increase on a year-on-year basis. The increase was largely attributable to higher contribution from the school-based subscription business with higher margins as well as enhanced operating leverage as our subscription model business growth. Total operating expenses for the fourth quarter of 2025 were RMB 72.5 million which is USD 10.4 million increased RMB 8.9 million of share-based compensation expenses representing a year-over-year decrease of 10.9% from RMB 81.4 million in the fourth quarter of 2024. Sales and marketing expenses for the fourth quarter of 2025 was RMB 40.2 million, including RMB 1.7 million of share-based compensation expenses, representing a year-over-year decrease of [ 99.0 ] from RMB 20.2 million in the fourth quarter of 2024. This was primarily attributed to the increased market workforce and related expenses in support of the launch of our new AI powered consumer business. Research and development expenses for the fourth quarter of 2025 were RMB 16.3 million, USD 2.3 million, including RMB 2.9 million of share-based compensation expenses representing a year-over-year decrease of 3.8% from RMB 17.0 million in the fourth quarter of 2024. The decrease was primarily due to the decrease in the share-based compensation compared with the same period last year. Generating and administrative expenses for the fourth quarter '25 were RMB 16.0 million, USD 2.3 million, including RMB 4.3 million of share-based compensation expenses, representing a year-over-year decrease of 63.8% from RMB 44.2 million in the fourth quarter of 2024. This was primarily due to the decrease in share-based compensation and the effect of one-off expenses in impairment loss provision in the fourth quarter of 2024. Loss from operations for the fourth quarter of 2025 was RMB 54.86 million, USD 7.8 million compared with RMB 69.1 million in the fourth quarter of 2024. Loss from operations as a percentage of net revenues for the fourth quarter of 2025 was negative 142 -- 140.2% compared with negative 188.8% in the fourth quarter of 2024. Net loss for the fourth quarter of 2025 was RMB 53 million compared with net loss of RMB 63.7 million in the fourth quarter of 2024. Net loss as a percentage of net revenues was negative 160 -- 136.1% in the fourth quarter of 2025 compared with negative 174.2% in the fourth quarter of 2024. Adjusted net loss non-GAAP for the fourth quarter of 2025 was RMB 44.1 million, which is USD 6.3 million compared with adjusted net loss non-GAAP of RMB 40.1 million in the fourth quarter of 2024. Adjusted net loss, non-GAAP, as a percentage of net revenues was negative [indiscernible] in the fourth quarter of 2025 compared with negative 109.5% of adjusted net loss as a percentage of net revenues in the fourth quarter of 2024. Please refer to the table captioned reconciliations of non-GAAP measures to the most comparable GAAP measures at the end of this press release, for reconciliation of net loss under U.S. GAAP to the adjusted net loss non-GAAP. Cash and cash equivalents, restricted cash and term deposits were RMB 407.0 million which is USD 58.2 million as of December 31, 2025, compared with RMB 359.3 million as of December 31, 2024. Going forward, we will continue to strengthen our core strength with the advancement of AI capabilities serving as a key driver of our sustainable growth. At the same time, we will further enhance cross-business synergies and reinforce our business resilience to support long-term development. These integrated efforts enable us to combine our respective strengths and deliver consumer-centric offerings that truly resonate, creating a sustainable growth pathway that generates lasting value for both learners and shareholders. With that, we conclude our prepared remarks. Thank you. Operator, we are now ready to begin the Q&A session. Operator: [Operator Instructions] I'm showing no questions. I'll now turn the conference back to Ms. Lara Zhao for closing comments. Lara Zhao: Thank you, operator. In closing, on behalf of 17EdTech's management team, we'd like to thank you for your participation on today's call. If you require any further information, please feel free to reach out to us directly. Thank you for joining us today. This concludes... Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.
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.
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.
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: Good morning, ladies and gentlemen, and welcome to the NRx Pharmaceuticals Q4 2025 Results Conference Call. [Operator Instructions] This call is being recorded on Tuesday, March 24, 2026. I would now like to turn the conference over to Michael Abrams, CFO. Please go ahead. Michael Abrams: Thank you, Joelle, and welcome, everyone. Before we proceed with the call, I would like to remind everyone that certain statements made during this call are forward-looking statements under the United States federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. Additional information concerning factors that could cause results to differ from statements made on this call is contained in our periodic reports filed with the SEC. The forward-looking statements made during this call speak only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements. Information presented on this call is contained in the press release issued today and in the company's Form 10-K, which may be accessed from the Investors page on the NRx Pharmaceuticals website. Joining me on the call today is Dr. Jonathan Javitt, our Founder, Chairman and CEO. Dr. Javitt will provide an overview of our company's progress as reported yesterday on Form 10-K, following which, I will review our financial results. Following their prepared remarks -- these prepared remarks, we will address investor questions. I will now turn the call over to Jonathan. Jonathan? Jonathan Javitt: Thank you, Mike. Good morning, everyone. Thank you for joining us. 2025 was a pivotal and transformative year for NRx and for its HOPE Therapeutics subsidiary. We've advanced each of our programs with a drug approval anticipated for KETAFREE over the summer potential for drug approval this year for NRX-100 and a dramatically expanded opportunity for NRX-101. Our HOPE therapeutics clinics are demonstrating EBITDA positive revenue growth. Most importantly, given our low cash burn, we only need to be successful on one of those fronts to reach pro forma profitability by the end of the year. Of course, the 10-K only demonstrates the impact of first quarter of clinical operations, i.e., the fourth quarter was our first quarter of operations so you can interpolate that over a full year. We've ended 2025 a far stronger company than when the year began. Our 10-K documents a year-over-year reduction in expenses from operations even as we move far closer to potential FDA approval. We eliminated all convertible debt from our balance sheet and ended the year with a $7.8 million of cash on hand. More importantly, with the growing revenues from operations and ongoing ATM activities, we anticipate adequate cash resources to support operations at least through 2026 by which time we aim to be a fully commercial pharmaceutical company and to own a substantially larger clinical network. Let's start with an overview for each of our development programs beginning with our Abbreviated New Drug Application or ANDA for preservative free ketamine, which we call KETAFREE while we're waiting for a final trade name from FDA. In August 2025, FDA approved our suitability petition for our proposed strength of preservative-free ketamine. We filed the ANDA in September 2025. And in November, received notification that FDA noted no significant deficiencies and agreed to review the file. Last week, we were notified by FDA of a preliminary determination of bioequivalence to the reference branded drug, which is Ketalar. This is a key determination in any generic application. Our room temperature stability data has continued to support at least 3 years of room temperature stability. And we've manufactured 3 registration batches of KETAFREE in anticipation of summer 2025 approval -- 2026 approval. The company has additionally submitted a citizen petition seeking to have benzethonium chloride, a toxic preservative included in all currently approved ketamine products and it's really in there for antiquated reason, we've petitioned to have it removed from all presentations of ketamine. The FDA has just notified us that their review of expectation is ongoing. This preservative is the subject of a detailed toxicology report that we posted on the public record, which casts a considerable doubt on the assumed safety of this chemical including potential cytotoxicity and neurotoxicity. Notably, benzethonium chloride is not categorized by FDA as GRAS or generally recognized as safe. And the law requires that all ingredients of drugs must be safe. This report has been submitted to FDA in support of our citizen petition. As a preservative-free version of ketamine is an important invention, we filed a patent application with USPTO to protect our intellectual properties surrounding this product. The existing market for Ketamine has been projected at approximately $750 million a year, and we believe KETAFREE made in the United States and offered without any toxic preservatives offers patients and clinicians a superior option. As you know, we're also pursuing an innovative new drug application under FDA Fast Track Designation for Ketamine, which we've designated NRX-100. When we met with you in Q4, our intent was to submit this NDA based only on data from existing clinical trials which we've summarized for you in the 10-K and various other presentations. However, in Q4, FDA announced a significant policy change for the first time inviting companies to submit real-world evidence and supportive effectiveness without a requirement that the evidence submitted be personally identifiable. In our estimate, this provided an important opportunity to strengthen our case for approval and to substantially broaden the indication we were seeking, whereas we originally anticipated seeking only accelerated approval as we shared with you at the time, the FDA policy change to open the path to seek full approval. Accordingly, we partnered with Osmind Inc. to leverage their database on more than 65,000 patients treated with intravenous ketamine, and approximately 6,000 patients treated with intranasal ketamine. Summary data are presented in the 10-K and demonstrate the benefits that thousands of Americans have already received in reducing depression and suicidality with intravenous ketamine. As we shared with you, we were granted an in-person meeting at FDA headquarters with the leadership of the FDA Division of Psychiatry Products, the Office of Neurosciences and the leadership of the FDA Center for Drug Evaluation research. The minutes of that meeting demonstrate FDA's willingness to review not only the clinical trials data, but also the real-world evidence. More importantly, FDA guided us to seek full approval rather than accelerated approval and to seek a substantially larger indication for depression in patients who may have suicidality rather than only those who already have suicidality, an indication that we believe applies to more than 10 million Americans. Our aim is to package the data FDA have requested by the end of Q2 with the potential for decision date otherwise known as a PDUFA date by the end of the year or in the opening months of 2027. We're confident that seeking FDA's alignment on this expanded pathway was the right thing to do for our patients and our shareholders. As we shared last year, the product is already manufactured. The manufacturing modules are complete and already in the hands of the FDA and 3 registration batches are manufactured and in the warehouse in anticipation of approval. Again, we have stability data to support at least 3 years of room temperature shelf stability. In August 2025, FDA granted us an expanded Fast Track designation for NRX-100. This expanded designation goes beyond the prior grant simply for suicidal bipolar depression to now include all patients with suicidal ideation in depression including bipolar depression. Suicidal depression is a massive problem in the United States. In fact, the Center for Disease Control estimates that nearly 13 million Americans seriously consider suicide each year and this leads to an American dying from suicide every 11 minutes. In June, the FDA created the Commission's National Priority Voucher program that affords substantially faster review times of once 2 months versus the standard 10- to 12-month review, enhances communication throughout the review process and creates potential for accelerated approval, and full approval of NRX-100. The first 2 tranches of vouchers have been granted. We remain optimistic for NRX-100's chance to receive a voucher, given that CMS targeted drugs other than bulk ketamine, have been underrepresented to this point. Further, we're confident that NRX-100 meets the program's criteria and is a prime candidate to receive a voucher. Moving on from ketamine. We've experienced what we believe to be transformative change in our NRX-101 program. As you know, we originally developed NRX-101, a fixed-dose combination of D-cycloserine and lurasidone to address the needs of patients with suicidal bipolar depression. While we hope to get back into the clinic with a pivotal trial to prove the value of NRX-101 at high doses to treat patients with that condition. A near-term opportunity appeared that offers a far broader potential application for D-cycloserine the active ingredient of NRX-101. As we illustrated in the 10-K, there's a rapidly emerging body of evidence suggesting that D-cycloserine or DCS at low doses has the potential to drive neuroplasticity which is the process by which brain cells form connections to other brain cells and especially to augment the clinical effect of transcranial magnetic stimulation or TMS. Accordingly, we appointed Professor Joshua Brown, MD PhD of Harvard McLean as our Chief Medical Innovation Officer. Dr. Brown is a principal investigator on NIH funded and DARPA-funded projects that highlight the future of neuroplastic care including the use of D-cycloserine and transcranial magnetic stimulation or TMS, for treating depression, PTSD and suicidality. Today, we're announcing that we're on the path to developing a patentable sustained release presentation of D-cycloserine to provide an extended release profile suitable for enhancement of TMS efficacy. Prior clinical trials have shown a doubling of clinical response in patients with depression and an eightfold increase in remission from depression versus standard TMS therapy. However, DCS, D-cycloserine, which is a tuberculosis drug has always been a somewhat unstable and problematic molecule that degrades rapidly, if not carefully formulated and it is stable in our current formulation. Moreover, its absorption profile in the human body more closely resembles a sharp spike rather than a steady state. We're excited that after a long period of research and development, we found a path to an innovative modern version of DCS that is better suited to maintaining a steady state in the blood during TMS treatment. NRx has more than 25,000 manufactured doses of NRX-101 at the appropriate strength and has launched a nationwide expanded access program to enable physicians who are performing TMS and want to add the benefit of D-cycloserine to access this medication at no charge to the patient under expanded access and federal right to try laws while we await a confirmatory Phase III trial of NRX-101 to augment the effects of TMS. That trial is planned to start this summer, and we expect non-dilutive federal sources to support that trial. The market estimate for this newly validated indication for NRX-101 is in excess of $1 billion. We're collaborating with Dr. Brown and his DARPA-funded initiatives related to D-cycloserine and TMS that have attractive support because of the clear implications for supporting the needs of military personnel, veterans and first responders in addition to the tens of millions of civilians who need this treatment. In recent months, we've had the opportunity to brief on these activities at senior-most levels within the Department of War, the Department of Veterans Affairs and both House and Senate leadership who are concerned about the welfare of our troops and veterans. That's why some of you noticed my attendance in the gallery at this year's State of the Union address. Our clinics have contracts to treat military personnel through TRICARE and to treat veterans through direct contracts with the VA. We first established a cooperative research and development agreement with the VA in 2018. In September 2025, HOPE Therapeutics initiated revenue generation upon closing its first acquisition of Dura Medical located in Naples and Fort Myers, Florida. HOPE subsequently added Cohen & Associates in Sarasota, another revenue-generating site, an EBITDA-positive clinic that's now part of our HOPE network. Dr. Rebecca Cohen, Founder of Cohen Associates has been appointed as HOPE Medical Director. In December, HOPE was the first organization in Florida to launch 1-day TMS treatment for severe depression combining D-cycloserine and TMS. The 1D protocol has been reported in the peer-reviewed literature to achieve 87% response and 72% remission from severe depression in 6 weeks following a single day of TMS treatment combined with D-cycloserine. By way of comparison, if you look at the SPECT-D trial, antidepressants have been reported only to demonstrate about half that response. We're currently opening additional clinics in West Palm Beach, Sarasota, Boston, Denver, with the expectation that we'll have a far more robust network by the end of the year with revenue to match. Although there are many more milestones described in our 10-K, I'll end with our newly declared partnership with Neurocare AG of Munich and Atlanta, Georgia. Neurocare manufactures the top-selling TMS device in the U.S. today, the Apollo machine, which has installed at more than 400 clinical locations in the U.S. with many more internationally. Our aim is to leverage our mutual strengths to achieve the benefits of integrated care in neuroplastic integrated psychiatry that were achieved in renal dialysis through integration. Those results were achieved several decades ago by DaVita and Fresenius Medical. Those 2 organizations demonstrated that combining integrated pharmaceutical and medical device development with a quality-driven approach to patient care could transform clinical outcomes for patients with end-stage kidney disease, and they created organizations that are currently valued at $15 billion and $30 billion, respectively. We aim to take that same model into the future of interventional psychiatry for the treatment of PTSD, depression, autism, traumatic brain injury and Alzheimer's. Working together with our academic partners, our government partners and now with the leading medical device partner we'll do everything in our power to bring hope to life. I'll now turn it over to Michael Abrams, our CFO, to review our 2025 financial results. Mike? Michael Abrams: Thank you, Jonathan. For the year ended December 31, 2025, NRx Pharmaceuticals reduced its loss from operations by approximately $2.3 million to $16.2 million from $18.5 million for the year ended December 31, 2024, which was primarily driven by a decrease in research and development expense. For the year ended December 31, 2025, research and development expense decreased by approximately $2.4 million to $3.8 million as compared to $6.2 million for the year ended December 31, 2024, primarily driven by a decrease in clinical trial and development expense. Finally, general and administrative expense for the year ended December 31, 2025, decreased by approximately $0.4 million to $13.1 million as compared to $13.5 million for the year ended December 31, 2024, primarily driven by certain ongoing cost reduction initiatives. As of December 31, 2025, we had approximately $7.8 million in cash and cash equivalents. Management believes that the current available cash resources in concert with anticipated growth in total clinic revenue, ongoing cost reduction initiatives and current availability and trends in connection with the company's active at-the-market offering, will be sufficient to support ongoing operations through the end of 2026. Our singular focus remains advancing our primary drug development initiatives and planned clinic acquisitions to build long-term value for our shareholders. With that, I will turn the call back over to Jonathan. Jonathan? Jonathan Javitt: Thank you, operator. We're now ready to take questions. Operator: [Operator Instructions] Your first question comes from Tom Shrader with BTIG. Thomas Shrader: Congratulations on all the progress. Just an update on how you see building KETAFREE inventory? Is that something you will wait to do? You will do externally? Or do you have a lot already? And then you're quoting the generic value of ketamine. Do you think if you have -- I mean, I guess, how confident are you that if you had the only available ketamine that maybe the current generic price isn't so relevant. And how much increase in price do you think the market would bear. And then I have a DCS follow-up. Jonathan Javitt: Thank you, Dr. Shrader. You always ask wonderful questions. As far as inventory goes, as I said earlier, we've already manufactured 3 registration batches. Those batches are in the warehouse. KETAFREE is up on what's called a blow-fill seal assembly line. So for those of you who don't deal with pharma manufacturing every day, most injectable drugs are sold in glass bottles. To do that, you have to actually buy glass bottles somewhere. You have to clean them, sterilize them, fill them, put a stopper and put a crimp on. Both those seal works very differently. You take a hopper full of polyethylene pellets, you melt them down into molten polyethylene. You blow them with air into the shape of a vial, the machine fills that vial automatically seals that vial with a little more polyethylene, puts a wrapper on it, puts it in a box, puts it on the pallet all without any human being touching it. You can make 1 million units of drug in the same time and at about half the cost as you can make 10,000 vials of traditional glass-filled injectable product. So we've just asked our manufacturer to do a first production run, we anticipate having a couple of hundred thousand units in the warehouse at the time of generic approval. With regard to the effect of having the only preservative-free ketamine on the market, should the citizen petition be granted, probably Wall Street analysts will do a much better job of projecting what that might do to pricing models than we can. But I agree with you that if it's a product the market wants, the market will probably pay for it. Thomas Shrader: Great. And then a quick question on the extended release D-cycloserine. Is there -- is it known that, that would have the same effect? Is there a clinical data that you don't need the spike? Or do you think you have a little clinical work to do? Jonathan Javitt: I think that, that's work that can be done in vitro. Really, what we're looking for is a neuroplastic effect from D-cycloserine and there's a lot of reason to believe that continued exposure of the neurons to the drug is what matters. But we have the ability in brain slices to look at the dendritic sprouting and to look at the effects. In general, you do want a steady state of drug to create a biological response. But I agree with you, it's certainly something worth continuing to look at. And as you know, from Dr. Brown's resume, he's probably done more of this than anybody in academia. Operator: Your next question comes from Patrick Trucchio with H.C. Wainwright. Patrick Trucchio: Congrats on the progress. Just a couple of questions on each program. Just first on NRX-100. I was just wondering if you can talk a little bit more about the Type C meeting with the FDA and how that now enables an NDA filing for NRX-100 without additional clinical trials? And specifically, how is the FDA viewing the role of the 65,000 to 70,000 patient real-world data set in this submission? And then separately from that, as we think about the broader treatment-resistant depression label, how should we think about the expansion of the addressable patient population impact on payer coverage and prescriber adoption if approved? Jonathan Javitt: So to start with the Type C meeting, the most important way it enables FDA review of existing clinical trials data and real-world data without the need for additional clinical trials is that that's what the FDA told us. They did not demand additional clinical trials as a precondition to reviewing an NDA filing. And when you look at the data available, there are now multiple clinical trials that have demonstrated that intravenous ketamine is far superior to placebo, far superior to active placebo and noninferior on efficacy to electroshock therapy. But of course, there's a huge safety difference between NRX-100 between ketamine and electroshock in that the electroshock group had 30% memory loss, whereas memory loss was not seen in the ketamine group. So while technically, you would say it's not inferior because the design was noninferiority based on the MADRS scale. From a patient's perspective, it's a far superior treatment. Do me in favor and restate your second question? Patrick Trucchio: Yes. Just on the broader treatment-resistant depression label, how should we think about the expansion of the addressable population and the impact on payer coverage and prescriber adoption if the drug is approved? Jonathan Javitt: Well, if you look at the narrower indication, we were originally forecasting which would have been people with active suicidality. That would have been about 3 million, 3.5 million patients a year reporting to CDC numbers. But if you look at the much broader population of people with depression who may from time to time have suicidal ideation, the CDC numbers would suggest that you're talking about an addressable population of 12 million or so people. In terms of payer coverage. Payers have told us in the past that as long as our course of treatment is less than about $10,000 a year, it's unlikely to have substantial formulary restrictions. Mental health is one of the most rapidly growing challenges that payers face in insurance coverage and a treatment that has the potential to rapidly stabilize people, keep them out of the hospital, keep them at work, keep them productive is highly attractive to payers. And you've seen that with SPRAVATO, you've seen SPRAVATO rapidly grow to what's estimated at a $2 billion market today. And that's the market that we would seek to share if NRX-100 is approved as we've expected. Patrick Trucchio: Right. And with the ANDA showing favorable preliminary bioequivalent determination, I'm wondering what remains before final approval in the third quarter of this year? Jonathan Javitt: Well, the Office of Generic Drugs has to do its process. They're going to continue to examine our stability data. They'll have to do a pre-approval plant inspection. They'll have to go through the whole litany of final checks associated with any drug approval. But we think clearing the bioequivalence hurdle is a major turning point. Operator: [Operator Instructions] Your next question comes from Edward Woo with Ascendiant Capital. Edward Woo: Congratulations on all the progress as well. Assuming that you get the approval for the ANDA in Q3 2026, can you talk a little bit about your commercial strategy and how you expect to commercialize it? Jonathan Javitt: Well, there are 2 large segments of buyers for ketamine under the existing label. One is hospital surgery centers, et cetera, that already buy ketamine and then there are the clinics who are using it for psychiatry for pain control, et cetera. On the former side, we've been approached by a number of organizations that already sell to those hospitals. Their names are well known and anybody who's currently selling into that marketplace is interested in a modern preservative-free presentation. So we'd be unlikely to build our own sales force to go into hospitals because the average person selling injectable drugs into a hospital is representing a number of drugs, not just one. On the other hand, the clinics that use ketamine are much smaller number. They're well known, they tend to belong to the same associations, and we do expect to set up a medical liaison service relatively small number of representatives can cover a large swath of the clinics. So we believe that it's a very compact commercial footprint, one that's easily financeable within our available resources. Operator: There are no further questions at this time. I will now turn the call over to Jonathan for closing remarks. Jonathan Javitt: Thank you. So thank you for joining our call today. As you can see, we've made progress towards 3 potential drug approvals in the near term. And we have this new pipeline target that could be a much larger use for NRX-101 than we ever anticipated. With the continuing development of the HOPE Therapeutics network for care delivery, we believe that we've really taken transformative steps to turn NRx Pharmaceuticals into a commercial stage company that has the potential to save lives on a daily basis and to bring a return to our investors. We finally reached that long-awaited inflection point where we're generating revenue, we expect to increase revenue and we really appreciate the extraordinary dedication and hard work of our team to support that long-term initiative and the patience of our investors and the support of our investors while we've made that turn. Our goal of bringing hope to life is closer than ever. Thank you so much for participating. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please 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: 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, 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: Good day, everyone, and welcome to Leatt Corporation Fourth Quarter 2025 Results Conference Call. [Operator Instructions] Please note, this call may be recorded. [Operator Instructions] It is now my pleasure to turn the conference over to Michael Mason. Please go ahead. Michael Mason: Thanks, Reza. Good morning, and welcome to the Leatt Corporation investor conference call to discuss the financial results for the fourth quarter and full year 2025. My name is Michael Mason. The company issued a press release today, Tuesday, March 24, 2026, at 8:00 a.m. Eastern and filed its report with the SEC. The press release is posted on Leatt's website at leatt-corp.com. This call is being broadcast live and may be accessed on the company's website. An audio replay of this call will be available for 7 days and may be accessed from North America by calling 1 (844) 512-2921 or 1 (412) 317-6671 for international callers. The replay pin number is 11161317. A replay of the webcast will be available immediately following this call and will continue for 7 days. Certain statements in this conference call may constitute forward-looking statements. Actual results could differ materially from those discussed in this call. Leatt Corporation does not undertake any obligation to update such statements made in this call. Please refer to the complete cautionary statement regarding forward-looking statements in today's press release dated March 24, 2026. The company will make a presentation on the quarterly results and then open the call to questions. I'd now like to turn the call over to Mr. Sean MacDonald, CEO of Leatt Corporation. Good afternoon to you in Cape Town, Sean. Sean MacDonald: Thank you, Mike, and thank you all for joining us today. 2025 was a remarkable year for us, fueled by strong international demand for our innovative products, improved stocking dynamics, encouraging ordering patterns and a surge in consumer direct sales. The global demand for our products and an expanding Leatt brand that reaches a much wider group of riders around the world are helping us to build tremendous traction and momentum. We achieved double-digit revenue growth for the fifth consecutive quarter and year-over-year growth for the sixth consecutive quarter following the post-COVID industry-wide inventory overhang. Total global revenues for the year were $61.91 million, a 41% increase over 2024. International revenues were $44.64 million for the full 2025 year, up 47% year-over-year as our distributors continue to reorder and restock in line with global demand and stocking dynamics. Customer direct sales, an important focus for us, increased by 44% year-over-year and dealer direct sales with our reorganized and reenergized domestic sales force increased by 22%. For the fourth quarter of 2025, revenues increased by 43% year-over-year and gross profit as a percentage of sales increased to 46% as domestic sales continue to grow, and we continue to ship our new products. Net income for the quarter was $465,000, an increase of 204% over last year. We closed the year with robust double-digit revenue growth in all of our major product categories in 2025. It's a testament to the expertise of our creative design and engineering team and continued strong brand momentum. Helmet sales grew by 59% year-over-year. Sales of our flagship neck brace increased by 18%. Body armor revenues increased by 29%, which included a 40% increase in footwear sales and sales in our other products, parts and accessories category increased by 56% as technical apparel sales continued to show strong progress. Gross profit as a percentage of sales for the year increased to 44% year-over-year as domestic trading conditions continue to improve and our supply chain team achieved logistical efficiencies despite some uncertainty around global trade tariffs. For the full year 2025, income before tax was $4.41 million, an increase of $7.1 million compared to the full year of 2024. Net income for the year 2025 increased by 248% to $3.26 million, which we believe is a testament to our ability to generate strong revenues and robust margins. As we announced in December, our Board authorized an extension of our share repurchase program to purchase shares of outstanding Leatt common stock valued at up to $750,000. The program has been extended to March 31, 2026. We believe that this demonstrates our continued confidence in the strength of the company and our business plan as well as our commitment to enhance long-term shareholder value. Now I will turn to more details on sales of our product categories for the full year 2025 compared to 2024. Sales of our flagship neck brace designed to prevent potentially devastating sports injuries to the cervical spine were $2.89 million. an 18% increase, primarily due to a 35% increase in the volume of neck braces sold. Neck braces represented 5% of our total revenues for the year. Our body armor products are comprised of chest protectors, full upper body protectors, upper body protection vests, back protectors, knee braces, knee and elbow guards, off-road motorcycle boots and mountain biking shoes. Body armor revenues were $28.98 million, a 29% increase over 2024. The increase was due primarily to a 22% increase in the sales of upper body and limb protection products and a 40% increase in footwear sales, comprised of motorcycle boots and mountain biking shoes. Body armor products represented 47% of our total revenues for 2025. Helmet sales were $13.31 million, a 59% increase, primarily due to a 33% increase in the volume of helmets sold during the year. Helmets represented 21% of our revenues for the 2025 year. Our other parts, products and accessories category is comprised of goggles, hydration bags and apparel items, including jerseys, pants, shorts and jackets as well as aftermarket support items. Other products , parts and accessories sales were $16.73 million, 56% increase in the sales volumes of our MOTO, MTB and ADV technical apparel lines designed for off-road motorcycle, mountain biking and adventure motorcycle riding. Other products, parts and accessories represented 27% of our total revenues for the year. Now I will turn to our financial results in a bit more detail. Total revenues for the fourth quarter of 2025 were $16 million, a 43% increase compared to $11.2 million for the fourth quarter of 2024. Net income for the fourth quarter was $465,000 or $0.07 per basic and $0.07 per diluted share as compared to a net loss of $447,000 or $0.07 per basic and $0.07 per diluted share for the fourth quarter of 2024. Total revenues for the full year 2025 were $61.91 million, a 41% increase compared to revenues of $44 million for the full year 2024. This increase in worldwide revenues is attributable to a $6.52 million increase in body armor sales, a $4.92 million increase in helmet sales, a $6 million increase in other products, parts and accessories sales and a $450,000 increase in net sales. Net income for the full year 2025 was $3.26 million or $0.53 per basic share and $0.51 per diluted share, up by 248% compared to a net loss of $2.2 million or $0.35 per basic share and $0.34 per diluted share for 2024. Leatt continued to meet its working capital needs from cash on hand and internally generated cash flow from operations. And at December 31, 2025, the company had cash, cash equivalents and restricted cash of $13.23 million compared to $12.37 million at December 31, 2024, and a current ratio of 4.9:1. Looking forward, the momentum we are achieving at all levels of our business has our entire team energized and optimistic about the future of the company. Although there are some potentially challenging geopolitical headwinds globally, domestic sales at the dealer level are gaining very promising traction, participation remains strong and international ordering patterns remain robust, all driven by strong demand for Leatt products around the world. Sales of our adventure motorcycling lineup of apparel, helmets and boots backed by positive industry reviews and our proven ability to develop exciting and durable products continues to exceed our expectations and contribute strongly to our revenues. We look forward to delivering a pipeline of new innovative products to the growing ADV market over the next several quarters. Total operating costs increased by 12%, and we do expect working capital investments to grow in the coming periods, reflecting our strong drive to continue building a global multichannel team of sales and marketing professionals in emerging and developed markets. The team is building and leveraging revenue opportunities by enabling our brand to reach a much wider group of riders of all levels around the world. We are confident that we have sufficient liquidity to fuel this growth. As always, we are very proud of our design engineering and innovation expertise focused on technical innovations and functional rider protection. These innovations are being increasingly recognized by riders at all levels all over the world as well as by our peers. Our team was honored twice at Eurobike 2025 for our 5.0 Gravity Helmet and our 6.0 HydraDri jacket designs. In conclusion, we are very enthusiastic about the future. With a growing portfolio of innovative products in the market and in the pipeline, a focus on elevating and amplifying our brand and a robust balance sheet position to fuel growth, we remain confident that we are very well positioned for future growth and sustained shareholder value. As always, we'd like to thank our entire Leatt family, our dedicated employees, business partners and team riders for their continued strong support. With that, I'd like to turn the call over to the operator for questions. Operator: [Operator Instructions] We'll take our first question from Olivier Colombo. Olivier Colombo: Congrats on the fantastic performance of 2025. I'm looking for future growth as well this year. I had 3 questions for you this afternoon. The first one is regarding the U.S. business, which saw a very significant growth of 27%. This is quite an achievement. How happy are you with this performance? And what are you taking -- what are you doing to push those U.S. sales even higher to match the overall international growth of 41%? Sean MacDonald: Thanks, Olivier. Good to hear from you. I think we're very happy with the performance. It's been quite a strong turnaround in the U.S. We have a brand-new management and sales team in place. We have a reenergized and refocused group of sales representatives on the motorcycle and the mountain biking side in place, all highly motivated to take sales in the U.S. to the next level. So I think it's a very strong performance. I'm proud of the team there. And I think this is just the beginning of what we can achieve in the U.S. I think we've managed to gain some significant footprint through our outreach to dealers around the country. We've managed to grow our consumer direct sales in the U.S. significantly also. So we really are pushing on all cylinders there. I think in future, you can expect us to continue to build up the team and to improve our dealer penetration across the country as well as our direct-to-consumer business, which is a strong focus area for us, balancing that out with our B2B business. So a strong push on the distribution side in the U.S. and also a very strong focus on marketing. We've got a new Head of Marketing Global, Nick Larsen, and he is very enthusiastic about the future and the opportunities that we still have. There will be a strong focus on the U.S. market, where I think we still got a lot of market share that we can still gain. So big opportunities in the U.S. for sure. Olivier Colombo: Perfect. My next question is regarding the tariffs. How much do you think the tariff situation has hurt your business in the U.S.? Sean MacDonald: It's an interesting question to quantify. I think it definitely has had an impact. Of course, we've tried our best to mitigate that as far as possible. We have had some price increases. But having said that, if I look at complete brands, the supply chain is very similar, and there have been increases across the board. I think the biggest impact has perhaps been due to the uncertainty that tariff situation created in terms of global trade. But the dollar has obviously weakened and it started to strengthen again. And for us, that is beneficial in Europe for sure. it impacts the retail selling price in Europe when the dollar gets a bit weaker. But the tariff uncertainty around the world definitely did impact our business, particularly in the first half of the year. I do think that we acted quite quickly. We got support of our suppliers. We increased pricing without doing anything that takes the price points outside of where the consumers are at. And we analyze the market very, very carefully to make sure that we were acting within market constraints. So I think it definitely did have an impact. I do not think it was extreme though. Olivier Colombo: Perfect. And my final question is, how much growth came from the new customers and distributors versus distributors restocking? Sean MacDonald: I think it was a combination of things in terms of -- on the distribution side. I think the biggest factor has been an increase in the demand for Leatt products. So of course, that leads to restocking. And that's certainly been the biggest contributor of the growth on the international side. If I look at the new customers that we brought on, we have new customers in emerging markets and also in some developed areas. I mean we had really strong sales to those customers as well, and they're very energized by the sell-through that they've experienced. So we are expecting that to carry on driving sales and reordering patterns in the future. So primarily restocking due to an increase in demand, but a really nice contribution from new customers as well. Operator: [Operator Instructions] It appears we have no further questions. I'll turn the call back to the speakers for any additional or closing remarks. Sean MacDonald: Thank you all for joining us today. We are looking forward to our next call to review the results for the 2026 first quarter. Operator: This concludes today's program. Thank you for your participation, and you may disconnect at any time.
