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Operator: Good day, and thank you for standing by. Welcome to the Q1 2026 Quanex Building Products Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speakers' presentation, there will be a question-and-answer session. To ask a question, please press 11 on your telephone, and wait for your name to be announced. To withdraw your question, please press 11 again. I would now like to hand the conference over to your speaker today, Scott Zuehlke, Senior Vice President, CFO and Treasurer. Thanks for joining the call this morning. Scott Zuehlke: On the call with me today is George Wilson, our Chairman, President and CEO. This conference call will contain forward-looking statements and some discussion of non-GAAP measures. Forward-looking statements and guidance discussed on this call and in our earnings release are based on current expectations. Actual results or events may differ materially from such statements and guidance, and Quanex Building Products Corporation undertakes no obligation to update or revise any forward-looking statement to reflect new information or events. For a more detailed description of our forward-looking statement disclaimer and a reconciliation of non-GAAP measures to the most directly comparable GAAP measures, please see our earnings release issued yesterday and posted to our website. I will now turn the call over to George for his prepared remarks. George Wilson: Thanks, Scott, and good morning to everyone on the call. Before beginning my commentary on our first quarter results, I would like to take a moment to recognize and thank Susan Davis for her many years of dedicated service as a Board member to Quanex Building Products Corporation and its shareholders. Her commitment, insight, and guidance have been invaluable to our organization. Susan consistently served as a steadfast voice for shareholders during our transformation from a metals company to a pure-play building products company and through three CEO transitions and several acquisitions. Her perspective and presence in the boardroom made a meaningful impact, and she will be greatly missed. On behalf of the board and the entire organization, we wish her all the best in her retirement. Turning now to our fiscal first quarter, market conditions remained soft and company performance was in line with our expectations. As is typical given the seasonality of our business, the first quarter is our most challenging from a volume standpoint. The holidays, coupled with the onset of winter weather, consistently create headwinds in our Q1, and this year was no exception. From a broader perspective, challenges in the global macroeconomic environment and the markets we serve continued to impact results. The most significant challenge continues to be end consumer confidence. While inflationary pressures, labor costs, and certain raw material costs have started to moderate, energy prices have risen. In addition, heightened geopolitical tensions, particularly in recent days, are contributing to a more cautious consumer environment worldwide. Despite the near-term headwinds, the longer-term underlying fundamentals for the residential housing sector remain constructive. In addition, inflation appears to be stabilizing, and there is an increasing expectation of additional rate cuts from the Federal Reserve this year. We continue to believe the structural drivers supporting both new construction and the repair and replacement markets remain intact. At this time, we do not anticipate a deeper downturn in the end markets we serve. In Europe, economic data from third-party sources point to early signs of stabilization and gradual recovery across most countries, which we view as an encouraging development as we look ahead. Now turning to our performance in 2026. In the Hardware Solutions segment, our focus is centered on two key priorities: stabilizing operational performance and strengthening our commercial organization, including the finalization of go-to-market strategies across our international markets. As previously disclosed last year, we identified an operational issue at our hardware facility in Monterrey, Mexico that required some incremental capital to remediate. We are pleased to report that our efforts have advanced to the point where we believe the plant is now stable, and we do not expect to provide updates on this matter going forward. Within the Extruded Solutions segment, our focus has been on advancing new product development initiatives, evaluating adjacent market opportunities, and relaunching and repositioning our Schlagel product lines. We are very encouraged by the progress being made across each of these areas as they are central to achieving our profitable growth objectives. These initiatives are expected to strengthen our competitive positioning and expand our addressable market over time. I anticipate being able to share additional details on new product launches and commercialization milestones later in the year. In the Custom Solutions segment, we continue to advance several initiatives designed to support future growth. More specifically, in our cabinet components operation, the primary focus has been on driving operational efficiencies to successfully integrate recent market share gains and ensure that we scale effectively. Within our access solutions operations, efforts have centered on optimizing operating methods to enhance process consistency, quality, and on-time delivery. And in our mixing and compounding operations, we remain focused on new products and chemistry development. These initiatives are enabling us to expand into adjacent markets that demand highly engineered solutions supported by strong technical expertise and service. Together, these efforts position the Custom Solutions segment to deliver improved performance while building a stronger foundation for sustainable growth. Looking at our corporate functions, our newly created commercial and operational excellence teams are now focused on new market development, the creation of global pricing strategies, logistics and sourcing projects to drive savings, ongoing ERP rationalization, and AI-led process improvements. We believe these efforts will produce the results needed for revenue growth, margin expansion, cash flow generation, and improved return on invested capital. From a capital allocation perspective, we will continue to focus on maintaining a healthy balance sheet through disciplined debt reduction. And looking ahead from a growth standpoint, we will focus on driving organic initiatives while pursuing targeted small bolt-on acquisitions, if available, that complement our existing platforms and capabilities. The outcome of these actions will be a stronger, more flexible balance sheet that is well positioned to support our long-term growth opportunities and strategic objectives. I will now turn the call over to Scott, who will discuss our financial results in more detail. Scott Zuehlke: Thanks, George. On a consolidated basis, we reported net sales of $409,100,000 during the first quarter of 2026, which represents an increase of approximately 2.3% compared to $400,000,000 for the same period of 2025. The increase was mainly due to foreign exchange translation and the pass-through of tariffs. We reported a net loss of $4,100,000, or $0.09 per diluted share, during the three months ended 01/31/2026, compared to a net loss of $14,900,000, or $0.32 per diluted share, during the three months ended 01/31/2025. On an adjusted basis, we reported a net loss of $300,000, or $0.01 per diluted share, during 2026, compared to net income of $9,000,000, or $0.19 per diluted share, during 2025. Adjustments being made to EPS are primarily for transaction and advisory fees, amortization of the step-up for purchase price adjustments on inventory, restructuring charges, amortization expense related to intangible assets, and foreign currency impact. On an adjusted basis, EBITDA for the quarter was $27,400,000, compared to $38,500,000 during the same period of last year. The decrease in adjusted earnings for 2026 compared to 2025 was mainly due to reduced operating leverage from lower volumes related to ongoing macroeconomic uncertainty coupled with low consumer confidence and higher but temporary operational costs related to our hardware plant in Monterrey, Mexico. Now for results by operating segment. We generated net sales of $189,100,000 in our Hardware Solutions segment for 2026, an increase of 2.4% compared to $184,700,000 in 2025. We estimate that volumes were down 3.6%, pricing was up 0.5%, the tariff impact was about 3.2%, and foreign exchange translation was a benefit of about 2.3%. Adjusted EBITDA was $4,500,000 in this segment for the first quarter, compared to $8,200,000 in the same period of last year, mainly due to decreased operating leverage related to lower volume, general inflation, and approximately $3,000,000 of incremental costs related to our hardware plant in Monterrey, Mexico. As George mentioned, we believe this plant is now stable. Our Extruded Solutions segment generated revenue of $139,000,000 in the first quarter, essentially flat compared to $139,600,000 in 2025. We estimate that volumes were down 2.6% year over year in this segment for the quarter, with pricing up slightly by 0.3%, and a positive foreign exchange translation impact of about 2.4%. Adjusted EBITDA declined to $20,900,000 in this segment for the quarter, versus $24,000,000 during the same period of last year, mainly due to decreased operating leverage related to lower volumes and general inflationary pressure. We reported net sales of $89,100,000 in our Custom Solutions segment during the quarter, which represented growth of 4.8% compared to prior year. We estimate that volumes were up 2.4%, pricing decreased by 2% in this segment for the quarter, and foreign exchange translation coupled with the pass-through of tariffs was a benefit of approximately 0.5%. Adjusted EBITDA declined to $4,600,000 from $6,300,000 in this segment for the quarter, mostly due to general inflation and higher SG&A. Moving on to the cash flow and the balance sheet, cash used by operating activities was $20,200,000 for 2026, which compares to $12,500,000 for 2025. Free cash flow was negative $31,500,000 in 2026 compared to negative $24,100,000 in 2025. Keep in mind that the first quarter of our fiscal year is usually the low watermark for the year due to the seasonality of our business. On a related note, we have historically been a net borrower in the first quarter of our fiscal year, but with the addition of Tyman and their longer cash conversion cycle, we now expect to be a net borrower during the first half of each fiscal year, with the majority of our cash flow generated in the second half. Our liquidity was $331,600,000 as of 01/31/2026, consisting of $62,300,000 in cash on hand plus availability under our senior secured revolving credit facility due 2029, less letters of credit outstanding. As of 01/31/2026, our leverage ratio of net debt to last twelve months adjusted EBITDA was 2.8 times. We do expect our leverage ratio to increase slightly in Q2, but we also believe we will exit 2026 with a net leverage ratio closer to 2.0 times as we generate cash and repay debt in the second half. As George mentioned in our earnings release, our long-term view continues to be favorable as the underlying fundamentals for the residential housing market remain positive. While we entered fiscal 2026 with a cautious outlook due to the ongoing macroeconomic challenges, we remain somewhat cautious in light of the geopolitical events now occurring. We are optimistic that demand for our products will improve as consumer confidence is restored over time. We are monitoring the situation in the Middle East, which could have an impact on customer demand, raw materials pricing, and shipping rates for our international hardware business, but as of now, we are comfortable with providing guidance for fiscal 2026. During our last earnings call in December, we mentioned that fiscal 2026 could be somewhat flat compared to fiscal 2025, with puts and takes, but that the first half of 2026 may be more challenged than 2025, implying a somewhat improved second half year over year. Our current views remain consistent with that message. Overall, on a consolidated basis for fiscal 2026, we estimate that we will generate net sales of $1,840,000,000 to $1,870,000,000, which we expect will yield approximately $240,000,000 to $245,000,000 in adjusted EBITDA. In addition, the following modeling assumptions should be reasonable for the full year 2026: gross margin of 28% to 28.5%; SG&A of $295,000,000 to $300,000,000, which reflects bonus accrual at target; D&A of $105,000,000 to $110,000,000; adjusted D&A, excluding intangible amortization, of $65,000,000 to $70,000,000, which should be used to calculate adjusted EPS; interest expense of $50,000,000; a tax rate of about 24%; CapEx of $70,000,000 to $75,000,000; and free cash flow of approximately $100,000,000. As always, we will stay focused throughout the year on the things that we can control, with an emphasis on generating cash to continue paying down debt. Please use the following cadence for fiscal 2026 versus fiscal 2025: on a consolidated basis, we expect revenue to be up 12% to 14% in 2026 compared to 2025. Adjusted EBITDA margin, again on a consolidated basis, is expected to be up 500 to 550 basis points in 2026 compared to 2025. Operator, we are now ready to take questions. Operator: Thank you. As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. George Wilson: One moment for questions. Operator: And our first question comes from Kevin Gainey with Thompson Davis and Company. You may proceed. Kevin Gainey: Hey, George, Scott. Good morning. It is Kevin. Morning. For Adam. Yep. Maybe to start, if you could break out how the Extruded Solutions segment did. Margins in that segment were much higher than what we expected. Maybe you can talk about what drove the margin improvement there? Scott Zuehlke: Well, in general, I would say that the Extruded Solutions segment, the products that are included in that segment, have historically been our most profitable products. So you have things like the IG spacer, you have our vinyl profile business in the UK, which is called Liniar. Those have historically been very profitable businesses for us and continue to be. George Wilson: I think you would see the operating model within that segment too tends to revolve around larger, more levered plants. So, you know, fewer sites, tends to be less fixed cost, which drives margin in that product line. Again, I think part of the reasoning for the resegmenting too is to give our investor base a little more clear look into each of these different segments and what product lines are actually contributing what. So, you know, we know that this is new, a new perspective for you and others, but this has been very consistent for us throughout our whole period of having these products. Kevin Gainey: Sounds good. Appreciate the color on that. And then maybe if you could talk on the Custom Solutions segment as well and maybe what drove the strongest year-over-year revenue growth in that. George Wilson: You know, one of the bright spots with tariffs and just some of the macroeconomic environment has been in our cabinet components and our wood components business. We have been able to secure some new market share as people have insourced product from overseas, consolidated their facilities, and have outsourced that product, and our team has done a very good job of being able to show the value that we can create for our base in providing a wide array of products just in time as they need it, minimizing their working capital needs, and allowing us to do what we do well. So that really drove some revenue growth in what has really been a soft market, but that has been a bright spot for us on revenue. And our focus in that segment now is actually we are kind of in hiring mode in some of those plants to be able to make sure that we have the capacity and the ability to satisfy demand once the seasonal uptick does occur. But we have been very happy with the performance and what our team is doing there to show our value to our customers. Kevin Gainey: That sounds good. And then maybe, I know recently the builder show was done recently. Is there any takeaways that you could have from that? What maybe the sentiment was or optimism going into the year? George Wilson: You know, the show was well attended, which I think everyone would agree on. I think that there is guarded optimism. You know, there are a lot of moving pieces in everything in the world right now. You have now the geopolitical issues in Iran, and what is going on there, the potential push on inflation. You have the political climate in the US. Just a lot of moving pieces. So I think what we have heard is that, without a fault, everyone believes in the long-term view and the optimism that exists in the housing market, like we mentioned in this earnings call, that the indicators are there that housing is in demand, and there is pent-up demand that will be released at some point. It is just, I think, the feel of the show is when is that going to happen and what needs to make it happen to give the end consumer some confidence, whether it is a relief on some energy pricing, whether it is Fed movement, whether it is a couple more data points on inflation, or all of the above. So long answer to what should have been: guarded optimism. Kevin Gainey: Sounds good, George. Thank you, guys. Thanks. I will turn it over. Thank you. Operator: Our next question comes from Julio Romero with Sidoti and Company. You may proceed. Julio Romero: Good morning, George. Good morning. Your guidance implies the remaining nine months of the year is going to see flattish sales year over year but see some year-over-year margin expansion, about 70 to 80 basis points across the remaining nine months. Based on that Q2 cadence you stated earlier, that definitely implies it will be back-half weighted. If you could just talk about the cadence of that margin expansion between the third and fourth quarters, the expected? And then secondly, maybe just where across the portfolio you would see that margin lift? Scott Zuehlke: Good question. I think the main driver for the second half of 2026 versus the second half of 2025, if you recall, the issues we had in Monterrey impacted EBITDA by, I think, $13,000,000 in the second half of last year. We consider that plant stable; we should not see that impact in the second half of this year. So that alone is going to drive most of the margin expansion. George Wilson: That is obviously in our Hardware segment. Julio Romero: Yep. Good reminder, and congrats on completing that Monterrey issue. My second question is just on trying to better understand how much longer Tyman legacy Tyman extends the cash conversion cycle versus legacy Quanex, and then related to that, you mentioned capital allocation remains debt repurchase remains your key priority there. Just how are you thinking about debt pay down in the back half? Thank you. Scott Zuehlke: From a cash conversion standpoint, historically, Quanex was 45 to 60 days cash conversion. Tyman, legacy Tyman, was double that. So while we have made some progress in getting Tyman more towards the made-to-order versus a made-to-stock, that takes time. And there are certain pieces of that business that will never move to a made-to-order because it is more distribution. But I think what you will see from us really over the next probably two to three years is a significant improvement in getting that cash conversion cycle for the legacy Tyman business down, which will obviously impact cash flow positively. George Wilson: There are obviously multiple projects that we have identified to make that change, and I feel very comfortable where we are at in that progress, and more to come. But I think the softness in the market has allowed us to focus on the things that we need to do integration-wise and that we knew we needed to do, and I am very pleased with where we are at at that point. Scott Zuehlke: And then as far as the debt pay down, clearly it is our priority, especially given the macro backdrop here. We do feel like there is shareholder value creation if we can get that leverage or net ratio down closer to 2 and even below 2 over the next couple years for sure. So that is our focus. George Wilson: Makes sense. Julio Romero: Thanks very much. Operator: And as a reminder, to ask a— Our next question comes from Steven Ramsey with Thompson Research Group. You may proceed. Steven Ramsey: Hey. Good morning, everyone, and thanks for taking my questions. I wanted to look at spacers within the Extruded segment. Solid double-digit growth in the quarter and a good product category for quite some time. A couple of questions there. What were the drivers of growth within the quarter? And do you think spacers is a growth product in FY 2026? And then can you talk about the margin profile of that product relative to the segment in 2026? George Wilson: I will split my answers. I think the driver in the growth of all spacer markets, but especially our product lines that Quanex Building Products Corporation offers, is definitely being driven by the demand, and some of it code-related, on the performance, the thermal performance of windows. So as energy costs go up, you are able to justify the replacement of windows with higher-performing thermal windows, whether it is keeping warm air in the northern climates or better keeping the cold air in where we air condition. As we see migration from single-pane to double-pane windows, double-pane to triple-pane in some areas, that is driving an increase in volume demand, which lends itself well. And as codes and standards change to demand higher-performing, thermally performing windows, that falls right in line with the products that we offer at Quanex Building Products Corporation. So we do believe it has the potential to be a growth driver in 2026 and, to be honest, further years as that continues to take hold. Consumers are changing, energy costs are becoming a bigger part of the world, and these types of products are going to be demanded more, and we feel very good about that as a leading product in our portfolio. In terms of the breakout of profitability within the segment or even getting into any more granularity, we have not and cannot, for obvious reasons, provide any breakout there. We just have not provided that publicly. Steven Ramsey: Okay. Fair enough, and good color. You have talked about bundling being an opportunity for you over time with the Tyman integration going to market. In a tough backdrop, can you talk about if this is happening in any product sets or segments right now, or do you need a better demand backdrop to really see bundling become an opportunity? George Wilson: It is a great question. I think we are seeing it. We have started the development of that. It has been slow to take hold for two reasons. One is the macro backdrop. Obviously, volume helps any sort of bundling or incentive package regardless of what you are doing. The second one is, it is really hard to go to your customers and try to offer advantages of bundling when you have a product line that was not performing because of some operational issues. It is just a core fundamental for us that I have to have my house in order before I can offer those types of incentives as a valuable supplier. So I am not going to insult my customer base by trying to push incentives when I need to better improve operational performance. We are at that point. I feel really good at what we have done to protect our customers in something that was unforeseen. There will be a time and a place in the near future where we can have those conversations and give our customers opportunity to share in the benefits of what we provide. We were not there a year ago, and we are just getting to that point now. Steven Ramsey: Okay. That is helpful to hear. Last one for me. Cabinet wood components being a good story right now, and this was a segment that I pondered would potentially be a strategic value to someone else and maybe not core to Quanex Building Products Corporation. With the recent success, does this change the potential of this segment staying within the company and being a profit driver in the next couple of years? George Wilson: We are happy with what the segment is doing. We operate under a philosophy that, as a public company, I think everyone is this way. We are going to drive our product lines and our segments to perform the best they can to create as much shareholder value as we can, whether they are in the portfolio. The reality is every segment is potentially for sale every day. So you never say never, but we are extremely happy with what that group has done. I think that they are driving value for us, and I am pleased with their performance. I cannot give you any more of a clear answer because everything every day is always a negotiation. Steven Ramsey: Sure. Thanks for the color. Operator: I would now like to turn the call back over to George Wilson for any closing remarks. George Wilson: Thanks for joining the call today, and we look forward to providing our update in June. Thank you very much. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
Operator: Greetings. Welcome to Nutex Health's Fourth Quarter and Full Year 2025 10-K Earnings Call. [Operator Instructions] Please note this conference is being recorded. At this time, I'll now turn the conference over to Jennifer Rodriguez, Investor Relations Manager. Thank you, Jennifer. You may now begin. Jennifer Rodriguez: Good morning, everyone, and welcome to Nutex Health, Inc. Fourth Quarter and Full Year 2025 Earnings Call. My name is Jennifer Rodriguez, and I'm happy to serve as your moderator today. We're truly grateful for your participation and your continued interest in our company as we share the highlights of another exceptional year. Please note that this call is being recorded for future reference. Joining me this morning are some of the key leaders driving Nutex Health Forward, our Chairman and CEO, Dr. Tom Vo; our Chief Financial Officer, Jon Bates; our President, Dr. Warren Hosseinion; and our Chief Operating Officer, Wes Bamburg. Together, they'll provide prepared remarks to give you a comprehensive view of our performance, strategies and vision, after which we'll open the floor for your questions. Before I turn this over to Dr. Vo, I'd like to take a moment to address a few important points. Today's discussion may include forward-looking statements, which reflect management's current expectations about our future performance. These statements are based on what we know today, but they are subject to risks, uncertainties and other factors that could cause our actual results to differ from mobile share. For a deeper dive into these forward-looking statements and the factors that might influence them, I encourage you to review the press release and Form 10-K filed earlier this week as well as our various SEC filings. You'll find all the details there. Additionally, we may reference non-GAAP financial measures such as adjusted EBITDA during the call. For those interested in how these metrics reconcile to GAAP standards. Please refer to the press release and Form 10-K, where we've included that information. With those housekeeping items out of the way, it's my pleasure to hand the call over to Dr. Tom Vo, our Founder and Chief Executive Officer. Dr. Vo, the floor is yours. Thomas Vo: Thank you, Jennifer, and good morning, everyone. Thank you for joining us today. It's a pleasure to meet with you as we review Nutex Health's fourth quarter and full year 2025 results. This past year has been one of exceptional growth, operational discipline and continued innovation as we advance our mission of delivering high-quality, concierge level accessible health care to the communities we serve. Our organization remains deeply committed to a patient-first culture and I'm really excited to walk you through the accomplishments, strategies and opportunities that shape our year. First, let's discuss the full year 2025 financial and operational performance. Total revenue reached $875.3 million, an 82% increase from $479.9 million in 2024. Net income increased to $7.8 million to $52.1 million during '24. Note that this includes a noncash expense of $117 million for stock-based compensation for 2025 in the form of a onetime obligations of earnout shares issuable to qualifying under construction and ramping hospitals. This expense would decrease drastically in future years as most of the under construction facilities from 2022 have already vested. Adjusted EBITDA, which includes the add-back of the stock-based compensation rose $25.6 million, up 152.6% from $102.8 million in the prior year. On the volume side, our hospitals recorded a 188,300 total patient visits up 11.8% from 168,400 in 2024. 1.3% of that growth came from mature facilities, demonstrating their resilience and continued relevance in their markets. On the balance sheet, even with 3 new hospitals opening in 2025 and early 2026, the current portion of long-term debt decreased slightly to $14.4 million to $13.2 million. Net long-term debt increased from $22.5 million to $29.2 million, still very low relative to our revenue and expansion pace. Net cash from operating activities of $248.1 million for the 12 months ended December 25, 2025. And cash on hand grew dramatically to $186 million as of 12/31 2025, up from $41 million a year earlier. Next, I'd like to touch on the fourth quarter financial [indiscernible] During the fourth quarter, we did recognize a onetime $55 million revenue reduction related to the cumulative true-up of 18, 950 arbitration claims that were deemed ineligible by our traders under the IDR process. The periods involved for July 2024, and we first started through an arbitration and IDR through the end of December 2025. 18-month reconciliation resulted from a mid-2025 CMS directive instruction IDRs to resolve and clear the existing backlog of disputes. Fortunately, this process was very slow. On the inefficient side, and involve a lot other providers, including itself. This catch-up period reduced the number of active disputes compared to the same period last year and consequently lower reported net revenue for the quarter. It's important to emphasize that this was a onetime reconciliation driven by CMS mandate. So to put this number into perspective, approximately 18,950 cars deemed ineligible equate to an average of roughly 1,050 cards per month. And according to Halo MD, our IDR consultant, an ineligible rate for Nutex Health is roughly 8%, all the charts that we submit. This is significantly better than the national average of approximately 19%, indicating that our processes are performing well above industry norms. Additionally, Halo MD is continuing to challenge the ineligibility determinations for a portion of these charts. Should any of these disputes be resolved in our favor associated revenues will be added to future monthly and quarterly financial results. The good news, though, is that excluding the impact of this adjustment, our Q4 2025 adjusted revenue would be approximately $206.7 million, just consistent and in line with revenue levels from previous quarters However, even with a slight decrease in accrual revenue, operating cash flow remained very strong. Net cash provided by operating activities was $70.4 million in the fourth quarter compared to only $100,000 in the same quarter last year, demonstrating that cash collection continues to perform very well. We encourage investors seeking a deeper financial understanding of our business to focus on the full period from 2024 and through December 2026. Quarterly results can appear lumpy to the natural rate constraints of accrual-based accounting, which can shift the timing of revenue and expense recognition. Jon will provide additional insights into these dynamics later in the presentation. In terms of arbitration and IDR process performance, we continue to perform well within the IDR framework. It is now a normal part of our revenue cycle process. 50% to 60% of our claims are submitted through the IDR process. When a determination is issued eval in over 85% of those cases, demonstrating that insurers are still underpaying in 85% of the cases that we sent to arbitration. We are also currently realizing an average cash collection rate of more than 85% and our legal determination wins. We are actively monitoring the forthcoming IDR final rules from the office of management and budget and other federal agencies. At this time, we do not expect any material changes to the current process and remain optimistic that the final rule will further strengthen and streamline the IDR process with additional end dates for insurers to comply. An example of a more efficient IDR system would be avoidance such as the 18-month true-up that we just experienced for the fourth quarter in the future. On the regulatory and legislative outlook front, we are closely watching the progress of the No Surprises Act -- I'm sorry, no Surprises Enforcement Act, also known as the Murphy Act. It is designated as HR 4710 in the house and S-2420 in the Senate. These mills are currently under review in the following committees in the house, the energy and on commerce, education and workforce and ways and means. And in the Senate, it is currently being reviewed in the health, education, labor and pension it otherwise known as helped. Our 2025 financial and operational results demonstrate the strength of our model, the scalability of our platform and our disability focused on 3 core metrics: ER visit growth inpatient volume growth and revenue per patient. Many of you know, Nutex Health has operated since 2010. More than a decade as a private company, our micro hospital model built on concierge level, high-accessible care, deliver consistent and respectable profitability. After going public in 2022, we faced challenges, primarily driven by the faulty implementation of the No Surprises Act or the NSA which materially reduced reimbursement across our industry. The authors of No Surprises Act are credit anticipated that insurers might use the payment process to underpay smaller providers like us. That reason, Congress included the independent dispute resolution IDR process as an essential safeguard, giving providers a meaningful avenue challenge unfair reimbursement. Now this mechanism insurers would have the unchecked ability to dictate payments unilaterally, effectively determining winners and losers in the marketplace and undermining fair competition resulting imbalance with Stifel free trade, in small operators and distort the health care ecosystem. In many ways, this is truly a David and Goliath [indiscernible]. As we enter the next phase for our growth, we are fortunate to have strong liquidity and adequate cash on hand. This financial position allows us to remain disciplined and highly return focused. Our capital allocation strategy continues to center on 4 priority areas: number one, share repurchases. Share repurchases activity underscore our conviction in the intrinsic value of new Excel, launched a $25 million repurchase program in late 2025 and completed it in early 2026. Earlier, we authorized an additional $25 million for further repurchases. These programs reflect our commitment to delivering shareholder value, prudent accretive capital deployment. For two, growth at existing hospitals, our existing micro hospital footprint remains a powerful engine for organic growth. We are heavily investing in both the ER and inpatient volume initiatives to expand capacity on service lines and enhanced revenue quality. In terms of ER volume initiative, we are strengthening community engagement, expanding referral pathways and diversifying service offerings. Targeted investment including services such as medical detach programs favor health services, outpatient imaging or patient procedures, personal injury services. These initiatives are in addition to our normal ER volume and will help expand patient access and improve the overall revenue mix. On the inpatient volume initiative, and to capture more high acuity cases and reduce unnecessary transfers, we are enhancing specialized equipment. We are very excited because with advances such as AI, medical device, biopharma, there are more cases that we could treat at our micro hospital than ever before. We have also expanded inpatient nursing and ancillary capacity. And to top it off, we are adding a tele specialist, I'm sorry, tell a hospitalist and tell a specialist coverage for all of our hospitals in the coming year. These upgrades allow us to manage high-acuity patients within our own facilities, increased retention and strengthening contribution markets. Wes, our COO, will discuss more on this operational part later. Early expansion of our IPA and published and Health division. Our independent physician Association currently operating in Los Angeles, Phoenix, Houston and South Florida continue to be a strategic advantage, strengthen our relationship with PV physicians enhanced care coordination and support by directional referrals and to expand our IP footprint into markets surrounding our hospitals, enabling more efficient care pathways, stronger physician alignment and by direction referrals between IPAs and the Nutex Hospital. This expansion also position us more effectively within the risk-based and value-based reimbursement models and our goal will be to operate as many IPAs around our existing hospitals as possible. Warren will discuss this more in detail when he speaks later. Lastly, real estate development strategy. We are evaluating opportunities to develop micro hospitals using a capital-efficient real estate model. Will we develop and own the facilities during the stabilization period build both operational and real estate value and possibly eventually execute a sale-leaseback transaction to recycle capital into future. This approach preserves strategic control of early-stage operations while enabling accelerated expansion without over leveraging the balance sheet. Today, Nutex Health operates 27 hospital facilities across 12 states. In 2025 and early 2026, we opened new hospitals in Sherman, Texas, St. Louis, Missouri and Amble, Texas. We are actively building a pipeline of new hospitals for later in 2026, 2027, 2028, starting in 2029. Each facility is designed around the same principles. [indiscernible] level care little to no emergency wait times and tailored inpatient and outpatient services that meet the needs of the local community and remains very strong. Physicians and community leaders across the country continue to approach us weekly using new facilities in their markets. We're trying to keep up with demand. In addition, we are in ongoing communication with payers and continually reviewing their in-network contracts to evaluate whether the terms are offered are fair and reason. Good news is that we are now receiving better offers than we have in the past. In closing, it has taken approximately 2.5 years to recalibrate our operational and reimbursement strategies. I am very pleased to share that in 2025, return to the level of profitability that our model has historically produced. Over the years, we have operated 4 different administrations, navigated the complexities of the Affordable Care Act drive through COVID, overcame the challenges of the No Surprises Act and are now actively optimizing our approaches to the IDR process. While no one can predict the future, our longevity and experience across multiple health care cycle give me confidence that Nutex can continue to pivot effectively against any geopolitical or regulatory headwinds. We are very excited while the trajectory of Nutex Health as we enter 2026. We are carrying significant momentum and we believe we are very well positioned to continue our disciplined, profitable growth. So with that, I'll turn it over to Jon Bates, our CFO, walk through the financials in more detail. Jon? Jon Bates: Thanks, Tom. Appreciate that, and good morning, everyone. I'm very excited to break down the financials for Nutex Health's fourth quarter and full year 2025, a year where we didn't just grow, but we continue to improve our business model while delivering on a record year for the company. Tom has given you some of the big picture, and I will zoom in a little more detail, beginning with the full year of 2025 results, and then we'll discuss the fourth quarter of '25 as well. So starting with the 12 months ended December 31, '25 compared to the same period in 2024. I wanted to start by highlighting the fact that the company worked very hard in 2025 to continue to improve our overall controls environment and that effort enabled us to remediate all previously disclosed material weaknesses in internal controls over financial reporting in 2025. It's a huge accomplishment that shows our commitment to having a solid control environment that can be relied upon by our shareholder base and the investment community. Now on to some of the numbers. Total revenue for the full year of 2025, as Tom indicated earlier, increased by 82.4% or $39.5 million, up to $875.3 million versus $479.9 million for the full year of 24% with the hospital division revenue being $844.2 million in 2025. Of the $844.2 million in the hospital revenue $7.8 million or approximately 63% related to a combination of both higher acuity claims as well as success through the IDR process. For some perspective, we reduced this 7% from the third quarter of 2025 when we were closer to 70%. Regarding arbitration-related revenue, we have submitted between 50% to 60% of our claims through the RDR process, which came down approximately 10% from the third quarter as well. And when an award determination is made, we currently prevail in over 85% of those determinations, and we currently have an average collection rate of over 85% of those determination wins. From an arbitration cost perspective, it's approximately about 26% of that arbitration related revenue. And of the total revenue increase mature hospitals increased their revenue by 73.4% for the year of 25% versus the same period in '24. Hospital visits, as Tom indicated earlier, increased by 11.8% or 19,891 visits to 188,279 visits in 2025, and versus 168,388 visits in the same period in '24, with those mature hospitals growing at 1.3% over the same period. Additionally, the Population Health division had a slight revenue growth of 0.7% to $31 million for the year of 2025 versus 30.9% for the same period in '24. So in addition to the revenue and visit growth note and above, facility and corporate costs also showed improvement for the year of '25 relative to '24. Total facility level operating costs and expenses increased $147.3 million during the period but only represented 49.2% or $431 million of total revenues for 2025 versus 59.1% or $283.7 million for the same period in so effective decrease of just under 10%. Of the $147 million increase for the period, $138.3 million related to the arbitration costs for the arbitration -- additional arbitrational revenue booked during this period. Total stock compensation expense for the 12 months ended December 31, 2025, was $117 million compared to only $16.6 million in the same period of $24 million, which is $100.4 million increase in '25 and just so you know, almost all of this increase was related to the 3 hospitals that completed their earn-out periods during the third quarter of '25. Now we do have 3 more facilities currently in the earn-out period with one of them completing the earn-out period in the first quarter of '26 in the remaining 2 completing their periods earn-out periods in the fourth quarter of '26. The gross profit for the 12 months in 2025, was $444.3 million or 50.8% of total revenue as compared to $196.3 million or only 40.9% of total revenue in the same period in again, just under 10% increase for the 12-month period ended December '24 versus 2025. From a corporate and other cost perspective, general and administrative expenses as a percentage of total revenue for the 12 months ended '25 decreased to 5.9% or $51.7 million from 8.7% or $41.9 million for the same period in 2024. Operating income for the 12 months ended December 2025 was $275.6 million compared to $130.7 million for the 12 months ended 2024, which is an increase of $144.9 million. Net income attributable to new tax was $70.8 million for 2025 compared to net income of $52.1 million for the 2024 period, an increase of $18.7 million. Adjusted EBITDA attributable to Nutex increased $156.8 million or 152.6% from $102.8 million in 2024 and to $259.6 million in 2025. So now let's move on to discuss more the fourth quarter of December 2025 and compare those results to the fourth quarter in December 31, 2024. And Tom indicated some of this on his earlier discussion. But for the fourth quarter of 2025, our total revenue did technically decrease by 41.1% or $105.9 million to $151.7 million versus $257.6 million for the fourth quarter of 2024. With a little more context, the company attributes $105 million decrease primarily to 2 items that we disclosed in our press release. Number one, was the onetime $55 million cumulative true-up of 8,950 arbitration claims that arbitrator is determined to be ineligible for the in the fourth quarter of 2025 under the independent dispute resolution process. These claims were submitted for the period from July '24 through all through December '25. So cumulatively, we believe the onetime cumulative arbitration true-up resulted from a mid-2025 CMS directed instructing the certified independent dispute resolution entities to address and clear any backlog they had of their disputes. The associated kit up reduced the number of active disputes compared to the same period in '24 and contributed to lower net revenue for the quarter. Now we believe the backlog has been materially addressed, but we'll continue to watch the process very closely. The second item was arbitration revenues of $69 million, and this is for the previous year 2024, that related to submissions that were in that related to the third quarter of 2024 that were recorded in Avenue in the fourth quarter of 2024. As you probably recall, prior to September 30 of 2024, the company did not have any sufficient historical data to determine the likelihood of a prevailing determination of potential award amount or the collectibility of such awards. But after considering the impact of the adjustments above, including that $69 million, our 2025 4th quarter revenue would be $206.7 million and the 2024 4th quarter revenue would be $188.6 million, which would result in a revenue increase of $18.1 million period-to-period, primarily driven by higher patient business in the fourth quarter of 2025 compared to the fourth quarter of 2024. So I just want to take a step back on how we accrue revenue for the company for those that maybe aren't as familiar with it, which hopefully will explain some of this situation and its impact as we move forward. So if you look at it, as the company has been predominantly out of network for over a decade with the billing process. Therefore, we have to negotiate most of the claims that are sent to payers based on what we believe we should be paid using market industry payment data. In our accrual process, there were 3 key items that we use in this process, and it is all based upon the historical results we have regarding payments by 3 items, payments by each specific payer, by each specific physical location of the visit and thirdly, by the specific acuity level of that visit. And the averages of those results over the recent past, let's say, 1 to 2 years of activity. And then we take those averages at that specific detail and then they're attached to a current period visit with similar characteristics of those averages, which then sets our accrual of realizable AR and revenue in the month of the visit. And then as payments come in, we adjust the accruals up and down, up or down based upon the results with the net impact being recorded to revenue in the period when the payment is ultimately received. So these numbers and the history we're talking about here are continually updated as each payment is made and our updated averages will affect the new current period visits as we move forward. And this is exactly how we've been doing it. since inception. So in the case of the arbitration activity, we added a layer to our standard revenue accrual process that is very similar to our baseline process. But because the process has been new to us since we began the process in July of 2024, we have continued to build this additional layer as we have more and more data. And in the case of the ineligible claim write-down or claims write-down in the fourth quarter of 2025, there had been a nominal number of items like that, small, nominal that we had seen and accounted for in our normal accruals up through the third quarter of 2025. But certainly, there was nothing material in there. And so we were not aware of any material indications in this area that ultimately led to the onetime true-up of outstanding disputes in the fourth quarter of 2025 that the RDR had in backlog until the fourth quarter of 2025. So that's the first time we understood what was going on. And so we're continuing to work to better understand the overall situation as it is so recent to that process. And now we believe we have a much better understanding of this and we'll monitor it as we go forward. Now as we have gotten this recent information and continue to fine-tune our accrual process, we believe that this situation did resolve a majority of their backlog of claims that would be deemed ultimately ineligible, but anticipate this will continue to be a part of the process as we move forward, but just at a much more nominal consistent rate. Now the industry data that we have seen indicates that ineligible claims within the entire IDR process have been closer to 19% of submissions. While our current data that we have through now, Nutex shows were cumulatively showing less than an 8% ineligible claims submission rate since we started the process in July of 2025. So we realize this is part of the overall arbitration process now, and we haven't included within the way we do our accrual process as we move forward. Now we'll finish with the rest of the fourth quarter 2025 discussion. For hospital division visits, we saw an increase during the quarter of 6.1% or 2,761 visits to 48,205 visits in the fourth quarter of 2025 versus 45,444 in the same period of 24 with mature hospitals slightly decreasing 0.3% in the fourth quarter of '25 compared to 2024. Additionally, the Population Health division revenue increased by $0.1 million or 1% to $8 million in the fourth quarter of 2025 from $7.9 million in the similar period of '24. Now we discussed the growth in the hospital revenue visits that we've seen in the fourth quarter. And now let's discuss the overall facility and corporate costs. Total facility level operating costs and expenses increased $10.5 million for the fourth quarter of '25 versus the fourth quarter of '24 to $105 million from $116 million for the same period in 2024. Total stock-based compensation for the 3 months ended December 31, 2025, was a credit of $2.6 million compared to an expense of $14.6 million for the same period in '24. Operating income for the fourth quarter of 2025 was $30.9 million compared to $114 million in the fourth quarter of '24, representing a decrease of $83.4 million quarter-to-quarter. Net income attributable to new tax was $11.8 million in the fourth quarter of '25. The comparable net income attributable to new tax was $61.6 million for the fourth quarter of in showing a $49.6 million decrease quarter-to-quarter. Adjusted EBITDA attributable to Nutex decreased $70.1 million from $86.7 million in the fourth quarter of $24 million to $16.6 million in the fourth quarter of '25. But as discussed above, we believe that the fourth quarter numbers aren't necessarily representative of a typical quarter because of the effect of the onetime cumulative arbitration true-up discussed previously. We believe that looking at the year-to-date numbers represents a much better picture of the company's strength as we continue to grow in visits and volume, and our cash flow continues to be extremely strong, with over $207 million in a hospital receipts collected in the fourth quarter of 2025 alone. Looking at our balance sheet, it remains very strong with cash and cash equivalents at December 31 of '25 at $185.6 million. It's up $144.9 million or 356.6% from just $40 million -- $40.6 million at the end of December '24. The other size will increase at the end of 2025 is the accounts receivable balance, which was a $319.4 million compared to $232.4 million at the end of '24 and our consistent strong collections throughout the year provides us continued confidence in this increase. Regarding cash flow. Net cash from operating activities increased by $225 million for the 12 months ended December of 2025 to $248.1 million as compared to only $23.2 million for the same period in 2024. On the liability side, as Tom indicated, our total bank debt increased by $2.1 million to $43.5 million at December '25 from $41.4 million at December of 2024, with the majority of this debt really just relating to equipment loans at our hospitals for such items as MRIs, x-rays, ultrasound and CTs, the main equipment that runs our facilities. So this is a very slight increase in 2024 with the overall balance being a relatively small amount of true operating debt for a company of our size, especially with opening 2 new facilities in 2025 and with another one in the early part of 2026. With all this said, our balance sheet remains very solid, and we have provided our company the flexibility to execute on our growth plan in 2026 and beyond. Now on to Warren Hosseinion, our President for a population health update. Warren? Warren Hosseinion: Thank you, Jon, and good morning, everyone. It's great to be with you today to discuss how Nutex Health is advancing population health management, an important piece of our mission to deliver sustainable, impactful health care. In 2025, we made strides in this area, and I'm excited to share the progress, the strategies driving it and our plans to keep pushing forward. Let's start with where we are today. Our Population Health Management division now oversees a diverse group of approximately 40,000 members across our platform including a mix of Medicare Advantage, commercial and Medicaid managed care members. That's a broad reach, and it's growing because of the trust we've built through our independent physician associations or IPA I am happy to report that each of our 4 operational IPAs were profitable in 2025. Our strategy revolves around physician networks our IPAs are comprised of networks of contracted and credentialed primary care physicians and specialists located around our facilities building strong partnerships with local doctors is critical. By forming these IPAs, we are building awareness of our hospitals among the local community doctors and their patients. Why do the physicians join our IPA. We offer these physicians ownership in our IPAs, they can also participate in the Board and committees of the ITA, we offer them to get on the staff of our hospitals so they can admit and follow patients we also incentivize the physicians to achieve high-quality metrics. We believe that over time, these relationships will not only increase the volume of patients to our hospital but also create a web of care that's seamless for patients. Our vision is that our hospitals and IP will work hand-in-hand to amplify our reach and effectiveness. We are fostering collaboration, sharing best practices and ensuring every provider is aligned with our patient-first culture. We're growing our IP strategically focusing on areas near our hospitals to leverage existing relationships and infrastructure. In 2025, we launched the new IP in Phoenix. In 2026, we plan on launching 2 IPAs, one in Dallas and one in San Antonio. Going forward, our strategy focuses on 3 areas: provider network expansion by partnering with physicians in high-value markets value-based contract growth by increasing the number of covered lives under management and technology scaling by enhancing our analytics and care management platform. With that, I'll turn it over to Wes Bamburg, our Chief Operating Officer. Wesley Bamburg: Thank you, Warren, and good morning, everyone. As mentioned earlier, volume is up. For the year 2025, total patient visits were up 11.8% from 2024, with mature hospital visits growing at 1.3% over the same period. This performance highlights solid demand and the disciplined execution behind our ER and inpatient initiatives. From an operational standpoint, our focus throughout the year has been ensuring that our investments translate into consistent execution across every facility as we broaden our service offerings ranging from medical detox and behavioral health to advanced outpatient imaging and procedures, we have been building the operational infrastructure required to support higher throughput and a more diversified patient mix. That includes standardizing workflows, strengthening our intake in triage processes and enhancing staffing models to seamlessly accommodate increased ER demand while protecting the patient experience. On the inpatient side, the expansion of specialized equipment and tele specialist capabilities has allowed us to manage more complex patients safely and effectively within our hospitals. Operationally, we've paired these enhancements with stronger clinical governance, upgraded care pathways and expanded training to ensure that higher acuity care is delivered with consistency and quality across the enterprise. These efforts are already improving patient retention, reducing avoidable transfers and supporting stronger contribution margins. From a cost management perspective, 2025 was a transformative year, driven largely by the ongoing advancement of our corporate purchasing and supply chain teams. Excluding arbitration expenses, operational costs were 33.4% of total revenue for 2025, down from 47.1% in 2024. Over the past year, this function has become far more centralized disciplined and data-driven giving us greater ability to engage more effectively with key vendors. As a result, we secured significantly better pricing on major imaging equipment, including MRI and CT scanners as well as improved rates on lab instruments and reagents. These categories have historically been among our highest cost items, so the impact on margins is meaningful. Lastly, during 2025, Nutex received more than 8,700 patient reviews averaging an enterprise rating of 4.8 out of 5, a level of satisfaction that continues to set us apart in the health care industry. This performance reflects the strength of our model and mission, which are built around delivering concierge-level service, little to no ER wait times and a highly personalized patient experience. As we scale, we are advancing system-wide standardization, both in how we engage with patients and in the care we deliver, ensuring that every Nutex facility delivers consistent outcomes, service and a best-in-class experience. These foundational elements continue to differentiate Nutex in a sector where patient satisfaction and reliability are critical drivers of long-term value. Across the organization, our teams remain deeply focused on reliability, scalability and disciplined execution. As we grow, we are firmly committed to ensuring that every new tech facility delivers the same high-quality patient-centered care that defines our brand and supports our long-term growth. Thank you, everyone, for your time, and back to you, Jen. Jennifer Rodriguez: Thank you, Wes and team for those updates. I will now turn it over to our operator, Rob, who will begin the Q&A portion of the call. Operator: [Operator Instructions] And our first question will be coming from the line of Thomas McGovern from Maxim Group. Thomas McGovern: I want to start with some high DR-related questions, right? So historically, and on today's call, you've discussed IDR submission rates in the range of 60% to 70% with historical collection rates hovering around 80%. If we look at the press release, it actually says that the submission rates were 50% to 60% with that with an improved collection of around 85%. So I just wanted to see if you guys could help us reconcile the shift, is this a reflection of maybe higher quality, fewer submissions but higher quality and that's leading to an improved collection? And how should we look at this dynamic moving forward? Unknown Executive: Jon, do you want to get -- yes, go ahead, Jon. Jon Bates: No, I was just going to say -- no, you're right, Thomas. Obviously, we've seen -- and the whole goal here in the independent dispute resolution is, ultimately, if we can get to a situation where we're able to get these claims resolved prior to it, that's a win. So of course, up through now to the third quarter, we were submitting a higher percentage. And actually, historically, it was around that 60% to 70%. But what we saw I've seen in the last quarter, now cumulatively sort of the impact is a little bit less in which we hope that will be the trend with the trend being that ultimately that would go down and we'd still be able to get what we believe to be fair and reasonable payments. And we believe that's still happening. And as we look to try to get in contracts with payers, which we're always looking to try to do, if we can find one that's reasonable, we'll continue to do that. So I think it's partly some of that going on for sure, and it's something we're going to watch real closely as we look and continue to watch reimbursement rates, which have stayed very strong throughout the year, as you've probably seen. And as you can tell, even the collection piece as you referenced was where we were kind of close on in the second and third quarter. Now we're collecting it 85-plus, continuing to have a strong legal determination wins of high -- mid- to high 80s. And so all of that, we anticipate hopefully even improving and we'll watch it as we go, but it's been a consistent pattern of an improvement there. So I think that's what we're seeing is that we're able to resolve more either with contracts or in open negotiations earlier on. It's still a smaller percentage, right, that we want there to be more of that on the front end. But for now, I think the trend is actually positive and the more watch reimbursement is affected with that. And as you know, and you and I have talked about this before, even if we are able to settle some of these earlier in the process was in open negotiations specifically open negotiations if they don't pay us well at the beginning, even if it's slightly less than even though we feel that we're getting is paid fair and reasonable, if it's slightly less than that, when you remove the cost component, from a net perspective, it ends up being similar or maybe even more positive. So we don't view it as negative at all, I just view it as kind of the opportunity as we move forward to watch this with our goal, ultimately, of getting everything resolved more timely, quickly and if we can have contracts across the board, we would do that. We just have not been able to successfully execute those and find reasonable fair payments yet from many of the payers. Tom, you might have more to add. Thomas Vo: No, that's correct, Thomas. And in essence, as you know, health care is all about ebb and flow. Some quarters higher, some quarters lower. But to Jon's point, it is definitely moving in the right direction with less submissions, which may mean that the payers are paying better and more correctly,first time. So we will continue to monitor that progress. Thomas McGovern: It sounds like solid improvement with open negotiations. And obviously, you don't have to do a whole drawn out arbitration process. That's great for you guys. Great. So next question for me. You guys recently reopened a hospital in Texas is back in January. First part of this question is, what led to that decision? What are you seeing in that market now that leads you to believe this is the right time to do so? And then a follow-up to that is, do you believe that you're on track -- you remain on track rather to open the 5 to 6 facilities you've discussed in the past in 2026. And maybe if you could -- Tom, you mentioned a new real estate strategy at [indiscernible]. So maybe if you could touch on that and how that might impact your planned openings in the year. Thomas Vo: Yes. No, thank you, Thomas. So the first question, our Ambo Hospital, we did have to close it. when we were going through the No Surprises Act issue. And after we established the IDR process, reimbursement get better. And so when that happened, it became a correct move to reopen it simply because we knew that there was volume there. And so the volume that we saw prior to the IDR was maybe not enough make it a profitable operation. But with the IDR process and better collection, better fair and reasonable collection that business made sense. And on top of that, as you know, we've essentially focus on more of an inpatient side. And so we became much better at it when we weren't as good at it back then. And so now that we're much better at the inpatient side, opening a slightly bigger hospital with more inpatient bed just made better sets and made a better business sense with a better projection. Does that answer the first question, Thomas? Thomas McGovern: Yes, yes. And then just a reminder, the second part of that question is, do you believe you remain on track for the 5 to 6 openings in '26 that we've discussed in the past? And then just how your new real estate strategy might influence the timing or the scope of these openings? Thomas Vo: Yes. So the 5 to 6 locations are both for '26 and '27. So in 2026, the 3 locations that are on track to be open are Jacksonville, West Little Rock and San Antonio. And so those are the 3 for sure this year that are essentially will be finished with construction, I would say, probably by third quarter. And then on top of that, we're already working on '27 and '28 and so we protect probably another 4 hospitals to open in '27 and probably another 4 after that. And then in terms of the real estate strategy, yes, now that we're fortunate enough to have some cash in the bank, the idea is to explore ways where new tax could essentially start the development on the new hospitals. And once the hospital has stabilized and convert it to a REIT or sell it to a real estate investor and take that cash out and we invest in the 3 to 4 new projects going forward. So essentially to recycle the cash. The idea is that, that cash would essentially be accrual, and it would be essentially profitable for the company, whenever we cycle that cash again. The initial investment is that cost but hopefully, when we do a sale leaseback, we would make a small profit on it and then use that to recycle the cash to continue with the pipeline. And by the way, we have not formalized anything yet, but that is under discussion as an additional way to maximize our cash and return some investor maximal shareholder returns. Operator: The next question is from the line of Gene Mannheimer with Freedom Capital. Eugene Mannheimer: So Tom, Jon, when did you -- when exactly did you learn about the true-up adjustments? And have you given any thought to preannouncing? Jon Bates: Yes, I can talk to that. Thomas Vo: Go ahead, Jon. Jon Bates: Yes. So the earliest indication we were getting was in and that was just information we were seeing on the early ineligible information was the middle part of the fourth quarter, and it was very, very new to us trying to understand it. In fact, a lot of it is it comes to us, we look at it and say, there we might even, in a lot of cases, disagree with it being deemed ineligible and there's a process we didn't talk about here, but that we're going back on some of these and saying, hey, there's -- we disagree with that. But long story short is we were getting information in the middle part of the quarter, but it was very, very new. So then us trying to understand exactly the impact, understand exactly the legitimacy of it has taken us a couple of months to go through and analyze it. So that's the reason we -- there was nothing -- we didn't know what to report because it was new. And as quickly as we got our clarity on it, then we had to -- we started to roll it through our numbers, which was as we were finishing out the year. And then from a timing perspective, this was the best opportunity based on the data we have. to when we would communicate it because we didn't really know much sooner than this exactly that impact. Eugene Mannheimer: Got you. That makes sense, Jon. And when we think about those 19,000 or so claims that were deemed ineligible, you do the math on that. I think it's about $2,900 a claim. So is it safe that these were mostly confined to ER visits and not any inpatient volumes? Jon Bates: Yes. That's good insight. So yes, a majority of those would be more. It was a little bit of the lower we call it, tier or acuity. And so yes, most were more relative to our -- what you call more and more standard ER-type visit, maybe with blending to maybe one step forward, maybe an observation or a couple inpatient, but majority of them were EOR-related. Eugene Mannheimer: Got you. And one more for me. In terms of any future true-ups that might happen, should there be any -- would those also likely to be reserved in the fourth quarter like what you had yesterday? Or could they be trued up anytime? Jon Bates: Absolutely. I mean it's -- we don't control that, but I can tell you that as we see the information, if we see any activity that shows and there's going to be, as I mentioned, there's going to be ineligibles in this process. I think a year ago, they were talking about it being a much higher percentage even what the industry says they finished with recently, which was 19-ish percent of every claim going through is deemed to be an eligible and we're significantly less than that as we're seeing, but we just became known in a material nature of it in the fourth quarter. There were smaller ones that came to us earlier in the period, not material and we addressed those and they went through our natural accrual process. And then this sort of sprung up on us in the fourth quarter was a big surprise, but now with more knowledge and more understanding of the communication from, say, CMS to a lot of those independent dispute resolution and user arbitrators I think they were almost threatening them to say, you guys don't catch up if you're behind, then we're going to find someone else to do it. And as a result, I think they got caught up. They also have added more arbitrators, certified arbitrators at this point as well. So we believe that the backlog concept is probably something more of the past. There will be some at all times. And then more importantly, we'll find out if there is something sooner in the process, and then we certainly will account for that as soon as we know it. But also, as we talked about in that whole description of how we accrue for revenue, the more data we have like this, now we incorporate that into our model, so there will even be some level of ineligible assumption in a current day visit based on what we're finding out now based on our percentages. So -- and then we'll adjust that like everything else every single month, which is a complex process, but I think we have a really phenomenal team that has been doing this for 3 or 4 years now in [indiscernible] and many auditors and banks have spent a ton of time analyzing our process, and they've all come away saying, what you guys are doing seems very solid. So it's just new. It's a new process, and I think we're getting better at this for the IDR side and who knows what's going to be next, but this looks to be the latest, newest situation that's happened, and we feel like we've addressed it and don't feel like it will be a material issue going forward, but we'll watch it and see. And to your point, we don't wait to record it at some later point as soon as we know it or see any indication of it happening, we're going to do our best to try to reflect it within the current numbers that we have so that we're properly recording our revenue costs and keeping in line with the accrual-based approach. Good question. Operator: At this time, I'll hand the floor back to Jennifer Rodriguez for closing comments. Jennifer Rodriguez: Thank you all for those valuable questions and answers. For all those joining us today, if you have more questions, please email us at investors@nutexhealth.com, and we'll get back to you promptly. On behalf of the Nutex management team, thank you all for joining us for our fourth quarter and full year 2025 earnings call. We've covered a lot, growth, strategy, challenges and our vision, and we appreciate your time and interest. A recording of this call will be available on our website for a limited time. So feel free to revisit it. Take care, everyone, and we look forward to keeping you updated on our journey. Operator: Thank you. You may now disconnect your lines at this time, and have a wonderful day.