Operator: Greetings. Welcome to Xiaomi's 2025 Annual Results Announcement Investor Conference Call and Audio Webcast. Today's conference will be recorded. If you have any questions or objections you may disconnect at this time. [Operator Instructions] Now we will have Mr. Xu Ran, General Manager of Group Investor Relations and Capital Markets Department to start. Ran Xu: Welcome, everyone. Welcome to the investor conference call and audio webcast for the company's 2025 annual results. Before we start the call, we would like to remind you that this call may include forward-looking statements, which are underlined by a number of risks and uncertainties and may not be realized in the future for various reasons. Information about general market conditions comes from a variety of sources outside of Xiaomi. This presentation also contains some unaudited non-IFRS financial measures, which should be considered in addition to, but not as a substitute for the company's financials prepared in accordance with IFRS. We have William Lu, Partner and President of Xiaomi Corporation; and Mr. Alain Lam, Vice President and CFO of the Corporation to talk to us. Mr. Lu will share recent strategic and business update. Thereafter, Mr. Lam will review the company's financial performance of 2025. And then after that, we will have the Q&A. Mr. Lu, please. Weibing Lu: Good evening. Thank you very much for coming to the 2025 full year call. Now this evening, I'll be talking about 3 points. First of all, review our main achievements in 2025. Second, share of breakthroughs in hard-core tech, in particular, in AI and embodied intelligence. And thirdly, we'll look ahead for the strategic direction focus in 2026. First of all, in 2025, some of our outstanding achievements. Well, in the year, our Xiaomi Group maintained high growth with both annual revenue and net profit reaching all-time highs. Total group revenue reached RMB 457.3 billion, surpassing the RMB 400 billion mark for the first time, up 25% year-on-year. Adjusted net profit reached RMB 39.2 billion, up 44% year-on-year. By segment, first of all, Smartphones. According to Omdia, in 2025, our global smartphone shipments ranked top 3. Market share was 13.3%, remaining global top 3 for 22 consecutive quarters. In Latin America and Southeast Asia, shipment ranking rose to second. In Europe and Africa, third. According to third-party data in Mainland China, our smartphone sales ranking rose to second. On premium models. In 2025, premium models in Mainland China accounted for 27.1% of total smartphone sales, up 3.8 percentage points. In RMB 6,000 to RMB 10,000 price bracket, our market share rose by 2.3 percentage year-on-year. We solidified our high-end base domestically and are making continuous breakthroughs in the RMB 6,000 to RMB 8,000 ultra-high-end market. By end of February 2026, we launched our first Leitzphone for global markets, priced at EUR 1,999, a new milestone in our overseas premium strategy. We'll continue achieving top-tier pricing in mature international markets and elevate our premium overseas sales to new heights. For IoT business in 2025, revenue surpassed RMB 120 billion for the first time, reaching RMB 123.2 billion and 18.3% year-on-year growth, hitting all-time high both domestically and internationally. For the home appliances revenue, it reached 23% plus growth with record shipments. Wearables ranked first globally, TWS earphones ranked second. Tablet shipments grew 25.2% year-on-year, ranked fifth. Our AI glasses released in June '25 ranked third globally and first in China. We continue to drive full category premiumization at home and abroad with overseas high-end products, achieving stellar performance. On premium strategy, in '25, our tech home appliances entered the European market already covering Spain, France, Germany, Italy and more. For autos, Xiaomi Auto delivered 410,000 units in 2025, far exceeding the 300,000 units target set at the year's start. February 13, '26, cumulative deliveries surpassed 600,000, and we are fully committed to delivering 550,000 units. In March 19, we officially launched a new generation SU7. It features major upgrades inside and out, including across the electric powertrain chassis, electronics architecture, et cetera. Within 34 minutes of launch, locked orders for SU7 exceeded 15,000, surpassing 30,000 orders after 3 days. For this year's MWC, we also showcased our Vision GT concept car, not just a concept car, this is Xiaomi Auto's latest exploration of design innovation built on hardcore technology. We are the first Chinese brand invited to participate, and it represents recognition by the world's top simulation driving platforms. For China's auto industry, it shows that in terms of design and innovation, Chinese automakers can already compete on par with the world's best. For hardcore tech, in '25, our R&D investment exceeded RMB 33 billion. For '26 we plan to invest over RMB 40 billion with more than RMB 16 billion for AI, embodied intelligence and other innovation fields. These investments build our solid product capability defenses. And for AI in 2025, we achieved breakthrough progress. For AI, it is an era of truly useful AI, undergoing historical leap from usable to truly useful, a paradigm shift from single tasks to complex tasks processing, from passive to active planning, from tool attributes to ecosystem attributes, and for us with rich terminal products and use cases across smartphones, cars, home appliances, IoT, real data value of AI far surpass the single category companies. Two, our foundation large models enter the leading global open-source tier. In March of the year, we released 3 models, Xiaomi MiMo-V2-Pro, MiMo-V2-Omni and MiMo-V2-TTS, completing our technical foundation for the Agent Era. MiMo-V2-Pro surpasses 1 trillion parameters, supporting 1 million token context windows and ranking 8th globally in Artificial Analysis Large Model Intelligence Index, fifth by global brand. During closed beta and public launch, these models rank first in weekly calls and held first place for many days on OpenRouter, single days as much as double in second place. And we will keep upgrading our foundation models as we move towards general intelligence. Three, we are poised to lead AI in the physical world, deep integration of AI in the physical world as the next frontier. We control over 1 billion hardware access points for its ecosystem. In March '26, our phone AI Agent, Xiaomi miclaw entered limited testing. We're the first OEM to attempt deploying [ launch ] Lobster on phone terminals, exploring the delivery of true AI phone and ecosystem to users. For auto, the new SU7 is equipped with our XLA Cognitive Large Model, achieving mall parking, navigation, complex scene understanding and voice control, improving both driving and experience. For SU7 Ultra, it's equipped with super shell AI, a smart cockpit and advanced AI. For the home in November '25, we launched our Miloco smart home solution, giving smart homes eyes and brains and hands and feet for the first time, a pioneering real world application of Xiaomi MiMo, laying a new vision for next-generation smart homes. Fourthly, for our AI is now Xiaomi core innovation engine in '25 with our tech-forward, about 2/3 of the winning projects used AI, reimagining work across fundamental materials, chipsets and OS, intelligent driving, tech home appliances and more, backed by China's strong AI industry. The coming decade belongs to China. And also Xiaomi is well positioned in person, car, home ecosystem. We'll invest RMB 60 billion in AI over the next 3 years. And in this era, we are confident that we'll place a new trade for Chinese AI. For embodied robotics, it is the ultimate integration platform for AI chips, OS and manufacturing capabilities, a high barrier field. In 2026, we launched a haptic-driven precision grasping, fine-tuning model, core tech for robotic dexterous hands. Shortly after, we open-source a Xiaomi Robotics VLA large model, Xiaomi-Robotics-0, achieving several new SOTA results. In March, Xiaomi embodied robot began internship in our car factory, achieving 90.2% deal size site simultaneous installation success for self-tapping nut workstations, meeting production line cycle times as quick as 76 seconds with 3 hours of auto operation. These are just starts. Over the next 5 years, we believe large numbers of embodied robots will work in Xiaomi's factories. And robots will break brown boundary between virtual and physical worlds. But there are challenges such as cost increase, et cetera. In the short term, there may be some pressure on our business. But on the other side, we will be steadfast in our strategy so that we will continue to have breakthroughs in AI, chips, OS and embodied intelligence. We are committed to scaling our global business model and advancing Chinese tech worldwide. This person, vehicle, home ecosystem is not just a product combination, but the platform for understanding users' full scenario data. We'll firmly seize the opportunities of AI era, and we are filled with endless possibilities and imagination. Alain Lam: Well, thank you, President Lu. As shared by Mr. Lu, in 2025, we have achieved historical leap. Our total revenue reached a record high of RMB 457.3 billion, setting a company best. This year, we achieved a year-on-year increase of 25%. Revenue in the fourth quarter is a new single quarter record. Overall, gross profit margin was 22.3%, up 1.3% year-on-year, historical high also. The second half of 2025 was more challenging for the first. For the full year, our smartphone times AIoT segment revenue was RMB 351.2 billion, up 5.4% year-on-year, which is also a new annual high. The smartphone times AIoT segment gross profit margin also reached a record 21.7%, up 0.5% year-on-year. For smartphones, for the year, revenue was -- sorry, RMB 186.4 billion, accounting for 40.8% of total revenue. In '25, our global shipments reached 165 million units. Our high-end strategy had significant results of continued product strength enhancement. Third-party data shows that in 2025, our high-end smartphone sales in the Mainland of China accounted for 27.1% of our total smartphone sales, up 3.8% year-on-year. In that, RMB 4,000 to RMB 6,000 price segment, our market share reached 17.3%, up 0.5% year-on-year. For RMB 6,000 to RMB 10,000 segment, our market share was 4.5%, nearly doubling year-on-year. According to third party in 2025, our global smartphone shipment volume ranked top 3 with market share 13.3%, maintaining a top 3 position globally for 5 consecutive years. In 58 countries and regions, our smartphone shipments ranked top 3. And in 70 countries and regions, we ranked top 5. Despite rising memory prices in 2025, our smartphone gross margin remained relatively healthy at 10.9% for the year. For IoT, for this year, our revenue and gross margin both performed remarkably. 2025 revenue from IoT grew rapidly by 18.3% year-on-year to RMB 123.2 billion, a new record. And both for domestic and international sales, it was at all-time highs, thanks to product structure optimization and improved product strength. For gross profit margin of IoT, it was a record high of 23.1%, up 2.8% year-on-year. By category, large smart home appliances performed exceptionally well with revenue up 23.1% year-on-year, a record high. Our wearable devices maintained rapid growth and an industry-leading position. Our wearable band ranked first in global shipments and TWS earphones ranked second. Tablet products continue to grow fast, ranking fifth globally with shipments up 25.2% year-on-year. Internet services. We continue to expand our user base. In December '25, our global MAU reached 750 million, up 7.4% year-on-year. Of these, Mainland China MAU reached 190 million, up 10.1% year-on-year. In 2025, our Internet service revenue hit a record RMB 37.4 billion, up 9.7% year-on-year. And of this, just in the fourth quarter 2025 alone, Internet service revenue reached RMB 9.9 billion. Throughout 2025, our Internet gross margin remained relatively stable at 76.5%. Advertising continued to drive Internet business growth with annual revenue of RMB 28.5 billion, a record high. Overseas Internet service revenue grew by 15.2% to a record RMB 12.6 billion, accounting for 33.8% of total Internet service revenue. Next, on EVs. Our EV and AI and innovation business segment, annual revenue for the segment reached RMB 106.1 billion, surpassing RMB 100 billion in less than 2 years, up over 200% year-on-year, accounting for 23.2% of the group's total revenue. Of this, Smart EV sales revenue was RMB 103.3 billion, with other related revenue at RMB 2.8 billion. For the year, gross profit margin for Smart EV and AI, innovation business segment was 24.3%, up 5.8% year-on-year. In 2025, the segment achieved positive annual operating profit for the first time, recording an operating profit of RMB 0.9 billion. We delivered a total of 411,082 new vehicles in 2025. In the fourth quarter alone, 145,115 new vehicles were delivered, a single quarter record high. The average post-tax unit price for the year was RMB 251,171, up 7% year-on-year. Next, over the past 5 years, our cumulative R&D expenditure was RMB 105.5 billion, up 37.8%. '25 alone, R&D expenditure was RMB 33.1 billion, up year-on-year, and we estimate starting from 2026, our cumulative R&D expenditure over the next 5 years will exceed $200 billion. For net profit in '25, the group's adjusted net profit was RMB 39.2 billion, a record high and up 43.8% year-on-year. For CapEx for '25, our CapEx reached RMB 18.2 billion, up 73% year-on-year. And of this, Smart EV and AI innovation accounted for 66% and over. We continue to enhance our shareholder value and we actively repurchased shares on the open market. In '25, our share repurchase was approximately HKD 6.3 billion. Since early '26, our share repurchase totaled about HKD 4.7 billion. In January '26, we announced an automatic share repurchase plan for a cap, with a cap of HKD 2.5 billion, demonstrating our confidence in our company's long-term future. We actively practice sustainable development. In low carbon initiatives in 2025, our group purchased more than 40 million-kilowatt hours of green electricity, over 10x of last year. In '25, our [ PV ] electricity usage in our auto plant exceeded 13 million-kilowatt hours, reducing carbon emissions by nearly 10,000 tonnes annually. On ESG ratings in '25 for CDP Climate Change and Water Security Survey, Xiaomi received a management level B score. Also, in March '26, we achieved our best-ever score of 81 in EcoVadis gold medal, marking another recognition of our ESG efforts. We will continue to follow a robust and enterprising operating strategy and look forward to an even greater achievement for 2026. Thank you so much. This ends my report for this evening. Next, we can have the Q&A session. Operator: [Operator Instructions] Morgan Stanley. Andy Meng: Greetings both. First of all, congratulations for 2025, revenue and profits have reached new record highs. I have two questions, one on memory. We see that memory prices have been rising significantly. Investors, what's most concerned about this for the segment of smartphones. And we noticed that there are already some smartphone selling price hikes in order to offset this memory prices hike. But your smartphone sets are still the same in terms of pricing. So perhaps in supply chain management and in inventory, you are better than your competitors so that in this challenging situation, you exceed your competitors in performance. Perhaps Mr. Lu can explain to us for your new thoughts concerning smartphones and what are your responses to this year's challenges? Weibing Lu: Right. For memory, yes, for each quarter, you have always been caring and concerning about this. And in different occasions, I have also talked about my views on this. In the past, I have said that this is a period that we are going through, and we have to look at 2027. And there may be high price hikes and we have done our work in this regard. But on the other hand, my own feeling is that the cycle of hikes may be longer than I had expected. First of all, there is the AI-led demand. And also for memory, the cost hikes magnitude, I think, is going to be higher and much higher than I had expected. My expectation in the industry was already forward, but I think it's going to be even higher in terms of price hikes for this. So it is longer cycles and the price hikes is going to be higher than I had expected. So for all the consumer items, it is going to impact greatly, not only for smartphones, which we are more concerned about. But for some categories, for some smaller capacity, categories with smaller memories, units, there is a situation where there is a cut in supply even. So this is an actual situation that's facing us in reality. The impact of that, we have a calculation which is very simple, and that is we look at the memory and it's part of the product. The more it is as a part of this product category, the more it will be impacted but less -- of course, it will be less impacted. And in our categories, smartphones, tablets, notebooks, they are more in terms of proportion. But on the other hand, there are some, for example, high-end smartphones. Relatively speaking, it is less for memory part. So for a company, if the products will have more memory as a part of their product then, of course, the impact will be higher, less will be less impact. So this is a very simplistic way of calculation I'm looking at it. In the past 2 weeks, looking at the memory price hikes, we already see some competitors raising their mid-priced smartphone prices. And I fully understand that. I think for annual smartphone manufacturer, if they do not unload to the consumer, it is very difficult to sustain this kind of price hikes. But I think it is inevitable for this. And for Xiaomi, our pressure is very, very large indeed. But as I say, we will try our very best to digest this to protect the consumer. And when we can do this no more, we will have to hike our smartphones prices, and we hope that our consumers and our customers will understand this. Yes, we are slower in price hikes, but it doesn't mean that we are immune from it. There are some competitive advantages for Xiaomi, which I can tell you. So for example, in home appliances, the category, for this category, it will be less impact. For smart cars, EVs, it would be higher because the memory part of that is higher. But on the other hand, compared to the proportion in smartphones, it will be lower. So with our variety of product segments, this is how I see it. And through this, I hope we will be able to better resolve this problem. For smartphones, tablets and notebooks, we are a company -- we are globally leading and also in EVs as well in the past few years. And for the memory suppliers around the world, we have built a very good relationship, mutual trust, and we have long-term supply contracts. So at this point, I do not feel that we have any risk of nonsupply or stopping of supply. So this is our competitive advantage compared to our competitors. The third point is that in my previous expectation, I was more pessimistic about memory price hikes. And therefore, I have been making more aggressive preparations. So in that case, our inventory sufficiency was higher. But overall speaking, for our terminal products cost, it is highly impactful. So this short-term pressure is definitely in existence, it is there. Andy Meng: Mr. Lu, this is very clear. My second question is about our vehicles. For the new generation of Xiaomi vehicles, there had been a successful announcement. And in the investor interaction, I noticed that some investors feel that we -- that Xiaomi doesn't -- no longer talk about or announce the data, but only for the unit data, well, and this is more negative. But for Xiaomi, what is the sale? I think it's going to be stable and it will be positive, and this is how I see it. Can you talk about these 2 investors' point of view? Unknown Executive: Andy, let me just answer that question. Well, for the announcement of sales from the users side, we see some phenomena. The first phenomenon is that for the first 3 days of sales, we already have achieved significant sales, 34 minutes, 150 locked-in sales. And after 3 days, it was over 30,000 units sales, and we have lived up to our commitment. And that is for the delivery starting from the fourth day of launch, we have already started delivery because we have already made preparations for the manufacturing of cars. And also, with some of the problems of the previous batch, they had to wait for a long time and before we could deliver to our users, those who have locked in their purchases. So we have absorbed our experience, and we had a new iteration. Well, as you have mentioned, why do we only disclose our locked-in contracts. We think that this is more fair. So it is not about preordering or big ordering. It is locked orders. Locked orders are solid, and that is the buyers are going to take delivery of these vehicles. And this governs our manufacturing cycle as well. So we think that's locked contracts or purchase is a fairer way of looking at it, and that is why we made the change. And in the industry, I'm sure people have their different practices, but this is what we maintain is the right way. So this is the first point. And also using this particular opportunity for our -- concerning the locked in contracts, let me share some information. So for the first point, it is that a lot of investors have asked about the locked orders. Buyers, are they from our previous buyers or new buyers or most of them we know are new buyers. For the locked orders, they come from new buyers. So it is not the original owners who are changing to -- changing from -- [ 2 Euro ] cars. For iPhone, about 50%, it is first generation. And for 60% of the new buyers, they are iPhone users. So for our locked contracts, the progress is faster than our first-generation users. So compared to the previous numbers, these locked orders are bigger. And also, you are very complementary of our allocation. About 60% of them are using the paid choice, the paid options. So compared to the previous generation, we think that the penetration is better. For example, female buyers, iPhone users penetration and also choosing different options of colors, for example, all these have been performing better in penetration than the last generation, the previous generation. Thank you for your question. Operator: Timothy Zhao from Goldman next. Timothy Zhao: I have 2 questions concerning AI. First of all, concerning in the past 2 years, there are some models and including the foundation models. So for AI capabilities in the ecosystem, what is our capability? And also for miclaw and also for the IoT, how is miclaw positioning? And how do we see it done with IoT? And how is miclaw going to be significant? And also, I would like to know how we consider AI in its users and also developers and internal to Xiaomi and its commercialization? In LLM, what are some KPI considerations for your team? You once said that in the next 3 years, there's going to be a RMB 60 billion expenditure? And how is this on OpEx and CapEx, the allocation, please? Unknown Executive: For 2023, we have used a lot of energy to consider our AI strategy going forward. So we have faced it. First of all, the infrastructure for AI, algorithm, et cetera. And out of the infrastructure, we had an exponential growth in terms of its application. And last year, we had already said that '26 was an explosive use of AI era. So from virtual, AI has moved into the physical world. And this is true to my earlier prediction. And with this prediction coming true, we will be developing our AI/LLM. We started investing in '24 and in 2025 in [ MiMo ] LLM or large language models, we have made a lot of progress. And we have been very clear last year in saying that this year, '26 will be the year of explosive use of AI. And last year, we were more considering about agents, AI agents. So in individual terminal, how can AI have a bigger usage so that people are able to do things that they were not able to use before. With OpenClaw, it's allowed us to very quickly roll out miclaw in testing. So at present, from the responses of our testing, it is very, very positive. And going forward, there is a huge market, and that is AI going to the physical world. So it will be in driving, in robots, in humanoids, et cetera. So in this area, Xiaomi has already made the deployment. And at the end, I think it will have to serve our entire ecosystem of Xiaomi. So this is a direction. This is a large direction, and we will continue to strategically follow that. And also, you mentioned miclaw. And for miclaw, this AI agent of Xiaomi, this is our own developed and it is an agent and it is going to test our modeling capability and also our limitation, and also, it's going to test how we are able to deeply integrate and also our data capability. And at Xiaomi, we will do our own integration with our own data from our users. So we will also be using cloud-based data. And also there will have to be certain integration into the system and also safety, we will be good in protecting safety. So for Xiaomi miclaw, it is going to be the prototype for the future AI agent. Now this is still early on. We do not have some specific commercialization model. And I don't have any KPI for the team yet because only when it is mature will the team has a certain KPIs. So as for the RMB 60 billion that you talked about, yes, my colleague will answer that question. Unknown Executive: That's right. For the [ RMB 16 billion ] and 3 years -- RMB 60 billion, it is -- it includes R&D and also CapEx. But of course, in R&D, it also includes the distribution from previous year's R&D. So it is our present period R&D and also our previous R&D and also CapEx. So there will be 3 parts. If you look at the 2026 [ RMB 16 billion ], most of it is R&D expenses, the present period. So it's a 70% present period R&D. So if it is CapEx plus the previous years, it would be the rest. So the next 3 years, every year, our CapEx will have some previous CapEx, which had been detained into this year. So it may be lower than the 70%. So it is for this period as well as a portion from the previous year's CapEx or amortization from previous year's CapEx. Operator: China Capital, Wen Hanjing next. Hanjing Wen: I have 2 questions. First question concerning our IoT business. We see 2025 IoT performance have been very, very good from revenue and also in progress and advancement. So for this year, there are 2 concern points. They are positive. And for home appliances, new highs reached. But some investors are concerned that with the domestic situation, what do you say the economy ramping down a bit? How do you see this? And also, what about IoT going overseas? What is the planning? And secondly, for vehicles in 2025, overall, for EVs, it is already profitable. And also for future planning for the entire year, how do you see profits for the entire year for vehicles? Weibing Lu: I'll be talking about IoT, and then Alain will answer the other question. For IoT for this business, because we have a number of different categories. I'll be talking about China market and overseas markets. For China market, I think there is an opportunity, and that is premiumization of IoT. For IoT business for us, even though it is very large scale, but our ASP is low. Last year, we had major progress made, but it is still far from our goal. Our watches, our, for example, our hairdryer, et cetera, I think still the average price is relatively low. So in R&D, with our investment in that, I think this year, we are going high end. I think there will be a lot, a lot of positive progress. So I think this is a huge opportunity. So for major home appliances, for our washing machines, our fridge, and it is 4 points. And for aircons, it is 10 points. So for ESG, I think there is still room for pricing. And for our IoT business, overall, last year, it is already at a very high level of AIoT as we will continue to do so. As for overseas business, I think there is a huge space for development because our market has always been the -- in China. If going to the North American market, it's going to be 3x of our original market size. And it's -- so that is to see it's going to be 6x if we reach our potential. It's going to be 6x or at least a few times our domestic China market. So there is a lot of empty room for us to fill in terms of overseas markets. We will send people. We will send our products. And with our IoT development, there had been a lot of overseas and information and testing, and there is huge room for overseas growth and development. So for our high ASP products, this is a high area of growth potential. So this is our overseas plan. Last year, it was 4.5 shops and it's going to grow to 10 or 10,000 shops. And I was in London in Xiaomi Home, I was able to observe that most of the products were high-end product selling. So you think that actually, our categories are very full in range, and these overseas markets, for example, in the U.K., they are selling at high end. So I think there is huge room for development in the overseas market. For the vehicle question, last year in 2025, we have delivered over 410,000 units, far exceeding the 300,000 unit target we set at the year start. So at the year start for this will be 550,000 units for this year's delivery target for 2026. So '26 compared to '25, there is growth. But for the overall situation in '26, there is pressure. So for our expectations, et cetera, we are still very confident that we'll be able to reach our target. As for our target profit. You would know for this category, it is AI and new business segment. So that would include our AI investment and also new development areas. So you cannot just look at the segment as just an auto segment. It includes other new businesses in this segment. But at present, the new businesses are still in the investment stage. As I've mentioned, in AI, for example, this year, we will continue to increase our investment in AI, including in robots. Robotics, we'll increase our investment there as well. So you have to look at 2 areas. One, auto in this segment. And secondly, AI plus new business investment. So for this particular segment, last year, it performed very well. For this year, as auto growth and also in other areas, the kind of fruit that we're going to pick from them, the results, this is going to be an encouraging segment. Operator: Kyna Wong, Citibank. Hiu King Wong: Can you hear me fine? Unknown Executive: Yes. We can. Hiu King Wong: I have 2 questions. First of all, I would like to know for the Middle Eastern situation recently, I don't know whether for the overseas business, including IoT, handsets, has it impacted you? Are there certain logistics and also cost of raw materials had presented issues to you? And also another question concerning your gross profit margin. For this year, for handsets or smartphones, is there a principle, let's say, under what kind of profit level will you be keeping it or making certain choices for adjusting the price. So for smartphone handsets to protect your profit margin, gross profit margin? And also for vehicles, there may be some pressure, as you have mentioned before. And how do you think this will be making your performance better than your competitors? Are there certain safeguards for profits and also AI, IoT because premiumization is a strategy of yours, you did say that for this kind of premiumization. What is your plan for AIoT, please? Unknown Executive: First of all, for Middle Eastern conflict, it's nothing that we want to see, certainly. I hope that there will be a solution for it because it's going to impact industries and economy around the world, it's going to impact big way. As for Xiaomi business, the Middle Eastern overall situation, for revenue from that part, it is not so much -- it is only in the single digits as a contribution to our profit. So in terms of the market from the Middle East, it's a small proportion of our overall at Xiaomi. So it is controllable from that regard. But at the same time, we also see that the oil situation from the Middle East, we already see some pellets, plastic pellets, and the raw materials is influenced or impacted. But overall speaking, it is still controllable. So that's for your first question. Second question, concerning cars, IoT and also smartphone handsets, the gross margin and what is our pricing strategy, well, for this, I would say, first of all, for memory, for memory components, we are to quantify that. I would say in the past, for a quarter, for example, we expect it to be at a certain high price, but actually, it's going to be at an even higher price, rising even higher. So we are very -- it's very hard for us to quantify that even for a small increase, it may because it is such a big part of the product, it will be impacting the cost of the product a lot. So it is very difficult to foretell early on, like what we had been able to do before. But for smartphones for this category, I think given our size and also our market share, it is very important for us. So if you say whether there's a principle, it would be that we hope. We try our best to make some balances. So my consideration is that we want to maintain our market position. That is very important to us because for smartphones, there are very few listed companies in this category. So I'm not being able to get a lot of accurate data from the industry competitors. But from my years of experience, I know the following. For example, in vehicles, the absolute number as a part of the overall car price, it is less in terms of its impact, but not as big as a smartphone part. For IoT, it is even -- it is also even lower in terms of memory, internal memory price impact. So different categories will have different impact. What is big impact would be smartphone, notebook and also tablets, less so for smart cars, less so for vehicles that is, and even less so for IoT. Operator: Next question, Citic, Xinchi. Xinchi Yin: I have 2 questions. First of all, on AI business. Miclaw has been introduced. And I was fortunate to have joined the launch. That was excellent. Can you give us more guidance? And that is at what point of maturity would you in big model or miclaw to commercialize them? And how would that be like in revenue? That's the first question. As for the second question for this year for chip, for example, do you think that you can have some progress to update us? Unknown Executive: For miclaw, I have already talked a lot about it, and I'm sure as a user, you will have felt this product, and you were there at the launch, and it's given us a lot of nice surprises, but it's a new product. And we still have a lot of -- there's a lot of room for improvement. And I, myself, also have gotten a lot of responses, so we have to improve on it. But I think the iterations will be very fast, and it will be a new version in a few days. So it's going to be -- it's going to have high speed iterations. For Xiaomi overall speaking, for AI, it's still going to be contributed to our users. For the commercialization of AI, I would say, at this point, it is still too early. Even though our large model, efficiency is high, our token commercialization, for instance. But from absolute numbers, it may be a little bit high. So at this point today, I would say commercialization is too early to talk about for us. And also, we already see our XLA model, XLA model. This is the XLA model, which is a cognitive large model. And SU7 is equipped with it from -- at present internally from our testing, it is very, very good in performance. So for these 2 models of cars, I am a user. And I personally would use -- if I use them, and if I have any questions in terms of use, I will put these cases to the team. And I personally experience these auto driving functions. It will be going forward step by step. And also our auto driving, whether the models or chips, we already have some deployments. So integration terminal to terminal, and when we have this ready, it's going to give a lot of new experience to our users. I don't know whether you've been driving our cars. Yes, watch out for its progress as we integrate more and more of our models into them for automotive. Operator: Because of time, this will be the last question from Zoe Xu of UBS. Zoe Xu: A lot of questions have already been asked by others. I have 2 questions to ask concerning new business investment and also IoT. For new business, with the models iterations faster, and you said that there will be more investment into AI. So for expenditure on new business, is chips side will be adjusted? Or do we see that there will be new chips introduced? Second question on IoT. Just now it's been mentioned for tablet and notebooks, there will be some cost impact. So will there be something like smartphones pricing strategy and that is to emphasize the experience for users, please? Unknown Executive: Well, for this year, we have increased a lot of R&D expenses. But for chip, it is a long-term strategic capability of ours. I have already said that this is a platform capability chip because it's going to provide capability for a lot of profit -- product types and product categories. So even though in AI, we have increased our investment, but we have not slackened our investment in chips. Actually, some of the chips, many of the chips. They are part of our big AI strategy. So we will definitely be steadfast with it. As for PC and tablets, we will follow more or less the same strategy as for smartphones. But please also notice that for the notebook that we have just launched, the Xiaomi NoteBook, after 4 years of development, it is selling very well. And it is the demand is even higher than we had expected. When we launched this NoteBook, we already knew that the memory part will be increasing in price. But on the other hand, the response has been so encouraging because of the product strength is good, even though it is more expensive, the users will be able to adopt it and they'll accept it. So I think product innovation, technological capability, these are important, even though memory is hiking in prices. But still, we will have ways to make our products attractive. In 2022, through our efforts, I think our company and our management team will still be able to deliver good performance for everyone. Operator: Thank you. We end the meeting here. Thank you very much for your participation. Thank you for your support for the company, Xiaomi. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Ladies and gentlemen, welcome to Nexteer Automotive Group Limited 2025 Annual Results Conference Call. [Operator Instructions] I would now like to turn the conference call over to Investor Relations Director, Mr. Tony Wang. Please go ahead. Tony Wang: Okay. Thank you, Jamie. Again, welcome, everyone, to our earnings call for the full year of 2025. We made the announcement of our annual results this evening, Hong Kong time. Before we begin today's call, I would like to remind you that this presentation contains a safe harbor statement. For additional information, please refer to the content in the second page of our slides. The presentation accompanying today's call are available on our company's website. Please visit nexteer.com to download slides if you have not done yet. Joining us today are Robin Milavec, Executive Board Director, President, CTO and Interim Global COO; Mike Bierlein, Senior Vice President and CFO. Starting the presentation, Robin and Mike will provide the business and financial highlights, respectively. And then we will open the lines for your questions. Please follow the limit of 2 questions per person. With that, let me turn the call over to our President, Robin. Robin Milavec: Thank you, Tony, and hello to everybody online today. I'll begin with an overview of our business performance and strategic progress, and then I'll hand it over to Mike Bierlein, our Chief Financial Officer, and he will walk you through our financial results and 2026 outlook. So starting with Slide 4 in our deck, let me start with a high-level overview of our full year business highlights. This reflects 5 key milestones demonstrating Nexteer's focus on long-term profitable growth. First is revenue. Our total revenue reached nearly $4.6 billion increasing 7.2% compared to 2024. And as a result, we achieved record revenue for a third consecutive year. This reflects sustained above-market growth driven by new and Conquest business wins. Second is program launches. We successfully launched 57 customer programs with particularly strong momentum in APAC, reflecting our deepening engagement with both global and Chinese OEMs. Third is new business bookings. We achieved customer program bookings totaling $4.9 billion, including new Steer-by-Wire wins with 2 leading Chinese NEV OEMs. The business development on Steer-by-Wire is well on track, along with the solid execution by our team in 2025. Fourth is revenue in our Asia Pacific division. APAC revenue reached a record of approximately $1.5 billion. This represents a 9.8% increase year-over-year, making the fourth consecutive year of record revenue in this region. This milestone highlights a remarkable organic growth trajectory with revenue surging from about USD 1 billion to USD 1.5 billion in less than 3 years. In 2025, Nexteer China and Nexteer India, each achieved record revenue, reflecting continued growth and strong regional execution. And finally, enhancing shareholder returns. We are glad to announce that the Board of Directors has approved a $46 million dividend subject to the approval of the shareholders in the upcoming Annual Shareholders Meeting. This dividend amount is more than double that of last year and represents a total of 45% payout ratio of the 2025 net profit attributable to equity holders which is an increase from 35% we had in 2024. These milestones collectively demonstrate Nexteer's ability to grow above market, while maintaining financial discipline. As I mentioned earlier, we successfully launched 57 customer programs across multiple product lines, regions, customers and vehicle segments. 42 of these were new or conquest wins and 36 were for electric vehicle platforms, demonstrating strong executions as bookings convert into revenue. Today, rather than walking through a detailed launch list line-by-line, this slide simply highlights the selection of major program launches that illustrate our new bookings wins that are translating into tangible growth. First, we achieved the initial launch of our Modular Column EPS or mCEPS in the EMEASA region. While Nexteer's mCEPS was first introduced in China, leveraging our industry-leading EPS building blocks. This successful EMEASA launch further enhances our competitiveness and our regional footprint. Second, we delivered the first Dual Pinion EPS program launch with a leading Chinese OEM. Following the inaugural Dual Pinion EPS launch in EMEASA, we have secured additional orders from multiple Chinese domestic OEMs and other European OEM over the past year. The customer demand for this product is strong, driven by the need for cost-effective speed-to-market solutions combined with Nexteer's proven steering, reliability and performance. At the same time, despite the emergence of Dual Pinion EPS, we have built a very solid and growing Rack EPS business foundation in China. Nexteer Technologies have been adopted across numerous mainstream and premium EV models with customers, including Xiaomi, XPeng, Li Auto, Zeekr, Chery, Changan, and others. Overall, the strong launch momentum across gear-based EPS platforms, including our single pinion, dual pinion and Rack EPS products continue to reinforce Nexteer's market leadership, particularly in the China market. Out of the 57 program launches, 48 of those were in APAC, supporting both Chinese and global customers. This, again, is another proof point of Nexteer's strategic targeting and capitalizing on the region's growth opportunities. This robust launch pipeline reflects increasing diversity across products, across customers and regions which is critical to our long-term success. Looking ahead, we are particularly excited about 2 Motion-by-Wire related product launches beginning in 2026. Turning now to new business awards. We secured $4.9 billion in customer program bookings in 2025, reflecting strong commercial momentum across products, regions and customers. These wins include several breakthrough awards and important first, underscoring our leadership in advanced steering technologies. Most notably, we secured Steer-by-Wire program with 2 leading Chinese new energy vehicle OEMs. And these cover both the handwheel actuator as well as the roadwheel actuator applications. These awards further reinforce Nexteer's leadership in next-generation Motion-by-Wire technologies. Let me expand a little bit more on these 2 customers. So building on our first Steer-by-Wire win with a leading Chinese OEM in the second half of 2024, we successfully secured a second award with this customer in 2025. This follow-on win demonstrates growing customer confidence and an expanding adoption of by-wire technology across the OEM's upcoming vehicle platforms. In addition, we secured our first Steer-by-Wire booking with another leading Chinese OEM, including, again, both the handwheel actuator and roadwheel actuator applications. This program is expected to launch as early as next year, reflecting a short lead time from a business award to production and strong execution capabilities. Beyond Steer-by-Wire, we continue to expand our dual pinion and rear wheel steering business across APAC and EMEASA, deepening relationships with existing Chinese OEMs, while also securing a new European-based OEM. These wins highlight not only the scalability of our dual pinion product technology, but also our ability to deliver cost-effective, lightweight rear wheel steering solutions that enable up to 12 degrees of rear wheel steering turning angle and supporting a broader growth pipeline. We also earned our first Column Assist EPS win with a market-leading OEM in India. This marks an important milestone for Nexteer in 1 of the world's fastest-growing automotive markets. This win demonstrates our ability to localize proven global electric power steering technologies and compete effectively on cost, quality and reliability in a highly value-focused market. Another important first is that we earned the first high output Column Assist EPS win with a leading Chinese OEM. This represents an important expansion of our Column EPS portfolio into higher performance and load applications. This win highlights our ability to extend Column EPS technology beyond the traditional output range to meet more demanding vehicle requirements. We continue to capture the global expansion of Chinese OEMs as they grow their presence in Europe and South America, by leveraging our strong China relationships and global footprint to support customers with consistent scalable steering solutions across regions. Importantly, this trend allows Nexteer to extend China originated wins into incremental global revenue opportunities. And lastly, we successfully conquested a new Power Column business for full-size truck platform in North America, strengthening our leadership position in this region as well. Looking at bookings across product lines and regions, over 75% of Nexteer's bookings were in our EPS product line and nearly half or 45% of our bookings were secured in the APAC region. Overall, this diversified portfolio indicates our technology is becoming the product of choice by many domestic and global OEMs. On the next slide, this highlights that customer diversification remains a core growth pillar for Nexteer. We partner selectively with OEMs to align with the long-term industry mega trends, including electrification, autonomy and connectivity. And today, we serve more than 60 OEMs globally. Over the last year, we've expanded our customer base by winning programs across a broad range of customer models from leading domestic OEMs in China to the market leader in India, to premium EV manufacturers in North America as well as an emerging autonomous mobility company. Importantly, these wins span a wide mix of technologies, including our Rack EPS, Column EPS, Dual Pinion, Rear Wheel Steering, Driveline and Columns and Intermediate Steering Shafts. This demonstrates our ability to deploy the full Nexteer portfolio. It positions us to capture growth from established volume leaders, while also participating in the emergence of new mobility players which are reshaping the industry. While every competitive situation is different, our success consistently comes down to a few core strengths. We bring world-class product and process technologies. Our quality and reliability performance as measured by our customers remains strong and continues to improve. We listen carefully to understand what each customer truly values. And as the Tier 1 in our space was experienced as a global OEM in our early history, we truly understand how critical speed, agility and mindset are in responding to those needs. And finally, flawless execution from development through launch remains a defining differentiator. Together, these capabilities underpin our ability to win, scale and grow profitably across a diverse and evolving customer base. We also continue to make disciplined progress in expanding our manufacturing and technical footprint across Asia Pacific to support long-term growth and localization. This slide shows the time line on how APAC steering production and validation has expanded in the past 5 years. In January of 2025, we opened our state-of-the-art Changshu Manufacturing and Testing facility in China, strengthening our ability to support the growing demand from Chinese OEMs, while aligning with China's focus on high-end intelligent and sustainable manufacturing. That expansion is complemented by our Asia Pacific technical center in Suzhou, which brings comprehensive engineering, validation and corporate functions together in 1 location, enabling faster development cycles and closer proximity to our customers. We have also expanded our India Technical Center near Bengaluru with additional physical validation capabilities, enhancing localized engineering support in that region. Looking into 2026, we've opened our first manufacturing facility in Rayong, Thailand, which has begun production with an initial focus on Column Assist EPS to support growing demand across Southeast Asia. And finally, we broke ground on new smart manufacturing facilities in both Liuzhou and Suzhou, further expanding capacity for advanced steering technologies, including EPS and Steer-by-Wire. Together, these initiatives reflect our disciplined approach to scaling capabilities and supporting customers across the region. On this next slide, I'd like to update the status of 1 of our most important Motion-by-Wire development portfolio products, which is electromechanical breaking or EMB. Nexteer publicly debuted EMB at the 2025 Shanghai Auto Show. We leveraged our technology building blocks to create a modular high-precision braking system to strategically expand into Motion-by-Wire chassis control. Following the Winter Test on EMB 1 year ago, a second round of winter vehicle tests were completed in Yakeshi, China during the period between December of 2025 and March of this year. In this event, we had more than 17 OEM customers that were engaged and had given very positive feedback on the vehicle performance through the on-site test driving and technical review. Meanwhile, our customers were surprised by the rapid pace of our EMB product development progress. Right now, we're developing highly automated production line to accelerate our industrialization process. And we also will continue to optimize the function, performance and durability of the EMB product. We're looking to secure our first business booking of EMB with the Chinese OEM in the course of this year. This next slide highlights how we are capitalizing on Motion-by-Wire and MotionIQ to enable Intelligent Motion in the vehicle. First, we're integrating smart chassis technologies, including steer-by-wire, rear wheel steering and brake-by-wire, with the electric powertrain architectures. This system-level integration allows us to deliver precise coordinated motion control across the vehicle, while supporting OEMs efforts to simplify platforms and scale advanced architectures. Second, we're embedding software-defined vehicle and AI capabilities directly into motion control. Through MotionIQ, we combine proven safety critical algorithms with flexible software tools enabling OEMs to develop, tune and update motion functions more quickly, while retaining control over vehicle differentiation. And third, these capabilities support autonomous vehicle applications, including Robotaxi and ADAS Level 3 Plus. Our Motion-by-Wire, hardware and software foundation enables the redundancy, the precision and the control required for higher levels of automation. Now I'll hand it over to Mike Bierlein for the financial review. Michael Bierlein: Thanks, Robin, and good day, everyone. Nexteer delivered a record year in 2025 with full year revenue reaching $4.6 billion. On an adjusted basis, excluding foreign exchange and commodity impacts, revenue increased 6.9% year-over-year outperforming the market by approximately 320 basis points. Importantly, all 3 regions delivered growth, supported by strong production schedules. Profitability continues to improve. EBITDA grew 11.2% year-over-year, with margins expanding by 40 basis points. We generated positive free cash flow of $124 million, and our balance sheet remains strong, ending the year with $414 million of net cash. From a growth and visibility standpoint, we secured $4.9 billion of customer program bookings during 2025, including 2 Steer-by-Wire program awards reinforcing our long-term growth outlook. Finally, reflecting our confidence in Nexteer's financial strength, our Board approved a $46 million dividend representing a 45% payout ratio, up from 35% in 2024. This confirms our commitment to disciplined capital allocation and increasing shareholder returns. This slide highlights our key financial metrics for 2025: revenue, EBITDA, net profit and free cash flow, and demonstrate solid improvement across our core earnings profile. Revenue reached $4.6 billion in 2025, up 7.2% year-over-year, reflecting favorable volumes and execution on New and Conquest program launches. EBITDA increased to $472 million representing an 11.2% increase versus 2024, with margins expanding to 10.3%, driven by favorable volume and improved operating performance. Net profit attributable to equity holders was $102 million or 2.2% of revenue compared to $62 million in 2024. This includes a $24 million of net impairment costs driven by customer program cancellations. While we recognized a similar net impaired cost of $23 million a year ago. Adjusting for these onetime items, our net income would be $126 million or 2.7% for the year of 2025. Free cash flow was $124 million in 2025 compared to $166 million in 2024. Improvements in EBITDA were offset by a onetime favorable tax benefit received in 2024 and by net investment in working capital to support growth. Overall, 2025 represents a year of improved earnings quality, supported by stronger volumes and operating performance. This slide shows a walk of 2024 revenue to 2025 revenue. Favorable foreign exchange increased revenue by $15 million, driven by the euro strengthening compared to the U.S. dollar. As noted here, the largest driver of the year-over-year increase in revenue was represented by volume, pricing and others, which provided an uplift of $293 million, driven by strong customer schedules and above-market growth in all 3 segments. APAC continued to lead with revenue growth, mainly with the China OEMs. Finally, commodity prices reduced slightly, causing a year-over-year revenue decrease of $1 million. This slide shows our year-over-year revenue growth versus the market in 2025, adjusted for foreign exchange and commodity price changes. On a global basis, Nexteer delivered 6.9% adjusted revenue growth year-over-year, outperforming the market by approximately 320 basis points. Looking at the regions. North America revenue increased by 4.4% year-over-year and 5.4% above market as our customer programs continue to perform well in the market. APAC continued to lead with 10.2% year-over-year growth and 3.1% growth over market, underscoring the strength of our regional execution and customer portfolio. EMEASA delivered strong growth with 8.5% year-over-year revenue increase and 9.5% above market, supported by program ramp-ups. This slide summarizes our 2025 revenue performance by region and highlights both the mix and growth dynamics across the business. Starting on the left. Total revenue increased from $4.3 billion in 2024 to $4.6 billion in 2025. From a mix standpoint, North America remains our largest region at 50% of total revenue, with APAC at 32%, and EMEASA at 17%. Overall, the regional mix remains balanced with continued structural growth in APAC. Turning to the regional growth performance on the right. North America revenue of $2.3 billion increased 4.4% year-over-year. APAC delivered strong growth of 9.8% or 10.2% excluding FX and commodity impacts supported by sustained momentum from New and Conquest program launches over the past several years and our leading position with the Chinese OEMs. EMEASA revenue increased 11.4% year-over-year or 8.5% excluding FX and commodity impacts driven primarily by Conquest program volume ramp-ups. This slide walks through the year-over-year change in EBITDA from 2024 to 2025. EBITDA increased from $424 million in 2024 to $472 million in 2025, representing an 11.2% year-over-year increase with margins expanding from 9.9% to 10.3% of revenue. Starting with the key drivers. Volume and mix contributed $59 million, reflecting higher revenue and improved operating leverage across the business. These gains were partially offset by $10 million related to troubled supplier costs as well as $10 million of net tariff impact, both of which pressured year-over-year performance in North America. Restructuring cost was $9 million in 2025, which was equal to our restructuring cost in 2024. Restructuring costs were primarily to support a further 15% reduction in U.S. salaried employment in 2025, as we continue to focus on optimizing our cost structure to improve margins and costs related to the transfer of the Columns operation from the U.S. to Mexico, which is nearing completion. All other performance factors contributed $9 million, reflecting continued improvement in manufacturing and material performance more than offsetting price reductions and economics. This slide highlights our EBITDA and margin performance by region in 2025 compared with the last year. Starting with North America. EBITDA was $174 million in 2025 compared with $178 million in 2024. EBITDA margin declined from 8.1% to 7.6%, as margin improvement initiatives were more than offset by troubled supplier and net tariff costs. APAC EBITDA increased to $243 million up from $230 million in the last year, driven by continued strong revenue growth, EBITDA margins remained robust at 16.6%. APAC continues to deliver solid earnings growth and margin performance supported by increased scale and operating execution. In EMEASA, EBITDA increased significantly to $69 million, up from $36 million in 2024. EBITDA margins expanded from 5% to 8.6%, driven by improving operating efficiency and revenue growth, reflecting meaningful year-over-year progress in the region. This slide shows our EBITDA to net profit walk for 2025. Overall, the year-over-year $48 million in EBITDA increase is driving the net profit increase from $62 million to $102 million. Depreciation and amortization totaled $309 million in 2025, broadly flat versus last year. D&A includes depreciation of plant, property and equipment as well as amortization of intangible assets. The results include a $24 million net program impairment charges recorded in 2025. And $23 million in 2024, primarily related to North America EV program cancellations and volume reductions. We continue to work with our customers on cost recoveries related to these programs. Operating profit increased to $163 million, up from $115 million last year, reflecting the stronger EBITDA performance. Below operating profit, JV earnings increased modestly, driven mainly by contributions from our Chongqing operations. Income tax expense increased to $55 million compared with $42 million last year. This increase was primarily driven by improved profitability. Our U.S. operations remain in a valuation allowance position, driving our effective tax rate to be elevated at 33% for 2025 compared to 36% in 2024. As our profitability continues to improve in the U.S., our effective tax rate will continue to reduce. For 2026, the forecast for effective tax rate is slightly below 30%, and our long-term effective tax rate remains in the high teens. Moving to the balance sheet and cash flow. On the left of the slide, you can see our full year 2025 cash flow performance compared with 2024. Cash from operating activities of $405 million in 2025 was $41 million lower than 2024, as increased EBITDA was offset by a onetime favorable tax benefit in 2024 and by a net investment in working capital to support growth. Cash used in investing activities totaled $281 million in 2025, largely in line with the last year. Overall, free cash flow was strong at $124 million. We ended 2025 with $501 million of cash on hand and gross debt of only $50 million with finance leases of $37 million, resulting in a net cash position of $414 million at year-end. Total liquidity stood at $833 million comprised of $501 million of cash and $332 million of committed credit facilities, providing significant financial flexibility. Turning to our 2026 operating considerations. Despite expectations for modestly lower global OEM production in 2026 we remain on track to deliver another year of record revenue. We expect above-market revenue growth in 2026 of approximately 200 to 300 basis points, driven primarily by continued growth in APAC, particularly in China as we continue to expand with both global and domestic OEMs. From a profitability perspective, we expect continued margin expansion benefiting from net performance improvements and increased volume leverage. Our Motion-by-Wire portfolio continues to build momentum with additional order opportunities anticipated and initial revenue recognition expected to begin in 2026, marking an important milestone in the commercialization of this technology. At the same time, geopolitical risks persist, including ongoing conflicts and trade tensions, we remain vigilant and continue to actively manage these risks through close engagement with customers, suppliers and our global operating footprint. Nexteer's long-term investment opportunity remains compelling, supported by above-market revenue growth, continued margin expansion through operational efficiency and execution, our leading position in Motion-by-Wire technology and a strong balance sheet, enabling strategic investments and increasing shareholder returns. In closing, Nexteer has a well-defined strategy focused on technology leadership, portfolio alignment with megatrends, disciplined cost management and targeted growth in China and emerging markets. Thank you for joining us today. Operator, Jamie, please open the line for Q&A. Operator: [Operator Instructions] And our first question today comes from Shelley Wang from Morgan Stanley. Shelley Wang: I have 2 questions. The first is about our new products. And it's good to see the progress on the Steer-by-Wire project wins. And then, I was wondering, like, in the long term, are we more focused on the Steer-by-Wire itself or we target to provide like the integrated solutions, maybe including the Steer-by-Wires like EMB. And then if it's the integrated one, then what's our advantage if comparing to other chassis suppliers and the start-up? So this is my first question. And my second question is about the impairments and the compensation. And because from the financial statements, we see we booked $54 million customer compensation in 2024, but only $8 million last year. So are we expected to receive more compensation this year? Or the $8 million is for the project installations last year? Yes. So that's my second question. Robin Milavec: Okay. Thank you, Shelley. This is Robin. I'll take the first question that you had, and then I'll turn it over to Mike to address your second question. So in terms of the new product strategy, certainly, we've been developing our Steer-by-Wire product for a number of years now, and we are beginning to see traction in the market, especially in the China market with Steer-by-Wire, new business wins, production launches that will start this year. And as a part of this by wire technology, our intention is to be a chassis Motion-by-Wire supplier. So that is the reason for the recent development of our electromechanical braking system. And that is a critical milestone in the Chassis-by-Wire system that we need to fulfill. So I would indicate that the advantage that we will have in this market, obviously, when you think about braking, we don't have a long history of braking as a company. However, we are very experienced in safety-critical vehicle systems, and the EMB product has -- shares a lot of commonality with electric power string in terms of the electric motor, the actuator, the electronics, the software, all of that is very scalable, and it builds on those critical technology building blocks with the EPS. So we see a lot of potential to increase our scale and really drive competitiveness by having both the Steer-by-Wire and the EMB products together. In addition, we don't have a lot of legacy investments in hydraulic braking. So we're really free from the past legacy of this older technology that will be phasing out and we are entering in this technology shift in the industry to electric braking. So we believe that is also an advantage for us. And the third advantage I would highlight is the close partnership that we have developed with the China OEMs. I noted that we had 17 customers evaluating our Brake-by-Wire vehicles in our Winter testing. There is significant interest from many of the China OEMs to support Nexteer, and we believe that relationship will lead to business sourcing for both Steer-by-Wire and EMB, and that will enable us to enter the braking market globally at some point in the near future. With that, let me hand it over to Mike for part 2 of your question, Shelley. Michael Bierlein: Thanks for the question, Shelley. So in terms of the impairments, it's certainly a challenging situation in North America with the changing, say, demand and support from government programs to support the electric vehicles. So each of our 3 major customers within North America determined to cancel or significantly reduce volumes on their EV truck and SUV platforms. And that happened towards the end of the year of 2025. We did record $32 million of impairments between write-offs for our engineering intangible assets as well as write-offs for some specific, say, machinery and equipment. We did recover $8 million that netted us down to $24 million on a P&L impact for the year. And because these program cancellations happen toward the end of the year, we were not able to fully negotiate the recoveries with our customers, and we do expect to receive recoveries yet in 2026. Now we also have to deal with challenges across our supply chain. And certainly, we have costs that our partners and our supply base have incurred relative to these program cancellations as well. But to answer your question, yes, we do expect to recover this further cost to offset these write-offs in 2026. Operator: And our next question comes from [ Jiayi Shi ] from Guotai Haitong Securities. Unknown Analyst: And I'm just wondering how much would you estimate the growth of revenue of each area in 2026 and the EBITDA margin of each area? Michael Bierlein: Thanks, Jiayi, for further questions. And certainly, considering the dynamic environment that we're facing in 2026, there has been certainly a mix of impacts on our revenue outlook forecast. As I mentioned, we are expecting our revenue to grow on a year-over-year basis, above market by 200 to 300 basis points. And with that, we are, at this point, anticipating a global market volumes to be lower by about 1% for the year. And I think that the 1% really depends on how this geopolitical conflict between the U.S., Israel and Iran ends up playing out over the years -- over the year. Hopefully, the conflict ends sooner. Our forecast is, of course, assuming a short-term conflict with that. So from a volume perspective, we are seeing that most of our growth over market will be in Asia Pacific. So you can think about, the 200 to 300 basis points growth being largely in Asia Pacific. From an earnings profile. We do see a continued margin expansion. And if you think about breaking that down then by region, I continue to challenge our Asia Pacific region to maintain profit margins in around the 16% to 17% EBITDA range. And we continue to see improvement and momentum in our EMEASA segment. So you can expect added improvements in EMEASA as well as we see improvements in North America as we have these onetime charges related to troubled suppliers and net tariff costs within North America. Operator: [Operator Instructions] And at this time, I'm showing no additional questions, we would like to thank you for the questions and today's participation. If there are any further queries, please contact us at investors@nexteer.com. The conference has now concluded. We do thank you for attending today's presentation. You may now disconnect your lines. Robin Milavec: Thank you, gentlemen.
Operator: Good morning, ladies and gentlemen, and welcome to the LENZ Therapeutics Year-end 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this call is being recorded. At this time, I would like to turn the call over to Dan Chevallard, Chief Financial Officer. Please go ahead. Daniel Chevallard: Thank you. Good morning, and thank you for joining us today. My name is Dan Chevallard, Chief Financial Officer of LENZ Therapeutics. We are joined today by Evert Schimmelpennink, our President and Chief Executive Officer; and Shawn Olsson, our Chief Commercial Officer; as well as Dr. Marc Odrich, Chief Medical Officer, who will join us for the question-and-answer session. Before we begin, I would like to remind you that this call will contain forward-looking statements regarding LENZ's future expectations, plans, prospects, corporate strategy, regulatory and commercial plans and expectations, cash runway projections and performance. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors and risks, including those discussed in our filings with the SEC and which can also be found on our website. In addition, any forward-looking statements represent only our views as of the date of this webcast and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update such statements. The company encourages you to consult the risk factors contained in our SEC filings for additional detail, including in our 2025 Form 10-K, which will be filed later today. With that, I will now turn the call over to Eef. Evert Schimmelpennink: Thank you, Dan. Good morning, everyone, and thank you for joining us. We are now about 5 months into the launch of this. I would summarize where we are today in 3 simple observations. First, the product clearly works, something I know many of you are also hearing as you do your own bucket checks. Second, what we're seeing so far suggests the promising share of patients who buy the product tend to refill. And third, we are clearly building a new treatment category. And while new categories take time to develop, the signals we are seeing reinforce our confidence that this can become the blockbuster market opportunity we have always envisioned. At this early stage of the launch, our priority is putting the right foundations in place. This category can scale and adoption can accelerate over time. Importantly, we are executing this launch from a position of significant financial strength. We closed the fourth quarter with over $292 million in cash, which gives us the resources and flexibility to continue investing in building this category. Let me take you through each of these observations, starting with the product itself. Across the field, we continue to hear consistent feedback from both doctors and patients. The clinical performance we saw in our trials is translating directly into the real world. This works quickly with many patients noticing the effect within about 30 minutes and with the benefits of near vision typically lasting throughout the workday. Importantly, we're also seeing the same broad patient profile we observed in our clinical program. That breadth matters when you consider the scale of the opportunity. Presbyopia affects approximately 128 million people in the United States, and this is the first and importantly, the only once-daily eye drop capable of addressing such a broad segment of that population, which is what ultimately creates the opportunity for a large and durable category. From launch through the end of this quarter, we believe that we are on track to have sold over 45,000 boxes of this prescribed by more than 10,000 eye care professionals, creating a strong and rapidly expanding base of physicians adopting the product. In fact, the number of prescribing doctors we have seen at this stage of the launch already significantly exceeds what we observed with several recent eye care product launches. Importantly, we are seeing strong productivity within that base. As we look deeper into prescribing behavior, we're seeing a very encouraging pattern among our highest volume prescribers. When we normalize for the same script volume of around 45,000 scripts and compare prescribing frequency across top deciles of our ECPs, the data suggests that our top 1,000 prescribers are filling over 40% more scripts per doctor than what was observed at a comparable point in the VUITY launch. And based on the same data, we estimate that the total amount of prescribing doctors that took VUITY to get to this volume is approximately 2x . What this tells us is that once physicians understand how to integrate this into their practice, they are successful with it. We view this as an important signal because it suggests that the opportunity is not only to continue to bring more physicians into the category, but also to increase productivity across the broader ECP base as we learn from these top prescribers and use those insights as a blueprint to scale across the field. Equally important, we are seeing encouraging early signals around patient persistence. What we are seeing so far suggests that patients who try the product and choose to purchase it often continue using it, which is exactly the behavior we hope to see at this stage of the launch. Our sample strategy is a key part of this. By allowing patients to try the product first, we see a natural self-selection dynamic, but patients who experience the benefit and choose to purchase are more likely to continue using it. This does mean that the early new patient numbers developed differently compared to the launch of VUITY, where patients often had to purchase the product before trying it. That approach led to a faster initial ramp, but also a rapid drop-off as many patients did not continue therapy. Our approach is designed to build a more durable patient base from the start, even if that results in a more gradual early ramp in new patients. While the refill signals we're seeing are encouraging, the pace at which new patients are coming on to therapy is therefore developing more steadily, which is consistent with what we often see when an essentially new treatment category is being established. These are the typical dynamics you see when new categories are introduced and new prescribing habits are being developed. And importantly, they are very addressable through focused execution in the field, combined with effective consumer marketing. Let me discuss that some more. From our conversations in the field, there are 2 themes that emerge with ECPs as they build prescribing habits that will get this recommended to more patients more often. First, ECPs must learn how to best work this into their patient discussion and start from a place of unfamiliarity with respect to how to counsel patients on a presbyopia eye drop. Second, many physicians primarily think of this for early emerging presbyopes, patients who are just beginning to experience near vision challenges. The reality is much simpler. This can be introduced during a routine exam with a short 10-second discussion, and it works for a much broader patient population than only emerging presbyopes. Changing that mindset and helping physicians integrate the product naturally into their exam flow is a key focus for us. Based on what we've learned over these first months of launch, we are leaning in operationally to accelerate adoption. We've sharpened our physician messaging to address the 2 themes I just discussed. Specifically, our sales force is working closely with eye care professionals on how to naturally integrate this into the patient proposition and introduce the products during a routine exam by a simple, quick discussion. At the same time, we are reinforcing the breadth of the patient population. This works across a wide range of presbyopes, including contact lens wears, patients with prior LASIK, patients and not only the early emerging presbyopes. In addition, we are expanding our field presence to a total field organization of 117 reps. This expansion will allow us to increase call frequency with existing prescribers while also expanding the number of physicians we actively cover, enabling us to react to strong inbound interest from doctors who are not currently in our target panel, but who are already prescribing this because patients are asking about it or because they learned about the product through other channels. We are making this investment because we see a clear opportunity to accelerate adoption in the field, further integrating this into everyday clinical practice. Besides physician efforts, creating a new category also requires consumer awareness, and we are continuing to build the consumer side of the category. Many of you have complemented us on our direct-to-consumer campaign, which features Sarah Jessica Parker and asked when we expect to see that translate into prescription trends. As a reminder, we launched our DTC campaign in mid-January with February representing the first full month of activity. We are encouraged by the early signals we're seeing. The campaign is resonating with consumers and clearly driving engagement. Website traffic is now running roughly 5x higher than our baseline levels. And during national activations, we've seen spikes of up to 10x normal traffic. At the same time, consumer activation in a new category takes time. Across consumer-driven categories, people typically need to see it at 5 to 7x what they act on it. In our case, the journey from awareness to prescription naturally takes longer. The consumer first sees the advertisement, learns about the product, schedules an appointment with the eye care professional, receives a sample and only then transitions to purchasing a prescription. Pharmaceutical direct-to-consumer campaigns like ours, therefore, typically take at least 2 quarters to translate into prescription trends. What we are seeing today are encouraging early indicators of that process, and we would expect a more meaningful impact on script volume as we move into the second half of the year. In other words, the consumer awareness engine is now beginning to build momentum, while in parallel, we continue to focus on helping physicians integrate this more consistently into their patient discussions. With that, let me briefly summarize where I believe we are today. We have a product that clearly works and is delivering the real-world results we expected to see. We are seeing encouraging early signals around patient persistence, and we have already built a strong and rapidly growing foundation of prescribing physicians. At the same time, we're building a new treatment category, which naturally takes time. But as I've noted, the early signals we're seeing give us confidence that we are on the right path. With the operational actions we're taking in the field, expansion of our sales force and a growing consumer awareness driven by our direct-to-consumer campaign, both the physician and consumer adoption engines are now beginning to build momentum. And as prescriber habits build and consumer awareness grows, we expect to see an acceleration in new patient starts from that foundation. The opportunity in front of us remains exactly what we've always believed it to be, a large and underpenetrated market with 128 million presbyopes in the United States and a product that can meaningfully improve how patients manage their near vision. Our focus now is straightforward, continue executing, continue expanding adoption and continue building what we believe can become a blockbuster category. With that, I will now turn the call over to Shawn to give more insights into our commercial strategy. Shawn Olsson: Thank you, Eef, and good morning, everyone. As a quick reminder, presbyopia is the largest unmet vision condition in the United States. It affects approximately 128 million people, a population nearly 4x larger than those of dry eye. In fact, presbyopia affects more Americans than dry eye, demodex, childhood myopia, macular degeneration, diabetic retinopathy and glaucoma combined. This is uniquely positioned to address this opportunity and performing exactly where it matters. The product works and early persistent signals are encouraging. Because this is a new category of creation, as Eef noted, ramp in new patients is developing gradually as physicians are starting to build the habit of introducing an eye drop option during routine visits. We're focused on accelerating uptake by sharpening our physician messaging, expanding our sales force to increase reach and frequency and building consumer pull through DTC so that more patients are offered VIZZ in the exam room and more come in asking about VIZZ. I will unpack these details and insights across our key strategic pillars. Doctors recommend us and consumers request us by name. Focusing first on our eye care professional strategy. We are encouraged by the progress of doctors who recommend this. Just 5 months into launch, aided awareness is already at 98% and unaided awareness is already at 79%. As a reminder, unaided awareness means that dye doctor brought up VIZZ in the survey as an eye drop to treat presbyopia unsolicited. So both metrics are above our targets and demonstrating that ECPs are very aware of VIZZ. In the same survey, we're also seeing accuracy of key VIZZ messages resonating with ECPs as they're prompted to write in what they know about VIZZ. We see consistent answers such as pupil selective, different MOA, not pilocarpine . The results demonstrate that ECPs understand VIZZ well. Confidence in VIZZ is also clear as reflected by more than 14,000 ECP locations enrolled in our . And most importantly, we expect to have over 10,000 prescribing ECPs by the end of Q1, which exceeds what we observed with several recent eye care product launches, including MIEBO and XDEMVY at this stage of their launch. In addition to the broad ECP prescriber base, we're also seeing ECP confidence as over 55% of these doctors have written VIZZ multiple times. As we look at the first 5 months of launch, we're also gaining important insights that continue to reinforce our confidence in the opportunity for VIZZ. First, we're seeing that access to optometrists and ophthalmologists is not a meaningful barrier for VIZZ, as evidenced by our consistent execution of our field team, which continues to deliver approximately 7 calls per day. Secondly, our sampling strategy is working. We see that most patients are able to obtain a sample. And when they do, it helps identify those who like the product, which in turn has supported encouraging refill rates. In terms of prescriber mix, it remains about 80% optometry and 20% ophthalmology with our expected top prescribers performing as anticipated. As Eef stated earlier, once these ECPs have integrated this into the practice, they're successful with it as data suggests, our top 1,000 ECPs are filling over 40% more scripts per doctor than what was observed at a comparable point with VUITY. Interestingly, we're also seeing adoption broaden across lower decile writers, which is an encouraging sign for the depth of the opportunity. Particularly notable is the growing number of eye care professionals writing VIZZ multiple times who never wrote VUITY. We view that as an important proof point. It suggests that VIZZ is not simply capturing prior prescribers in this category, but it's expanding physician engagement with the prescription presbyopia opportunity more broadly. And finally, while others enter this market, their limited success means this remains a true category build effort. We're working to build new prescribing habits and overcome legacy prescriptions from prior products. And our market research confirms there is still an opportunity to further educate ECPs that VIZZ is not just for early presbyopes and how to more routinely integrate VIZZ's discussions into the standard eye exam. Based on what we've learned in these initial months, we've already begun to implement clear steps to accelerate adoption. We're expanding -- we're excited to expand our field organization from 88 representatives to 117 representatives, as I noted earlier, which will allow the in-field organization to cover a broader set of ECPs who are already prescribing VIZZ and increase call frequency with eye care professionals. This expands the outside field team's reach to approximately 15,000 ECPs. We believe that added reach and frequency are important to supporting behavior change needed to build the category and integrate VIZZ as a routine part of the presbyopia discussion. We've already begun recruiting the expanded field and expect to be fully onboarded in Q2. At the same time, the field is focusing on the messages that matter most to bring up VIZZ more often, including the broader inclusion criteria from our clinical studies, which included moderate advanced presbyopia and strong success that we're seeing in the moderate advanced presbyopes as well as practical tools to make offering VIZZ to patients a simple and seamless addition to the office visit. Moving to our consumer strategy of driving patients to request VIZZ by name. We're encouraged by the early momentum we're seeing. Since launch and through the end of March, we expect to have sold more than 45,000 monthly packs of VIZZ. And importantly, this is proving to be a product that works for patients and is generating encouraging refill behavior. We are already seeing patients come back for refills, transition from 1-month to 3-month prescriptions and in many cases, start directly with a 3-month order, which reinforces our view on the benefit of the product that the most important near-term driver of growth is focusing on increasing NRxs. To support that, in addition to our work we just discussed with ECPs to bring VIZZ into the conversation more often, we've recently launched our direct-to-consumer campaign and have seen strong early uptake that I'll outline shortly. Our spokesperson, Sarah Jessica Parker, is resonating well with VIZZ consumers and our advertising is now running across a broad mix of high-impact media, including YouTube, Instagram, TikTok, ESPN, Paramount+, Uber, Pinterest and other platforms, helping us reach consumers where they spend their time and driving not only sustained increase in web visits, but up to a 10x increase in visits to vizz.com. We've also begun activating influencers across a diverse set of audiences from well-known reality personalities to recognizable voices in sports media and iconic actors who are now the Presbyopic age. In addition, we're seeing strong pickup across broad media platforms, including Good Morning America, New York Live, The New York Times and Late Night TV. As we look at what we are learning from our early consumer launch efforts, our consumer mix today is approximately 60% female and 40% male, with the majority of users between the ages of 45 and 65, which is consistent with the audience we target and expect it to reach. As we highlighted earlier, it typically takes a couple of quarters to see DTC take hold, and we're encouraged by the early performance indicators of our advertising, where click-through rates and cost per impressions are exceeding relevant benchmarks. For example, our early lift in brand awareness from YouTube is performing 2x above benchmark, and we're seeing similar lifts across both men and women demographics. Just as importantly, these campaigns are giving us useful insights into how our various creative assets perform across women and audiences, including which visuals, messages and executions are resonating the most strongly with consumers. Even with our early encouraging DTC metrics, we're actively optimizing our creative ads and media placement to maximize impact. We're increasing investment allocation behind the higher-performing media placements while reducing the allocation to lower-performing media, allowing us to concentrate resources where we are seeing the strongest response. We're also introducing new permutations of creators into the mix, which bring up the everyday frustration with reading glasses, which we believe is an important point of recognition as consumers consider VIZZ. Starting in April, we will pilot linear TV commercials in select markets across our top states to test patient response. Linear advertising is your traditional TV commercials on your common network stations like ABC, NBC and cable through typical providers like Comcast. Together, these actions will continue to optimize our media mix, ad messaging and build additional consumer demand for VIZZ. We're encouraged by the progress we've made. We are seeing broad physician adoption, growing commercial demand and encouraging early repeat behavior and the first signs that our consumer campaign is beginning to activate that market. We continue to believe this is a category of one. As the only approved presbyopia eye drop with up to 10 hours of duration, this offers a differentiated profile that we believe is well aligned with the need of both consumers and eye care professionals as demonstrated by the ECP adoption and encouraging patient persistence. I'd now like to hand the call over to Dan Chevallard, our CFO, to step through our financial results. Daniel Chevallard: Thank you, Shawn. As both Dave and Shawn have outlined, the fourth quarter and recent period of launch has been a tremendous time for LENZ as we have proudly introduced this into the U.S. marketplace, representing a novel solution for the treatment of presbyopia with the 128 million Americans frustrated with their near vision. As has been highlighted, this is a true market build and one that we're doing from a position of financial strength. This morning, I'd like to focus my remarks into 3 sections. First, summarizing our 2025 financial results, and discuss our outlook on 2026 capital allocation, and I will conclude by highlighting the significant progress made on the global expansion of VIZZ through our international partnership strategy. First, and as has been mentioned, we continue in the launch of VIZZ from a position of financial strength, ending 2025 with approximately $292.3 million in cash, cash equivalents and marketable securities. We remain debt-free and ended 2025 with approximately 31.3 million shares of common stock outstanding. Our Q4 results were highlighted by net product revenues of approximately $1.6 million in our first quarter of product launch with over 20,000 monthly paid and filled prescriptions. As you will recall, we launched VIZZ with availability through 2 consumer channels. The first, our e-pharmacy receives prescriptions from the ECP, processes individual orders and ships product directly to the consumer's home. We recognize revenue when our product is delivered to the consumer. Our second channel, the more traditional retail pharmacy is a channel supplied by our network of wholesalers. As is typical through this channel, we recognize revenue when shipments of VIZZ are received by the wholesaler, not upon delivery to the patient. Turning now to our operating expenses. We have discussed in previous quarters our planned ramp in spend as we move into launch, specifically driven by our commercial strategy. Our total Q4 operating expenses was approximately $40 million, including $4 million of noncash stock-based compensation expense compared to $31.4 million in Q3 of 2025. Importantly, net cash burn in the fourth quarter was approximately $32 million. Cost of goods sold in the fourth quarter totaled $400,000 and was primarily driven by indirect product costs associated with nonrecurring manufacturing processes. Going forward, we anticipate this to trend to an approximately 9% direct product gross margin. Total SG&A expenses increased to $39.6 million in Q4 2025 or approximately $35.9 million net of noncash stock-based compensation compared to $9.4 million for the same period in 2024, driven almost entirely by the establishment of our sales force and launch of VIZZ, including a significant nonrecurring investment in Q4 to enable the launch of our DTC campaign in early Q1 of 2026. Sequentially, quarter-over-quarter, SG&A increased by approximately 43% from $27.6 million in the third quarter. In recent quarters, we have discussed the importance of capital allocation at LENZ and the significant weighting of our SG&A spend towards sales and marketing to support VIZZ. In Q4, approximately 80% of our SG&A was driven by sales and marketing, with the remaining representing general and administrative expenses. This is a trend that we expect to continue. Total research and development expenses decreased to 0 in Q4 2025 compared to $5.9 million in the same period last year. Sequentially, R&D expenses decreased quarter-over-quarter by 100% from $3.8 million in the third quarter. This reduction was anticipated and was primarily a result of the conclusion of our positive Phase III CLARITY study and subsequent approval of VIZZ in July. Finally, our net loss per share, both basic and diluted, was $1.16 per share in the fourth quarter of 2025 on a net loss of $35.9 million compared to a net loss per share of $0.46 in the fourth quarter of 2024 on a net loss of $12.7 million. As we look ahead to 2026, I wanted to highlight a few points to help further characterize our P&L. First, on the revenue front, and after our first quarter of sales, we noted a better-than-anticipated blended gross to net ratio of approximately 90% or $67 per monthly package of VIZZ. Additional non-gross to net costs of the respective distribution channels have consistently resulted in a net cash per unit of $60 per monthly package with the difference flowing into our SG&A line. This net cash per unit of $60 is consistent with our long-standing expectations. Our Q4 2025 cash burn was substantially in line with our go-forward quarterly expectations over 2026. The recently initiated sales force expansion was in our 2026 operating plan. We will continue to target an allocation of approximately 75% to 80% of our OpEx to sales and marketing with an aim to maintain reasonably flat G&A spend period-over-period. R&D spend now becomes a de minimis line item on the P&L. The last point I'd like to highlight is an update on our recent progress advancing the global expansion of VIZZ through our international partnership strategy. We've seen significant progress across the globe in recent months and now anticipate potential approvals in multiple geographies in early 2027. Breaking that down, as we initially announced in Q3 of last year, the NDA review in China is now well underway. In May 2025, we executed a commercialization agreement with Lotus Pharmaceutical and are happy to report that of the 8 country license in Southeast Asia, we have NDA submitted and under review in 3 countries, including South Korea, Thailand and Singapore. As announced in early March, we recently submitted our central marketing authorization application to the European Medicines Agency for approval in Europe with our submission to the Medicines and Healthcare Products Regulatory Agency or MHRA in the U.K. to follow. Théa, our commercial partner in Canada, continues to make progress towards their submission to Health Canada and significant regulatory activities are already underway with Lunatus, our commercial partner for the recently signed 9 country distribution agreement in the Middle East region. In total, 5 ex U.S. NDA or equivalent submissions have been completed, and we anticipate over 10 to be completed by the end of this year with multiple potential approvals possible in 2027. In summary, we feel confident about where we are both financially and strategically, and the team is well positioned to execute and advance VIZZ on the back of a strong balance sheet with a broad strategic network of partners making regulatory advancements globally. With that, I'll turn the call back over to Eef. Evert Schimmelpennink: Thanks, Dan. To conclude, I'm incredibly proud of the LENZ team and the progress we are making in these early months of launch. We're seeing what we hope to see, a product that clearly works, encouraging early signals of patient persistance and a growing base of prescribing physicians. We are now focused on accelerating new patient adoption through disciplined execution in the field and continued investment behind the category. We believe we are in the early stages of building what can become a significant and durable market. As we continue to execute and prescribing habits built and consumer awareness grows, we expect to see an acceleration in new patient starts from this foundation. We look forward to updating you on our continued progress in the quarters ahead. With that, I'd like to open up the call for questions. Operator: [Operator Instructions] your first question comes from Stacy Ku with TD Cowen. Stacy Ku: We really appreciate all the detailed commentary on the VIZZ launch so far. We have a couple of questions. So first, maybe further discuss that sampling dynamic to NRx and the retention that you're seeing, how is refill, let's say, high level tracking to your internal expectations so far? So that's the first question. And then second, as you're trying to broaden patient demand, maybe talk a little bit more about the investments and where you think they can help with the friction points that you listed. Do you believe that select television advertising plans will also take about 2 quarters to lift prescriptions? We're asking because from what we remember, our consultants told us that VUITY ads were everywhere. Of course, the prescribers were not necessarily prepared to set expectations on VUITY's efficacy profile, which has been your focus, but just help us understand that dynamic. And maybe a reminder on the size of the VUITY sales force as you're expanding your sales force as well. And then the third question is on the prescriber additions. If you're willing to comment, what percentage are from your initial target group versus the imbalance from patient demand? And are you seeing a certain practice profile where the prescriber becomes a repeat? Evert Schimmelpennink: Thanks, Stacy. Appreciate your questions. Let me start off with the NRx and refill dynamic and give a little bit more color, and then Shawn will talk about the DTC and ECP question. So we feel very good about where we are actively, as I've mentioned, accelerating adoption. If you look at the strong foundation that we've built with the over 10,000 prescribing ECPs and more than 45,000 boxes sold, we believe that that's a great start. And what matters most early is to see that the product works, as I've mentioned, that we see that patients who choose the purchase continue to use it, and we're seeing both. So new patient starts are developing as expected for a new category that takes a little time, like I mentioned. We're actively working to continue to accelerate that as per plan. So significantly or specifically, we're expanding our sales force, like I mentioned, we're adding 29 reps to drive both breadth and frequency. And Shawn will probably talk about that a little bit more as he answers your ECP question because that allows us to increase coverage of physicians that are already showing interest, but also increases how often we engage with those existing prescribers. And along that, as I mentioned, we'll continue to build the consumer demand through DTC, and that ties into your second part of the question, I think. So as we now pivot into the refills, we know that this is a refill-driven category and early signals are encouraging. We're seeing patients come back and reorder. If we now look at that cohort of patients that got that first order in Q4 or the first quarter of our launch, we're seeing them come back and reorder. We're seeing patients move from initially a 1-month pack now to a 3-month pack, suggesting that they are committed and they're liking the product. We're also seeing patients that are new to the product now actually starting initially on multi-month supplies. So in our mind, that tells us that they had a chance to sample the product, the sampling strategy works. They self select and they like the product enough to start off with treatment. So all of that, we feel is very consistent with the product that's delivering for patients. And it's still early. So we want to make sure that we see this dynamic develops over multiple quarters. But again, the patterns that we're seeing so far are aligned with what we would expect. So with that, let me switch over to Shawn to talk about DTC and ECP. Shawn Olsson: Thanks, Eef. Thanks for the questions. When we look at broadening the patient demand and where we're focusing our investments to help, our primary focus has always been digital advertising to hit the patients where they are. So we know what these patients look like, and we knew that prior to launch, right? We knew that they make over $100,000 a year. They're mostly between 45 and 65. They're in major city centers. And that digital marketing is working. What we look at every single day is what's our click-through rates of different ads, what's our cost per impressions of not only different ads but different media placements. So inside that digital aspect, it's really a lot of optimizing, right? Do we actually see more benefit when we're putting the assets on YouTube versus when we put them on Instagram and how that translates to visits to our website. So that's a lot of optimization. The influencer standpoint, same thing. We look at the influencers post and we say, okay, we saw the post by Heather Dubrow and she got 650,000 views. What does that look like and what does it translate? So a lot of that is optimizing. With the addition of linear, what we're also seeing is there are select markets where the patients are early adopters. And therefore, as we continue to evolve and optimize that media mix, it's a good opportunity to bring linear TV in those select markets and test that response and we continue to optimize to get that broader adoption. You are correct. When VUITY launched, they're putting a big substantial media plan out there. We're being much more focused with targeting each individual that we want to drive in versus driving a shotgun approach of telling all 125 million people about it to make sure we have an efficient campaign. You also brought the sales force size. Looking into more and more about the VUITY launch, it appears they had a sales force of roughly 300 people specifically focused on VUITY. So therefore, our expansion from 88 to 116 (sic) [ 117 ] also makes sense, but it's also a more rationally sized sales force. So jumping into that, which was the second part of your question on the target groups of ECPs and where are they sitting. So our field, the outside portion of the field was focused before on about 12,000 eye care professionals that covered decile 4 through 10 of VUITY, 10 being the highest prescribers. And we continue to see that today. Our decile 10 doctors are our highest prescribers as well. And we have the inside sales team covering the lower deciles. The growth from targeting 12,000 to 15,000 ECPs at the outside field is because we were seeing those lower decile ones prescribing repeatedly as well as a good portion that we actually called in our analysis NA. These are doctors that have never written VUITY. So we have doctors that never wrote VUITY that are now wanting to write VIZZ. And so a good way to think about it is our target initial group from outside sales was 12,000 ECPs, and we've now grown that to 15,000 ECPs because of those deciles that were not targets. Now when we do that, we're growing not only the number of targets, but when we expand this field from 88 to 117, what you're also seeing is the ECPs per rep is getting smaller. So we can get in that doctor office more often and really work with them to make sure they can get to that 10-second conversation to bring it up to every patient and understand that they can offer this to more patients, not the early presbyopes. So hopefully, that answers your question, Stacy. Operator: Your next question comes from the line of Yigal Nochomovitz with Citigroup. Yigal Nochomovitz: Just a few questions here. I'm wondering if you could spend a little more time talking about these top 1,000 writers in terms of their behavior and how they approach the conversation with the patient, their knowledge of the product. I know you mentioned that many of the ECPs that are familiar with VIZZ believed apparently erroneously that it was only for the early presbyopes and not for the other categories you mentioned, Shawn, like the contact lens wearers, the ones with prior LASIK and the pseudophakic. So I'm just curious how that crept into the message that some people apparently didn't understand that it was for a much, much broader set. And how are you planning to help correct that perception and then discuss the behavior of these top writers that seem to get it and have gotten it from the very beginning. So that was my first question. Evert Schimmelpennink: Thanks, Yigal. Great question. Shawn and I will tag team on that a little bit. So just to double-click on the stats that I shared. So very encouraging for us to see those 2 things that I have shared. One is that it's only taking us about half of the amount of prescribing doctors to get to the same script volume that VUITY got to at 45,000. So I think what that tells us is that doctors are enthusiastic. They like working with a drug, and they especially like working with a drug that's efficacious. And if you in that group, like look at the top 1,000, you see that they're actually writing 40% more. So those are the doctors that wrote the most for VUITY, they're writing even more for us. And your question on what makes them different. Again, I'll hand over to Shawn shortly, is really around they figured out how to, one, bring this up consistently and easily and quickly and offer it as an alternative option to their patients, setting the right expectations around what to expect from an eye drug and then realizing that, as you've mentioned as well, this is truly something that they can offer to pretty much every eligible presbyope in the practice. So I think that's what makes them different. And we're obviously trying to follow it up and share that with all the other doctors out there already prescribing and all the new ones that we're tapping into. So with that, I'll hand it over for Shawn to give some even more color on that. Shawn Olsson: Yes, absolutely. And thanks, Yigal, for the question. So Eef hit on a lot of the key points, but jumping in a little bit deeper. So our top 1,000 prescribers, again, they're tied to those higher decile accounts. So these are doctors that are more comfortable implementing new technologies, historically are also higher prescribers. But this is something that they're more used to doing in general on a day-to-day basis. What we're seeing is they follow that standard process, which we always continue message, make sure you give the patient a sample and a script, right? Allow all the patients to try it and then give them the script as well. And as they've said, they offer up as an option to more patients. They've figured out how to do the 10-second pitch, how to offer it and set the right expectations. In terms of your questions on the understanding of the broader use, why are some still thinking only about the early presbyope, this is really an effect of the previous product on the market, which really was tested in a younger population and the efficacy really only worked in that very early emerging presbyope. Therefore, people naturally go there. It is taking work to make sure people understand that we really did show just as much success in moderate advanced presbyopia. And then we show them the graphs to actually show those that have worse presbyopia gain more lines. And that's a process to understand that this product truly does work for that full scope of presbyopes. Yigal Nochomovitz: Okay. Awesome. And then this is really quick. Just maybe for maybe Shawn also. This is just more of an operational question. You mentioned doing the TV ads. I think that wasn't in the original blueprint. I'm sure it was one of your scenarios. But I assume this doesn't mean that your emphasis and investment in terms of targeting the regional influencers, one layer below the SJPs that, that's still in place as it was with the initial plan. And then also, are you able to track -- I know Eef mentioned the conversion to -- the uptick in the web traffic when you have various campaigns that are delivered to the market. Are you able to track the conversion rates there? And are you seeing higher conversion to Rxs as a result of these waves of coming to the website? Shawn Olsson: Great question, Yigal. So first, talking about the TV ads. So our strategy remains the same on primarily focused on digital ads and the influencers. So we never plan to do broad national linear TV campaigns. However, what we're seeing is there are key markets that are prescribing a lot more often than others. And so this is a perfect opportunity to drop linear advertising on network TV and cable in those targeted markets in a responsible, financially responsible way to see what type of response we see. So that's the opportunity that's now provided itself with linear TV. So think of these as key markets, we test the response. And in testing those response, you need exactly what you just brought up. How does that translate to then visits to the web and then does that then translate to actual scripts later on. And that's exactly what we're continuing to look at every day. So we can see when we actually run different ads in different markets, how that then responds to web traffic. I think we're early on in DTC, so we don't have a pure correlation from the web traffic to then a script later on. There isn't a connection there, but it's something that we'll continue to look at for correlation to make sure we continue to further optimize those DTC ads. Operator: Your next question comes from the line of Marc Goodman with Leerink Partners. Unknown Analyst: This is Alyssa on for Marc. So you previously had highlighted 3 different patient categories as the foundation of the advertising strategy. Could you update us on which of those segments are driving the early adoption today? And then secondly, I might have missed this, but on the distribution, can you clarify whether prescriptions are being fulfilled entirely through the e-pharmacy channel or if retail is now kind of contributing to that? And how is the mix between those 2, if so? Shawn Olsson: Great. Thanks for the question. So if you think back to our strategy in terms of early adopters, we want to focus on those that are in contacts. We want to focus those that have had post refractive surgery and what we call the active lifestyle. So we commissioned a survey of patients that have recently received the product. And what we're seeing is those targets are right. When we actually look at the data, we're seeing about half of the patients on this have worn contacts. About 1/3 of them have had LASIK in the past and that about 1/4 of them have had BOTOX in the past 12 months. Now that quarter number is a little bit biased because we have an equal split of men and women, about 60% female, 40% male in terms of our prescriptions. And BOTOX does tend to be about 90% women, 10% men. So that would lift up that percentage overall. But we feel good about our targets that we're focused on there. And then in terms of the mix of retail as well as the pharmacy, both meaningful channels, we have not broken out or shared that mix yet. Operator: Your next question comes from the line of Biren Amin with Piper Sandler. Biren Amin: For Q1, can you maybe tell us what the split is between the 1-month pack and the 3-month pack? My second question is, I think previously, you had estimated 5 refills per year. In your early adopters, do you feel that, that still would align with your annual refill projections? And then third question is, can you talk about how many of the samples in Q4 converted to scripts in Q1? I think that would be a good barometer of patient experience. Evert Schimmelpennink: Thanks, Biren. Great questions. And obviously, we all know that ultimately, these statistics are going to be very important to track the progress of the launch. We're also remaining with what we said before that refill -- actual refill percentages is something that we really start to look at in the second half of the year and start to communicate that. But what we do see at the moment on your various questions is that, like I mentioned earlier, that 3-pack is important in the market, and we're seeing that move. Again, this is early days. So like for many of the statistics and the parameters that we've spoken about, we really want to see a couple of quarters and see how this clearly develops before we feel that it's a reasonable number that we can start to share. Same goes for refills. Like I mentioned earlier, we're encouraged by what we're seeing. We also need to remind ourselves that the cohort that we currently can follow is the one from Q4 of last year. So our first 3 months of being in the market with this, the first consumers have a chance to buy this product. And that's probably a mix between initially when we just started to bring samples out, consumers that bought the product without having sampled and later in the quarter, that now most of the people will have had a chance to sample. So on top of that, you see that somebody bought a 3-pack, for example, in December, which is clearly happening, you wouldn't expect that person to come back until maybe late Q1 or even into Q2. So that means that the numbers that we're seeing now, we're really looking at them more as a barometer than the actual number. But clearly, like we shared, what we're seeing is encouraging us, and we feel that we have a product that does live up to what we want to see, a product that people like, that once they order it, they are sticky and they continue to buy it. Operator: Your next question comes from the line of Jason Gerberry with Bank of America. Unknown Analyst: This is Melanie on for Jason. First, can you share any more details about indicators that are most encouraging regarding the DTC program that can spur growth? And secondly, anything you can share about key thresholds you're looking to see in NRx and refills in the second quarter? Shawn Olsson: Thanks, Melanie. I appreciate it. So in terms of the DTC program, when we think of our DTC, what we're really looking to see is are we driving consumer activation, right? And so in terms of this stage of a DTC program, where we're still fairly early on, the easiest items to look at that we're looking for, for indicators are, are we driving awareness? And are we driving increases in web traffic? And are we doing it at a responsible financial spend. So the indicators we continue to look at are, are we increasing people that are going to website? Not only are we seeing a sustained increase in website visitors, we're seeing up to a 10x increase in web visitors depending on what we're running. That's very good. When I look across the metrics of our DTC, I'm looking at what are we paying per 1,000 impressions, what are we paying per click. Again, what we're seeing right now with our ads, we're testing well. We're actually doing better than benchmarks for click-through rates as well as spend per impression. So that's looking positive. And then what we're continuing to look at is as we talk to the patients, serving them, did they see an ad, did that drive come in? And so those are all the metrics that we're continuing to look at. Evert Schimmelpennink: The second question was around key thresholds that we're looking for as we enter into the second quarter. But I think just looking back to what I shared earlier, there's 2 elements that we're focusing on and that Shawn just highlighted as well, activating the doctors to bring it up to more patients more often. Obviously, that's something that's ongoing. And then really starting to see that DTC play out. Those things all take a little bit of time, which is why we've said that the DTC, this is not only for us, but in general, any Nielsen report that you pick up will show you that it takes at least 2 quarters to really see that translate into DTC. I think early indicators that Shawn talked about that we're seeing are very positive. And similarly, with the expansion of the sales force happening in Q2, we would expect that to take a little bit of time for that to take effect. But we really are expecting more of a step change in acceleration of new patients as both of these mechanisms fully take a hold closer to the second half of the year. Operator: Your next question comes from the line of Lachlan Hanbury-Brown with William Blair. Lachlan Hanbury-Brown: I guess the first, I'd be curious what you're finding in terms of how often or how many samples doctors giving out. Are you finding the reps when they go back the fridge is empty or they still have some? Do they have to go back earlier? Just I've spoken to a few docs that tend not to give the samples, they prefer to write a script. So kind of curious to see what you're seeing on the sampling and the volume front there. And then maybe a second one on the prescribers. Curious what you're seeing in terms of the time it takes for them to go from a single prescription to become a repeat prescriber? Is it -- there's a cohort of doctors that basically immediately prescribe it to multiple people and then others that prescribe one and takes much longer? Or is there a trend you're seeing there? Evert Schimmelpennink: Thanks, Lachlan. Good questions. Let me start off with the sampling and then double-click a little bit more on the sampling strategy and the conversion and how we think about that. So sampling in our case is really designed to bring the right patients into the therapy. So it's a central part of our strategy as we've highlighted early on because the product has such an immediate and observable effect. So we want to get samples out there, and that's how what we focused on to get as many samples as needed to as many offices as possible to make sure that those patients can really experience the product first and then self-select into the therapy. And we're seeing that, that's working. We believe that currently, probably more than 90% of people that start with this or new patients have had a sample first. So again, that strategy is working. What's also important is to understand how the sampling works. So the samples are dispensed, as you've mentioned, directly by physicians. So once our reps leave the samples with the doctor, there's no way for us to track individual samples and how they're being handed out to patients and how many are being handed out. But what we do see is that most of the doctors now are handing them out. But you are right that there's a group of doctors that just prefers to write a script directly. We'll continue to work with them to actually start to change that habit as well. So we actually don't really look at conversion as a key metric at this point. Samples for us are very cost effective and it's really a way to get as many people as we can to try the product, make sure they like it and then they self-select in. Like I said earlier, that this will lead to indeed a much more sticky patient population. I think your second question was around prescribing dynamics. What we see is that, as you would expect at this stage, there's a mix like Shawn highlighted, there's a great amount of doctors that are already doing what we would like them to do, provide a sample together with a script. There's also a group of doctors that wants to sample first and have the patient call back. If they like it, they write a script, the doctors that, to your point, write a script immediately put out a sample. So all the different flavors that you can think of are currently out there. And that's the focus of us now to take that blueprint of doctors that we know are very successful with the product, that high percentages of the patients converting and start to apply that or keep that to the rest of the doctor cohorts. Operator: Your next question comes from the line of Matthew Caufield with H.C. Wainwright. Matthew Caufield: Can you speak more to the nuances you're seeing in terms of that initial refill patients? Like, for instance, have the refills been predominantly those early presbyopes so far? Shawn Olsson: Yes, great question. So when we look at the consumer, just given a little bit more detail. So when we dig into it and look at those people that are adopting the fastest, and we're seeing the refills come through. Again, what we're seeing when we break it down, it's 60% women, 40% men. Predominantly that 55- to 64-year-old, there are certain states that we see perform better than others. And when we dig into them, they are our target patients that are doing it. It is, as I stated earlier, half of those patients have worn contacts in the past. About 1/3 of them have had LASIK. And I said 1/4 of them have had BOTOX. But again, that's a bit biased by the mix of male, female. So we are right on that core target. We're hitting the right patients that want to use it. I think the most important thing is they get the sample and try it because that self-selection is so important. And that's what really drives that repeat behavior is getting them to self-select in, try the product, know it's for them and then continue to use it. So I think that's the important nuance to focus on. Operator: That concludes our question-and-answer session. As I'm showing no further questions, thank you for your participation, and we will now conclude today's conference call. You may now disconnect.