Operator: Greetings, and welcome to the Methode Electronics Third Quarter Fiscal 2026 Results Conference Call. And please note, this conference is being recorded. I will now turn the conference over to your host, Joni Konstantelos, Managing Director of Riveron. Ma'am, the floor is yours. Unknown Executive: Good morning, and welcome to Methode Electronics Fiscal 2026 Third Quarter Earnings Conference Call. Our fiscal 2026 third quarter financial results, including a press release and presentation can be found on the Methode Investor Relations website. I'm joined today by John DeGaynor, President and Chief Executive Officer; and Laura Kawaltick, Chief Financial Officer. Please turn to Slide 2 for our safe harbor statements. This conference call contains certain forward-looking statements, which reflect management's expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements are subject to the safe harbor protection provided under the securities laws. Methode undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in Methode's expectations on a quarterly basis or otherwise. The forward-looking statements in this conference call involve a number of risks and uncertainties. We will also be discussing non-GAAP information and performance measures, which we believe are useful in evaluating the company's operating performance. Reconciliations for these non-GAAP measures can be found in the conference call materials. The factors that could cause actual results to differ materially from our expectations are detailed in Methode's filings with the SEC, such as the 10-K and 10-Q. Please turn to Slide 3, and I will now turn the call over to John DeGayner. Jonathan DeGaynor: Thanks, Jonny, and good morning. Welcome to Methode's Third Quarter 2026 Earnings Call. I want to begin by recognizing our global team for their continued focus on serving our customers in the face of a challenging and rapidly evolving environment while driving forward our multiyear transformation journey. Across our manufacturing sites and corporate functions, our teams have demonstrated resilience as we work through industry headwinds and advance our transformation initiatives. Your discipline, collaboration and commitment to continuous improvement are strengthening our foundation and positioning us for better long-term performance. Thank you. Moving to our third quarter results. We generated $234 million in sales and $7.3 million in adjusted EBITDA. While profitability was pressured year-over-year, we delivered positive free cash flow of $10 million in the quarter and approximately $17 million in year-to-date cash flow as we remain on track to achieve our fiscal '26 free cash flow targets. Importantly, our Industrial segment sales increased 9.5% year-over-year, reflecting continued strength in off-road lighting and power distribution solutions supporting data center applications. That performance demonstrates the benefit of our growing exposure to higher-growth industrial power markets and helps offset some of the headwinds we are seeing in North American automotive and in commercial vehicle lighting. Generating cash while navigating a volatile revenue environment is a clear reflection of the operational discipline we are building into this organization. Please turn to Slide 4. Our transformation journey continues. As I've said before, progress will not be linear and is not something that could be measured in a single quarter or even a few quarters. Our transformation is a multiyear effort focused on strengthening the foundation of the company, utilizing our resources as efficiently as possible and finding new sources of value. Along the way, we must refine our portfolio, align our business structure, optimize our footprint and embed operational discipline into everything we do. At the same time, there are factors outside of our near-term control, commercial vehicle market softness, EV program delays and macro volatility, particularly in North American automotive that will impact our improvement trajectory. We are addressing those realities directly with our teams and with our customers, but we are not allowing them to distract us from executing our priorities. Let me briefly recap these priorities. First, stabilize and improve our operational execution. When we started this journey, we had 2 facilities that were extremely challenged, Egypt and Mexico. We continue to see positive trends in Egypt as a result of the changes we have made there. The transformation of our Mexico facility is not as far along. We're making progress in upgrading the team and improving execution on both existing programs and new programs. However, we have not seen the productivity improvements as quickly as we initially expected, which has been exacerbated by commercial vehicle volume reductions and program delays from multiple North American customers. These external factors were the primary driver of our EBITDA guidance revision that Laura will talk about later in the call. We've built an entirely new leadership team in Mexico, and we are supplementing that team with both corporate and specialist external resources. Our new leadership team is getting fully up to speed and working hard to tackle the challenges in our 2 Mexico facilities, understanding root causes, driving accountability and resetting expectations. Naturally, when you're transforming an operation, there's a cleanup involved. You have to surface issues before you can permanently fix them. This is part of the process. It is not comfortable, but it is necessary. We are taking focused actions to improve execution, efficiency and cost control, and we expect performance to strengthen as those actions take hold. Second, we are refining and simplifying the portfolio. A clear example is the completed sale of the Dataamate business, which I'll talk about more in a minute. Third, align our cost structure and footprint. We completed the move of our headquarters from Chicago and sublease that facility. We've signed a purchase agreement on our Howard Heights facility in Illinois, a facility that formally housed our Dataamate business. So we are making good progress in reducing our overall footprint. And fourth, position the company to capitalize on secular growth opportunities, particularly in Power Solutions. We are actively capitalizing on the data center and vehicle electrification megatrends, reallocating resources toward the areas where the strongest long-term return potential. These are deliberate, measurable actions, and we are doing what we said we would do. These are not concepts, they are actions. Turning to Slide 5. For background, Datamate is a supplier of copper transceivers for enterprise and telecom networks. While it was a solid business, it was not aligned with our long-term power solutions strategy. Divesting it allows us to redeploy capital and management toward higher growth, higher return opportunities, particularly in our Industrial Power Solutions business. We are concentrating our capital management -- capital and management attention and engineering resources on the areas that can generate the greatest long-term returns. The proceeds from this sale and the Harvard Heights facility sale will be used primarily to repay debt and further strengthen our balance sheet, consistent with our disciplined capital allocation approach. Turning to Slide 6. Power Solutions has been part of the Methode DNA for more than 60 years. We are now leveraging that deep expertise to serve today's most demanding applications across EV, industrial and data center markets. We're expanding our customer base. We are adding experienced industry veterans into the industrial power business, and we are rotating engineering and commercial resources toward higher growth opportunities. This is not a short-term pivot. It is a structural reallocation of talent and capital, and we expect this to pay dividends over time, but we are still early in this journey. Let me spend a minute on data centers. Based on Q4 order patterns, we now have line of sight toward $120 million annualized run rate. This represents a significant increase in run rate year-over-year. Importantly, this run rate reflects current end customers through various contract manufacturers. It does not assume incremental wins from new accounts. Our actions regarding additional commercial and engineering resources and our investment in items like vendor-managed inventory are enabling us to react much more quickly to customers. We are seeing increasing momentum as a result of these actions. We are expanding our customer base, but our current run rate is supported solely by existing relationships. As momentum builds, the trajectory suggests a 50% increase in run rate year-over-year in the near term. This is a meaningful growth driver for Methode both for today and the future. Turning to Slide 7. Transformation is not linear. There will be turbulence, particularly in North American automotive, and we are seeing that today. But we are building a stronger operational foundation underneath the business. At the same time, we are executing every day. We're shipping product. We're supporting launches, and we are managing working capital. This dual focus of transformation while operating is critical. -- transformation does not happen in isolation. We remain encouraged by opportunities in our Industrial segment, especially in power distribution solutions supporting data center infrastructure. Those align directly with our core competencies while there is more work ahead, we are making measurable progress, strengthening execution, simplifying the organization, improving the balance sheet and positioning method for performance over time. I'll now turn it over to Laura to go through the financials. Laura Kowalchik: Thanks, John. And turning to Slide 8. Third quarter net sales were $233.7 million compared to $239.9 million in fiscal 2025, a decrease of 3%. The year-over-year decrease in sales reflected lower sales volumes in the automotive segment related to a reduction in North American electric vehicle volumes and the interface segment related to a previously announced appliance program roll off. Results were partially offset by a higher sales volumes in the Industrial segment, particularly for off-road lighting and power products as well as positive foreign currency translation which had a favorable impact of approximately $12 million in the quarter. As a reminder, the third quarter is also historically our weakest quarter for sales as it covers the year-end holidays. Gross profit was $38.8 million, down from $41.3 million in the prior fiscal year quarter, primarily a result of lower sales volume and product mix in the Automotive segment and interface cement. Selling and administrative expenses increased by $1.4 million to $39.1 million in the quarter. Restructuring and asset impairment charges included within selling and administrative expenses were $400,000. Income tax expense for the quarter was $2.8 million, down from $6.2 million in the prior fiscal year quarter. In the quarter, we realized a lower valuation allowance for U.S. deferred tax assets of $2.4 million compared to $6.5 million in the prior fiscal year quarter. Third quarter adjusted EBITDA was $7.3 million, down $5 million from the same period last fiscal year. Third quarter adjusted net loss was $13.1 million a $5.9 million change from the third quarter of fiscal 2025 attributable to the decrease in gross profit and increase in selling and administrative expenses, partially offset by a lower income tax expense. Third quarter adjusted loss per diluted share was $0.37 compared to a loss of $0.21 in the prior fiscal year third quarter. Please turn to Slide 9, where I will discuss the progress made with our disciplined capital allocation strategy. We ended the quarter with $133.7 million in cash, which was up $30.1 million compared to the end of fiscal 2025. Operating cash generation in the third quarter was $15.4 million. Third quarter free cash flow was $10.1 million compared to $19.6 million in the fiscal third quarter 2025. Although down year-over-year, we continue to generate robust free cash flow amidst a challenging operating environment with a free cash flow of $16.5 million year-to-date as we continue to operate with strong capital discipline. Net debt was down $16.9 million compared to the same period last year. Moving forward, we remain committed to driving strong cash flow generation to further pursue our capital allocation priorities of net debt reduction, selective high-growth investments, business improvements, portfolio alignment as well as returning value to our shareholders through dividends. Turning to Slide 10. Again, please note that fiscal 2025 was a 53-week fiscal year in fiscal 2026 is a 52-week fiscal year. Our guidance also does not reflect the sale of Data Mate or our Howard Hites, Illinois facility. For fiscal 2026, we have narrowed our net sales guidance, raising the low end of the range by $50 million to now be $950 million to $1 billion. The increase primarily reflects the benefit of foreign currency translation, which totaled approximately $25 million through the first 9 months of fiscal 2026. For the full year, we anticipate foreign exchange to provide an approximate $30 million benefit relative to our prior assumptions, which is largely driving the increase in our midpoint. In addition, we have lowered our adjusted EBITDA outlook to be in the range of $58 million to $62 million compared to our prior range of $70 million to $80 million. The reduction is primarily concentrated in North American auto and reflects updated cost assumptions related to multiple customer program delays and higher expenses associated with the transformation of our Mexico facility, including wages and professional fees. For fiscal year 2026, we continue to expect positive free cash flow in the fourth quarter and for the full year compared to an outflow of $15 million in the previous fiscal year. With that, I will hand it back to Jon for closing remarks. Jonathan DeGaynor: Thanks, Laura. To close, while the near-term environment remains dynamic and our improvement trajectory is not linear, we are taking deliberate actions to strengthen the company. We are stabilizing operations, refining the portfolio, aligning our footprint and cost structure and reallocating resources towards higher-growth power solutions opportunities. There is more work ahead, particularly in Mexico and within North American automotive. But the foundation we are building is real. At the same time, we are maintaining a sharp focus on cash generation and balance sheet discipline. We believe the actions we are taking today position method for improved performance and more consistent value creation over the long term. With that, operator, please open the line for questions. Operator: [Operator Instructions] Our first question is coming from John Franzreb with Sidoti & Company. John Franzreb: I would like to start with Mexico. Can you just kind of review what's going on there? And how far along are you on the process and maybe time line when you think it will be completed. . Jonathan DeGaynor: Yes. So John, a couple of things. Thanks for your question, and Laura will chime in here as well. As we said on previous calls, the transformation in Mexico is probably about 6 months behind where we are with Egypt. And we are making progress there. But one of the challenges that we have is in Egypt, we have year-over-year revenue growth on top of performance improvement whereas in Mexico, we have continued -- we have year-over-year revenue shrinkage. Most of the roll off of our past programs is in Mexico and the primary impact of program delays is also in Mexico. So the -- what we're spending to prepare and launch new programs as well as the transformation there isn't getting any benefit from tailwinds of increased revenue. We're seeing -- we're spending the money to get the launches ready and we're seeing the delays. The team has been completely rebuilt over the last 6 months, and I'm really pleased with the progress that we're making on our day-to-day execution. But we're 6 months behind where we were with regard to Egypt. Laura Kowalchik: Yes. And as Jon mentioned, the decrease year-over-year in revenue, which results in the bottom line decreases as well as under absorption. We have some additional S&A expenses related to changing out the management team and wages as well as additional resources that we brought in to help with the operational performance. But despite this, we are seeing improvements in scrap and direct material costs as a percent of sales through our supply chain initiatives. John Franzreb: Now we had 3 great months of commercial truck orders. I'm curious, have you seen that flow through your P&L yet or any purchasing orders or anything? And also, does that impact the Mexico facility at all? Can you just maybe talk to that? Jonathan DeGaynor: So John, it does impact the Mexico facility and it's the impact of -- we're actually still seeing it as a headwind with regard to orders. Both what we've seen from DTA and PACCAR in is more of second half of calendar '26 as to where the volumes start to come back. And what we're seeing the impact, and we talk a little bit about it, is the trade-off between commercial vehicle volumes in our in lighting and some of the North American automotive programs. So we have a mix impact as well as volume impact. We do see some future growth later in this quarter and probably more into early of our fiscal 2027, but we aren't yet seeing it. John Franzreb: And one last question on Data made. How much in revenue or annualized revenue did that business contribute? And was it profitable? Or maybe you can give us maybe the scale profitability? . Jonathan DeGaynor: So it's roughly $18 million worth of revenue. It was profitable. But what I can say is in roughly $3 million worth of profitability. But what we can say, John, is the ability to pay down debt, the ability to exit an underutilized facility and to continue just our overall rationalization of structural cost, we believe we can largely offset that profitability. So we think overall, it's an accretive decision. Operator: Our next question is coming from Luke Junk with Baird. Luke Junk: I'll jump off there. Jon, can you just remind us of some of the key products and applications for that data made business? And I guess 1 of the obvious questions strategically is just why it wasn't too complementary with the core power business in data center? . Jonathan DeGaynor: So this is more of a data over copper. -- system. It's a small electronic data over copper product. It's not complementary with our data center activity whatsoever. And really, the judgment for this look was it's a good business. But as you think about the opportunities that we have, and you and I have talked many times about return on effort, what it would take to make that grow materially because it's been relatively flat in the $15 million to $18 million for revenue for a long period of time. As we looked at it, it was a good business -- it is a good business. But in order for us to make it grow versus putting more effort into our base data center business or some of the other areas where we can drive growth and really return for the shareholders, our decision was that probably is a better open for the business than method. Luke Junk: Sticking with data center, if I look at the chart that you guys provided, which is helpful. Just trying to extrapolate the data center piece in fiscal '26 specifically. It seems like it's trending fairly flat this year. Now I understand some of the reasons for that. I know you were implementing the VMI. There's some other things going on in the hood there. But just trying to understand, certainly, there's been a lot of CapEx growth this year. Should we perceive that there's been effectively like a little bit of a growth bubble because I'm just trying to get comfortable then stepping into, I think you said in the $120 million run rate on a go-forward basis given the clarification. Jonathan DeGaynor: So look, -- what we've said to you is -- and said to the investors is that as we move to an EDI-based sales forecast versus just a, if you will, a contract-by-contract sales forecast that we would give you transparency as soon as we knew it. This run rate that we're talking about is that transparency. This is backed with EDI. So you're right that on a total year basis, it looks like it's relatively flat. Part of that was due to some of the sales gap that we had moving from where we recognize the sale when the parts leave the boat in Shanghai to moving to vendor-managed inventory, which created a 6- to 8-week revenue gap. So -- the most important thing here is a flat -- relatively flat year-over-year, but Q4 run rate of $120 million with EDI that gives us great confidence in what we see on year-over-year growth and what we see into the future. The other aspect is I think you made a comment about CapEx growth. We have not had significant CapEx growth. It's actually down year-over-year. And there's been no material CapEx that's been invested for the data center business whatsoever. As a matter of fact, we're using some core competencies and some capabilities from other investments as we rotate into Mexico. So we have really use our capabilities. We rotated with this VMI and it is creating the momentum that we said it would and the $120 million run rate reinforces that. Laura Kowalchik: Yes. Our CapEx, just to jump in here. Our CapEx was $42 million for FY '25, and we're at 16.5% right under 17% approximately this year. Luke Junk: Yes. That $120 million, you also mentioned, Jon, that you have a line of sight to 50% kind of growth in the medium term. I think if I try to extrapolate what you're implying in the targets maybe about $85 million of data center this year. Is that -- what kind of base numbers should we use for that 50% opportunity? . Jonathan DeGaynor: And that's what we have said pretty consistently is $80 million to $85 million as a basis in our guidance. And as we talked about on the last earnings calls, that considered the impact of VMI. But what we're seeing here is a run rate that's actually higher, much of which will be setting us up into 2027 -- fiscal 2027. Luke Junk: And then last question for me, a Mexico, understand some of the challenges there. I think you had some initial improvements, but obviously, things that are cutting against you as well. It feels like maybe there's been some things that have cropped up that you weren't anticipating? I guess, is this some more contagion across launchings and the fact that just -- I know you had whatever is something in the range of 20 launches this year. Just that as you're spending to those that Silensys was pretty visible, but are there more launches that are becoming problematic at the margin? . Jonathan DeGaynor: Yes. So I think the way to think about this is as you bring new people in with fresh eyes, we do see some things from a performance perspective. But as Laura said, our scrap rates and our premium freight and other items that are really controllable performance-based items are better year-over-year. We -- what we have seen with regard to the new launches is we've spent the money both from a capital standpoint and from an engineering standpoint to prepare for the launches and we've had further delays even from what we said in the last quarter. So because those launches were primarily EV-based power application launches for North America, and many of our customers have further delayed their programs. That's where the challenge is. So we just don't have the revenue that we would expect as these launches -- as these programs start and ramp up, we're not seeing those. So as we've talked about we're dealing with it from a class standpoint. We're also dealing with it with going back to customers for recoveries on where we have those delays. Operator: Our next question is coming from Gary Prestopino with Barrington Research. Gary Prestopino: Jon, Laura. I just want to follow up on this EV issue. These are delayed programs. Is there any programs that have been outright canceled? . Jonathan DeGaynor: Yes, you okay. So as we -- Gary, just to answer that, as we've talked about there, we have talked about some Stellantis program cancellations as well as other programs that are delayed. And we've mentioned what we've done with regard to previously about going back to customers and particularly Stellantis with regard to dealing with cancellation claims. So those are ongoing. None of the customer negotiations are in our -- in this guide. I think it's important to note that neither the data make transaction nor the Hardwood Height transaction nor any customer recoveries are in this guide. Gary Prestopino: Let me ask the question another way just so I can get an idea. In the programs that you have right now that you're actually producing for and you're actually having take rates, was -- were the take rates less than you had anticipated and that has been causing you to channel down your expectations for the EV market this year? I'm just trying to get a handle on it, how this is all shaping out. Jonathan DeGaynor: Yes. So here's -- the answer is yes. And it's primarily in North America. So if you think about it, auto is 45% of method. EVs are 41% of auto. So as a total, EVs as a percentage of method through this year, through this fiscal year is 18%, where now take it to the next level, which is exposure to EVs -- of that 41% of auto that is EVs, only 14% of that is North America. If we were going back, and I don't have the number at my fingertips, if we've gone back when we originally set guidance, that number should have been much, much higher based on the assumption of launches from multiple programs. So the -- what we're seeing is expenses launch expenses, CapEx, building inventory, all those sort of things in Mexico, in a place where you have big programs rolling off that we've talked about across multiple quarters and none of the revenue coming from the EV programs. Gary Prestopino: What about what you're doing outside of North America, how would the take rate spend there? Jonathan DeGaynor: Those take rates are relatively on track. The growth on a year-over-year basis in Egypt, the top line growth we have bottom line that's driven by performance. We have top line growth that's basically driven by ramp-up of programs, particularly the EV programs that we launched there, and China is stable. So this is -- it's why we refer to it specifically as a North American automotive challenge and as an EV program cancellation or delay challenge. Gary Prestopino: Are the products that you guys produce the EVs, are they applicable to plug-in hybrids and hybrids. I mean can you bid on those new models that are coming out because it seems that that's the way the market's really rolling now. Jonathan DeGaynor: Yes. And our pipeline of bids has our quoting and cost estimating team is very busy. Operator: We have another question from John Franzreb with Sidoti. John Franzreb: I stick to the launch topic here. How many programs have you launched on so far in fiscal '26 and how many remain for this year -- and how does that compare to your expectations at the beginning of the year? I'm just trying to contextualize what kind of magnitude we're talking here. Jonathan DeGaynor: John, I don't I don't have the exact split between what we plan to launch and what we have launched versus cancellations. Our number was programs in this fiscal year. It was 56% over fiscal 2025 and fiscal '26. And because of the timing -- because of the timing of some of these delays, we spent the money on the launches before we ended up with either a delay or cancellation. So the number is still the same. It's just a question of whether we got the revenue from it. John Franzreb: And when looking at the product portfolio, where does that stand? I mean, is Data made the first of many? Or are you still like looking at everything you're trying to decide. I'm pretty sure at 1 point, you said there was some unprofitable businesses that you may want to exit. But can you just kind of give us an update on what -- how that process looks at this point? Jonathan DeGaynor: What we would say is that data mate was an important first step. It reinforces what we have said to the shareholders that we will continue to refine our portfolio as well as refine our overhead structure. The portfolio review is ongoing, and you can expect more to come in the future. Operator: Thanks, Jon. Thank you, everybody. Thank you, ladies and gentlemen. As we have reached the end of our Q&A session. This will conclude today's call. You may disconnect your lines at this time, and we thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to the Evaxion Business Update and Full Year 2025 Financial Results Webcast and Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Helen Tayton-Martin, CEO. Please go ahead. Helen Tayton-Martin: Thank you, and good morning, everyone. Thank you for joining us for Evaxion's business update following the reporting of our 2025 full year financial results yesterday. And apologies that this call is 24 hours later than we anticipated for technical reasons, we are delighted to be here today. My name is Helen Tayton-Martin, and I am honored to be leading this call for the first time as Evaxion's CEO. We move to the first slide. Okay. So on today's call, we will review the achievements of 2025 and touch on the milestones we anticipate for 2026. Our Chief Scientific Officer, Birgitte Rono, will then walk through our key R&D updates for the year, including the latest innovations from our AI immunology platform, after which our CFO, Tom Schmidt, will walk through our 2025 financial results before we close with a few concluding remarks and take questions. Right. Moving to the next slide. And of course, our comments and presentation today may contain forward-looking statements and all references on today's call, I'll refer to our filed SEC statements and specifically, our most recent 20th annual report for 2025 -- 2025 filed yesterday. So moving to the next slide. I will start with our 2025 achievements and our 2026 milestones. In 2025, we were very pleased to report tremendous progress across all pillars of the company. First of all, in business development, we were delighted with the progress in our collaboration with MSD and our infectious disease portfolio, with the decision by Merck to exercise its option over our EVX-B3 program candidate. Whilst the target for this program is not disclosed, we are very proud that this represents the first in-licensing to our knowledge of an infectious disease vaccine candidate identified and validated to an AI discovery platform. Whilst MSD chose not to exercise its option over our EVX-B2 candidate in gonorrhea, we remain very excited about the data and the prospects for this program, over which we have retained full rights and have seen significant interest. We were also pleased to enter into a collaboration with the Gates Foundation on the design of a new polio vaccine and are also seeing significant interest in our platform and pipeline programs more broadly from a number of parties. In R&D, we were very pleased to be able to present very positive [ to ] Phase II data at ESMO on our EVX-01 program with a personalized neoantigen-directed cancer vaccine in advanced melanoma patients. We also presented preclinical data at ASH on our first cancer vaccine we shared [ at antigen directed ] to a conserved endogenous retroviral EBR elements that we have identified in AML patients with our EVX-04 program. In our infectious disease portfolio, we were also able to move forward a new program with candidates identified from our AI immunology platform against [ Group A strep Coke ]. On the platform itself, the team has continued to innovate and use platform to not only identify optimal vaccine candidates, but improve their design biology for product delivery for us in our new automated module. And Birgitte will touch on all of these achievements shortly. We were also honored by the recognition of our AI immunology platform by the Galien Foundation for AI advances in human health. And finally, we were very pleased to see the capital influx of the business last year through financing, business development and the use of our ATM, which now gives us action a cash runway to the second half of 2027. And Thomas will talk more to this later. So moving to the next slide. Just as a reminder, our action has built a broad novel product basis pipeline of assets from its unique AI immunology platform. clinically validated with the cancer vaccine space with our EVX-01 [ peptide ] base vaccine in advanced melanoma that's supported by assets and data on DNA and RNA platforms and together with a preclinical pipeline of infectious disease vaccine candidate, focused on challenging targets remaining intractable with conventional approaches and subject to significant medical need. On to the next slide. This unique capability with AI immunology is something that we have also begun to investigate within the autoimmune field, given a wider range of diseases driven by autoimmune attack and the direct applicability of our platform to focus on immune mechanisms in disease. Autoimmune diseases affected over 14 million patients annually in the U.S. and are characterized by chronic debilitating conditions with treatment options focused primarily on the symptoms rather than the underlying cause of disease. Moving on to the next slide. This is why we believe our AI immunology platform is strongly positioned to focus on underlying disease mechanisms with greater specificity to identify autoimmune disease targets, which can be approached in different ways. There will be more to come on this later in the year. So finally, in the next slide, turning to our 2026 milestones. This year, we will be updating on our EVX-01 program with additional biomarkers and immunogenicity data, AACR and then the clinical data, 3-year data towards the [ later ] towards the end of the year. Well, we will be talking more about the autoimmune applications of our AI immunology platform and bringing forward data on our new EVX-B4 candidate in Group B [ rubric ] in the second half of the year. And finally, be ready to submit a regulatory application for our next EVX-04 candidate vaccine candidate for the shared her antigens in AML by the end of the year. And throughout, we remain committed to driving value from both our platform and our pipeline assets to partnership for our shareholders and patients. I'll now hand over to Birgitte to update you further on our R&D achievements. Birgitte Rono: Thank you, Helen. So 2025 marked a turning point with significant advancement across our R&D pipeline and also and our AI platform. And additionally, as Helen alluded to, we also entered into the in-licensing agreement with MSD on the EVX-03 program. So our 2025 focus has been on strengthening our platforms predictive power, maturing key R&D assets and are building the foundation for future partnerships. So the 2025 achievements position us well as we move towards the data with milestones in 2026, that Helen just presented. So with that, I will begin by walking through individual key programs and platform development. So next slide, please. [ EVX-01 ], our personalized peptide-based cancer vaccine in advanced melanoma continues to deliver strong clinical data. So our 2-year Phase II data presented at an oral session at ESMO in October showed strong clinical outcomes, including a high objective response rate of 75% and complete response rate of 25%. Notably, 92% of the responders remained in response at this 2-year mark. Key biomarker data included the very high [ immunogenicities ] rate with 81% of all the individual new antigen administered across patients, giving rise to a specific T-cell response. So this very impressive heat rate outcompete data from similar programs conducted by others. And this truly underlines the precision of our AI immunology platform, to identify better than vaccine targets. Two key milestones are expected for this program, as Helen also alluded to, additional biomarker and [ genicity ] data expected in the first half of '26, and we also plan to communicate the 3-year data from a subset of patients that are currently in expansion part of the Phase II study, and that will be reported in the second half of '26. So importantly, we aim to conduct future trials in partnership ensuring the broadest possible impacts for patients. So moving to the next slide and EVX-04, our after-shelf therapeutic vaccine for acute myeloid leukemia or e-mail, we have generated a compelling preclinical base evidence supporting its development. In this program, we are focusing on a completely novel class of tumor antigens, so-called endogenous retroviruses or ERVs that are selectively and highly expressed in AML blast, making them attractive as therapeutic targets. So with AI immunology, we have identified millions of shortages from patient sequencing tumor data and designed the [ EVX-04 ] vaccines with 16 optimal ERV [ anti fragment ] selected based on craft patients [ pellets ] and also on the immunological potential. So key data include invite vaccination studies, demonstrating that all of these 16 fragments in the vaccine induced a strong specific immune response and further that EVX-04 prevents tumor growth in several of our tumor [ virus ] and induce strong T-cell responses. So again, these findings reinforces the power of our platform. And here, we have expanded it to uncover unique tumor antigens that are not accessible through traditional discovery methods. Next slide, please. As we progress towards clinical business for EVX-04, we have completed key steps, including antigen selection and lead development we have conducted preclinical efficacy studies and are currently conducted further human cell-based translational assays. CMC work and GMP manufacturing are advancing according to plan. And the next major milestone for this program is the submission of the clinical trial application in the second half of '26, which enabled first in human system. So this program is a prime example of how AI immunology accelerates vaccine design from concept to clinic. So next slide, please. Now turning to our key indexes disease programs. So after retaining the full global rights to EVX-B2 late last year, we are now fully in control of the development of this highly differentiated vaccine candidate targeting -- gonorrhea. So our preclinical data package is strong and comprehensive demonstrating significant protection in a mouse infectious model. We have demonstrated broad efficacy against 50 clinically relevant -- dates reflecting coverage across diverse strengths and further induction of significant [ una ] and cellular responses in mice, and we have also demonstrated a well-established mechanism of actions supported by potent antibody-dependent complement-mediated killing. So collectively, these results position EVX-B2 as one of the most advanced and differentiated infectious disease preclinical gonorrhea vaccine candidates in an area of high unmet need where no approved vaccine exists today. So given the strength of our data, we see a clear opportunity to engage with potential partners to progress the program towards clinical development. So next slide, please. So a number of our key infectious disease vaccine program is EVX-B1. In this program, we are developing a margin target vaccine against cytomegalovirus or CMV and instead of relying on a single glycoprotein or limited set of glycoproteins, the program integrates both these well-described glycoprotein and novel antigens to target the prior -- from multiple complementary angles. So this broad multicomponent strategy is designed to enhanced vaccine efficacy and also to reduce the risk of viral escape. So we have applied AI immunology for both antigen optimization of the known glycoproteins and for identification of 2 novel antigens. So first, we improved these established CMV antigens that are essential for virus neutralization. And as part of this, we have engineered the glycoprotein B antigen, by locking in a prefusion state. And this AI analogy designed a construct has demonstrated a superior neutralization capacity compared to the native program. And secondly, we are identifying and validating entirely novel antigens and several of these -- they have already demonstrated the ability to inhibit [ Vinten ] further, we are characterizing them at the moment. So supported by this strong preclinical data, EVX-B1 represents a highly promising program for continued development and for future partnership discussions. Next slide, please. So now turning to the recent development of our AI-Immunology platform. So our AI-Immunology platform continues to expand capability. So the platform integrates [ multiomic ] data sets to generate ranked antigen lifts within 24 hours. So in October last year, we launched a an automated vaccine design module enabling sequence and structural optimization directly from this short-listed engines. At this end-to-end automation significantly reduced cost development time and also this. So next slide, please. So more specifically, the automated module enhances design of [ Sage ] antigen constructs, enabling higher expression, better formulation and improved manufacturability. So this capability directs the design of [ salable ] antigen constructs and also stabilizing antigens using in various posing producing more reliable antigen construct vendor, wire side variance. There is a faster and more cost-effective design cycle fully integrated into our antigen discovery and vaccine optimization workflow. So this strengthened the foundation for all of our programs across oncology and infectious diseases. So in conclusion, we have seen strong progress across our platform and our R&D pipeline, and we are encouraged by the momentum and we look forward to keeping you updated as we advanced to 2026. And with that, I will now hand over to Thomas, who will go us through our financial business. Thomas Schmidt: Yes. Thank you, Birgitte. And also a warm welcome from my side to our call today. And I will now walk you through the financial results for 2025. So turning to the next page. We have, throughout 2025, been really successful in expanding on our cash runway and also strengthening on our equity side. This has happened throughout the year through public offering and the use of ATM we did in January, followed by the MSD exercise fee and the ATM used in September. And furthermore, the exercise of investor warrants from our January offering in October and November, all summing up to a cash inflow of USD 32 million. Furthermore, as also shown on this slide, our EIB debt-to-equity conversion done in July of USD 4.1 [ billion ]. We've reduced certainly our cash -- future cash out and thereby certainly also expanding and extending our cash runway. And finally, with our filing in December of our prospectus supplement regarding our ATM. It has now created us with further flexibility ability and options as we move forward with expanding our pipeline and platform also. So really, really underlines the strong execution throughout the year. And turning to the next slide. that also leads into the highlights of 2025, where we really have delivered on all the targets that we set and we are progressing towards our aim of becoming a sustainable self-funding business. Both revenue and costs have improved while at the same time, we are continuing to invest in our platform and in our pipeline programs. As just mentioned on the previous slide, activities and execution of the MSD deal, the EIB debt conversion, our ATM and capital market activities have not only improved our cash position and runway, but has also significantly strengthened our equity. And with improved cash runway and equity -- equity we have created more stability and certainly have also reduced uncertainty. So I think that is really, really also a highlight for '25. And again, with the update of [ F3 ] and ATM, we have removed the constraints of baby shelf and also provides us far better flexibility and options in support of our long-term strategic initiatives and also the long-term plans we do have. Next slide. is on our profit and loss statement. As I just mentioned, revenue has improved, but also we've improved on our operational costs. So we've actually been successful in long in our operational spend whilst at the same time delivering on the quality that we would want to do from a pipeline and platform perspective. revenue certainly stems from our NST option exercises, but also important to mention, we also had a grant from the Gates Foundation that also has come in 2025 -- apologies. Net financial position of [ $4.6 million ] is driven by a premium that we received from -- our debt conversion -- debt-to-equity conversion from [ EIB ] and against that goes remeasurement of a derivative liability as some of our warrants or our [ launch ] from the public offering in January were in a different exchange setting, so the USD versus our reporting of DKK. Net loss for the year, [ $7.7 million ], certainly a better in compared to last year. And as I said before, also a good step on the way of becoming a sales funding and profitable business. Next slide, on the balance sheet. since we ended the year with a cash position of USD 23 million with a runway that now is extended into half year 2 of 2027 in certainly also a significant improvement compared to last year. And this, of course, will be used for operations expenses and investing into our platform and pipeline. We currently have an outstanding -- we have a total outstanding ADS of $8.3 million when assuming that all shares have been converted into ADSs. We've also, through the investor warrants exercise has been reducing the outstanding warrants in terms of ADSs by $1 million. which leaves another [ 2.8 million warrants ] outstanding. So also an improvement in that and really drives in the right direction. So in summary, from a financial position, we have during 2025, established a far better foundation that really makes us puts us in a good position to continue our execution of strategy and business for '26 and the years beyond. With that, I hand it back to Helen for some final concluding remarks. Helen Tayton-Martin: Thanks, Thomas. And just moving to the last slide. In summary, 2025 was a year of strong operational momentum for Evaxion, in which we achieved several key milestones. Overall, we strengthened the business considerably to the validation of our strategy with our AI-Immunology platform, delivering on both data and partnerships. This, in turn, has enabled us to both strengthen our financial position and consolidate our position as a leader in AI-based of discovery, design and early development. With a number of potential partnership discussions ongoing, we are already funded into the second half of 2027 through the financial milestones achieved in 2025. So we're in a good position to move forward through 2026. With that, I'll hand over to the operator for questions. Operator: [Operator Instructions]. Our first question today comes from the line of Thomas Flaten from Lake Street Capital Markets. Thomas Flaten: Maybe to start broadly, Helen, you've been in the seat now for a few months. I'm just curious if you could provide some overarching commentary on what you have implemented or are going to implement -- any changes in strategy? And any bigger picture notes like that, that could help us with the context of your tenure? Helen Tayton-Martin: Sure. Thanks. Thanks for the question. Yes, I joined at the end of November last year. So the last 3 months have flown by. But I already have a strong impression from my prior seat on the Evaxion Board. In terms of bigger picture, changes. I think the fundamental action remains really strong. And in fact, I think they have only got stronger through 2025. So the ability to have an AI platform that is built up over many years, many iterations, grounded in data and testing for that data in the lab, and ultimately in the clinic has really strengthened the core offering. So I remain really excited about the power of the platform in the oncology space and also in the infectious disease space. And I think we're sort of seeing a lot more traction around what we can do with the platform now from external engagement. So I think the fundamental strengths and core of what Evaxion has to offer is even stronger now than potentially before. And I think in a world of AI, everything, actually getting to products, actually producing candidates that can generate vaccines that generate a biological response and the clinical response is meaningful and is becoming recognized as meaningful, certainly in our partnering conversations, et cetera. So I think that, that is core. So clear observation I had before coming into the company and certainly strengthened by all my observations within it. and even more impressed by the team that's in place that can deliver on this. I think in terms of the overall strategy, what have Evaxion has done well is that early discovery, the early validation, that deep scientific and informatic embedded expertise, and we can certainly bring things forward into early clinical development, late preclinical, early clinical. And I think what we're going through at the moment is a process of really optimizing where we see the most value in the near term, both in terms of our oncology assets, but also within the infectious disease area. I think we are not positioned to take too much further forward into the clinic. So we've been very cautious about that but we certainly see strength in getting interest from external parties around the assets that we've already got. And actually, the capability of the platform. So there's not a fundamental change to strategy, but I think a sharpening and the deepening of focus around the assets that will have the most value. I hope that's helpful. Thomas Flaten: Yes, that's great. And just keying off of your last comment there about taking products into the clinic. You mentioned with EVX-04 in Birgitte's presentation that you would be looking to submit regulatory paperwork. Is that a product that you think you have to take into Phase I given that herbs are a bit new, a bit different in order to attract a partner interest? Helen Tayton-Martin: I think that's a very good question. We are certainly preparing to take it into the clinic, and we believe that we can do that to gain some initial proof of concept. There's a lot of interest around the platform at that particular metacandidate antigens in the vaccine. I think we're doing some further validation, which I think will continue to strengthen it. So the answer in short is not necessarily, but clearly, the more critical validating data that we can add to the package. The stronger the value proposition to an external partner, and that's obviously what we're all about is maintaining the -- building the value for as long as we can to strengthen our position. And I think we're very confident about what we can do with it preclinically and potentially clinically. Operator: Our next question today comes from the line of Michael Okunewitch from Maxim Group. Michael Okunewitch: Congrats on all the great progress you made. I guess to start off, I'd just like to see if you could comment a little bit on the partnering efforts for EVX-01. And in particular, if there's anything that you've heard either in your feedback from partners that you think you're still would be particularly important for us to watch for from the upcoming data releases, whether that's the 3-year data or the biomarker immunogenicity. Is there anything in particular you think is key for driving these partnering discussions? Helen Tayton-Martin: So that's a really good question. And I mean, clearly, the cancer vaccine space has had something of a checker passed -- way back, but more renaissance, I think, in the checkpoint era. And I think our data is certainly resonating with companies who are interested in the cancer vaccine area, understand the nuances around getting, I think, strong cancer -- antigens, [ presliced ] cancer antigens for not just immune recognition but for clinical benefit. So the -- it is a complex therapy to administer, but it is also potentially an effective therapy. And I think the sorts of things that gain interest of the -- not just the response rate that we've seen in 2 years, 1 year than 2 years at ESMO, but also the recognition of the antigens, the numbers that the [indiscernible], and I'll ask you to add comment to this as well. So I think the -- we're in a strong position with that updated clinical data package that we have, the translational data, I think it's going to be interesting. It continues to -- so why and how the immune response is happening in parallel to the clinical response. So that is, I think, a differentiator and also in the population, the advanced population rather than adjuvant melanoma population. And clearly, I think we're also seeing interest in this whole approach in other high mutational burden cancers too. So beyond melanoma knows of it. I think those are the differentiators thinking about where else this is applicable accolading the different biological parameters, the translational insights that we're seeing that's somewhat different to how others have reported on this with similar approaches. So quite a bit of interest. I think the number -- to be honest, a number of companies are on the fence, but we're looking with interest and very interested in the shared approach -- the share approach that our EVX-04 program offered. Birgitte, do you want to add some further comments? Birgitte Rono: So there's no doubt that the ability of our AI immunology platform to identify the relevant targets and is getting a lot of interest from potential partners and also from the academic community. And with this 81% hit rate, as we call it, I think this is very impressive. We have, of course, looked at other similar programs and seen that most of them are reporting hit rates way below 60%, meaning that the antigens that they are including in their vaccines are not all able to induce a specific T cell response. And this is, of course, a testament to the position of our platform. So that's one of the key elements. And another point that I would like to make is that we do see EVX-01 as not just a therapy for advanced melanoma. We believe that the same concept can be very useful in other occasions where there are a high mutational burden, meaning that there are several antigens to choose from. That includes many of the high prevalent cancer indications. It could be non-small cell lung cancer and also some of the colorectal cancers. Michael Okunewitch: Thank you. I appreciate that additional color on that. And then as a follow-up, I wanted to ask if you could provide a bit more color on how you're applying the AI immunology platform to autoimmune disease. You identified this as a new area of interest. And do you expect that this would be more focused on allergies? Or would you focus more on the major large autoimmune and inflammatory diseases. Any additional color you could provide on that would be helpful? Helen Tayton-Martin: Sure. I think the first thing to say is it's early in terms of our prioritization of the indications, but we've certainly done some work around that based on parameters, which I'll -- Birgitte you're happy to comment on that, I think, high level in terms of what's guiding where we focus will be -- that would be good. Birgitte Rono: Yes. So we have done a lot of analysis on most prevalent autoimmune diseases, and we do see a clear fit for our platform. I mean, we, of course, need to further improve it and build a few additional smaller unit that allows us to apply the immunology. But we do have many things in place that can be directly applied in this area. So we will, of course, share more when we have done both analysis on which key indications we will pursue and also when we have done a little bit more work on adjusting AI-immunology, so it fits these diseases. But we should remember to say that there's a lot of these smaller units we call them building blocks that we can directly apply for these tax of diseases. So not only for autoimmune diseases but also for other diseases where there is a strong immunological component. So of course, we need to build a little bit, but the majority is already in AI-Immunology. Operator: Our next question today will come from the line of RK from H.C. Wainwright. Swayampakula Ramakanth: Thank you. This is RK from H.C. Wainwright. Just to start off, Helen, a quick question for you. You have basically, we've been an architect and multibillion dollar balances at that [ immune ] especially the large deal that was transacted with GSK. And also, you have heard a lot of experience in transactions. And while Evaxion is technically a very strong company, they have always had a difficulty in translating that language into meaningful transactions. Of course, Merck is a pretty strong partner. Based on your experiences, and how you manage to translate that. What sort of discussions could you have at this point? especially when talking with large-cap pharma, I'm convinced them that an AI tools predictability is as good as a physical assay and get them to start looking into some of the products that Evaxion is generating. Helen Tayton-Martin: Thanks for the question. I think there are probably multiple dimensions to answer that question to the extent that it is possible to answer it at this point. One is that A lot of this is to do with timing. It's to do with data that validates that it's more than a sort of an AI platform. And I think actually, the fact that we have the scope to validate and iterate candidates target discovery with candidate development with cancer validation is something really novel that we're generally out there. And when I said timing -- there are obviously many of the large pharma, most of them will all have in-house AI platforms running in one form or another. But I don't think there are many that have got this sort of integrated long sort of longitudinal depth of expertise that actually has. So really, is that this is about crystallizing the offering through the validation of the cannabis we have and sort of being in dialogue with the right people. And you mentioned my background was a long time, 17 years in my precise company, building relationships establishing contact, understanding and listening to strategy, looking at the wider picture. These are all things that are very much part of how deals get done. And ultimately, it's down to relationships and credibility and really having something that fits the need. And all I can say at this point is we're reworking up some of those approaches and some of those themes in terms of how we are approaching potential partnering interaction, I have to say that the action team is well known with quite a few of these groups, but we're building and expanding that profile. And I think that's critical to the future success in partnering conversations. So it's being what you say you are in front of the right... Swayampakula Ramakanth: Perfect. Then going into relationships with Merck, especially regarding EVX-B2, Merck decided to extend the evaluation of the molecule rather than exercise the option at this point. Is this a function of them trying to do additional experiments or functional assets? Or are they requesting from new additional work so that they can come to a conclusion? Helen Tayton-Martin: Sorry, are you referring to the extension that they had last year before the opt decision there? Swayampakula Ramakanth: Yes, yes. Helen Tayton-Martin: I mean we can't really comment on, obviously, the combination nature of the interactions. All I can say is that sometimes is sort of R&D programs when they are back and forth and shared between organizations don't always run to plan. And so sometimes that requires looking at things again. But ultimately, then there are time frames around things, which have to follow through. So I think there are reasons for not taking sort of obviously, their reasons not multidimensional. All I can say is that we remain really excited about the data. We actually continue to build data on the program internally throughout that period of time as well. So we feel very, very bullish and strong about the data package but how and why I wanted to do that work? Or is it something we probably we can't really add any more commentary on. Swayampakula Ramakanth: Okay. On the EVX-01 durability, Birgitte, so you have shown 92% of the responders showing sustainability, be it 24 months. As we are looking forward to the 3-year durability what sort of exhaustion markers are you going to be tracking so that we understand how well the durability is. Birgitte Rono: Yes. Thank you for that question,. So it's correct that 92% of the responders remained in response with this 2 year mark. And I guess your question was related to the T-cell extortion -- as yes, we do a deep scar profiling, looking at activation marker, extortion markers and also at different phenotypes of the T-cells, so including CD4, CD8, but also looking into whether there are regulatory T-cells coming up. And so far, we have demonstrated that -- the profile of the T-cells are very favorable. So in more of the activation or effective type of sales and not too many that are having exhaustion markers. We also see that there's a like dominance of CD4 T-cells and with some patients are also mounting a CD8 T-cell by time. So we have -- during this extension phase of the study, we have been collecting additional blood samples that are currently being analyzed in our lab. So not to comment on that, but it's very exciting. And since EVX-01 is giving us a immunotherapy in this extension phase, we're also very curious of understanding what EVX-01 can drive on its own without having the background of the checkpoint inhibitors. Swayampakula Ramakanth: Okay. One last question from me. This is on the EVX-04... Operator: In the interest of time, we will move to our next question. And our next question comes from the line of Daniel Ben Hill from Jones. Daniel Ben Hill: On the autoimmune disease program, can you provide more detail on your strategy for validating early candidates? Helen Tayton-Martin: Thanks for the question. I mean it's early, and we probably cannot provide more details. But, Birgitte, do you want to comment on how we think about it. Birgitte Rono: Yes. So the first step is to settle on an indication. So we have done landscaping. We've done dianalysis on looking at the top 10 most prevalent ultimate diseases, and we are now narrowing down which one could be the most, I would say, interesting from a -- from our perspective, where there is a nice fit for AI-Immunology. And so that work is ongoing. We've almost completed it. And next step is to focused on building the additional smaller units that we will be needing in AI immunology to enable us to develop therapies for these diseases. And in parallel, we are also sitting on mouse models in our lab, so ensuring that we can also test the candidates that AI-Immunology is designing. So that is the current plan. So pretty traditional way of analyzing our existing the candidates that AI immunology is designing. Operator: Thank you. This concludes today's question-and-answer session. I will now hand the call back to Helen Tayton-Martin, CEO, for closing remarks. Helen Tayton-Martin: Thank you very much for everyone participating on the call today. It's been a great year of 2025 of transforming the company for Evaxion delivering on multiple milestones, leaving us in a stronger financial position than for some time, where we hope we can take the company forward and deliver on our 2026 milestones and continue to strengthen the value that comes from the platform and the asset. So thank you for your questions and your engagement, and we look forward to our next update. Thank you. Bye-bye. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Ladies and gentlemen, welcome to the Lufthansa Group Q4 2025 Results Conference Call and Live Webcast. I'm Moritz, 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 Marc-Dominic Nettesheim, Head of Investor Relations. Please go ahead, sir. Marc-Dominic Nettesheim: Yes. Thank you very much. And also from my end, a very warm welcome, ladies and gentlemen, to the presentation of our full year results 2025. With me on the call today are our CEO, Carsten Spohr; and our CFO, Till Streichert. Both of them will present the results for the past year and discuss our commercial outlook for 2026, and afterwards, as always, you will have the opportunity to ask questions. [Operator Instructions] Thank you very much. And with that, Carsten, over to you. Carsten Spohr: Yes. Thank you, Marc, and a warm welcome from me as well to this full year '25 conference, which I think will start in a little bit of a different tone, not because it's our famous 100-year celebration this year, which makes it a special year for us anyway. But while we were focusing on this to a certain degree, obviously last weekend when everything was changed again. So maybe I'll share with you a few thoughts on where we are when it comes to the situation at the Gulf first, which is, as you know, very dynamic. And of course, with a few thoughts on the whole year before I hand over to Till for more details and expected by you feedback on our numbers. And of course, also, we'd like to give you a view ahead as much as possible in such a dynamic environment. On the Gulf situation, like many of us, I would assume, we're a little bit surprised by the various dynamic turns this takes. In the end, our crisis management always asks us for safety first, which, in our case, meant we stopped flying a day early to the region, which also allowed us to have hardly any aircraft on location because we brought them home before. We then brought our crews home and then went into the next phase of our management of the situation by deciding to close 10 destinations initially, which included Larnaca. We are opening this next -- this Saturday, again, we'll keep the others closed for probably a few more days at least to remain. I think there's more and more now doubts. This is a question of days of reopening or was it weeks, we prepare for both, and we'll take you through this in the Q&A session, if required. Second, of course, big impact spike on fuel prices. Till will come back to that. We actually believe, due to the fact that we are hedged higher towards our main competitors, actually only other airline hedged the way we are is Ryanair with which who, as you know, hardly overlap, should give us a relative advantage where now prices in the markets need to go up to cover for higher fuel prices, especially, of course, for our American competitors and partners to more or less are not hedged at all. Third, extension or extra sections to be flown to markets beyond the Gulf. We have seen huge demand since day 1 for bookings coming in from Asia, to Asia, also South Africa, also very much in China towards Beijing and Shanghai. So we now decided to put extra sections into the air with spare aircraft we have due to the cancellations, spare crews we have and also by the fact that we're still in the winter schedule which doesn't put our fleet to the max. So we already announced quite a few extra flights to Bangkok. There will be more coming to Singapore, to Shanghai, to Cape Town, and to India, which will probably confirm the course of the last day from our revenue management teams that we have record inbound bookings, especially to those regions I mentioned. And that will allow us probably give also later on to a more positive outlook on the commercial output, at least of this initial phase of this crisis than we otherwise would have been able to do. Last but not least, the mother of all questions probably for European airlines. How much is the situation changing the view and the behavior of travelers, customers on this obvious Achilles' heel of geopolitical topics beyond aviation but surely in aviation. So we all -- I think we, the Gulf carriers will reopen eventually but how our traffic flows, how are cargo flows being directed in the future based on this terrible experience locally, I think is the mother of our questions for our industries, and we're sure we'll be discussing that later on. With that, let me, nevertheless, take you, of course, now back to '25, which, as you might recall, we have called a transition year from the very beginning. Various topics in the pipeline, we have addressed to you before, and of course, happy to also discuss today. Overall, the turnaround of the Lufthansa Airline remains our utmost priority. As also mentioned in the former quarterly result sessions, starting from operations. We have seen significant improvements, which also allowed us to reduce our flight irregularity costs by 43%, equivalent of EUR 362 million, significant input into our improved numbers of '25. And overall, also, we were quite cautious with our capacity increase, which only resulted a 4% or a little less, even 3.8% growth by lifting our revenues to a new record of EUR 39.6 billion. Nevertheless, of course, we're able to improve our profits, as you know, to at least by 19% compared to '24. This is a delta of EUR 350 million, far away from where Till and I want to take the company, talk about the 8% to 10% margins, but at least a step in the right direction and especially when it comes to the core airline operational stabilization was the basis for everything to come. We once again saw strong earnings contribution from MRO and Logistics. But for us, important that also in the core of the core, we are moving forward. We also have seen the first but only the first positive impacts of our fleet modernization and the associated product improvements. As you know, we finally were able to certify our Allegris seats also the 787, which is a big part of the 23 new aircraft deliveries we received. As a matter of fact, 7 of these 23 were 787 with now more or less all certified seats across all classes. That fleet alone, Boeing 787 will grow to 32 aircraft by the end of the year, '27 will have a significant impact on our modernization. Allegris, our new product in Lufthansa and SWISS Senses are now underway out of 3 hubs: Munich, Zurich and Frankfurt. Not only we are receiving very positive feedback but maybe more important for you in numbers, we have been able to achieve 12% higher yields for Allegris than for the former business class. To give you an example on business class, that's a big element of bringing up our ancillary revenues, which already went up 15% last year. And I'm pretty sure we'll show you some good numbers for '26 a year from today. Overall, that, of course, forced us to discuss how much we want to make sure that shareholders already participate from this improvement. We decided to increase the dividend by 10% to EUR 0.33 per share, which is a 10% increase, resulting in a dividend yield of 4% and a payout ratio of 30%. With that, let me turn to the traffic regions. I think we all remember Liberation Day last spring, when there were doubts about the development of the North Atlantic, it turned out as expected that the North Atlantic remained strong. And by the way, continues to do so. We'll come back to that later. And we managed to expand and sell capacity on this most profitable market segment of ours by 5%. In the fourth quarter, with an overall capacity growth of roughly 4%, we even managed to slightly increase unit revenues on a currency adjusted basis, which was clearly a trend reversal to the demand situation we saw in Q3. Going forward, I think the backbone of North Atlantic will remain but I think it's already fair to say we will see an increased shift of point of sales to the U.S. This stage where American customers tend to book earlier than European customers in Q3, in Q2, we are almost at a 60% above share of point-of-sale U.S. and obviously below 40% in Europe. Again, due to the later booking patterns of Europeans this will shift a little bit. But again, I'm convinced the trend of last year where we grew our American passengers by 10%, and our European passengers only by 1%, will probably result in even stronger dynamics this summer. Second largest intercontinental area for Lufthansa is not anymore China but by now India, which is also obviously one of the fastest-growing aviation markets in the world. We signed a partnership agreement with our long-term partner, Air India, following just a few weeks after the EU and India had concluded a new trade agreement. We, in this case, includes not only Lufthansa but the German economy, the German business environment, are quite positive and bullish on India. And of course, Lufthansa Group wants to be part of it. But also in South Korea and Japan, where we slightly increased capacity, along with demand, we were able to bring up profitability. And that is also true for South America, which, as you know, becomes more important for us also due to the fact that with IATA, we were able to double our capacities to Argentina and Brazil. The idea for '26 is to grow 6% on intercont and more or less stay flat on cont. And as I said, this, of course, does not include our recent extra sections, we are now in the process of offering. So these numbers, of course, are based on the regular flight pattern, which probably will change due to the short-term demand we are trying to take advantage of. Nevertheless, focused growth will remain our fundamental principle. We've seen the upside of this '25 and we'll probably see more of this in '26. Coming to the next slide. Let me talk a little bit about our obviously unique business model based on the fact of not having the same home market as our main competitors in Paris and London. We will be even more focused on the 4 business segments, and we'll also show them now also in our financial reporting with the 4 strategic pillars we know. Network Airlines will continue to be our core of the core by 70% turnover share. Of course, with Lufthansa Airlines being the biggest part of it. But we will also now be more transparent on our success in the point-to-point business where Eurowings is continuous, not only going strong to defend our non-hub home markets. You all know this is the utmost priority for Eurowings historically, we also see due to the fact that other airlines have been leaving Germany due to the high cost structure, additional market opportunities on the leisure side, we are continuously exploring. Third pillar, Logistics. Not surprisingly, the more unplannable the global economy is, the better for cargo. We've seen a good year in '25. Till will give you more numbers on in a minute. And already, the way things are starting now after the Chinese lunar year with a complete mix up of traffic lanes and supply chains due to the situation at the Gulf, we're probably looking at a good year here as well. And on top of that, new consumer behavior when it comes to e-commerce, I think combined, will make this big. This is a strong part of our company to come. That's even more true for Technik. We all have discussed with you before that '25 due to tariffs, there has been a little bit of a slowdown of our increase of margin and profits, which we don't expect to see again in '26. And obviously, the more or less new part of the Technik business being defense will probably also get more headwinds -- sorry, tailwinds, tailwinds from the unfortunate military developments in Iran over the last days and more to come. So I'm sure we'll be talking this -- we will be talking about this rather more than less in the future. Till with that little call it, 360 and almost hourly dynamic situation where we are, I hand over to you and talk to you in a few more minutes with some outlooks on my side on the strategic path before we are ready for your questions. Till Streichert: Yes. Thank you, Carsten, and also a warm welcome from my side. Exactly as Carsten said, I'll deal with the 2025 looking backwards. And then, of course, looking into 2026 and commenting on our outlook and then Carsten and I will try to answer your questions, in particular, to 2026 as much as we can in the best possible way. But let's first get 2025 out of the way. So 2025, as you've seen, revenue increased by 5.4% to EUR 39.6 billion, enabled by disciplined capacity growth of 3.8% of our Passenger Airlines, strong third-party revenue growth at Lufthansa Technik and as well continued strong demand for air cargo. And while costs developed in line with expectations last year, the cost increases continued to weigh on our P&L, such as a 10% increase in fees and charges or also a 40% increase for emission certificates last year. On the positive side, we did benefit from a lower fuel bill in 2025 and that was EUR 514 million lower than the year before. Overall, adjusted EBIT increased by EUR 350 million to EUR 1.96 billion and our adjusted EBIT margin improved to 4.9%. Please note, due to a one-off tax valuation effect, our positive EBIT development did not translate into a higher net income. Adjusted free cash flow amounts to EUR 1.2 billion, and this is a significant improvement, and this significant improvement was driven by the stronger adjusted EBIT, tax reimbursements and a slightly lower net CapEx. Turning now to our Passenger Airlines. The segment surpassed last year's results despite a challenging environment. Adjusted EBIT increased by EUR 41 million, supported by favorable fuel prices, a significantly lower irregularity impact and a positive earnings contribution from IATA. We are especially happy about Lufthansa Airlines adjusted EBIT improvement of around EUR 250 million. And this reflects the positive impact of the turnaround program. And across all our airlines, capacity grew, as mentioned before, 3.8%, with growth being primarily deployed to the North Atlantic and Continental routes, reflecting the strategic importance of both markets. In the second half of the year, we shifted capacity growth towards intercont markets while streamlining cont traffic. Seat load factor was at 83.2%, slightly higher than 2024 and with a clear momentum towards year-end. As anticipated, yields came under pressure, particularly on short haul and parts of long haul. However, I want to highlight that in our important North Atlantic traffic, unit revenue increased in the fourth quarter by 2.1% on a currency-adjusted basis, confirming the resilience of the demand. Moreover, yield weakness was, to a large extent, compensated by strong growth in ancillary revenues, up 15% for the full year as well as significantly lower irregularity related compensation cost. On the cost side, we have improved our performance throughout the year, while ex fuel CASK still increased by 3.6% in the first half of the year. The increase in Q3 was only 0.5% and the Q4 CASK was almost flat to prior year. This impact of our turnaround measures is important given the ongoing substantial cost inflation in fees, charges and personnel costs. As mentioned before, Lufthansa Airlines is of fundamental importance to us. So I'm happy to report progress. In its turnaround program, we achieved measures with a gross earnings impact of more than EUR 500 million, a clear confirmation that the turnaround is gaining traction. Looking ahead, we expect to measure volume to increase to EUR 1.5 billion by the end of 2026 and to EUR 2.5 billion by 2028. As communicated in our -- on our Capital Markets Day, we are targeting a high single-digit adjusted EBIT margin by 2028 to 2030 for Lufthansa Airlines. The key building blocks of this trajectory are clear: The continued renewal of our fleet, productivity improvements and the combined power of many other initiatives of the turnaround program. On fleet, we expect the Allegris share of the Lufthansa Airlines wide-body fleet to reach as much as 50% by the end of the year. This goes hand-in-hand with an improved yield level, we currently see a 12% RASK uplift from Allegris. On productivity, we will shift further 14 aircraft into our more cost-efficient AOCs, Discover Airlines and City Airlines, City Airlines has recently taken up operations out of Frankfurt and will operate 18 aircraft by the end of the year in total. Discover will operate 32 aircraft, including four A350s. Combined with further measures to improve cockpit and cabin staffing, this is expected to increase crew productivity by about 7% in 2026 compared to prior year. On our 700 turnaround initiatives, let me just comment on some of them. One example is ancillary revenues where we expect a further push driven by the prominent placement of additional services as well as the consistent monetization of the Allegris seating options. Our new cont fare structure will lead to a more personalized offer with the aim to increase customers' willingness to pay. And on the cost side, we will increase operational efficiency and hence, achieve a further reduction as well in fuel consumption. All of this improves financial performance. And in 2026, we expect that we can limit the increase of the Lufthansa Airlines ex fuel CASK to a maximum of half the annual rate of inflation. Moreover, it is noteworthy that this unit cost increase is fully driven by premiumization, hence an investment into value creation for both our customers and ultimately, our shareholders. Ladies and gentlemen, structural improvements do not only apply to our mainline, we also focus on digital transformation on a group level. Let me briefly touch on the progress of our One IT program. One IT is a group-wide transformation program and its aim -- its aim is to move toward a completely unified IT backbone, a common data and AI foundation and an integrated operating model under the recently founded legal entity Lufthansa Group .IO. The objective is clear, structurally lower IT costs while unlocking digital business value. And I'm pleased that already in 2025, the launch year of the program, One IT delivered its first tangible financial contribution. We realized more than EUR 50 million of IT cost savings through quick wins such as contract renegotiations, sourcing optimization and application rationalization. In 2026, One IT will focus on the implementation of structural changes followed by scaling on in 2027. The program targets in total about EUR 200 million of sustainable annual cost savings by 2030. This IT transformation will also enable significant additional business, value for example, ancillary revenues, personalized advertising or cost improvements and customer servicing. And this is why One IT is not only a cost program, but a core enabler of value creation across the entire group. Let me now turn to our Logistics segment. Lufthansa Cargo once again delivered a strong performance in 2025, demonstrating that the business is well positioned in the post-pandemic air freight environment. The revenue growth of 4% was driven by a 5% capacity increase as a result of one additional freighter and increased belly capacity. Strong demand was driven by Asian e-commerce, semiconductors, aviation components and pharmaceuticals, all of them high-margin verticals and therewith putting them into the focus of Lufthansa Cargo. Lufthansa Cargo delivered an adjusted EBIT of EUR 324 million, representing a 29% improvement driven by higher volumes and improved load factors more than compensating a decline in yields. On the cost side, Lufthansa Cargo showed a strong performance, ex-fuel unit cost decreased by around 6% and main drivers were here, lower charter expenses, IT cost reductions and improved crew productivity through optimizing network planning. Looking ahead, we expect for Lufthansa Cargo a clear earnings increase in 2026, building on a disciplined execution of its strategy and the strong market position in special cargo and premium products. Turning to our MRO segment. Lufthansa Technik achieved a 12% revenue growth, with total revenue exceeding EUR 8 billion for the first time, driven by a 23% increase in third-party business. While this was an exceptional top line development, adjusted EBIT amounted to EUR 603 million, broadly in line with the previous year. And this result was achieved despite sizable external headwinds. One of those headwinds came from foreign exchange developments, while the weak U.S. dollar had a net positive effect for our airlines, Lufthansa Technik was impacted negatively with a mid-double-digit million euro earnings effect. Lufthansa Technik was also affected by the U.S. tariffs on aluminum and steel impacting the results by roughly EUR 30 million. But please note that this was already significantly lower than originally assumed due to the swift and successful implementation of mitigation measures. These measures included adjustment to the production flows, renegotiations with customers and optimizing customs processes. These steps contributed to an earnings recovery in the fourth quarter and we expect that the negative effects will diminish further in 2026. In parallel, Lufthansa Technik continued to expand its global footprint. New or growing facilities in Portugal, Tulsa, Calgary and Malta will contribute to substantial capacity additions, particularly in the engine segment. And in 2026, we expect earnings at Lufthansa Technik to increase significantly, supported by normalization of tariff impact, continued growth in the engine segment and the benefits of the commercial initiatives already underway. Turning now to cash flow. 2025 was a year of significant improvement for the group, both in terms of cash flow profile and resilience of our balance sheet. Operating cash flow increased to EUR 4 billion, driven by higher earnings as well as a tax repayment from a German tax audit. CapEx includes the final payments for 23 new aircraft, of which 9 were wide-body aircraft. This was partially offset by 19 sale and leaseback transactions and net CapEx stands at EUR 2.5 billion and is therefore slightly below previous year's level and also below our expectation at the end of Q3 due to a delivery shift of 4 wide-body aircraft into the first half of 2026. And adjusted free cash flow reached close to EUR 1.2 billion, which represents a meaningful increase of EUR 350 million. Looking at our balance sheet. The combination of strong operating cash flow and disciplined investment led to a significant strengthening of our liquidity position, and we ended the year with liquidity of around EUR 10.7 billion, above our target corridor of EUR 8 billion to EUR 10 billion. And we expect this liquidity position to return to the target corridor -- into the target corridor by year-end 2026 as we use these available funds for aircraft, invest and payments. Financial net debt increased to EUR 6.4 billion, mainly driven by the capitalization of leases. And when including our net pension position, total net debt remained stable year-over-year. And as our profitability increased, our leverage ratio improved to 1.8x. We continue to be solidly positioned with an investment grade credit rating and ample financial flexibility to support our fleet renewal and growth plans. Now let's talk about fuel prices, which is, of course, on top of everyone's mind right now. So fuel costs developed favorably throughout 2025 and amounted to EUR 7.3 billion in line with guidance. For 2026, our fossil fuel bill estimate is around EUR 7.2 billion, thereof EUR 7 billion for fossil fuel and EUR 0.2 billion for mandatory SAF. All figures as of last week Friday. These numbers represent a tailwind of approximately EUR 100 million versus 2025, predominantly driven by the weaker U.S. dollar. And as you know, our hedging strategy continues to provide protection against volatility while also allowing us to benefit from price declines. And for the Passenger Airlines, we have already hedged around 82% of our fuel needs for the remainder of 2026. Since last Friday, we have, of course, seen a substantial increase in the jet fuel price, resulting from both higher crude oil price as well as higher jet crack. I will comment on this in more detail in a minute when we talk about our full year earnings outlook. So let's go there. And speaking now about our outlook for the current financial year. This is obviously not easy given the events in the Middle East. On the one hand side, I see the strength of our group and the progress we make in executing our strategy in all the dimensions and also in all the dimensions that we can control. On the other hand, I see what's happening around us and this does have an impact as well on our financials. The bottom line impact will depend on which effects are outweighing the others and also on whether those effects will change subject to the duration of the current situation. Being in this situation for only 6 days by now, obviously, does not provide us with sufficient hard data points to draw final conclusions for the rest of the year. But of course, we have data points from the first couple of days, which we were going to talk -- which we are going to talk about in a minute. Let's go through the building blocks of our outlook. We plan to increase capacity by around 4% and here also in a disciplined way. Clear focus will be on intercont routes where we expect to grow in mid- to high single-digit range while cont capacity will be broadly unchanged. I do expect cost inflation to persist but it will be partly offset by our transformation programs and the ongoing fleet modernization. And on this basis, we expect adjusted EBIT for 2026 to be significantly above the 2025 level, consistent with our commitment to delivering sustainable profitability improvements. Now let me put this into perspective of the Middle East crisis, and let me describe to you what we are currently seeing. One slide before, we've shown you a fuel price forecast based on last week's Friday, and that is the way we always presented to you each quarter, including also the fuel sensitivity, the fuel matrix where you can go along the axis and get an idea how things can move. Now since then, fuel prices have increased and taking a short-term perspective, just for the next 2 months, current fuel price levels mean about a 20% to 25% higher fuel cost for March and April compared to the underlying figures reflected in our EUR 7 billion forecast for the full year. However, for March, the impact -- and again, that's normal, for March, the impact will be further limited as about 60% of our physical settlements for fuel are priced at the prior month level. This does give us additional time to also adjust our revenue management approach. Having said that, broadly, in terms of fuel dynamics, we don't believe that fuel price levels remain in the long run where they are right now. Then we also have impacts from flight cancellations. Since 28th of February, we, of course, have stopped flying into the region. These are 10 destinations. And overall, to give you an idea, Middle East traffic would have represented about 3% of our capacity in the first quarter. For comparison in 2025, it was just about 2%. So you can see that the overall impact is somewhat limited. We estimate about a EUR 5 million earnings impact per week from those cancellations based on lost business and cost of care. On the other hand, we are also observing positive earnings effect. And firstly, since last weekend, more people have been flying with the Lufthansa Group Airlines instead of connecting via the Gulf hubs. Since the weekend, additional bookings on our Asia and Africa routes have by far overcompensated the cancellations we've seen on our Middle East routes. Over the past days, revenue intake for departures in March was about 60% higher than last year. Global net revenue intake for the full year during those days, was more than 20% higher than last year, indicating a positive impact in booking intakes also beyond March. We expect this situation to persist as long as the hubs in the Middle East cannot be fully serviced. Secondly, many people are currently changing their travel plans in the short term. And on this topic, we see the possibility that travel patterns might also change for longer. Potentially persisting -- potentially persisting security concerns around the Gulf region might also lead to more traffic within Europe or through European hubs or U.S. destinations. Thirdly, with more than 80% hedge ratio, we are hedged to a higher degree than many others. This provides us with a relative advantage, especially compared to those who are not hedged at all. And fourthly, a large part of the airfreight capacity in the Middle East is currently affected, about around 18% of global capacity is not available at the moment. This means that also cargo streams are shifting. And Lufthansa Cargo has observed an increase in demand over the past few days. Moreover, we've seen rise in cargo yields of 5% worldwide and plus 35% in the Middle East and Asia over the past few days, even a further yield uplift from these markets is conceivable. More longer term, we might also see more shift from seafreight to airfreight when things are time critical. Therefore, for me, the conclusion or the message is kind of clear. We do control what we can control, and we are obviously closely monitoring what's going on in the world right now. And even in the light of the current situation, we are convinced that we can significantly increase our adjusted EBIT in 2026. However, let me also be clear, the range of uncertainty has increased and there was also the range of possible outcomes. Let's now go back to what we control, that's our CapEx. Our CapEx outlook. Net CapEx is expected to amount to around EUR 2.9 billion, reflecting the planned delivery of up to 45 new aircraft. That's the largest single year fleet expansion in our company's history. And adjusted free cash flow is expected to be around EUR 0.9 billion slightly below last year due to the higher investment volume. We expect 2026 overall, to be a year of continued progress for the group on our path towards our midterm targets and our businesses are well positioned and on a clear trajectory towards long-term value creation. And on that note, knowing that, of course, 2026 will be at the center of our discussion, I believe. I'd like to hand back to Carsten for further remarks on the strategic outlook. Carsten Spohr: Yes. Thanks, Till. And just a few words on, indeed, how do we look into the future, of course, based on what Till and I communicated at the Capital Markets Day back in September, where we announced our medium-term financial targets, you are well aware of by now, centering around 8% to 10% adjusted EBIT margins. First, lever of -- the 4 key levers I'd like to address is obviously airline growth in a profitable way, which means for us more long haul than short haul. We actually want to grow the intercont fleet to 200 aircraft while we keep the short-haul fleet more or less flat. The additional required feed will be provided by coordinating our hub traffic in the future, centrally over all 6 hubs, which will give us a higher share of feed passengers to intercont destinations rather than short-haul to short-haul. At the same time, we're, of course, leveraging the One Group approach beyond this example. We do see a 3% margin uplift from fleet and new premium alone but there's also elements of the loyalty ecosystem and the ancillary push, which will pay into our midterm targets. Last but not least, the so-called One IT, where we're harmonizing the IT network, at least across the 6 hubs in many regards, even beyond our hub and Network Airlines is another example of this second lever. Third, airline cost transformation. Operational excellence focus in '25 has provided the stability I quoted was -- mentioned to you before. Now starting in '26, efficiency will be higher on the priority list. And we do believe, including more modern aircraft, including, of course, lessons learned, and finally, enough staffing at the European and especially German hub airports, we will be able to show that we keep our unit cost despite cost inflation flat in '26 as we already did in the fourth and last quarter of last year. Another element of this will be the fact that we grow fastest in those airlines with the best cost competitiveness, thinking about Discover, for example, and Lufthansa City Airlines. Yes, and last but not least, the so-called fourth lever is the additional focus on MRO and cargo. You know our Ambition 2030 program in Cargo, by which we want to achieve EUR 10 billion of revenue with the 10% EBIT margin by the end of the decade. And also in Lufthansa Cargo probably supported by the recent developments in the Gulf, we are looking to claim the top 3 position globally, again, coming out of top 5. Last but not least, defense was already mentioned, and we strongly believe, again, with current affairs probably creating a tailwind here that defense will be a very stable and highly profitable part of Lufthansa Technik to a higher degree. Last but not least, let's talk about a little bit more about maybe the single most important lever and most impactful lever we have, our fleet renewal. You're aware we're taking -- we're in the middle or at the beginning, if you might say, of the largest ever step towards a more modern and productive fleet. We expect 45 new aircraft this year alone, more or less 1 per week, and there is an unheard number of 27 widebodies among them. That will bring us to a new tech quota across the whole group of 1/3 with obviously resulting cost advantages and productivity gains. Also, we see some light at the end of the tunnel of the Pratt & Whitney engine issue. As far as it looks now, we'll be able to bring down the number of grounded aircraft to less than 10, which is 30% less than last year. Coming to an end, getting ready for your questions, you might share my view that the Lufthansa brand is an iconic brand in our industry for many, many years now, celebrating our 100 anniversary today. No doubt, we intend to maintain this in the future. And part of that must be the further improvement of the customer experience and be an example of Starlink, which we are looking to offer to our customers as of Q2, be it new lounges in almost all of our hubs and flagship lounge to be opened soon in JFK, where all of our group airlines or more or less all of our long-range group airlines are serving the airport at least once a day, where overall, the further integration of IATA creating more synergies is a step towards that product improvement for our customers. So overall, again, with all the uncertainties existing, we're looking optimistically into '26, and now -- look forward to your questions and comments. Thank you very much. Operator: [Operator Instructions] And the first question comes from Jaime Rowbotham from Deutsche Bank. Jaime Rowbotham: Two questions from me. Firstly, Carsten, I wanted to ask about these puts and takes, pros and cons of the current unfortunate situation. Till did a great job of running through some of them. Interesting to hear bookings to Asia Africa over compensated for cancellations to the Middle East. I just wanted to focus it maybe on the transatlantic, given it's so important for you, your U.S. competitors aren't hedged, so they are likely raising fares and hopefully, you can follow that a bit. At the same time, though, I wonder if fares are going up at just the wrong time in the sense that some people might be nervous to travel at all, which could have a downward impact on demand. Maybe you could just flesh out either what you've seen so far or what you think happens next insofar as that's possible. Second one for Till. Thanks a lot, for clarifying what might happen to fuel for March and April. I just wanted to ask, if possible, about the full year. So on the fuel slide, you tell us you as of last Friday, $71 for Brent, $26 for the crack spread to get to EUR 7.2 billion. Obviously, Brent now $88 and the crack spread about $100 a barrel. So it's costing more to refine than to buy the oil. Hopefully, that won't last. But the forward curves are pointing to a scenario that's not even covered by your sensitivity table where the jet crack part on the x-axis could double or triple versus what you show. You also mentioned in the footnote, the hedging you've got is part on gas oil and part on Brent, so you don't actually have the crack spread hedged. With that in mind, have you had a chance to do any scenario analysis on what a mark-to-market type fuel bill might look like for all of 2026? Till Streichert: I'll go second first and then maybe on the puts and takes, Carsten, if you want to add a little bit. So Jaime, absolutely. I mean, this is top of mind question how this is going to evolve. And you are quite right in terms of hedging. We've got a split and you know that we usually hedge blend with about 35% and gas oil as a proxy for jet crack with about 50%. And it's true that, obviously, jet crack has moved up. You can almost say off the chart of our fuel matrix on the right-hand side. So here, I would just highlight, and again, mathematically, you can calculate all of that, and we have done that. And the impact, obviously, if you would imagine that it stays for the full year is of size. On the other hand side, I also don't believe that this situation will going to stay there for a long time. And you can see also, and I'm sure you've looked at the volumes that have been traded driving ultimately the crack price, the crack spread. It's on very low liquidity. And therefore, there was -- I would also say a bit on the back of what President Trump yesterday evening said to possibly also escort tankers through the Strait of Hormuz. Ultimately, I do believe that this is not going to stay for long at these levels. And of course, leading now into the other side of the equation, it's true that the hedge levels do we have give us a solid upward protection. And of course, this differentiates us versus others that follow a non-hedging policy. And therewith, I do expect that also yields also or in particular, on the North Atlantic have got the potential to go up and increase. Carsten Spohr: Yes, Jaime, Carsten here. I think you already kind of put it in your question. There are pros and cons, and I think it's very difficult right now to quantify them exactly after just a few days. Again, cost of cancellations exist, probably like EUR 5 million per week is our best estimate. But at the same time, as you pointed out, we have a relative advantage on the fuel cost on the one hand. I think there's also historically a certain move of bookings towards highly trusted brands in times of crisis, we are definitely SWISS as the [indiscernible] Switzerland and Lufthansa to a certain degree, we probably benefit from. Then, of course, the question is, is the overall potential softness in travel for us, European carriers overcompensated by the shift of travel from carriers in parts of the world where people don't want to go now towards us. Hard to quantify at this point but not completely probably unexpected that will happen to a certain degree. And as I said before, there will be flexibility in our network as we are now within days putting capacity into China, into South Africa into Southeast Asia, of course, we're happy to also reallocate capacity throughout the whole summer if needed. If, for example, the demand tool from Asia become so strong that the next best route tool from Asia is more profitable then the weakest route on the North Atlantic, we would move the airplane. But I think it's way too early to discuss that now. Till Streichert: Let me add maybe just 1 additional point, if I may, just to give you a bit of a holding line as well on the RASK side. If we would have spoken 10 days ago and talked about RASK expectation for the first quarter, I would have said currency adjusted, so ex-X positive but including FX, slightly negative. Now as we speak today, with the net booking intake that we've seen over the past few days, this has shifted clearly to the positive side. And I expect that the RASK for the first quarter should reach a positive territory, even including the unfavorable FX headwind in comparison to prior year because remember, obviously, the U.S. dollar started to depreciate just in the second quarter last year. Operator: And the next question comes from Stephen Furlong from Davy. Stephen Furlong: Carsten, Till and Marc, congratulations on the results. Carsten, in the prepared remarks, I mean, you talked about the industry being more resilient to crisis than it used to be. Could you just amplify that? And then maybe just talk about the Allegris products and talk again about the kind of rollout of that product. I know there's been a lot of kind of news, comments and reports about some delays and then not delays and what the revenue kicker you're getting from that excellent product? Carsten Spohr: Yes, Stephen, thanks. I think has said this numerous times about the industry being more resilient before the unfortunate events that the Gulf started a few days ago. Because, unfortunately, already before that, we have more military conflict in the world than ever before since 1945. And whereas usually, when there's a conflict somewhere, bookings usually collapse because people are afraid to fly and want to stay home, this hasn't happened, not only not the last days, let's even go beyond that. We have seen, as you well know, record demand in the industry basically since COVID. And what is the background of this. I share the view of some of my American counterparts that for consumers, traveling has been higher prioritized since COVID as before. That's 1 element. We definitely don't have a period of overcapacity due to the shortage of engine and plane productions at the OEM level. And I think last but not least, you see more wealth around the world, not only in the saturated markets but also in other parts of the world, which airlines serve. I think all that combined -- by the way, the last one is why especially the premium classes, as you know, are booming now for many years. So I think all that combined shows that even though the world has not become more stable, our industry has. And now to also the last days might add to this because imagine this would have happened 20 years ago, I think you would see a very different booking environment than what we are seeing since last weekend. Allegris, yes, we had significant delays in certifying the Boeing aircraft with our Allegris seats who have a different manufacturer than the seats in our Airbus wide-bodies are manufactured by. We wanted to split the risk many years ago and also the capacity of none of the seat manufacturers was big enough to provide all of our wide bodies. But now these airplanes are coming in quick time, as I mentioned, 9 are here already. By the end of the year, we have 36, I think, as I said in my opening remarks, we have 28 seats in the 787, of which 25 are now certified as the end of March. And there is now only 3 seats, which will not be able to be sold by the end of March. And we even now decided to pull that 1 week forward giving us additional revenue opportunities by already having the seats open for a flight a few days before the end of the winter schedule. But that's only the 787 topic. And as mentioned also by the end of the year, in the Lufthansa Airline, 50% of our seats will either be Allegris or in case of the 380 aisle access seats. So we're another manufacturer. So this is now in full swing. We mentioned before, we have 12% to 13%, 14% higher yields on these seats than on our regular business class seats. So that's big and also the ancillary revenue increase, which we're expecting for '26 to a high degree, will come from Allegris versus the first time we actually charge for different seat types in business class, so that will also be, I think, tailwind for '26 and beyond. I hope that answers your question. Operator: And the next question comes from Alex Irving from Bernstein. Alexander Irving: I'll ask 2, please, both around technology. First of all, on IT, you signed in the last quarter for a new IT platform to implement across 9 of your group airlines. There's an IATA paper that's been around for a while that talks about a 2% to 3% improvement to RASK platforming like this. Is that the right way to think about the upside for Lufthansa Group? Or is the incremental gain less given your work to date in areas like continuous pricing, for example? Second question is on the distribution side of things, specifically, how are you approaching decision about whether and how to sell in large language models? Are you planning to engage directly through an API or to rely on existing infrastructure GDSs, travel agents and continue to pay commissions? Do you have a view on when you're likely to sell your first trip through an LLM? Till Streichert: Okay. I'll make a start on the first one, and then I'll see how far I get on the large language model based selling. Look, I mean, as you know, quite right, we want to embark on the journey of implementing on the one order path, it will be a long-term journey for the industry and also us but it is important to be amongst those ones that joined the pack at the beginning. And we do believe that there are clear benefits on the IT infrastructure on the one hand side because, I mean, as you know, the P&R standard, e-ticket standard and the miscellaneous data standard gets basically consolidated into a single order that is more efficient and drives back office efficiency on the other hand side, quite right. Once you've got this type of let me say, Amazon order type model, marketing and retailing obviously benefits as well. I am aware that IATA quotes these figures of 2% to 3% RASK benefit. To be honest, I find it quite early to take a view on this. But I do believe that principally, there are benefits also on the revenue side from better retailing. I think particularly for us, what I believe is good. We obviously come with scale when you think of passengers that we've got. And whenever you touch these large-scale transformations, when you get it for done at scale, it does give you normally a greater benefit. Look on the distribution, to be honest here, and large language models, I have to admit I'm not that deep into the status where we are. What I can tell you is that, clearly, we are advancing on many fronts in the digital arena to improve customer servicing, through large language model-based trainings, bots. And I don't know what the digital adoption right now is, but we are making progress on that front. But happy to come back and have a dedicated conversation on this. Operator: And the next question comes from James Hollins from BNB Paribas. James Hollins: So Till, on the turnaround update, maybe I always see a slightly in charge of this, so maybe I'm wrong. But as you see it, where have you outperformed, underperformed so far on the turnaround program? And you may not choose to answer this but if I take the Lufthansa Airline EBIT growth of EUR 250 million, which was a gross benefit of EUR 500 million. Is that 50% net versus gross benefit, a good indicator for the full year '26 EUR 1.5 billion? And then probably for Carsten and I know there's lots going on but I thought I'd better mention the strike you had in Q1. Maybe you could update on the cost of that where we are on some of the open CLAs and whether this current situation tends to lead to a bit of a backtrack from some of the union aggression? Till Streichert: Yes. So I mean turnaround, first, to give you my kind of assessment, I am happy with what we have achieved last year. Again, it's not easy to get such a large-scale program off the ground. And the EUR 500 million gross figure, as you know, has come from several initiatives. We've got EUR 700 million in the entire funnel. Several of them obviously have gained traction and delivered in 2025. Let me say, where were we strong and where maybe things will be moving in the future towards. Point where we were clearly strong and successfully executed was operational stability. You remember that was one of our big topics at the beginning of 2025. Get stability back into the production, into the system. That is good for our customers, was good for our customers. You can see that in NPS, customer satisfaction everywhere. And also in the significant benefits on the so-called IRREG cost charges and foregone revenue that is sizable. And that's a clear proof point but also on many other smaller initiatives. And again, I wouldn't speak about EUR 700 million initiatives if it wouldn't be quite granular. We've made good progress. What's ahead of us is clearly the focus on productivity. And this is why I made it also a point on my chart on my slide. And there, we will continue to move capacity into our lower-cost AOCs, Discover Airlines, City Airlines. You can see the aircraft that we are moving and also starting operations for City Airlines from Frankfurt and there with big focus for 2026 and beyond is productivity. Now to your question, gross versus net. Look, it's hard to say. To isolate it on a program level because we do have, obviously, underlying cost inflation drivers from a salary point of view, from a fees and charges point of view, and therefore, it's a bit of a harder ask to say how this -- how the gross is directly translated into a net. But I do see us on track to get the EUR 1.5 billion in 2026 delivered. Carsten Spohr: Yes. On the strikes, the number you're asking for day of strike like the 1 we just had, we probably estimated to be around [ EUR 50 million. ] You might see that's a lot less than what we had before. Why is that? Well, there's less support this time for the units going on strike, which results in more volunteers to continue operation. So therefore, we don't ground the whole fleet as we were forced to in the past but keep our most profitable routes in the area that's reducing the cost. Looking ahead, we are in constructive talks both with our cabin union, as a matter of fact happening today, and Verdi, our ground staff union and also for the cockpit union, actually, we have now 2 corporate units in Germany but for the 1 which is affected here for Unabhangige cockpit, we have offered even in a moderated fashion to talk about the bigger scheme of things, which right now has not been agreed to yet but the individual pilots very much want to stop the shrinking of the main airline, which becomes more and more obvious, as Till just pointed out with our shift of airplanes. So I'm quite optimistic that eventually, that shrinking on behalf of the pilots should come to an end, which will require us to talk on the bigger scheme of things. So I don't see any strike action like the one we saw in 2012 to 2016 or anything because there, we just now too much what the members want and believe that the answers, of course, can only be a reduction of the cost disadvantage of the main airline to the other AOCs in Lufthansa, whereas a strike itself and even the things they're asking for in the strike, and we are not willing to give in the airline with the lowest profit would increase the distance and the disadvantage on the cost side. So this will not be a long-lasting, I think, exercise. Operator: The next question comes from Harry Gowers from JPMorgan. Harry Gowers: First question, maybe just related to Jamie's question on the fuel hedging. Can you just confirm, do you fully hedge the crack component and that's all included within your comments on the March to April monthly impact? I think you said that gas oil hedging is a proxy for jet crack, and so does that type of hedging basically fully cover the price increases we're seeing in the crack spread market at the moment? That's the first one. And then second one, just on the ex-fuel unit costs. You have this comment around 2026 ex-fuel CASK is expected to be half of inflation for Lufthansa Airlines? Can we extrapolate that for the entirety, I guess, of the kind of new network airline segment? Is there any reason why those other airline businesses won't be reporting a similar cost results? And maybe just related to that, if I can squeeze 1 in, what are you assuming for the union agreements? And staff cost inflation in your overall kind of cost and EBIT guidance for the year? Till Streichert: Okay. Maybe a comment on just union agreements. I'll leave to you, Carsten, and I'll go on the first question -- on the second question first, ex-fuel unit cost. So let me be clear what I said is indeed for Lufthansa Airlines, half of inflation is our target. Now overall, as you will remember, we stayed away from giving a group guidance on CASK overall. So we limited it to a specification just for Lufthansa Airlines. Of course, all of the other airlines, our business units have got CASK saving programs in place but I don't want to give an overall cost guidance for the entire group. Going back to the first question, which is a fuel hedging, once again, we hedged gas oil 50%. So 50% is the element of our hedge. Our hedging composition included 35%. And gas oil as a proxy that is strongly correlated to jet crack but it's true currently, Jet crack is very high. We believe that the spread between jet and gas oil will come back to normal levels. And I think the spread currently is inflated mainly because of the illiquidity in the market. Carsten Spohr: Yes. Harry, if I got your question right, you wonder how union agreements would impact our guidance. So I think it's fair to say they will not impact our guidance. Where we have talks, we kind of know what we are willing to offer and how that would result in financial outputs. Of course, it's in our planning. And in the last strike we had for the pilots on the mainline, we told them that as long as the main line is not reaching its targets in terms of profitability. And that actually is the lowest profitability airline in the group. There is no any financial room for maneuver to pay even higher pension benefits, which are already higher than the ones in the other airlines. So there's also no room for additional costs here. That remains is, of course, the cost of strikes. But at the same time, the more strikes there are, the less airplane will be in that airline. So I think there's almost like a natural hedge if you want to use the term from our fuel environment. So the answer again, to your question is that there is no impact on the guidance to be expected from the current labor conflicts. Operator: And the next question comes from Axel Stasse from Morgan Stanley. Axel Stasse: I have two from me. On the first one, coming back on fuel, apologies. How much of that fuel inflation can be passed on? Obviously, you mentioned your exposure to jet and gas oil crack. But obviously, the U.S. guys are not hard at all. So if fuel goes up by 10% approximately, how much of that can be passed on? Can we assume half of it? The reason why I'm asking is because I'm slightly surprised to see you we're comfortable of providing an EBIT guidance without a lot of visibility in the near term on fuel. And I therefore assume you guys feel comfortable passing that on. So just trying to understand the extent of it. And then the second question is can you provide maybe an update on TAP, what are the latest news here? And how comfortable are you on TAP? Till Streichert: I'll take the first one, just on fuel once again. Two comments I would add in addition to what I already explained. I mean, first of all, ticket prices are made at the market level but we do see already increased yields also on the North Atlantic and the fuel price surcharges are being implemented. Now how much of that exactly I can't tell you but the situation is dynamic, and therefore, I think it is just not prudent to give you a statement on that. I think if in the future, fuel prices remain elevated, clearly, everyone and in particular, those ones that follow a no-hedge strategy or have got less hedge protection will need to pass on fuel prices. And that, in my view, provides an opportunity and allows for equally pass-through from our end of additional fuel cost. We have done first price increases already through the fuel price surcharge and have implemented them. And sorry, and just 1 more thing, Cargo. I wanted to speak about both segments. Cargo obviously works on a pass-through model as well. And there -- there is literally -- it's not on a daily basis but within a week, prices get adjusted for the input cost of fuel. Carsten Spohr: Yes. Actually, there's nothing really new on TAP. As you know, we are in the process because we believe there would be a perfect addition to our multi-hub network, also due to the fact that we are currently the weakest on the Latin American market. The overlaps are less than they would be for others, which probably has an impact on the antitrust approvals to be obtained. At the same time, there are so many open questions about the process and the outcome that it's impossible at this point to answer is creating value for our shareholders or not. If it doesn't create shareholder value, we will not do it. We don't need it. If it ends up to be a win-win of Portugal TAP and us, we will maybe see more progress here. Nothing else to add. Operator: And the next question comes from Muneeba Kayani from Bank of America. Muneeba Kayani: Firstly, Till, if I can just clarify your comments around the impact from the Middle East on kind of near-term March, April. Did you say that the higher bookings demand that you're seeing for Asia, Africa and all is compensating just the cancellation costs? Or is it compensating cancellation costs and the jet fuel higher costs on the unhedged portion? So that's my first question. And then secondly, just going back to the transatlantic and Carsten, in your experience, how long does it take for kind of U.S. airlines to adjust the capacity in such shocks on the oil price, given their lack of hedging? Till Streichert: Mona, let me take the first question, albeit I might not give you a totally conclusive answer on that. But yes, first of all, and let me go on the net booking intake and just to run you through that. And I've really taken the view on kind of what numbers do we see right now. And since last Saturday, our net booking intake has developed strongly, exactly as I said. And when we compare these net bookings which we have received between Saturday and Wednesday, end of day, for the month of March, this figure is about 60% higher than 1 year ago. And my second statement on the inflow side was, if I compare same period, those few days, net bookings for the rest of 2026, this figure is 20% higher than 1 year ago. So clearly, what I said on the negative side, the cost of the cancellations of the Middle East, we have comfortably covered. To your question now, does that cover as well the fuel cost. Look, it really depends on how long the fuel prices remain elevated because I've equally given you a view on March and March as such, while I said, nominally 20%, 25% higher fuel bill as we obviously settle the physical fuel bill with a month's delay, you can actually knock half of it off for a month, okay? So it's not that straightforward to say how all-in looks like but there are puts and takes. And I think we should clearly see both of them, albeit I'm not giving you a net figure right now because I can't. Carsten Spohr: Yes. Muneeba, Carsten, you asked for my experience, and I think the things I experience is twofold. First of all, the speed of reaction is a function of the impact of -- on the traffic. Think about 9/11, it took us all only days to come up with a different schedule when the skies reopened than the schedule we had before because it was so obvious impact was huge. I think this is a different situation here. But none of us knows how long the war will last, how long the impact will last, at which degree but I think it's worth to say that all of us have become much better in reallocating capacity to demand, also due to the lack of aircraft in general. What does that mean? When you have a route which is not performing well anymore, you can more easily find another route to provide profitability and value for your shareholders than in the past where maybe you already had loss-making routes and couldn't find something else because otherwise, we would have done it before. So I think with the profitability where it is also for the international business of the U.S. carriers, we're going to see a very market-focused reaction on both sides of the Atlantic, which fuses our optimism -- fuels our optimism, sorry, for my language. Operator: And the next question comes from Andrew Lobbenberg from Barclays. Andrew Lobbenberg: Can I ask about IATA, we haven't spoken about that beautiful pretty picture on the slide of the planes? How are you thinking about the decision to take majority in general? And then how are you thinking about it in the context of the unsettling events in the Gulf? And then can I just come back to the scale of current bookings? You've given us really precise figures on how bookings have come in for those destinations in the range of the Gulf that have gained. What has happened to booking inflows for short-haul Europe? What has happened to booking inflows on the North Atlantic in that short time period? Till Streichert: So look, first of all IATA, on it, maybe I'll just divert the sac, and just IATA has done a good 2025. Organically, they've reached breakeven on adjusted EBIT, which is positive, which is great. And you can actually back-calculate what also their overall net income was. Our 41% contributed with EUR 90 million. On our side, I do see many benefits of calling and integrate -- calling early and integrating IATA faster. We've made very good progress throughout last year. But as you can imagine, with the call option being open to be decided in June, we will keep our options open, and we continue to assess and then take a decision nearer by the time and will communicate. Secondly, on the different travel on the -- sorry, your second question was on Europe and North Atlantic in terms of sentiment, travel sentiment. We actually have so far not observed worsening of travel sentiment or also bookings in intra-Europe or North Atlantic but of course, it's to be seen. Operator: And the next question comes from Ruairi Cullinane from RBC Capital. Ruairi Cullinane: What have you done to Middle East capacity this summer? And linked to that, should we expect the EUR 5 million per week cost of cancellations to tail off even if the conflict doesn't come to an end soon? And then secondly, are you any less comfortable hedging fuel through Brent and the gas oil and leaving spread to jet fuel unhedged? Could you consider that in the future? Till Streichert: First of all, Middle East, I've given you an idea of the sizing. Last year, it was about 2% of our capacity. In Q1 normally that would have been 3%. Remember, last year, there was also a bit of on and off of flying into the Middle East, and this is why it was 2%, and we had it increased it a little bit. So I think what I've given you now is a EUR 5 million negative impact while we are not flying will rather go down because it does include, of course, a view on the cost of care. We took a view now of also those additional costs that is just on the ones where we actually need to care -- where we need to support, while also passengers guests are staying still need to be repatriated or flown back. If it stays long, we will clearly reallocate capacity. And then even this element of what I called negative impact or lost business from Middle East will obviously go away. And therewith, I would say this is not so much of an impact medium term. In terms of strategy of hedging, look, I think I've described it probably to the fullest extent I can do on this call. And we -- our hedging strategy is clearly designed through options and that's different to swaps where we want to participate, also in the downwards movement and therefore, I'm comfortable with the strategy that we have so far in place. Operator: And the next question then comes from Antonio Duarte from Goodbody. Antonio Duarte: The first one is on ancillaries. So 15% growth year-on-year, clearly doing very well, namely with Allegris rollout. Could you give us some color here where you see these terms of ranges going forward? And my second question is turning to the MRO. As you said, a bit of a margin compression seen in '25, a bit of recovery expected from your defense, et cetera. Would you be comfortable with the full recovery from the margin seen in '24? And any color on that would be great. Till Streichert: Okay. Let me make a start just on ancillaries. We have explained what we've seen on Allegris. And the additional seat options and also ancillary sales overall. If I split that, I do believe that the ancillary sales as such has got substance to continue. But of course, it's hard to be at a double-digit rate going forward, just a law of big numbers at one point in time. Therewith, I would like to go back to the Allegris element within the ancillaries. And here, we clearly see the benefit of selling the different seat options. And the main driver of that is obviously the number of aircraft coming with the Allegris cabin into it, and that has got runway and gives us longevity to continue to grow the ancillary sales category. Carsten Spohr: We always call it the big 3, Antonio, baggage, seating upgrades. And that, I think, will continue to drive ancillaries up as Till explained, with Allegris, of course, a special push. MRO, you know that in '25, MRO was suffering almost -- as the only part of the Lufthansa Group under tariffs, which, as you well know, for airplanes and engines don't apply. These tariffs, as we all know, have been ruled illegal by the Supreme Court. So at least they don't go forward. Probably there will also be reimbursements as we all know. So that will be definitely 1 of the reasons why we believe we can not only get back to '25 -- sorry, '24 margins in MRO, but we will continue to go towards the 10% we have planned for the end of the decade. And I'll leave that defense element out, which as I mentioned before, we'll see, I think, another support for the strategic development of Lufthansa Technik, even though it doesn't necessarily monetize short term. But again, we are committed to our 10% margin in '23. And some of the ramp-up costs we had in for Canada, for Portugal also won't repeat themselves. So overall, my optimism continues. Operator: Ladies and gentlemen, this was the last question. I would now like to turn the conference back over to Marc-Dominic Nettesheim for any closing remarks. Marc-Dominic Nettesheim: Thank you very much for your questions, for your interest and for the lovely discussion. We are happy to continue this from the Investor Relations side. We wish you a lovely afternoon and talk to you soon. Bye-bye. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect. Thank you for joining, and have a pleasant day. Goodbye.