Operator: Good day, ladies and gentlemen, and welcome to Kingfisher plc Full Year 2025-'26 Results Presentation. [Operator Instructions] I would like to remind all participants that this call is being recorded. I will now hand over to Thierry Garnier to start the presentation. Thierry Dominique Garnier: Good morning, and thank you for joining us today for Kingfisher's Full Year Results Presentation. Bhavesh and I will take you through our full year results, our outlook for the coming year and provide an update on our key strategic initiatives. Following this presentation will be the usual Q&A. So let's start with the key messages. 2025 was a strong year for Kingfisher as we continue to execute our strategy at pace and delivered on all our financial priorities. And there are three points I want to highlight. First, our strategic growth initiatives are driving market share gains, a key indicator of our progress. We grew market share across each of our banners in the U.K., France and Spain, and maintained share in Poland. Our sales growth was high quality, led by growth in volume and transaction. We delivered double-digit growth in both trade and e-commerce sales during the year, while our 1P commerce sales were strong. I am particularly pleased with our progress in our marketplaces now reaching GBP 518 million on a GMV basis and up 58% year-on-year. Second, we maintained strong financial discipline amidst significant cost pressure. We grew gross margin by 80 basis points in the year, leveraging Kingfisher scales and sourcing power and benefited from marketplace and retail media, both of which are gross margin accretive. We delivered strong growth in adjusted profit before tax and in EPS. When excluding the business rates refund at B&Q in the prior year, profit is up 13%. And our profit growth, combined with a sharp focus on working capital management enabled us to deliver strong free cash flow. Third, we delivered attractive returns to shareholders. We completed our GBP 300 million share buyback program in March. And today, we announced our fifth GBP 300 million share buyback program, reflecting the momentum in the business. We also announced today a dividend of 12.4p per share, in line with last year. And let me now hand over to Bhavesh for the financial review and outlook. Bhavesh Mistry: Thank you, Thierry, and good morning, everyone. Let me start with an overview of our performance for the year. Total sales for the group were GBP 12.9 billion, with like-for-like sales up plus 1.4%, excluding a negative calendar impact of minus 0.3%. Our sales growth was led by strong performance from our U.K. banners. Adjusted profit before tax was GBP 560 million, up 6%. Adjusted EPS was 23.8p, up 15%, underpinned by our strong earnings growth in the year and supported by a 6% uplift from our share buyback program. Free cash flow generation was GBP 512 million. We delivered this while also increasing CapEx by GBP 71 million as we stepped up our investment in our stores, technology and property. Net leverage now stands at 1.4x, and we maintain a very healthy balance sheet. Turning now to our markets. B&Q reinforced its market-leading position with total sales growth of plus 3.9% or plus 5.9% when we include marketplace GMV sales. Like-for-like growth is plus 3.3%, significantly outperforming a flat market with our market share at record levels. From a product category perspective, core remained resilient with 12 consecutive quarters of underlying like-for-like growth. Big-ticket delivered strong growth of plus 6% in the year and seasonal was plus 30% in Q1, benefiting from favorable weather, which we will lap this quarter. We successfully captured the transference of customers from Homebase to B&Q and acquired 8 of their stores, which our team rapidly opened in time for peak trading. TradePoint sales grew by plus 5.2%, fueled by our enhanced loyalty program and an increased investment in trade sales partners. E-commerce sales grew by plus 21.5%, supported by marketplace growth. B&Q's marketplace is gross margin accretive and generated GBP 15 million of profit in the year. Looking to the year ahead, we will further enhance our trade offering with investment in our people, our offer and our stores, and scale marketplace as we onboard cross-border vendors. You'll hear more on this from Thierry later on. Screwfix delivered consistently strong performance throughout the year with total sales growth of plus 4.5% and like-for-like growth of plus 3.2%, significantly outperforming the market. Our Screwfix team have executed at a high level, enhancing the customer proposition through targeted marketing and promotional campaigns, competitive pricing, range improvements and deeper engagement with trade customers via app-driven reward initiatives. Screwfix opened 27 stores on a net basis during the year, further growing our footprint and convenience for customers. Looking forward, our focus is on growing our share of the trade wallet. We also see further range and space opportunities. Our U.K. banners generated GBP 575 million in retail operating profit, representing 78% of our group total retail profit. Profit grew by plus 2.9% in the year or plus 9.4%, excluding the impact of last year's B&Q business rates refund. We delivered this profit growth despite the significant increases in wages, higher national insurance contributions and the impact from EPR packaging fees. In France, against a subdued consumer backdrop and a home improvement market decline of around minus 3%, we are encouraged to see both of our banners outperforming the market. Castorama like-for-like sales were minus 2.2% in a year of significant change, particularly from the restructuring of several stores. I'll speak more on the progress of our Castorama plan shortly. From a strategic perspective, Castorama delivered a rapid rollout of its trade proposition across the estate, introduced CastoPro zones in 50 stores and implemented a trade loyalty program. Trade penetration reached 9% by the end of the year, up from below 1% a year ago. Good progress was also made on marketplace with 1.6 million SKUs now available to customers. Brico Dépôt delivered total sales of minus 1.8% and like-for-like sales of minus 2.3%. Brico improved its price positioning by 2 points over the year and delivered strong progress in its trade proposition with trade sales up 26% and trade penetration increasing to 17% at the end of the year. This performance was driven by an expanded trade-focused range, investment in dedicated trade colleagues and enhancements to its loyalty program. Brico also successfully opened 1 store transferred from Castorama, doubling sales densities. We feel good about Brico Dépôt, a capital-light model with a clear customer offering of discounted prices and high product availability. Our French banners delivered GBP 97 million of retail operating profit with a margin of 2.5%, up 10 basis points year-on-year. This was a strong performance as both banners offset sales deleverage from a declining market and higher social charges through gross margin expansion and structural cost reductions. Turning now to an update on our restructuring plan for Castorama. Since the plan was announced in March 2024, the new management team has moved at pace to improve competitiveness and efficiency, delivering good progress despite a weaker market, which declined by over 7% in 2024 and a further 3% in 2025. We've already talked about our progress in trade and digital. In addition, the team undertook a significant number of range reviews, which benefited several core categories, including surfaces & décor, tools and tiling. We took cost price and supplier management actions, streamlining the head office organization and rationalized the distribution network space by 15%. The reduction since 2019 was over 35%. Our store restructuring and modernization program is delivering tangible results. Right-sized stores are seeing much higher sales densities, while revamped stores are outperforming the Casto average. The two franchise stores have returned to profitability. This progress has been delivered against a backdrop of significant people change, including a 50% refresh of store managers and regional directors and a 40% change in category directors. We will continue to drive this agenda at pace in 2026, positioning the business to fully benefit when market conditions improve. For France, overall, we remain confident in delivering our medium-term margin target of circa 5% to 7%, with the timing and trajectory of reaching this target dependent upon the pace of the market recovery. In Poland, we remain optimistic about the medium-term growth opportunities. Castorama is a market leader with potential to increase space whilst building on both trade and e-commerce. Poland experienced a slow start to the year with unfavorable weather and political uncertainty weighing on home improvement spending. Like-for-like was minus 1.1% for the full year, though conditions improved in Q4 with a return to growth in both the market and our business. We continue to make good progress with our strategic initiatives, about GBP 1 in GBP 3 comes from trade customers, supported by the rapid rollout of CastoPro zones in more than half of the estate, the recruitment of specialized sales partners and a new trade loyalty program. And e-commerce sales increased 30% year-on-year, benefiting from the launch of marketplace in January 2025. Poland generated GBP 87 million in retail operating profit, representing around 12% of group retail profit. During the year, we accelerated technology investment, resulting in a one-off circa GBP 5 million impairment of legacy systems. Excluding this charge, Poland retail profit was up and profit margin was broadly flat year-on-year. Iberia had an excellent year with plus 8.8% like-for-like growth, outperforming a growing market, driven by competitive price positioning and strong progress in trade. Moving now to our profit performance in the year. Adjusted profit before tax rose by 6% or plus 13% when excluding last year's GBP 33 million business rates refund at B&Q. A key driver of profit growth was gross margin expansion, which increased by 80 basis points, driven primarily by group buying and sourcing benefits, progress in marketplace and retail media with FX also providing a tailwind. We also delivered significant operating cost reductions. Some specific examples include a reduction in our supply and logistics network space of around 10% in France and nearly 30% in Poland, efficiencies in our stores from the rollout of self-service checkouts and the implementation of new store operating models and property cost reductions through store rightsizing and regears. For the year, we delivered 30 basis points of retail operating margin expansion to 5.7% and adjusted profit before tax of GBP 560 million. Turning now to our group cash flow. Starting on the left of this chart. We generated adjusted EBITDA of GBP 1.3 billion. Working capital delivered a net inflow of GBP 74 million, driven by higher payables and our focus on inventory management. Tax, interest and other items amounted to GBP 13 million, including a GBP 60 million benefit from tax prepayment true-ups, which we will lap in H1 2026-'27. CapEx spend totaled GBP 388 million, an increase of GBP 71 million as we continue to invest in technology and our stores. Together, these drove free cash flow of GBP 512 million. We returned GBP 474 million to shareholders through dividends and share buybacks, and total net cash inflow for the year was GBP 107 million. Our dividend payments and share buybacks in 2025-'26 build on our track record of attractive returns to shareholders. Over the past 5 years, we have returned GBP 2.4 billion, equivalent to around 40% of our market capitalization. Looking ahead, we'll continue to build on this track record with a proposed dividend of 12.4p per share to be paid in July and the launch of our fifth share buyback program of GBP 300 million commencing shortly. Looking ahead, we see further opportunities across gross margin, costs and working capital. On gross margin, we expect continued benefit from group buying and sourcing, marketplace, retail media and logistics efficiencies. On the other hand, we expect mix effects from our growing trade penetration and from maintaining competitive prices. We see further opportunities through cost action. At store level, we will deliver savings through operating model enhancements and technology. We also see additional opportunities from improving head office efficiency and to further leverage our shared services center. Inventory also continues to be a priority. Our supply visibility tool is enabling us to reduce lead times and minimum order quantities with our OEB vendors. Coming out of a strong year, we are confident in our ability to capitalize on the attractive growth opportunities in our markets and are well positioned to continue growing sales ahead of our markets, profit ahead of sales and to generate strong free cash flow. For the financial year '26-'27, with a mixed consumer environment, we expect adjusted profit before tax in the range of GBP 565 million to GBP 625 million, and are targeting GBP 450 million to GBP 510 million of free cash flow. We remain mindful of the heightened macroeconomic and geopolitical uncertainty in recent weeks. Where we stand today, we estimate that the in-year direct impact on energy and freight cost is limited. As you know, the situation remains fluid. In similar situations, our markets have behaved rationally on pricing and margin. We have a strong track record of maintaining competitive prices, managing gross margin effectively and flexing our cost base. You can expect us to maintain our disciplined approach. Let me now hand back to Thierry. Thierry Dominique Garnier: Thank you, Bhavesh, and I want to start by outlining the strategic growth drivers, which underpin our current performance and position us for future growth. You can see these priorities on this page. And let me start with trade. We continue to grow our exposure to trade customers, a segment that shops more frequently, spends more and exhibits more predictable purchasing patterns. Our trade strategy leverages our existing store footprint and supports both market share growth and higher store sales densities with little to no incremental CapEx. As a result, trade is both revenue and margin accretive at retail operating profit level. Screwfix treat penetration already stands at 75% across the rest of the group, trade sales grew by 23% and trade customers now account for GBP 1 in every GBP 3 of group sales. With this rapid progress, we are updating our medium-term ambition and now target GBP 5 billion of group sales from trade customers. So looking at some of our initiatives in a little more detail and starting with our stores. We are expanding dedicated trade space within our stores and now have trade zones live across all our banners. We made particularly strong progress in Castorama France during the year as we rolled out our trade proposition across the entire estate and opened 50 new CastoPro zones. We're also excited to announce our first stand-alone TradePoint store opening in London this week. We also continue to invest heavily in our people, 279 dedicated trade sales partners are enrolled across our banners, circa 3x more than last year. We are empowering our trade sales partners and see this as a key lever to unlock additional share of wallet. At Screwfix, our new rewards program provides an industry-leading proposition for our trade customers and is driving strong engagement via the Screwfix app. Customers who sign up to the program receive exclusive and personalized offers, but also surprise perks and gamified engagement. We now have 2.2 million active rewards customers showing higher frequency of visits and higher average order values. Screwfix is also a great example on how we have succeeded with an app-first approach with 41% of e-commerce sales now coming from the app. Another example of where our trade focus comes to life is Brico Dépôt France, a capital-light model with a strong discounter DNA. Trade customers like the efficient shopping experience, competitive pricing and high product availability. We trialed new Pro zones during the year and signed up over 210,000 trade customers to a Pro loyalty program. We also improved price competitiveness by 2 points and introduced bulk-buy discount. These actions enabled Brico Dépôt to grow trade sales by 26% and reached a trade penetration of 17% at the end of last year. We will further build on our trade proposition this year with more Pro zones and enhance our trade value offering through additional volume discounts. Moving now to the digital ecosystem we are building and it starts with a strong 1P e-commerce proposition with our stores at the center. In 2020, we made the strategic decision to leverage our store network to fulfill online orders. This enables us to offer market-leading fulfillment speed for click & collect and home delivery, while also driving incremental traffic to our stores. We continue to improve our core platform by transitioning of our e-commerce legacy systems towards modular and agile technology. This enables rapid feature innovation, faster site load times and market-specific feature deployment. We have developed a digital app store model to ensure excellent product availability for online orders, 94% of 1P orders are picked in-store and we offer rapid fulfillment options from store through our click & collect and home delivery propositions. All this, in turn, drives increased traffic, which supports the growth of our 3P marketplace. Our marketplace offers a broad choice with several million SKUs, which in turn generates more traffic to our websites and fuels additional 1P sales. Our stores also play a critical role for our marketplace. All stores accept marketplace returns and B&Q now offers in-store click & collect for marketplace items, driving additional footfall. Our loyalty programs provide us with rich customer data, enabling personalized offers and targeted promotions. The market is increasingly shifting towards mobile-first and app-based engagement, which provides us with access to data that allows us to improve and personalize customer interaction, and this leads us to monetization. With scale, traffic and comprehensive data, we can sell and grow retail media. As you know, there is lots of current news flow when it comes to agentic commerce. Our platforms are ready to connect to agentic commerce apps, and I will come back to this topic shortly. So to summarize, our digital ecosystem drives a virtuous cycle of value, leveraging our store assets, our web traffic and is powered by Kingfisher technology. So moving to Slide 22, which highlights our group e-commerce performance this year. Screwfix already generates 60% of sales from e-commerce. In the other banners, we grew e-commerce by 20%, and you can see progress in every one of our banners. At the group level, GBP 1 out of GBP 5 now come from e-commerce. Our target in the medium term is to reach e-commerce sales penetration of 30%, out of which 1/3 from marketplaces. So moving to our marketplaces, and I'm going to focus here on B&Q, which is most advanced and provides a clear blueprint for scaling across our other banners. We launched our B&Q marketplace in 2022 and have already achieved a cumulative GBP 1 billion of GMV sales since launch. We have scaled our platform significantly over the past 4 years, adding 2,800 vendors and 3.7 million SKUs while also improving convenience for our customers with the introduction of click & collect, a first for our marketplace in the U.K. B&Q's marketplace has generated GBP 50 million retail profit contribution last year and the marketplaces in France and Iberia have now reached breakeven early in their journey. So looking forward, we have ambitious growth plans, including the onboarding of more international cross-border vendors. And for context, cross-border accounts for broadly 50% of sales at mature pure-play marketplaces and only a few percent for us. An emerging income stream for us is the monetization of our customer data and our traffic. Our insight platform, Core IQ, underpinned by Kingfisher's first-party data enables us to monetize our data with our corporate vendors, having successfully built this capability in Castorama France, we plan to roll it out across all banners in 2026. So moving to retail media. We have brought capabilities in-house, build a group Center of Excellence, and each banner now has a dedicated retail media team. We have also started piloting advertising on digital screens in stores. While at an early stage, we are very excited about this new income stream as adoption of retail media is strong. We target 3% of our e-commerce sales as additional revenues with a significant drop-through to profit. Kingfisher is also a rapid adopter of AI. We see AI as a tailwind for our business and ourselves as leaders in this space. Our in-house AI agent, Hello Casto, was the first agentic agent in the global home improvement industry when we launched it in 2023, followed by Hello B&Q in 2025. Those early investments are paying off. We have seen an increase of over 60% of customers visiting Hello Casto online with conversion increasing by 95%. Last week, we announced a new strategic partnership with Google Cloud. Through this, we'll introduce AI-powered search across all our banner websites and apps, helping customers find products more intuitively. We have also done extensive work to enable AI agents to discover our products and to transact autonomously when this functionality becomes available in the U.K. and in Europe. This partnership will expand our capabilities further, allowing customers to complete purchases via Gemini and other AI agents. Underlying our business are strong own exclusive brands where we provide innovative solutions at affordable prices and which are accretive to our margin. In 2025, within our power tool categories, we launched our next-generation Erbauer range with best-in-class performance in power, in control and durability. Since launched, it has achieved plus 43% sales growth compared with the previous range, and Erbauer is now our #1 tool brand sold across the group. Our new Ashmead kitchen range delivers standout style at entry-level pricing. While our Pragma lowest-priced kitchen range, retails for less than EUR 200 and is 15% cheaper than branded alternatives. Our new kitchens have been a key driver of our strong big-ticket performance in the year. And alongside product innovation, we are developing a growing portfolio of complementary services that support customers with their project such as kitchen and bathroom design to rental, installation service and project finance. Our banners hold leading positions in their markets, each with a distinct model and clear customer proposition where attractive space opportunities exist that meet our investment criteria, we continue to complement our existing store estate. Our mid- to long-term ambition for store space remains at 1.5% to 2.5% sales contribution per annum, and 27 new store openings are planned for the coming year. We believe compact stores will play a more important role in the future across our markets, allowing us to meet customer needs in high-density urban areas and offering convenience and fast fulfillment through click & collect and home delivery. Let me now turn to Screwfix France, which is delivering plus 49% like-for-like store sales growth, in line with our expectation. Momentum continues across all KPIs with a 52% increase in unique customers year-on-year and growing national brand awareness. We continue to see good growth in our older cohorts after 3 years and particularly strong momentum in the north of France where we observe a network effect. So this performance gives us confidence in the future of Screwfix in France. The strategic growth drivers I have outlined underpin Kingfisher's attractive investment story. We have leading positions in our markets, and those markets have attractive structural growth drivers. We operate a diverse portfolio of banners, each with distinct formats and propositions that address a wide range of customer needs. Our strategic growth drivers are allowing us to grow our market share and give us confidence in our continued delivery against our financial priorities, growing our sales ahead of our markets, increasing our profit ahead of sales and generating strong free cash flow. So to summarize, '25-'26 was a strong year. We have clear and attractive growth drivers, and we are confident in our continued delivery in '26-'27 and beyond. With that, let's move to Q&A. Thank you, everyone. Operator: [Operator Instructions] I would like to remind all participants that this call is being recorded. We will take our first question from Richard Chamberlain with RBC. Richard Chamberlain: A couple of questions from me please to start. Can you hear me okay? Bhavesh Mistry: Yes, very good. Richard Chamberlain: Yes. Excellent, excellent. Yes. So first is on the space target you're setting out for the longer term. I think you're talking about 1.5% to 2.5% per year net. I wondered if you can just talk through what the key drivers of that space ambition will be? And also what would the gross space growth be in that scenario? That's the first question. Thierry Dominique Garnier: Thank you, Richard. So I think, first of all, indeed, that's our medium-term target. We believe that Screwfix first is our -- this area where we have a lot of potential. In the U.K., with a format like Screwfix City, but moreover in France. We know that today, we are happy with the store maturity, we will go for a large number of stores in France. In Poland, we have said that we'll probably cover about 50% of the city where we want to be. We have more store to open, not only big boxes as well as medium boxes, around 4,000 square meters of format, we really believe in and as well as smaller format, we call it Castorama Smart, about 2,000 square meters, a lot of potential in Poland. But in France, Brico Dépôt 1,000 is the format we are having high expectations upon that we have a few stores. We're still looking at the results, but it could be an attractive format as well as Iberia. So obviously, Richard, the expansion is not linear. Sometimes you have opportunities, sometimes you have up and down, but clearly, that's our medium-term target. Richard Chamberlain: Great. Very helpful color. And my second question is on the marketplace. Obviously, growth very strong last year. Can you give us a sense of how much that's being driven by newer vendors and how much by a sort of broader range of SKUs from existing vendors on the platform? Thierry Dominique Garnier: I think it's both. We are -- now B&Q, it's the third year in '25, will be the fourth year this year. So we keep increasing the number of SKU, if you compare year-on-year, the number of vendors. In the other countries, you have really a very strong scale up in France, in Poland, in Iberia, we really continue to grow the vendors. I think the big new things that started in '25 and that will be a bigger thing in '26 is what we call cross-border of vendors. In fact, today, when you look at the B&Q marketplace, we just have a few percent of our vendors that are not legally located in the U.K. And we know countries like Germany, for example, or other European countries, you have a very strong base of industrial vendors. It took us a while to find the tech solution to onboard and there is VAT and payment challenges. And now we are able to do that. So you will see a lot more cross-border vendors in the future. And for large marketplaces, I will not give you names, but you can guess the names, in Europe and in the U.S., it's broadly 50% of their vendors are not local vendors. So we feel that's a big opportunity for us looking forward. Bhavesh Mistry: Maybe a couple of things to add, Richard, why we like marketplace, it extends our ranges, lets us play in categories, we wouldn't align with our proposition, but it wouldn't make sense for us to stock directly. So things like white goods, bulky things that take a lot of space in stores, maybe lower margin cap products. But the other thing is marketplace that gets us to reach new customers, right? We have half of the customers that come to B&Q marketplaces are new to diy.com. And then they go on to buy 1P product as well. So we're attracting more customers onto our website to be able to sell them more 1P. Operator: Our next question comes from Tim Ramskill with Bank of America. Timothy Ramskill: I've got a few, so I'll maybe go one at a time. The first couple are kind of cash flow related. So I guess, you obviously highlighted the benefits delivered on inventory. But at the same time, looking at the balance sheet, that's sort of not immediately obvious numbers wise. So maybe you can just help me out. I think there may have been some Chinese New Year effects at play there. So maybe you can just sort of help us sort of square the kind of improvement of 5 days of inventory, please? Thierry Dominique Garnier: Maybe let me start and then we'll give you a few detailed color. I think we are very happy with our inventory program. You have seen it's not the first year we are decreasing our inventories days. I think number of days is really the way we are looking at it. And we had multiple programs from reducing the space of our DCs. And if you look at the past 5 years, we have been consistently reducing the number of DCs and the number of square meters, using better software to have real-time visibility on inventory across the group, from factories in China, ship DCs, providing real-time data to our vendors that allow us to negotiate lead time, minimum order quality. And now we are starting to really work on forecasting with AI and more software. So I would say, you have seen that in the past few years, and we are still very confident looking forward to work hard on our inventories and being able to reduce inventories. Bhavesh Mistry: Yes, not much to add. It's a key focus area for us. As Thierry said, we took out 5 days this year, 7 days last year. We expect continued steady progress. It's a key driver of our working capital improvement. And as Thierry mentioned, we try to focus on structural things, not tactical. So for example, we've got the supply chain visibility tool that we know where our stock sits. And so that means when we work with our factories in China, we can give them better data to better plan their production, and that means that we order less, we have shorter lead times. We order fewer sort of our minimum order quantity sizes are lower. So we're getting the product we need when we need it. That really helps. Just one example, but just gives you a bit of color on some of the structural initiatives that we're taking. Timothy Ramskill: Okay. Excellent. That's very helpful. The next sort of cash flow question was just a little bit around CapEx. Obviously, the guidance for GBP 400 million. What, if anything, is driving a little bit of a step-up? Is that just linked to the sort of store opening plans? And then maybe just some thoughts on how that sort of trends over the next few years, please? Bhavesh Mistry: Yes. So we spent GBP 388 million in CapEx this year, about 3% of sales, which is in line with our guidance. I guess the way we thought about it this year is as we navigated through, we had a good first half. And we're in constant dialogue with our businesses around where could we look for opportunity to deploy and invest more in our business first. That's the first pillar of our capital allocation strategy. That's what we focused on stores. So B&Q, for example, bought a freehold store that was opportunistic that came up, wasn't in our plan, but we felt the right thing to do. We also felt continued investment in maintenance of our stores. That's important. So customer-facing things like LED lighting, entrances, et cetera. So we sort of navigated through the year. And as we saw, we're having a good first half, we chose to take some of that performance and reinvest it, obviously, in the right project parts of the business that drive good returns and help our customer experience. Timothy Ramskill: Great. And then last one for me, if that's okay. Just in terms of marketplace, just help us think about how -- clearly, you've laid out ambition for where that gets to from a revenue contribution perspective. But what would be -- well, how do you expect to grow the costs to deliver that? So when should we start to see perhaps a sort of more dramatic drop-through to profitability? Just some parameters around that would be great. Thierry Dominique Garnier: Yes. Thank you, Tim. I think, first of all, I remind you that the market -- the B&Q marketplace delivered GBP 15 million of retail profit this year. So that starts to be meaningful. When I start from top line, the take rates, the commercial margin we are taking is around industry average for home improvement between 10% and 15%, and we are happy to see this margin across all our different countries. Then you have a bit of tech, but broadly, the investment has been done. We are working with Mirakl. So that's relatively -- it's a SaaS model. So we are -- it's really a small amount. They are small teams. If you take B&Q, we speak about 20 people for over GBP 400 million GMV. So the main variable is the marketing cost. And so when you start the marketplace, you want to be probably around 8% to 10% marketing investments. And then gradually, over time, you will decrease this marketing spend. And after a few years, you are at, let's say, a stable and standard level of marketing investment. So we are gradually decreasing our market investment. And overall, when you do the math, we are seeing very strong flows through to profit. To give you even more color, we will probably be able in the future to increase the take rates because we'll be able to sell more services to our vendors, retail media, fulfillment option, advisers. So a lot of things on the table as well on the take rates in the medium term. Operator: Our next question comes from Adam Cochrane with Deutsche Bank. Adam Cochrane: A couple of questions. First of all, you talked about the compact stores as being an area of growth. Can you just give us an idea of the dynamics on the compact stores. Are they -- despite a lower sales base, are they actually more profitable on a contribution margin than the larger stores? So where I'm going is, are they margin accretive across each of the different banners compared to where you currently are? Thierry Dominique Garnier: Maybe I'll start, and I think Bhavesh will give other views. I think firstly, you remember, we have started this journey a few years ago where we believe compact store format in DIY is an important trend. It's not an obvious format, there are countries that exist. When you look at France, we have in the market companies like Mr. Bricolage or Weldom that are, in fact, small format. In the U.K., you have less small format. So in the U.K., we have B&Q locals, and that's really a high street format. And we will start to open more B&Q locals this year, and we have a target in the medium term about 30 stores. We have a format that is called B&Q retail park, around 2,000 square meters. We have Screwfix City, very successful, and we believe we can open 100. We have Brico Dépôt 1,000 in France. I mentioned that it's a very important format for the future. In Poland, we have a great medium box, around 4,000 square meter, and we are working hard on the 2,000 square meter box that is not fully ready yet. And we are still working on our small format for Poland. And obviously, B&Q, we are as well very pleased with the medium box format. So I would say, on average, our medium box and smaller formats are in line or better than the average of their markets. There are a few exceptions. For example, if you tell me in Poland, smaller format, we are not up yet, so Brico Dépôt 1,000, there's still some improvement to do. But overall, what you see is sales density and profit in line or slightly better than the average. Bhavesh Mistry: And not much to add there, Adam. I think on B&Q Locals, we've got 11, 8 of them are working pretty well. The other 3 are not. Of the 8 that are working well, we look at what are the right ranges, what's the right delivery into a city center location, logistics, how are consumers engaging with us. So we're constantly learning as we build and adopt these. Adam Cochrane: And the second question I've got is, if we look at the B&Q performance as the year progressed, there may have been some drivers from Homebase customer transference. Did that make a material difference as each quarter went on? Can you just remind us of maybe when that annualizes? And the second part of that question is, if we assume that some of the B&Q like-for-like was from Homebase, and a decent proportion is coming through from the growth in trade, is there a question mark over the core U.K. DIY customer, which appears to be in reasonably low to mid-single-digit decline if you take into account the Homebase and your trade customer growth? And are you focusing so much on the trade customer that the DIY customer is getting less of a service than they were historically? Bhavesh Mistry: Let me -- thanks, Adam. Let me start with Homebase, and then I'll get Thierry answer the second one. So we haven't disclosed specifics on Homebase, but a couple of data points. Firstly, Homebase went to admin in November 2024, and then stores closed in January and February of 2025. And the way we sort of modeled and looked at it was one of the stores that are with -- B&Q stores that are within 20 minutes of a Homebase, and how are they performing versus the rest of the portfolio. And there -- that's where we did see an uplift. Obviously, the teams executed well. The 8 stores that we acquired, we made sure we're open for peak. We made sure we have the right product availability. As you know, we had a super strong seasonal last quarter 1. But Homebase was one of a number of drivers of B&Q's performance, right? We had good performance in big-ticket, continued growth in our core categories. We've got profitable growth in trade and e-commerce. And then obviously, the strong seasonal that you saw in H1. So yes, it benefited us, but one of many levers. Thierry Dominique Garnier: Yes, Adam, a few more comments. I think, first of all, we have to look at B&Q, including marketplaces. So we have indeed the store, we have trade, we have marketplaces. So when we add marketplaces, what we call the GMV, the B&Q sales growth is plus 5.9% in 2025-'26 versus the flat market. So yes, trade is growing. But you can't say that the rest of the perimeter is having difficulties. And it's all based on the same assets. So we are leveraging our assets to grow e-commerce and to grow trade. Another data I can give you is services installation. We're on 22% at B&Q. So clearly, we see a lot of good news on interaction with the customer. So you really have to keep looking at B&Q altogether, including marketplace. Bhavesh Mistry: And just to add, we performed above the market in the U.K. Well, that gives you a data point. Adam Cochrane: Okay. And final question is, you talked about growing sales ahead of the markets and profit ahead of sales. Your midpoint of the guidance implies a 6% increase in profits. Given that one number that today surprised me slightly was the OpEx growth, particularly in the U.K. is the implication to get to your midpoint that there's a low single-digit like-for-like in order to leverage that up to get to your 6% at the midpoint profit growth? Thierry Dominique Garnier: I think maybe to start, Adam, I think in the mixed consumer environment, we feel good with a 6% increase in the midpoint. We feel it's a good plan. It's predicated on continued progress in our strategy on trade and e-commerce and as well a lot of discipline on gross margin and costs. So in the current environment, we rather feel good around this midpoint guidance. Operator: Our next question comes from Grace Gilberg with Jefferies. Grace Gilberg: Can you hear me? Thierry Dominique Garnier: Yes. Grace Gilberg: Perfect, perfect. First one is around gross margin actually. I mean, obviously, it was a pretty good year in terms of your gross margin expansion and continuing in the second half after what was a pretty good first half, and that was quite impressive. You've mentioned that these have to do with primarily better sourcing as well as just getting better deals with your suppliers. How structural is -- or how structural are these gains? And what is -- what are the things that your suppliers are seeing that are having you to be able to have these better deals, for example? That's the first question. The second one is actually around France. It was a little bit weaker than the other two regions. Obviously, the market has been down, and it's very difficult to see, that hasn't been very helpful. But it seems from your perspective that the model is working particularly at Brico Dépôt. What are the benefits that we maybe haven't seen yet just because of the market? And what are you expecting to see going forward? I'll start with those two, and then I have one or two others. Bhavesh Mistry: Grace, so on gross margin, yes, look, we're really pleased with the performance in the year, right? We grew by 80 bps as we flagged. And as we look into the year ahead, we have different puts and takes. So on one hand, you're going to continue to see further expansion of marketplace, as Thierry mentioned earlier, that's margin accretive. We continue to look at the store as the heart of our digital ecosystem. So a lot of preparation and picking is done in the store. That means we need less logistics space. And so you'll see continued focus on logistics efficiencies. And then buying and sourcing was quite successful in this year that helped drive our margin, and we expect to continue to see that in the year ahead, particularly the insight that we get from our private label business. We look at something called should-costs. We understand the components of all of our products, and that gives us real data to negotiate with our branded suppliers. And that will continue. And then we expect further FX tailwinds based on our hedging. We hedge 100% of our committed orders into next year. So we have a pretty good read on FX. On the other hand, we have growing trade. We're really pleased with what we're doing with trade for all the reasons you heard us talk about. But at a gross margin level, it is dilutive. We always focus on maintaining competitive prices. And then freight is starting to turn into a headwind. So those are some of the pluses and minuses that we think about as we look at the year ahead on gross margin. Thierry Dominique Garnier: Now, I think to France, I think overall, I think we feel good about the progress in '25. Just to tell you what I have in mind. First, market was around minus 3%, so pretty difficult market. We did around minus 2%. So we overperformed the market. In a year where Castorama had significant disruption from store work, a lot of range reviews. We had a big head office restructuring. We were changing a lot of the team in the store. You heard in Bhavesh's comment that we changed about 50% of the store manager, 40% of the category manager. And as well in France, we have to remember that it's a lot of new tax and high wages in '25, like in the U.K. So in this environment, being able to gain market share in all banners, to have a profit up, to see the strategic progress on trade, on e-commerce, to deliver on the Casto plan, but as well on the Brico plan, to answer your question on Brico, probably the two biggest progress we made was continue to have an even lower price index because it's a discount -- discounter banner. And we did a lot, a lot of progress on the Pro sales. You saw that. And at the end, the team are in a good place. We see team engagement in France growing really in a strong position. So overall, I think it's a very strong year in a very difficult market. So indeed, we need the market to recover. But for me, the market recovery, the French market recovery is a question of time. Grace Gilberg: Okay. All clear. And then I suppose my last question is around the full year guidance for FY '27. Obviously, you do have some tough comparatives heading into Q1 given how strong B&Q was last year. And then many of your competitors have as well or just peers within the home market have cited that it's been pretty wet weather and hasn't been helpful for trading into the beginning of the year. What makes you confident in reaching your full year PBT numbers, given that you're facing some of these headwinds potentially? Bhavesh Mistry: Well, as you know, Grace, we don't provide current trading. So we don't guide for the current quarter. But factually, you're right, we had a very strong seasonal, so B&Q's Q1 seasonal last year was 30%. So it's a pretty tough comp to lap. But as we look ahead to sort of our guidance for the full year, we look at sort of what are of the drivers from a top line perspective. We've got a mixed consumer backdrop. But in the U.K., we expect continued momentum from our two banners, notwithstanding the tough comp in Q1 on Homebase transfers as we talked about earlier. Top line in France, it's still a weak market. It's improving, but very slowly. Savings rates are still elevated, 400 to 500 bps above the long-term average. So very much in France is focused on what we can control, differentiated proposition, discount proposition of Brico, all the heavy lifting we're doing at Casto. You heard us talk about in our prepared remarks. And then Poland was flat last year. Q4 was good, but I'd say we need to see more quarters of good sustained consistency in Poland. So that's sort of how we think about the top line when we set our guidance. And then we talked about in your earlier question, what things that we will continue to manage effectively got some puts and takes. And those will be the same things next year as we saw this year. And then continued focus on cost. We've got a track record of managing our costs pretty well. As and when trading environments change, we have the agility to flex our cost base. So those are some of the component parts that sort of set our full year guidance on profit and cash. Hopefully that adds. Thierry Dominique Garnier: Just to add a few words around general, how we feel, obviously, looking at the Middle East crisis. I think, obviously, we are very mindful. But we look at our top line first with resilient business. We have about 2/3 of our business is repair and maintenance, so less discretionary. We now have reached 30% of the group sales is delivered through trade. So as well more resilient. We really see the benefit of our strategy on e-commerce and trade. Looking again at B&Q in 2025, real growth, plus 5.9% in the flat market. So you start to see the benefit of the strategy. And as Bhavesh said, we have had a strong track record of discipline, margin management, cost management in all the past years. Operator: Our next question comes from Yashraj Rajani. Yashraj Rajani: I've got three, please. I'll ask them one by one. So the first one is on the cross-border vendor e-commerce, which you have fully highlighted. So is that just an element of introducing a different price point? Or do you think that you're missing something in the range architecture there, which is now being complemented with this cross-border vendor e-commerce? And how do you think about the right balance so that it doesn't cannibalize your own 1P sales? Thierry Dominique Garnier: So I think we -- thank you for the question, Yash, first of all. I think it's -- we really see that more as a range topic, as choice. In fact, we are already selling on our marketplaces, I think you should take the U.K., U.K.-based vendors. So you have a lot of very strong countries in the world with very strong industrial base. Germany, but even and as well China, we'll open gradually our marketplace to Chinese vendors. We see the potential here. But it's not around price competition. To give you another color, we are working hard on what we call buy box. And I will not enter into the tech detail, but we could do that off-line, if you want. That will allow us as well to have more price competition between the same SKUs from 2026. So cross-border is really around choice. Bhavesh Mistry: And what I said earlier, right? Yes, there's probably a little bit of cannibalization, but look at our 1P sales, it's stronger than our store sales. And 3P traffic brings new people to diy.com that we wouldn't otherwise get, and a lot of them go on to buy 1P product. So that's a benefit of having the choice that Thierry talks about. Yashraj Rajani: Sure, that's super helpful. And then the second question is, again, on France. So I appreciate you commented that the market is difficult, but there's obviously all the self-help initiatives that you highlighted. So even if you assume that the market stays where it is, what is the absolute margin improvement you can see from all the things that you control even if like-for-likes are negative? Thierry Dominique Garnier: Yes. I think, Yash, we are still confident in our 5% to 7% profit margin for France in the medium term. We always said part of it is really our self-help action, and we are progressing on this. To remind you as well that some of the self-help action, you have very short-term impact, when you do a head office restructuring, you have short-term impact. Some other, like range reviews or the store network restructuring, you need a bit of time to realize, to crystallize all the benefits. So one, self-help actions. Second part is the market improvement. Personally, I'm convinced that we'll see market improvement. It's a question of time, and we need both to achieve those 5% to 7%. Yashraj Rajani: Got it. Got it. Super helpful. And the last one from my end, maybe quite a topical one is the Middle East. So can you just sort of quantify any sort of freight headwinds or more broadly disruption that you're seeing, which would probably create some availability issues, if any? Or just anything else you'd like to highlight on the Middle East? Thierry Dominique Garnier: So maybe I'll start with supply chain, and then Bhavesh will come on the cost side. First, it's obvious that we have no operation in the region. We have nearly two suppliers in the region. So you see it's really a very, very limited direct impact. And before Bhavesh will comment on gross margin and costs, again, remind you that 2/3 of our business is repair and maintenance and 30% is trade. We are high expectation to deliver on our strategy on trade and e-commerce in 2026 and beyond. So we expect this to give us resilience looking forward. Bhavesh Mistry: Yes. I mean you heard me mention it in my prepared remarks, but the direct impacts, based on what we know today, and as you know, things are changing every day, but the impact for us is fairly limited energy. On energy, our quantum energy costs are less than 1% of our sales, and the majority of that is hedged. And then on freight, again, a small proportion of our COGS, about 20% of our COGS are sourced from Asia, and we typically lock in annual contracts with carriers. So those contracts have what we call like a fuel index, so there may be a little bit of a headwind, but we've locked in those contracts for the year. We looked at previous situations, the markets have behaved pretty rationally on pricing and margin. And we continue to stay focused on managing our margin and being super disciplined on cost. And so that's our focus, right, to continue to do that as we navigate our way through. Operator: Our next question comes from Mia Strauss with BNP Paribas. Mia Strauss: I just want to check a few. I think last year, you talked maybe about doing consumer surveys for your trade sales partners. And what sort of pipeline they're seeing over the next few weeks. Maybe if you can just give us a comment on that for the current year? Thierry Dominique Garnier: Yes, absolutely, Mia. And by the way, you will see that in the appendix of our document we released, Page 34. Indeed, we do a monthly survey for Screwfix. What you see on the Page 34 is that 93% of our trades people are working. So it's 2 points year-on-year. So slightly higher than last year. But we have a second category that is working and have more work to come, 79% of the survey and is 6 points up year-on-year. So we do this survey every month for the past few years. So it's pretty reliable. So we feel those results will remain strong. Mia Strauss: And then maybe just on your share of the trade wallet. What share do you currently have? And essentially, what is the realistic opportunity of what share you could get in the future? Thierry Dominique Garnier: I think Screwfix, our estimate is around 15%, 1-5. So for our trade business, you could say it's still relatively low, and that's why we believe we have a lot of opportunity ahead on Screwfix share of wallet on the range, the size of the range, B2B. We have a plan that will address more of this share of wallet growth in the future. And you have seen as well in the presentation, the rewards program. For all the big boxes, our estimate that is a few percent. Our share wallet in B&Q in France, in Poland is just a few percent of a very large market. Very often, the trade people, they already come to our stores, but mainly for urgencies. And that's why all this plan is finally leveraging your assets to sell more to people that are already in your stores through your loyalty program, traders sales partners. So we really feel starting from this very low base of share of wallet in our other big boxes, there is significant opportunities. Bhavesh Mistry: And look, in the U.K., it's a big market, right, it's GBP 30 billion, total trade market. TradePoint sales are close to GBP 1 billion. So a lot for us to still go after. Mia Strauss: That's helpful. And then maybe just for you, Bhavesh, on the free cash flow. So the guidance is a little bit lower year-on-year. And I think it's -- last year, you also talked about achieving over GBP 500 million over the full current year. I guess, last year, you saw about a GBP 91 million increase in payables. What was that from? And I guess, going forward, why is it a little bit lower? Bhavesh Mistry: So look, yes, pleased with our free cash guidance. We've delivered more than GBP 500 million over the last 3 years. And our focus this year will be continued on the profit drivers we talked about and working capital, and particularly inventory. So again, some of the stuff we mentioned earlier, some of the structural initiatives. We set a range of GBP 450 million to GBP 510 million, midpoint GBP 480 million. That's about GBP 30 million higher than the midpoint we set last year. And so confident that we'll continue to deliver cash flow well. We also still have spent more on CapEx this year. The question somebody asked earlier, as we saw and navigated through the year that we are trading well and had a good cash performance, we chose to redeploy some of that both in buying freehold, but also at our maintenance and tech. So we kind of navigate through the year. And then you always get fluctuations, right, in year-on-year. So sometimes one-offs. But over the medium term, we're still guiding to around GBP 500 million per annum free cash and have done that in the last 3 years. Mia Strauss: Great. Maybe just on the -- if we look back to '25, what was the reason for that significant increase in payables maybe? Bhavesh Mistry: I think timing, largely. We look -- as you'd expect any retailer, we kind of look at payment terms as well as something we navigate, but also, our sales was higher, right? So that sort of drives our payables. Operator: [Operator Instructions] Our next question comes from Georgina Johanan with JPMorgan. Georgina Johanan: Everyone, can you hear me okay? Thierry Dominique Garnier: Yes, Georgina. Bhavesh Mistry: Yes. Go ahead. Georgina Johanan: I've got three quick ones, please, really just following up some questions that have already been asked. The first one is very much appreciate that you prefer not to give current trading trends. But just in the context of maybe the consumer more broadly, particularly in the U.K., I think one of the early surveys that's been done since the start of the crisis and headlines around higher energy prices and so on, actually, we saw an 8-point fall in consumer confidence. So just wondering if you can kind of comment on how you're seeing consumer behavior rather than trading trends necessarily. The second one was, I appreciate you don't provide a like-for-like guidance, and of course, there are changes that will be made depending on trading performance. But if you were to see perhaps only a flat like-for-like this year, can you just confirm that you'd be able to hold profits in that scenario, please? And then finally, you very helpfully at the half year, I think, quantified some of the gross margin benefits from buying and sourcing initiatives. If I remember correctly, around 60 basis points. Is it reasonable to assume that you can actually achieve a similar level again in fiscal '27? And indeed, where did that land for fiscal '26 overall, please? Thierry Dominique Garnier: Thank you, Georgina. Let me start with the first one, and then Bhavesh will cover the two and three. So to be direct, indeed, we don't want to comment on the current trading. But I think it's an important topic, we have not seen up to now real impact on the customer. We have not seen a change of trend following the start of the Middle East crisis. Bhavesh Mistry: On your second question, we have different levers that we pull as we navigate through the year, margin, cost, investment in the business. We set our guidance range or profit range is the same as we said previously, GBP 60 million, around that midpoint, and we'll navigate and push and pull levers as trading evolves as you saw us do this year. On gross margin, I'm not going to quantify it, but I'd refer you to my previous response on the various puts and takes. We've got lots of things that are tailwinds, but we also have some things that are headwinds on gross margins. Operator: At this time, there are no further questions. I will now hand back to Thierry for closing remarks. Thierry Dominique Garnier: Just to thank you for joining us this morning, for your questions. Again, we are confident in our delivery of this year and our strategic progress. Confident in the fact we stay very disciplined on the thing we can control well as we did in the past. So again, thank you, and we are always available with the team if you have any questions. And for some of you, I think we'll meet in the coming days. Thank you very much. See you soon. Operator: Thank you for joining today's call. We are no longer live. Have a nice day.
Operator: Good day, and thank you for standing by. Welcome to Tongcheng Travel 2025 Fourth Quarter and Annual Results Announcement Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Ms. Kylie Yeung, Investor Relations Director of the company. Please go ahead, ma'am. Kylie Yeung: Thank you. Good morning, and good evening, everyone. Welcome to Tongcheng Travel's 2025 Fourth Quarter and Annual Results Conference Call. I'm Kylie Yeung, Investor Relations Director of the company. Joining us today on the conference call are our Executive Director and CEO, Mr. Hope Ma; our CFO, Mr. Julian Fan; our Chief Capital Officer and President of Wander Hotels and Resorts, Ms. Joyce Li. For today's call, our management team will provide a review of the company's performance in the fourth quarter and full year 2025. Hope will brief us on the company's strategies. Joyce will discuss our business and operational highlights, and then Julian will address the details of financial performance accordingly. We'll take your questions during the Q&A section that follows. As always, our presentation contains forward-looking statements. Such statements are based on management's current expectations and current market operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, which may cause the company's actual results, performance or achievements to differ from those in the forward-looking statements. This presentation also contains some unaudited non-IFRS financial measures. They should be considered in addition to, but not as a substitute for measures of the company's financial performance prepared in accordance with IFRS. For a detailed discussion of non-IFRS measures, please refer to our disclosure documents in the IR section of our website. Now let me introduce our CEO, Hope. Hope will be presenting in Mandarin, and our colleague will provide the English translation afterwards. Hope, please go ahead. Heping Ma: [Interpreted] In 2025, China's travel industry and the company entered a new phase of high-quality development. Over the past year, we witnessed resilient travel demand with increasingly diversified trends as immersive and experiential consumption continues to gain popularity. Amid this backdrop, we deeply dive into user needs and comprehensively optimize our travel products and user experiences. As a result, both our user base and ARPU demonstrated robust growth in 2025 with APU reaching a record high. The robust business growth reflected the ongoing enhancement of our service quality and the expanding influence of our brand. The year 2025 was a year of challenges and opportunities for us. In response to consumers' diversified and personalized needs, we continuously enriched our product offerings, facing growing expectations for premium services. We consistently improved our service quality. Amidst AI-driven technological revolution, we proactively embraced new frontier technologies with an open attitude. All these showcased our strong organizational agility and exceptional execution capabilities, further reaffirming our commitment to our user-centric mission of make travel easier and more joyful. The Chinese government sees travel as a vital pillar of national economic development. The latest 15th 5-year plan has explicitly stated the commitment to expanding the supplies of high-quality travel products and to enhancing travel service standards with the goal of establishing China as a premier travel destination from the pilot implementation of autumn and winter vacations in certain regions to the longest spring festival holiday on record. These expanding holiday arrangements underscore significant governmental support for the travel industry. In terms of demand, travel has become an essential part of people's pursuit of a better life with seasonal themes such as spring flower viewing, summer retreats, all foliage tours and winter snow activities continuously gaining popularity. In the coming year, we will remain focused on domestic market and deep dive into user needs, aiming to further solidify our leading position in the mass market. Simultaneously, we will make intensified efforts to capture growth opportunities in the outbound travel market to propel our global expansion strategy. On the operational front, we will continue to implement technological innovation and product upgrades centered on user experience while enriching membership privileges and deepening user engagement. In 2021, we tapped into the hotel management business. After several years of rapid expansion, it has now gained meaningful scale. The integration of Wanda Hotels and Resorts in 2025 marked a pivotal milestone in the development of our hotel management business. This strategic move strengthened our brand portfolio and ecosystem while substantially elevating our competitiveness and market influence. By consistently executing our strategy and leveraging our strong Internet DNA, we are well positioned to accelerate the segment expansion in 2026, laying a robust foundation for our long-term sustainable growth. Amidst the rapid advancement of AI technology, we are devoted to expanding the application of AI in our business process, further optimizing operational efficiency and enhancing user experience. Building on our user-centric value proposition, market acumen and superior execution capabilities, we are confident that we will continue broadening our competitive moat in the travel industry. Moving forward, we will continue to export our technologies and expertise to empower our partners and support the broader industry ecosystem while strengthening our commitment to corporate social responsibility to foster sustainable industry growth and create greater value for all stakeholders. Next, I will hand over the call to Joyce. She will share with you our business and operational highlights of the fourth quarter and the full year of 2025. Joyce, please go ahead. Joyce Li: Thank you, Hope. 2025 was a pivotal year of growth and achievement for our company. Beyond the steady expansion of our domestic business, our outbound travel and hotel management businesses made remarkable progress, contributing meaningfully to the overall growth momentum of the company. During the past year, we acutely grasped users' evolving preferences and precisely captured emerging demand. This enabled us to once again deliver solid growth across all business segments, highlighting our excellence in strategic execution, operational efficiency and organizational agility. Throughout the year, our accommodation business sustained robust growth momentum and achieved a record high in room nights sold. In early 2025, we identified a notable shift in users' preference towards high-quality hotels. In response to the changes, we strategically reallocated operational resources to meet this evolving demand, resulting in an approximately 5 percentage point year-over-year increase in the proportion of high-quality hotels sold on our platform. In the meantime, we prioritized enhancing user experience. We not only offer the best value for money products and services, but also provided faster and more responsive support to user requests to further strengthen our presence in the mass market. As for our international business, we continue to enhance our product capabilities by deepening partnerships with third-party providers as well as expanding our product and service offering. In addition, we leveraged our domestic user base to drive cross-sell initiatives and execute the precision marketing campaigns targeting high potential users. All these efforts collectively led to nearly 30% growth in our international room nights sold in 2025. In terms of our transportation business, it continuously demonstrated strong resilience throughout the year. Over the past year, we placed a strong emphasis on improving both user experience and engagement. At the core of the efforts is our Algorithm-driven Huixing system, which leverages advanced algorithm capabilities to provide users with viable and accessible travel solutions by utilizing a comprehensive range of transportation options. The intelligent system significantly enhances the overall travel experience for users. In the fourth quarter, we launched skiing-themed marketing campaigns and rolled out various benefits to skiing enthusiasts so as to reinforce our positioning as an experience-driven platform and further engage our user base. On the international front, we focused on improving operational efficiency by implementing a more disciplined subsidy policy and expanding our VAS offerings. As a result, we achieved a balanced growth in both volume and revenue throughout the year with volume growth of nearly 25% for 2025. As mentioned at the beginning of the speech, 2025 marked a milestone year for our hotel management business with significant progress achieved. This year, we successfully completed the acquisition of Wanda Hotels and Resorts, a company that possesses a renowned portfolio of upper upscale and luxury hotel brands with strong market presence in China. In addition to its hotel management expertise, the company is the only hotel management firm in China with proven specialization in operating scale resorts. This unique capability can help us strengthen supply chain resources in the travel industry, thereby enhancing our influence and competitiveness. Furthermore, Wanda Hotels and Resorts operates its own in-house design institute which is recognized as one of the leading hospitality design teams in China and has received numerous prestigious international awards. The team possesses strong capabilities in designing and managing large-scale hotels as well as convention and exhibition centers. Its design solutions serve not only its own properties, but also high-end hospitality projects across the industry. Following the acquisition, the Wanda Hotels and Resorts team underwent a seamless integration process, resulting in a significant boost to its vitality and optimized organizational capacity and refined strategic direction. This strategic integration has improved our brand portfolio, strengthened our market presence and accelerated the sustainable growth of our hotel management business. Regarding our eLong hotel technology platform, we remain focused on expanding our geographical footprint while prioritizing quality growth throughout the year. The platform also offers technology-enabled hotel management solutions featuring a proprietary property management system, a smart marketing solution, [indiscernible] and service robots for automated in-room delivery. By the end of December, our total number of hotels in operation exceeded 3,000 with more than 1,800 in the pipeline. Looking ahead, we are committed to further expanding our asset-light hotel management business through network expansion and ecosystem enablement. This strategic approach will position us to achieve leadership in China's hotel industry and establish a second growth engine for the company. Traffic operation has been the foundation of our success, leveraging the Weixin Mini program, we have effectively reached a broad user base across China, in particular, those in lower-tier cities. Over the past year, the Weixin ecosystem continued to serve as a critical traffic channel, where we focused on enhancing operational efficiency. At the same time, our stand-alone app, a key driver of new user acquisition, demonstrated strong growth momentum over the past 4 quarters. To attract younger demographics, we rolled out a series of innovative products and engaging marketing campaigns to enhance user mind share and solidify our positioning as an experience-oriented travel platform. As such, the average DAUs of our stand-alone app posted more than 30% growth year-over-year in 2025. Additionally, social media has played an increasingly vital role in engaging users, particularly those younger audiences. During the year, we stepped up our efforts in social media platforms to connect with younger travelers and broadened our user reach through effective and targeted user engagement. We have accumulated the most extensive user base in China's OTA industry. For the 12 months ended December 2025, our annual paying users climbed to 253 million, representing a year-over-year growth of 6%. In addition, the accumulated number of passengers served on our platform over the past 12 months continued to expand and reached 2,034 million with an annual purchase frequency exceeding 8x per user. Moreover, our annual ARPU for the year further rose to RMB 76.8, reflecting a year-over-year growth of 5.5%. Besides our MPU also maintained a growth trajectory throughout the year and increased by 6% year-over-year to 46 million for 2025. As an innovation-driven company, we fully embrace new technologies such as Gen AI to transform our business. In December, we rolled out collaboration with Yuanbao, enabling users to access to our travel booking services via the Weixin Mini program by searching travel itineraries on Yuanbao app. In mid-March last year, we introduced our AI-powered travel planner, DeepTrip, which integrates the supply chain capabilities and market insights of our platform with the resuming capabilities of DeepSeek. Over the past few quarters, we have continuously refined its functionality, incorporating social features to enhance its shareability among users. In the fourth quarter, we embedded a map tool to give users a clearer visual representation of their travel destinations. By the end of December, approximately 6.8 million users in total have utilized DeepTrip. Additionally, we extended its application to some business scenarios by integrating DeepTrip into air ticketing service. We aim to address users' prebooking inquiries as well as helping them find competitive ticket prices, which not only improved operational efficiency, but also enhanced overall user experience. In customer service, AI now covers around 80% of user inquiries, demonstrating its important role in streamlining operations and enhancing user experience. Over the past year, we have consistently advanced the integration of AI in every phase of the customer service process, which not only reduced the workload of customer service staff, but also improved overall operational efficiency. Furthermore, we have made continuous advancements in AI capabilities to enhance its precision in identifying user requests and delivering timeless, contextually relevant and human-like responses. By leveraging AI-driven solutions, we aim to further optimize customer interaction, reduce response time and maintain seamless user support as we continue to grow. In pursuit of global excellence in ESG practices, we have achieved milestones in improving our ESG performance over the past few years. Notably, in 2025, our MSCI ESG rating was elevated to the top AAA level, surpassing 95% of global industry players. In addition, we were included in the S&P Global Sustainability Yearbook China for the third consecutive year, and we were also honored with the Industry Mover Award for our remarkable progress in driving sustainable development within our sector. All these achievements have not only demonstrated our leadership in ESG performance among global peers, but also reflected our resilience and excellence in corporate sustainability in the face of market uncertainties, evolving policy landscape and dynamic social development, we remain dedicated to further strengthening our ESG practices and contributing to a more sustainable future. I'll stop here and give the call to our CFO, Julian. He will share with you the detailed financials in the fourth quarter and for the year of 2025. Julian, it's your turn. Lei Fan: Thank you, Joyce. Good evening, everyone. Over the past quarter, China's travel industry showcased remarkable resilience driven by rising demand for immersive and experiential travel experiences across both traditional holiday hotspots and newly emerging destinations. Leveraging our profound understanding of evolving traveler preferences, we delivered another quarter of robust performance, capping off a highly productive year. In the fourth quarter of 2025, we achieved healthy growth in both top and bottom line. We reported net revenue of RMB 4.8 billion, representing a 14.2% year-over-year increase from the same period of 2024. We executed targeted marketing campaigns to strategically prepare for the 2026 Chinese New Year, while upholding rigorous cost discipline to ensure financial prudence. During the fourth quarter, our adjusted net profit rose to RMB 779.8 million, reflecting an 18.1% year-over-year growth. The increase was principally fueled by the enhanced economies of scale and the optimized operations of our OTA business. Our core OTA business revenue registered a 17.5% year-over-year increase to RMB 4.1 billion during the fourth quarter of 2025. Our accommodation reservation business achieved RMB 1.3 billion in revenue for the fourth quarter of 2025, representing a 15.4% increase from the same period in 2024. The revenue increase was primarily driven by growth in hotel room nights sold, coupled with a modest rise in ADR. In our domestic accommodation business, we proactively explored diverse accommodation scenarios to capture emerging growth opportunities, including themed offerings tailored to specific demand such as winter vacation and exam season space. For our outbound accommodation business, we strengthened cooperation with third-party partners to expand product offerings as well as our destination footprint catering to growing user demand. In the fourth quarter, our ADR once again achieved year-over-year growth, benefiting from growing consumer demand for high-quality hotels and our proactive adjustment to user subsidy strategies, supported by precise and disciplined marketing strategies. Our net take rate remained stable year-over-year. Our transportation ticketing revenue for the fourth quarter reached RMB 1.8 billion, marking a 6.5% year-over-year increase compared with the same period of 2024. During the past quarter, we heightened our focus on improving user experience. We actively expanded travel supply chain and enriched VAS offerings to deliver a broader range of mobility options and ensure seamless travel experience for users. As for our international air ticketing business, it achieved balanced growth in both volume and revenue, which aligns with our long-term strategy. In the fourth quarter, our international air ticketing revenue increased to more than 7% of our total transportation ticketing revenue. Our other business segment maintained stellar growth momentum with revenue reaching RMB 916.7 million in the fourth quarter, representing a growth of 53% year-over-year. This growth was mainly propelled by outstanding performance of our hotel management business and the consolidation of Wanda Hotels and Resorts. Our tourism business achieved a revenue of RMB 777.5 million, which was largely flat year-over-year. mainly due to our proactive reduction in prepurchased business as well as softer demand for Southeast Asia and Japan. In terms of profitability, our gross profit increased by 18.5% year-over-year to RMB 3.2 billion for the fourth quarter of 2025. The operating profit margin of our core OTA business remained flat year-over-year for the fourth quarter of 2025, while the operating profit margin of our tourism business has been affected by the one-off goodwill impairment. Our adjusted EBITDA increased by 28.6% and reached RMB 1.3 billion in the fourth quarter of 2025. Adjusted net profit grew by 18.1% to RMB 779.8 million in the fourth quarter of 2025. Adjusted basic EPS for the fourth quarter of 2025 was RMB 0.33 with a 17.9% year-over-year increase compared to the same period in 2024. Service development and administrative expenses in the fourth quarter of 2025 increased by 6.8% from the same period of 2024. Excluding share-based compensation charges, service development and administrative expenses in total accounted for 18.1% of revenue in the fourth quarter compared with 18.6% of revenue in the same period of 2024. Selling and marketing expenses in the fourth quarter of 2025 increased by 22.7% from the same period of 2024, excluding share-based compensation charges. Selling and marketing expenses accounted for 32.4% of revenue in the fourth quarter compared with 30.2% of revenue in the same period of 2024. Now let's move to our results for financial year 2025. Our net revenue in 2025 achieved RMB 19.4 billion, representing an 11.9% year-over-year increase. The core OTA revenue achieved RMB 16.5 billion, representing a 16% year-over-year increase. Our accommodation reservation revenue was RMB 5.5 billion in 2025, representing a 16.8% year-over-year increase. Our transportation ticketing revenue reached RMB 7.9 billion, representing a 9.6% year-over-year increase. Other business revenue for 2025 achieved RMB 3.1 billion, representing a 34.4% year-over-year increase. Our tourism revenue for 2025 reached RMB 2.9 billion, representing a 6.9% year-over-year decrease. In terms of profitability, our gross profit in 2025 increased by 15.7% year-over-year to RMB 12.9 billion. Adjusted EBITDA for 2025 improved by 26.9% year-over-year to RMB 5.1 billion. Meanwhile, adjusted net profit for 2025 increased by 22.2% year-over-year to RMB 3.4 billion. Adjusted basic EPS for 2025 was RMB 1.45 with a 20.8% year-over-year increase. As of December 31, 2025, the balance of cash and cash equivalents, restricted cash and short-term investments was RMB 12.3 billion. We highly appreciate our shareholders' consistent support and are committed to delivering sustainable capital returns. Our Board of Directors has proposed a final cash dividend of HKD 0.25 per share, marking a 38.9% increase from last year. This reflects our commitment to enhance capital returns to shareholders. Over the past year, China's travel industry has demonstrated increasingly prominent trends towards diversification and personalization as consumers place growing emphasis on emotional value and unique experience-driven travel opportunities. Notably, the 2026 Spring Festival represented the longest holiday period on record. During the 9-day holiday, consumers divided their holidays into multiple shorter trips such as homecoming visits and vacation travel. Incremental demand from multiple trips during the festival has driven robust growth in our business volume. In addition, the pilot implementation of spring and autumn vacations initially launched in Zhejiang and Sichuan has been expanded to include more regions such as Jiangsu and Anhui. We believe this initiative will help stimulate travel consumption and provide additional momentum to the growth of the tourism industry. Such supportive government policy, combined with sustained strength in user demand, fuels our optimism about the upward trajectory of China's travel industry in the coming year. Moving forward, we will remain focused on our core OTA business, providing users with diverse domestic and international travel products while sparing no effort to enhance user experience. As we continue to improve operational efficiency in domestic OTA operations, we will actively expand our outbound business to bolster our global brand presence. Additionally, our hotel management business will enter a new phase of high-quality growth, building a solid foundation for the company's long-term sustainable development. Concurrently, we will continue to adopt technological innovations as well as deepening the integration of AI technology with our supply chain capabilities, striving to better meet user needs. Last but not least, we will strengthen our corporate social responsibility to support the healthy development of the travel industry and to create greater value for our stakeholders. With that, operator, we are ready to take questions now. Thank you. Operator: [Operator Instructions] We will now take our first question from the line of [ Xi Wei Liu ] from Citi. Unknown Analyst: Xi Wei From Citi. Congratulations to the company on a solid operating performance. I have 2 questions. The first about outbound travel. There have been many flight cancellations between China and Japan recently. How has this impacted your outbound business? Could you share the regional breakdown of your outbound markets? And what are your 2026 targets for outbound revenue growth and profitability? The second about large model and AI strategy. The company has actually rolled out some partnerships with large models so far. In the long run, as AI model portals become more important, how will the company position itself? Joyce Li: Thank you, Xi Wei for the question. The first one is in terms of outbound travel. We did observe a decline in Japan-bound travel volume given the current circumstance. However, the overall impact on our business has been limited as outbound travel accounts for only around 5% to 6% of our total transportation and accommodation revenue. And at the same time, outbound travel demand remains resilient, and we have been seeing users shift to alternative destinations rather than cancel their travel plans. During the Chinese New Year holiday, shop to middle-haul destinations within a 5-hour flight regions such as South Korea, Singapore, Malaysia, Hong Kong and Macau remain among the most popular choices, while demand for Thailand also shown signs of gradual recovery. In addition, demand for long-haul travel increased year-over-year with European destinations such as Italy and Spain seeing particular strong growth. We have been actively adjusting our product offerings and marketing focus to capture this demand shift. Overall, given the relatively small contribution of our outbound travel to our core OTA business and the substitution effect across destinations, we do not expect a material impact on our overall performance. And looking ahead to 2026, our priority remains to further improve the quality of growth by enhancing pricing discipline, optimizing marketing efficiency and strengthening cross-selling from air tickets to accommodation and other travel products. At the same time, we will continue to deepen partnerships with global suppliers to improve service capabilities and user experience. Overall, we expect the international business to continue expanding in scale and become an increasingly meaningful contributor to our revenue. Over the next 2 to 3 years, growing business volume and expanding the user base will remain the key priorities while maintaining a strong focus on improving growth quality and profitability. We expect the revenue contribution from the outbound segment to increase to around 10% to 15% with increasing operating leverage over time. And in terms of the AI cooperation, our AI strategy focused on enhancing both user experience and operational efficiency as we continue to evolve from a traditional OTA toward a more intelligent travel platform. We see AI as a core capability that helps us better understand user needs, improving decision-making and optimize service delivery across the entire travel journey. At the same time, AI-driven efficiency improvements are significantly enhancing staff productivity and optimize our cost structure, which we believe will be an important driver of margin improvement over time. On the user side, we have integrated our proprietary travel-specific AI with advanced large language models to develop DeepTrip, which supports itinerary planning, travel inspiration and personalized product recommendations. By combining AI capabilities with our real-time supply and transaction ecosystem, DeepTrip provides a practical and actionable solution and enables a seamless end-to-end booking experience. We will continue to iterate its functionalities to better support users across different travel scenarios. And as a positioning of us, I think that we have been started exploring the partnership with large AI platforms and large model ecosystems. For example, we enabled traffic [ redirection ] from Yuanbao to our mini programs and apps. So our strategy is to actively participate in the emerging AI ecosystem by positioning our platform as a trusted travel service partner with deep market insights and a strong understanding of user behaviors. Leveraging our long-term accumulation of transaction data and operational experience, we are able to provide users with more accurate recommendations and practical bookable travel solutions on our AI platforms. Users who enter through AI platforms complete their bookings within our mini programs or apps and the related user and transaction data remain within our ecosystem. This allows us to maintain direct user relationships, accumulate valuable behavior insights and continuously optimize our product services and personalized recommendations. It also enables us to strengthen user engagement and lifetime value, which remains a key competitive advantage for our OTA platform. Going forward, we will continue to monitor development of the AI ecosystem and expand partnerships where it makes strategic sense, while maintaining our focus on strengthening our product service offerings, operational capabilities and user experience. Operator: We will now take our next question from Wei Xiong of UBS. Wei Xiong: First, I want to get your thoughts on regulations because recently, an OTA peer has been under antitrust investigation. So how should we think about the implications to the OTA sector? Do you foresee any impact on OTA's business model or lead to any change in the competitive landscape? Lei Fan: Thank you, Wei Xiong, -- please go on. Wei Xiong: Yes. Sure. So second question is on the hotel management business, which is set to become our second growth engine. So I wonder, could management elaborate your strategic focus and planning for this year? And what are the key operational goals and financial metrics that we look to achieve in 2026 and in the medium term as well? Lei Fan: Okay. Thank you for the question, Xiong, Wei. In terms of the investigations, as you mentioned, we closely monitor regulatory developments recently. At this stage, we have not observed any material changes that would impact our day-to-day operations. Tongcheng has always operated with a strong focus on compliance and fair cooperation with our partners. We believe a well-regulated market environment is beneficial to the long-term healthy development for the company and also for the industry. We will continue to adapt our business practices as required to ensure full compliance in the company. Overall, we remain focused on executing our strategy and delivering sustainable growth and profitability improvement. In terms of the hotel management plan, I think Joyce will have her words. Joyce Li: Thank you, Xiong, Wei. Actually, following the completion of the Wanda Hotels and Resorts acquisition, the integration has progressed smoothly and is better than our expectations. We have achieved rapid organizational alignment, revitalized organization and teams and further refined the strategic direction of the business. Overall, the post-acquisition integration has been very successful. On the synergy front, we are beginning to see encouraging early results. The addition of the Wanda's upscale and luxury brands has enhanced our overall brand portfolio and strengthened our positioning in the middle to high-end segment of our hotel management business. At the same time, the integration has enabled better resource sharing across business development, operations and membership, which is gradually improving operational efficiency. It also further reinforced Tongcheng's presence within the accommodation supply chain. From the other perspective, Tongcheng also empowers Wanda Hotels and Resorts through our technology capabilities. By providing standardized system tools and digital solutions, we help improve internal operational efficiency while reducing research and development efforts and lowering system maintenance and third-party service costs. From a financial perspective, the acquisition has already delivered a positive contribution at the operational level as Wanda Hotels and Resorts is an established hotel management company with a solid operating track record. The consolidation has enhanced our revenue scale, optimized the business mix and strengthened the earnings visibility of the segment. As we move forward, our development strategy will remain disciplined with a focus on balancing scale expansion with operational efficiency and healthy returns, ensuring sustainable and high-quality growth of the business segment. With continued expansion of scale and improving operational efficiency, together with the contribution from Wanda Hotels and Resorts, we expect the hotel management segment to maintain strong revenue growth with a further improvement in profitability from 2026 onwards. Thank you. Operator: We will now take our next question from the line of Brian Gong of Citi. Brian Gong: Two questions here. First is, how do you -- how is the travel consumption trend for the industry in the first quarter considering recovery on hotel ADR. Do we still expect teens level on room nights growth this year? Second question is that recently, [indiscernible] has been under government's investigation. Do you think this will impact their cooperation with us and their stakeholding on us? [indiscernible] is adjusting their hotel business to comply with government's requirement. How will this impact the industry and us? Lei Fan: Okay. Thank you for the questions, Brian. In terms of the first quarter's performance and also the industry outlook, actually, during the Chinese New Year holiday, as we mentioned in the prepared remarks, the China travel market continued to demonstrate very solid demand. According to the Ministry of Transport, national passengers throughput during the 9-day Chinese New Year holiday reached a throughput record 8.2% year-over-year growth during the holiday with decent growth for both long-haul and short-haul travel. Our passenger throughput of railway and airline increased by around 10% and 7% year-over-year, respectively. Meanwhile, according to the industry statistics, overall hotel ADR increased during the Chinese New Year holiday among all segments. With demand for family reunions concentrated in the pre-holiday period, we observed a pickup in passenger throughput during the latter part of the Chinese New Year holiday this year. In response, we promptly adjusted our operational resources, strengthened supply coordinations with our partners and enhance the targeted marketing efforts to capture the rebound in travel demand and improve conversion efficiency in the latter part of Chinese New Year holiday. So as a result, we continue to outperform the industry in the first quarter and also during the 9-day Chinese New Year holiday with especially strong momentum in our accommodation business. Average daily room nights sold increased by 30%. Specifically, room night growth for 3-star and above hotels significantly outpaced that of lower-tier properties. This reflects our ability to respond effectively to changing user preferences as more travelers place greater emphasis on higher quality accommodation experiences. As a result, our hotel ADR in quarter 1 maintained a positive trend during the period and once again exceeded the industry average. For transportation business, we continue to focus on improving monetization, while average daily air ticket volume was broadly in line with the overall market. And also for the room nights growth in the full year of 2026, actually, I cannot provide a very clear numbers here because of the short booking window. But as we mentioned, looking into 2026, we continue to view the long-term fundamentals of China's travel market positively. Consumer preferences are increasingly shifting towards experiential-oriented spending with growing interest in event-driven and themed travel such as concerts, exhibitions and outdoor activities. At the same time, travel is becoming more integrated into everyday lifestyle, supporting more frequent and diversified travel demand. In addition, supportive policy measures aimed at expanding domestic consumptions and promoting high-quality tourism development provide a favorable backdrop for the whole industry. And also for the second question about the investigation, actually, we don't monitor any change on the cooperation with Trip and also, we don't monitor any change of the shareholder structures or potential change of the shareholder structures. So currently, as I mentioned in previous question, we're just focusing on our own execution and long-term competitiveness improvement. So actually, our strategy remains very consistent, focusing on enhancing our user value, improve the ARPU, strengthening our product and service capabilities and deepening cooperation with our suppliers through a mutual beneficial approach. And also, at the same time, we will continue to take a disciplined and prudent approach while monitoring the industry regulatory development. Thank you for the question. Operator: We will now take our next question from Yang Liu of Morgan Stanley. Yang Liu: I have 2 questions. The first one is also related with AI. Could management elaborate more about the DeepTrip's contribution to the business, especially on the business -- overall business volume and also cross-selling side? And my second question is regarding the marketing intensity this year, given the geopolitical risk in both China and Japan and also Middle East this year, will management adjust the outbound business marketing intensity? Yes, that is my second question. Joyce Li: Thank you. The first question is concerning our DeepTrip. As I mentioned, DeepTrip is our AI-driven travel planner that use the reasoning power of DeepSeek and our platform supply chain advantages to create personalized travel itineraries. Since launch, DeepTrip has served about 7 million users with orders placed through the platform steadily increasing over the past few months. Over the past quarters, we continue to enhance DeepTrip with the goal of strengthening user awareness and building long-term trust. We have been continuously upgrading its user-facing capabilities to support more comprehensive travel planning. Key enhancements include the integration of trend transfer data to enable seamless multimodal itineraries. The addition of social sharing features to improve engagement as introduction of a map tool in the fourth quarter to provide a more intuitive visualization of travel plans. In addition, DeepTrip has been embedded into our air-ticketing service to help users address pre-booking inquiries and identify more competitive fare options, delivering a more seamless booking experience. Beyond user-facing applications, we have also extended DeepTrip into different business scenarios to improve operational efficiency. We integrated customer service agent capabilities into DeepTrip to respond to customer inquiries directly within DeepTrip and guide users to human support when needed. For corporate clients, we piloted a travel booking suggesting tool customized according to travel profiles, business travel policies and past bookings. In the future, DeepTrip will continue to serve as a platform for understanding and addressing users' comprehensive travel needs across diverse scenarios. We will further leveraging our AI capabilities across various business segments to provide valuable solutions to users, thereby strengthening our competitive advantages. Additionally, we have begun the cooperation with [indiscernible] to acquire more traffic. We're also actively exploring potential collaborations with our AI agent platform to further broaden our reach and engagement opportunities. We remain committed to leading AI innovation, continuously increasing the investments in this area and delivering cutting-edge user-focused features to elevate our user travel experience. And in terms of the current circumstance in terms of outbound business, we have seen considerable growth potential in the outbound tourism market. As the travel habits evolve, more travelers are eager to explore the international destinations. The number of outbound tourists is still significantly lower than the domestic travelers, revealing a substantial opportunities for expansion in this area. At present, we believe that there are only a limited number of Chinese OTA players have the capabilities and resources to actively drive outbound business. This situation place us in a favorable positioning facing relatively low competitive pressure and allowing us to fully capitalize on the growth potential of the market. Again, our strategy and confidence are anchored in the long-term growth prospects of China's outbound industry and our competitive advantages. While we remain agile in our short-term tactics in response to the market conditions, I think our business momentum remains unaffected. Thank you. Operator: In the interest of time, we will take our last question from Thomas Chong of Jefferies. Thomas Chong: Congratulations on a solid set of results. My first question is about our future growth driver and the take rate trend for accommodation and transportation. And my second question is relating to margin. How should we think about the 2026 margin trend as well as the margin driver in the future? Lei Fan: Thanks for the question, Thomas. For growth, actually, the company's focus remains on achieving a high-quality growth in 2026 by balancing scale expansion with operating efficiency improvement, while continuously enhancing our user value and ARPU. So in the first quarter and also the second quarter, we will prioritize healthy and sustainable growth across our core OTA segments, supported by improved operational efficiency and more refined resource allocation. At the same time, we will continue to strengthen our competitiveness positioning and capture growth opportunity to future expand our market presence. Within the core OTA business, we anticipate that the accommodation business will grow faster than transportation business through the whole year. For accommodation business, we believe that the growth will be driven by volume expansion and ADR improvement, as we mentioned a lot of times. Our volume is expected to continue outpacing the market growth, while our ADR will benefit from the ongoing upgrade in hotel star mix driven by shifts in user preference. So we think it's enough to support a very nicely growth for accommodation business by these 2 reasons. So this year, in terms of the take rate of the accommodation, we expect that the take rate may be stable year-over-year at 2025. For transportation business, volume growth will be in line with the market and still one of the reasons of the revenue growth for transportation. While our take rate improvement driven by cross-sell and VAS will continue to contribute to the revenue growth of the transportation segment. Also, we expect the hyper growth for other revenue, mainly due to Wanda consolidation since the middle of October last year and the hyper growth of our original hotel management and PMS business and also our Black Whale business, the membership business. In terms of the profitability, as we promised, the margin improvement is one of the very important strategic priorities for the company. For the reasons, one, for our core OTA business, the improvement in operational efficiency will continue to be an important driver of profitability over time. In particular, we are leveraging AI technologies to enhance both customer service automation and R&D efficiency, which help improve staff profitability and overall operating efficiencies. For the development of our hotel management business, including eLong Hotel Technology platform and Wanda Hotels and Resorts, we will continue to support its high-quality expansion with a near-term focus on scaling the business, while the return profile is expected to improve progressively as the business matures. For our international business, we will maintain a very prudent approach as we continue to build the foundation for future growth and cultivate the company's next growth engine over the coming years. Last, in terms of the marketing investments, our marketing dollars may fluctuate slightly depending on market opportunity. For example, in quarter 4 last year and quarter 1 this year, we identified strong early booking demand for the 9-day Chinese New Year holiday period and therefore, increased our marketing investments to capture early demand and gain market share. At the same time, we will continue to strengthen ROI management across different marketing channels. So overall, we will continue to balance growth opportunities with disciplined cost management while focusing on improving operational efficiency across the business and improve our margins. Thank you. Operator: That's the end of the question-and-answer session. Thank you very much for all your questions. I'd now like to turn the conference back to Ms. Kylie Yeung, for closing comments. Kylie Yeung: Thank you. We are closing the call now. If you wish to check out our presentation and other financial information, please visit the IR section of our company website. Thank you, and see you next quarter. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.