Operator: Good morning, and welcome to the NewLake Capital Partners Fourth Quarter and Full Year 2025 Earnings Conference Call. Today's call is being recorded. I will now turn the call over to Jack Perkins, Investor Relations. Jack Perkins: Thank you, operator, and good morning, everyone. Joining me today are Gordon DuGan, Chairman; Anthony Coniglio, President and Chief Executive Officer; and Lisa Meyer, Chief Financial Officer. Before we begin, please note that certain statements made during today's call may be considered forward-looking under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to various risks and uncertainties. We will also reference non-GAAP measures, including FFO and AFFO. Reconciliations to the most direct comparable GAAP measures are included in our earnings release. With that, I'll turn the call over to our Chairman, Gordon DuGan. Gordon DuGan: Thank you, Jack, and good morning, everyone. We are very pleased with our fourth quarter and full year 2025 performance delivered against a backdrop that remains challenging for the cannabis industry with continued capital scarcity and inconsistent operator execution. For the year, we generated $51 million of revenue, $44 million of AFFO and returned $1.72 per share in dividends from our $2.09 per share of AFFO, highlighting the cash flow generation of our business. Since our IPO in 2021, we have paid $6.86 per share in dividends. Our team remains focused on disciplined risk management, re-tenanting where necessary and sourcing high-quality opportunities. Our measured pace of origination reflects intentional discipline as we navigate the current environment and position the company for future growth once reforms materialize. On the policy front, the most notable development of the quarter was obviously President Trump's executive order directing the Attorney General to accelerate the process of rescheduling cannabis from Schedule I to Schedule III. This represents an important and constructive federal signal, but one that now requires decisive follow-through from the Department of Justice. Rescheduling is critical to eliminating the burdensome 280E tax regime and supporting additional reform that could restore access to capital, both foundational to the long-term health of this industry. Like many, we are awaiting DOJ action. Until that occurs, we will continue to operate cautiously based on today's regulatory environment and maintain our disciplined risk-aware approach. As we look into 2026, NewLake is entering the year with a strong balance sheet. We have more cash than debt. We have no expensive preferred stock and basically the lowest leverage ratio of any REIT that I'm aware of. We expect continued cannabis industry headwinds until reforms are ultimately completed. And against that backdrop, we will remain disciplined, waiting for the opportunities that will come as the industry progresses. Thank you for joining us, and I'll now turn the call over to Anthony. Anthony Coniglio: Thank you, Gordon, and good morning, everyone Fourth quarter results were in line with our expectations, delivering $0.51 per share of AFFO and an 85% AFFO payout ratio. Our full year results exceeded those of 2024, which is especially notable in a market where competitors reported year-over-year declines in both revenue and AFFO. Throughout 2025, our team remained focused on mitigating risks across the portfolio, addressing vacancies and sourcing high-quality investment opportunities. That's work that's continued into 2026. During the year, we closed 2 smaller transactions with our existing tenant Cresco Labs, and we partnered with tenants, Curaleaf and C3 to optimize property performance and further reduce long-term risk in the portfolio. During our last call, we provided details about the C3 amendment. But as a reminder, that higher-than-expected construction costs reduced the attractiveness of the Hartford project, and we worked collaboratively with our tenant to structure a transaction, providing a better risk/reward for our shareholders. Overall, our portfolio remains in solid position. Our top 3 tenants, Curaleaf, Trulieve and Cresco, which together represent more than 50% of our annualized base rent, each reported strong 2025 results, including positive operating cash flow. Curaleaf generated $1.3 billion in net revenue, delivered a 50% adjusted gross margin and produced $90 million of free cash flow. Trulieve continued to demonstrate industry-leading profitability with 60% gross margins and $230 million of free cash flow. Cresco reported sequential improvements in gross margins to 52%, extended their debt maturities to 2030 and generated over $70 million in operating cash flow during the year. Having said that, the broader cannabis landscape remains challenging without federal reform, and we continue to proactively manage risk while seeking opportunities to strengthen the portfolio. We're also closely monitoring developments at The Cannabist, which remains in forbearance with its creditors following a debt default. In the first quarter of 2026, The Cannabist completed the sale of its San Diego operations where we lease a dispensary. The new operator, Wellgreens, has taken over the location, and we are pleased to welcome them to our tenant roster. In connection with the transition, we completed a lease amendment under which Wellgreens assumed full operational control of the property, and we secured a 5-year lease extension. This amendment underscores the property's strategic value within the cannabis ecosystem, enhances long-term cash visibility and reflects our disciplined, proactive approach to asset management in the portfolio. The transition also reduces our exposure to The Cannabist from 9% to 8% of annualized base rent. Turning to policy. While federal momentum is encouraging, we remain appropriately cautious until a final rule rescheduling cannabis is published. Eliminating 280E through a move to Schedule III would meaningfully improve long-term cash flow fundamentals for our tenants and in our view, pave the way for additional reforms such as the SAFER Banking Act and broader state-level expansion. In addition, shortly after our last earnings call, the President signed a continuing resolution that closed the long-standing hemp loophole from the 2018 Farm Bill. This loophole enabled a nationwide market for intoxicating hemp-derived THC products outside state-regulated systems. We believe this unregulated channel siphoned revenue from the state licensed operators. If fully implemented as scheduled on November 12 of this year, the ban on hemp-derived THC could help stabilize pricing and support operator revenue growth in the second half of 2026 and into 2027. The combination of these reforms, rescheduling and the elimination of hemp-derived THC, once implemented, has the potential to meaningfully improve industry fundamentals and by extension, our tenant quality. Importantly, we're not taking these reforms for granted nor are we adjusting underwriting or capital allocation based on anticipated policy outcomes. With respect to our vacant properties, we continue to advance re-tenanting efforts. Interest remains healthy, and we will update investors as developments become tangible. Our focus remains on thoughtful, risk-adjusted decisions designed to protect long-term shareholder value. With that, I'll turn it over to Lisa. Lisa Meyer: Thank you, Anthony. For the full year of 2025, our portfolio generated total revenue of $51.1 million, representing a modest 1.9% increase from $50.1 million for the full year of 2024. The key factors contributing to this revenue growth include rental income from the 2025 acquisition of 2 Ohio dispensaries, a full year of rent generated from a property that we acquired in 2024 for $4 million, a full year of rent generated from funded improvement allowances during 2024 of $15.1 million and annual rent escalators that consistently boost our revenue. The increase in revenue was partially offset by the impact of vacancies at 2 properties previously leased to Ayr and 1 property previously leased to Revolutionary Clinics. As a result of this modest revenue growth, we experienced a corresponding increase in our net income and AFFO. Net income attributable to common stockholders for the full year of 2025 totaled $26.3 million compared to $26.1 million for the full year of 2024. AFFO for the full year of 2025 totaled $43.8 million or $2.09 per share, reflecting a 0.3% year-over-year increase. Moving on to the fourth quarter of 2025. Total revenue was $12.3 million, reflecting a modest decrease of approximately 1.4% year-over-year. This decrease was primarily driven by vacancies previously mentioned. During the fourth quarter of 2025, we applied the remaining Ayr security deposit of approximately $408,000 to partially offset unpaid rent amounts. The lower rental income and additional property carrying costs drove corresponding declines in our results for the quarter. Net income attributable to common stock for the 3 months ended December 31, 2025, totaled $6 million or $0.29 per share. AFFO for the fourth quarter was $10.6 million or $0.51 per share, representing a 3% decline compared to the same period in 2024. On December 15, 2025, the company declared a fourth quarter cash dividend of $0.43 per share, which was paid on January 15, 2026. This dividend represents an AFFO payout ratio of 85%. For the full year of 2025, our aggregate dividend totaled $1.72 per share, reflecting an AFFO payout ratio of 82%. Most recently, our Board of Directors declared the first quarter 2026 cash dividend of $0.43 per share. The dividend is payable on April 15, 2026, to shareholders of record as of March 31, 2026. As of December 31, 2025, our balance sheet remains strong with $433 million in gross real estate assets and only $7.6 million in outstanding debt. Our leverage remains exceptionally low at 1.6% debt to total gross assets and a debt service coverage ratio of approximately 78x. Furthermore, we have no debt maturities until May of 2027. Our liquidity is solid with $106.3 million available, including $23.9 million in cash and $82.4 million in untapped capacity under the revolving credit facility. With that, I will turn the call over to the operator. Operator, please open the line for questions. Operator: [Operator Instructions] Our first question is from Pablo Zuanic with Zuanic & Associates. Pablo Zuanic: Just following up on the comment on the Ayr security deposit that was applied to rental in the fourth quarter. Just very basic math question, trying to model 1Q. All else equal, what would be the impact on the Ayr side? Because you still applied some deposits and escrow, I think, to rental income in 4Q. If you can explain that, please, quantify that. Lisa Meyer: Yes. So the $408,000 represents a little over 1.5 months of rent. So I guess it's approximately... Anthony Coniglio: Yes, that's it. Just the $408,000. Lisa Meyer: Yes. Pablo Zuanic: Right. Okay. So that's -- I mean that's all else equal, and I know that a lot of things can change, but at least based on what we know right now, that would be the major change when we try to model 1Q, right? Or would there be any expense items that have cadence or that are different from 4Q? Again, just it's a basic modeling question to start. Lisa Meyer: Yes. No, it would just be the $408,000. We already have the property carrying costs on balance sheet -- I mean on the income statement. So those will just continue to roll forward. Pablo Zuanic: Okay. And then, Anthony, in the recent IIPR call, they sounded quite, I guess, positive or bullish on their ability to re-tenant facilities. I don't know if you share those comments. From my point of view, it's taking a while to retenant the facility in Massachusetts from Rev Clinics. And I'm not sure where we are with retenanting the 2 Ayr properties in Pennsylvania and Nevada. But if you can -- it's a 2-part question. Do you echo the positive sentiment from IIPR? And then maybe just more color in terms of when and how you can retenant to cannabis operators or to people outside the industry. Anthony Coniglio: Yes. Thank you for the question, Pablo. We've been at this now over 7 years. We talk to a lot of operators. We're very cautious about this industry. Given some of the stuff we talked about in the prepared remarks, the fact that this industry lacks access to regular way capital, the onerous 280E taxation on the industry and how that limits capital flows to the companies. And so while we have seen a modest pickup in interest in the vacant properties, we're just going to continue to be very cautious. I would say specifically about Massachusetts, there are some structural changes to the state regulatory approach such as increasing the cap on dispensaries that any one operator could own that is part of driving some renewed interest in the sector. And so while we're having some activity around our properties, we won't be announcing LOIs. We're only going to announce actual lease activity. And so while I'm cautiously optimistic, we're certainly not going to strike the tone here at NewLake that we think everything is great, and we're going to be able to backfill these properties with no problem. That's not our position. Gordon DuGan: And I would just add to that, Anthony, that I agree with everything you said. And we are seeing a modest pickup in activity and operator interest in expansion, and we do have activity on all 3 sites. But it's tough getting a lease across the line on any of these. So we're -- as Anthony said, I think we're very appropriately cautious about announcing anything ahead of getting something done. Pablo Zuanic: That's good color. I appreciate it. Look, and then just moving on to Cannabist and Acreage. And again, I know there's only so much you can share about these companies. I realize you have access to data that is not public, so you cannot comment on that. But in the case of Cannabist, you talked about the California property, so great. That's been with the new operator. But can you comment on the other Cannabist operations, I mean, cultivation dispensary in Illinois, cultivation dispensary in Massachusetts. Are they operational? And I guess as an analyst, I should know that, but I'm not -- are they operational? What color can you share, if not from the operator or a bit more at the state level? And the same question regarding Acreage cultivation in Massachusetts and Pennsylvania. Whatever color you can share, Anthony. I mean from my point of view, those are 2... Anthony Coniglio: From what we know all those properties are operational. Is it possible they closed down yesterday? It is. I'm only limited on what we know. We don't run the properties. But it's our belief that they're all currently operational. Obviously, Illinois is a better state to operate in for those familiar with the industry than it would be safe for Massachusetts. And we take some comfort that Acreage is owned by a very large Canadian company, albeit having a ring-fenced structure, but that transaction closed only a little over a year ago, and I think Canopy sees meaningful opportunity long term in owning and maximizing the value from a U.S.-based MSO like Acreage. And so I think you could look at the first quarter dividend announcement and also connected with that if we had something material to tell you, we take transparency with our investors very importantly. And so we would have announced something. But as we stand here, all of our tenants are in compliance with their leases. Nobody is in a default position when we sit here today. Gordon DuGan: Maybe just a little extra color on that. I would -- you picked on exactly the 2 right tenants to focus on. And I'd be more worried about Cannabist and Acreage, and we'll just have to see how they both play out. But Acreage has been prompt in paying rent. And Cannabist, I think, similarly up to now, but they have defaulted on their -- they're in forbearance on their senior debt. So we're watching that very closely. Pablo Zuanic: Yes. All right. That's great color again. Just moving on, in terms of the Connecticut property that's held for sale in your balance sheet, C3, I think if I read correctly, in the 10-K, if that property is sold above your book value, that goes to C3. If it's sold below book value, C3 is responsible for that. Can you clarify that and correct -- I mean, correct me if I'm wrong in my interpretation. Anthony Coniglio: You're correct, but I'd provide an amplification around if it's sold above market value, there is a corridor of value where C3 participates so they can recover some of their very significant investment into the property. But beyond that corridor, premiums on the property come to NewLake. And you are also correct, and I would reiterate that the extent that there's even a $0.01 below our basis, we are reimbursed 100%. Pablo Zuanic: Right. But what happens if the property is not sold for a year or 2? I mean the agreement remains in place, I suppose, right? Anthony Coniglio: Yes. We continue -- they continue to be a tenant and they continue to pay rent while they're seeking -- while we're seeking a sale of the property. Pablo Zuanic: Okay. Sorry, I didn't realize that. So that property, although it's held for sale at the moment, it is paying rental and it's current. Yes. Anthony Coniglio: Correct. Yes. Pablo Zuanic: Just moving on, and apologies if there's somewhere else on the Q&A line here. In the case of IIPR, in their conference call, they disclosed that they've been served by the SEC. There's a bit -- I don't know what that exact legal term is, subpoena or investigation. When I hear things like that, I wonder if there's any read across for the rest of the industry, for other sale-leaseback operators. I mean, obviously, if you have been served, you would probably issue a press release on that. But in my opinion, when there's this type of investigations, they are not just company specific, but we can be looking at the industry and practices in the industry. So there could be some minimal risk read across for NewLake. But again, please correct me if I'm wrong. Anthony Coniglio: I don't believe so at all. Let me be clear. We are not under investigation. We have not received any SEC inquiries. We do not have any subpoenas from the SEC. And we take transparency and investor communication extremely seriously. As you could tell from the way we've been doing this for 5 years, we try to be very upfront about issues in the portfolio, about the condition of our tenants. I don't know, Pablo, that there really is a read-through from this. If you look at the disclosure, and that's really all that any of us have to go on right now. If you look at the disclosure, it looks like it was an outgrowth of their class action lawsuits that were pertaining to the transparency of the disclosures that the company had made. We don't have any class action lawsuits. We've never been accused of not being transparent in our communications with investors. So I would not think that there is a read-through to other sale-leaseback providers. Pablo Zuanic: Okay. And the very last question, and I know you touched on the policy front, and we know that it's uncertain, although we are all positive at the federal level and state level. But can you give more color in terms of your conversations with operators? Are people trying to get ahead of Virginia or Pennsylvania and that could lead to discussions that are more positive and constructive right now in terms of future opportunities for NewLake. And by the same token, like you said, with rescheduling, the credit quality of your operators, tenants improves, more business. But is all this news flow translating into more active conversations with operators out there or not really yet? Am I putting too much of a positive spin on this right now? Anthony Coniglio: It is, but to a small extent. I would say that similar to what we saw in Florida, before the ballot initiative, there were some operators that were building up -- build out in anticipation. A large majority were awaiting the actual results. I'd say in Pennsylvania, it's a similar thing. We've heard of a couple who are thinking about and looking forward to some expansion, others and many of them are not. And so it's a mixed bag. I would say that the level of activity for us has increased -- in terms of looking at new deals has increased in the first quarter from the fourth quarter. But I don't want to give you the impression that it's up tenfold that it's a massive pipeline. It certainly isn't that, which quite frankly is a good thing because it tells me that this industry is remaining disciplined about its CapEx obligations because even though we fund for real estate on any of these projects, there's a meaningful amount of equity investment that an operator needs to put into a cultivation facility or a dispensary in terms of equipment, people training and other various expenses to get these facilities up and running. And so I think people are being generally judicious about not leaning too hard into the what can happen. They're doing their research, having the conversations, but I think being appropriately cautious. Gordon DuGan: Yes. I would say it is -- I think it is fair to have a more positive outlook on that. We're seeing more operator interest in places like Massachusetts. Virginia, hopefully, is close to some positive momentum. Pennsylvania, you mentioned. So yes, it feels like for the first time in a while, the operators are modestly better and more optimistic. It's really been -- the industry has been tough. And it does feel like some green shoots are appearing. Pablo Zuanic: And again, I would say congratulations to the team for having maintained the discipline throughout in a very tough environment. Operator: Our next question is from Craig Kucera with Lucid Capital. Gordon DuGan: Sorry, Craig, you had to wait so long. Those are good questions though. That was useful. Craig Kucera: Yes, they were. Yes, absolutely. So I've got a few follow-up questions on Cannabist. So I guess you were able to get the California asset retenanted without any real downtime, obviously. Were the lease terms -- I know you mentioned it was a 5-year lease, but as far as the rent, was that more or less in line with what Cannabist was paying? Anthony Coniglio: One clarification. It's not a 5-year lease. It's a 5-year lease extension. Craig Kucera: Extension. Okay. Anthony Coniglio: That was an extension. So we added duration to that lease generating from an NPV perspective, as you know, we created value by getting that lease extension. And Cannabist... Gordon DuGan: Anthony, what was the old lease term? Anthony Coniglio: We had about 6 years remaining. Gordon DuGan: Okay. Yes. So we pushed it out to 11, obviously, or roughly. Anthony Coniglio: Yes, and rental... Gordon DuGan: yes, Go ahead. Sorry, Anthony. Anthony Coniglio: No, no, go ahead, Gordon. Rent was not adjusted. Craig Kucera: Okay. That's helpful. And of the remaining 4 assets that Cannabist has leased, can you give us a split of how much is coming from Massachusetts versus Illinois? Anthony Coniglio: It's about half and half. In Illinois, we have a dispensary and a cultivation, and we have the same in Massachusetts. Craig Kucera: Right. Okay. And do those leases kind of have your standard, call it, 6-month rent deposit affiliated with them? Anthony Coniglio: The deposits vary on those leases. It's not 6 months. It varies. Sometimes you have a little bit more on cultivation, a little bit less on dispensary. But if those go into default and we have an announcement, we'll talk about the security deposits associated with those. Craig Kucera: Okay. That's helpful. And just one more on Cannabist. I guess, can you give us a sense of the rent coverage of those assets? Are those kind of in line with your -- I think you typically have maybe 3.5% on the cultivation, 9% on the dispensary. Are they in that kind of ballpark range? Anthony Coniglio: We don't disclose specific property level asset-by-asset coverages. The way I'd answer your question is by focusing on the state's operating environment. And I think what you would find is that Illinois, given the size of that market, given the more limited license nature of that market has a better operating profile overall for cannabis operators in the state versus, say, a Massachusetts. We've spoken many times over the last couple of years about the difficulties in Massachusetts, primarily driven by the lack of ability to become vertical with the cap at 3 on dispensaries, but also the proliferation of cultivation licenses that occurred over the last 4 years. And in fact, the state has taken notice and recently at a February regulatory commission hearing, the CCC was requesting input on a potential moratorium for new cultivation licenses. And so that's part of what's driving some of this increase in interest in Massachusetts because with the moratorium, it could make the state dynamics better and provide a better floor support for wholesale revenue there and couple that with the increase in the cap on dispensary ownership where the legislature approved a bill that would let you go to 6, the House has approved one that lets you go to 4, and they're in reconciliation right now. Those are some of the tailwinds that people are feeling a little bit better about Massachusetts today. But coming back to your question, Illinois is an easier market to operate in than Massachusetts. Craig Kucera: Right, right. That's helpful. Changing gears, last quarter, you mentioned that you might look at expanding outside of the cannabis sector. Does the sort of improving legislative environment momentum maybe put that on pause? Or are you still evaluating maybe expansion outside of cannabis? Anthony Coniglio: We continue to evaluate all opportunities to deliver growth for shareholders. And so yes, during the quarter, we were evaluating noncannabis opportunities. And when we think there's an opportunity for good risk/reward, we'll present it to our investment committee and ultimately, the Board for approval. Gordon DuGan: Yes. If I might just add to that, I think there is some subtle positive momentum that would raise the bar on noncannabis opportunities given some positive momentum. And almost without exception, we still find the highest cap rates in the net lease sector in the cannabis sector. So it's a tough bar. Most of the alternatives that we've looked at, some of them are, we think, attractive, but they're lower return alternatives. And that's always been sort of the premise of the cannabis sale-leaseback industry, very high returns, higher risk. And I think we've navigated that very well. But it's still -- the bar -- the positive momentum from the regulatory standpoint has probably raised the bars in a subtle way for doing something outside of it. Craig Kucera: That makes sense. Just one more for me. You mentioned the strength of the public companies that represent, I think, about 50% of your portfolio. And obviously, we can look at that and there's a lot of visibility into their operations. But can you talk about your private tenants? Are you seeing any degradation in 4-wall coverage or any concerns there? Anthony Coniglio: No. And you point out we can't discuss their specific profitability, but they are performing as expected. And that's not a -- they are performing well. We have some private operators that have profit and cash flow profiles that people in the industry would love to have that financial performance. But we are -- everybody is performing in line with our expectations. Operator: Thank you. There are no further questions at this time. I'd like to hand the floor back over to Anthony Coniglio for any closing comments. Anthony Coniglio: Great. Thank you all for joining us today. We appreciate your continued support, and we look forward to updating you in the months ahead. Have a nice weekend.
Operator: Good morning, ladies and gentlemen. Welcome to Central Puerto's Fourth Quarter of 2025 Earnings Conference Call. A slide presentation is accompanying today's webcast and will be also available on the Investors section of the company's website, centralpuerto.com/en/investors. [Operator Instructions] Please note, this event is being recorded. If you do not have a copy of the press release, please refer to the Investor Relations Support section on the company's corporate website at www.centralpuerto.com. In addition, a replay of today's call will be available in upcoming days by accessing the webcast link at the same section of the Central Puerto's website. Our host today will be Mr. Fernando Bonnet, Central Puerto's CEO; Mr. Enrique Terraneo, the company's CFO; Mrs. Maria Laura Feller, Head of Investor Relations; and Mr. Alejandro Diaz Lopez, Head of Corporate Finance. Maria Laura, please go ahead. Maria Feller: Good morning, everyone, and thank you for joining us. We will walk you through Central Puerto's fourth quarter and full year 2025 results, discuss key operational and market developments and then open the line for questions. Before we begin, please note that my remarks may include forward-looking statements and references to non-IFRS measures, such as adjusted EBITDA. These statements are subject to risks and uncertainties, and actual results may differ materially. Definitions and reconciliations are available in our 4Q '25 earnings presentation and financial statements. Revenues for 2025 reached $782.8 million, up 17% year-over-year. 4Q '25 revenues were $172.8 million, decreasing 26% quarter-on-quarter and increasing 3% year-on-year. 2025 adjusted EBITDA was $337.2 million, an increase of 17% year-over-year. And 4Q '25 adjusted EBITDA was $84.7 million, down 16% quarter-on-quarter and up 30% year-on-year. Total generation for the year was 18.6 terawatt hour, down 14% year-over-year, largely reflecting historically low hydrology at Piedra del Aguila. And also in 2025, we undertook nonrecurring maintenance works in Central Costanera combined cycles and Lujan de Cuyo generation asset. Regarding business performance, 2025 marked a pivotal year of consistent growth and market normalization. The company strengthened its strategic positioning and reinforced its power generation asset portfolio for long-term value creation. Throughout 2025, Argentina's wholesale market -- power market advanced toward normalization. Since November 1, Resolution 400 has supported U.S. dollars-denominated spot prices and recognized a margin over variable costs. In December 2025, 97% of our revenues were denominated in U.S. dollars and we also progressed in the new thermal term market, signing around 11% of total volumes in the contracted market with approximately 900 megawatt hour delivered to industrial customers during November and December. Our CapEx plan in 2025 included fully executed projects over the year and additional projects that allow us to look forward and continue delivering growth. In 2025, our total CapEx was $202.4 million, consisting of concluding with 2024 projects such as the closing of the Brigadier Lopez combined cycle that achieved commercial operation during 1Q '26, and we concluded also the San Carlos solar farm project, our first solar greenfield project. The asset reached commercial operation in November 2025, adding 15 megawatts of renewable capacity to our portfolio. Together with Cafayate, our two 2025 solar projects doubled our installed solar capacity and increased our total renewable portfolio by 20%. Also, in 2025, we extended Piedra del Aguila concession. The company was awarded the concession under the Comahue Hydroelectric Complex privatization process, extending the operation -- the operating term of the Piedra del Aguila hydroelectric facility through 2055. Winning bid offer was $245 million paid in January 2026. The company is also focused on the battery energy storage system projects, looking forward to add 205 megawatts of new technology in 2027. Our growth plan is [ backed ] by our financial strength, flexibility and low leverage ratio. In December 2025, net leverage ratio was 0.3x annual adjusted EBITDA, which positions us well to add new financial debt to finance Piedra del Aguila concession extension and the fee payment and the battery energy storage system projects. 2025 revenues stood at $782.6 million, 17% above 2024 revenues despite the 14% decrease in generation volumes. Spot revenues growth in 2025 reflects additional revenues from the realignment of the spot price over the year and the Resolution 400 since November 2025. Also, we see the effect of the self-procured fuel oil with the associated cost pass-through in revenues. Offsets came from lower water inflows from Piedra del Aguila and the maintenance works in Central Costanera combined cycles. PPA sales growth include new MAT contracts in November and December 2025, including also cost of fuels incorporated in the energy component. Renewable revenues increased by 3% as wind farm volumes increased 5% due to higher wind resources and the full contribution from Cafayate solar plant since the end of August 2025. Full year 2025 EBITDA reached $337.2 million, a 17% increase year-on-year, primarily driven by revenue growth and the market normalization and higher margins from self-procured fuels, which added approximately $8 million. In 2025, total generation reached 18.6 terawatt hours, representing 14% decrease compared to 2024. Central Costanera's generation volumes decreased by 15% year-over-year, primarily due to maintenance work in both Mitsubishi and Siemens combined cycle during 2025. Second, Piedra del Aguila generated 38% less than in 2024, mainly due to historically low water inflows affecting hydro production. Finally, Lujan de Cuyo was 24% lower year-on-year, largely explained by maintenance works in the co-generation asset in the fourth quarter. Moving to installed capacity, our portfolio reached 6,938 megawatt hours in 2025, representing an increase of 234 megawatt hours compared to 2024. The increase was driven by several developments. Brigadier Lopez combined cycle was completed and the San Carlos solar project added 15 megawatts of solar capacity. Together with Cafayate solar farm acquired in August 2025, these two solar projects contributed by 20% of the renewal capacity additions during the year. Regarding market position, Central Puerto maintained its market leadership, reaching 14% market share of total SADI generation. Finally, looking at operational performance, our thermal fleet continued to show solid availability levels. In 2025, total thermal availability reached 77%, while combined cycle availability stood at 89%, reflecting strong operational reliability. During 2025, three thermal and renewable projects were completed, combining greenfield developments and M&A transactions, further expanding our generation portfolio. First, the Cafayate solar farm, which was acquired through an M&A transaction is already in operations. Second, we finalized Brigadier Lopez combined cycle project, which is also already in operation since January 2026. Third, the San Carlos solar farm also entering in operations in November 2025. In addition, we were awarded two battery energy storage system projects, which were granted in August 2025. These projects are currently under development and are expected to begin operations during the first half of 2027. Finally, an important milestone regarding the Piedra del Aguila hydroelectric plant was that Central Puerto successfully secured a 30-year concession extension for the plant through the privatization tender process. The concession fee payment was successfully completed in January 2026, marking another key step in strengthening our long-term asset base. In 2025, the Argentine power system reached a new record for the demand with a peak of 30,257 megawatts on February 10, 2025. Renewable generation rose 16.5% year-over-year and supplied about 19% of total demand, including hydro renewables representing roughly 39% of the total annual energy mix. Thermal fuel consumption declined 2.6% year-over-year with gas oil down 53% and fuel oil 60%, partially offset by 1.2% increase in natural gas and 5.2% increase in coal. As of December 31, outstanding financial debt was $337.8 million and net leverage ratio stood at 0.3x adjusted EBITDA. On December 19, we signed a $300 million syndicate A/B loan with IFC with an average life of 5 years to fund Piedra del Aguila concession fee and Central Puerto's BESS project. Also, our outstanding FONINVEMEM receivable credit was $118 million as of year-end. Overall, 2025 was a year of solid growth and continued progress as the market normalized. During the year, the company kept expanding and strengthening its generation portfolio to support long-term development. Looking ahead, we will focus on three priorities: discipline contracting commercialization, operational excellence and advancing our growth agenda. Fernando Bonnet: 2025 was a pivotal year for Central Puerto, marked by Piedra del Aguila concession extension by 30 years more, portfolio expansion, market normalization and strategic progress across our assets. We enter 2026 from a position of strength with robust liquidity and resilient business model. Thank you for your continued confidence in Central Puerto. Please let's stay connect. And now we will open the line for questions. Operator: [Operator Instructions] Our first question comes from Martin Arancet with Balanz. Martin Arancet: I have three. I would like to run them one by one, if that's okay. First, I was wondering if you could give us some color on why the decrease in the quarter-over-quarter EBITDA given that the market liberalization should have been at least positive for thermal exposed to the spot market. Fernando Bonnet: Martin, thank you for your question and your interest in Central Puerto. The main topic affected the 4Q 2025 is that we have a strong maintenance in our combined -- Central Puerto combined cycle and Mendoza combined cycles, the two of our biggest combined cycles. And because of that, we don't catch in those units, the benefits of the new regulation scheme. But it's only regarding to that. The rest of the equipment was okay and the new regulation is in place. So we expect that will be recovered in the first quarter 2025 -- '26, sorry. Martin Arancet: Okay. And sorry for this follow-up because probably you already disclosed this, but are those plants already working again? Fernando Bonnet: Yes, yes, yes, they start working at the end of December and the other one early January. So we don't expect additional maintenance for those units until 2027, '28. Martin Arancet: Okay. Then regarding one of your main focus for 2026, I was wondering how much of the thermal capacity that was under the legacy scheme do you think can compete for energy PPAs? How much of that do you already have contracted? And how do you see the market for signing the rest of the energy that you have? I don't know if you are seeing much interest. I don't know if you have discussed this with distribution companies. And if you expect probably a stronger interest for industrial consumers as we approach the winter where you have higher seasonal prices? Fernando Bonnet: Well, in terms of our capacity, we are -- we can contract, as you know, 20% of our combined cycles that are the spot legacy scheme. That is around 2 gigawatts, the whole combined cycle. So it's the 20% of that with the private customers, with big industries. And then this -- and we are doing around that 20% yet. During January, February and March, we're going to cover that capacity contracted. For -- to exceed that, we need to go to -- as you mentioned, we need to go to the distribution companies. And that is coming slower. The distribution companies need to discuss with the regulators -- each regulator because it's not only federal, it has local regulators in each provinces. And this is coming slowly because they need to discuss and receive a pass-through possibility in order to make the pass-through to the demand. So by now, we are entering with not a lot -- we are not doing a lot of transaction with distribution companies. Right now, we are, of course, in discussions. We are having advances, but we are not closing big deals yet. We expect that it could happen -- start happening during this year. Martin Arancet: Okay. Right. So do you think that to sign contract with distribution companies, you probably will require I don't know, some backup from CAMMESA or something like that, like it happened with the battery project? Fernando Bonnet: No, no, no, no. We -- of course, we're going to make our credit analysis, and we're going to pick the distribution companies that we think that they are suitable to giving credit, but we don't request additional CAMMESA backup. Talking about, as I mentioned, legacy energy selling because this is month on month, and we can cut the provision if they doesn't pay. So -- but talking about other projects like new generation or perhaps, [indiscernible] this is different. This will be different. Martin Arancet: Okay. And my last question then regarding the other main focus that you will have for 2026. I was wondering where do you see growth opportunities coming this year and probably also the next year? Because it seems that there is not enough incentives yet to add thermal capacity. Now with the thermal capacity competing also for PPAs with renewables, we have seen lower [ tenures ] in new PPAs and at slightly lower prices. So I don't know if adding more battery is now the best idea. And there has been a lot of comments regarding probably new renewable capacity for mining and oil and gas, but it doesn't appear to have materialized yet. So I was wondering where do you see the growth opportunities coming in the near term? Fernando Bonnet: Okay. Well, first of all, we have right now an auction in place for new battery storage system for the other provinces than Buenos Aires that was -- that we get awarded last year. So we are looking spots over the interior in different province Santa Fe, Mendoza, [ Corrientes ], Cordoba, there are opportunities there. This new auction is in place and will be -- have the due date in May this year. So this is an opportunity of expansion that we're going to look at. As you mentioned, in terms of renewables, right now, it's getting difficult to get new PPAs with existing demand. So we are looking for new demand. Now the existing one, as you mentioned, mining companies are one of them. Oil and gas companies are other possibilities, companies that needs -- perhaps gain efficiency in the product in their processes, like introducing steam, perhaps we can work on co-generations there. And looking forward for perhaps in the middle of this year or perhaps in the third quarter of an auction for new capacity that need to be set for cover some areas, specific areas like specifically Buenos Aires area. And I see there are opportunities, not -- as you mentioned, not trying to catch the existing demand with renewable because, as you mentioned, it's been challenging right now because the thermal are entering in the market and are stressing prices. Also, the hydros are entering the market and put some pressure there also. But I see opportunities, as I mentioned, in storage system capacity, in new demand coming from new players in the market like mining companies and a possibility in capacity -- new thermal capacity coming in some auction during this year. Martin Arancet: Okay. Great. So this thermal auction that you mentioned, something similar to the Terconf that got canceled? Fernando Bonnet: Well, it's not completely established by the government yet, but we have talking with them that could be something similar, but with different perhaps approach to the to the demand. So something like receiving a payment for capacity from CAMMESA. But well, it's something that are under discussion right now. Operator: We are going to go now for the question with Lucas Lombardo with BACS. Lucas Lombardo: I want to know the percentage of new term contract that -- the income from -- for the company. Fernando Bonnet: Okay. I think you are referring to how much of the 20% that we can sell to private consumers we reach. That is the question. Lucas Lombardo: Yes. Fernando Bonnet: Yes. We expect during March to cover all those 20%. Operator: Our next question comes from Matias Cattaruzzi with Adcap. Matias Cattaruzzi: I wanted to ask first about the outlook for 2026 and the -- how do you see volumes coming for next year, especially hydro volumes? And then how do you expect the PPA versus spot mix to be in next year regarding the new regulation? Do you expect PPAs to grow more in generation? Fernando Bonnet: Okay. Thank you. Talking about volumes for Piedra del Aguila specifically, the hydrological year starts on May. So it's difficult today to say that we're going to see better inflows than the previous year. Of course, the previous year was a low year, so in our expectations are to be better than that. But to have a clear view, we need perhaps 2 more months in order to see how the year comes. In terms of the thermal generation, we expect an increase because, as I mentioned before, two of our combined cycles were in maintenance during the whole month of December and the other one was in maintenance the whole month of September. So we don't see those maintenance in 2026. So we expect an increase of our thermal generation also. In terms of new PPAs coming, we -- as I mentioned, we are trying to catch additional demand from the distribution companies. This will unlock the possibility to sell the legacy energy above the 20% that we have already granted -- so we expect to have news on that this year. It's difficult to predict, as I mentioned before, it's difficult to predict the volume that we can reach there because the distribution companies are discussing with the regulators, the feasibility of make that pass-through directly to the demand and the terms of that pass-through. So right now, it's difficult to forecast the potential there, but we see potential. So I think we can catch more than the 20% that we are already selling, and we can go over that going to distribution companies. Matias Cattaruzzi: Great. And then do you intend to participate in the upcoming tender for national batteries? Fernando Bonnet: Yes, we are looking at, yes. Yes. We are looking at -- of course, it's different from the participation that we have in the last year because we are looking in places different for our facilities in -- the ones that we awarded last year, we established inside our facilities and it's convenient or very convenient for us. And right now, this new auction is all over the country. So we are looking at places. And the new reality in the battery storage system prices because the lithium goes up, the copper, all the materials the batteries used. So -- and the price according to the last auction. So we are looking at returns on that places that are outside from the -- our facilities -- are far from our facilities is not the same. So we are looking at, but we need to do more work in order to understand if something suitable for us or not. Matias Cattaruzzi: Great. Do you expect to participate in the upcoming privatizations by ENARSA assets? Fernando Bonnet: Yes. Yes, we are looking at. We don't have the mandate yet to move forward, but we are looking at. Matias Cattaruzzi: Great. And do you have any updates on the OpenAI-Sur Energy project? Fernando Bonnet: No, we have discussion with them. After that we award Piedra del Aguila that was very important for them that we have a huge hydro backup in us to give power to them. That was a great news for them. We discussed with them that, but we don't have a clear timing on any additional news coming from that place. Matias Cattaruzzi: Great. And last, can you give us like an EBITDA bridge for upcoming years until 2028? Fernando Bonnet: Well, I can give you some perhaps information regarding 2026. 2028 is, of course, need to -- we will expect to maintain that, but talking about increasing will be challenging regarding the expansion, as I mentioned, of new PPAs and how we're going to do in terms of the new coming auctions. But talking about 2026, we have some certainties that can share with you and the rest of the listeners. One important thing or the biggest improvement that we are seeing for 2026 and onwards is that the PPA, the Brigadier Lopez closing combined cycle PPA going to bring additional $60 million for our EBITDA. The other improvement, as we talked in the previous calls, the new regulation for spot market bring another between $70 million and $80 for our EBITDA. Piedra del Aguila also have an improvement compared to the old regime that compared to this new concession will bring additional $15 million. And if you perform the full year of the renewables that we acquired and build last year, this will add additionally $8 million and -- between $8 million and $10 million more. So [indiscernible] terms will be an improvement of $150 million, $160 million. Matias Cattaruzzi: Great. And I have two more questions. One is if you expect distributing dividends in 2026? Yes. And the second one would be more operational. With the upcoming IP for the Perito Moreno pipeline expansion, do you expect that your plants in the central area would get some more upside with lower costs due to lower gas prices because of the expansion of the [indiscernible] Perito Moreno? Fernando Bonnet: Okay. In terms of dividend, that is something that we'll be discussing by the Board of Directors. Right now, we have no guidance regarding to that, specifically because, as I mentioned, we have different projects under our pipeline, and we are performing some projects right now. So this is something that Board will be -- discuss in the next coming month. Talking about the TGS pipeline, we are -- we don't see a reduction on prices because the gas prices are set right now by the plant gas contracts that CAMMESA and the government signed during the former administration. So we received these prices -- or these prices are fixed until the end of 2028 when those contracts get to the end. So we don't see big reduction on prices until this plant gas goes to the end. In terms of the capacity or the transportation capacity of the TGS, we are analyzing the convenience or not to acquire that capacity. The problem is that going further in a big 10 or -- contract is like 15 -- of course, you can do less, but normally it will be 15 years of contract, is not fully discussed the regulation scheme in which we can recover this additional cost because this additional transportation will have an incremental cost related to what -- one that we are paying now. So it's not clear for us yet the new regulation scheme that will be available or the regulation scheme that will be available to recover that incremental cost. So right now, we are looking at, but we don't have a decision yet. Matias Cattaruzzi: Great. But wouldn't it be better for gas prices in the winter? Wouldn't you need less liquids or gasoline or fuel oil? Fernando Bonnet: Yes. The problem is to get here to our terminals, you do not only need the TGS expansion, you will need distribution here and the distribution in Buenos Aires area are very constrained. So we don't see a full elimination of diesel and LNG during winters for a while. Of course, will be a reduction because the TGS will inject here and also have some volumes that could go to the north. But we'll see a reduction, but not a full elimination of diesel and LNG. Operator: This concludes our Q&A session. I would like to turn the conference back over to Mr. Fernando Bonnet for any closing remarks. Fernando Bonnet: Well, thank you for your interest in Central Puerto. I will encourage you to ask any questions to our team that you may have. Thank you very much, and have a good day. Operator: This concludes today's presentation. You may now disconnect, and have a good day.