Operator: Good day, and thank you for standing by. Welcome to Tongcheng Travel 2025 Fourth Quarter and Annual Results Announcement Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Ms. Kylie Yeung, Investor Relations Director of the company. Please go ahead, ma'am. Kylie Yeung: Thank you. Good morning, and good evening, everyone. Welcome to Tongcheng Travel's 2025 Fourth Quarter and Annual Results Conference Call. I'm Kylie Yeung, Investor Relations Director of the company. Joining us today on the conference call are our Executive Director and CEO, Mr. Hope Ma; our CFO, Mr. Julian Fan; our Chief Capital Officer and President of Wander Hotels and Resorts, Ms. Joyce Li. For today's call, our management team will provide a review of the company's performance in the fourth quarter and full year 2025. Hope will brief us on the company's strategies. Joyce will discuss our business and operational highlights, and then Julian will address the details of financial performance accordingly. We'll take your questions during the Q&A section that follows. As always, our presentation contains forward-looking statements. Such statements are based on management's current expectations and current market operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, which may cause the company's actual results, performance or achievements to differ from those in the forward-looking statements. This presentation also contains some unaudited non-IFRS financial measures. They should be considered in addition to, but not as a substitute for measures of the company's financial performance prepared in accordance with IFRS. For a detailed discussion of non-IFRS measures, please refer to our disclosure documents in the IR section of our website. Now let me introduce our CEO, Hope. Hope will be presenting in Mandarin, and our colleague will provide the English translation afterwards. Hope, please go ahead. Heping Ma: [Interpreted] In 2025, China's travel industry and the company entered a new phase of high-quality development. Over the past year, we witnessed resilient travel demand with increasingly diversified trends as immersive and experiential consumption continues to gain popularity. Amid this backdrop, we deeply dive into user needs and comprehensively optimize our travel products and user experiences. As a result, both our user base and ARPU demonstrated robust growth in 2025 with APU reaching a record high. The robust business growth reflected the ongoing enhancement of our service quality and the expanding influence of our brand. The year 2025 was a year of challenges and opportunities for us. In response to consumers' diversified and personalized needs, we continuously enriched our product offerings, facing growing expectations for premium services. We consistently improved our service quality. Amidst AI-driven technological revolution, we proactively embraced new frontier technologies with an open attitude. All these showcased our strong organizational agility and exceptional execution capabilities, further reaffirming our commitment to our user-centric mission of make travel easier and more joyful. The Chinese government sees travel as a vital pillar of national economic development. The latest 15th 5-year plan has explicitly stated the commitment to expanding the supplies of high-quality travel products and to enhancing travel service standards with the goal of establishing China as a premier travel destination from the pilot implementation of autumn and winter vacations in certain regions to the longest spring festival holiday on record. These expanding holiday arrangements underscore significant governmental support for the travel industry. In terms of demand, travel has become an essential part of people's pursuit of a better life with seasonal themes such as spring flower viewing, summer retreats, all foliage tours and winter snow activities continuously gaining popularity. In the coming year, we will remain focused on domestic market and deep dive into user needs, aiming to further solidify our leading position in the mass market. Simultaneously, we will make intensified efforts to capture growth opportunities in the outbound travel market to propel our global expansion strategy. On the operational front, we will continue to implement technological innovation and product upgrades centered on user experience while enriching membership privileges and deepening user engagement. In 2021, we tapped into the hotel management business. After several years of rapid expansion, it has now gained meaningful scale. The integration of Wanda Hotels and Resorts in 2025 marked a pivotal milestone in the development of our hotel management business. This strategic move strengthened our brand portfolio and ecosystem while substantially elevating our competitiveness and market influence. By consistently executing our strategy and leveraging our strong Internet DNA, we are well positioned to accelerate the segment expansion in 2026, laying a robust foundation for our long-term sustainable growth. Amidst the rapid advancement of AI technology, we are devoted to expanding the application of AI in our business process, further optimizing operational efficiency and enhancing user experience. Building on our user-centric value proposition, market acumen and superior execution capabilities, we are confident that we will continue broadening our competitive moat in the travel industry. Moving forward, we will continue to export our technologies and expertise to empower our partners and support the broader industry ecosystem while strengthening our commitment to corporate social responsibility to foster sustainable industry growth and create greater value for all stakeholders. Next, I will hand over the call to Joyce. She will share with you our business and operational highlights of the fourth quarter and the full year of 2025. Joyce, please go ahead. Joyce Li: Thank you, Hope. 2025 was a pivotal year of growth and achievement for our company. Beyond the steady expansion of our domestic business, our outbound travel and hotel management businesses made remarkable progress, contributing meaningfully to the overall growth momentum of the company. During the past year, we acutely grasped users' evolving preferences and precisely captured emerging demand. This enabled us to once again deliver solid growth across all business segments, highlighting our excellence in strategic execution, operational efficiency and organizational agility. Throughout the year, our accommodation business sustained robust growth momentum and achieved a record high in room nights sold. In early 2025, we identified a notable shift in users' preference towards high-quality hotels. In response to the changes, we strategically reallocated operational resources to meet this evolving demand, resulting in an approximately 5 percentage point year-over-year increase in the proportion of high-quality hotels sold on our platform. In the meantime, we prioritized enhancing user experience. We not only offer the best value for money products and services, but also provided faster and more responsive support to user requests to further strengthen our presence in the mass market. As for our international business, we continue to enhance our product capabilities by deepening partnerships with third-party providers as well as expanding our product and service offering. In addition, we leveraged our domestic user base to drive cross-sell initiatives and execute the precision marketing campaigns targeting high potential users. All these efforts collectively led to nearly 30% growth in our international room nights sold in 2025. In terms of our transportation business, it continuously demonstrated strong resilience throughout the year. Over the past year, we placed a strong emphasis on improving both user experience and engagement. At the core of the efforts is our Algorithm-driven Huixing system, which leverages advanced algorithm capabilities to provide users with viable and accessible travel solutions by utilizing a comprehensive range of transportation options. The intelligent system significantly enhances the overall travel experience for users. In the fourth quarter, we launched skiing-themed marketing campaigns and rolled out various benefits to skiing enthusiasts so as to reinforce our positioning as an experience-driven platform and further engage our user base. On the international front, we focused on improving operational efficiency by implementing a more disciplined subsidy policy and expanding our VAS offerings. As a result, we achieved a balanced growth in both volume and revenue throughout the year with volume growth of nearly 25% for 2025. As mentioned at the beginning of the speech, 2025 marked a milestone year for our hotel management business with significant progress achieved. This year, we successfully completed the acquisition of Wanda Hotels and Resorts, a company that possesses a renowned portfolio of upper upscale and luxury hotel brands with strong market presence in China. In addition to its hotel management expertise, the company is the only hotel management firm in China with proven specialization in operating scale resorts. This unique capability can help us strengthen supply chain resources in the travel industry, thereby enhancing our influence and competitiveness. Furthermore, Wanda Hotels and Resorts operates its own in-house design institute which is recognized as one of the leading hospitality design teams in China and has received numerous prestigious international awards. The team possesses strong capabilities in designing and managing large-scale hotels as well as convention and exhibition centers. Its design solutions serve not only its own properties, but also high-end hospitality projects across the industry. Following the acquisition, the Wanda Hotels and Resorts team underwent a seamless integration process, resulting in a significant boost to its vitality and optimized organizational capacity and refined strategic direction. This strategic integration has improved our brand portfolio, strengthened our market presence and accelerated the sustainable growth of our hotel management business. Regarding our eLong hotel technology platform, we remain focused on expanding our geographical footprint while prioritizing quality growth throughout the year. The platform also offers technology-enabled hotel management solutions featuring a proprietary property management system, a smart marketing solution, [indiscernible] and service robots for automated in-room delivery. By the end of December, our total number of hotels in operation exceeded 3,000 with more than 1,800 in the pipeline. Looking ahead, we are committed to further expanding our asset-light hotel management business through network expansion and ecosystem enablement. This strategic approach will position us to achieve leadership in China's hotel industry and establish a second growth engine for the company. Traffic operation has been the foundation of our success, leveraging the Weixin Mini program, we have effectively reached a broad user base across China, in particular, those in lower-tier cities. Over the past year, the Weixin ecosystem continued to serve as a critical traffic channel, where we focused on enhancing operational efficiency. At the same time, our stand-alone app, a key driver of new user acquisition, demonstrated strong growth momentum over the past 4 quarters. To attract younger demographics, we rolled out a series of innovative products and engaging marketing campaigns to enhance user mind share and solidify our positioning as an experience-oriented travel platform. As such, the average DAUs of our stand-alone app posted more than 30% growth year-over-year in 2025. Additionally, social media has played an increasingly vital role in engaging users, particularly those younger audiences. During the year, we stepped up our efforts in social media platforms to connect with younger travelers and broadened our user reach through effective and targeted user engagement. We have accumulated the most extensive user base in China's OTA industry. For the 12 months ended December 2025, our annual paying users climbed to 253 million, representing a year-over-year growth of 6%. In addition, the accumulated number of passengers served on our platform over the past 12 months continued to expand and reached 2,034 million with an annual purchase frequency exceeding 8x per user. Moreover, our annual ARPU for the year further rose to RMB 76.8, reflecting a year-over-year growth of 5.5%. Besides our MPU also maintained a growth trajectory throughout the year and increased by 6% year-over-year to 46 million for 2025. As an innovation-driven company, we fully embrace new technologies such as Gen AI to transform our business. In December, we rolled out collaboration with Yuanbao, enabling users to access to our travel booking services via the Weixin Mini program by searching travel itineraries on Yuanbao app. In mid-March last year, we introduced our AI-powered travel planner, DeepTrip, which integrates the supply chain capabilities and market insights of our platform with the resuming capabilities of DeepSeek. Over the past few quarters, we have continuously refined its functionality, incorporating social features to enhance its shareability among users. In the fourth quarter, we embedded a map tool to give users a clearer visual representation of their travel destinations. By the end of December, approximately 6.8 million users in total have utilized DeepTrip. Additionally, we extended its application to some business scenarios by integrating DeepTrip into air ticketing service. We aim to address users' prebooking inquiries as well as helping them find competitive ticket prices, which not only improved operational efficiency, but also enhanced overall user experience. In customer service, AI now covers around 80% of user inquiries, demonstrating its important role in streamlining operations and enhancing user experience. Over the past year, we have consistently advanced the integration of AI in every phase of the customer service process, which not only reduced the workload of customer service staff, but also improved overall operational efficiency. Furthermore, we have made continuous advancements in AI capabilities to enhance its precision in identifying user requests and delivering timeless, contextually relevant and human-like responses. By leveraging AI-driven solutions, we aim to further optimize customer interaction, reduce response time and maintain seamless user support as we continue to grow. In pursuit of global excellence in ESG practices, we have achieved milestones in improving our ESG performance over the past few years. Notably, in 2025, our MSCI ESG rating was elevated to the top AAA level, surpassing 95% of global industry players. In addition, we were included in the S&P Global Sustainability Yearbook China for the third consecutive year, and we were also honored with the Industry Mover Award for our remarkable progress in driving sustainable development within our sector. All these achievements have not only demonstrated our leadership in ESG performance among global peers, but also reflected our resilience and excellence in corporate sustainability in the face of market uncertainties, evolving policy landscape and dynamic social development, we remain dedicated to further strengthening our ESG practices and contributing to a more sustainable future. I'll stop here and give the call to our CFO, Julian. He will share with you the detailed financials in the fourth quarter and for the year of 2025. Julian, it's your turn. Lei Fan: Thank you, Joyce. Good evening, everyone. Over the past quarter, China's travel industry showcased remarkable resilience driven by rising demand for immersive and experiential travel experiences across both traditional holiday hotspots and newly emerging destinations. Leveraging our profound understanding of evolving traveler preferences, we delivered another quarter of robust performance, capping off a highly productive year. In the fourth quarter of 2025, we achieved healthy growth in both top and bottom line. We reported net revenue of RMB 4.8 billion, representing a 14.2% year-over-year increase from the same period of 2024. We executed targeted marketing campaigns to strategically prepare for the 2026 Chinese New Year, while upholding rigorous cost discipline to ensure financial prudence. During the fourth quarter, our adjusted net profit rose to RMB 779.8 million, reflecting an 18.1% year-over-year growth. The increase was principally fueled by the enhanced economies of scale and the optimized operations of our OTA business. Our core OTA business revenue registered a 17.5% year-over-year increase to RMB 4.1 billion during the fourth quarter of 2025. Our accommodation reservation business achieved RMB 1.3 billion in revenue for the fourth quarter of 2025, representing a 15.4% increase from the same period in 2024. The revenue increase was primarily driven by growth in hotel room nights sold, coupled with a modest rise in ADR. In our domestic accommodation business, we proactively explored diverse accommodation scenarios to capture emerging growth opportunities, including themed offerings tailored to specific demand such as winter vacation and exam season space. For our outbound accommodation business, we strengthened cooperation with third-party partners to expand product offerings as well as our destination footprint catering to growing user demand. In the fourth quarter, our ADR once again achieved year-over-year growth, benefiting from growing consumer demand for high-quality hotels and our proactive adjustment to user subsidy strategies, supported by precise and disciplined marketing strategies. Our net take rate remained stable year-over-year. Our transportation ticketing revenue for the fourth quarter reached RMB 1.8 billion, marking a 6.5% year-over-year increase compared with the same period of 2024. During the past quarter, we heightened our focus on improving user experience. We actively expanded travel supply chain and enriched VAS offerings to deliver a broader range of mobility options and ensure seamless travel experience for users. As for our international air ticketing business, it achieved balanced growth in both volume and revenue, which aligns with our long-term strategy. In the fourth quarter, our international air ticketing revenue increased to more than 7% of our total transportation ticketing revenue. Our other business segment maintained stellar growth momentum with revenue reaching RMB 916.7 million in the fourth quarter, representing a growth of 53% year-over-year. This growth was mainly propelled by outstanding performance of our hotel management business and the consolidation of Wanda Hotels and Resorts. Our tourism business achieved a revenue of RMB 777.5 million, which was largely flat year-over-year. mainly due to our proactive reduction in prepurchased business as well as softer demand for Southeast Asia and Japan. In terms of profitability, our gross profit increased by 18.5% year-over-year to RMB 3.2 billion for the fourth quarter of 2025. The operating profit margin of our core OTA business remained flat year-over-year for the fourth quarter of 2025, while the operating profit margin of our tourism business has been affected by the one-off goodwill impairment. Our adjusted EBITDA increased by 28.6% and reached RMB 1.3 billion in the fourth quarter of 2025. Adjusted net profit grew by 18.1% to RMB 779.8 million in the fourth quarter of 2025. Adjusted basic EPS for the fourth quarter of 2025 was RMB 0.33 with a 17.9% year-over-year increase compared to the same period in 2024. Service development and administrative expenses in the fourth quarter of 2025 increased by 6.8% from the same period of 2024. Excluding share-based compensation charges, service development and administrative expenses in total accounted for 18.1% of revenue in the fourth quarter compared with 18.6% of revenue in the same period of 2024. Selling and marketing expenses in the fourth quarter of 2025 increased by 22.7% from the same period of 2024, excluding share-based compensation charges. Selling and marketing expenses accounted for 32.4% of revenue in the fourth quarter compared with 30.2% of revenue in the same period of 2024. Now let's move to our results for financial year 2025. Our net revenue in 2025 achieved RMB 19.4 billion, representing an 11.9% year-over-year increase. The core OTA revenue achieved RMB 16.5 billion, representing a 16% year-over-year increase. Our accommodation reservation revenue was RMB 5.5 billion in 2025, representing a 16.8% year-over-year increase. Our transportation ticketing revenue reached RMB 7.9 billion, representing a 9.6% year-over-year increase. Other business revenue for 2025 achieved RMB 3.1 billion, representing a 34.4% year-over-year increase. Our tourism revenue for 2025 reached RMB 2.9 billion, representing a 6.9% year-over-year decrease. In terms of profitability, our gross profit in 2025 increased by 15.7% year-over-year to RMB 12.9 billion. Adjusted EBITDA for 2025 improved by 26.9% year-over-year to RMB 5.1 billion. Meanwhile, adjusted net profit for 2025 increased by 22.2% year-over-year to RMB 3.4 billion. Adjusted basic EPS for 2025 was RMB 1.45 with a 20.8% year-over-year increase. As of December 31, 2025, the balance of cash and cash equivalents, restricted cash and short-term investments was RMB 12.3 billion. We highly appreciate our shareholders' consistent support and are committed to delivering sustainable capital returns. Our Board of Directors has proposed a final cash dividend of HKD 0.25 per share, marking a 38.9% increase from last year. This reflects our commitment to enhance capital returns to shareholders. Over the past year, China's travel industry has demonstrated increasingly prominent trends towards diversification and personalization as consumers place growing emphasis on emotional value and unique experience-driven travel opportunities. Notably, the 2026 Spring Festival represented the longest holiday period on record. During the 9-day holiday, consumers divided their holidays into multiple shorter trips such as homecoming visits and vacation travel. Incremental demand from multiple trips during the festival has driven robust growth in our business volume. In addition, the pilot implementation of spring and autumn vacations initially launched in Zhejiang and Sichuan has been expanded to include more regions such as Jiangsu and Anhui. We believe this initiative will help stimulate travel consumption and provide additional momentum to the growth of the tourism industry. Such supportive government policy, combined with sustained strength in user demand, fuels our optimism about the upward trajectory of China's travel industry in the coming year. Moving forward, we will remain focused on our core OTA business, providing users with diverse domestic and international travel products while sparing no effort to enhance user experience. As we continue to improve operational efficiency in domestic OTA operations, we will actively expand our outbound business to bolster our global brand presence. Additionally, our hotel management business will enter a new phase of high-quality growth, building a solid foundation for the company's long-term sustainable development. Concurrently, we will continue to adopt technological innovations as well as deepening the integration of AI technology with our supply chain capabilities, striving to better meet user needs. Last but not least, we will strengthen our corporate social responsibility to support the healthy development of the travel industry and to create greater value for our stakeholders. With that, operator, we are ready to take questions now. Thank you. Operator: [Operator Instructions] We will now take our first question from the line of [ Xi Wei Liu ] from Citi. Unknown Analyst: Xi Wei From Citi. Congratulations to the company on a solid operating performance. I have 2 questions. The first about outbound travel. There have been many flight cancellations between China and Japan recently. How has this impacted your outbound business? Could you share the regional breakdown of your outbound markets? And what are your 2026 targets for outbound revenue growth and profitability? The second about large model and AI strategy. The company has actually rolled out some partnerships with large models so far. In the long run, as AI model portals become more important, how will the company position itself? Joyce Li: Thank you, Xi Wei for the question. The first one is in terms of outbound travel. We did observe a decline in Japan-bound travel volume given the current circumstance. However, the overall impact on our business has been limited as outbound travel accounts for only around 5% to 6% of our total transportation and accommodation revenue. And at the same time, outbound travel demand remains resilient, and we have been seeing users shift to alternative destinations rather than cancel their travel plans. During the Chinese New Year holiday, shop to middle-haul destinations within a 5-hour flight regions such as South Korea, Singapore, Malaysia, Hong Kong and Macau remain among the most popular choices, while demand for Thailand also shown signs of gradual recovery. In addition, demand for long-haul travel increased year-over-year with European destinations such as Italy and Spain seeing particular strong growth. We have been actively adjusting our product offerings and marketing focus to capture this demand shift. Overall, given the relatively small contribution of our outbound travel to our core OTA business and the substitution effect across destinations, we do not expect a material impact on our overall performance. And looking ahead to 2026, our priority remains to further improve the quality of growth by enhancing pricing discipline, optimizing marketing efficiency and strengthening cross-selling from air tickets to accommodation and other travel products. At the same time, we will continue to deepen partnerships with global suppliers to improve service capabilities and user experience. Overall, we expect the international business to continue expanding in scale and become an increasingly meaningful contributor to our revenue. Over the next 2 to 3 years, growing business volume and expanding the user base will remain the key priorities while maintaining a strong focus on improving growth quality and profitability. We expect the revenue contribution from the outbound segment to increase to around 10% to 15% with increasing operating leverage over time. And in terms of the AI cooperation, our AI strategy focused on enhancing both user experience and operational efficiency as we continue to evolve from a traditional OTA toward a more intelligent travel platform. We see AI as a core capability that helps us better understand user needs, improving decision-making and optimize service delivery across the entire travel journey. At the same time, AI-driven efficiency improvements are significantly enhancing staff productivity and optimize our cost structure, which we believe will be an important driver of margin improvement over time. On the user side, we have integrated our proprietary travel-specific AI with advanced large language models to develop DeepTrip, which supports itinerary planning, travel inspiration and personalized product recommendations. By combining AI capabilities with our real-time supply and transaction ecosystem, DeepTrip provides a practical and actionable solution and enables a seamless end-to-end booking experience. We will continue to iterate its functionalities to better support users across different travel scenarios. And as a positioning of us, I think that we have been started exploring the partnership with large AI platforms and large model ecosystems. For example, we enabled traffic [ redirection ] from Yuanbao to our mini programs and apps. So our strategy is to actively participate in the emerging AI ecosystem by positioning our platform as a trusted travel service partner with deep market insights and a strong understanding of user behaviors. Leveraging our long-term accumulation of transaction data and operational experience, we are able to provide users with more accurate recommendations and practical bookable travel solutions on our AI platforms. Users who enter through AI platforms complete their bookings within our mini programs or apps and the related user and transaction data remain within our ecosystem. This allows us to maintain direct user relationships, accumulate valuable behavior insights and continuously optimize our product services and personalized recommendations. It also enables us to strengthen user engagement and lifetime value, which remains a key competitive advantage for our OTA platform. Going forward, we will continue to monitor development of the AI ecosystem and expand partnerships where it makes strategic sense, while maintaining our focus on strengthening our product service offerings, operational capabilities and user experience. Operator: We will now take our next question from Wei Xiong of UBS. Wei Xiong: First, I want to get your thoughts on regulations because recently, an OTA peer has been under antitrust investigation. So how should we think about the implications to the OTA sector? Do you foresee any impact on OTA's business model or lead to any change in the competitive landscape? Lei Fan: Thank you, Wei Xiong, -- please go on. Wei Xiong: Yes. Sure. So second question is on the hotel management business, which is set to become our second growth engine. So I wonder, could management elaborate your strategic focus and planning for this year? And what are the key operational goals and financial metrics that we look to achieve in 2026 and in the medium term as well? Lei Fan: Okay. Thank you for the question, Xiong, Wei. In terms of the investigations, as you mentioned, we closely monitor regulatory developments recently. At this stage, we have not observed any material changes that would impact our day-to-day operations. Tongcheng has always operated with a strong focus on compliance and fair cooperation with our partners. We believe a well-regulated market environment is beneficial to the long-term healthy development for the company and also for the industry. We will continue to adapt our business practices as required to ensure full compliance in the company. Overall, we remain focused on executing our strategy and delivering sustainable growth and profitability improvement. In terms of the hotel management plan, I think Joyce will have her words. Joyce Li: Thank you, Xiong, Wei. Actually, following the completion of the Wanda Hotels and Resorts acquisition, the integration has progressed smoothly and is better than our expectations. We have achieved rapid organizational alignment, revitalized organization and teams and further refined the strategic direction of the business. Overall, the post-acquisition integration has been very successful. On the synergy front, we are beginning to see encouraging early results. The addition of the Wanda's upscale and luxury brands has enhanced our overall brand portfolio and strengthened our positioning in the middle to high-end segment of our hotel management business. At the same time, the integration has enabled better resource sharing across business development, operations and membership, which is gradually improving operational efficiency. It also further reinforced Tongcheng's presence within the accommodation supply chain. From the other perspective, Tongcheng also empowers Wanda Hotels and Resorts through our technology capabilities. By providing standardized system tools and digital solutions, we help improve internal operational efficiency while reducing research and development efforts and lowering system maintenance and third-party service costs. From a financial perspective, the acquisition has already delivered a positive contribution at the operational level as Wanda Hotels and Resorts is an established hotel management company with a solid operating track record. The consolidation has enhanced our revenue scale, optimized the business mix and strengthened the earnings visibility of the segment. As we move forward, our development strategy will remain disciplined with a focus on balancing scale expansion with operational efficiency and healthy returns, ensuring sustainable and high-quality growth of the business segment. With continued expansion of scale and improving operational efficiency, together with the contribution from Wanda Hotels and Resorts, we expect the hotel management segment to maintain strong revenue growth with a further improvement in profitability from 2026 onwards. Thank you. Operator: We will now take our next question from the line of Brian Gong of Citi. Brian Gong: Two questions here. First is, how do you -- how is the travel consumption trend for the industry in the first quarter considering recovery on hotel ADR. Do we still expect teens level on room nights growth this year? Second question is that recently, [indiscernible] has been under government's investigation. Do you think this will impact their cooperation with us and their stakeholding on us? [indiscernible] is adjusting their hotel business to comply with government's requirement. How will this impact the industry and us? Lei Fan: Okay. Thank you for the questions, Brian. In terms of the first quarter's performance and also the industry outlook, actually, during the Chinese New Year holiday, as we mentioned in the prepared remarks, the China travel market continued to demonstrate very solid demand. According to the Ministry of Transport, national passengers throughput during the 9-day Chinese New Year holiday reached a throughput record 8.2% year-over-year growth during the holiday with decent growth for both long-haul and short-haul travel. Our passenger throughput of railway and airline increased by around 10% and 7% year-over-year, respectively. Meanwhile, according to the industry statistics, overall hotel ADR increased during the Chinese New Year holiday among all segments. With demand for family reunions concentrated in the pre-holiday period, we observed a pickup in passenger throughput during the latter part of the Chinese New Year holiday this year. In response, we promptly adjusted our operational resources, strengthened supply coordinations with our partners and enhance the targeted marketing efforts to capture the rebound in travel demand and improve conversion efficiency in the latter part of Chinese New Year holiday. So as a result, we continue to outperform the industry in the first quarter and also during the 9-day Chinese New Year holiday with especially strong momentum in our accommodation business. Average daily room nights sold increased by 30%. Specifically, room night growth for 3-star and above hotels significantly outpaced that of lower-tier properties. This reflects our ability to respond effectively to changing user preferences as more travelers place greater emphasis on higher quality accommodation experiences. As a result, our hotel ADR in quarter 1 maintained a positive trend during the period and once again exceeded the industry average. For transportation business, we continue to focus on improving monetization, while average daily air ticket volume was broadly in line with the overall market. And also for the room nights growth in the full year of 2026, actually, I cannot provide a very clear numbers here because of the short booking window. But as we mentioned, looking into 2026, we continue to view the long-term fundamentals of China's travel market positively. Consumer preferences are increasingly shifting towards experiential-oriented spending with growing interest in event-driven and themed travel such as concerts, exhibitions and outdoor activities. At the same time, travel is becoming more integrated into everyday lifestyle, supporting more frequent and diversified travel demand. In addition, supportive policy measures aimed at expanding domestic consumptions and promoting high-quality tourism development provide a favorable backdrop for the whole industry. And also for the second question about the investigation, actually, we don't monitor any change on the cooperation with Trip and also, we don't monitor any change of the shareholder structures or potential change of the shareholder structures. So currently, as I mentioned in previous question, we're just focusing on our own execution and long-term competitiveness improvement. So actually, our strategy remains very consistent, focusing on enhancing our user value, improve the ARPU, strengthening our product and service capabilities and deepening cooperation with our suppliers through a mutual beneficial approach. And also, at the same time, we will continue to take a disciplined and prudent approach while monitoring the industry regulatory development. Thank you for the question. Operator: We will now take our next question from Yang Liu of Morgan Stanley. Yang Liu: I have 2 questions. The first one is also related with AI. Could management elaborate more about the DeepTrip's contribution to the business, especially on the business -- overall business volume and also cross-selling side? And my second question is regarding the marketing intensity this year, given the geopolitical risk in both China and Japan and also Middle East this year, will management adjust the outbound business marketing intensity? Yes, that is my second question. Joyce Li: Thank you. The first question is concerning our DeepTrip. As I mentioned, DeepTrip is our AI-driven travel planner that use the reasoning power of DeepSeek and our platform supply chain advantages to create personalized travel itineraries. Since launch, DeepTrip has served about 7 million users with orders placed through the platform steadily increasing over the past few months. Over the past quarters, we continue to enhance DeepTrip with the goal of strengthening user awareness and building long-term trust. We have been continuously upgrading its user-facing capabilities to support more comprehensive travel planning. Key enhancements include the integration of trend transfer data to enable seamless multimodal itineraries. The addition of social sharing features to improve engagement as introduction of a map tool in the fourth quarter to provide a more intuitive visualization of travel plans. In addition, DeepTrip has been embedded into our air-ticketing service to help users address pre-booking inquiries and identify more competitive fare options, delivering a more seamless booking experience. Beyond user-facing applications, we have also extended DeepTrip into different business scenarios to improve operational efficiency. We integrated customer service agent capabilities into DeepTrip to respond to customer inquiries directly within DeepTrip and guide users to human support when needed. For corporate clients, we piloted a travel booking suggesting tool customized according to travel profiles, business travel policies and past bookings. In the future, DeepTrip will continue to serve as a platform for understanding and addressing users' comprehensive travel needs across diverse scenarios. We will further leveraging our AI capabilities across various business segments to provide valuable solutions to users, thereby strengthening our competitive advantages. Additionally, we have begun the cooperation with [indiscernible] to acquire more traffic. We're also actively exploring potential collaborations with our AI agent platform to further broaden our reach and engagement opportunities. We remain committed to leading AI innovation, continuously increasing the investments in this area and delivering cutting-edge user-focused features to elevate our user travel experience. And in terms of the current circumstance in terms of outbound business, we have seen considerable growth potential in the outbound tourism market. As the travel habits evolve, more travelers are eager to explore the international destinations. The number of outbound tourists is still significantly lower than the domestic travelers, revealing a substantial opportunities for expansion in this area. At present, we believe that there are only a limited number of Chinese OTA players have the capabilities and resources to actively drive outbound business. This situation place us in a favorable positioning facing relatively low competitive pressure and allowing us to fully capitalize on the growth potential of the market. Again, our strategy and confidence are anchored in the long-term growth prospects of China's outbound industry and our competitive advantages. While we remain agile in our short-term tactics in response to the market conditions, I think our business momentum remains unaffected. Thank you. Operator: In the interest of time, we will take our last question from Thomas Chong of Jefferies. Thomas Chong: Congratulations on a solid set of results. My first question is about our future growth driver and the take rate trend for accommodation and transportation. And my second question is relating to margin. How should we think about the 2026 margin trend as well as the margin driver in the future? Lei Fan: Thanks for the question, Thomas. For growth, actually, the company's focus remains on achieving a high-quality growth in 2026 by balancing scale expansion with operating efficiency improvement, while continuously enhancing our user value and ARPU. So in the first quarter and also the second quarter, we will prioritize healthy and sustainable growth across our core OTA segments, supported by improved operational efficiency and more refined resource allocation. At the same time, we will continue to strengthen our competitiveness positioning and capture growth opportunity to future expand our market presence. Within the core OTA business, we anticipate that the accommodation business will grow faster than transportation business through the whole year. For accommodation business, we believe that the growth will be driven by volume expansion and ADR improvement, as we mentioned a lot of times. Our volume is expected to continue outpacing the market growth, while our ADR will benefit from the ongoing upgrade in hotel star mix driven by shifts in user preference. So we think it's enough to support a very nicely growth for accommodation business by these 2 reasons. So this year, in terms of the take rate of the accommodation, we expect that the take rate may be stable year-over-year at 2025. For transportation business, volume growth will be in line with the market and still one of the reasons of the revenue growth for transportation. While our take rate improvement driven by cross-sell and VAS will continue to contribute to the revenue growth of the transportation segment. Also, we expect the hyper growth for other revenue, mainly due to Wanda consolidation since the middle of October last year and the hyper growth of our original hotel management and PMS business and also our Black Whale business, the membership business. In terms of the profitability, as we promised, the margin improvement is one of the very important strategic priorities for the company. For the reasons, one, for our core OTA business, the improvement in operational efficiency will continue to be an important driver of profitability over time. In particular, we are leveraging AI technologies to enhance both customer service automation and R&D efficiency, which help improve staff profitability and overall operating efficiencies. For the development of our hotel management business, including eLong Hotel Technology platform and Wanda Hotels and Resorts, we will continue to support its high-quality expansion with a near-term focus on scaling the business, while the return profile is expected to improve progressively as the business matures. For our international business, we will maintain a very prudent approach as we continue to build the foundation for future growth and cultivate the company's next growth engine over the coming years. Last, in terms of the marketing investments, our marketing dollars may fluctuate slightly depending on market opportunity. For example, in quarter 4 last year and quarter 1 this year, we identified strong early booking demand for the 9-day Chinese New Year holiday period and therefore, increased our marketing investments to capture early demand and gain market share. At the same time, we will continue to strengthen ROI management across different marketing channels. So overall, we will continue to balance growth opportunities with disciplined cost management while focusing on improving operational efficiency across the business and improve our margins. Thank you. Operator: That's the end of the question-and-answer session. Thank you very much for all your questions. I'd now like to turn the conference back to Ms. Kylie Yeung, for closing comments. Kylie Yeung: Thank you. We are closing the call now. If you wish to check out our presentation and other financial information, please visit the IR section of our company website. Thank you, and see you next quarter. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.
Operator: Greetings. Welcome to Xiaomi's 2025 Annual Results Announcement Investor Conference Call and Audio Webcast. Today's conference will be recorded. If you have any questions or objections you may disconnect at this time. [Operator Instructions] Now we will have Mr. Xu Ran, General Manager of Group Investor Relations and Capital Markets Department to start. Ran Xu: Welcome, everyone. Welcome to the investor conference call and audio webcast for the company's 2025 annual results. Before we start the call, we would like to remind you that this call may include forward-looking statements, which are underlined by a number of risks and uncertainties and may not be realized in the future for various reasons. Information about general market conditions comes from a variety of sources outside of Xiaomi. This presentation also contains some unaudited non-IFRS financial measures, which should be considered in addition to, but not as a substitute for the company's financials prepared in accordance with IFRS. We have William Lu, Partner and President of Xiaomi Corporation; and Mr. Alain Lam, Vice President and CFO of the Corporation to talk to us. Mr. Lu will share recent strategic and business update. Thereafter, Mr. Lam will review the company's financial performance of 2025. And then after that, we will have the Q&A. Mr. Lu, please. Weibing Lu: Good evening. Thank you very much for coming to the 2025 full year call. Now this evening, I'll be talking about 3 points. First of all, review our main achievements in 2025. Second, share of breakthroughs in hard-core tech, in particular, in AI and embodied intelligence. And thirdly, we'll look ahead for the strategic direction focus in 2026. First of all, in 2025, some of our outstanding achievements. Well, in the year, our Xiaomi Group maintained high growth with both annual revenue and net profit reaching all-time highs. Total group revenue reached RMB 457.3 billion, surpassing the RMB 400 billion mark for the first time, up 25% year-on-year. Adjusted net profit reached RMB 39.2 billion, up 44% year-on-year. By segment, first of all, Smartphones. According to Omdia, in 2025, our global smartphone shipments ranked top 3. Market share was 13.3%, remaining global top 3 for 22 consecutive quarters. In Latin America and Southeast Asia, shipment ranking rose to second. In Europe and Africa, third. According to third-party data in Mainland China, our smartphone sales ranking rose to second. On premium models. In 2025, premium models in Mainland China accounted for 27.1% of total smartphone sales, up 3.8 percentage points. In RMB 6,000 to RMB 10,000 price bracket, our market share rose by 2.3 percentage year-on-year. We solidified our high-end base domestically and are making continuous breakthroughs in the RMB 6,000 to RMB 8,000 ultra-high-end market. By end of February 2026, we launched our first Leitzphone for global markets, priced at EUR 1,999, a new milestone in our overseas premium strategy. We'll continue achieving top-tier pricing in mature international markets and elevate our premium overseas sales to new heights. For IoT business in 2025, revenue surpassed RMB 120 billion for the first time, reaching RMB 123.2 billion and 18.3% year-on-year growth, hitting all-time high both domestically and internationally. For the home appliances revenue, it reached 23% plus growth with record shipments. Wearables ranked first globally, TWS earphones ranked second. Tablet shipments grew 25.2% year-on-year, ranked fifth. Our AI glasses released in June '25 ranked third globally and first in China. We continue to drive full category premiumization at home and abroad with overseas high-end products, achieving stellar performance. On premium strategy, in '25, our tech home appliances entered the European market already covering Spain, France, Germany, Italy and more. For autos, Xiaomi Auto delivered 410,000 units in 2025, far exceeding the 300,000 units target set at the year's start. February 13, '26, cumulative deliveries surpassed 600,000, and we are fully committed to delivering 550,000 units. In March 19, we officially launched a new generation SU7. It features major upgrades inside and out, including across the electric powertrain chassis, electronics architecture, et cetera. Within 34 minutes of launch, locked orders for SU7 exceeded 15,000, surpassing 30,000 orders after 3 days. For this year's MWC, we also showcased our Vision GT concept car, not just a concept car, this is Xiaomi Auto's latest exploration of design innovation built on hardcore technology. We are the first Chinese brand invited to participate, and it represents recognition by the world's top simulation driving platforms. For China's auto industry, it shows that in terms of design and innovation, Chinese automakers can already compete on par with the world's best. For hardcore tech, in '25, our R&D investment exceeded RMB 33 billion. For '26 we plan to invest over RMB 40 billion with more than RMB 16 billion for AI, embodied intelligence and other innovation fields. These investments build our solid product capability defenses. And for AI in 2025, we achieved breakthrough progress. For AI, it is an era of truly useful AI, undergoing historical leap from usable to truly useful, a paradigm shift from single tasks to complex tasks processing, from passive to active planning, from tool attributes to ecosystem attributes, and for us with rich terminal products and use cases across smartphones, cars, home appliances, IoT, real data value of AI far surpass the single category companies. Two, our foundation large models enter the leading global open-source tier. In March of the year, we released 3 models, Xiaomi MiMo-V2-Pro, MiMo-V2-Omni and MiMo-V2-TTS, completing our technical foundation for the Agent Era. MiMo-V2-Pro surpasses 1 trillion parameters, supporting 1 million token context windows and ranking 8th globally in Artificial Analysis Large Model Intelligence Index, fifth by global brand. During closed beta and public launch, these models rank first in weekly calls and held first place for many days on OpenRouter, single days as much as double in second place. And we will keep upgrading our foundation models as we move towards general intelligence. Three, we are poised to lead AI in the physical world, deep integration of AI in the physical world as the next frontier. We control over 1 billion hardware access points for its ecosystem. In March '26, our phone AI Agent, Xiaomi miclaw entered limited testing. We're the first OEM to attempt deploying [ launch ] Lobster on phone terminals, exploring the delivery of true AI phone and ecosystem to users. For auto, the new SU7 is equipped with our XLA Cognitive Large Model, achieving mall parking, navigation, complex scene understanding and voice control, improving both driving and experience. For SU7 Ultra, it's equipped with super shell AI, a smart cockpit and advanced AI. For the home in November '25, we launched our Miloco smart home solution, giving smart homes eyes and brains and hands and feet for the first time, a pioneering real world application of Xiaomi MiMo, laying a new vision for next-generation smart homes. Fourthly, for our AI is now Xiaomi core innovation engine in '25 with our tech-forward, about 2/3 of the winning projects used AI, reimagining work across fundamental materials, chipsets and OS, intelligent driving, tech home appliances and more, backed by China's strong AI industry. The coming decade belongs to China. And also Xiaomi is well positioned in person, car, home ecosystem. We'll invest RMB 60 billion in AI over the next 3 years. And in this era, we are confident that we'll place a new trade for Chinese AI. For embodied robotics, it is the ultimate integration platform for AI chips, OS and manufacturing capabilities, a high barrier field. In 2026, we launched a haptic-driven precision grasping, fine-tuning model, core tech for robotic dexterous hands. Shortly after, we open-source a Xiaomi Robotics VLA large model, Xiaomi-Robotics-0, achieving several new SOTA results. In March, Xiaomi embodied robot began internship in our car factory, achieving 90.2% deal size site simultaneous installation success for self-tapping nut workstations, meeting production line cycle times as quick as 76 seconds with 3 hours of auto operation. These are just starts. Over the next 5 years, we believe large numbers of embodied robots will work in Xiaomi's factories. And robots will break brown boundary between virtual and physical worlds. But there are challenges such as cost increase, et cetera. In the short term, there may be some pressure on our business. But on the other side, we will be steadfast in our strategy so that we will continue to have breakthroughs in AI, chips, OS and embodied intelligence. We are committed to scaling our global business model and advancing Chinese tech worldwide. This person, vehicle, home ecosystem is not just a product combination, but the platform for understanding users' full scenario data. We'll firmly seize the opportunities of AI era, and we are filled with endless possibilities and imagination. Alain Lam: Well, thank you, President Lu. As shared by Mr. Lu, in 2025, we have achieved historical leap. Our total revenue reached a record high of RMB 457.3 billion, setting a company best. This year, we achieved a year-on-year increase of 25%. Revenue in the fourth quarter is a new single quarter record. Overall, gross profit margin was 22.3%, up 1.3% year-on-year, historical high also. The second half of 2025 was more challenging for the first. For the full year, our smartphone times AIoT segment revenue was RMB 351.2 billion, up 5.4% year-on-year, which is also a new annual high. The smartphone times AIoT segment gross profit margin also reached a record 21.7%, up 0.5% year-on-year. For smartphones, for the year, revenue was -- sorry, RMB 186.4 billion, accounting for 40.8% of total revenue. In '25, our global shipments reached 165 million units. Our high-end strategy had significant results of continued product strength enhancement. Third-party data shows that in 2025, our high-end smartphone sales in the Mainland of China accounted for 27.1% of our total smartphone sales, up 3.8% year-on-year. In that, RMB 4,000 to RMB 6,000 price segment, our market share reached 17.3%, up 0.5% year-on-year. For RMB 6,000 to RMB 10,000 segment, our market share was 4.5%, nearly doubling year-on-year. According to third party in 2025, our global smartphone shipment volume ranked top 3 with market share 13.3%, maintaining a top 3 position globally for 5 consecutive years. In 58 countries and regions, our smartphone shipments ranked top 3. And in 70 countries and regions, we ranked top 5. Despite rising memory prices in 2025, our smartphone gross margin remained relatively healthy at 10.9% for the year. For IoT, for this year, our revenue and gross margin both performed remarkably. 2025 revenue from IoT grew rapidly by 18.3% year-on-year to RMB 123.2 billion, a new record. And both for domestic and international sales, it was at all-time highs, thanks to product structure optimization and improved product strength. For gross profit margin of IoT, it was a record high of 23.1%, up 2.8% year-on-year. By category, large smart home appliances performed exceptionally well with revenue up 23.1% year-on-year, a record high. Our wearable devices maintained rapid growth and an industry-leading position. Our wearable band ranked first in global shipments and TWS earphones ranked second. Tablet products continue to grow fast, ranking fifth globally with shipments up 25.2% year-on-year. Internet services. We continue to expand our user base. In December '25, our global MAU reached 750 million, up 7.4% year-on-year. Of these, Mainland China MAU reached 190 million, up 10.1% year-on-year. In 2025, our Internet service revenue hit a record RMB 37.4 billion, up 9.7% year-on-year. And of this, just in the fourth quarter 2025 alone, Internet service revenue reached RMB 9.9 billion. Throughout 2025, our Internet gross margin remained relatively stable at 76.5%. Advertising continued to drive Internet business growth with annual revenue of RMB 28.5 billion, a record high. Overseas Internet service revenue grew by 15.2% to a record RMB 12.6 billion, accounting for 33.8% of total Internet service revenue. Next, on EVs. Our EV and AI and innovation business segment, annual revenue for the segment reached RMB 106.1 billion, surpassing RMB 100 billion in less than 2 years, up over 200% year-on-year, accounting for 23.2% of the group's total revenue. Of this, Smart EV sales revenue was RMB 103.3 billion, with other related revenue at RMB 2.8 billion. For the year, gross profit margin for Smart EV and AI, innovation business segment was 24.3%, up 5.8% year-on-year. In 2025, the segment achieved positive annual operating profit for the first time, recording an operating profit of RMB 0.9 billion. We delivered a total of 411,082 new vehicles in 2025. In the fourth quarter alone, 145,115 new vehicles were delivered, a single quarter record high. The average post-tax unit price for the year was RMB 251,171, up 7% year-on-year. Next, over the past 5 years, our cumulative R&D expenditure was RMB 105.5 billion, up 37.8%. '25 alone, R&D expenditure was RMB 33.1 billion, up year-on-year, and we estimate starting from 2026, our cumulative R&D expenditure over the next 5 years will exceed $200 billion. For net profit in '25, the group's adjusted net profit was RMB 39.2 billion, a record high and up 43.8% year-on-year. For CapEx for '25, our CapEx reached RMB 18.2 billion, up 73% year-on-year. And of this, Smart EV and AI innovation accounted for 66% and over. We continue to enhance our shareholder value and we actively repurchased shares on the open market. In '25, our share repurchase was approximately HKD 6.3 billion. Since early '26, our share repurchase totaled about HKD 4.7 billion. In January '26, we announced an automatic share repurchase plan for a cap, with a cap of HKD 2.5 billion, demonstrating our confidence in our company's long-term future. We actively practice sustainable development. In low carbon initiatives in 2025, our group purchased more than 40 million-kilowatt hours of green electricity, over 10x of last year. In '25, our [ PV ] electricity usage in our auto plant exceeded 13 million-kilowatt hours, reducing carbon emissions by nearly 10,000 tonnes annually. On ESG ratings in '25 for CDP Climate Change and Water Security Survey, Xiaomi received a management level B score. Also, in March '26, we achieved our best-ever score of 81 in EcoVadis gold medal, marking another recognition of our ESG efforts. We will continue to follow a robust and enterprising operating strategy and look forward to an even greater achievement for 2026. Thank you so much. This ends my report for this evening. Next, we can have the Q&A session. Operator: [Operator Instructions] Morgan Stanley. Andy Meng: Greetings both. First of all, congratulations for 2025, revenue and profits have reached new record highs. I have two questions, one on memory. We see that memory prices have been rising significantly. Investors, what's most concerned about this for the segment of smartphones. And we noticed that there are already some smartphone selling price hikes in order to offset this memory prices hike. But your smartphone sets are still the same in terms of pricing. So perhaps in supply chain management and in inventory, you are better than your competitors so that in this challenging situation, you exceed your competitors in performance. Perhaps Mr. Lu can explain to us for your new thoughts concerning smartphones and what are your responses to this year's challenges? Weibing Lu: Right. For memory, yes, for each quarter, you have always been caring and concerning about this. And in different occasions, I have also talked about my views on this. In the past, I have said that this is a period that we are going through, and we have to look at 2027. And there may be high price hikes and we have done our work in this regard. But on the other hand, my own feeling is that the cycle of hikes may be longer than I had expected. First of all, there is the AI-led demand. And also for memory, the cost hikes magnitude, I think, is going to be higher and much higher than I had expected. My expectation in the industry was already forward, but I think it's going to be even higher in terms of price hikes for this. So it is longer cycles and the price hikes is going to be higher than I had expected. So for all the consumer items, it is going to impact greatly, not only for smartphones, which we are more concerned about. But for some categories, for some smaller capacity, categories with smaller memories, units, there is a situation where there is a cut in supply even. So this is an actual situation that's facing us in reality. The impact of that, we have a calculation which is very simple, and that is we look at the memory and it's part of the product. The more it is as a part of this product category, the more it will be impacted but less -- of course, it will be less impacted. And in our categories, smartphones, tablets, notebooks, they are more in terms of proportion. But on the other hand, there are some, for example, high-end smartphones. Relatively speaking, it is less for memory part. So for a company, if the products will have more memory as a part of their product then, of course, the impact will be higher, less will be less impact. So this is a very simplistic way of calculation I'm looking at it. In the past 2 weeks, looking at the memory price hikes, we already see some competitors raising their mid-priced smartphone prices. And I fully understand that. I think for annual smartphone manufacturer, if they do not unload to the consumer, it is very difficult to sustain this kind of price hikes. But I think it is inevitable for this. And for Xiaomi, our pressure is very, very large indeed. But as I say, we will try our very best to digest this to protect the consumer. And when we can do this no more, we will have to hike our smartphones prices, and we hope that our consumers and our customers will understand this. Yes, we are slower in price hikes, but it doesn't mean that we are immune from it. There are some competitive advantages for Xiaomi, which I can tell you. So for example, in home appliances, the category, for this category, it will be less impact. For smart cars, EVs, it would be higher because the memory part of that is higher. But on the other hand, compared to the proportion in smartphones, it will be lower. So with our variety of product segments, this is how I see it. And through this, I hope we will be able to better resolve this problem. For smartphones, tablets and notebooks, we are a company -- we are globally leading and also in EVs as well in the past few years. And for the memory suppliers around the world, we have built a very good relationship, mutual trust, and we have long-term supply contracts. So at this point, I do not feel that we have any risk of nonsupply or stopping of supply. So this is our competitive advantage compared to our competitors. The third point is that in my previous expectation, I was more pessimistic about memory price hikes. And therefore, I have been making more aggressive preparations. So in that case, our inventory sufficiency was higher. But overall speaking, for our terminal products cost, it is highly impactful. So this short-term pressure is definitely in existence, it is there. Andy Meng: Mr. Lu, this is very clear. My second question is about our vehicles. For the new generation of Xiaomi vehicles, there had been a successful announcement. And in the investor interaction, I noticed that some investors feel that we -- that Xiaomi doesn't -- no longer talk about or announce the data, but only for the unit data, well, and this is more negative. But for Xiaomi, what is the sale? I think it's going to be stable and it will be positive, and this is how I see it. Can you talk about these 2 investors' point of view? Unknown Executive: Andy, let me just answer that question. Well, for the announcement of sales from the users side, we see some phenomena. The first phenomenon is that for the first 3 days of sales, we already have achieved significant sales, 34 minutes, 150 locked-in sales. And after 3 days, it was over 30,000 units sales, and we have lived up to our commitment. And that is for the delivery starting from the fourth day of launch, we have already started delivery because we have already made preparations for the manufacturing of cars. And also, with some of the problems of the previous batch, they had to wait for a long time and before we could deliver to our users, those who have locked in their purchases. So we have absorbed our experience, and we had a new iteration. Well, as you have mentioned, why do we only disclose our locked-in contracts. We think that this is more fair. So it is not about preordering or big ordering. It is locked orders. Locked orders are solid, and that is the buyers are going to take delivery of these vehicles. And this governs our manufacturing cycle as well. So we think that's locked contracts or purchase is a fairer way of looking at it, and that is why we made the change. And in the industry, I'm sure people have their different practices, but this is what we maintain is the right way. So this is the first point. And also using this particular opportunity for our -- concerning the locked in contracts, let me share some information. So for the first point, it is that a lot of investors have asked about the locked orders. Buyers, are they from our previous buyers or new buyers or most of them we know are new buyers. For the locked orders, they come from new buyers. So it is not the original owners who are changing to -- changing from -- [ 2 Euro ] cars. For iPhone, about 50%, it is first generation. And for 60% of the new buyers, they are iPhone users. So for our locked contracts, the progress is faster than our first-generation users. So compared to the previous numbers, these locked orders are bigger. And also, you are very complementary of our allocation. About 60% of them are using the paid choice, the paid options. So compared to the previous generation, we think that the penetration is better. For example, female buyers, iPhone users penetration and also choosing different options of colors, for example, all these have been performing better in penetration than the last generation, the previous generation. Thank you for your question. Operator: Timothy Zhao from Goldman next. Timothy Zhao: I have 2 questions concerning AI. First of all, concerning in the past 2 years, there are some models and including the foundation models. So for AI capabilities in the ecosystem, what is our capability? And also for miclaw and also for the IoT, how is miclaw positioning? And how do we see it done with IoT? And how is miclaw going to be significant? And also, I would like to know how we consider AI in its users and also developers and internal to Xiaomi and its commercialization? In LLM, what are some KPI considerations for your team? You once said that in the next 3 years, there's going to be a RMB 60 billion expenditure? And how is this on OpEx and CapEx, the allocation, please? Unknown Executive: For 2023, we have used a lot of energy to consider our AI strategy going forward. So we have faced it. First of all, the infrastructure for AI, algorithm, et cetera. And out of the infrastructure, we had an exponential growth in terms of its application. And last year, we had already said that '26 was an explosive use of AI era. So from virtual, AI has moved into the physical world. And this is true to my earlier prediction. And with this prediction coming true, we will be developing our AI/LLM. We started investing in '24 and in 2025 in [ MiMo ] LLM or large language models, we have made a lot of progress. And we have been very clear last year in saying that this year, '26 will be the year of explosive use of AI. And last year, we were more considering about agents, AI agents. So in individual terminal, how can AI have a bigger usage so that people are able to do things that they were not able to use before. With OpenClaw, it's allowed us to very quickly roll out miclaw in testing. So at present, from the responses of our testing, it is very, very positive. And going forward, there is a huge market, and that is AI going to the physical world. So it will be in driving, in robots, in humanoids, et cetera. So in this area, Xiaomi has already made the deployment. And at the end, I think it will have to serve our entire ecosystem of Xiaomi. So this is a direction. This is a large direction, and we will continue to strategically follow that. And also, you mentioned miclaw. And for miclaw, this AI agent of Xiaomi, this is our own developed and it is an agent and it is going to test our modeling capability and also our limitation, and also, it's going to test how we are able to deeply integrate and also our data capability. And at Xiaomi, we will do our own integration with our own data from our users. So we will also be using cloud-based data. And also there will have to be certain integration into the system and also safety, we will be good in protecting safety. So for Xiaomi miclaw, it is going to be the prototype for the future AI agent. Now this is still early on. We do not have some specific commercialization model. And I don't have any KPI for the team yet because only when it is mature will the team has a certain KPIs. So as for the RMB 60 billion that you talked about, yes, my colleague will answer that question. Unknown Executive: That's right. For the [ RMB 16 billion ] and 3 years -- RMB 60 billion, it is -- it includes R&D and also CapEx. But of course, in R&D, it also includes the distribution from previous year's R&D. So it is our present period R&D and also our previous R&D and also CapEx. So there will be 3 parts. If you look at the 2026 [ RMB 16 billion ], most of it is R&D expenses, the present period. So it's a 70% present period R&D. So if it is CapEx plus the previous years, it would be the rest. So the next 3 years, every year, our CapEx will have some previous CapEx, which had been detained into this year. So it may be lower than the 70%. So it is for this period as well as a portion from the previous year's CapEx or amortization from previous year's CapEx. Operator: China Capital, Wen Hanjing next. Hanjing Wen: I have 2 questions. First question concerning our IoT business. We see 2025 IoT performance have been very, very good from revenue and also in progress and advancement. So for this year, there are 2 concern points. They are positive. And for home appliances, new highs reached. But some investors are concerned that with the domestic situation, what do you say the economy ramping down a bit? How do you see this? And also, what about IoT going overseas? What is the planning? And secondly, for vehicles in 2025, overall, for EVs, it is already profitable. And also for future planning for the entire year, how do you see profits for the entire year for vehicles? Weibing Lu: I'll be talking about IoT, and then Alain will answer the other question. For IoT for this business, because we have a number of different categories. I'll be talking about China market and overseas markets. For China market, I think there is an opportunity, and that is premiumization of IoT. For IoT business for us, even though it is very large scale, but our ASP is low. Last year, we had major progress made, but it is still far from our goal. Our watches, our, for example, our hairdryer, et cetera, I think still the average price is relatively low. So in R&D, with our investment in that, I think this year, we are going high end. I think there will be a lot, a lot of positive progress. So I think this is a huge opportunity. So for major home appliances, for our washing machines, our fridge, and it is 4 points. And for aircons, it is 10 points. So for ESG, I think there is still room for pricing. And for our IoT business, overall, last year, it is already at a very high level of AIoT as we will continue to do so. As for overseas business, I think there is a huge space for development because our market has always been the -- in China. If going to the North American market, it's going to be 3x of our original market size. And it's -- so that is to see it's going to be 6x if we reach our potential. It's going to be 6x or at least a few times our domestic China market. So there is a lot of empty room for us to fill in terms of overseas markets. We will send people. We will send our products. And with our IoT development, there had been a lot of overseas and information and testing, and there is huge room for overseas growth and development. So for our high ASP products, this is a high area of growth potential. So this is our overseas plan. Last year, it was 4.5 shops and it's going to grow to 10 or 10,000 shops. And I was in London in Xiaomi Home, I was able to observe that most of the products were high-end product selling. So you think that actually, our categories are very full in range, and these overseas markets, for example, in the U.K., they are selling at high end. So I think there is huge room for development in the overseas market. For the vehicle question, last year in 2025, we have delivered over 410,000 units, far exceeding the 300,000 unit target we set at the year start. So at the year start for this will be 550,000 units for this year's delivery target for 2026. So '26 compared to '25, there is growth. But for the overall situation in '26, there is pressure. So for our expectations, et cetera, we are still very confident that we'll be able to reach our target. As for our target profit. You would know for this category, it is AI and new business segment. So that would include our AI investment and also new development areas. So you cannot just look at the segment as just an auto segment. It includes other new businesses in this segment. But at present, the new businesses are still in the investment stage. As I've mentioned, in AI, for example, this year, we will continue to increase our investment in AI, including in robots. Robotics, we'll increase our investment there as well. So you have to look at 2 areas. One, auto in this segment. And secondly, AI plus new business investment. So for this particular segment, last year, it performed very well. For this year, as auto growth and also in other areas, the kind of fruit that we're going to pick from them, the results, this is going to be an encouraging segment. Operator: Kyna Wong, Citibank. Hiu King Wong: Can you hear me fine? Unknown Executive: Yes. We can. Hiu King Wong: I have 2 questions. First of all, I would like to know for the Middle Eastern situation recently, I don't know whether for the overseas business, including IoT, handsets, has it impacted you? Are there certain logistics and also cost of raw materials had presented issues to you? And also another question concerning your gross profit margin. For this year, for handsets or smartphones, is there a principle, let's say, under what kind of profit level will you be keeping it or making certain choices for adjusting the price. So for smartphone handsets to protect your profit margin, gross profit margin? And also for vehicles, there may be some pressure, as you have mentioned before. And how do you think this will be making your performance better than your competitors? Are there certain safeguards for profits and also AI, IoT because premiumization is a strategy of yours, you did say that for this kind of premiumization. What is your plan for AIoT, please? Unknown Executive: First of all, for Middle Eastern conflict, it's nothing that we want to see, certainly. I hope that there will be a solution for it because it's going to impact industries and economy around the world, it's going to impact big way. As for Xiaomi business, the Middle Eastern overall situation, for revenue from that part, it is not so much -- it is only in the single digits as a contribution to our profit. So in terms of the market from the Middle East, it's a small proportion of our overall at Xiaomi. So it is controllable from that regard. But at the same time, we also see that the oil situation from the Middle East, we already see some pellets, plastic pellets, and the raw materials is influenced or impacted. But overall speaking, it is still controllable. So that's for your first question. Second question, concerning cars, IoT and also smartphone handsets, the gross margin and what is our pricing strategy, well, for this, I would say, first of all, for memory, for memory components, we are to quantify that. I would say in the past, for a quarter, for example, we expect it to be at a certain high price, but actually, it's going to be at an even higher price, rising even higher. So we are very -- it's very hard for us to quantify that even for a small increase, it may because it is such a big part of the product, it will be impacting the cost of the product a lot. So it is very difficult to foretell early on, like what we had been able to do before. But for smartphones for this category, I think given our size and also our market share, it is very important for us. So if you say whether there's a principle, it would be that we hope. We try our best to make some balances. So my consideration is that we want to maintain our market position. That is very important to us because for smartphones, there are very few listed companies in this category. So I'm not being able to get a lot of accurate data from the industry competitors. But from my years of experience, I know the following. For example, in vehicles, the absolute number as a part of the overall car price, it is less in terms of its impact, but not as big as a smartphone part. For IoT, it is even -- it is also even lower in terms of memory, internal memory price impact. So different categories will have different impact. What is big impact would be smartphone, notebook and also tablets, less so for smart cars, less so for vehicles that is, and even less so for IoT. Operator: Next question, Citic, Xinchi. Xinchi Yin: I have 2 questions. First of all, on AI business. Miclaw has been introduced. And I was fortunate to have joined the launch. That was excellent. Can you give us more guidance? And that is at what point of maturity would you in big model or miclaw to commercialize them? And how would that be like in revenue? That's the first question. As for the second question for this year for chip, for example, do you think that you can have some progress to update us? Unknown Executive: For miclaw, I have already talked a lot about it, and I'm sure as a user, you will have felt this product, and you were there at the launch, and it's given us a lot of nice surprises, but it's a new product. And we still have a lot of -- there's a lot of room for improvement. And I, myself, also have gotten a lot of responses, so we have to improve on it. But I think the iterations will be very fast, and it will be a new version in a few days. So it's going to be -- it's going to have high speed iterations. For Xiaomi overall speaking, for AI, it's still going to be contributed to our users. For the commercialization of AI, I would say, at this point, it is still too early. Even though our large model, efficiency is high, our token commercialization, for instance. But from absolute numbers, it may be a little bit high. So at this point today, I would say commercialization is too early to talk about for us. And also, we already see our XLA model, XLA model. This is the XLA model, which is a cognitive large model. And SU7 is equipped with it from -- at present internally from our testing, it is very, very good in performance. So for these 2 models of cars, I am a user. And I personally would use -- if I use them, and if I have any questions in terms of use, I will put these cases to the team. And I personally experience these auto driving functions. It will be going forward step by step. And also our auto driving, whether the models or chips, we already have some deployments. So integration terminal to terminal, and when we have this ready, it's going to give a lot of new experience to our users. I don't know whether you've been driving our cars. Yes, watch out for its progress as we integrate more and more of our models into them for automotive. Operator: Because of time, this will be the last question from Zoe Xu of UBS. Zoe Xu: A lot of questions have already been asked by others. I have 2 questions to ask concerning new business investment and also IoT. For new business, with the models iterations faster, and you said that there will be more investment into AI. So for expenditure on new business, is chips side will be adjusted? Or do we see that there will be new chips introduced? Second question on IoT. Just now it's been mentioned for tablet and notebooks, there will be some cost impact. So will there be something like smartphones pricing strategy and that is to emphasize the experience for users, please? Unknown Executive: Well, for this year, we have increased a lot of R&D expenses. But for chip, it is a long-term strategic capability of ours. I have already said that this is a platform capability chip because it's going to provide capability for a lot of profit -- product types and product categories. So even though in AI, we have increased our investment, but we have not slackened our investment in chips. Actually, some of the chips, many of the chips. They are part of our big AI strategy. So we will definitely be steadfast with it. As for PC and tablets, we will follow more or less the same strategy as for smartphones. But please also notice that for the notebook that we have just launched, the Xiaomi NoteBook, after 4 years of development, it is selling very well. And it is the demand is even higher than we had expected. When we launched this NoteBook, we already knew that the memory part will be increasing in price. But on the other hand, the response has been so encouraging because of the product strength is good, even though it is more expensive, the users will be able to adopt it and they'll accept it. So I think product innovation, technological capability, these are important, even though memory is hiking in prices. But still, we will have ways to make our products attractive. In 2022, through our efforts, I think our company and our management team will still be able to deliver good performance for everyone. Operator: Thank you. We end the meeting here. Thank you very much for your participation. Thank you for your support for the company, Xiaomi. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Thank you for standing by. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Vertical Aerospace Full Year 2025 Business and Strategy Update Call. [Operator Instructions] I would now like to turn the call over to Samuel Emden, Head of Investor Affairs. Please go ahead. Samuel Emden: Good morning. I'm delighted to welcome you to Vertical Aerospace's Full Year Business and Strategy Update Call. Before we get started, I'd like to remind you that during today's call, we'll be making forward-looking statements. These statements involve risks and uncertainties that may cause actual results to differ materially. Any forward-looking statements we make are based on assumptions as of today. We undertake no obligation to update these statements as a result of new information or future events. We've posted an accompanying slide deck to our Investor Relations website at investor.vertical-aerospace.com, which contains detailed information on forward-looking statements. For a more complete discussion about these risks and uncertainties, we have filed our 2025 annual report with the SEC earlier today. Please now let me hand over to our Chairman, Domhnal Slattery. Domhnal Slattery: Good morning, and thank you, Samuel, and thank you all for joining us this morning. So over the past several weeks, we've had the privilege of hosting a series of Valo showcase events here in the U.K. and London, New York, Miami and most recently in Atlanta. These events brought together our airline partners, our investors, regulators, our suppliers and the broader advanced air mobility ecosystem. And what has stood out most was the energy and the enthusiasm around the opportunity ahead. And before getting in today's earnings call, we wanted to give you a taste of it. [Presentation] Domhnal Slattery: So at each step, the message was consistent. The market is ready for safe, quiet, zero emissions urban air mobility. And the response to our aircraft, Valo has just been extraordinary. This is a product that is redefining the eVTOL market globally. Now before we dive into the detailed content of today's call, let me take a step back just to address some key top-of-mind issues. First, on our flight test progress. I'm delighted that our Chief Engineer, David King, will go into this in further detail later. But to sum it up, we are in the final innings of completing full pilot transition under the regulatory oversight of the CAA. We are close to being complete with the 5 profiles and expect to have this finalized soon. On capital, as Stuart will speak to later in this call, cash is critical through certification. And despite annual spend being a fraction of our peers, we will need to continue to raise capital. We are exploring all of the options that are available to us right now across the capital markets, strategics and with government support. And we will execute that when it is the right moment for the business. Stuart will take you through the detail of that later. Today, our call will be broken into 4 sections to address some of the key issues and questions we hear from our stakeholders. First, we'll talk you through the aircraft. We'll talk you through Valo, the size, the modularity and safety that makes Valo the industry Valo the industry-leading electric eVTOL. Following that, our Chief Engineer, David King, will walk you through our pilot transition flight test progress, and he will provide a detailed breakdown of where we are today and the remaining elements to be completed. Then our CEO, Stuart Simpson, will do a deep dive on our battery technology. And we believe this technology underpins both Valo and our hybrid aircraft and gives Vertical Aerospace a differentiated power platform. Finally, we will discuss our current financial snapshot and our plans for capital raising. So first, Valo. The excitement around Valo is not just about the promise of the category, it's about the product itself. Unquestionably, Valo is the highest quality eVTOL aircraft in development globally today. It combines the safety architecture of a modern commercial aircraft with the performance and efficiency required for real-world commercial airline operations. Our design philosophy has always been clear: build an aircraft that meets the standards of the best airlines in the world today. We have developed Valo together and working in collaboration with our customers for well over 5 years. And that is why it has some key differentiators other eVTOLs in the market simply do not have and cannot have because of their designs. Why Valo has a seat next to the pilot for training, separation between the pilot and the passengers and why we have, without doubt, the roomiest cabin and the largest luggage bay. And critically, the aircraft sizing to accommodate 4, then 5 and then 6 passengers. This is the first truly upgradable aircraft, improving economics for our operators. With our largest cabin and the modular architecture, Valo is without doubt the perfect fit for multiple applications across the emergency, medical services, cargo and beyond. And we plan to be the leader in the hybrid electric defense space. And we look forward to deepening our discussions already underway with militaries around the world but particularly here in Europe in the run-up to the Farnborough Air Show later this year in July. As we've spoken about several times, we are deliberately a pure-play OEM, relying and collaborating on Tier 1 aerospace partnerships who allocate the best talent in the world, the absolute best resources and IP to the development and the certification of our aircraft. And we have now contracted the vast majority of those partners. And we look forward to bringing the final partners on board later this year as we progress towards critical design review this summer. And with that, I'm delighted to hand over to David King, our Chief Engineer. David? David King: Good morning, all, and thank you, Domhnal. Let's talk about flight testing. We've been flight testing a full-scale piloted prototype of Valo for 20 months now. In November, we began piloted transition. The phase where the aircraft moves between hovering over a spot as needed for vertical takeoff and landing and wing-borne flight, Valo's cruise condition. This flight testing is progressing steadily under disciplined U.K. CAA oversight. And here's a short video to give you a flavor. [Presentation] David King: We are nearing completion of the transition flight test phase, and the data we are collecting each flight is directly informing certification of our final commercial design. By doing the disciplined engineering and regulatory work upfront in close collaboration with the CAA, we reduced certification risk and avoid redesign later. As Simon Davis, our Chief Test Pilot, explained in the video, we've approached full transition incrementally from both ends, validating performance and building an evidence base before moving to the next test point. We've accelerated from a hopper, tilting the propellers forward from vertical orientation of 90 degrees. We've decelerated from wing-borne flight, tilting the propellers from horizontal. We are methodically and incrementally closing the gap, studying the wealth of valuable data at each step while working side-by-side with our certification authority. For example, we recently took advantage of a break in the U.K. weather to complete a piloted profile with a conventional runway takeoff, a deceleration from wing-borne cruise condition, a controlled deployment of the stowed rear props, 40 degrees of upward prop tilt while slowing down towards thrustborn and then accelerating back to wingborne and restowing the rear crops before landing. This test demonstrated smooth transitions with optimized software with the propellers deploying and reparking exactly as designed. By working closely with the CAA upfront, we now have a clear, well-defined, tried and tested path to certification. The standards, the criteria and the means of compliance are published, approved and have been dry run on the prototype program. This upfront work puts us on track to certify Valo to globally portable airliner safety standards. Then after certification comes entry into service. So I want to briefly touch on initiatives to accelerate deployment of an eVTOL operational ecosystem across the globe, including the eVTOL, Integration Pilot Program known as eIPP, recently announced in the United States. We applaud the eIPP program as a means to accelerate the introduction of eVTOL into United States National Airspace. As a non-U.S. eVTOL manufacturer, we were not eligible to participate directly in the United States eIPP program. However, we are participating in similarly focused European initiatives to advance the introduction of eVTOL in Europe. In the U.K. and in the European Union, flight demonstrations are planned and supported by government-backed programs, including the U.K. government's Future Flight Challenge and in due course, SESAR in Europe. These are taxpayer-supported initiatives designed to develop infrastructure, air traffic management technologies and operational procedures for optimized eVTOL operations. These programs will also build public and stakeholder confidence through structured and visible demonstrations. In the U.K., we've been a long-standing participant in the Future Flight Challenge, a GBP 150 million government-backed program focused on demonstrating operational readiness and accelerating safe integration of eVTOL technologies. Through this program, we're supporting funded flight demonstrations, including upcoming flights at Skyports Vista VertiPort and related work to demonstrate the feasibility of eVTOL operations between Oxford and Cambridge. By combining learnings from eIPP in the United States and similar European initiatives, we expect to see accelerated deployment of a safe and effective eVTOL ecosystem across the globe. At Vertical, we are laser-focused on executing to our clear pathway from prototype to preproduction to certification and then to full-scale production. Our final prototype aircraft # 3 has completed its commissioning tests and last week was the first time we had both of our prototype aircraft running at the same time. By the middle of this year, we will complete critical design review for Valo, the gate which freezes design and enables full throttle on building 7 preproduction aircraft to be conformed to type design and used for certification credit. And now I'll hand the microphone to our CEO, Stuart Simpson. Stuart Simpson: Thanks, David. It's great to hear about Valo and our testing progress. We heard Domhnal speak earlier on what makes Valo a differentiated eVTOL aircraft. But let me touch on Vertical's true secret sauce, which is our battery technology. While our core strategy is to operate as an OEM, utilizing partnerships across Tier 1 aerospace suppliers to minimize certification risk, the battery system is our core in-house technology and a key value driver for the business. We source cells and then manufacture the batteries at our world-class facilities. As cell technology evolves, our battery packs will provide increased payload and range to our customers. Vertical's proprietary battery system will support both the electric Valo eVTOL and our hybrid aircraft. The testing we have done to date confirms our current batteries capabilities to deliver power such that at launch, the Valo will be able to provide lift for 1 pilot, 4 passengers and 70 pounds of luggage