Asli Demirel: Good morning and good afternoon, ladies and gentlemen. Welcome to Anadolu Efes' Last Quarter 2025 Financial Results Conference Call and Webcast. I'm Asli Demirel. I'm the Investor Relations and Risk Management Director of Anadolu Efes. Our presenters today CEO, Mr. Onur Alturk; and our CFO, Ms. Yasemen Cayirezmez. [Operator Instructions]. Unless explicitly stated otherwise, all financial information disclosed in this presentation are presented in accordance with TAS 29. Just to remind you, this conference call is being recorded, and the link will be available online. Before we start, I would kindly request you to refer to our notes in our presentation regarding forward-looking statements. Now I'm leaving the ground to Mr. Onur Alturk, Anadolu Efes' CEO. Sir? Onur Alturk: Thank you, Asli. Good morning and good afternoon, everyone, and welcome to Anadolu Efes' Full Year 2025 Operational and Financial Results Conference Call. Before we begin, I am delighted to welcome our new CFO, Yasemen Cayirezmez, who is with us today for her first results call in her new role. 2025 was a year in which we delivered a mixed set of results in a complex and evolving operating environment, but we continued our disciplined execution across our markets. On a pro forma basis, we delivered consolidated volume growth of 7% in full year 2025 and 5% in the last quarter of the year. Beer Group recorded a flat volume performance on a pro forma basis in full year 2025 as a softer domestic performance was offset by international operations. Supported by solid volume performance and timely pricing actions as well as tight discount control, we achieved a healthy top line at TRY 244 billion in 2025. In the last quarter, our EBITDA performance was supported by gross profit improvement and a reduction in our OpEx margin, reflecting our continued focus on strict cost discipline. However, our EBITDA recorded a slight decline around 2% year-on-year on a pro forma basis to TRY 40.5 billion in 2025 with 17 margin -- 17% margin. Our consolidated net loss was recorded around TRY 3 billion in the last quarter. Despite stronger operator profitability in the quarter and lower financial expenses compared to last year, net income was negatively impacted by lower monetary gains and tax adjustments, which in the following section, Yasemen will cover the impact in more details. Yet we were able to deliver a strong net income of TRY 9 billion for the full year. Free cash flow was negative both in fourth quarter and the full year. It was pressurized by weaker operational profitability. Higher interest expense payments as a result of a very high interest rates compared to previous year. Yet there was an improvement year-on-year, thanks to prudent CapEx spending and lower tax payments. Consequently, our consolidated net debt-to-EBITDA ratio stood at a level of 1.4x as of December 31, 2025, still at a healthy level. Finally, I'm pleased to announce our dividend proposal of TRY 0.34 per share, which is a testament of our commitment to delivering value to our shareholders. Looking more closely at our beer operations, diversification across markets was a key factor, supporting volume stability in 2025. In the fourth quarter, consolidated beer volumes reached 2.7 million hectoliter, increasing by 0.6% year-on-year with the contribution of all operations with the exception of Georgia. For the full year, consolidated beer volumes were 13 million hectoliter, broadly parallel to 2024 on a pro forma basis. Turkiye beer volumes declined by 1.1%, while international beer volumes increased by 0.8%, highlighting the balancing effect of our geographic footprint. As shown in the volume breakdown of our beer group operations in 2025, Turkiye remains our largest contributor, while our international markets particularly continue to support overall volume performance. Looking at our Turkiye beer operations, we delivered 1.4 million hectoliter volume in the fourth quarter, up 0.4% versus last year. For the full year, volume reached 2.6 (sic) [6.2] million hectoliters, representing a 1% decline year-on-year, broadly in line with our expectations. High base impact following growth for several years, persistent inflationary environment and less supportive tourism season weighed on domestic volume performance. Despite these headwinds, we continue to invest our portfolio through diversification by launching our new premium brand, Stella Artois. In a market where we clearly observe increasing premiumization, we believe Stella Artois is well positioned to meet evolving consumer needs and expectations. Additionally, in the second half of 2025, we started a distribution of raki Turkish [indiscernible] spirits in line with our ambition to strengthen our presence in the distilled spirits category. We are still in the process of buying 60% of Taris z m, which I believe you will hear from us the developments in the near future. Let me briefly touch on our international beer operations, where our volume performance was resilient throughout the year. Starting with Kazakhstan, we were pleased to see the market stabilization after a few years of contraction. In line with market as a clear market leader, we achieved to record a slight increase supported by low single-digit volume growth in last quarter of the year. This performance was supported by improved promotional activities as well as marketing campaigns together with our continued focus on the KEG segment, while a solid contribution also came from our export business. 2025 was also a strong year in terms of portfolio diversification, supported by successful launches, including Kruzhka Svezhego 0.0 and Wukong Ju, our new product, addressing the changing preferences of consumers. Turning to Moldova. Despite cycling a very strong low teens growth in 2024, full year volumes delivered low to mid-single-digit growth in 2025, which is supported by low single-digit volume growth in the fourth quarter. Throughout the year, affordability pressures remained a key challenge for the market, which is managed by our well-balanced brand portfolio, combined with targeted marketing campaigns and consumer activations. In Moldova, we also introduced one of Efes' most popular premium brands, Stary Melnik iz Bochonka, to the market this year. Additionally, as part of our continuous efforts on the premiumization, we also introduced the premium brand, Spaten to the market. Finally, Georgia, volumes declined mid- to high teens in the fourth quarter and mid-single digit for the full year, mainly reflecting the restructuring of our export operations from Georgia. Some of our export operations are doing local production and paying royalty fees to our Georgian operation. Therefore, as previously communicated, although restructuring led to a lower volume, it does not have an impact on profitability. It is also worth to mention that this impact will continue to weigh on volumes in 2026. We continue to invest in KEG business in Georgia, where there is an ongoing expansion on-trade channel. The negative impact of restructuring was partially offset by our positive momentum in KEG channel as well as premium segment. Regarding our soft drinks business, we -- CCI delivered a solid performance in 2025. Consolidated volume grew by 5% in the fourth quarter and increased by 8% for the full year. Central Asia was the key growth engine with Uzbekistan, Kazakhstan leading the growth. In Turkiye, volumes declined by 1% as a result of a deliberate choice to optimize portfolio since water category has relatively lower value contribution. Excluding water, Turkiye delivered 3.8% year-on-year volume growth, confirming the underlying strength of the core categories. International operations volume grew by 13.5%. Solid growth performance was supported across markets with Central Asia posting robust double-digit growth. Pakistan volumes increased by 1.3%, while Kazakhstan, Uzbekistan and Iraq delivered a robust growth of 15.5%, 33.7% and 12%, respectively. Let me hand over to Yasemen to review the financials now. Yasemen Guven Cayirezmez: Good morning, and good afternoon, everyone. Let me start by reminding that all figures I refer to are on a pro forma basis, excluding Russian operations to ensure comparability with this year. Unless otherwise stated, financials are presented in accordance with TAS 29. In the last quarter of 2025, revenue increased by 10.9% year-on-year to TRY 11.1 billion, yielding full year revenue of TRY 51 billion (sic) [ TRY 54 billion ]. On the other hand, gross profit declined by 4.6%, resulting in margin contraction of 680 basis points. This was a result of last year's low cost base related to very low hedge levels and aluminum costs in Turkey beer operations. Coming to EBITDA. EBITDA declined by 42.2% to TRY 649 million in the quarter, corresponding to 537 basis points margin contraction. Decline in gross profitability was reflected in the EBITDA, and this was partially mitigated by strict OpEx control, particularly in the last quarter. As seen on the bridge, there has been no increase in OpEx in the last quarter, and there are even savings in OpEx in full year. For full year 2025, Beer Group EBITDA reached to TRY 7.3 billion with a margin of 13.4%, which is down 209 basis points year-on-year. On the cash flow side, Beer Group free cash flow was TRY 834 million in the fourth quarter of 2025, thanks to the improvements in working capital as well as lower interest expense and taxes. In the full year, there was a year-on-year decline in free cash flow, mainly driven by softer beer operational profitability, together with the higher interest payments, yet thanks to our efforts to improve working capital, there was improvement both on working capital and CapEx spending. Going forward, improving free cash flow generation remains our top priority going into 2026. For analysis purpose, if you look at the numbers, excluding TAS 29 effects, underlying operational performance is materially stronger, both at consolidated and Beer Group levels. More specifically, on a TAS 29 excluded basis at Beer Group level, revenue would have been TRY 52.6 billion compared to TRY 54.3 billion under TAS 29. EBITDA would have been TRY 10.3 billion compared to TRY 7.3 billion as reported. Accordingly, EBITDA margin would have been 19.6% compared to 13.4% under TAS 29. With respect to debt and cash and debt management, as of end of 2025, consolidated net debt-to-EBITDA stood at 1.4x while excluding TAS 29 effects. This ratio improves to 1.2x. At the Beer Group level, net debt-to-EBITDA was reported at 4x, while excluding TAS 29, it was 2.8x. From the balance sheet perspective, gross debt at Beer Group level stands at approximately USD 0.9 billion with average maturity of 1.7 years, while 67% of gross debt is in hard currency. Our cash position is USD 0.2 billion with 34% held in hard currency and 24% in Eurozone currencies. As regards to risk management, for 2026, we already hedged 47% our aluminum exposure for Turkiye and CIS at USD 2,929. In Turkiye, 57% of our FX exposure has been hedged at a USD exchange rate of 47, while total FX exposure of Beer Group represents approximately 19% of cost of goods sold plus operating expenditures. Coming to the end of the presentation, I would like to underline that despite all the headwinds, we closed 2025 with a stable top line momentum as well as controlled costs and expense structure. For 2026, our priority is to restore positive free cash flow, maintain margin stability through disciplined cost control and improve working capital for sure. Thank you. Now I will hand it back for Q&A. Onur Alturk: Let me recap our strategic focus areas first for 2026. We are fully focused on execution guided by our clear priorities. First, strengthening our brand priority is at the core of our priorities. We plan to elevate brand quality, packaging and executional excellence across both production and sales operations. In parallel, we will continue our pricing discipline, supported by centralized revenue growth management and continuous product and channel mix optimization, focusing deeply on affordability. Second, we will continue to accelerate premiumization as a core growth driver. We will sharpen our portfolio to a higher value mix, scale, value-accretive packs and deepen premium offerings across key channels. Third, we are committed to strengthening the -- and diversify our organization through localization and expanding in spirits category. China and Uzbekistan are key engines of our agenda with localization initiatives moving forward in line with plans. At the same time, we are building a scalable distilled alcohol business with a clear focus on expansion, best-in-class trade execution and profitability. We will also ensure the effective integration of raki business and lay the foundations for a sustainable long-term organization. Therefore, this will strengthen our revenue and support sustainable top line growth. Our quality growth algorithm enables us to grow profit ahead of revenue and revenue ahead of industry growth, while financial discipline is at the heart of how we operate. We will sustain profitability through top line growth and strict cost discipline. We will continue to apply zero-based spending mindset across trade spending, CapEx and tight governance. And this will enable us to eliminate inefficiencies, simplify ways of working and strengthen operational agility. We will strengthen our balance sheet by improving average core working capital across all operations in 2026. Lastly, the most important one is to generate positive cash flow consistently and sustainably. Cash generation is not just an outcome. It's a strategic priority that strengthens resilience and expands our ability to invest. Looking into 2026, we anticipate a year that will remain volatile and complex. Again, persistent inflation, macroeconomic headwinds and geopolitical tensions are likely to continue shaping the environment we operate in. Amid the challenging environment, we expect our consolidated volume to grow mid-single digits with beer volumes to grow by low single digits and soft drinks volumes growth to be mid-single digits. According to the inflationary accounting figures, our consolidated net sales revenue per hectoliter is expected to grow low single digits. Material costs are expected to remain high, while we will manage our revenue growth with the pricing discipline, which will tightly offset some of the impact. And we expect to deliver a flat EBITDA margin across our consolidated beer and soft drink businesses, where the pressure on gross profitability will be compensated by tight OpEx management. According to without inflationary accounting figures, as a result of the revenue growth initiatives in both business lines, our consolidated net sales revenue per hectoliter is expected to grow by mid-teens on FX-neutral basis, where beer revenues per hectoliter is expected to grow high teens. The expected growth from soft drinks volume per unit case low to mid-teens, both on FX-neutral basis. In profitability side, we expect to deliver a flat EBITDA margin across our consolidated beer and soft drink businesses. Our CapEx over sales ratio will be stable at normalized levels of high single digits. Thank you for your patience. I think now we are ready to take questions. Asli Demirel: Thank you, Abe. We have a couple of questions on the floor. So let me start with reading the first one from Tore Fangmann from Bank of America. Could you please elaborate on how and when you can reach free cash flow breakeven and positive cash generation in the beer business? What are the exact stones? And can you already achieve that in 2026? Onur Alturk: So thank you. Let me take this one. Actually, the last part of my presentation that is emphasizing our strategic key focus areas are kind of an answer to this question. Thank you for the question. But the simple answer is focusing on top line and bottom line at the same time. Our international operations had a good start to the year like in Kazakhstan, Moldova and Georgia as well, which is lapping a softer base from last year. And also, we have good launch plans and good marketing plans in Turkiye for this year. But these are all about the top lines. And also, lastly, I mentioned about China, Uzbekistan, Azerbaijan and Belarus in order -- which will help us to increase our top line. But yet again, like the second half of last year and the first 2 months of this year, it's going to be cost disciplined actions, tight OpEx management, ZBB actions and of course, timely pricing in Turkiye and in other international operations. So it's going to be a combination of all these efforts. And the target -- the sole target is being cash flow positive at the end of this year, excluding Russia. Asli Demirel: Thank you very much, Onur bey. Another question comes from [indiscernible]. Several questions from my side. Could you please explain the low base effect for cost from the hedges that affected margins year-on-year? Yasemen Guven Cayirezmez: Let me start with the cash designation, which has an impact on Q4 2025. In Turkiye, the Q4 2024 FX hedge impact was the one-off cost advantage stemming from the use of a lower FX rate through cash designation. So we are no longer using cash designation in our accounting. Accordingly, we don't expect any gross margin dilution in our margins. So what are expectations for 2026 on the gross margin level, a flattish level. Asli Demirel: So Maxim -- there was a question from Maxim regarding gross margin, but Yasemen already mentioned about gross margin. So this year's margin -- this quarter's margin pressure year-on-year is not expected to be seen in 2026. So that was one-off. So I think that answers your question, Maxim. So another question comes from, again, [indiscernible] where do you see Beer Group net leverage ratio at the end of 2026? Yasemen Guven Cayirezmez: Our expectation for the leverage, I mean, net debt-to-EBITDA level is 2.8x for 2026. But of course, with TAS 29 numbers -- I'm sorry, without. Asli Demirel: Can you please run over your CapEx guidance for beer operations in 2026? Do you expect Turkish beer operation to turn into positive free cash flow in 2026 from [indiscernible]? Yasemen Guven Cayirezmez: Our aim for free cash flow to turn into positive within the next of the -- at the end of the 2026. But in terms of the timing, we don't expect any positive free cash flow until the fourth quarter of the year. Asli Demirel: Another question is regarding the impact about the latest Middle Eastern issues crisis. What is going to be the impact on direct impact on our operations? Yasemen Guven Cayirezmez: Actually, our Middle East exposure is very limited. So in terms of the volume and the revenue exposure, I can say that just 1% of our volume and revenue, respectively. Onur bey, do you have any comments on Middle East? Onur Alturk: Actually, as mentioned, based on our preliminary assessment, our direct financial exposure in Middle East is very limited, as mentioned. Our beer exports in the region cover 11 countries, but they represent around 1% of our total volume and roughly 1% of total beer group revenue. I mean, within that footprint, the high-risk markets are Iran, Iraq, Lebanon and Syria. In Iran, specifically, our exposure is asset-light as we operate through a licensing model with no owned assets, limited royalty income and fully collateralized receivables. So -- and also in Turkey, geopolitical developments could potentially create some short-term volatility for sure, whether through logistic constraints, operational disruptions or temporary demand fluctuations. However, we already put mitigation measures in place, including close coordination with our partners, potential route adjustments, careful inventory management and strict receivables control. I mean, overall, while geopolitical uncertainty in the region remains elevated, our current assessment is that the financial impact on Anadolu Efes should remain contained. Asli Demirel: Onur bey, another question comes from [ Melis ]. Can you comment on competitive landscape in Turkish beer market, the consumer sentiment right now and the market share evolve? Onur Alturk: I mean, Turkish markets was resilient last year. But after 4 consecutive years of growth, our beer volumes in Turkey declined slightly by 1% in 2025. One of the reasons was weak consumer demand as well. And the decline in consumer and affordability was another reason, especially the pressure was mainly felt in the second half of the year as the persistently inflationary environment continued to weigh on consumer purchasing power. We also saw somewhat less supportive tourism season last year, softer on-trade demand and of course, a more competitive discounting environment. In response, we maintain a disciplined commercial approach and focused on protecting value rather than chasing for volume. And we try to keep our margins and we try to protect our profits last year. And this year, again, it's going to be a competitive market environment. The year started soft in Turkish beer market again. It's going to be a tough year for us. And we will see, especially after Ramadan, after Bayram, we were -- we have high hopes for the season, summer season this year. Our market share, volume and value share is almost flattish, stabilizing right now. In summer season, we should expect with the marketing campaigns, with the marketing plans, with the launch plans, we are expecting better volumes, but the start of the year is soft. Asli Demirel: Thank you very much. I think there was a question regarding clarifying the free cash flow question. Let me read the question once again. In the beer business, you were expecting free cash flow positive by the end of 2026 in Q4, but free cash flow for the full year '26 will be negative. Can you then reach a fully positive free cash flow in 2027? I think there was a misunderstanding. Therefore, let's clarify. Yasemen? Yasemen Guven Cayirezmez: Our target to reach the positive free cash flow by the end of 2026 on a quarterly basis, we will not be able to see positive free cash flow until quarter 4. I believe this clarified the question. Asli Demirel: There was a question about dividend payment. Why did you increase your dividend payment compared to last year? Yasemen? Yasemen Guven Cayirezmez: Actually, we are paying as a dividend, the dividend that we get through the CCI as a pass-through. We don't pay any more cash from the beer business on top of that. Asli Demirel: This seems to be actually covering all the questions. If we are missing any questions, we can always help through e-mails or calls. So if there are no more questions on the floor, we may end up the call.
Asli Demirel: Good morning and good afternoon, ladies and gentlemen. Welcome to Anadolu Efes' Last Quarter 2025 Financial Results Conference Call and Webcast. I'm Asli Demirel. I'm the Investor Relations and Risk Management Director of Anadolu Efes. Our presenters today CEO, Mr. Onur Alturk; and our CFO, Ms. Yasemen Cayirezmez. [Operator Instructions]. Unless explicitly stated otherwise, all financial information disclosed in this presentation are presented in accordance with TAS 29. Just to remind you, this conference call is being recorded, and the link will be available online. Before we start, I would kindly request you to refer to our notes in our presentation regarding forward-looking statements. Now I'm leaving the ground to Mr. Onur Alturk, Anadolu Efes' CEO. Sir? Onur Alturk: Thank you, Asli. Good morning and good afternoon, everyone, and welcome to Anadolu Efes' Full Year 2025 Operational and Financial Results Conference Call. Before we begin, I am delighted to welcome our new CFO, Yasemen Cayirezmez, who is with us today for her first results call in her new role. 2025 was a year in which we delivered a mixed set of results in a complex and evolving operating environment, but we continued our disciplined execution across our markets. On a pro forma basis, we delivered consolidated volume growth of 7% in full year 2025 and 5% in the last quarter of the year. Beer Group recorded a flat volume performance on a pro forma basis in full year 2025 as a softer domestic performance was offset by international operations. Supported by solid volume performance and timely pricing actions as well as tight discount control, we achieved a healthy top line at TRY 244 billion in 2025. In the last quarter, our EBITDA performance was supported by gross profit improvement and a reduction in our OpEx margin, reflecting our continued focus on strict cost discipline. However, our EBITDA recorded a slight decline around 2% year-on-year on a pro forma basis to TRY 40.5 billion in 2025 with 17 margin -- 17% margin. Our consolidated net loss was recorded around TRY 3 billion in the last quarter. Despite stronger operator profitability in the quarter and lower financial expenses compared to last year, net income was negatively impacted by lower monetary gains and tax adjustments, which in the following section, Yasemen will cover the impact in more details. Yet we were able to deliver a strong net income of TRY 9 billion for the full year. Free cash flow was negative both in fourth quarter and the full year. It was pressurized by weaker operational profitability. Higher interest expense payments as a result of a very high interest rates compared to previous year. Yet there was an improvement year-on-year, thanks to prudent CapEx spending and lower tax payments. Consequently, our consolidated net debt-to-EBITDA ratio stood at a level of 1.4x as of December 31, 2025, still at a healthy level. Finally, I'm pleased to announce our dividend proposal of TRY 0.34 per share, which is a testament of our commitment to delivering value to our shareholders. Looking more closely at our beer operations, diversification across markets was a key factor, supporting volume stability in 2025. In the fourth quarter, consolidated beer volumes reached 2.7 million hectoliter, increasing by 0.6% year-on-year with the contribution of all operations with the exception of Georgia. For the full year, consolidated beer volumes were 13 million hectoliter, broadly parallel to 2024 on a pro forma basis. Turkiye beer volumes declined by 1.1%, while international beer volumes increased by 0.8%, highlighting the balancing effect of our geographic footprint. As shown in the volume breakdown of our beer group operations in 2025, Turkiye remains our largest contributor, while our international markets particularly continue to support overall volume performance. Looking at our Turkiye beer operations, we delivered 1.4 million hectoliter volume in the fourth quarter, up 0.4% versus last year. For the full year, volume reached 2.6 (sic) [6.2] million hectoliters, representing a 1% decline year-on-year, broadly in line with our expectations. High base impact following growth for several years, persistent inflationary environment and less supportive tourism season weighed on domestic volume performance. Despite these headwinds, we continue to invest our portfolio through diversification by launching our new premium brand, Stella Artois. In a market where we clearly observe increasing premiumization, we believe Stella Artois is well positioned to meet evolving consumer needs and expectations. Additionally, in the second half of 2025, we started a distribution of raki Turkish [indiscernible] spirits in line with our ambition to strengthen our presence in the distilled spirits category. We are still in the process of buying 60% of Taris z m, which I believe you will hear from us the developments in the near future. Let me briefly touch on our international beer operations, where our volume performance was resilient throughout the year. Starting with Kazakhstan, we were pleased to see the market stabilization after a few years of contraction. In line with market as a clear market leader, we achieved to record a slight increase supported by low single-digit volume growth in last quarter of the year. This performance was supported by improved promotional activities as well as marketing campaigns together with our continued focus on the KEG segment, while a solid contribution also came from our export business. 2025 was also a strong year in terms of portfolio diversification, supported by successful launches, including Kruzhka Svezhego 0.0 and Wukong Ju, our new product, addressing the changing preferences of consumers. Turning to Moldova. Despite cycling a very strong low teens growth in 2024, full year volumes delivered low to mid-single-digit growth in 2025, which is supported by low single-digit volume growth in the fourth quarter. Throughout the year, affordability pressures remained a key challenge for the market, which is managed by our well-balanced brand portfolio, combined with targeted marketing campaigns and consumer activations. In Moldova, we also introduced one of Efes' most popular premium brands, Stary Melnik iz Bochonka, to the market this year. Additionally, as part of our continuous efforts on the premiumization, we also introduced the premium brand, Spaten to the market. Finally, Georgia, volumes declined mid- to high teens in the fourth quarter and mid-single digit for the full year, mainly reflecting the restructuring of our export operations from Georgia. Some of our export operations are doing local production and paying royalty fees to our Georgian operation. Therefore, as previously communicated, although restructuring led to a lower volume, it does not have an impact on profitability. It is also worth to mention that this impact will continue to weigh on volumes in 2026. We continue to invest in KEG business in Georgia, where there is an ongoing expansion on-trade channel. The negative impact of restructuring was partially offset by our positive momentum in KEG channel as well as premium segment. Regarding our soft drinks business, we -- CCI delivered a solid performance in 2025. Consolidated volume grew by 5% in the fourth quarter and increased by 8% for the full year. Central Asia was the key growth engine with Uzbekistan, Kazakhstan leading the growth. In Turkiye, volumes declined by 1% as a result of a deliberate choice to optimize portfolio since water category has relatively lower value contribution. Excluding water, Turkiye delivered 3.8% year-on-year volume growth, confirming the underlying strength of the core categories. International operations volume grew by 13.5%. Solid growth performance was supported across markets with Central Asia posting robust double-digit growth. Pakistan volumes increased by 1.3%, while Kazakhstan, Uzbekistan and Iraq delivered a robust growth of 15.5%, 33.7% and 12%, respectively. Let me hand over to Yasemen to review the financials now. Yasemen Guven Cayirezmez: Good morning, and good afternoon, everyone. Let me start by reminding that all figures I refer to are on a pro forma basis, excluding Russian operations to ensure comparability with this year. Unless otherwise stated, financials are presented in accordance with TAS 29. In the last quarter of 2025, revenue increased by 10.9% year-on-year to TRY 11.1 billion, yielding full year revenue of TRY 51 billion (sic) [ TRY 54 billion ]. On the other hand, gross profit declined by 4.6%, resulting in margin contraction of 680 basis points. This was a result of last year's low cost base related to very low hedge levels and aluminum costs in Turkey beer operations. Coming to EBITDA. EBITDA declined by 42.2% to TRY 649 million in the quarter, corresponding to 537 basis points margin contraction. Decline in gross profitability was reflected in the EBITDA, and this was partially mitigated by strict OpEx control, particularly in the last quarter. As seen on the bridge, there has been no increase in OpEx in the last quarter, and there are even savings in OpEx in full year. For full year 2025, Beer Group EBITDA reached to TRY 7.3 billion with a margin of 13.4%, which is down 209 basis points year-on-year. On the cash flow side, Beer Group free cash flow was TRY 834 million in the fourth quarter of 2025, thanks to the improvements in working capital as well as lower interest expense and taxes. In the full year, there was a year-on-year decline in free cash flow, mainly driven by softer beer operational profitability, together with the higher interest payments, yet thanks to our efforts to improve working capital, there was improvement both on working capital and CapEx spending. Going forward, improving free cash flow generation remains our top priority going into 2026. For analysis purpose, if you look at the numbers, excluding TAS 29 effects, underlying operational performance is materially stronger, both at consolidated and Beer Group levels. More specifically, on a TAS 29 excluded basis at Beer Group level, revenue would have been TRY 52.6 billion compared to TRY 54.3 billion under TAS 29. EBITDA would have been TRY 10.3 billion compared to TRY 7.3 billion as reported. Accordingly, EBITDA margin would have been 19.6% compared to 13.4% under TAS 29. With respect to debt and cash and debt management, as of end of 2025, consolidated net debt-to-EBITDA stood at 1.4x while excluding TAS 29 effects. This ratio improves to 1.2x. At the Beer Group level, net debt-to-EBITDA was reported at 4x, while excluding TAS 29, it was 2.8x. From the balance sheet perspective, gross debt at Beer Group level stands at approximately USD 0.9 billion with average maturity of 1.7 years, while 67% of gross debt is in hard currency. Our cash position is USD 0.2 billion with 34% held in hard currency and 24% in Eurozone currencies. As regards to risk management, for 2026, we already hedged 47% our aluminum exposure for Turkiye and CIS at USD 2,929. In Turkiye, 57% of our FX exposure has been hedged at a USD exchange rate of 47, while total FX exposure of Beer Group represents approximately 19% of cost of goods sold plus operating expenditures. Coming to the end of the presentation, I would like to underline that despite all the headwinds, we closed 2025 with a stable top line momentum as well as controlled costs and expense structure. For 2026, our priority is to restore positive free cash flow, maintain margin stability through disciplined cost control and improve working capital for sure. Thank you. Now I will hand it back for Q&A. Onur Alturk: Let me recap our strategic focus areas first for 2026. We are fully focused on execution guided by our clear priorities. First, strengthening our brand priority is at the core of our priorities. We plan to elevate brand quality, packaging and executional excellence across both production and sales operations. In parallel, we will continue our pricing discipline, supported by centralized revenue growth management and continuous product and channel mix optimization, focusing deeply on affordability. Second, we will continue to accelerate premiumization as a core growth driver. We will sharpen our portfolio to a higher value mix, scale, value-accretive packs and deepen premium offerings across key channels. Third, we are committed to strengthening the -- and diversify our organization through localization and expanding in spirits category. China and Uzbekistan are key engines of our agenda with localization initiatives moving forward in line with plans. At the same time, we are building a scalable distilled alcohol business with a clear focus on expansion, best-in-class trade execution and profitability. We will also ensure the effective integration of raki business and lay the foundations for a sustainable long-term organization. Therefore, this will strengthen our revenue and support sustainable top line growth. Our quality growth algorithm enables us to grow profit ahead of revenue and revenue ahead of industry growth, while financial discipline is at the heart of how we operate. We will sustain profitability through top line growth and strict cost discipline. We will continue to apply zero-based spending mindset across trade spending, CapEx and tight governance. And this will enable us to eliminate inefficiencies, simplify ways of working and strengthen operational agility. We will strengthen our balance sheet by improving average core working capital across all operations in 2026. Lastly, the most important one is to generate positive cash flow consistently and sustainably. Cash generation is not just an outcome. It's a strategic priority that strengthens resilience and expands our ability to invest. Looking into 2026, we anticipate a year that will remain volatile and complex. Again, persistent inflation, macroeconomic headwinds and geopolitical tensions are likely to continue shaping the environment we operate in. Amid the challenging environment, we expect our consolidated volume to grow mid-single digits with beer volumes to grow by low single digits and soft drinks volumes growth to be mid-single digits. According to the inflationary accounting figures, our consolidated net sales revenue per hectoliter is expected to grow low single digits. Material costs are expected to remain high, while we will manage our revenue growth with the pricing discipline, which will tightly offset some of the impact. And we expect to deliver a flat EBITDA margin across our consolidated beer and soft drink businesses, where the pressure on gross profitability will be compensated by tight OpEx management. According to without inflationary accounting figures, as a result of the revenue growth initiatives in both business lines, our consolidated net sales revenue per hectoliter is expected to grow by mid-teens on FX-neutral basis, where beer revenues per hectoliter is expected to grow high teens. The expected growth from soft drinks volume per unit case low to mid-teens, both on FX-neutral basis. In profitability side, we expect to deliver a flat EBITDA margin across our consolidated beer and soft drink businesses. Our CapEx over sales ratio will be stable at normalized levels of high single digits. Thank you for your patience. I think now we are ready to take questions. Asli Demirel: Thank you, Abe. We have a couple of questions on the floor. So let me start with reading the first one from Tore Fangmann from Bank of America. Could you please elaborate on how and when you can reach free cash flow breakeven and positive cash generation in the beer business? What are the exact stones? And can you already achieve that in 2026? Onur Alturk: So thank you. Let me take this one. Actually, the last part of my presentation that is emphasizing our strategic key focus areas are kind of an answer to this question. Thank you for the question. But the simple answer is focusing on top line and bottom line at the same time. Our international operations had a good start to the year like in Kazakhstan, Moldova and Georgia as well, which is lapping a softer base from last year. And also, we have good launch plans and good marketing plans in Turkiye for this year. But these are all about the top lines. And also, lastly, I mentioned about China, Uzbekistan, Azerbaijan and Belarus in order -- which will help us to increase our top line. But yet again, like the second half of last year and the first 2 months of this year, it's going to be cost disciplined actions, tight OpEx management, ZBB actions and of course, timely pricing in Turkiye and in other international operations. So it's going to be a combination of all these efforts. And the target -- the sole target is being cash flow positive at the end of this year, excluding Russia. Asli Demirel: Thank you very much, Onur bey. Another question comes from [indiscernible]. Several questions from my side. Could you please explain the low base effect for cost from the hedges that affected margins year-on-year? Yasemen Guven Cayirezmez: Let me start with the cash designation, which has an impact on Q4 2025. In Turkiye, the Q4 2024 FX hedge impact was the one-off cost advantage stemming from the use of a lower FX rate through cash designation. So we are no longer using cash designation in our accounting. Accordingly, we don't expect any gross margin dilution in our margins. So what are expectations for 2026 on the gross margin level, a flattish level. Asli Demirel: So Maxim -- there was a question from Maxim regarding gross margin, but Yasemen already mentioned about gross margin. So this year's margin -- this quarter's margin pressure year-on-year is not expected to be seen in 2026. So that was one-off. So I think that answers your question, Maxim. So another question comes from, again, [indiscernible] where do you see Beer Group net leverage ratio at the end of 2026? Yasemen Guven Cayirezmez: Our expectation for the leverage, I mean, net debt-to-EBITDA level is 2.8x for 2026. But of course, with TAS 29 numbers -- I'm sorry, without. Asli Demirel: Can you please run over your CapEx guidance for beer operations in 2026? Do you expect Turkish beer operation to turn into positive free cash flow in 2026 from [indiscernible]? Yasemen Guven Cayirezmez: Our aim for free cash flow to turn into positive within the next of the -- at the end of the 2026. But in terms of the timing, we don't expect any positive free cash flow until the fourth quarter of the year. Asli Demirel: Another question is regarding the impact about the latest Middle Eastern issues crisis. What is going to be the impact on direct impact on our operations? Yasemen Guven Cayirezmez: Actually, our Middle East exposure is very limited. So in terms of the volume and the revenue exposure, I can say that just 1% of our volume and revenue, respectively. Onur bey, do you have any comments on Middle East? Onur Alturk: Actually, as mentioned, based on our preliminary assessment, our direct financial exposure in Middle East is very limited, as mentioned. Our beer exports in the region cover 11 countries, but they represent around 1% of our total volume and roughly 1% of total beer group revenue. I mean, within that footprint, the high-risk markets are Iran, Iraq, Lebanon and Syria. In Iran, specifically, our exposure is asset-light as we operate through a licensing model with no owned assets, limited royalty income and fully collateralized receivables. So -- and also in Turkey, geopolitical developments could potentially create some short-term volatility for sure, whether through logistic constraints, operational disruptions or temporary demand fluctuations. However, we already put mitigation measures in place, including close coordination with our partners, potential route adjustments, careful inventory management and strict receivables control. I mean, overall, while geopolitical uncertainty in the region remains elevated, our current assessment is that the financial impact on Anadolu Efes should remain contained. Asli Demirel: Onur bey, another question comes from [ Melis ]. Can you comment on competitive landscape in Turkish beer market, the consumer sentiment right now and the market share evolve? Onur Alturk: I mean, Turkish markets was resilient last year. But after 4 consecutive years of growth, our beer volumes in Turkey declined slightly by 1% in 2025. One of the reasons was weak consumer demand as well. And the decline in consumer and affordability was another reason, especially the pressure was mainly felt in the second half of the year as the persistently inflationary environment continued to weigh on consumer purchasing power. We also saw somewhat less supportive tourism season last year, softer on-trade demand and of course, a more competitive discounting environment. In response, we maintain a disciplined commercial approach and focused on protecting value rather than chasing for volume. And we try to keep our margins and we try to protect our profits last year. And this year, again, it's going to be a competitive market environment. The year started soft in Turkish beer market again. It's going to be a tough year for us. And we will see, especially after Ramadan, after Bayram, we were -- we have high hopes for the season, summer season this year. Our market share, volume and value share is almost flattish, stabilizing right now. In summer season, we should expect with the marketing campaigns, with the marketing plans, with the launch plans, we are expecting better volumes, but the start of the year is soft. Asli Demirel: Thank you very much. I think there was a question regarding clarifying the free cash flow question. Let me read the question once again. In the beer business, you were expecting free cash flow positive by the end of 2026 in Q4, but free cash flow for the full year '26 will be negative. Can you then reach a fully positive free cash flow in 2027? I think there was a misunderstanding. Therefore, let's clarify. Yasemen? Yasemen Guven Cayirezmez: Our target to reach the positive free cash flow by the end of 2026 on a quarterly basis, we will not be able to see positive free cash flow until quarter 4. I believe this clarified the question. Asli Demirel: There was a question about dividend payment. Why did you increase your dividend payment compared to last year? Yasemen? Yasemen Guven Cayirezmez: Actually, we are paying as a dividend, the dividend that we get through the CCI as a pass-through. We don't pay any more cash from the beer business on top of that. Asli Demirel: This seems to be actually covering all the questions. If we are missing any questions, we can always help through e-mails or calls. So if there are no more questions on the floor, we may end up the call.
Operator: Good morning. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the Methanex Corporation Fourth Quarter 2025 Results Conference Call. [Operator Instructions] I would now like to turn the conference call over to the Vice President of Investor Relations at Methanex, Mr. Robert Winslow. Please go ahead, Mr. Winslow. Robert Winslow: Good morning, everyone. My name is Robert Winslow, and I recently joined Methanex as Vice President, Investor Relations. Welcome to Methanex' Fourth Quarter 2025 Results Conference Call. Our 2025 fourth quarter news release and 2025 annual report were posted yesterday, and can be accessed through our website at methanex.com. I would like to remind the listeners that our comments today may contain forward-looking information, which by its nature is subject to risks and uncertainties that may cause the stated outcome to differ materially from actual results. We may also refer to non-GAAP financial measures and ratios that do not have any standardized meaning prescribed by GAAP, and are, therefore, unlikely to be comparable to similar measures presented by other companies. Any references made on today's call reflect our 63.1% economic interest in the Atlas facility, our 50% economic interest in the Egypt facility, our 50% interest in the Natgasoline facility and our 60% interest in Waterfront Shipping. To review the cautionary language regarding forward-looking statements, and to find definitions and reconciliations of the non-GAAP measures, please refer to our most recent news release, MD&A, annual report and investor presentation, all of which are posted on our website under the Investor Relations tab. I will now turn the call over to Methanex' President and CEO, Mr. Rich Sumner for his comments, followed by a question-and-answer period. Rich Sumner: Thank you, Robert, and good morning, everyone. We appreciate you joining us today to discuss our fourth quarter 2025 results. I'd like to start the call by thanking all our global team members for their continued commitment to responsible care and safety, which remains at the core of our company's culture. Over 2024 and 2025, we've had the best 2-year safety performance in our company's history, even as we navigated significant changes to our asset portfolio and supply chain. As a demonstration of these results, we've had 0 Tier 1 process safety incidents over the past 2 years and recorded only 0.09 and 0.12 recordable injuries per 200,000 hours worked in 2024 and 2025, respectively, compared with the chemical industry average of 0.59 in 2024. These outstanding achievements are a testament to our employees and contractors continued focus on strong planning, hazard awareness and reliable behaviors. Turning now to a financial and operational review of the company. Our fourth quarter average realized price of $331 per tonne, and produced sales of approximately 2.4 million tonnes generated adjusted EBITDA of $186 million and an adjusted net loss of $11 million. Adjusted EBITDA was lower compared to the third quarter of 2025, as higher sales of produced methanol were offset by a lower average realized price, and the impact of immediate fixed cost recognition related to plant outages in the fourth quarter. Turning now to industry fundamentals. We're closely monitoring the current events in the Middle East region and its impact on global markets and our business. Looking back on the fourth quarter, we estimate that global demand increased in China by about 4%, while demand outside of China was relatively flat. The increased demand in China in the fourth quarter compared to the third quarter was driven by increased demand for methanol into energy applications and higher operating rates by methanol to olefin producers, the latter also being supported by high operating rates and import supply availability from Iran. Steady imports from Iran, particularly through October and November, also led to higher coastal inventories in China, which pushed pricing towards the $250 per metric ton range. Towards the end of the fourth quarter, we believe seasonal gas constraints significantly reduced Iranian output leading to MTO producers reduced operating rates in response to decreasing supply. Through the first quarter of 2026, up until current market escalations, our average realized pricing has been quite stable with some small increases on slightly tighter supply conditions. After considering first quarter posted prices and factoring in higher discounts -- customer discounts through recontracting for 2026, our first quarter average realized price is estimated to be between $330 and $340 per tonne. The current escalation in the Middle East brings significant uncertainty to reliability of methanol supply to the market from this region. We continue to see significantly reduced methanol supply from Iran, and we believe it is also impacting operations and trade flows from other producers. This has led to an increase in spot methanol pricing in Asia Pacific and Europe with Chinese methanol prices now trading above $300 per metric ton and European spot prices now trading close to $400 per tonne. Now turning to our operations, where our methanol production was higher in the fourth quarter compared to the third quarter. Starting with our newly acquired assets in Texas. We produced 216,000 tonnes at Beaumont and 186,000 tonnes from our equity share of Natgasoline. During the fourth quarter, Beaumont experienced a short unplanned outage and Natgasoline took a plant 10-day outage to reduce a -- to replace the catalyst that's important to environmental compliance. We've been actively working with both of these manufacturing sites on integration plans, completing detailed reviews of systems and technical findings and are pleased with the progress to date. In Geismar production was slightly higher in the fourth quarter as all 3 plants operated reasonably well, although we did experience some minor unplanned outages. In Chile, after completing a plant turnaround in September, we operated both plants at full rates for most of the fourth quarter, utilizing gas supply from Chile and Argentina. During December, a third-party pipeline failure caused a temporary restriction on gas supply to our facilities, and this resulted in approximately 75,000 tonnes of lost production. The gas supplier developed a resolution to this issue in early '26, and we're now operating both plants at full rates, which we expect to sustain through April. In Egypt, we had higher production in the fourth quarter as the third quarter was partially impacted by seasonal gas availability constraints. There's been stabilization of gas balances in the region, but some continued limitations on supply to industrial plants are expected going forward, particularly in the summer. The plant is currently operating at full rates, and we're closely monitoring the regional situation for any potential impact on gas supply to the plant. In New Zealand, we produced 171,000 tonnes as increased gas supply was available in the nonwinter season. Notwithstanding the short-term dynamics, structural gas supply availability in New Zealand continues to be challenging, and we're working with our gas suppliers, and the government to optimize our operations in the country. Our expected equity production for 2026 is approximately 9 million tonnes of methanol. Actual production may vary by quarter based on timing of turnarounds, gas availability, unplanned outages and unanticipated events. Now turning to our current financial position and outlook. During the fourth quarter, solid cash flows from operations allowed us to repay $75 million of the Term Loan A facility and end the year in a strong cash position with $425 million on the balance sheet. Since the start of '26, we've repaid a further $50 million, and the balance of the Term Loan A facility is currently at $300 million. Our priorities for 2026 are to safely and reliably operate our business and continue to deliver on our integration plan. We remain focused on maintaining a strong balance sheet and ensuring financial flexibility and our near-term capital allocation priority is to direct all free cash flow to the repayment of the Term Loan A facility. Based on a forecasted first quarter average realized price between $330 and $340 per tonne and similar produced sales, we expect slightly higher adjusted EBITDA in the first quarter of 2026 compared to the fourth quarter. We'd now be happy to answer your questions. Operator: [Operator Instructions] Your first question comes from the line of Joel Jackson with BMO Capital Markets. Joel Jackson: Welcome aboard, Rob. Nice to hear from you again. Rich team, can you talk about costs? So if we look at Q4, and we think of costs, not gas costs but other costs logistics, other things going on, can you talk about what does that look like into the first half of this year in Q1? It seems like costs have really elevated. What's going on? Are there any artifacts, some of the things going on with the OCI taking over the OCI assets? Rich Sumner: Thanks, Joel. Yes. I mean a couple of points I'd make on cost is we did see that the unabsorbed costs come through. That's really about how the assets ran through December. We saw some outages there that just results in immediate recognition of those costs to the P&L. As we think into where we were, our fixed costs we would expect those to come down. Our ocean freight was probably a longer supply chain in the third and fourth quarter. As we said, we do have probably a higher percentage of sales coming through in the last few quarters as we -- higher than we expect as we move into the new year with our contracted position. And then we have not yet -- we're not all the way through the OCI transaction. So right now, we are spending costs as we move through to create the synergies post deal, and that will happen through 2026 and when we get into 2027. So we're not all the way there, obviously. And what we do need to do is to continue the integration plans. And as we move through, we'd expect beginning in 2027, that our fixed cost structure also adjusts down to the new base of the business. Joel Jackson: Okay. And then my second question is, obviously, you all know what's going on in the world. And there's a lot of methanol sitting in Iran and Saudi and around the Middle East. You obviously set your contract prices, your posted prices for March just on the onset of this. It's early, but what do you think is going to happen here in the market? Like if this continues, can you talk about what will we see in the short term, the medium term as you see your business potentially changing from what's going on? Rich Sumner: Yes, for sure. I think for us, I mean, I think the -- our first -- and first priority here is our supply to customers. And I think this is where our reliability of supply and our global supply chain really shows -- demonstrates its value. And where we are today is that's our first commitment. Pricing has obviously increased in all regions with the anticipation of tightness coming out because the amount of tons on the internationally traded market here is quite meaningful that's currently impacted. So our first commitment is to our customers. And as of right now, we'll see some benefits because of the tightness on pricing through March, but the real reset will come through into the second quarter. I think the big -- we're talking about around 15 million to 20 million tonnes of the globally internationally traded methanol market here. So it's a significant impact. which will ultimately impact all global markets, and we've seen pricing come up around the world, and we're watching things really closely here obviously, with our customers trying to make sure we keep them whole while also looking at the risks on the global market and potentially some demand destruction that could come out of the market as well. So watching things very closely, and we're really talking to all our suppliers about -- or all of our customers about how we can keep them supplied through this. Operator: Your next question comes from the line of Ben Isaacson with Scotiabank. Ben Isaacson: I have a question and a follow-up. Rich, can you remind us how opportunistic are you able to be when we have price spikes? I know most of your volume is contracted. So can you just talk about how you can take advantage of short-term price spikes? And is there some kind of lag in that recognition? Rich Sumner: Thanks, Ben. Yes, I mean, we're a term contract supplier. So our first priority is our commitment to our customers, and we reset price monthly. And so right now, we're selling based on our March contract price. And we would expect under current conditions that we would be resetting into April to be reflective of the market. So our first priority right today is the security of supply to our customers globally. Of course, there are certain mechanisms in our contracts, which may adjust up slightly, and that's built into our forecast. So you could see that there could be a little bit of a push up in our kind of guidance on where pricing is for the first quarter. But generally, it will reset into April. And our first commitment is really about, how do we make sure we keep the industry operating for our customers and really to help them take care of their business. Ben Isaacson: Great. And my follow-up is in the Middle East. I know things are moving very quickly. Are you aware factually of any damage to methanol assets or export or port infrastructure in Iran? And are you seeing a slowdown in gas flow from Israel to Egypt? Rich Sumner: Thanks, Ben. No, we're not aware of any damage to any methanol facilities. We're monitoring the situation really, really closely. As far as it relates to the gas supply from Israel and to Egypt, our understanding is that gas is not flowing that they've all but shut down the gas imports from Israel today. What we're working really closely with our gas suppliers in Egypt. Our plant continues to operate. It is the low season in terms of demand on the gas grid in Egypt. And -- the Egyptian government has been getting in excess supply or more supply through LNG imports. So, so far, we've got sustainable operations there, but we're watching things and monitoring them really closely. Operator: Your next question comes from the line of Hamir Patel with CIBC Capital Markets. Hamir Patel: Rich, in your price guidance for Q1, you referenced new customer discounts for 2026. So how should we think about, how much maybe on an annual basis, those have shifted? And will that largely be apparent in Q1? Or will it adjust over the year? Rich Sumner: I think the Q1 will be sort of -- is sort of the reset, Hamir. It's what we'll wind up seeing is that when we think about where our realized pricing is for Q1, if you go sort of region by region, China is going to be up because we saw that supply through Q4 built in China. So China is going to realize more in Q1. The European contract settlement actually results in slightly lower pricing for Q1 compared to Q4. And then when we look at where North America, Latin America and Asia Pacific are, they're kind of relatively flat on a realized basis. So that should be a resetting the discount for 2020 -- or Q1 should be consistent through or a good guide for the rest of the year. And then on an average realized basis, we're expecting to be up a little bit. And this is all pre the current developments, right? So I think prior to the current situation, we were going to be slightly up mainly because of China and factoring in all those other considerations. Hamir Patel: Okay. Great. And Rich, with respect to the 2026, the $9 million production guide, can you give us some color on some of the regional puts and takes embedded in that? I imagine the Egypt piece is probably maybe the most fluid. Rich Sumner: Yes, I think it's -- we've got a -- you can think of it in terms of these numbers about 6 million or a little over 6 million tonnes in North America, about 1.3 million to 1.4 million tonnes for Chile, which is consistent with where we were last year, around 0.5 million to 0.6 million tonnes for Egypt, which is obviously less than around an 80% operating rate. And then Trinidad would be one plant would be really the Titan plant around 800,000 tonnes. So I think -- and then New Zealand our guide for New Zealand is less than 0.5 million tonnes, and that's because of the situation we're faced with in New Zealand on gas supply. So those are rough numbers to help you with kind of breaking that out by plant. . Operator: Your next question comes from the line of Steve Hansen with Raymond James. Steven Hansen: I just want to go back to the discount issue or perhaps even just the weighted average global price just as we think about the shifting dynamics there. It did strike me that the realized price came in lower, but not just because of the discount but because of that global-weighted spread or global-weighted average, I should say. Has there been a material shift in the sales mix here in the last 2 quarters relative to prior? It does seem that the formulas we used in the past are becoming outdated. Rich Sumner: No, I think, what we do is we give guidance in terms of percentages in terms of regional allocations there, Steve. So I think you can use those as a good guide. And I think the proportion of China was higher as we move through Q4 for sure. And that's partly because when we acquired the assets, we did inherit a fairly large uncontracted position from the OCI business. We've contracted into Q1 now. And I think the what you'd see is that if you work the percentages, and the pricing you get close to our ARP. But I think, we can help you with that offline, if it's, for some reason, it's not adding up. Steven Hansen: Okay. No, that's very helpful. And just on the operational rhythm or cadence at the new facility in Geismar. It sounds like things are running well now. But just to give us a sense for again that cadence? Is it running sort of to plan, and you think you suggested even full rates? But I mean, is there anything else in sort of the tempo that we should expect to change over the balance of the year, whether it be turnarounds or other major hiccups? Rich Sumner: Yes. No, we're pleased with the operations in Geismar. We've gotten through our the ATR challenges that we had, and we feel really good about the way the asset is running. So in a lot of ways, it's about just continuing to ensure safe, reliable operations in Geismar, and the team is doing a fantastic job there. So we're -- we've put those issues behind us. And right now, we've got a really good, stable production coming out of Geismar. Operator: Your next question comes from the line of Jeff Zekauskas with JPMorgan. Jeffrey Zekauskas: I remember that you were less hedged on gas at Beaumont and Natgasoline. Is your hedging now consistent with your other North American plants, and when there was that gas spike at the end of January? Was that something that you felt or you were hedged against it? Rich Sumner: Yes. Thanks, Jeff. We -- so our hedging today, what we're guiding towards is around 50% hedged for our North American assets, and that's across the whole portfolio. We did see gas pricing, as we always see, come up through the winter period, and then we did hit the gas spike. We'll talk more about our operations when we get to our first quarter results, but we would expect and normally expect gas prices to come up, and then we have different ways to manage that. So we would have had some open exposure, but we would have been managing disclose more about that in our first quarter. We do expect the gas pricing, and that's part of the guide. Really, when we look at slightly higher earnings, part of the reason that it's slightly higher and not higher is because there is a bit higher gas cost coming through in the first quarter compared to the fourth quarter, which we'll give more information on when we go to disclose that in the coming weeks here. . Jeffrey Zekauskas: Okay. And in Trinidad, do you expect your operating rates to rise relative to the fourth quarter or fall in the first quarter? Rich Sumner: Well, we've got in Trinidad. We're running the one plant, the one -- the smaller Titan plant based on a gas contract for the plant. So we're expecting that operations should be very consistent. And yes, we'll operate that plant. Our main focus is going to be on gas contract renewals for the Titan facility. That contract comes up at the end of -- in September time frame, and we would expect to have good operations from that plant up until that time frame. We are looking at the contract renewal already. Most producers are already in discussions for their gas recontracting, their feedstock recontracting in Trinidad, and we're making sure we're in discussions as ours comes up later in the year. But I would anticipate that we're running that plant at similar rates to last year until that time. Operator: Your next question comes from the line of Josh Spector with UBS. Christopher Perrella: It's Chris Perrella on for Josh. As you had lower production out of the OCI -- the acquired assets sequentially. Can you just give us an update on the integration there and sort of what the cost puts and takes over the course of 2026 or what you guys are budgeting in there for the spend to get the synergies? Rich Sumner: Yes. No, the first thing I'd say about the assets is we're really pleased with the way the operations are going there. We -- when we modeled this, on the acquisition, we used operating rates of around 85% to 90%, and we've definitely achieved over and above that since we've owned the assets. We're really impressed with the teams that we're working with, and we're really working collaboratively together to bring our global expertise and work with the expertise at both sites to create value from the asset. So really happy with that. We did have some downtime in Natgasoline, and that was really partly an environmental compliance getting ahead of environmental compliance there and taking a proactive outage. And then we did have some minor downtime at the Beaumont plant as well. So really happy with the way the assets are running and as well as the other parts of the integration. What we did have is, we had, we said about $30 million in synergies that we were targeting to realize by the end of 2026. We've realized some of those, but you also have to take on higher costs when you're integrating systems, and you're integrating teams and other things during that phase. So we're in the middle of that right now, and we'd expect to try to complete that as we move through 2026, and then have realized the $30 million in synergies as we move into '27. Christopher Perrella: I appreciate that. Is there a step-up in the spend there in the year? Or is that cost now kind of baked in on a go-forward basis, at least through the end of the year? And then could you just -- has the gas supply situation in Trinidad absent the contract improved since the events in Venezuela? Rich Sumner: Yes. So to the first question about the spend there increased. I would say no. When we did the modeling around the deal, we would have set a certain assumption around operating rates, and we would have set an assumption around CapEx spend on average per year. The two things I'd say to that is the plants have been operating above our assumptions on the deal. And the second thing is both of the assets have come off of turnarounds in 2024 and 2025. So really, the CapEx spend relative to where we had deal assumptions, which would have been an average are much lower in the early phase of the asset acquisition, which is good for us because we're in a deleveraging period. On your second question, which is in regards to Venezuela, yes. So there's announcements about fields being developed there and for import into Trinidad. So that is a longer-term positive. When we look at the Dragon field that's recently been announced, the things I would say is, one, the size of these fields relative to the demand/supply gap, more than just the Dragon field needs to be developed. So there are other fields also being developed, but that's going to take time. It's going to take a lot of progress. And then ultimately, we're also going to need to ensure that the commercial agreements and pricing that is for that gas, allows that to make sense long term for methanol. So there's a lot to be done there, and our focus is really on the short term right now is how we're operating our plants in Trinidad with a contract renewal that's ahead of us before any of this gas could come on. Operator: Your next question comes from the line of Nelson Ng with RBC Capital Markets. Nelson Ng: Quick question on the supply/demand dynamics. Rich, you talked about potential demand destruction. Can you -- like I think you talked about in the past how MTO facilities are, like their economics are somewhat challenged. But do you expect a large reduction in MTO demand? And also from your customer perspective, do you have a sense of how price sensitive they are? Rich Sumner: Yes. So thanks, Nelson. Yes, just there's a lot of dynamics going on, obviously, right now. So we've seen, just in terms of MTO and MTO affordability, to your point, the price in methanol is rising, but so is the price downstream for the -- in the olefins market, and that's because, it's not -- methanol is constrained, but so is naphtha, so is all the oil derivatives that come out of the Middle East, which means naphtha pricing has gone up, which means olefins pricing has gone up, which means that makes methanol more affordable. So there's a lot of dynamics at play right now. That's what's you're actually uplifting China price, but their pricing in the downstream has gone up too. So the affordability dynamics are changing as well. So there's a lot in play. I think what's going to happen here is depending on the restriction on supply, it's going to be, okay, how does that supply get directed into which markets, and then what does that do to price? So we're watching things really, really closely. But right now, every -- all energy and energy derivatives are lifting up because the demand supply gap continues to grow every day that there's disruption in that region and not a lot of product flowing out. So we're going to monitor this really closely. Our commitments to work with our customers and on security of supply, and certainly, we see the forecast would be there's going to be pressure until some relief comes into the market. Nelson Ng: Okay. Got it. And then in terms of your production in New Zealand, it's staying relatively low in 2026. I presume that facility is marginally profitable. So I just want to get your sense on like what are some of the factors or some of the key factors you look at in terms of making a decision to potentially like mothball that last plant? Rich Sumner: Yes. So I mean, really, it's coming down to gas production and gas development and production out of the field. These are very mature fields, and there's not outside of the existing fields, there's not a lot of new exploration going on. So our concern would be that we have seen the forecast continue to decline. . And in that industry, you have to see capital going in, and you have to see development consistently happening for that to be -- for your operations to be sustained. So we're watching things really, really closely. Today, that we've got a profitable operation, but we are operating even when there's peak gas available, we're still operating at less than one plant at less than full rates, which is not ideal. So we're watching things really closely. And we're working with gas suppliers as well as the government to sustained operations, but it is a tough outlook right now. Operator: Your next question comes from the line of Matthew Blair with TPH. Matthew Blair: Great. Could you talk about whether you're truly realizing the benefits of the OCI acquisition that closed in mid-2025. And just looking at the total company EBITDA in Q3 and Q4, it's roughly flat to Q2, even though like global spot methanol prices are also about flat, and I think the OCI acquisition should have provided at least $250 million in EBITDA. So is this just a function of, I remember Q3, you had some accounting headwinds, Q4, it sounds like some unplanned outages, but are you getting the benefits of that OCI deal rolling through? Rich Sumner: Yes. So I think, maybe the way to answer this is just look at that -- if we look at kind of the numbers that we had on the deal at a $350 methanol price, we said it was slightly over $1 billion in EBITDA. So that would be $250. Methanol prices today are not at $350 per tonne, that's $20 lower across an asset base that's 9 million tonnes. So that's -- the big thing is price. We're also pre-synergies on the deal, so we haven't realized the synergies. And I did describe there are some other things on cost structure that are slightly above what our assumptions would have been on the deal. So as we see that some of those cost issues are transitionary. And I think we can get back to those numbers, but we certainly need the market to be a little tighter and methanol prices to be at the $350 level to hit the numbers that we disclosed. And in today's environment, we would be looking and thinking we're probably at least in the short term, going above $350. Matthew Blair: Okay. Sounds good. And then what percent of your North American methanol production is exported? And should we think about applying spot U.S. prices to those export volumes? Or is that really still on like a contract basis? Rich Sumner: We run our -- I think the way to think of it is we run our global supply chain, our assets through our global supply chain. So we give our regional sales percentages, and then you can see where our assets are located. So our -- we run things so that our product isn't assigned to any particular region. It's a flexible supply chain where we -- our main priority is to keep our customers full with in the most cost-effective manner to do that. So I think it's a little bit more, you have to put it together on where the product is going and how much we're selling. And right now, we've got -- we would give you the global sales allocation, and you can see where our assets are located. And so we will have some cross-basin flows from the Atlantic over into Asia Pacific, but mostly the product stays within the Atlantic Basin. Operator: Your next question comes from the line of Laurence Alexander with Jefferies. Laurence Alexander: I guess, first of all, just can you help parse what the current situation means for the market in terms of the near term? Like how much of the near-term disruption is shipping being rerouted, and to what extent, or how long do you think it will take for you to start seeing customers shutting capacity in response to a tighter market? Can you help sort of parse the near-term supply chain adjustment versus how you're thinking about the demand adjustment? Rich Sumner: Yes. So thanks, Laurence. I think when we look at what supply is impacted today, you have between Iran that Iran puts into the market around 9 million to 10 million tonnes a year. And then when you combine Saudi Arabia, Oman, Qatar, Bahrain in other countries that are going to be impacted. It's probably another 9 million to 10 million tonnes of a 100 million-tonne market, but really a globally internationally traded market about 55 million tonnes. So this is a pretty big impact. Of course, Iranian supply goes only into China. So that's a direct impact to the China market. And then the other product services, mainly the Asia Pacific region as well as some into Europe. So those trade flows today have stopped. How long this lasts, how quickly you can -- you work, you're going to first work off inventories, you're going to try and buy product to ensure security of supply. How long this lasts will impact. How long and how long people have on inventory will ultimately determine how long people can operate here. So our first commitment here is to our contract customers, and the security of supply that we provide through our contracts, and that's our #1 commitment, and we'll continue to monitor this as it evolves because it's certainly hitting methanol, and it's hitting a lot of other downstream oil and energy products as this develops. Laurence Alexander: And secondly, on your shipping fleets, given that you can reroute tankers more quickly than sort of somebody who's using the -- has a ship but that might be contracted to ship in other products rather than being committed to methanol. Should you be seeing a benefit in Q2 or Q3 from that? And can you help size it? Rich Sumner: Yes. I mean, I think the main thing for us is that this is where our time charters certainly give us that security within our supply chain. And so we have very little spot exposure in our fleet. We've seen shipping rates double on a lot of the lanes that we do. And so it's more of a what does it do to our competitors versus what does it do to us to the extent that pricing has to go up to help our competitors cover costs to meet security of supply well, then that's going to be baked into the pricing that we can benefit from. So it's not an immediate like instant hit to our cost structure because we -- ours are fixed in. But we do think that, that partially is compensated through increasing price that's required to get other products into market. So again, that's another factor that we'll be watching. And certainly, this shows that demonstrates the value of our Waterfront Shipping company and having dedicated ships to our business. . Operator: The last question comes from the line of Steve Hansen with Raymond James. Steven Hansen: Just in the event that this conflict does last longer than planned or longer than some people might expect, how do you think about the incremental or excess cash flow coming in the door? Is it just going to accelerate the paydown of Term Loan A? How you've been at a fairly rapid pace thus far, anyways. But is that how we should think about that excess cash flow that comes in the door? Rich Sumner: Yes. Our first commitment is to our balance sheet right now. We have, like I said in the opening remarks, we've got $300 million left on the Term Loan A, and that's our first priority for cash. Of course, we're going to monitor things really closely here. Volatility is important. You can have fly-ups, and then you can have reversals depending on how quickly things do change. But obviously, our first priority and commitment is to the balance sheet post-deal. And right now, obviously, this pricing environment is very supportive of that. Operator: There are no further questions at this time. I will now turn the call over to Mr. Rich Sumner. Rich Sumner: All right. Well, thank you for your questions and interest in our company. We hope you'll join us in April when we update you on our first quarter results. Operator: This concludes today's conference call. You may now disconnect.
Operator: Greetings, and welcome to the Doman Building Materials Group Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Ali Mahdavi. Please go ahead. Ali Mahdavi: Thank you, operator. Good morning, everyone, and thank you for joining us this morning for Doman Building Materials Fourth Quarter and Full Year 2025 Financial Results Conference Call. Joining me this morning are Amar Doman, Chairman and Chief Executive Officer; and James Code, Chief Financial Officer. . If you have not seen the news release which was issued yesterday, it is available on the company's website at domanbm.com as well as on SEDAR+, along with our MD&A and financial statements. I would also like to remind you that a replay of this call will be accessible until March 20, 2026. Following management's presentation of the 2025 fourth quarter and full year results, we will conduct a Q&A session for analysts only. Instructions will be provided at that time for you to join the queue for questions. Before we begin, we are required to provide the following statements regarding forward-looking information, which is made on behalf of Doman Building Materials Group Ltd., and all of its representatives on this call. Remarks and answers to your questions today may contain forward-looking information about future events or the company's future performance. This information is subject to risks and uncertainties that may cause actual events or results to differ materially. Any information regarding forward-looking statements is made as of the date of this call, and the company does not undertake to update any forward-looking statements. Please read the forward-looking statements and risk factors in the MD&A as these outline the material factors which could cause or would cause actual results to differ. The company will not provide guidance regarding future earnings during today's call, and management does not anticipate providing guidance in future quarterly or interim communications with investors. I'll now turn the call over to Amar. Amardeip Doman: Thanks, Ali, and good morning, everybody. Thank you for joining us on today's call. Let me start by highlighting some of our key financial metrics, followed by some color on our operations during the fourth quarter. And then I will hand the call over to Jay Code, who can review the numbers in further detail. 2025 presented itself to certain challenges, which were not dissimilar to the prior year with constant falling lumber pricing and other relevant economic headwinds. While we are not directly impacted by tariffs, the building materials sector in general, continue to navigate the effects of tariffs, fluctuating construction material pricing elevated interest in mortgage rates and even and uneven building activity across various regions. While these conditions created near-term pressure, our teams responded very well managing this. We remain focused on what we can control, operational efficiency, customer service, cost disciplines and safety while positioning the business for long-term success. Despite the pricing movements across all construction materials categories in our portfolio on both sides of the border, we exited 2025 with strong performance across all our key financial metrics, including revenues, gross margin, EBITDA and net income, while paying our shareholders a quarterly dividend of $0.14 per common share or $0.56 per common share on an annual basis. We are both pleased and proud of the company's performance throughout 2025, given the market conditions we had to work through. Despite trends and volatility that at times presented us with challenges, we remain encouraged and pleased with the resilience of our diversified business model withstanding these cycles resulting in Canadian revenues, gross margin, adjusted EBITDA and net earnings totaling $3.1 billion, $505 million, $256 million and $80 million, respectively. Our ability to deliver consistent performance across a variety of market cycles, results from our tireless focus on operations and to the many successful acquisitions we've completed throughout the years. Now focusing on the most recent fourth quarter results, adjusting for normal seasonality, we remain active across all business divisions, our ongoing cost management and focus on operational efficiencies enabled the company to demonstrate revenue performance, while gross margin continued to be within our target range as well as EBITDA and bottom line. We are very proud of our financial performance and believe there is a lot to be gained from the strength and momentum, which has resulted from our successes in recent years. As a result of these efforts during the fourth quarter, we saw revenues coming in at $644 million, gross margin at 16.6% or $107.2 million, EBITDA amounting to $44.3 million, net earnings of $11 million; and lastly, our quarterly dividend of $0.14 per share was again declared. We remain cautiously optimistic about the prospects ahead and look forward to further demonstrating the strength and leverage available in our business model as we continue to be well positioned to take advantage of sensible growth opportunities. On the heels of successfully integrating recent acquisitions, our relentless focus on paying down debt and strengthening our balance sheet remains a priority, which will enable us to be in a strong position to take advantage of strategic opportunities. Overall, 2026 is off to a decent start, despite severe weather issues in some of our regions, which we're prepared to deal with. I continue to be pleased with how our growth strategy continues to unfold, resulting in strong sales and earnings in the face of a tough year-over-year pricing environment while remaining focused on margin protection during these times. In 2025, we were also able to demonstrate the positive impact of prior year acquisitions for the full fiscal year. We are very proud of our acquisition of Doman Tucker Lumber and prior to that Southeast forest products. As you probably are aware, Jay Code, our CFO, of 15 years, will be retiring on April 7. So before handing the call off to Jay, one last time to provide a review of the company's full financial results on behalf of the entire Doman family, I would like to extend our sincere thanks for your years of dedicated service at Doman. Your commitment, professionalism and contributions have made a lasting impact on our team and organization. I'm truly grateful for all you have done and wish you continued success in your well-deserved retirement. Over to you, Jay. James Code: Thank you very much for those kind words, Amar, and good morning, everyone. Sales for the year ended December 31, 2025, were $3.12 billion versus $2.66 billion in '24, representing an increase of $456 million or 17.1%, largely due to the positive impact of the company's acquisitions completed in 2024. The company's sales in the year were made up of 81% construction materials compared to 76% last year, with the remaining balance of sales resulting from specialty and allied products of 16% and other sources of 3%. Doman's gross margin was $505.5 million versus $424.8 million in '24, an increase of $80.7 million, benefiting from the contributions of our '24 acquisitions as well as ongoing execution of our margin enhancement strategies. Gross margin percentage was 16.2% this year compared to 16% achieved in the previous year. Expenses for '25 were $349.1 million compared to $306.5 million last year, an increase of $42.6 million or 13.9%. As a percentage of sales, 2025 expenses were 11.2% compared to 11.5% in '24. Distribution, selling and administration expenses increased by $19.9 million or 8.7% to $249.1 million in 2025 versus $229.2 million in 2024, mainly related to activities of the acquired companies as well as broad inflationary pressures. As a percentage of sales, DS&A was 8% this year compared to 8.6% in the prior year. Depreciation and amortization expenses increased by $22.8 million or 29.5% from $77.2 million to $100 million, mainly due to additional property, plant and equipment and intangible assets related to the '24 acquisitions. Finance costs for 2025 were $72.9 million compared to $53.7 million in 2024, an increase of $19.1 million largely as a result of additional costs related to the financing of the Doman Tucker Lumber acquisition on October 1, 2024. We note directly attributable acquisition costs during the comparative prior year were $3.3 million and these costs included due diligence, legal, environmental, financial, management resources and other advisory services directly attributable to the acquisition activities. EBITDA in 2025 was $256.4 million compared to $192.2 million in 2024, an increase of $64.2 million or 33.4%. Adjusted EBITDA in the comparative prior year before the nonrecurring acquisition costs was $195.5 million. Our EBITDA in 2025 benefited from the full year inclusion of the results from the 2024 acquisitions, but these benefits were partially offset by the previously discussed overall weaker pricing in certain construction materials categories as well as an increase in expenses due to inflationary pressures. Net earnings for 2025 were $80.3 million compared to $54.2 million in 2024, an increase of $26.1 million. And turning Now to the statement of cash flows, operating activities before noncash working capital generated $163.6 million in cash compared to $148.7 million in 2024. Stronger operating cash flows in 2025 were largely driven by this year's significant increase in net earnings. Financing activities in 2025 consumed $235.7 million of cash related to repayments of debt and payments to equity stakeholders. And during the comparative prior year, the company utilized debt facilities to finance the Doman Tucker Lumber acquisition, resulting in $345.5 million of cash provided by overall net financing activities. The company returned $49 million to shareholders through dividends paid in 2025, largely in line with 2024, and the shares issued net of transaction costs generated an additional $1.8 million of cash compared to $1.5 million in the prior year. Payment of lease liabilities, including interest, consumed $32.3 million of cash compared to $29.1 million in 2024. And we note the company's lease obligations generally require monthly installments, and these payments are entirely current. We also note the company was not in breach of its lending covenants during the year ended December 31, 2025. overall, investing activities this year generated $45.6 million of cash compared to consuming $474.3 million in 2024. Investing activities this year included the sale of the company's timber loans for total cash proceeds of $75.2 million, whereas investing activities in 2024 included the Southeast Forest Products and Doman Tucker acquisitions for total cash consideration of $460.8 million. Additionally, the company invested $29 million in new property plant and equipment during the year compared to $14.2 million of property plant and equipment expenditures in 2024. This concludes our formal commentary, and we'd now be happy to respond to any questions that you may have. Thank you. Operator: [Operator Instructions] And our first question comes from the line of Kasia Kopytek with TD Cowen. Kasia Trzaski Kopytek: Its Kasia on the line. First question is on your margin enhancement strategies. You posted really strong margins in Q4. Can you give us an update on the sorts of things you're working on to keep margins high and just articulate your general confidence in your ability to keep margins towards the high end of your historical range going forward? Amardeip Doman: Sure, Kasia. Without us telling all our trade secrets, certainly, our lumber buyers have done a hell of a job on both sides of the border, positioning well when there was dips buying under the market and positioning ourselves ahead of time for market gyrations and really buying in those gross margin dollars. So that was evidenced in Q4, and Q1 year has started off in the same fashion. So I've got to give the credit to the lumber buyers really working through rough waters here, but really digging deep and making things make sense for us. So that's really where it's coming from. James Code: I'd add there, Kasia, that freight optimization strategies had also a significant role in the margin enhancements. In 2025, we began to use new technology for the business. And that's starting to show in the freight cost. The freight cost being a significant part of our cost of goods. . Kasia Trzaski Kopytek: Right. You've talked about this great strategy in the past. Are we in the early innings of that? Is there still a lot of runway left for optimizing those kind of costs? James Code: Yes. I'd say early. We're in the early innings. We have rolled it out in only 2 of our divisions. And so we've got a ways to go to take full benefit from that. Kasia Trzaski Kopytek: Okay. And this is probably a question for you as well. The selling, distribution and administrative expense, can you comment on the kind of inflation that you're seeing in these expense categories? And maybe reference what a normalized range could look like for you guys going forward? James Code: Yes. It's -- I'd say, broadly in line with the consumer price index. We're talking about a significant portion of that being compensation costs and then facility costs, we're releasing facilities, leasing material handling equipment, that kind of thing. So we'd be in that 3% range in '25, I would estimate, overall. . Kasia Trzaski Kopytek: Okay. And then $61 million to $63 million quarterly that sort of a range that we're looking at and the inflation on top of that. Is that fair? James Code: Yes. Yes. Q4 being, as Amar pointed out, normally a seasonal slower period for us. So we would expect to ramp up costs a little bit in the busier quarters. Kasia Trzaski Kopytek: Right. And on CapEx, there was a bit of a ramp to end the year. Any special projects worth calling out. If I recall correctly, you guys are pretty excited about things in the pipeline for your specialty lumber. Amardeip Doman: Exactly, yes. That -- there's a bunch of noise inside that number. So we can attribute it pretty much all to either upgrading or investing in new fencing equipment for our sawmills, including into the Carolinas a new market for us. So some of that production will start to evidence later this year. We've upgraded our sawmill in Gilmer. We were there this week, and it's running. We're getting close to getting it to the point of -- we're happy with the volumes. The bugs are getting out of that. So those investments are -- and I commented earlier in my comments, the fencing market continues to be strong for us. And certainly, with some tariffs being on South American countries or a lot of U.S. spend comes in. There's a shortage right now. So we're trying to amp up pretty quickly and modernize upgrade and get more efficient. Kasia Trzaski Kopytek: Okay. So the level we saw in Q4, is that a new run rate going forward? Or should we see levels go back to what you did in the first 3 quarters of the year? Amardeip Doman: Yes, that would be kind of a high water. James Code: Yes, we still expect cash to be under 1% of revenue for PP&E expenditures. So Q4 was a little bit high, just based on lumpiness of where we spend -- timing of spending. . Operator: The next question comes from the line of Nikolai Goroupitch with the IBC Capital Markets. Nikolai Goroupitch: With both Lowe's and Home Depot forecasting a relatively flat R&R market this year. Do you share a similar order outlook? And do you -- how do you see the treated lumber market performing in comparison? Amardeip Doman: Yes. I think everyone is just trying to forecast in a very, very murky world. It's hard to make predictions here. So I think everyone is cautious the repair and renovation market, yes, I think it's going to be flat. We had a decent takeaway year last year despite that. I think we'll have the same this year. . I think it's just kind of what you see is what you get out there and I think Lowe's and Depot certainly have the same forecast, just kind of flat to off a bit, maybe up a bit really hard to read, frankly. And as far as our pressure treated category, we're very pleased with our initial bookings and volumes heading into '26. The first 2 months are booked and we're pleased with what we see. So not superly excited, for sure, it's just the way the world is. But certainly, we're going to be hitting good base hits this year, and we should be just fine. Nikolai Goroupitch: Okay. And with lumber prices climbing over the past few months in the U.S. South and producers earning a decent margin in the region, do you think mills will add hours and in turns bring more SYP production online in this market? Amardeip Doman: Yes. Some have and some haven't. The increase wasn't dramatic. And of course, it was through very, very slow months, a little bit in December and then into January and then the cold, the deep freeze really came in and stalled everything and it's kind of flatlined. So don't really see the mills ramping up, and I'm hoping they kind of don't so we can kind of keep the sustainability of a bit of a higher pricing for everybody involved would be, I think, decent for the industry. Operator: The next question comes from the line of Zachary Evershed with National Bank Financial. Zachary Evershed: Could you give us a little bit more commentary on how volumes trended throughout the quarter? I know that the cold months can be slow, but maybe a bit of an idea of how things were paced in November, December into January and February? Amardeip Doman: Yes. I wouldn't say it was abnormal. It was just a normal fourth quarter. I think some of the research analysts had different views on pricing or volumes and there was quite a range. And for us, it was just a routine fourth quarter. Pricing started to pick up in kind of the first week of December, but it's December. So it's a bit of a so what. We did some good buying to help protect the margins. And I think -- 2 key things for the fourth quarter. I think one, our debt reduction; and number two, our margin stability was great. So the pulse of the business is just fine as it's the balance sheet. Zachary Evershed: And speaking of that balance sheet, maybe you could tell us about what's in your crosshairs for M&A at the moment? Amardeip Doman: Yes. We're still looking to fill in some of those white spaces, if you will, on the map, where we're not directly located yet, and we'll continue to work through those opportunities. But we will be in those markets, just a matter of the right opportunity coming up and the balance sheet is ready. So stay tuned, and we'll continue on with our strategy. . Zachary Evershed: And then just one last one, pretty speculative here. Obviously, we've got a very volatile tariff framework, some global geopolitical instability. The R&R side of things seems to be pretty cautious. What's your view on new residential housing in North America this year? Amardeip Doman: Yes. I think the worst is behind us, I think. I think the interest rates will continue to go down. Obviously, nobody likes what's happening with oil today. But I think that if these rates continue to tick down in the United States like they are, we're under 6% now. We're starting to see some action. So that's good. . I don't expect some boom, but I think there will be more action as people can move around and get out of some of those cheaper mortgages they did during COVID now as the gap is getting closed. So for what it's worth, our view is the worst is behind us. But not crazily excited about things running up hard, but I don't think they get worse from here. Operator: The next question comes from the line of Ian Gillies with Stifel. Ian Gillies: Amar, are you able to talk a little bit about where you're at with adding value-added services into your various facilities? I mean whether it be as a percentage of revenue? Or what inning you think you may be in and where you'd like to get to? Amardeip Doman: Yes. The value added is our primary business. We'll continue to grow in areas such as fencing, manufacturing, 1 inch. We've got some good strategies inside the company to organically grow with our customer base that are national in the United States, and of course, across Canada. So we're working on all kinds of things inside with our specialty sawmills. Obviously, they're smaller, but they're very effective into our marketplace with niche products. So I won't dive into all that into the weeds today. But some of those investments in dollars that we talked about earlier on the call are directly going into our specialty value-added side of the business, and we're going to continue to amp that up we mentioned when we bought Tucker back in '24. Some of those strategies want to cross-pollinate over to Doman Lumber side and then vice versa, getting and defensing on the East Coast of the United States in a big way starting mid this year. We're going to be producing a lot of fence boards out there and the market is ready for it. So stay tuned, we're right on track. Ian Gillies: Okay. There's been a number of government programs either announced or bandied about on both sides of the border. Are there any in particular that you would point to that you're particularly excited about that you think could benefit Doman moving forward or perhaps demand drivers that are well understood. Amardeip Doman: Yes. I think you've heard me say it before, the government getting involved in housing has never worked. I don't think it works this time either. I think it's more of a press release than anything. I think the market has to figure things out, developers, cost of land, cost of materials, mortgage. I just don't see the government coming in. If they do great, we can do some supplying to them. Probably the modular guys that do well, who we supply across Canada. And then, of course, in the United States, the government won't get involved in building housing, building that market to figure it out. Operator: The next question comes from the line of Frederic Tremblay with Desjardins Capital Markets. Frederic Tremblay: Starting with maybe the sensing side. Obviously, a big component there this year. I was wondering if you can help us better understand the capacity increase in fencing, given all the investments that you're putting together now? And maybe just a clarification on when you expect the revenue contribution from those initiatives to come through in the financials. Amardeip Doman: Sure. Yes. I don't have percentages ready for you today, but probably in the second or third quarter, we'll have a clearer picture of exactly how the modifications are going at the sawmills and our new venture in the Carolinas to start up there as well sometime in Q2, the start of Q3. We also did not have storms last year. This year, they're forecasting a heavier hurricane season or at least a hurricane season. And when that happens, that drives a lot of quick demand for our fencing products. So we expect to have a busier volume year. And apologies, Frederic, I don't have percentages. But I just know that we're going to get more efficient, doing it with less labor, more automation and the volumes are going to pick up. And our goal is to be probably the #1 fence producer in the United States over the next 2 years, and I think we're going to get there. Frederic Tremblay: That's very helpful. And would you say sensing products in general are margin accretive compared to the individual margin of the company? Amardeip Doman: They are. As we manufacture everything inside right from the log, right to the finished pressure-treated pick it on the truck right to the retailer. We capture those margins all along the way with the manufacturing in there. And it's not something that moves around like random lengths pricing. So we try to do our best to maintain the margin to -- there's obviously a higher cost to it being a manufactured item than distribution. So to protect those margins, and by investing in the plant and the equipment in the sawmills, we're certainly getting more efficient in driving those costs down. . Frederic Tremblay: Great. And then last question for me. Just coming back on the M&A topic. Maybe from the valuation angle, are you seeing any sort of changes in seller's expectations given the state of the market now? Are you noticing any valuation changes on there? James Code: Yes. Valuation perspectives on M&A, Frederic, I think, is what your question is. And we're not seeing any dramatic changes in expectations from sellers at this point. And we're remaining disciplined in what we will be willing to pay certainly. It has to be within our multiple range, and we're not going outside that range ever. . Operator: The next question will come again from the line of Kasia Kopytek with TD Cowen. Kasia Trzaski Kopytek: The sensing products, Amar. I know you said you don't have a percentage for go-forward contribution handy, but can you give us a sense of fencing, what percentage fencing encompasses of your current product mix? Is it less than 5%? So what's the number? Amardeip Doman: It's between 5% and 10% and rapidly growing. We're pretty much sold out everything that we made currently which is a great place to be. We've never been in that position. A lot of it is to do with the tariffs again out of South America. Material is just stalled coming out of there, and it was so big going into Houston and Florida than being redistributed around. And it's basically crickets. And the demand has turned on strong. So number one, we're looking after all of our current customers and then taking on some new business from customers that really need that we're close to and then we're trying to turn on our production as fast as possible. These things don't happen overnight. But it's a key part of our business, Kasia, that we're going to grow in. And frankly, we're very excited about the domestic production made in the U.S.A., et cetera, and carrying on with that mantra, and not importing these materials. And frankly, we did import some ourselves as well. That game is pretty much over and we'll be making our own. Kasia Trzaski Kopytek: Okay. And then ending on M&A, the Temecula acquisition, is that a precursor to a possible pivot in your M&A strategy going forward towards more of these types of products? What I mean here is away from commodity wood products? Amardeip Doman: Yes. Our Electrical division is small. Obviously, Hawaii is the big piece. California, with Temecula just acquired a small outfit, but certainly a key for us. We'll see where that leads. Our leader there will bring us M&A opportunities as he sees fit. And also organically grow with certain customers in that field in Hawaii works because of our [indiscernible] lumber division, there's some nice synergies we have with warehousing, et cetera, with products. And it's not our #1 growth category, it's a very, very key business unit for us or we would not have invested in California. So kind of a stay tuned, cash. I don't think it's an exciting story at this point. But it's very key piece of what we're doing. And nice to have a little diversification there on some product lines. It's a well-run division, good leadership. Operator: Thank you. There are no further questions at this time. And I'd like to turn the call back over to Ali Mahdavi for closing remarks. Ali Mahdavi: Thank you, operator, and thank you, everyone, for joining us again this morning. This concludes today's call. We look forward to speaking to you again during our first quarter 2026 financial results call. I'll hand it over back to the operator, and I wish you all have a great weekend. . Operator: Thank you. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
Operator: Good morning. My name is Carmen, and I will be your host today. Welcome to Canfor and Canfor Pulp's Fourth Quarter Analyst Call. [Operator Instructions] During this call, Canfor and Canfor Pulp's Chief Financial Officer will be referring to a slide presentation that is available in the Investor Relations section of the company's website. Also, the companies would like to point out that this call will include forward-looking statements. So please refer to the press releases for the associated risk for such statements. I would now like to turn the meeting over to Susan Yurkovich, Canfor Corporation's President and Chief Executive Officer. Please go ahead, Susan. Susan Yurkovich: Thank you, Carmen, and good morning, everyone. Thanks for joining the Canfor and Canfor Pulp Q4 2025 Results Conference Call. I'll kick off with a few comments this morning before I turn things over to Stephen MacKie, Canfor's Chief Operating Officer and the CEO of Canfor Pulp; and Pat Elliott, Chief Financial Officer of Canfor Corporation and Canfor Pulp. I'm also joined by Kevin Pankratz, our Senior Vice President of Sales and Marketing for Canfor; and Brian Yuen, Vice President of Sales and Marketing for Canfor Pulp, who will be available to take questions as well. Before discussing our fourth quarter results, I just want to highlight the significant transformation that Canfor has undertaken over the past several years. Our strategy is focused on strengthening our operating platform to reduce the impact of elevated duties, further diversify our asset base and product offering and improve our cost competitiveness. In that vein, since 2023, we've made the difficult but necessary decisions to close 9 high-cost sawmills, including 2 in 2025, with a total capacity of 2.3 billion board feet. At the same time, we've invested heavily in new facilities in the U.S. South, expanded our operations in Sweden and proactively managed our Canadian business in response to the challenges we are seeing accessing economic fiber in BC and elevated countervailing and antidumping duties as well as the more recent Section 232 tariffs. While 2025 was another challenging year, we have started to see the benefit of these strategic actions. And although the near-term uncertainty is likely to persist, Canfor is well positioned to navigate the challenging markets, supported by our high-quality globally diversified operating platform. Looking ahead, we continue to believe the medium- to long-term lumber demand fundamentals remain strong and the improvements to our asset base will enable us to capitalize on stronger market dynamics going forward. Finally, notwithstanding the current market uncertainty, we have maintained a strong balance sheet and have the flexibility to pursue strategic growth should the right opportunities present themselves, although we will continue to remain patient and disciplined in our approach. I'd now like to turn it over to Stephen to provide an overview of Canfor Pulp. Stephen MacKie: Thanks, Susan, and good morning, everyone. Canfor Pulp continues to be impacted by weak global pulp and paper markets with ongoing trade disputes and broader economic uncertainty contributing to elevated inventory levels and weak pricing through much of 2025 and continuing into 2026. Against a challenging market backdrop, we continue to focus on achieving targeted cost reductions and improving our operating performance. While we have made some progress on identified initiatives in recent months, weak market conditions continue to weigh on our financial results and available liquidity with results in the fourth quarter further impacted by scheduled maintenance downtime at Northwood. Notwithstanding the pending transaction with Canfor, Canfor Pulp's management team remains committed to mitigating the impact of global trade dynamics and economic uncertainty by closely managing factors within our control. This includes managing our balance sheet, preserving available liquidity and continually assessing our operating footprint based on our cost structure, the availability of economically viable fiber and market demand. I will now turn it over to Pat to provide an overview of our financial results. Patrick A. Elliott: Thanks, Steve, and good morning, everyone. In my comments this morning, I'll speak to our fourth quarter financial highlights, a summary of which is included in our overview slide presentation, as always, in the Investor Relations section of Canfor's website. Our lumber business generated an adjusted EBITDA loss of $8 million in the fourth quarter, $6 million lower than the prior quarter. These results continue to reflect weak lumber market conditions, particularly for Southern Yellow Pine as well as lower sales realizations in Canada following the introduction of Section 232 tariffs in the fourth quarter. Our European lumber business generated adjusted EBITDA of $42 million in 2025. However, weak demand and elevated log costs have contributed to losses in recent quarters. Given ongoing cost pressures in the region, we recorded a $214 million (sic) [ $250.6 million ] asset write-down and impairment charge in the fourth quarter, which has been excluded from our adjusted EBITDA. Looking ahead, we have started to see improvements in our underlying cost structure in Sweden and remain well positioned to navigate the current market challenges. While we expect European demand to remain relatively flat in the first quarter, constrained lumber supply across the region is anticipated to support higher pricing heading into the second quarter. In North America, industry-wide downtime in December has contributed to stronger lumber pricing to start the year, particularly for Southern Yellow Pine. Although near-term volatility is expected to persist, our lumber business is well positioned to navigate the current market dynamics, the transformation of our operating platform Susan previously mentioned. Turning to our pulp business. Canfor Pulp reported an adjusted EBITDA loss of $17 million in the fourth quarter, $14 million lower than the prior quarter, reflecting the ongoing impact of weak global markets as well as scheduled maintenance at Northwood. Canfor Pulp ended the quarter with net debt of $104 million and $40 million of available liquidity, while Canfor, excluding Canfor Pulp and the duty loan completed in 2024, ended the fourth quarter with net debt of approximately $226 million and available liquidity of $1.2 billion. Looking ahead to 2026, we anticipate capital spend of approximately $175 million in our lumber business with $35 million for Canfor Pulp, inclusive of capitalized maintenance. In addition, Canfor has also entered an agreement to acquire all of Canfor Pulp's issued and outstanding shares not already owned by the company and will receive the results of the shareholder vote later today. Following a write-down and impairment charge in the fourth quarter, it's highly probable that Canfor Pulp will reach its financial covenants in the first quarter, absent a successful transaction with Canfor. As Stephen mentioned, regardless of ownership structure, Canfor Pulp continues to review its underlying business as it looks to optimize and mitigate financial losses. Despite challenging market conditions and elevated capital spending in recent years, Canfor's balance sheet remains solid. With lower capital spending over the next several years, we believe our financial position provides flexibility to manage current market uncertainty and support potential strategic investments should the right opportunity arise. And with that, we are now ready to take questions from analysts. Operator: [Operator Instructions] For our first question that comes from the line of Ben Isaacson with Scotiabank. Ben Isaacson: Just a couple of questions. First one, Susan, for you. Just in the lumber market in North America overall, since the last conference call 3 months ago, have you seen an uptick in distressed assets and potential assets available for sale in the marketplace? And sorry, if not, are you surprised by that? Susan Yurkovich: Well, I think there's no question, Ben, that the elevated duties that we're all paying is -- it's a big challenge for every company. It's putting a lot of pressure on companies across the country as we -- because those are cash deposits. So we know that, that's a challenge. Have I done an inventory or have asked all of our competitors exactly what their position is? No, but I know it's a challenge for us, and it's a challenge for everybody across the business. Ben Isaacson: And then, Pat, for you, the $210 million in '26 CapEx guidance, I saw the split between lumber and pulp. But can you give a little bit more detail in terms of maintenance versus growth? Or maybe asking it in a different way, how much of that is discretionary? Patrick A. Elliott: Yes, Ben, thanks. I think we've already identified one project, the sawmill we bought in El Dorado, Arkansas, there's a rebuild going on there. There's a number of other sort of smaller discrete projects with -- I'd say about 40% of the budget is on the discretionary side. The remainder is maintenance. Ben Isaacson: Okay. And -- but on that discretionary, I mean, that seems quite committed. There's really not an opportunity for a pullback if markets deteriorate. Is that fair to say? Patrick A. Elliott: Well, look, there's always opportunity to do that. I think we're committed to doing it. The balance sheet supports it. It's strategic, particularly in Arkansas as it relates to our facility there at Urbana as well and the synergies that come with doing it and kind of having 2 mills in that region. So I think we are going to proceed with it, but that's more of a choice. Ben Isaacson: Understood. And then just final question is on the pulp inventory days of about 47, I think, you mentioned. Can you just give some historical context in terms of how much that has swung around in good times and bad? Patrick A. Elliott: Yes. So Ben, thanks for the question. I would say for sure, inventories on the softwood side are well above the balance range. And if you use historically, that range has been in the high 30s to mid-40s at most. So again, assuming that balance is in terms of a balanced supply-demand fundamental, 40 days, we've got about a week's worth of inventory overhang sitting in the producers' hands. And when you're talking about a 25 million tonne market, that's about 0.5 million tonnes in there. Operator: [Operator Instructions] Our next question comes from Hamir Patel with CIBC Capital Markets. I do not hear any audio from Mr. Patel. Susan Yurkovich: No, we can't hear him either. Operator: Well, at this time, there are no further questions. I will turn the call back to Susan Yurkovich for any closing comments. Please go ahead, Susan. Susan Yurkovich: Sure. Thanks, operator. And Hamir, if you're having trouble with your phone, maybe just give us a call, and we'll try and help you out there. Thanks very much for joining us on today's call, and we'll see you next quarter. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the South Bow Fourth Quarter and Year-End 2025 Earnings Call. [Operator Instructions]. Please be advised that today's call is being recorded. I would now like to hand it over to your speaker, Martha Wilmot, Director, Investor Relations. Please go ahead. Martha Wilmot: Thank you, Victor, and welcome, everyone, to South Bow's Fourth Quarter and Year-end 2025 Earnings Call. With me today are Bevin Wirzba, President and Chief Executive Officer; Van Dafoe, Senior Vice President and Chief Financial Officer, and Richard Prior, Senior Vice President and Chief Operating Officer. Before I turn it over to Bevin, I'd like to remind listeners that today's remarks will include forward-looking information and statements, which are subject to the risks and uncertainties addressed in our public disclosure documents available under South Bow's SEDAR+ profile and in South Bow's filings with the SEC. Today's discussion will also include non-GAAP financial measures and ratios that may not be comparable to those presented by other entities. With that, I'll turn it over to Bevin. Bevin Wirzba: Thanks, Martha, and good morning, everyone. We appreciate you joining us today. 2025 was an important year for South Bow. It was a year that tested our organization, but ultimately a year that demonstrated the resilience of our business and the discipline of our decision-making. We delivered financial results that were slightly ahead of expectations, advanced our first growth initiative to completion and most importantly, continue to operate safely. Safety remains the foundation of everything we do. In a year of significant activity, we delivered a strong occupational safety record, reflecting the commitment of our employees and contractors, even under challenging conditions. We also made meaningful progress on our Milepost 171 remedial actions, continuing to prioritize system integrity and working toward returning Keystone to baseline operations. Richard will speak to Milepost 171 shortly. Our focus on safety and operations goes hand-in-hand with South Bow's financial discipline. Strong financial performance in 2025, supported by our highly contracted and predictable cash flows enabled us to deliver on our capital allocation priorities. Now turning to growth. At our Investor Day last November, we outlined our ambitions to grow our business. Today, we see multiple potential paths to achieving those growth objectives. This will include a combination of organic opportunities that leverage our existing infrastructure to support anticipated crude oil production growth in the Western-Canadian Sedimentary Basin as well as inorganic opportunities that diversify and enhance the competitiveness of our base business. The policy environment in North America is becoming more constructive, and we believe Canada has a tremendous opportunity to grow production and add incremental egress in the coming years. Canadian producers aspire to materially grow their asset bases, and with our customer-led strategy, we are looking to put forward the most competitive solutions to meet their needs while aligning with our capital allocation principles and risk preferences. All growth at South Bow will be balanced with financial discipline. This is nonnegotiable for our team and Board of Directors. We remain committed to maintaining a strong balance sheet, returning a meaningful and sustainable dividend to our shareholders, all while investing in growth. That balance is central to our strategy. The Blackrod Connection project is a good example of how we think about organic growth at South Bow. It builds on existing infrastructure and enables us to safely and reliably move Canadian crude to a desirable market at a competitive toll. A recent endeavor of ours, the Prairie Connector project has garnered some attention. While currently in early stages, the project would provide firm transportation service from Hardisty, Alberta, leveraging and optimizing South Bow's pre-invested infrastructure and connecting to other systems downstream to deliver Canadian crude to U.S. refining and demand markets, including Cushing and destinations on the Gulf Coast. An open season to determine commercial interest is currently underway, and we look forward to discussing this potential solution further in the future. With that, I'll now ask Richard and Van to provide an update on the operational, commercial and financial aspects of the business. Go ahead, Richard. Richard Prior: Thanks, Bevin. I'll start by talking about our safety performance. We had significant construction activity levels across our business last year from the Blackrod Project to the Milepost 171 response and restoration to executing a significant Maintenance and Integrity Program. The scope amounted to more than 2.5 million work hours, where we achieved 0 recordable safety incidents. Our strong focus on safety supports the well-being of our workforce and the communities where we operate. Earlier this week, we placed The Blackrod Connection Project into commercial service less than 24 months from the time of sanctioning. The project was on time, on budget and with exceptional safety performance. As our first growth initiative, this is a significant accomplishment for the organization and demonstrates that we have a highly capable team who can develop and execute organic projects and deliver competitive solutions to our customers. Turning to Milepost 171. Last month, PHMSA posted the results of the independent third-party root cause analysis, which confirmed that the characteristics of the incidents were unique and that the pipe and wells met industry standards for design, materials and mechanical properties. We began proactively addressing many of the recommendations after the incident occurred last April and have made significant progress on our remedial actions and integrity work with 11 in-line inspection runs and 51 integrity digs to investigate 68 pipe joints completed across the system so far. In parallel, we continue to work closely with our in-line inspection technology providers to enhance tool performance and detection capabilities. We are operating the Keystone pipeline at a high system operating factor, which has enabled us to continue meeting our contracted commitments while under pressure restrictions. As we progress our remedial and integrity work and share our findings with the regulators, we expect pressure restrictions to be lifted in a phased manner. The lifting of pressure restrictions would present an opportunity for a modest increase in spot movements later in 2026. With that, I'll turn it over to Van to walk through our financial performance and outlook. P. Van Dafoe: Thanks, Richard, and good morning. First, I'll speak to our financial performance in 2025. South Bow delivered solid results despite a challenging backdrop that included geopolitical and market uncertainty, tight pricing differentials and pressure restrictions following Milepost 171. South Bow delivered normalized EBITDA of $1.02 billion in 2025, slightly above our expectations of $1.01 billion, with a modest out-performance driven by our Marketing segment. While 90% of our business is underpinned by high-quality cash flows generated from long-term contracts, our Marketing affiliate does make small contributions to our bottom line. Early last year, we took steps to reduce our risk exposure in the face of market volatility, and the team did a great job throughout the year to partially offset some of those losses. Our tax team also did an exceptional job optimizing our tax position throughout the year. Reflecting these efforts, South Bow reported distributable cash flow of $709 million, in line with revised guidance and more than 30% above our original guidance. This out-performance expanded our free cash flow position, enabling us to accelerate our de-leveraging priority. We exited 2025 with a net-debt to normalized EBITDA ratio of 4.7x, slightly better than the expected 4.8x. All other items were in line with our 2025 guidance. After a solid year, South Bow is starting 2026 in a position of strength, and we are reaffirming our financial outlook for the year. As Blackrod cash flows ramp in the second half of the year, we will continue to direct our free cash flow to strengthening our balance sheet, remaining on track to meet our leverage targets of 4x in the medium term. As we de-leverage, we also intend to allocate capital towards growth, and we will share our growth capital plans once we have sanctioned our next initiative. Finally, the stability of our financial results enables us to deliver a meaningful return to our shareholders. In 2025, we returned $416 million or $2 per share through our sustainable dividend. With that brief financial overview, I'll hand it back to Bevin for closing remarks. Bevin Wirzba: Thanks, Van. Thanks, Richard. To close, I'll come back to what defines South Bow. We operate critical and enduring energy infrastructure in a corridor that connects one of the strongest and most secure supply basins in North America to some of the most attractive refining and demand markets, and we have a growing set of customer-led opportunities that leverage our pre-invested infrastructure. We plan to do that with a focus on safety, integrity and discipline, and you can trust that our growth will be paired with balance sheet strength and sustainable shareholder returns, that is fundamental to how we run this company. 2025 showed what South Bow can deliver. We're confident in the foundation we've built and the path ahead offers even greater opportunity. You can expect us to execute it, the right way. With that, I'll now ask the operator to open the line for questions. Operator: [Operator Instructions] Our first question will come from the line of Theresa Chen from Barclays. Theresa Chen: With respect to the open season for the Prairie Connector Project. Can you discuss any early indications of commercial interest at this point, understanding that you are still very early on? And then in general, how are you thinking about competition for U.S.-bound WCS egress from Enbridge and Energy Transfer as well as the impact of incremental Venezuelan barrels flowing to the U.S. Gulf Coast, potentially displacing WCS in PADD 3. What do you see as Prairie Connector's key competitive advantages? Bevin Wirzba: Thank you, Theresa. This is Bevin, and thanks for joining the coverage group. So to direct our -- to your question on the Prairie Connector, we are in early stages, as I mentioned. We -- I did say in our remarks that we are a customer-led strategy, meaning that we had good alignment with our customers heading into the open season. So that's as much as I can share with respect to the outcome of the open season at this time. Obviously, we -- in addressing your second question, the impacts of the other open seasons in Venezuela, my earlier remarks also focused on providing the most competitive solution for our customers. And we believe what we've put forward is a very competitive offering that should attract the attention that we're looking for. So with respect to the other opportunities, owning and controlling the most competitive and direct path to the Gulf Coast has always been an advantage that South Bow has leveraged, and we will continue to do so. Theresa Chen: And in relation to the existing Keystone system, after sharing the root cause analysis related to Milepost 171, can you talk about the timeline of lifting the pressure restrictions in a phased manner. Can you give some details around this? What are your expectations for how much the pressure and hydraulic capacity could step up beginning in second half of 2026? And then within your annual guidance, how much of an impact is this, given expected capacity for higher spot movements, but also the expectations for tight differentials, nonetheless. Can you help us reconcile this? Bevin Wirzba: Yes. Thank you, Theresa. Even initially after the incident, as Richard pointed out, we've been working very closely with our regulator and all the remedial efforts, and we've made tremendous progress on the digs and in-line inspections to-date. And early on, we did -- we were able to have some derates lifted already on the system as we progress. And so what we've described in our release is that we intend to continue those remedial efforts at pace, here this year so that we could see a lifting of the correction action order by the end of this year. We're very -- we're in active dialogue with the regulator to ensure that what we're doing and what we're finding informs the plans as we go forward. In terms of the capacity that would be realized, it would be returning back to the kind of operational capacity that we delivered in previous years, which was, I believe, in 2024 and early 2025, we were just north of 600,000 barrels a day of delivered capacity. With respect to your last part of the question, we -- our outlook in terms of our earnings and our guidance, the timing of this incident kind of occurred where arbs were quite tight with TMX coming on in the early part of 2024, the basin was long pipe by approximately 250,000 barrels a day. In 2025, we saw the basin grow north of 100,000 barrels a day and continuing to grow here in 2026. So we believe that our guidance, while it includes the impact of not being able to move as many spot volumes as we had hoped, the market really -- doesn't really open for us until early 2027. And at that point, we should be -- we're planning and targeting to have the derates lifted so we can take advantage of those arbs, as the basin grows and overtakes kind of the egress out of the basin. Operator: Our next question will come from the line of Robert Hope from Scotiabank. Robert Hope: Two questions on the Prairie Connector. Maybe first, just in terms of a follow-up on when you think incremental capacity will be needed out of the basin? And then how would that mesh with what you would think would be a reasonable regulatory time frame and construction time frame if this project does proceed? Bevin Wirzba: Thanks, Rob. One of the benefits of having a strategy that focuses on our pre-invested corridors is that we're in a position where our permits are in place in Canada for the Prairie Connector, and we're working close with the Canadian energy regulator to manage through that. Obviously, it's early stages. So we're not going to share our timelines for a potential development timeline. But I would suggest much like the Blackrod Project where, we were working within an existing corridor, our ability to advance construction quickly in a regulated environment is consistent with the Prairie Connector Project kind of objectives. With respect to time line of the need for the project, you can see that from our customer base that most are announcing or are suggesting that they have growth ambitions over the next 3 to 5 years of quite materiality. And so being able to develop the project over the next -- in the midterm would be consistent with providing a competitive solution for our customers at the time frame of when they're intending to have their production growth. Robert Hope: All right. Appreciate that color. And then maybe as a follow-up, as we take a look at the -- what the Prairie Connector would connect into in the U.S. and the path down to the Gulf Coast. We've seen Bridger file already for some regulatory approvals there. But how do you envision working with partners to help get barrels down to the Gulf Coast? Bevin Wirzba: Yes. Great question, Rob. We won't speak on behalf of other developers. But what I can say is our team has learned through many previous projects that allocating risk appropriately amongst all stakeholders, our customers, ourselves as developers, partners is really critical. And so the team has been working diligently on that front to ensure that we have the right alignment amongst all stakeholders to ensure that we have a project that could be advanced within our risk preferences, which, as I've stated, is critical. We will not sacrifice our capital allocation discipline through advancing any project. Operator: Our next questions will come from the line of Robert Kwan from RBC Capital Markets. Robert Kwan: If I can just ask about your growth initiatives. I'm just wondering, is there a preference? Or do you -- how do you think about the role of joint ventures and partnerships versus just outright acquisitions kind of over and above the organic initiatives? Bevin Wirzba: Yes. Thank you, Robert. Within our strategy, we've always said that leveraging that pre-invested capital on the ground and organic allows us to develop projects at that 6x to 8x EV to EBITDA build multiple and Blackrod was demonstrated at the low end of that range. And so clearly, organic development that fits the needs of our customers with the same risk preferences that we've been able to achieve with even our base operations is far more accretive for our shareholders over the long term. But as I pointed out in my remarks, to complement that organic strategy, there are opportunities that we believe we could leverage inorganically that provide the diversity and provide some additional synergies to the business. Now obviously, those aren't being -- those won't advance at that same EV to EBITDA build multiple, but the combination of an organic and inorganic strategy, we believe, can deliver the shareholder returns we're targeting. Robert Kwan: And if I could just finish asking about the open season. There's some language there about asking potential shippers to demonstrate market demand for incremental egress opportunities. So just wondering what we should take away from that specific wording. And then how should we think about this with respect to the existing Keystone capacity in your contract rollovers or expirations that would occur in roughly the same proximity as this initiative? Bevin Wirzba: Two great points, Robert. First of all, the language is actually pretty benign in that, from a regulatory standard, we have to prove need and necessity for any development that happens. That need and necessity on our existing permits was demonstrated years ago, and that need and necessity still exists today. And so by -- the language is really pointing to that, our customers are indicating to us if they support the open season that they have need and necessity, they have growth ambitions that require us to develop this this capacity. On the second point, with respect to base Keystone operations and impact potential of re-contracting, the way we think about it is we're really developing a corridor. And the Prairie Connector would be in addition to that corridor, and it really serves the same customer base and the same demand markets. And so we believe that the combination of the two would be an extremely competitive corridor going forward, and we believe that we can provide that competitive solution for customers going forward, making the corridor in and of itself the ideal solution for getting Canadian -- Western Canadian oil sands production down to the Gulf Coast. Operator: Our next question will come from the line of Sam Burwell from Jefferies. George Burwell: Another open season question, but maybe from a different angle. Like are there any learnings to be had from what happened with the original Keystone XL, like especially on the U.S. side, I mean, anything that went wrong on that project that's within your control to perhaps do differently with this one? I mean, obviously, the route will be different, and it's different in many ways. But just curious like what gives you more confidence in this project its success where Keystone XL didn't? Bevin Wirzba: Sam, great question. I was around and many of our team were around during that initial or the last attempt. And so there are a tremendous amount of learnings. With subject to the permit that we have, we're developing it in a very consistent manner to that permit requirements. But our conversations with our customers and how we can work with them through a commercial offering, we're leveraging a lot of those learnings and those commercial discussions that obviously are confidential at this time. Certainly, there were -- as I mentioned in my opening remarks, is that the policy environment in North America has been far more constructive. The unfortunate events that are ongoing in Iran and what we've had in the tragic events in Ukraine really have demonstrated that energy security and establishing energy corridors is critical. And so those realities are a great backdrop for us to provide maybe a solution that increases energy security in North America between the great resource up in Canada to the strong demand markets in the U.S. Gulf Coast. George Burwell: Okay. Understood. And then the -- like sort of tying on to that, like the Bridger proposal mentioned that presidential permits required to cross the border. So just curious, like that was obviously an issue with Keystone XL that everyone knows about. But is there a point in time or a point in construction or some threshold met whereby the presidential permit is kind of iron clad and can't be revoked. And like just has anything changed with that dynamic since 2021 when Biden effectively put the kibosh on Keystone XL? Bevin Wirzba: Yes. Per my earlier remarks, Sam, we're only going to talk to our component of a project, which is delivering service from Hardisty to the border and my comments around risk allocation and structuring and your earlier comment around lessons learned. So there's a lot of things going into the commercial dialogue right now, amongst ourselves and then directly with our partners, and I'll leave our partners to speak to their own business. We've really focused on finding a solution that we can deliver for our customers, the allocation of risk that makes sense for all stakeholders in this approach. If we're not able to achieve those, that risk allocation that we all believe that we need, then the project just won't advance. Operator: Our next question will come from the line of A.J. O'Donnell from TPH. Andrew John O'Donnell: I'm going to sneak in one more about the Prairie Connector, maybe just talking about your existing -- leveraging your existing corridor. I think we know that you guys have some pipe already in the ground in Canada. But let's say things go to plan and the project moves forward, thinking about these barrels getting into Cushing and ultimately getting down to the Gulf Coast. I'm wondering if you could speak to what's needed on your U.S. Gulf Coast infrastructure in order to be able to accommodate potentially 450,000 barrels a day going down to the coast? Would that be all on the existing Keystone system? Or would you be looking to leverage other infrastructure as well? Any details you can provide there would be great. Bevin Wirzba: Yes. A.J., the Keystone system in this corridor has been built in phases, Phase 1, Phase 2, Phase 3. And Phase 2 and 3 was the extension of the Keystone System to Cushing and then to the Gulf Coast. And Phase 3 of the system, the Gulf Coast was sized and built for the original -- the expansion of that system, which is what we're now building into with our Prairie Connector. And so it's just a continuation of that sequenced expansion of the broader Keystone system is what we're intending. There are some -- we did build capacity on that Gulf Coast section for increased volumes. There will be some facility modifications through our base Keystone system that will occur. But this is all just a continuation of kind of that sequenced expansion of our base corridor. Andrew John O'Donnell: Okay. And then maybe just one more, shifting to Marketing. I realize it's a smaller portion of your business, but spreads have been on the move, particularly WCS Houston is trading pretty far back from Brent and WTI right now. Curious if you could speak to kind of what is going on at WCS Houston and if you're seeing any opportunities either in the short or medium term to potentially capture some upside there, either through marketing or maybe storage opportunities? Bevin Wirzba: Yes. A.J., great question. We're always in a dynamic crude oil market, as It appears in the last few years with some macro volatility earlier this year with Venezuela now with the war that's ongoing in Iran. We've taken a really risk-off strategy with our Marketing affiliate. As we pointed out, last year, we went through a situation where early in the year, there were tariffs that caused volatility. That caused us to kind of reevaluate how we leverage our Marketing affiliate and again, back to a customer-led strategy. The whole strategy around our Marketing affiliate is really to kind of reduce the overall operating costs and variable tolls for our customers. And so we don't try to take advantage purposely on any of the swings that we see down in Houston on the WCS. We do manage and contract Marketlink because we still have capacity there. And so we have seen some movements, as you say, but it's really a nonmaterial part of our strategy. We're focused on our -- 90% of our business is contracted and just managing that as best we can. Operator: Our next question will come from the line of Ben Fullerton from TD Cowen. Aaron MacNeil: I guess I had my associate run this one. It's Aaron MacNeil here. You guys highlighted Blackrod as a successful project in the context of the balance sheet in your prepared remarks. Maybe bigger picture, can you speak to how you may look to finance a potentially larger capital and longer duration project given the leverage and payout ratio profile of South Bow? Bevin Wirzba: Yes. Thanks, Aaron. At our Investor Day, we kind of laid out a number of the different financing strategies, whether it's financing a project at the asset level or whether it's partnering with other capital sources. We will look at the specifics of any kind of capital project to ensure that we manage the cost of capital as well as, match it to the execution risk. I think the point I'd like to make, though, is when you think about us developing projects, going back to my comments around within our risk preferences means that when you're -- we're not going to take risks that wouldn't allow us to debt finance something, and that can be a base case for people to look at, is you have to have the conditions and the contract terms and the investment-grade counterparties and the risks mitigated to a level that can attract debt level financing that aligns with our risk preferences. Now that might not be the best way to finance it, but the principles around managing the risks are consistent with any kind of financing approach. And so we wanted to make clear to our market in November that there's multiple solutions on that front. But I want to just remind that we go back to our risk preferences and making sure that anything we develop meets those criteria. P. Van Dafoe: And Aaron, it's Van here. We'll also keep with our de-leveraging journey to get to 4x kind of by that midterm 2028. So we're not deviating from that. Aaron MacNeil: Okay. That's helpful. And then switching gears a bit. we've been fielding a lot of questions on the Grand Rapids arbitration. I can appreciate that you're not going to speak to the ongoing legal matter, but I was just hoping you could help with some clarifying items. So first, again, I assume the answer is no here, but is the Blackrod Connection Project included in the scope of a potential sale? And then second, how should we be thinking about sanctioning new projects with connectivity to Grand Rapids while arbitration is ongoing? Bevin Wirzba: Yes. So Aaron, Blackrod, we advanced as South Bow alone, PetroChina is not involved in that project. They were offered an opportunity to participate in it. And that's as much as I can say as part of the partnership agreement when we do pursue growth, that's obviously the growth within the partnership frame, is open to all partners and whether or not our partners choose to capitalize into those projects is up to them. Operator: The next question will come from the line of Robert Catellier from CIBC Capital Markets. Robert Catellier: Most of my questions have been exhausted here, but I'll take a shot in the dark to see if you're interested in putting out a potential capital number for the Prairie Connector Project should it make it through the open season and have enough commercial interest. Bevin Wirzba: Yes, Robert, unfortunately, you're not going to bait me with that. I'll take a pass. We're obviously in early stages. Our team has done a good amount of work, obviously, given