per person. We are already testing the next generation of batteries that will further improve payload range, ensuring this aircraft will only get better over time. And as announced last week, our battery pilot production line is now operational. In fact, I had the pleasure of undertaking many of the process steps yesterday. In addition, we are expanding our battery manufacturing capability and capacity through the development of a new 30,000 square feet vertical energy center adjacent to our existing facilities. This new facility will open later this year. And in July, just before the Farnborough Air Show, we will be hosting an Investor Day at the Vertical Energy Center to allow our shareholders, prospective investors and analysts to see the progress we are making. More details to come, and we look forward to seeing many of you there. Here is where the true value proposition comes in, our Battery-as-a-Service business line. We expect batteries to be replaced approximately one time per year over the circa 20-year operational life of the aircraft. What this means is a long-term, predictable, high-margin revenue stream. As we have said before, we anticipate margin for this to be circa 40% Note that our published Flight Path 2030 figures don't include wide-ranging second life opportunities for our batteries. Given European aerospace standards, once the battery degrades below a particular level, circa 93%, the battery will be removed from the Valo but will be perfect for other applications. Our lightweight and high-power batteries have multiple second life opportunities, including CTOL aircraft, surface transport, marine and storage. This drives significant additional revenue and margin opportunities for Vertical. We have had multiple inbound requests from third parties wishing to understand our technology and see if and how it is for sale above and beyond us using it in the Valo and our hybrid aircraft. As mentioned in our prior earnings calls, we have shifted from dream to reality. And as David mentioned, laser-focused on execution. As seen in 2025, we completed almost 100% of our stated milestones, the final one being transition, which will be closed out imminently. We have made a tremendous start to 2026 across product, customers and ecosystem. We kicked off the Valo roadshow in key U.S. hubs, signed a critical supplier partnership with Evolito for the development and supply of EPUs for the Valo and made strides on further integration and partnerships in artificial intelligence. We launched new customer partnerships with the Kingdom of Saudi Arabia, Heli Air Monaco, JetSetGo and launched customer networks in and around London, New York, Miami and Atlanta. Now looking ahead to the balance of 2026. We categorized our operational goals into 3 buckets: aircraft, industrialization and commercialization. I'd just like to draw your attention to a couple of things. First, we'll be flying at Farnborough Air Show, and we look forward to seeing many of you there. Second, this year, we will open 2 new manufacturing facilities. Third, we will complete the CDR for Valo, locking in the final 25% of suppliers. And finally, we will begin assembly of the first preproduction Valo. This next slide shows that through fiscal year 2025, our spend was in line with our guidance of $110 million to $125 million. As stated, this is a fraction of what our main competitors spent but our progress, particularly in full-scale piloted and regulated test flight remains industry-leading. Our cash and cash equivalent position was $93 million as at the 31st of December 2025. As of today, our short-term liquidity is estimated at approximately $85 million, comprising cash on hand and anticipated near-term receipts. Our ATM facility, which was put in place in September 2025, has a remaining capacity of approximately $78 million. Over the next 12 months, we anticipate spending circa $190 million to $200 million as we ramp up our manufacturing footprint and move into the assembly of the first Valo. With that, I'll hand back to Domhnal for closing remarks. Domhnal Slattery: Thank you, Stuart, and thank you, David. We would like everyone on this call to walk away with just 3 key messages. First, our approach to flight testing is intentional, it's disciplined and certification focused. We are deliberately expanding the flight test envelope systematically to extract maximum value to derisk the ultimate Valo certification program. Secondly, we have optionality when it comes to capital raising, and we will execute when it is the right time for the business and our shareholders. And three, as Stuart illuminated, our battery technology is a key differentiator in our business model. With its high power and lightweight, use cases support our eVTOL and hybrid aircraft, along with multiple other applications in adjacent industries that we intend to pursue. So with that, we will hand over to Samuel to open up the line for questions. Thank you, Samuel. Samuel Emden: Yes, we asked our social media community for some questions. I'm just going to kick off the Q&A with one of them. So the question was, with EU delegation and British government representation at the Valo event in London, is there a credible likelihood of meaningful state financial support from the U.K. Domhnal Slattery: Stuart, maybe you could take that one, please. Stuart Simpson: Thank you. It's a good question. We have had tremendous support from the U.K. government. If you look at it over the prior years, this is up to around $100 million, and it shows the U.K.'s commitment to aerospace. And it's why we're based here in the U.K. in the heart of the European aerospace industry. Now the government knows we've had approaches from several other European countries as we move from the R&D phase to the industrialization phase of doing a business. We have had incoming requests for us to relocate to several European countries in many U.S. states. However, we remain committed to being anchored in the U.K. and are working closely with government to find a way to make sure that happens. Samuel Emden: Great. Thank you. And over to you, operator. Operator: [Operator Instructions] Your first question comes from Edison Yu with Deutsche Bank. Xin Yu: First, I just want to check in on your comment you said about the pilot to full transition. You said it's very, very soon. Are there any regulatory hurdles that you're waiting for? I know weather has been an issue at times. Perhaps just elaborate on what's left to do. David King: Yes. Thanks, Edison. This is David. Thanks so much for the question. The short answer is the S curve. So if you were to -- and this is normal for envelope expansion. If you were to plot up test pass on the Y-axis versus time on the X-axis, this type of testing, you typically see a curve that looks like an S-leaning to the right in that it's the last few tests that have this tail end with this low slope, and that's where we are right now. So over the last couple of months, we did have a difficult winter, as you said, Records were broke in Bristol. I think there were 22 straight days without any sun and 45 straight days with rain. So we did have some weather difficulties. But with the spring time now, we're starting to see the forecast starting on Thursday to start to get a little bit better. So yes, we just have these last few tests to pass. And as we go through it, what we have done, and we tried to highlight this in the messaging is that we are doing these tests side-by side with the certification authority, the U.K. CAA. We are using our approved design organization, our DOA procedures, which are the same procedures we're going to use for certification to conduct the flight testing. So just to give you an example, as we conduct a test, we take the thousands of data points and then we compare it against our predictions that come from physics-based models. Where we see a slight deviation, we flagged that and we said, hey, we need to understand what that is before we move on. And when we have to go update and tweak our performance predictions in our models, then we go back to our airworthiness data package and update the appropriate sections to ensure that we still comply with the full airworthiness with this modification to the models before we move on to the next point. So it's using a certification process on the prototype, which is dry-running it to reduce the risk of certification later. Xin Yu: Understood. Appreciate the color. Separate topic on the strategic but from my understanding, there's been discussions going on. Any update on when we could maybe get something? And is the -- should we think about the full transition that I just asked about as a precursor for some type of strategic to come in? Domhnal Slattery: Edison, it's Domhnal. So the conversations that we are having with strategics are ongoing, and they've been ongoing now for a number of months. I'll refer back to our last earnings call. I think it's clear that the successful transition is a catalyst to moving to deepening those conversations into something tangible occurring, okay? So the focus right now from the entire organization is to complete that transition successfully and as quickly as possible from where we stand today. And the reality is it's taken us longer than we anticipated. On our last earnings call, I specifically said it's weeks, not months. Well, actually, as I was thinking about it this morning, it's months, not weeks. But we are very, very close at this juncture. Xin Yu: Understood. And just lastly for me, on the hybrid military side, I know you sort of alluded to some things earlier. Is that something that could happen as we get closer to Farnborough where you maybe announce some efforts or some programs? That's obviously a very hot topic or hot area given what's going on in the world. So curious your thoughts there. Domhnal Slattery: Yes. So maybe I'll bring in David just to give you some flavor from VERTICON, and we can supplement that. David? David King: Yes, yes. Thanks. Just to give you the perspective that I heard from the Vertical lift community at the Vertical Aviation International Trade Show in Atlanta 1.5 weeks ago, where people looked at the Valo and the differentiators resonated and one of those was the size of the aircraft and the ability to upgrade it to a hybrid configuration without changing the airframe, essentially just taking the spacious baggage bay and inserting a turbo generator system, and we are demonstrating that on our prototype aircraft #3. So the feedback that I heard was with the size of Valo and the versatility, what we were forecasting for the defense market we're not forecasting high enough is what I was hearing from the people. And as you mentioned, with the geopolitical situation as it is today, there are different opportunities. One that was talked about was distributed contested logistics where they said, if you look at the defense opportunities that are coming, they're based on vertical takeoff and landing in a configuration that can be turned into an autonomous platform quickly. And that's part of the value proposition of Valo and the Honeywell flight control system is it's one small step from fully autonomous and then to be able to have the room and the payload and the capacity in the baggage bay for the logistics to be able to turn it into that mission and open up a large set of demand. Domhnal Slattery: And maybe just to supplement that, Edison, we believe we are the only eVTOL manufacturer in the world that can basically create a hybrid from the current airframe, as David touched on. But from a time frame perspective, we'll have that aircraft certified in 2029. Our competitors are multiple years behind in that regard. Now in terms of commercializing that and actually generating sales, we're now dedicating a significant amount of internal resources to defense sales. And I hope during the course of this year, maybe as soon as the Farnborough Air Show, we'll be able to share some progress in that regard. But unquestionably, we've got the best product. We now need to make sure we can sell it. Operator: Your next question comes from Amit Dayal with H.C. Wainwright. Amit Dayal: So with respect to the timing for the fully -- the piloted transition flight, should we expect timing on that to be sort of mid-2026 or maybe later in the second half of 2026? Stuart Simpson: Thank you for the question. As David alluded to, we're really down to the very last little bit of this. Now we don't want to commit to a timing because, as David said, each time we put the aircraft in the air, we learn a little bit more. But with the weather improving, we actually flew yesterday, which was fantastic. We got some more learnings, nothing hindered us. We have literally a handful of flights to do to accomplish full transition as we sit here today. Now the timing of that very difficult to commit to because, as David said, we have the weather to contend with. We have new learnings. So it's something we anticipate over the coming weeks, I would say. Hopefully, that gives you a bit of color commentary. Amit Dayal: No, that's understandable. Just wanted to see if there was sort of a concrete time line to that but I can take that offline. The other question was the battery efforts, the $190 million to $200 million spend for the next 12 months, does that include your battery needs as well? Stuart Simpson: Yes, absolutely. The $190 million to $200 million is a rolling 12 months from end of March. It covers everything we need to do to remain on track with FlightPath 2030, delivering our new battery facility and new aircraft manufacturing facility, the conversion of Aircraft 3 into a hybrid and the build of the first Valo. So that financial number I mentioned covers all of the things we said we'd be doing in '26. Amit Dayal: Got it. And then just last one, the strategic investor you are sort of quoting and the other financial options that you are sort of looking at, how urgent are these needs given where the balance sheet is? Or are you comfortable at least for the remainder of 2026 to execute according to plan? Stuart Simpson: We're pretty comfortable as we sit here today. We've got line of sight to circa $150 million, $160 million as we sit here today. We're in constant discussions amongst a range of options for financing, and we'll execute as and when the time is right for the company. So we don't feel under pressure to do it. We'll do it as and when it's right for the company and the current shareholders. Operator: Your next question comes from Louie DiPalma with William Blair. Louie Dipalma: Stuart, Domhnal, and David congrats on the development of Valo and the demonstrations in London, New York City and Miami. For my first question, I was wondering, following these demonstrations and your test thus far, how do you feel that your Valo aircraft stacks up with peers in the market? Is the main difference between vertical and peers the balance sheet right now? Domhnal Slattery: Yes. Louie, great to hear from you. So I mean, we fundamentally believe, I mean, fundamentally that we've got the best product in terms of the size, shape and scale and its capabilities. We've believed that for a very long time. We've now shown the physical embodiment of that to our stakeholders, particularly in the United States over the last couple of months. So people have sat in the aircraft. People have seen the quantum of baggage that the aircraft actually takes. They've seen the cockpit and the segregation, which provides a very safe environment for the pilot. And so people are now getting really convinced that Valo as designed is the category killer in this space. It is not a minimum viable product that we believe some of our other competitors are developing. So our balance sheet, we think we've got the best product. We also think we've got the best supply chain collaboration globally, particularly with some of the major partners we have like Honeywell, Aciturri. But finally, we've got the best customer base. And at the end of the day, it's the customer base determines the success or failure of an aircraft. And if you look at our customers, they're globally diversified, Tier 1 airlines, many of them, and all of them are fully engaged in the constant development of the aircraft. And today, we're actually speaking from our battery facility here in the U.K., where I've just been brought through some of the unique proprietary battery systems that we've developed. We've basically collaborated on almost everything else with the aircraft because we think almost everything else is going to get commoditized. The battery, as Stuart said, is the special sauce. And our team is the best in the world in the development of our battery technology. So it's no surprise that we're convinced that we've got the best product but all of our stakeholders are telling us that now. Operator: Your next question comes from Austin Moeller with Canaccord Genuity. Austin Moeller: So just my first question here. Can you talk a little bit about the R&D and CapEx plans over the next 12 months that fits into the $195 million in cash you expect to burn? Like how many aircraft do you expect to build as part of that? Stuart Simpson: Austin, thanks for the question. Thanks for the continued support. The $190 million to $200 million is a rolling 12 months from the end of March. As I mentioned earlier, it covers everything we have laid out in FlightPath 2030 and today that we are going to achieve over the coming 12 months. So that is the public flight displays of the current prototype. It is the conversion of one of those into a hybrid. It is the expansion of the battery center where we are today, as Domhnal mentioned, it's the build of our aircraft manufacturing facility. And really importantly, it is the start of the build of the first Valo. So everything we said we'd be doing over this 12 months, that is funded within that $190 million to $200 million. Austin Moeller: Okay. And then is there an active program of record or the equivalent in the U.K. Ministry of Defense right now to procure a hybrid eVTOL aircraft? And are there other similar programs in the works with some of the allied NATO militaries? Stuart Simpson: So we've had multiple conversations across many different defense customers and defense partners in Europe and the U.S. There is no official program of record that we're attached to. However, we're in deep discussions with the U.K. government about this hybrid product. As David alluded to from his feedback from VERTICON, we are totally unique in this space in that we will be certifying a hybrid product in 2029 in an airframe that is sized and capable and perfectly usable by the military now. We do not have to go and redesign and defer this. So that is generating significant interest across the whole world for our product. We anticipate being able to close out something in that space over the coming months, the rest of this year because we definitively have the best product for the military. As Domhnal said, it's been widely recognized now we've showcased Valo, and that reads right across into the hybrid space as well. And David also touched importantly on autonomy. We are perfectly placed to jump quickly into autonomy because of our deep strategic partnership with Honeywell. So we are the first choice for military. Austin Moeller: Okay. And just my last question. Have you narrowed down any of the -- on the market or available hybrid powertrains to like 1 or 2 options yet? Stuart Simpson: We have. Actually, we've got a short list. I don't think we've announced who we are going with yet but we've had wide-ranging discussions. And interestingly, everyone wants to work with us because they've seen we have an airframe that is going to be highly, highly successful. So we have had inbounds for us for people that are absolutely desperate to be our partners on this because we are leading the way in the military and dual use space. Domhnal Slattery: Yes. And in that regard, Austin, we have European and U.S. alternatives from Tier 1 suppliers who are -- have gone from being, I would say, mildly interested in Vertical and our hybrid to being intensely focused because they can see the applicability. And to David's point, they also can see the absolute scale of the market opportunity, which I believe right now, we are currently underestimating. And we're going to have to take a good look at the scale of that defense opportunity globally, not just in Europe, but globally to ensure that our internal forecasts are really accurately reflecting the depth of that market opportunity, which is getting literally deeper by the month and quarter, given the scale of the budgets particularly in Europe that the European governments are allocating to defense. Operator: Your next question comes from Chris Pierce with Needham. Christopher Pierce: I was hoping to go a little bit deeper on the transition delays. Maybe delays harsh word. But either way, I'd just love to hear sort of if we think about a pie or 100%, however you want to bucket it, like what's within your control and what's been that you haven't been able to control from November until now. And in the U.S., we have like flight aware, we can sort of track and see flights that people are kind of flying, have there been weeks where you haven't been able to fly and that significantly pushed things out? Or I guess, kind of just let us know sort of what's -- kind of what's been going on in Cotswold? Stuart Simpson: Let me just -- I'll give you a little bit of color commentary, then I'll hand to David. You said were the weeks, we couldn't fly. I mean there were months, we couldn't -- it rained for 46 days in a row, as David said. We need a permit to fly every time we put the aircraft in the air, and we can't do it when it's raining. So there were 46 days in a row we could not fly just to orientate you. It isn't all in our control. Now David, if you want to give maybe a little bit more technical color. Domhnal Slattery: Well, certainly around the pie chart, David, I mean, how close are we? I mean, if you were to give a sense in a pie chart basis. David King: Yes. And so in terms of the number of tests that we have to do, it's less than 10% in a pie chart. It's in the tail end of the S-curve. So we're on that tail end of the S-curve. And as Stuart said, if you were then to create another pie chart that said, okay, what were the sources of not flying when you initially planned to fly, the biggest one was weather. And it was a really rough January and February. But on top of that, we also are doing envelope expansion testing. And as we do envelope expansion testing, each test point brings a database of data that gets compared with our predictions. So the wind conditions, we have a tight tolerance as well because we don't want to have that noise associated with the atmospheric disturbance. So in terms of the weather, the clouds, the wind conditions, that was the first one. And then the second one was as we conduct the test, and as we find that we have to make some adjustments to our predictive models to update our database, then we update the database and go through our full design organization procedures to get that new airworthiness document approved side-by-side with the CAA before we go to the next test. Domhnal Slattery: And maybe, Chris, just to bring that a little bit more to life because the environment that we're here in Europe is different to the United States. We are testing under a regulatory oversight. In the United States, it's an experimental -- the regulatory oversight effectively means that every time we fly, we have to receive a permit to fly, which means we sit with the CAA, we walk them through the learnings from the previous flight, any observations, any amendments, any changes. And that process is because it's the safest in the world, it is sequential. And unfortunately, it's slow. But slow is good because it means it's intentional and it ensures that we're flying in the safest manner possible. We all wish this was faster, but we're very comfortable about where we stand. And to David's pie chart picture there, we're into the last 10%. Christopher Pierce: Can you sort of help us with how slow is slow on those 2 sort of buckets that you just talked about, you fly, you compare the data, you have to tweak versus what you saw versus what you expected and then you need to take that to the CAA and then get approval to fly the next time. Are we talking days, weeks? Like what is the time frame between when you fly and when you're ready to fly the next time? And what's in your control and out of your control as far as that goes as well? Domhnal Slattery: Yes. It depends on the issue. We've had some issues that we get resolved in days. We've had a couple of issues over the last few months. They've taken several weeks actually. The good news in that scenario is we weren't able to fly anyway because of the weather. That's just the nature of the regulatory framework that we find ourselves in. It is the nature of 10 to the minus 9. But when we get through it, we will have the safest, commercially safest aircraft in the world. So the pain will be worth the gain. Stuart Simpson: Chris, just to give a final little comment on that. When we've taken learnings and made little tweaks, the joy of this is this aircraft we're flying now directly reads over to the Valo. So if you look at a top-down view of the Valo and the prototype, the rotors are the same size, the wing is of the same size and shape, the rears are almost exactly the same. So a lot of this stuff where we've had a few days delay or weeks delay, for example, this is stuff that we don't have to revisit because it goes directly into the Valo design. So we may have lost a little bit of time here, but we've actually derisked certification. This is one of the key things you've got to remember here. This derisks certification. Every single time we go back to CAA, we sit with them, with their experts, with our experts, we agree a way forward, and that is baked in knowledge learning and technical results and technical solutions that will be baked into the Valo. So it actually accelerates the whole program, which is why [ we are ] extremely confident. Christopher Pierce: Okay. I appreciate the details. And then just one other one. You guided to a 12-month cash burn of $200 million or $195 million. Is there any reason to think the next 12 months prior to that will be meaningfully different from that? As you ramp, like if I'm looking at Slide 17, you've got the 7 certification aircraft you're going to build. Like as we think about burn going forward before you have entry into service and revenue, how should we think about burn beyond the next 12 months, just... Stuart Simpson: Yes. We've actually put that out, I think FlightPath 2030. We've talked about the cash certification. It might be a little bit up on the $200 million, but it's in that ballpark. That's the way to think about it. Operator: Your next question comes from David Zazula with Barclays. David Zazula: First question is with respect to the selection of Evolito the EPU supplier. How has that been received by CAA and EASA? And I guess, do you perceive any risk with respect to certification with them relative to kind of the prior established Tier 1 supplier you had on the EPU side? Stuart Simpson: So actually, we didn't have an established Tier 1 supplier for certification. We're very proud to have been working with MAGicALL on that. But Evolito, we believe from a certification perspective, they're already up and running. They already have a DOA in place. They're working on a POA. They're highly, highly respected and it's proven, proven technology. So this is something from a certification perspective and support from regulatory bodies, we're very positive about. And David, if there's anything you want to add? David King: No. I mean it's a great question. And there are a couple of attributes of Evolito that are really a good fit for Valo. The first is, as Stuart said, is they have excellent certification processes in place, and they've really leaned forward on that. And they're not too far away, right? They're near Vista. And as we mentioned earlier, that Vista near Oxford is in the Oxford Cambridge Arc, which is one of the prime use cases for eVTOL in the United Kingdom. And so being here in the United Kingdom, it gives us advantage to work together on the U.K. CAA certification, and we have very complementary certification processes in place. David Zazula: Super helpful. I mean maybe can you frame how do you think they'll fit into the broader supplier strategy? How you think the supplier coordination is going to go? And I guess, broadly, how the suppliers will support your ability to ramp up production over the next couple of years? Stuart Simpson: David, thanks. We have been working with most of our supply chain for many, many years. They're deeply embedded in our process. Our whole Flightpath 2030 and certification date of 2028 has been done hand-in-hand with our supply chain. So they are there, ready, willing, committed. And as David alluded to, our CDR, a critical design review, where we'll have done the full design envelope of every single component. We're around 75% to 80% through that. Every single complex, long-term, difficult high-value component we've done. So EPUs, batteries, avionics, flight control systems, the airframe is locked in already, and they are there, ready and willing to make a certification aircraft in 2028. Operator: And there are no further questions at this time. I'll now turn the call back over to CEO, Stuart Simpson, for closing remarks. Stuart Simpson: I'd just like to thank everyone for listening into this call and all of the analysts for the questions. Really, really appreciate it. We are on the cusp of great things at Vertical. David and Domhnal said, we genuinely believe we have the industry-defining aircraft. The feedback we've had from everyone in this space has been outstanding, way above and beyond what we were expecting. We are going to bring the Valo to life. We will start building it at the end of this year, we'll be flying early next year. It's going to be an amazing 12 months. So thank you very much. Operator: This concludes today's conference. Thank you for participating. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Transgene 2025 Annual Results and Prospective for 2026 Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Lucie Larguier. Please go ahead. Lucie Larguier: Well, thank you, Nadia, and hello, everyone. So I'm Lucie, Chief Financial Officer at Transgene, and I'm with Dr. Alessandro Riva, our Chairman and CEO today. We will review the progress over 2025 and answer any questions you may have. Before I turn the call over to Alessandro, I'd like to remind everyone that today's discussion contains forward-looking statements which are subject to multiple risks and uncertainties. [Operator Instructions] With this, I now turn the call over to Alessandro. Alessandro Riva: Thanks, Lucie, and good morning, good evening, good afternoon, everyone. So 2025 has been a year of meaningful clinical progress for Transgene. As you all know, we advanced our individualized neoantigen therapeutic vaccine, INTV, TG4050, supported by compelling clinical and translational data in head and neck cancer that reinforce our confidence in its potential to prevent relapse in patients. I would say that there were 3 crucial moments this year that confirm our conviction that the myvac platform can bring benefit to patients. First of all, our Phase I data being presented already at ASCO in the same section as 2 Phase III trials in head and neck cancer. Second, the immunogenicity data that we present at the SITC conference in November in the United States of America; and third, the completion of EUR 105 million fundraising that provides financial visibility until the first quarter 2028 to support our priority programs. With these 3 major achievement, Transgene is on track to continue building the scientific and operational capability to execute our strategy. Now on Slide 5. TG4050, the first INTV based on our myvac platform is currently being evaluated in international randomized Phase I/II clinical trial in the adjuvant treatment of HPV-negative head and neck squamous cell carcinoma, a setting with significant unmet medical need as more than 30% of patients relapse after 3 years despite the recent advances in the innovation with checkpoint inhibitors. At ASCO, we presented Phase I data showing that all patients with HPV-negative cancer who received TG4050 after surgery and the standard chemo radiotherapy remained disease-free after at least 2 years of follow-up. Importantly, the trial met all endpoints for both safety and feasibility. This 100% disease-free survival rate compared with 3 relapses observed in the control arm provides the first clinical evidence supporting TG4050 potential to prevent cancer recurrence in early head and neck cancer patients. In November, at the Society for Immunotherapy of Cancer Annual Meeting, we presented a compelling translational data that further strengthened the clinical proof of principle for TG4050. In particular, the data showed that TG4050 induced neoantigen-specific T cell responses in 73% of evaluable patients. Importantly, these responses were durable, persisting 24 months after the start of treatment and showed cytotoxic and effector phenotype markers up to 1 year after the end of treatment. Together, these findings demonstrated that TG4050 can generate potent and long-lasting immune responses capable of targeting and eliminating tumor cells contributing to the prevention of relapses. In January 2026, a comprehensive analysis of the Phase I clinical and translational data was published on the preprint platform of [ Med Archive ] and is currently under review by peer-review journal. I'm on Slide 6 now. Let me now turn on the ongoing Phase II part of the Phase I/II trial. The randomized Phase II part of the trial is in the same setting as the Phase I. All patients are close to being randomized, and this will be a key operational milestone for the program. The primary endpoint on the Phase I/II study is 2-year disease-free survival that is very well recognized by the health authorities being an important and critical milestone, and we expect this efficacy readout once all patients reached 2 years of follow-up from randomization. In second half 2026, we also expect to share the first immunogenicity data from patients from the Phase II cohort of the Phase I/II study. For the Phase I part of the study, we plan to report 3-year follow-up data on disease-free survival in second, third quarter 2026, followed by 4-year follow-up in second, third quarter 2027. Beyond head and neck cancer, we are working to broaden the spectrum of opportunity for myvac across additional solid tumor types where significant unmet medical needs remain. The platform, as you know, is designed to generate individualized neoantigen therapeutic vaccine tailored to each patient's tumor mutational profile. As mentioned, we are currently in the start-up phase of the new Phase I trial in a second not yet disclosed indication in early treatment setting, and our goal is to initiate this trial in 2026. We are actively optimizing our manufacturing process, improving turnaround time and preparing for increased production volumes. Importantly, part of the proceed is dedicated to advancing industrial and regulatory readiness, including the alignment with the FDA and the EMEA requirements as we move toward late-stage development. Now turning on Slide 7, BT-001, which is our intratumor administered oncolytic virus developed with our partner, BioInvent. At ESMO 2025, we presented a poster data evaluating BT-001 in combination with pembrolizumab in patients with advanced refractory tumors. This data shows positive abscopal and sustained antitumor activity in both injected and non-injected lesions. The immune-mediated tumor shrinkage observed is consistent with our mechanistic hypothesis. BT-001 in combination with pembrolizumab can convert cold tumors into immunologically active hot tumors. This data supports further development of BT-001 and you should be hearing from us about this development in the next couple of months. Now I would like to turn over to Lucie for the financial update. Lucie? Lucie Larguier: Thank you, Alessandro. So if we look at our financial position and what happened in 2025, we can definitely say that the most significant financial event of the year was the successful fundraising in December 2025 and through which we raised approximately EUR 105 million. And together with the conversion of EUR 39 million debt with TSGH into equity, Transgene strengthened its balance sheet, reduced its financial liabilities. The company is now virtually debt-free, and we are now ready to move and fund it until early 2028. If we look at our cash burn over last year, it was approximately EUR 38.2 million. So it reflects the investment in our Phase II trial, the fact that we manufacture and enroll patients into this Phase II in head and neck cancer. So I think that -- and I'm convinced that with the budget that we have, the money that we have, we have funded to deliver on key milestones, which include the development of 4050, the myvac platform, the planned Phase I trial in the second indication and also the work on manufacturing and process optimization, preparing late-stage development. So Alessandro, if you want to comment on outlook. Alessandro Riva: Yes. Thank you, Lucie. As we look ahead, our priorities as you know, are very clear. We remain focused on TG4050, our first INTV vaccine from the myvac platform. We intent being to continue to establish Transgene as a key player in the INTV field that is growing across the community, and it attracts a lot of interest. With the progress we have made so far and with the finance sources that Lucie just mentioned, we believe that we have what do we need to execute on the next phase of development. So overall, when we look at the next 24 months that are covered by our recent fundraising, we see a clear path of execution, multiple meaningful milestones and the financial visibility, as mentioned to support them throughout early 2028. Before opening the Q&A, let me also mention that we'll be participating in investor access events in Paris on April 9 and to the Life Science Conference in Amsterdam on April 16. And we would, of course, be very pleased to meet with those of you who may be attending. With that, the team and I will be happy to take your questions. Operator, please up to you. Operator: [Operator Instructions] And now we're going to take our first question. And it comes from the line of Chiara Montironi from Van Lanschot Kempen. Chiara Montironi: I actually have a couple. So the first one, how should we be looking at the 3 years DFS data that are approaching in Q2, Q3, given that the primary endpoint and the benchmark are 2 years? What do you expect to see here? And what will be a good result? And the second question is on the immunogenicity Phase II data in H2 '26? At which follow-up will be those data, we'll be able to see the induction of the immune response also to understand that these immune responses are durable? Alessandro Riva: Thank you, Chiara. So first question is on 3-year disease-free survival data. First of all, we plan to send an abstract for the ESMO conference in Q3 2026. And what we should expect, of course, we don't know because we have not analyzed the data. I mean the base case scenario is, of course, that we continue to see that the 2 curves stay separated throughout the additional follow-up. So that's the base case scenario. The best case scenario, which is which is not good for patients that have been randomized to the observation is to serve more relapses in the arm that did not receive the TG4050. And therefore, this scenario will show a larger magnitude of the separation of 2 curves. And that's what -- and of course, there is a worst-case scenario that is that we start to observe relapses in TG4050. So -- but in the base case scenario, in best case scenario, this is going to be quite good for the program and of course, for patients. Then in terms of the immunogenicity data of the Phase II study, we expect to start having the first set of data by the end of 2026. And of course, we will start to analyze the patients that were randomized first, right? So therefore, we expect that those patients have at least 1 year kind of follow-up with the potential to show durability over 1 year in the Phase II study. And of course, this will be important to start also to strengthen the data that we have presented earlier in 2025 with the Phase I. Hopefully, this is clear. Operator: And the question comes line of Dominic Rose from Intron Health. Dominic Rose: It's Dominic here. I've got a couple as well. My first question is, how do you think the GMP manufacturing reconfiguration will change the ability to get a deal done towards the end of the year? So how impactful is that versus getting new data? And my second question is what, if anything, do you hope to learn this year from the Moderna data readouts? Alessandro Riva: Okay. So the first question is around the GMP manufacturing. So as you know, it is important to continue to optimize manufacturing for an individualized antigen therapeutic company like Transgene. So we plan to have full GMP manufacturing by 2027, Q3 2027. And of course, having a full GMP manufacturing is an important value creation for myvac program and, of course, we strengthened the [indiscernible] from pharmaceutical companies for the simple reason that having a GMP manufacturing allow us or the potential partner to move forward to a potential pivotal trial. So that's the reason why we are investing significantly on the GMP. Again, it is critical to succeed in the individualized neoantigen therapeutic vaccine. And then the second question was around Moderna data. I mean, I guess you're referring to the Phase II that they've already published, but also the potential Phase III in adjuvant setting melanoma. So first of all, I mean, the long-term follow-up data set that they have published just recently, I would say, confirm what they've already published a few years ago in terms of the efficacy of their INTV in adjuvant setting melanoma. And of course, they clearly say that they will disclose the Phase III data always in adjuvant melanoma by the end of the year, beginning of 2027. And of course, for the INTV community, the Phase III data will be quite important because if the data is positive, the data will continue to derisk the INTV approach. And of course, if the data is negative, then as you know, Transgene has a different technology with a different vector. And we think that we will have to wait our data set in head and neck, specifically the randomized Phase II study before making any conclusion because, again, our technology is different from Moderna one. But of course, for patients for the field, we hope that the melanoma data, Phase III is going to be positive, right? So -- but of course, we have to wait. So -- and from a bio and tech point of view, right? So as you know, they are doing some changes in their leadership and they have recently also announced that they plan to close their Phase II trial in the [indiscernible] cancer because the competitive landscape has changed significantly. And therefore, what they said, of course, they do some reprioritization and now they are staying focused on pancreatic cancer and colon cancer, and we don't know the data, the studies are still ongoing. And again, of course, we hope for all it will be there for all the studies that are in the INTV field in early setting because, again, all the data points will help to continue to derisk the field and, of course, for biotech companies to continue to accelerate the development. Lucie Larguier: So we have received a few questions on the chat. So I'll take and read [indiscernible] question, [indiscernible] from Biomed Impact. So the question is regarding the new indication, TG4070 program as shown on the website, could you give us more information, solid tumors as far as I understand, will the population of patients be homogenic or will you address several types of solid tumors, single or multiple injections? Alessandro Riva: So this is going to be one indication. It's not a basket protocol. It's going to be randomized Phase I study in a new indication that, I would say, very similar to what we did in head and neck, same type of methodology, but in another indication, where the medical need is quite significant. And the indication will be very different from head and neck from a biological standpoint and also in terms of the potential of being immunogenic tumor. And I cannot disclose exactly what we are going to plan. So we are in the kind of waiting for the regulatory feedback on the final protocol. And as soon as we have, of course, the approval from the agencies, we're going to disclose the indication and the time lines associated to. We're very confident that this study can start this year. Lucie Larguier: So we had a question from [ Jamie Land ], but I think with [indiscernible] from all investment, I think we've answered it given the current landscape. I also have a question from Martial Descoutures, ODDO BHF, which is, as you expand myvac platform, thanks to the additional tumor types, how do you see the long-term value? Could we think that you will look for partners in the future? Or could we think that you will continue alone for the long term? On TG4050, what level of efficacy could you consider as clinically relevant in the Phase II? Alessandro Riva: So let's start from the last question perhaps. So everything that is similar to what we have observed in the randomized Phase I makes a lot of sense for patients. And you know what we have disclosed and the disease-free survival curve. So having a flat curve without any relapses by itself is very important for early setting head and neck cancer patients. So we hope that we are going -- as I said also answering the question from Chiara, we hope to see the same kind of shape of the curve, the same type of separation and of course, the same durability of the plateau that we are observing in the Phase I study. So in terms of the long-term strategy for Transgene related to myvac, so I would say that, first of all, our priority is to continue to create value for patients. So -- and of course, by doing that to stay very open on potential opportunities in terms of having a kind of constructive dialogue with the scientific community with the pharmaceutical companies. And we think that, of course, as we generate more data in terms of Phase II, in terms of optimization of the manufacturing, in terms of showing that we are able to do a second indication with a manufacturing process that is even better than what we have used in the Phase I and the Phase II study. So all this kind of value creation activities and catalysts will help significantly to attract the interest of pharmaceutical companies. So the objective that we have is ultimately to bring the organization to a kind of starting block for launching a potential pivotal trial. And we hope that if we demonstrate that in the next 24 months, we can generate interest from potential partners and working them together to launch a potential Phase III trial. So value creation first dialogue in parallel with the industry and third potential collaboration to continue to accelerate our program. Lucie Larguier: Okay. We have a quick few follow-up questions from [indiscernible] from [ All Invest ]. So any update on the media conference where you plan to report Phase I data, particularly the 3-year survival. Should we assume it's ASCO? Should we expect Phase II patient randomization to be completed during Q2 2026? And finally, how should we think about the timing for initiating a Phase I trial in a new indication this year? Alessandro Riva: So I mean the 3 years survival data for the Phase I study of TG4050 will be potentially that's our plan presented at ESMO. And of course, this requires that ESMO accept our abstract. So we plan to submit it and then we'll keep you posted whether this is accepted and ultimately disclosed and presented at the ESMO meeting. So that's your first question. So the second question related to the randomized Phase II trial. So I mean, the randomization will -- I mean, will be completed certainly by Q2, right? So that's our plan, right? So -- and of course, we will obviously sign an announcement as soon as we have this milestone completed, but we are kind of optimistic that really we are close to the final recruitment. And then the third question, there was another one. Lucie Larguier: How should we think about the timing for initiating a Phase I trial? Alessandro Riva: Yes. As we mentioned, it's going to be in 2026. As soon as we have the formal approval from the health authorities, we're going to move forward. Lucie Larguier: And I think that we have at least -- I don't have additional questions, a few wins. Thank you very much, everyone, for your questions. Alessandro Riva: Thank you for the questions. So just to close, I mean we think that 2025 was a year of strong progress for Transgene. As I mentioned, we continue our journey to continue to establish Transgene as a key player in this field of individualized neoantigen therapeutic vaccine that can be potentially transformative for patients and can, as you have seen, can go beyond one single indication. Looking ahead, we are confident in our strategy in the transformative potential of the myvac platform. And with the financial visibility until early 2028 and a clear path to clinical readouts, so we are very well positioned to deliver meaningful value for patients and shareholders alike. We are grateful for your, of course, continued support and looking forward to keep you updated on our progress. With this, I would like to conclude today's call. Have a great rest of the day and talk to you soon. Operator, please? Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.