it's an existing corridor, but we're not establishing any costs at this point in time. Robert Catellier: Understood. And related to that, is there any ability or understanding that you can invest in some of the downstream pieces, whether it's Bridger's project or otherwise, should the project move forward? Bevin Wirzba: We're really speaking to the Prairie Connector component is how we're looking to participate going forward, and we're still in commercial discussions ongoing. But as you could appreciate, with the scale of what would be contemplated in Canada, that's a very meaningful development for South Bow. Operator: Our next question comes from the line of Jeremy Tonet from JPMorgan Securities. Jeremy Tonet: Just wanted to turn to Slide 19, if we could, with the Blackrod and project ramp there. If you could just, I guess, remind us what gives you confidence to the ramp. As you laid out in the slide, it looks like the '27 contribution could be 3x to 4x the size of '26 with the project just online now. Wondering if you could walk us through that a little bit more? Bevin Wirzba: Yes. Great question, Jeremy. We did the final tie-in well earlier this year. So our systems are fully prepared for our customer to begin the ramp-up. The sequence of events that we're not in control of are obviously on their end, whereby they would -- they've already been steaming their asset. Once the wells start producing, they'll fill their tankage and infrastructure, fill the pipeline and then fill our tankage. And then that's when the production will actually start hitting the Grand Rapids corridor. So there's a buildup that takes to effectively get through commissioning and filling the existing infrastructure, and that happens through the balance of the last half of this year. Now we have made comments in the market previously. I'll just remind folks that the commercial agreements that were agreed to between ourselves and our customer were to acknowledge that ramp in terms of their production growth. And then in 2027, our outlook is that we'll have a full year contribution of that EBITDA given the commercial agreements. Jeremy Tonet: Got it. Understood. And if we think about '27 in totality, are there any other major moving pieces as we think about growth at that point in time? Bevin Wirzba: Well, I'll refer to my previous remarks, Jeremy, where, we're working hard this year to move through the corrective action order and complete the remedial efforts, which would then allow us to have -- if those -- if the order is lifted, then we would return to being able to be full capacity on our base systems, which would give an opportunity for us to achieve that spot capacity out of the basin at a more material level than what we're experiencing. And just to remind you that, so 94% of our base system is take-or-pay, and we reserve 6% for spot capacity. So that is the capacity we're targeting to leverage in 2027. Operator: Our next question will come from the line of Patrick Kenny from NBCN. Patrick Kenny: Just maybe back on the funding plan for Prairie Connector, assuming a successful open season here. Just wondering if you can confirm your desire for the Alberta government's involvement, if any? Either as an equity partner or perhaps providing loan guarantees through construction just to help protect your financial guardrails along the way. Bevin Wirzba: Thanks, Patrick. Certainly, you're kind of referring to the model that was pursued historically. And I believe The Premier has been pretty clear that she wants private developers to develop projects. And so we're pursuing Prairie Connector as South Bow today. As with respect to your question around loan guarantees and other commercial matters, I'll just refer back to my comments that we're looking at the risk framework and allocating risks appropriately amongst the customers and us as a developer and broadly other stakeholders. We feel that we're in a different environment today where we're able to have those discussions and ensure that we've got good alignment of where those risks should be allocated. Patrick Kenny: Got it. And then maybe on the 60-day review period following the March 30 deadline, how should we think about this period just in terms of the binding commitment? Can they be nullified by any material change in policy such as the emissions cap, industrial carbon tax or any other developments that might come out of the MOU between Alberta and Ottawa? Or would these binding commitments basically be taking on the full stroke pen risk, so to speak, beyond March 30? Bevin Wirzba: Well, as you point out, Patrick, there's a lot going on that, when I refer to a constructive policy environment, constructive also means a very active policy environment where our customers are working closely with not only ourselves on this open season, but considering the broader framework that the Federal and Alberta Government are putting together. And that is obviously consistent with the timeline of what we're pursuing. I'm not able to speak to kind of those conditions or those discussions because not a part of them. But our time line with having a binding open season and the time frame there is just the regulated approach of how you develop a project. And that's why we've really been thoughtful around making a competitive solution for our customers, acknowledging the significant commitment that they have to make over the time frame of the development to commit to a project like this. So these are not small decisions by anyone. I think the basin customers have relayed that they're under the right policy environment, there is an ability for them to grow. And so we'll have to defer to them whether they feel that they have the confidence to grow into the capacity that we're we're offering. Operator: Our next question will come from the line of Benjamin Pham from BMO. Benjamin Pham: Maybe to start off on potential acquisitions. Can [ you both ] provide an update on your appetite and observations on acquisitions since your Investor Day? I'm also particularly interested in valuation levels on M&A versus organic growth? Bevin Wirzba: Yes, Ben, I think as articulated in the Investor Day and even in my earlier remarks, we're pushing all the [ bots ] down the field, both organic and inorganic, certainly organic with leveraging our pre-invested corridors has better valuations. But to complement and diversify our business, we've been in active dialogues to try to move down the path on inorganic opportunities. In both cases, as per even my last response to a previous question is, we can put forward the most competitive organic opportunities for our customers, but it still takes our customers to decide if they can commit. And on the inorganic side, we can provide a compelling potential solution for an acquisition, but it takes the counterparty to similarly view it as a good outcome. So we're managing a kind of multipronged approach where we're advancing conversations on organic and inorganic in parallel. Benjamin Pham: And maybe just a quick follow-up on that. You haven't -- it sounds like you haven't seen just with the market valuations expanding meaningfully since your Investor Day that the spread between the two, they haven't widened since that time? Bevin Wirzba: No. I think, obviously, we've seen a flight to the energy sector and in particular, to hard assets like infrastructure. So many have moved. I think that has just kind of raised the confidence in shareholders in the space and the investment proposition that infrastructure has. So I think it gives us more confidence in the equity capital markets if something did work on the inorganic side that it could be supported in a transaction. So yes, valuations have improved, but I think the strength and the thesis around infrastructure investment has strengthened as well. So I think that's -- if anything, it's a slight tailwind for us. Benjamin Pham: Got it. And maybe a follow-up on the Prairie Connector and you had the Big Sky proposal about a year ago. Are you able to maybe compare and contrast the two? Is it just simply more the downstream is changing, Canadian is unchanged? And then secondarily on the Canadian permits, is that just simply a matter of reaffirming that with the CR? Is there -- you mentioned earlier in your commentary, I just want to clarify that portion of it. Bevin Wirzba: Yes. So in contrast to Big Sky, I think the most important thing is the macro environment. Obviously, at the time that we pursued Big Sky in January of '25, we had a Canadian Government that was going through a significant transition. We had a potential tariff environment that was very uncertain. And we had a policy and regulatory framework that wasn't clear and didn't provide the signpost for our customers to legitimately view growth, any kind of meaningful growth as an alternative. So fast forward a year later, all those three things have materially moved in the favor of a more constructive environment to consider a development. We did find out that our -- this Prairie Connector Project, getting barrels to the U.S. Gulf Coast is a very strategic advantage and leveraging that pre-invested corridor more broadly also provides advantages. So that would be the comparison. With respect to the permitting situation, I mean, these are very complex developments. The largest of the permit requirements, as you say, are held with the Canadian energy regulator. We have to work within those permits that have been awarded, and there are expectations and things that we have to do to maintain them as we -- if we're able to begin developing the project. There are no other material permits that are required at this point in time. Operator: Our next question will come from the line of Sumantra Banerjee from UBS. Sumantra Banerjee: I was just curious about how you mentioned that you materially exited the TSA with TC and were you able to see some workflow optimization? I was just curious about any specific examples of the optimization you could talk to? Bevin Wirzba: Yes. Thanks, Sumantra. Our team had three objectives last year in addition to always, table stakes of safe operations, and that was -- and one of those objectives was exiting the TSAs as soon as we could. And that ties to one of our key objectives this year in terms of now optimizing our business workflows and processes. So we've already begun seeing some optimizations occur, even since October when we were effectively off of the TSAs. And we've got a number of work streams along that front in each of the areas. And an easy example would be in terms of supply chain and procurement in utilizing the historical ERP system that we had until we stood up our own system, all those business processes around invoicing and procurement were done in the old way. And now we're able to establish new procurement. We've got on financial planning and analysis and working on our systems, we've got a really good work stream on even building a new process around budgeting and real-time analysis of our financials and costs, giving the tools to our teams so that they can really run the business as efficiently as possible. So we see 2026 as a big year of standing up all those optimizations. And there is obviously, we're leveraging the latest technology in AI where it's appropriate and where it can help us make those processes more efficient. Sumantra Banerjee: 6 Got it. That's really helpful. And I just wanted to shift towards capital allocation really quickly. I know you outlined your priorities in the release, but just wanted to ask about how you're looking at balancing dividend growth versus reducing the leverage? Bevin Wirzba: So I'll start, but I'll turn it over to Van on our dividend policy. We're -- what I just want to remind folks is that we're going to stick to our capital allocation philosophy with respect to building out this business. And when we spun, we were allocated a significant amount of debt and then a very meaningful and sustainable dividend, but at a very high level and at payout ratios maybe a bit higher than we'd like. But maybe, Van, you can talk through our journey on de-leveraging and dividend growth? P. Van Dafoe: Sure. Yes. Thanks, Bevin. Our payout ratios on a DCF basis and on an earnings basis were higher than what we would like. We'd like them to be kind of on a DCF basis in the low 60s on a consistent basis and obviously under 100% on an earnings basis. So until that time, we would not even contemplate a dividend increase. On top of that, our journey to get to 4x leverage, again, we wouldn't contemplate a dividend increase until we get to that point. And once we do, our plan would never be to forecast future dividend growth. If we decide we are going to increase our dividend, we would state that, and that would be our new dividend level. Operator: This concludes the question-and-answer session. I would now like to turn it back over to Bevin for closing remarks. Bevin Wirzba: Thank you for joining us today and for your continued interest in South Bow. We look forward to connecting with you in a couple of months' time. Have a great day. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Nexus Industrial REIT Fourth Quarter 2025 Results Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Kelly Hanczyk, Chief Executive Officer. Please go ahead. Kelly Hanczyk: I'd like to welcome everyone to the 2025 Fourth Quarter Results Conference Call for Nexus Industrial REIT. Joining me today is Mike Rawle, Chief Financial Officer of the REIT. Before we begin, I'd like to caution with regard to forward-looking statements and non-GAAP measures. Certain statements made during the conference call may constitute forward-looking statements, which reflect the REIT's current expectations and projections about future results. Also during this call, we'll be discussing non-GAAP measures. Please refer to our MD&A and the REIT's other securities filings, which can be found on our website and at sedar.com for cautions regarding forward-looking information and for information about non-GAAP measures. I'm delighted to share that we are entering 2026 with good momentum and well-positioned growth. And despite challenging economic backdrop, 2025 was a very successful year for us. For the full year 2025, we delivered record net operating income of $129 million, and an increase of 2.8% compared to last year. We generated record adjusted EBITDA of $120 million and also grew our per unit metrics compared to last year. FFO per unit increased to $0.61 and our NAV grew to $13.22 per unit. Impressively, we grew despite selling our retail portfolio at the beginning of the year, completing our transition to a pure-play industrial REIT. This sale raised $47 million and focused our business so that today, 99% of our net operating income comes from industrial assets. As a result, we fulfilled our vision to be Canada-focused pure-play industrial REIT, and have now moved forward, adopting our new purpose to be Canada's industrial building partner with a vision to be the first choice provider of high-quality industrial properties in Canada. During the year, we strengthened our industrial portfolio by completing 2 transformative developments and 2 opportunistic acquisitions. At 70 Dennis Road in St. Thomas, we added 325,000 square feet for an existing tenant. We completed the project in September and are now earning a 9% contractual yield on the $55 million of development costs. At 4750 102 Ave in Calgary, we completed construction in August of 115,000 square feet of small bay industrial units on vacant land that we had adjacent to another building. We have leased 5 of the 9 units and have an additional lease for 1 more unit under negotiation, and offers on 2 additional units. After a good start, the leasing progress slowed as a prospective large tenant unexpectedly retired. Nevertheless, interest remains high for the property, and I expect that we will have it fully leased by late summer. Overall, the construction cost us $15 million and will deliver a healthy 11% cash and cash return when stabilized. Turning to the acquisitions. At the end of November, we had a rare opportunity to acquire 2 high-quality industrial buildings well located in Montreal at a very attractive price. The opportunity arose due to our strong network and our reputation as a reliable partner. A private equity firm that we've worked with in the past was acquiring an operating business, and they didn't want the business real estate. They didn't want to have to pay for the real estate. So we worked with them to acquire the 2 buildings and entered into a sale leaseback agreement under a long-term lease agreement. We acquired the buildings for $40 million at a going-in cap rate of 6.6%. However, the lease rate resets to market in 2028, which at current rates works out to a stabilized cap rate of approximately 10.4%. The buildings added 283,000 square feet of high-quality real estate to our portfolio, at a purchase price of approximately $145 per square foot. where similar real estate typically trades in the range of $215 to $235 per square foot. We had the building appraised at year-end and realized a significant mark-to-market lift of approximately $23 million. We also sold several properties during the year. In October, after a complex land zoning and severance process, we sold surplus land at our last remaining retail property for $8.5 million and used the proceeds to delever. The sale appeared well timed as the land was zoned for condominium development, a segment of the market which has shown signs of slowing since the sale was completed. Now that we have completed the land sale, we are soft marketing our 50% share of the retail mall for sale. It's a well-located, high-quality property that cash flows well for us. So we don't feel rushed to -- force to make a sale. During the year, we opportunistically sold 3 industrial buildings. In April, we sold a vacant property in Fort St. John above our carrying value of -- $7 million and used the proceeds to offset the acquisition of land surrounding our building in Kelowna, BC, where we saw a development opportunity. In June, we sold another small building in Edmonton that we viewed as non-core, that had been vacant for nearly a year, to an owner user for $4.2 million, which was in line with our carrying value. We used the proceeds to reduce debt. In September, we sold a third industrial building in Saint-Laurent, Quebec, to an owner user for $9.2 million. This exceeded our carrying value and equaled a 5.5% cap rate. After year-end, we closed on the sale of a fourth small industrial building. On February 20, we sold a 35,000 square foot building in Calgary at a 5.7% cap rate to the existing tenant for $8.5 million. We have used the proceeds to pay down debt. We are currently working on 3 more asset sales. As I mentioned earlier, we are currently soft marketing our 50% share of our last retail property, Les Halles d'Anjou Du. In Hamilton, we're looking for a buyer, or a tenant for our 115,000 square foot new build on Glover Road. We had a buyer lined up for the property, had it under contract at an attractive price. However, the deal fell through at the last minute. We own 80% of the property and it has been a challenging market in Hamilton, but we have a brand-new state-of-the-art 40-foot clear LEED certified product. Once sold, it will contribute significantly to our AFFO per unit as we will immediately reduce the carrying costs and be able to use that equity to pay down debt. In Red Deer, Alberta, we have a firm sale contract for our 190,000 square foot building at 40th Avenue. This building went vacant when Peavey Mart filed for CCAA in April 2025. We have been marketing the building for lease and for sale, and we now have it under firm contract to close in April for a little over $11 million. We will also look to sell our 80% interest in development land on South Service Road in Hamilton in the near future and be able to utilize the proceeds to further reduce our debt. Turning to our operating performance. We had a strong fourth quarter. In total, we completed nearly 117,000 square feet of renewals at an average rent lift of 2%. Year-to-date, we have completed a total of 1.2 million square feet of leasing and realized an average leasing spread of 60% over expiring and in-place rents. In the fourth quarter, our industrial occupancy held steady at 96%. Combined with embedded rent escalation in our leases, our leasing activities drove industrial same-property NOI growth of 2.8% in the quarter and 2.6% for the full year, in line with our guidance. Our financial results also improved in the quarter. Normalized FFO grew 3.3% versus Q3 to $0.186 per unit, and our normalized AFFO rose 3.4% to $0.151 per unit. In both cases, the increase was due to strong net operating income, which was up 2.5%, or $800,000 compared to last quarter, and up 2.7% compared to the prior year. This NOI increase largely resulted from the completion of our development project in St. Thomas, the 2 Montreal building acquisitions as well as same-property NOI growth, partially offset by foregone rent from properties we sold since Q4 of last year. At our cross-dock facility at 102 Avenue in Southeast Calgary, the new tenant that we had lined up for December 1 reneged on the deal after fully negotiating a lease agreement. Accordingly, we are marketing a 29,000 square foot building for lease and anticipate renting it quickly. We had a lot of interest in the building and had recent follow-up showing, so we're pretty optimistic. Overall, while we saw strong growth in 2025, and we expect to realize an even bigger benefit in 2026 from our completed development projects, embedded rent steps and lease-up of a vacant space, and the re-leasing of space at market rents above expiring rents. We are anticipating mid-single-digit same-property NOI growth in our industrial portfolio for the year, and we expect our normalized AFFO payout ratio to average below 100%. We have made good progress on our 2026 renewals. In total, we had about 990,000 square feet coming for renewal in 2026. Roughly 415,000 square feet comes due in the first 9 months and the remaining 575,000 square feet in the fourth quarter -- late in the fourth quarter. As of today, we have committed tenants for approximately 65% of the January through September expiries, and we're making good headway on our Q4 renewals. For Q4, 405,000 square feet comprised of 3 large tenants, and we fully expect them all to renew, and 140,000 square feet are strategic vacancies -- another 140,000 square feet, are sort of, strategic vacancies where we believe we can increase the rent on renewal. We also recently announced 2 additional development projects, which will get underway in the first half of 2026. We're going to build up to 180,000 square feet of micro industrial units on a vacant land surrounding our industrial building at Adams Road in Kelowna for a total estimated cost of approximately $47 million. And our Savage Road property in Richmond, BC will be adding another 28,000 square feet, time to the 52,000 square feet that we announced in November for a total of 80,000 square feet, additional 28,000 square feet expected to cost about $19 million. As I shared previously, the original 52,000 square foot expansion is being paid in REIT units at $10.50 per unit. We'll earn about 6% on the REIT units issued during the construction period, and we will earn a contractual 6% yield upon completion. I expect construction will begin in the first half of 2026. In summary, we continue to advance our strategy in 2025 as Canada's industrial building partner. We will continue to realize organic growth through embedded rent steps and positive mark-to-market on renewal. And we will continue our track record of accretive capital recycling through opportunistic acquisition and development. I'll now pass the call over to Mike, who will give some more color on our financials. Michael Rawle: Thank you, Kelly, and good morning, everyone. Starting with headline earnings in the quarter, net income was $30.6 million, a $19.1 million decrease to last year. The fluctuation was due to a decrease in the fair value adjustment on Class B units by $31 million, and fair value losses on our Montreal office building joint venture of $4.2 million, partially offset by an increase in fair value adjustments of investment properties of $10.6 million, and an increase in fair value adjustments on derivatives of $3.9 million. As Kelly mentioned, our Q4 net operating income increased 2.7%, or $800,000 year-over-year to $33 million. This was primarily due to the completion of our St. Thomas development and the Montreal building acquisitions, which combined added $1.5 million in the quarter, and an increase in same-property NOI of $700,000, and higher straight-line rent adjustments of $500,000. These increases were partially offset by $1.4 million of NOI associated with properties that we have sold over the past year. Normalized AFFO for the period was $0.151 per unit, compared to $0.153 a year ago, primarily due to the issuance of $2.8 million Class B units for prepayment of the development in Richmond, BC. This was partially offset by higher normalized AFFO by $300,000, resulting from higher net operating income. Total general and administrative expenses for the quarter were $2 million, which was $200,000 higher than a year ago, primarily due to higher compensation, legal and professional fees. Net interest expense in the quarter was $14 million, which was consistent with last year. The carrying value of our investment properties increased by $31.3 million in the quarter, primarily due to the $40.1 million acquisition of the 2 industrial properties in Montreal, $18.7 million of fair value gains, and $3.7 million of development expenditures, partially offset by $34.8 million of investment properties that were reclassified to assets held for sale. At December 31, our NAV per unit was $13.22, a $0.03 per unit increase from last quarter. Our weighted average cap rate increased by 3 basis points to 5.88% in the quarter compared to 5.85% at September 30. I'll now turn the call back to Kelly. Kelly Hanczyk: Thanks, Mike. With that, operator, I'll open up the line to any questions. Operator: [Operator Instructions] The first question comes from Mark Markidis with BMO. Michael Markidis: Kelly, you gave some pretty good color on the 2026 lease maturities. So I apologize if I've missed some of the detail. But did you mention an average spread expectation for the 2026 program? Kelly Hanczyk: We didn't. We didn't. I think at the end of the day, when I'm looking at them in the last half of the year, when I look at the -- there's 3 large ones that make up, and I'd say they're on an average of about 850 net where I think we'll be somewhere around 10, 11 on those. And then one of them, 90,000 square footer in Montreal is an intentional one. And that one, we worked out a deal with those guys because they had a very low rental rate and they had 3-, 5-year option to renew at very little to no increase. So we worked out a deal. We gave them a 1-year renewal last year at a higher rent, still below market, but at a higher rent to get it back, and to lose those renewals and be able to lease it at a decent rate. So that makes up -- I mean that makes up about 500,000 square feet, I believe. So I think on all of those, we're probably at $1.50, maybe $2 increase per square foot. Michael Markidis: Sorry. And so that's for the 500 or for the full 900? Because I think you've got [indiscernible] of the Jan to September done, right? Kelly Hanczyk: Yes. There's -- I don't know if -- I don't have the average spread of what we've completed. Michael Markidis: Okay. No problem there. Michael Rawle: But I think, Mike, also another way of thinking about it is the SPNOI guidance we've given of mid-single digits will help anchor you. Michael Markidis: No, that's fair. That's fair. Just on the -- there's different methodologies around the space, and I haven't looked in your MDA to confirm exactly, but I'll just ask a question. For your SPNOI, does that include the contribution from intensifications? Or is it a pure number? Michael Rawle: Includes that. Michael Markidis: It includes that. So Dennis Road and 102 Avenue Southeast would be in there? Michael Rawle: Sorry, I'm being corrected. It's excluded. Michael Markidis: Excluded. Okay. Good to know. All right. And then just, I guess, last question for me before I turn it back. Just on the future developments. It looks like Adams Road is -- you're going to commence construction, it sounds like. Or is that one already under construction? Kelly Hanczyk: Yes, it's not under construction yet. We're in the permitting phase. Michael Markidis: Okay. Got you. And then Savage Road. So -- and you gave the detail on the yield for Savage Road, I guess, 8% converting to 6% on completion. And then -- so for Adams, I guess, what's the anticipated yield on that? And just with both projects, where do you expect the completions to line up? Kelly Hanczyk: I think they would probably be complete some point next year and it depends on how fast we can get going. Adams, it's a little different because we are looking at building micro industrial. And right now, I'm working on the difference between either pre-leasing them or preselling -- or selling them as we go and funding the next batch. So it's a little up in the air as we haven't really fully started the project yet. We're in the planning phase and it could be a mixture where we lease some and we sell some because from a sale on a per square foot basis, we expect to get -- because we are micro industrial and these are small units. So it's a good user -- owner user opportunity where I think we can hit better returns. So I'd say it's probably going to be, let's call it, a 7% overall, between 7% and 10%. Operator: The next question is from Sam Damiani with TD Cowen. Sam Damiani: Maybe just on the debt to EBITDA, it remains elevated near 11x. I was just wondering if you have a year-end target for 2026? Michael Rawle: We haven't given guidance to that, but we do see a pretty rapid delevering this year. And so our goal is -- maybe a way of thinking about it is our goal is to hit investment-grade balance sheet this year. And the guidance we've been giving from DBRS is that they're looking for mid-9s to achieve that. So that's our target is to get to that IG rating. Sam Damiani: So is that something you're shooting for by the end of the year, sort of mid-9s? Michael Rawle: Yes, I think that's fair to say. Mid-9s would be our target, and that would get us to the IG rating. Sam Damiani: Great. And just on the Belvedere Club, I'm just wondering if you could maybe expand on -- or go into some detail on what the expansion phase, what the scope of work for that latest expansion phase you've announced? Kelly Hanczyk: Yes. So it's same like Adams, it's micro industrial units on land that's available for us to build. Sam Damiani: So it's not part of the Rapid Club? Kelly Hanczyk: No. No, separate. We're trying to -- we've redone the drawings to create a series of micro industrial units. Sam Damiani: Got it. And I guess last one for me. On the fair value gains, is a nice one on the Montreal acquisitions there. Just wondering, did you revisit the Voila CFC in Montreal in light of Empire's announcement earlier this year? Kelly Hanczyk: Yes. Actually, I was there last week in Vida tour, and it's my understanding, the Montreal facility has the largest share of -- market share of home delivery in Quebec. So I think just a very different circumstance. The brand is pretty large in Quebec. So from everything I see, it was full steam ahead. They were pretty busy. Michael Rawle: Yes. Another -- just a little more color on that is there's a long lease on that building, too. So this isn't one that we're concerned about? Operator: The next question is from Brad Sturges with Raymond James. Bradley Sturges: Maybe switching gears a bit. Obviously, you did the 2 acquisitions in Montreal. How do you think about acquisitions this year? Obviously, the focus is to delever and to get that investment grade. How do you think about opportunistically on the growth side? Kelly Hanczyk: Yes. So I think reality is if we are looking -- we are looking, I am in the process of working through a bunch of different things, but they would be more geared towards unit deals. So we wouldn't be purchasing anything from cash. It would be a unit transaction. So if you see us do anything this year, it would 99% likely be a unit deal transaction. Bradley Sturges: And how does that pipeline look today in terms of potential deals you're working on? Kelly Hanczyk: Yes. I mean I'm working on one. It's early phase, but it would be -- it's a 3 building that would fit nicely into the portfolio and see if I can get it done. It's tough when the units are trading down at this level, but we'll see what we can do. Operator: [Operator Instructions] The next question is from Jimmy Shan with RBC Capital Markets. Khing Shan: So just going back to that $40 million Montreal deal, you gave pretty good color on sort of the deal dynamic. Perhaps just trying to get my head around, how is it that you're able to still get a very low basis for it and kind of why would the PE firm be willing to accept? I guess, ultimately, this will be like a 10% cost for them, right? And so kind of what's -- what are the other nuances that are part of the deal that you're able to get such a good deal? Kelly Hanczyk: I don't think there's any other nuance in that. So we've done a deal with them before. We actually purchased our Windsor -- part of our Windsor portfolio through them, I think is A.P. Plasman. I think that was a 4-building transaction. And we closed and it was a smooth transaction, easy to complete. And I think at the end of the day, they're just not focused on the real estate, and we managed to negotiate a pretty sweet deal at $145 a foot. So we pounced on it. But there's no other nuances to the deal, really. Khing Shan: Okay. That's good. And then just on the swaps. I think you've got a total of about $350 million of notional amount where it's -- is it callable by the counterparty? And I'm just wondering, like, I guess, rates have gone up since then. Like are these likely to be called? The ones that have... Michael Rawle: Not at this point. No, they're out of the money for them, so. Khing Shan: Yes. Okay. Okay. And maybe lastly, just on Glover, I guess what's the plan now? Is it still to try to market that property? And are you trying to for a tenant? Kelly Hanczyk: Absolutely. I mean our preference is to market it for sale. So we haven't listed right now and always do is wait to get an offer. We had it under contract. It seemed to be going fine. And then at the last minute, the purchaser just dropped out, and it was an owner-occupier, which is even more strange. But yes, we're anxious to move that one because that frees up, quite frankly, a lot of capital and reduces the burn on our AFFO. So it has a meaningful effect once we're able to unload it. Khing Shan: Are you hopeful you'll be able to get something done this year, on it? Kelly Hanczyk: Yes. I'm hopeful for this year, I'm hopeful -- I mean, it's March, maybe we could close something, I would think, in -- I would say, early fall. That's what I'm hoping for. If we're lucky, maybe sooner. Operator: The next question is from Tal Woolley with CIBC Capital Markets. Tal Woolley: Just on the renewal rents in Q4, they were a little bit lower than where they've been for the rest of the year. Anything special about that or anything just -- sorry, was that just sort of like a one-off kind of lease situation that created that? Or is there something we should be reading into the market? Michael Rawle: I don't think there's anything to read into it there. I think it's just the nature of the leases that we had coming up. I think also we had -- if we look at some of the leasing that we did earlier in the year was there was some really big lift that we had really low rates coming up, so. Tal Woolley: Okay. And then just when you look at your outlook for 2026, like -- do you sort of see that as -- are there big swing factors in there that could have you hit higher than that or not reach those things -- not reach those targets? Are there any key, like sort of, things coming up throughout the year that we should be particularly paying attention to? Michael Rawle: Kelly can add color. I think it's a pretty volatile world out there. I don't think anyone expected the geopolitical instability we saw last year. And I think -- we obviously really happy with how our business performed during all that upheaval. And so -- but the answer is last year, we had 2 tenants filed CCAA completely from left field, unaffected by the tariffs. They just went less than that with 3 buildings that came back to us. And so I think we did a fantastic job of working through that. And we don't see that anything like that on the horizon, but we didn't see it on the horizon last year. So nothing that we're aware of, I think, to call out, but that doesn't mean things don't happen. And I'm just happy with how well the team has responded to the challenges that have come up over the last year. Kelly Hanczyk: Yes. And when I look out at the renewals in October, we have 150,000 square foot, and I fully expect we have an offer out with them, and we're negotiating back and forth right now. End of December, we have 2 larger ones, 175,000 square foot and 80,000 square foot and we expect both of them to renew. I don't see any issue there. So there's a decent lift there. The November 30th one, 90,000 square feet, that's the one we knew was coming back to us. We're hoping and we have that listed now. So I mean, we're pretty hopeful. And then when I look at the balance of kind of what comes up in the end of the year, we have one in Ajax. It's not a lot, but they paid us an early termination fee and that comes back, but I think we'll get some lift on that one. And an early termination fee takes them to the end of their lease which is, I believe, end of September. And then we have another 20,000 square footer in Saskatchewan that's just a vacant -- it's going to be a vacated truck court. So like an exterior type space that they're renting, we're actually going to -- in the planning stage to finish the space when we get it back in full and add to the GLA and be able to charge much higher rents. And Saskatchewan seems to be a pretty solid market for us right now. So on the new deals and renewal deals, we're still pretty positive. Tal Woolley: Okay. And then I guess just on the financing side, you guys have a significant amount of your debt sitting on credit facilities and your desire to get to investment-grade rating. You've been very clear about that. Are you noticing any like change from lenders in terms of like the type of lending product they'd like you to take, like secured financing versus credit facilities? Or is it just sort of been business as normal? I'm just trying to get a sense that banks have really changed at all sort of over the last couple of years. Michael Rawle: Yes, in a very good way. And this is -- it's interesting being at this end of the table, I guess, when you start getting close to being an IG-rated lender -- borrower, everyone wants to lend to you just before that because they want part of the debt deal, right? So absolutely, we have a huge amount of support from our banking syndicate and more banks wanting to join than we had ever hoped. And so it's a very good position to be in as we're just on that kind of cusp. And so we're pretty relaxed about the timing of when we get there other than it's obviously substantial savings and additional flexibility to get to IG. So that's the rush, not from any kind of liquidity challenges. It's just the tons of support for us out there from our group of bankers. Tal Woolley: And that mid-9 number, that would put you like you think at like BBB mid, kind of rating? Michael Rawle: No, I think what we go to BBB- is what we're trying to get, just trying to get IG and then go from there. Operator: The next question is a follow-up from Mike Markidis with BMO. Michael Markidis: It's been a while. I just wanted to recircle back on Savage Road. The [indiscernible] unit deal -- but I think you said micro industrial units. So is that a similar plan to Adams where it might be a partial sale? Or I'm just trying to get a sense of how that works? Kelly Hanczyk: Less possible there, but possibly. Yes, it's possible. There's a possibility of I do half rental, half for sale. So we're just working through that now. Michael Markidis: Okay. And then just -- so you're collecting as you issue the units, or you will issue the units? Kelly Hanczyk: As we release the units. The distribution becomes payable and then we effectively get the distribution back. Michael Markidis: Okay. Got it. So -- but that really hasn't happened yet, right? Because you got only $0.7 million of that. Kelly Hanczyk: I think we have one batch out. Michael Rawle: Yes. Just under -- $500,000. Michael Markidis: Right. So can you just remind me why you go from an 8% to a 6% yield, like 8% return on your units and then it goes down to 6% on completion? Kelly Hanczyk: Yes. It's -- 6% cap in Richmond is pretty attractive. We're looking at stuff right now and everything we see is in the high 4s, low 5s. So it's still a fairly decent -- its a way to, I guess, build our market cap using our currency. I guess that's as best as I can say. Michael Markidis: No, no, I get that. It's an attractive stabilized yield. But what I'm trying to understand is I think unless I misunderstood, like you're getting an 8% return on the units you advance, but then are you saying that the terminal value would be a 6%? Are you saying that then the unlevered yield on completion is a 6%? I'm just trying to... Michael Rawle: We get a 6% yield on the units. So it's basically cash neutral to us. Michael Markidis: So you're 8% in the interim, 6% on completion? Michael Rawle: No, no. 6% in the interim. Kelly Hanczyk: Yes, it's not today's yield, right? It's at [ 10.50% ]. Operator: The next question is a follow-up from Sam Damiani with TD Cowen. Sam Damiani: Just on -- I think you mentioned, Kelly, there's a tenant that paid an early termination fee in Ajax for taking -- I guess, the lease will wrap up in September. Will that late lease termination fee go into same-property NOI for this year? Kelly Hanczyk: Well, I think what that does is we account for it as rent, I believe, up until the end of the term. And if we lease it prior to that, then I will let Mike answer that. Michael Rawle: Yes. No, it won't go into same-property NOI. Sam Damiani: Okay. I appreciate that. And could you share with us what the expired rent is on that building, or set of buildings? Kelly Hanczyk: It's one building. I cannot, off my head, remember what the expiry rent is that, but I know. Michael Rawle: 1,350. Kelly Hanczyk: So I think we'll have a pretty decent lift on that one. Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Kelly Hanczyk for any closing remarks. Kelly Hanczyk: All right, everybody, thanks so much, and we will see you next quarter. Operator: This brings to an end today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Good morning, ladies and gentlemen. Welcome to Central Puerto's Fourth Quarter of 2025 Earnings Conference Call. A slide presentation is accompanying today's webcast and will be also available on the Investors section of the company's website, centralpuerto.com/en/investors. [Operator Instructions] Please note, this event is being recorded. If you do not have a copy of the press release, please refer to the Investor Relations Support section on the company's corporate website at www.centralpuerto.com. In addition, a replay of today's call will be available in upcoming days by accessing the webcast link at the same section of the Central Puerto's website. Our host today will be Mr. Fernando Bonnet, Central Puerto's CEO; Mr. Enrique Terraneo, the company's CFO; Mrs. Maria Laura Feller, Head of Investor Relations; and Mr. Alejandro Diaz Lopez, Head of Corporate Finance. Maria Laura, please go ahead. Maria Feller: Good morning, everyone, and thank you for joining us. We will walk you through Central Puerto's fourth quarter and full year 2025 results, discuss key operational and market developments and then open the line for questions. Before we begin, please note that my remarks may include forward-looking statements and references to non-IFRS measures, such as adjusted EBITDA. These statements are subject to risks and uncertainties, and actual results may differ materially. Definitions and reconciliations are available in our 4Q '25 earnings presentation and financial statements. Revenues for 2025 reached $782.8 million, up 17% year-over-year. 4Q '25 revenues were $172.8 million, decreasing 26% quarter-on-quarter and increasing 3% year-on-year. 2025 adjusted EBITDA was $337.2 million, an increase of 17% year-over-year. And 4Q '25 adjusted EBITDA was $84.7 million, down 16% quarter-on-quarter and up 30% year-on-year. Total generation for the year was 18.6 terawatt hour, down 14% year-over-year, largely reflecting historically low hydrology at Piedra del Aguila. And also in 2025, we undertook nonrecurring maintenance works in Central Costanera combined cycles and Lujan de Cuyo generation asset. Regarding business performance, 2025 marked a pivotal year of consistent growth and market normalization. The company strengthened its strategic positioning and reinforced its power generation asset portfolio for long-term value creation. Throughout 2025, Argentina's wholesale market -- power market advanced toward normalization. Since November 1, Resolution 400 has supported U.S. dollars-denominated spot prices and recognized a margin over variable costs. In December 2025, 97% of our revenues were denominated in U.S. dollars and we also progressed in the new thermal term market, signing around 11% of total volumes in the contracted market with approximately 900 megawatt hour delivered to industrial customers during November and December. Our CapEx plan in 2025 included fully executed projects over the year and additional projects that allow us to look forward and continue delivering growth. In 2025, our total CapEx was $202.4 million, consisting of concluding with 2024 projects such as the closing of the Brigadier Lopez combined cycle that achieved commercial operation during 1Q '26, and we concluded also the San Carlos solar farm project, our first solar greenfield project. The asset reached commercial operation in November 2025, adding 15 megawatts of renewable capacity to our portfolio. Together with Cafayate, our two 2025 solar projects doubled our installed solar capacity and increased our total renewable portfolio by 20%. Also, in 2025, we extended Piedra del Aguila concession. The company was awarded the concession under the Comahue Hydroelectric Complex privatization process, extending the operation -- the operating term of the Piedra del Aguila hydroelectric facility through 2055. Winning bid offer was $245 million paid in January 2026. The company is also focused on the battery energy storage system projects, looking forward to add 205 megawatts of new technology in 2027. Our growth plan is [ backed ] by our financial strength, flexibility and low leverage ratio. In December 2025, net leverage ratio was 0.3x annual adjusted EBITDA, which positions us well to add new financial debt to finance Piedra del Aguila concession extension and the fee payment and the battery energy storage system projects. 2025 revenues stood at $782.6 million, 17% above 2024 revenues despite the 14% decrease in generation volumes. Spot revenues growth in 2025 reflects additional revenues from the realignment of the spot price over the year and the Resolution 400 since November 2025. Also, we see the effect of the self-procured fuel oil with the associated cost pass-through in revenues. Offsets came from lower water inflows from Piedra del Aguila and the maintenance works in Central Costanera combined cycles. PPA sales growth include new MAT contracts in November and December 2025, including also cost of fuels incorporated in the energy component. Renewable revenues increased by 3% as wind farm volumes increased 5% due to higher wind resources and the full contribution from Cafayate solar plant since the end of August 2025. Full year 2025 EBITDA reached $337.2 million, a 17% increase year-on-year, primarily driven by revenue growth and the market normalization and higher margins from self-procured fuels, which added approximately $8 million. In 2025, total generation reached 18.6 terawatt hours, representing 14% decrease compared to 2024. Central Costanera's generation volumes decreased by 15% year-over-year, primarily due to maintenance work in both Mitsubishi and Siemens combined cycle during 2025. Second, Piedra del Aguila generated 38% less than in 2024, mainly due to historically low water inflows affecting hydro production. Finally, Lujan de Cuyo was 24% lower year-on-year, largely explained by maintenance works in the co-generation asset in the fourth quarter. Moving to installed capacity, our portfolio reached 6,938 megawatt hours in 2025, representing an increase of 234 megawatt hours compared to 2024. The increase was driven by several developments. Brigadier Lopez combined cycle was completed and the San Carlos solar project added 15 megawatts of solar capacity. Together with Cafayate solar farm acquired in August 2025, these two solar projects contributed by 20% of the renewal capacity additions during the year. Regarding market position, Central Puerto maintained its market leadership, reaching 14% market share of total SADI generation. Finally, looking at operational performance, our thermal fleet continued to show solid availability levels. In 2025, total thermal availability reached 77%, while combined cycle availability stood at 89%, reflecting strong operational reliability. During 2025, three thermal and renewable projects were completed, combining greenfield developments and M&A transactions, further expanding our generation portfolio. First, the Cafayate solar farm, which was acquired through an M&A transaction is already in operations. Second, we finalized Brigadier Lopez combined cycle project, which is also already in operation since January 2026. Third, the San Carlos solar farm also entering in operations in November 2025. In addition, we were awarded two battery energy storage system projects, which were granted in August 2025. These projects are currently under development and are expected to begin operations during the first half of 2027. Finally, an important milestone regarding the Piedra del Aguila hydroelectric plant was that Central Puerto successfully secured a 30-year concession extension for the plant through the privatization tender process. The concession fee payment was successfully completed in January 2026, marking another key step in strengthening our long-term asset base. In 2025, the Argentine power system reached a new record for the demand with a peak of 30,257 megawatts on February 10, 2025. Renewable generation rose 16.5% year-over-year and supplied about 19% of total demand, including hydro renewables representing roughly 39% of the total annual energy mix. Thermal fuel consumption declined 2.6% year-over-year with gas oil down 53% and fuel oil 60%, partially offset by 1.2% increase in natural gas and 5.2% increase in coal. As of December 31, outstanding financial debt was $337.8 million and net leverage ratio stood at 0.3x adjusted EBITDA. On December 19, we signed a $300 million syndicate A/B loan with IFC with an average life of 5 years to fund Piedra del Aguila concession fee and Central Puerto's BESS project. Also, our outstanding FONINVEMEM receivable credit was $118 million as of year-end. Overall, 2025 was a year of solid growth and continued progress as the market normalized. During the year, the company kept expanding and strengthening its generation portfolio to support long-term development. Looking ahead, we will focus on three priorities: discipline contracting commercialization, operational excellence and advancing our growth agenda. Fernando Bonnet: 2025 was a pivotal year for Central Puerto, marked by Piedra del Aguila concession extension by 30 years more, portfolio expansion, market normalization and strategic progress across our assets. We enter 2026 from a position of strength with robust liquidity and resilient business model. Thank you for your continued confidence in Central Puerto. Please let's stay connect. And now we will open the line for questions. Operator: [Operator Instructions] Our first question comes from Martin Arancet with Balanz. Martin Arancet: I have three. I would like to run them one by one, if that's okay. First, I was wondering if you could give us some color on why the decrease in the quarter-over-quarter EBITDA given that the market liberalization should have been at least positive for thermal exposed to the spot market. Fernando Bonnet: Martin, thank you for your question and your interest in Central Puerto. The main topic affected the 4Q 2025 is that we have a strong maintenance in our combined -- Central Puerto combined cycle and Mendoza combined cycles, the two of our biggest combined cycles. And because of that, we don't catch in those units, the benefits of the new regulation scheme. But it's only regarding to that. The rest of the equipment was okay and the new regulation is in place. So we expect that will be recovered in the first quarter 2025 -- '26, sorry. Martin Arancet: Okay. And sorry for this follow-up because probably you already disclosed this, but are those plants already working again? Fernando Bonnet: Yes, yes, yes, they start working at the end of December and the other one early January. So we don't expect additional maintenance for those units until 2027, '28. Martin Arancet: Okay. Then regarding one of your main focus for 2026, I was wondering how much of the thermal capacity that was under the legacy scheme do you think can compete for energy PPAs? How much of that do you already have contracted? And how do you see the market for signing the rest of the energy that you have? I don't know if you are seeing much interest. I don't know if you have discussed this with distribution companies. And if you expect probably a stronger interest for industrial consumers as we approach the winter where you have higher seasonal prices? Fernando Bonnet: Well, in terms of our capacity, we are -- we can contract, as you know, 20% of our combined cycles that are the spot legacy scheme. That is around 2 gigawatts, the whole combined cycle. So it's the 20% of that with the private customers, with big industries. And then this -- and we are doing around that 20% yet. During January, February and March, we're going to cover that capacity contracted. For -- to exceed that, we need to go to -- as you mentioned, we need to go to the distribution companies. And that is coming slower. The distribution companies need to discuss with the regulators -- each regulator because it's not only federal, it has local regulators in each provinces. And this is coming slowly because they need to discuss and receive a pass-through possibility in order to make the pass-through to the demand. So by now, we are entering with not a lot -- we are not doing a lot of transaction with distribution companies. Right now, we are, of course, in discussions. We are having advances, but we are not closing big deals yet. We expect that it could happen -- start happening during this year. Martin Arancet: Okay. Right. So do you think that to sign contract with distribution companies, you probably will require I don't know, some backup from CAMMESA or something like that, like it happened with the battery project? Fernando Bonnet: No, no, no, no. We -- of course, we're going to make our credit analysis, and we're going to pick the distribution companies that we think that they are suitable to giving credit, but we don't request additional CAMMESA backup. Talking about, as I mentioned, legacy energy selling because this is month on month, and we can cut the provision if they doesn't pay. So -- but talking about other projects like new generation or perhaps, [indiscernible] this is different. This will be different. Martin Arancet: Okay. And my last question then regarding the other main focus that you will have for 2026. I was wondering where do you see growth opportunities coming this year and probably also the next year? Because it seems that there is not enough incentives yet to add thermal capacity. Now with the thermal capacity competing also for PPAs with renewables, we have seen lower [ tenures ] in new PPAs and at slightly lower prices. So I don't know if adding more battery is now the best idea. And there has been a lot of comments regarding probably new renewable capacity for mining and oil and gas, but it doesn't appear to have materialized yet. So I was wondering where do you see the growth opportunities coming in the near term? Fernando Bonnet: Okay. Well, first of all, we have right now an auction in place for new battery storage system for the other provinces than Buenos Aires that was -- that we get awarded last year. So we are looking spots over the interior in different province Santa Fe, Mendoza, [ Corrientes ], Cordoba, there are opportunities there. This new auction is in place and will be -- have the due date in May this year. So this is an opportunity of expansion that we're going to look at. As you mentioned, in terms of renewables, right now, it's getting difficult to get new PPAs with existing demand. So we are looking for new demand. Now the existing one, as you mentioned, mining companies are one of them. Oil and gas companies are other possibilities, companies that needs -- perhaps gain efficiency in the product in their processes, like introducing steam, perhaps we can work on co-generations there. And looking forward for perhaps in the middle of this year or perhaps in the third quarter of an auction for new capacity that need to be set for cover some areas, specific areas like specifically Buenos Aires area. And I see there are opportunities, not -- as you mentioned, not trying to catch the existing demand with renewable because, as you mentioned, it's been challenging right now because the thermal are entering in the market and are stressing prices. Also, the hydros are entering the market and put some pressure there also. But I see opportunities, as I mentioned, in storage system capacity, in new demand coming from new players in the market like mining companies and a possibility in capacity -- new thermal capacity coming in some auction during this year. Martin Arancet: Okay. Great. So this thermal auction that you mentioned, something similar to the Terconf that got canceled? Fernando Bonnet: Well, it's not completely established by the government yet, but we have talking with them that could be something similar, but with different perhaps approach to the to the demand. So something like receiving a payment for capacity from CAMMESA. But well, it's something that are under discussion right now. Operator: We are going to go now for the question with Lucas Lombardo with BACS. Lucas Lombardo: I want to know the percentage of new term contract that -- the income from -- for the company. Fernando Bonnet: Okay. I think you are referring to how much of the 20% that we can sell to private consumers we reach. That is the question. Lucas Lombardo: Yes. Fernando Bonnet: Yes. We expect during March to cover all those 20%. Operator: Our next question comes from Matias Cattaruzzi with Adcap. Matias Cattaruzzi: I wanted to ask first about the outlook for 2026 and the -- how do you see volumes coming for next year, especially hydro volumes? And then how do you expect the PPA versus spot mix to be in next year regarding the new regulation? Do you expect PPAs to grow more in generation? Fernando Bonnet: Okay. Thank you. Talking about volumes for Piedra del Aguila specifically, the hydrological year starts on May. So it's difficult today to say that we're going to see better inflows than the previous year. Of course, the previous year was a low year, so in our expectations are to be better than that. But to have a clear view, we need perhaps 2 more months in order to see how the year comes. In terms of the thermal generation, we expect an increase because, as I mentioned before, two of our combined cycles were in maintenance during the whole month of December and the other one was in maintenance the whole month of September. So we don't see those maintenance in 2026. So we expect an increase of our thermal generation also. In terms of new PPAs coming, we -- as I mentioned, we are trying to catch additional demand from the distribution companies. This will unlock the possibility to sell the legacy energy above the 20% that we have already granted -- so we expect to have news on that this year. It's difficult to predict, as I mentioned before, it's difficult to predict the volume that we can reach there because the distribution companies are discussing with the regulators, the feasibility of make that pass-through directly to the demand and the terms of that pass-through. So right now, it's difficult to forecast the potential there, but we see potential. So I think we can catch more than the 20% that we are already selling, and we can go over that going to distribution companies. Matias Cattaruzzi: Great. And then do you intend to participate in the upcoming tender for national batteries? Fernando Bonnet: Yes, we are looking at, yes. Yes. We are looking at -- of course, it's different from the participation that we have in the last year because we are looking in places different for our facilities in -- the ones that we awarded last year, we established inside our facilities and it's convenient or very convenient for us. And right now, this new auction is all over the country. So we are looking at places. And the new reality in the battery storage system prices because the lithium goes up, the copper, all the materials the batteries used. So -- and the price according to the last auction. So we are looking at returns on that places that are outside from the -- our facilities -- are far from our facilities is not the same. So we are looking at, but we need to do more work in order to understand if something suitable for us or not. Matias Cattaruzzi: Great. Do you expect to participate in the upcoming privatizations by ENARSA assets? Fernando Bonnet: Yes. Yes, we are looking at. We don't have the mandate yet to move forward, but we are looking at. Matias Cattaruzzi: Great. And do you have any updates on the OpenAI-Sur Energy project? Fernando Bonnet: No, we have discussion with them. After that we award Piedra del Aguila that was very important for them that we have a huge hydro backup in us to give power to them. That was a great news for them. We discussed with them that, but we don't have a clear timing on any additional news coming from that place. Matias Cattaruzzi: Great. And last, can you give us like an EBITDA bridge for upcoming years until 2028? Fernando Bonnet: Well, I can give you some perhaps information regarding 2026. 2028 is, of course, need to -- we will expect to maintain that, but talking about increasing will be challenging regarding the expansion, as I mentioned, of new PPAs and how we're going to do in terms of the new coming auctions. But talking about 2026, we have some certainties that can share with you and the rest of the listeners. One important thing or the biggest improvement that we are seeing for 2026 and onwards is that the PPA, the Brigadier Lopez closing combined cycle PPA going to bring additional $60 million for our EBITDA. The other improvement, as we talked in the previous calls, the new regulation for spot market bring another between $70 million and $80 for our EBITDA. Piedra del Aguila also have an improvement compared to the old regime that compared to this new concession will bring additional $15 million. And if you perform the full year of the renewables that we acquired and build last year, this will add additionally $8 million and -- between $8 million and $10 million more. So [indiscernible] terms will be an improvement of $150 million, $160 million. Matias Cattaruzzi: Great. And I have two more questions. One is if you expect distributing dividends in 2026? Yes. And the second one would be more operational. With the upcoming IP for the Perito Moreno pipeline expansion, do you expect that your plants in the central area would get some more upside with lower costs due to lower gas prices because of the expansion of the [indiscernible] Perito Moreno? Fernando Bonnet: Okay. In terms of dividend, that is something that we'll be discussing by the Board of Directors. Right now, we have no guidance regarding to that, specifically because, as I mentioned, we have different projects under our pipeline, and we are performing some projects right now. So this is something that Board will be -- discuss in the next coming month. Talking about the TGS pipeline, we are -- we don't see a reduction on prices because the gas prices are set right now by the plant gas contracts that CAMMESA and the government signed during the former administration. So we received these prices -- or these prices are fixed until the end of 2028 when those contracts get to the end. So we don't see big reduction on prices until this plant gas goes to the end. In terms of the capacity or the transportation capacity of the TGS, we are analyzing the convenience or not to acquire that capacity. The problem is that going further in a big 10 or -- contract is like 15 -- of course, you can do less, but normally it will be 15 years of contract, is not fully discussed the regulation scheme in which we can recover this additional cost because this additional transportation will have an incremental cost related to what -- one that we are paying now. So it's not clear for us yet the new regulation scheme that will be available or the regulation scheme that will be available to recover that incremental cost. So right now, we are looking at, but we don't have a decision yet. Matias Cattaruzzi: Great. But wouldn't it be better for gas prices in the winter? Wouldn't you need less liquids or gasoline or fuel oil? Fernando Bonnet: Yes. The problem is to get here to our terminals, you do not only need the TGS expansion, you will need distribution here and the distribution in Buenos Aires area are very constrained. So we don't see a full elimination of diesel and LNG during winters for a while. Of course, will be a reduction because the TGS will inject here and also have some volumes that could go to the north. But we'll see a reduction, but not a full elimination of diesel and LNG. Operator: This concludes our Q&A session. I would like to turn the conference back over to Mr. Fernando Bonnet for any closing remarks. Fernando Bonnet: Well, thank you for your interest in Central Puerto. I will encourage you to ask any questions to our team that you may have. Thank you very much, and have a good day. Operator: This concludes today's presentation. You may now disconnect, and have a good day.
Operator: Ladies and gentlemen, welcome to the Lufthansa Group Q4 2025 Results Conference Call and Live Webcast. I'm Moritz, 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 Marc-Dominic Nettesheim, Head of Investor Relations. Please go ahead, sir. Marc-Dominic Nettesheim: Yes. Thank you very much. And also from my end, a very warm welcome, ladies and gentlemen, to the presentation of our full year results 2025. With me on the call today are our CEO, Carsten Spohr; and our CFO, Till Streichert. Both of them will present the results for the past year and discuss our commercial outlook for 2026, and afterwards, as always, you will have the opportunity to ask questions. [Operator Instructions] Thank you very much. And with that, Carsten, over to you. Carsten Spohr: Yes. Thank you, Marc, and a warm welcome from me as well to this full year '25 conference, which I think will start in a little bit of a different tone, not because it's our famous 100-year celebration this year, which makes it a special year for us anyway. But while we were focusing on this to a certain degree, obviously last weekend when everything was changed again. So maybe I'll share with you a few thoughts on where we are when it comes to the situation at the Gulf first, which is, as you know, very dynamic. And of course, with a few thoughts on the whole year before I hand over to Till for more details and expected by you feedback on our numbers. And of course, also, we'd like to give you a view ahead as much as possible in such a dynamic environment. On the Gulf situation, like many of us, I would assume, we're a little bit surprised by the various dynamic turns this takes. In the end, our crisis management always asks us for safety first, which, in our case, meant we stopped flying a day early to the region, which also allowed us to have hardly any aircraft on location because we brought them home before. We then brought our crews home and then went into the next phase of our management of the situation by deciding to close 10 destinations initially, which included Larnaca. We are opening this next -- this Saturday, again, we'll keep the others closed for probably a few more days at least to remain. I think there's more and more now doubts. This is a question of days of reopening or was it weeks, we prepare for both, and we'll take you through this in the Q&A session, if required. Second, of course, big impact spike on fuel prices. Till will come back to that. We actually believe, due to the fact that we are hedged higher towards our main competitors, actually only other airline hedged the way we are is Ryanair with which who, as you know, hardly overlap, should give us a relative advantage where now prices in the markets need to go up to cover for higher fuel prices, especially, of course, for our American competitors and partners to more or less are not hedged at all. Third, extension or extra sections to be flown to markets beyond the Gulf. We have seen huge demand since day 1 for bookings coming in from Asia, to Asia, also South Africa, also very much in China towards Beijing and Shanghai. So we now decided to put extra sections into the air with spare aircraft we have due to the cancellations, spare crews we have and also by the fact that we're still in the winter schedule which doesn't put our fleet to the max. So we already announced quite a few extra flights to Bangkok. There will be more coming to Singapore, to Shanghai, to Cape Town, and to India, which will probably confirm the course of the last day from our revenue management teams that we have record inbound bookings, especially to those regions I mentioned. And that will allow us probably give also later on to a more positive outlook on the commercial output, at least of this initial phase of this crisis than we otherwise would have been able to do. Last but not least, the mother of all questions probably for European airlines. How much is the situation changing the view and the behavior of travelers, customers on this obvious Achilles' heel of geopolitical topics beyond aviation but surely in aviation. So we all -- I think we, the Gulf carriers will reopen eventually but how our traffic flows, how are cargo flows being directed in the future based on this terrible experience locally, I think is the mother of our questions for our industries, and we're sure we'll be discussing that later on. With that, let me, nevertheless, take you, of course, now back to '25, which, as you might recall, we have called a transition year from the very beginning. Various topics in the pipeline, we have addressed to you before, and of course, happy to also discuss today. Overall, the turnaround of the Lufthansa Airline remains our utmost priority. As also mentioned in the former quarterly result sessions, starting from operations. We have seen significant improvements, which also allowed us to reduce our flight irregularity costs by 43%, equivalent of EUR 362 million, significant input into our improved numbers of '25. And overall, also, we were quite cautious with our capacity increase, which only resulted a 4% or a little less, even 3.8% growth by lifting our revenues to a new record of EUR 39.6 billion. Nevertheless, of course, we're able to improve our profits, as you know, to at least by 19% compared to '24. This is a delta of EUR 350 million, far away from where Till and I want to take the company, talk about the 8% to 10% margins, but at least a step in the right direction and especially when it comes to the core airline operational stabilization was the basis for everything to come. We once again saw strong earnings contribution from MRO and Logistics. But for us, important that also in the core of the core, we are moving forward. We also have seen the first but only the first positive impacts of our fleet modernization and the associated product improvements. As you know, we finally were able to certify our Allegris seats also the 787, which is a big part of the 23 new aircraft deliveries we received. As a matter of fact, 7 of these 23 were 787 with now more or less all certified seats across all classes. That fleet alone, Boeing 787 will grow to 32 aircraft by the end of the year, '27 will have a significant impact on our modernization. Allegris, our new product in Lufthansa and SWISS Senses are now underway out of 3 hubs: Munich, Zurich and Frankfurt. Not only we are receiving very positive feedback but maybe more important for you in numbers, we have been able to achieve 12% higher yields for Allegris than for the former business class. To give you an example on business class, that's a big element of bringing up our ancillary revenues, which already went up 15% last year. And I'm pretty sure we'll show you some good numbers for '26 a year from today. Overall, that, of course, forced us to discuss how much we want to make sure that shareholders already participate from this improvement. We decided to increase the dividend by 10% to EUR 0.33 per share, which is a 10% increase, resulting in a dividend yield of 4% and a payout ratio of 30%. With that, let me turn to the traffic regions. I think we all remember Liberation Day last spring, when there were doubts about the development of the North Atlantic, it turned out as expected that the North Atlantic remained strong. And by the way, continues to do so. We'll come back to that later. And we managed to expand and sell capacity on this most profitable market segment of ours by 5%. In the fourth quarter, with an overall capacity growth of roughly 4%, we even managed to slightly increase unit revenues on a currency adjusted basis, which was clearly a trend reversal to the demand situation we saw in Q3. Going forward, I think the backbone of North Atlantic will remain but I think it's already fair to say we will see an increased shift of point of sales to the U.S. This stage where American customers tend to book earlier than European customers in Q3, in Q2, we are almost at a 60% above share of point-of-sale U.S. and obviously below 40% in Europe. Again, due to the later booking patterns of Europeans this will shift a little bit. But again, I'm convinced the trend of last year where we grew our American passengers by 10%, and our European passengers only by 1%, will probably result in even stronger dynamics this summer. Second largest intercontinental area for Lufthansa is not anymore China but by now India, which is also obviously one of the fastest-growing aviation markets in the world. We signed a partnership agreement with our long-term partner, Air India, following just a few weeks after the EU and India had concluded a new trade agreement. We, in this case, includes not only Lufthansa but the German economy, the German business environment, are quite positive and bullish on India. And of course, Lufthansa Group wants to be part of it. But also in South Korea and Japan, where we slightly increased capacity, along with demand, we were able to bring up profitability. And that is also true for South America, which, as you know, becomes more important for us also due to the fact that with IATA, we were able to double our capacities to Argentina and Brazil. The idea for '26 is to grow 6% on intercont and more or less stay flat on cont. And as I said, this, of course, does not include our recent extra sections, we are now in the process of offering. So these numbers, of course, are based on the regular flight pattern, which probably will change due to the short-term demand we are trying to take advantage of. Nevertheless, focused growth will remain our fundamental principle. We've seen the upside of this '25 and we'll probably see more of this in '26. Coming to the next slide. Let me talk a little bit about our obviously unique business model based on the fact of not having the same home market as our main competitors in Paris and London. We will be even more focused on the 4 business segments, and we'll also show them now also in our financial reporting with the 4 strategic pillars we know. Network Airlines will continue to be our core of the core by 70% turnover share. Of course, with Lufthansa Airlines being the biggest part of it. But we will also now be more transparent on our success in the point-to-point business where Eurowings is continuous, not only going strong to defend our non-hub home markets. You all know this is the utmost priority for Eurowings historically, we also see due to the fact that other airlines have been leaving Germany due to the high cost structure, additional market opportunities on the leisure side, we are continuously exploring. Third pillar, Logistics. Not surprisingly, the more unplannable the global economy is, the better for cargo. We've seen a good year in '25. Till will give you more numbers on in a minute. And already, the way things are starting now after the Chinese lunar year with a complete mix up of traffic lanes and supply chains due to the situation at the Gulf, we're probably looking at a good year here as well. And on top of that, new consumer behavior when it comes to e-commerce, I think combined, will make this big. This is a strong part of our company to come. That's even more true for Technik. We all have discussed with you before that '25 due to tariffs, there has been a little bit of a slowdown of our increase of margin and profits, which we don't expect to see again in '26. And obviously, the more or less new part of the Technik business being defense will probably also get more headwinds -- sorry, tailwinds, tailwinds from the unfortunate military developments in Iran over the last days and more to come. So I'm sure we'll be talking this -- we will be talking about this rather more than less in the future. Till with that little call it, 360 and almost hourly dynamic situation where we are, I hand over to you and talk to you in a few more minutes with some outlooks on my side on the strategic path before we are ready for your questions. Till Streichert: Yes. Thank you, Carsten, and also a warm welcome from my side. Exactly as Carsten said, I'll deal with the 2025 looking backwards. And then, of course, looking into 2026 and commenting on our outlook and then Carsten and I will try to answer your questions, in particular, to 2026 as much as we can in the best possible way. But let's first get 2025 out of the way. So 2025, as you've seen, revenue increased by 5.4% to EUR 39.6 billion, enabled by disciplined capacity growth of 3.8% of our Passenger Airlines, strong third-party revenue growth at Lufthansa Technik and as well continued strong demand for air cargo. And while costs developed in line with expectations last year, the cost increases continued to weigh on our P&L, such as a 10% increase in fees and charges or also a 40% increase for emission certificates last year. On the positive side, we did benefit from a lower fuel bill in 2025 and that was EUR 514 million lower than the year before. Overall, adjusted EBIT increased by EUR 350 million to EUR 1.96 billion and our adjusted EBIT margin improved to 4.9%. Please note, due to a one-off tax valuation effect, our positive EBIT development did not translate into a higher net income. Adjusted free cash flow amounts to EUR 1.2 billion, and this is a significant improvement, and this significant improvement was driven by the stronger adjusted EBIT, tax reimbursements and a slightly lower net CapEx. Turning now to our Passenger Airlines. The segment surpassed last year's results despite a challenging environment. Adjusted EBIT increased by EUR 41 million, supported by favorable fuel prices, a significantly lower irregularity impact and a positive earnings contribution from IATA. We are especially happy about Lufthansa Airlines adjusted EBIT improvement of around EUR 250 million. And this reflects the positive impact of the turnaround program. And across all our airlines, capacity grew, as mentioned before, 3.8%, with growth being primarily deployed to the North Atlantic and Continental routes, reflecting the strategic importance of both markets. In the second half of the year, we shifted capacity growth towards intercont markets while streamlining cont traffic. Seat load factor was at 83.2%, slightly higher than 2024 and with a clear momentum towards year-end. As anticipated, yields came under pressure, particularly on short haul and parts of long haul. However, I want to highlight that in our important North Atlantic traffic, unit revenue increased in the fourth quarter by 2.1% on a currency-adjusted basis, confirming the resilience of the demand. Moreover, yield weakness was, to a large extent, compensated by strong growth in ancillary revenues, up 15% for the full year as well as significantly lower irregularity related compensation cost. On the cost side, we have improved our performance throughout the year, while ex fuel CASK still increased by 3.6% in the first half of the year. The increase in Q3 was only 0.5% and the Q4 CASK was almost flat to prior year. This impact of our turnaround measures is important given the ongoing substantial cost inflation in fees, charges and personnel costs. As mentioned before, Lufthansa Airlines is of fundamental importance to us. So I'm happy to report progress. In its turnaround program, we achieved measures with a gross earnings impact of more than EUR 500 million, a clear confirmation that the turnaround is gaining traction. Looking ahead, we expect to measure volume to increase to EUR 1.5 billion by the end of 2026 and to EUR 2.5 billion by 2028. As communicated in our -- on our Capital Markets Day, we are targeting a high single-digit adjusted EBIT margin by 2028 to 2030 for Lufthansa Airlines. The key building blocks of this trajectory are clear: The continued renewal of our fleet, productivity improvements and the combined power of many other initiatives of the turnaround program. On fleet, we expect the Allegris share of the Lufthansa Airlines wide-body fleet to reach as much as 50% by the end of the year. This goes hand-in-hand with an improved yield level, we currently see a 12% RASK uplift from Allegris. On productivity, we will shift further 14 aircraft into our more cost-efficient AOCs, Discover Airlines and City Airlines, City Airlines has recently taken up operations out of Frankfurt and will operate 18 aircraft by the end of the year in total. Discover will operate 32 aircraft, including four A350s. Combined with further measures to improve cockpit and cabin staffing, this is expected to increase crew productivity by about 7% in 2026 compared to prior year. On our 700 turnaround initiatives, let me just comment on some of them. One example is ancillary revenues where we expect a further push driven by the prominent placement of additional services as well as the consistent monetization of the Allegris seating options. Our new cont fare structure will lead to a more personalized offer with the aim to increase customers' willingness to pay. And on the cost side, we will increase operational efficiency and hence, achieve a further reduction as well in fuel consumption. All of this improves financial performance. And in 2026, we expect that we can limit the increase of the Lufthansa Airlines ex fuel CASK to a maximum of half the annual rate of inflation. Moreover, it is noteworthy that this unit cost increase is fully driven by premiumization, hence an investment into value creation for both our customers and ultimately, our shareholders. Ladies and gentlemen, structural improvements do not only apply to our mainline, we also focus on digital transformation on a group level. Let me briefly touch on the progress of our One IT program. One IT is a group-wide transformation program and its aim -- its aim is to move toward a completely unified IT backbone, a common data and AI foundation and an integrated operating model under the recently founded legal entity Lufthansa Group .IO. The objective is clear, structurally lower IT costs while unlocking digital business value. And I'm pleased that already in 2025, the launch year of the program, One IT delivered its first tangible financial contribution. We realized more than EUR 50 million of IT cost savings through quick wins such as contract renegotiations, sourcing optimization and application rationalization. In 2026, One IT will focus on the implementation of structural changes followed by scaling on in 2027. The program targets in total about EUR 200 million of sustainable annual cost savings by 2030. This IT transformation will also enable significant additional business, value for example, ancillary revenues, personalized advertising or cost improvements and customer servicing. And this is why One IT is not only a cost program, but a core enabler of value creation across the entire group. Let me now turn to our Logistics segment. Lufthansa Cargo once again delivered a strong performance in 2025, demonstrating that the business is well positioned in the post-pandemic air freight environment. The revenue growth of 4% was driven by a 5% capacity increase as a result of one additional freighter and increased belly capacity. Strong demand was driven by Asian e-commerce, semiconductors, aviation components and pharmaceuticals, all of them high-margin verticals and therewith putting them into the focus of Lufthansa Cargo. Lufthansa Cargo delivered an adjusted EBIT of EUR 324 million, representing a 29% improvement driven by higher volumes and improved load factors more than compensating a decline in yields. On the cost side, Lufthansa Cargo showed a strong performance, ex-fuel unit cost decreased by around 6% and main drivers were here, lower charter expenses, IT cost reductions and improved crew productivity through optimizing network planning. Looking ahead, we expect for Lufthansa Cargo a clear earnings increase in 2026, building on a disciplined execution of its strategy and the strong market position in special cargo and premium products. Turning to our MRO segment. Lufthansa Technik achieved a 12% revenue growth, with total revenue exceeding EUR 8 billion for the first time, driven by a 23% increase in third-party business. While this was an exceptional top line development, adjusted EBIT amounted to EUR 603 million, broadly in line with the previous year. And this result was achieved despite sizable external headwinds. One of those headwinds came from foreign exchange developments, while the weak U.S. dollar had a net positive effect for our airlines, Lufthansa Technik was impacted negatively with a mid-double-digit million euro earnings effect. Lufthansa Technik was also affected by the U.S. tariffs on aluminum and steel impacting the results by roughly EUR 30 million. But please note that this was already significantly lower than originally assumed due to the swift and successful implementation of mitigation measures. These measures included adjustment to the production flows, renegotiations with customers and optimizing customs processes. These steps contributed to an earnings recovery in the fourth quarter and we expect that the negative effects will diminish further in 2026. In parallel, Lufthansa Technik continued to expand its global footprint. New or growing facilities in Portugal, Tulsa, Calgary and Malta will contribute to substantial capacity additions, particularly in the engine segment. And in 2026, we expect earnings at Lufthansa Technik to increase significantly, supported by normalization of tariff impact, continued growth in the engine segment and the benefits of the commercial initiatives already underway. Turning now to cash flow. 2025 was a year of significant improvement for the group, both in terms of cash flow profile and resilience of our balance sheet. Operating cash flow increased to EUR 4 billion, driven by higher earnings as well as a tax repayment from a German tax audit. CapEx includes the final payments for 23 new aircraft, of which 9 were wide-body aircraft. This was partially offset by 19 sale and leaseback transactions and net CapEx stands at EUR 2.5 billion and is therefore slightly below previous year's level and also below our expectation at the end of Q3 due to a delivery shift of 4 wide-body aircraft into the first half of 2026. And adjusted free cash flow reached close to EUR 1.2 billion, which represents a meaningful increase of EUR 350 million. Looking at our balance sheet. The combination of strong operating cash flow and disciplined investment led to a significant strengthening of our liquidity position, and we ended the year with liquidity of around EUR 10.7 billion, above our target corridor of EUR 8 billion to EUR 10 billion. And we expect this liquidity position to return to the target corridor -- into the target corridor by year-end 2026 as we use these available funds for aircraft, invest and payments. Financial net debt increased to EUR 6.4 billion, mainly driven by the capitalization of leases. And when including our net pension position, total net debt remained stable year-over-year. And as our profitability increased, our leverage ratio improved to 1.8x. We continue to be solidly positioned with an investment grade credit rating and ample financial flexibility to support our fleet renewal and growth plans. Now let's talk about fuel prices, which is, of course, on top of everyone's mind right now. So fuel costs developed favorably throughout 2025 and amounted to EUR 7.3 billion in line with guidance. For 2026, our fossil fuel bill estimate is around EUR 7.2 billion, thereof EUR 7 billion for fossil fuel and EUR 0.2 billion for mandatory SAF. All figures as of last week Friday. These numbers represent a tailwind of approximately EUR 100 million versus 2025, predominantly driven by the weaker U.S. dollar. And as you know, our hedging strategy continues to provide protection against volatility while also allowing us to benefit from price declines. And for the Passenger Airlines, we have already hedged around 82% of our fuel needs for the remainder of 2026. Since last Friday, we have, of course, seen a substantial increase in the jet fuel price, resulting from both higher crude oil price as well as higher jet crack. I will comment on this in more detail in a minute when we talk about our full year earnings outlook. So let's go there. And speaking now about our outlook for the current financial year. This is obviously not easy given the events in the Middle East. On the one hand side, I see the strength of our group and the progress we make in executing our strategy in all the dimensions and also in all the dimensions that we can control. On the other hand, I see what's happening around us and this does have an impact as well on our financials. The bottom line impact will depend on which effects are outweighing the others and also on whether those effects will change subject to the duration of the current situation. Being in this situation for only 6 days by now, obviously, does not provide us with sufficient hard data points to draw final conclusions for the rest of the year. But of course, we have data points from the first couple of days, which we were going to talk -- which we are going to talk about in a minute. Let's go through the building blocks of our outlook. We plan to increase capacity by around 4% and here also in a disciplined way. Clear focus will be on intercont routes where we expect to grow in mid- to high single-digit range while cont capacity will be broadly unchanged. I do expect cost inflation to persist but it will be partly offset by our transformation programs and the ongoing fleet modernization. And on this basis, we expect adjusted EBIT for 2026 to be significantly above the 2025 level, consistent with our commitment to delivering sustainable profitability improvements. Now let me put this into perspective of the Middle East crisis, and let me describe to you what we are currently seeing. One slide before, we've shown you a fuel price forecast based on last week's Friday, and that is the way we always presented to you each quarter, including also the fuel sensitivity, the fuel matrix where you can go along the axis and get an idea how things can move. Now since then, fuel prices have increased and taking a short-term perspective, just for the next 2 months, current fuel price levels mean about a 20% to 25% higher fuel cost for March and April compared to the underlying figures reflected in our EUR 7 billion forecast for the full year. However, for March, the impact -- and again, that's normal, for March, the impact will be further limited as about 60% of our physical settlements for fuel are priced at the prior month level. This does give us additional time to also adjust our revenue management approach. Having said that, broadly, in terms of fuel dynamics, we don't believe that fuel price levels remain in the long run where they are right now. Then we also have impacts from flight cancellations. Since 28th of February, we, of course, have stopped flying into the region. These are 10 destinations. And overall, to give you an idea, Middle East traffic would have represented about 3% of our capacity in the first quarter. For comparison in 2025, it was just about 2%. So you can see that the overall impact is somewhat limited. We estimate about a EUR 5 million earnings impact per week from those cancellations based on lost business and cost of care. On the other hand, we are also observing positive earnings effect. And firstly, since last weekend, more people have been flying with the Lufthansa Group Airlines instead of connecting via the Gulf hubs. Since the weekend, additional bookings on our Asia and Africa routes have by far overcompensated the cancellations we've seen on our Middle East routes. Over the past days, revenue intake for departures in March was about 60% higher than last year. Global net revenue intake for the full year during those days, was more than 20% higher than last year, indicating a positive impact in booking intakes also beyond March. We expect this situation to persist as long as the hubs in the Middle East cannot be fully serviced. Secondly, many people are currently changing their travel plans in the short term. And on this topic, we see the possibility that travel patterns might also change for longer. Potentially persisting -- potentially persisting security concerns around the Gulf region might also lead to more traffic within Europe or through European hubs or U.S. destinations. Thirdly, with more than 80% hedge ratio, we are hedged to a higher degree than many others. This provides us with a relative advantage, especially compared to those who are not hedged at all. And fourthly, a large part of the airfreight capacity in the Middle East is currently affected, about around 18% of global capacity is not available at the moment. This means that also cargo streams are shifting. And Lufthansa Cargo has observed an increase in demand over the past few days. Moreover, we've seen rise in cargo yields of 5% worldwide and plus 35% in the Middle East and Asia over the past few days, even a further yield uplift from these markets is conceivable. More longer term, we might also see more shift from seafreight to airfreight when things are time critical. Therefore, for me, the conclusion or the message is kind of clear. We do control what we can control, and we are obviously closely monitoring what's going on in the world right now. And even in the light of the current situation, we are convinced that we can significantly increase our adjusted EBIT in 2026. However, let me also be clear, the range of uncertainty has increased and there was also the range of possible outcomes. Let's now go back to what we control, that's our CapEx. Our CapEx outlook. Net CapEx is expected to amount to around EUR 2.9 billion, reflecting the planned delivery of up to 45 new aircraft. That's the largest single year fleet expansion in our company's history. And adjusted free cash flow is expected to be around EUR 0.9 billion slightly below last year due to the higher investment volume. We expect 2026 overall, to be a year of continued progress for the group on our path towards our midterm targets and our businesses are well positioned and on a clear trajectory towards long-term value creation. And on that note, knowing that, of course, 2026 will be at the center of our discussion, I believe. I'd like to hand back to Carsten for further remarks on the strategic outlook. Carsten Spohr: Yes. Thanks, Till. And just a few words on, indeed, how do we look into the future, of course, based on what Till and I communicated at the Capital Markets Day back in September, where we announced our medium-term financial targets, you are well aware of by now, centering around 8% to 10% adjusted EBIT margins. First, lever of -- the 4 key levers I'd like to address is obviously airline growth in a profitable way, which means for us more long haul than short haul. We actually want to grow the intercont fleet to 200 aircraft while we keep the short-haul fleet more or less flat. The additional required feed will be provided by coordinating our hub traffic in the future, centrally over all 6 hubs, which will give us a higher share of feed passengers to intercont destinations rather than short-haul to short-haul. At the same time, we're, of course, leveraging the One Group approach beyond this example. We do see a 3% margin uplift from fleet and new premium alone but there's also elements of the loyalty ecosystem and the ancillary push, which will pay into our midterm targets. Last but not least, the so-called One IT, where we're harmonizing the IT network, at least across the 6 hubs in many regards, even beyond our hub and Network Airlines is another example of this second lever. Third, airline cost transformation. Operational excellence focus in '25 has provided the stability I quoted was -- mentioned to you before. Now starting in '26, efficiency will be higher on the priority list. And we do believe, including more modern aircraft, including, of course, lessons learned, and finally, enough staffing at the European and especially German hub airports, we will be able to show that we keep our unit cost despite cost inflation flat in '26 as we already did in the fourth and last quarter of last year. Another element of this will be the fact that we grow fastest in those airlines with the best cost competitiveness, thinking about Discover, for example, and Lufthansa City Airlines. Yes, and last but not least, the so-called fourth lever is the additional focus on MRO and cargo. You know our Ambition 2030 program in Cargo, by which we want to achieve EUR 10 billion of revenue with the 10% EBIT margin by the end of the decade. And also in Lufthansa Cargo probably supported by the recent developments in the Gulf, we are looking to claim the top 3 position globally, again, coming out of top 5. Last but not least, defense was already mentioned, and we strongly believe, again, with current affairs probably creating a tailwind here that defense will be a very stable and highly profitable part of Lufthansa Technik to a higher degree. Last but not least, let's talk about a little bit more about maybe the single most important lever and most impactful lever we have, our fleet renewal. You're aware we're taking -- we're in the middle or at the beginning, if you might say, of the largest ever step towards a more modern and productive fleet. We expect 45 new aircraft this year alone, more or less 1 per week, and there is an unheard number of 27 widebodies among them. That will bring us to a new tech quota across the whole group of 1/3 with obviously resulting cost advantages and productivity gains. Also, we see some light at the end of the tunnel of the Pratt & Whitney engine issue. As far as it looks now, we'll be able to bring down the number of grounded aircraft to less than 10, which is 30% less than last year. Coming to an end, getting ready for your questions, you might share my view that the Lufthansa brand is an iconic brand in our industry for many, many years now, celebrating our 100 anniversary today. No doubt, we intend to maintain this in the future. And part of that must be the further improvement of the customer experience and be an example of Starlink, which we are looking to offer to our customers as of Q2, be it new lounges in almost all of our hubs and flagship lounge to be opened soon in JFK, where all of our group airlines or more or less all of our long-range group airlines are serving the airport at least once a day, where overall, the further integration of IATA creating more synergies is a step towards that product improvement for our customers. So overall, again, with all the uncertainties existing, we're looking optimistically into '26, and now -- look forward to your questions and comments. Thank you very much. Operator: [Operator Instructions] And the first question comes from Jaime Rowbotham from Deutsche Bank. Jaime Rowbotham: Two questions from me. Firstly, Carsten, I wanted to ask about these puts and takes, pros and cons of the current unfortunate situation. Till did a great job of running through some of them. Interesting to hear bookings to Asia Africa over compensated for cancellations to the Middle East. I just wanted to focus it maybe on the transatlantic, given it's so important for you, your U.S. competitors aren't hedged, so they are likely raising fares and hopefully, you can follow that a bit. At the same time, though, I wonder if fares are going up at just the wrong time in the sense that some people might be nervous to travel at all, which could have a downward impact on demand. Maybe you could just flesh out either what you've seen so far or what you think happens next insofar as that's possible. Second one for Till. Thanks a lot, for clarifying what might happen to fuel for March and April. I just wanted to ask, if possible, about the full year. So on the fuel slide, you tell us you as of last Friday, $71 for Brent, $26 for the crack spread to get to EUR 7.2 billion. Obviously, Brent now $88 and the crack spread about $100 a barrel. So it's costing more to refine than to buy the oil. Hopefully, that won't last. But the forward curves are pointing to a scenario that's not even covered by your sensitivity table where the jet crack part on the x-axis could double or triple versus what you show. You also mentioned in the footnote, the hedging you've got is part on gas oil and part on Brent, so you don't actually have the crack spread hedged. With that in mind, have you had a chance to do any scenario analysis on what a mark-to-market type fuel bill might look like for all of 2026? Till Streichert: I'll go second first and then maybe on the puts and takes, Carsten, if you want to add a little bit. So Jaime, absolutely. I mean, this is top of mind question how this is going to evolve. And you are quite right in terms of hedging. We've got a split and you know that we usually hedge blend with about 35% and gas oil as a proxy for jet crack with about 50%. And it's true that, obviously, jet crack has moved up. You can almost say off the chart of our fuel matrix on the right-hand side. So here, I would just highlight, and again, mathematically, you can calculate all of that, and we have done that. And the impact, obviously, if you would imagine that it stays for the full year is of size. On the other hand side, I also don't believe that this situation will going to stay there for a long time. And you can see also, and I'm sure you've looked at the volumes that have been traded driving ultimately the crack price, the crack spread. It's on very low liquidity. And therefore, there was -- I would also say a bit on the back of what President Trump yesterday evening said to possibly also escort tankers through the Strait of Hormuz. Ultimately, I do believe that this is not going to stay for long at these levels. And of course, leading now into the other side of the equation, it's true that the hedge levels do we have give us a solid upward protection. And of course, this differentiates us versus others that follow a non-hedging policy. And therewith, I do expect that also yields also or in particular, on the North Atlantic have got the potential to go up and increase. Carsten Spohr: Yes, Jaime, Carsten here. I think you already kind of put it in your question. There are pros and cons, and I think it's very difficult right now to quantify them exactly after just a few days. Again, cost of cancellations exist, probably like EUR 5 million per week is our best estimate. But at the same time, as you pointed out, we have a relative advantage on the fuel cost on the one hand. I think there's also historically a certain move of bookings towards highly trusted brands in times of crisis, we are definitely SWISS as the [indiscernible] Switzerland and Lufthansa to a certain degree, we probably benefit from. Then, of course, the question is, is the overall potential softness in travel for us, European carriers overcompensated by the shift of travel from carriers in parts of the world where people don't want to go now towards us. Hard to quantify at this point but not completely probably unexpected that will happen to a certain degree. And as I said before, there will be flexibility in our network as we are now within days putting capacity into China, into South Africa into Southeast Asia, of course, we're happy to also reallocate capacity throughout the whole summer if needed. If, for example, the demand tool from Asia become so strong that the next best route tool from Asia is more profitable then the weakest route on the North Atlantic, we would move the airplane. But I think it's way too early to discuss that now. Till Streichert: Let me add maybe just 1 additional point, if I may, just to give you a bit of a holding line as well on the RASK side. If we would have spoken 10 days ago and talked about RASK expectation for the first quarter, I would have said currency adjusted, so ex-X positive but including FX, slightly negative. Now as we speak today, with the net booking intake that we've seen over the past few days, this has shifted clearly to the positive side. And I expect that the RASK for the first quarter should reach a positive territory, even including the unfavorable FX headwind in comparison to prior year because remember, obviously, the U.S. dollar started to depreciate just in the second quarter last year. Operator: And the next question comes from Stephen Furlong from Davy. Stephen Furlong: Carsten, Till and Marc, congratulations on the results. Carsten, in the prepared remarks, I mean, you talked about the industry being more resilient to crisis than it used to be. Could you just amplify that? And then maybe just talk about the Allegris products and talk again about the kind of rollout of that product. I know there's been a lot of kind of news, comments and reports about some delays and then not delays and what the revenue kicker you're getting from that excellent product? Carsten Spohr: Yes, Stephen, thanks. I think has said this numerous times about the industry being more resilient before the unfortunate events that the Gulf started a few days ago. Because, unfortunately, already before that, we have more military conflict in the world than ever before since 1945. And whereas usually, when there's a conflict somewhere, bookings usually collapse because people are afraid to fly and want to stay home, this hasn't happened, not only not the last days, let's even go beyond that. We have seen, as you well know, record demand in the industry basically since COVID. And what is the background of this. I share the view of some of my American counterparts that for consumers, traveling has been higher prioritized since COVID as before. That's 1 element. We definitely don't have a period of overcapacity due to the shortage of engine and plane productions at the OEM level. And I think last but not least, you see more wealth around the world, not only in the saturated markets but also in other parts of the world, which airlines serve. I think all that combined -- by the way, the last one is why especially the premium classes, as you know, are booming now for many years. So I think all that combined shows that even though the world has not become more stable, our industry has. And now to also the last days might add to this because imagine this would have happened 20 years ago, I think you would see a very different booking environment than what we are seeing since last weekend. Allegris, yes, we had significant delays in certifying the Boeing aircraft with our Allegris seats who have a different manufacturer than the seats in our Airbus wide-bodies are manufactured by. We wanted to split the risk many years ago and also the capacity of none of the seat manufacturers was big enough to provide all of our wide bodies. But now these airplanes are coming in quick time, as I mentioned, 9 are here already. By the end of the year, we have 36, I think, as I said in my opening remarks, we have 28 seats in the 787, of which 25 are now certified as the end of March. And there is now only 3 seats, which will not be able to be sold by the end of March. And we even now decided to pull that 1 week forward giving us additional revenue opportunities by already having the seats open for a flight a few days before the end of the winter schedule. But that's only the 787 topic. And as mentioned also by the end of the year, in the Lufthansa Airline, 50% of our seats will either be Allegris or in case of the 380 aisle access seats. So we're another manufacturer. So this is now in full swing. We mentioned before, we have 12% to 13%, 14% higher yields on these seats than on our regular business class seats. So that's big and also the ancillary revenue increase, which we're expecting for '26 to a high degree, will come from Allegris versus the first time we actually charge for different seat types in business class, so that will also be, I think, tailwind for '26 and beyond. I hope that answers your question. Operator: And the next question comes from Alex Irving from Bernstein. Alexander Irving: I'll ask 2, please, both around technology. First of all, on IT, you signed in the last quarter for a new IT platform to implement across 9 of your group airlines. There's an IATA paper that's been around for a while that talks about a 2% to 3% improvement to RASK platforming like this. Is that the right way to think about the upside for Lufthansa Group? Or is the incremental gain less given your work to date in areas like continuous pricing, for example? Second question is on the distribution side of things, specifically, how are you approaching decision about whether and how to sell in large language models? Are you planning to engage directly through an API or to rely on existing infrastructure GDSs, travel agents and continue to pay commissions? Do you have a view on when you're likely to sell your first trip through an LLM? Till Streichert: Okay. I'll make a start on the first one, and then I'll see how far I get on the large language model based selling. Look, I mean, as you know, quite right, we want to embark on the journey of implementing on the one order path, it will be a long-term journey for the industry and also us but it is important to be amongst those ones that joined the pack at the beginning. And we do believe that there are clear benefits on the IT infrastructure on the one hand side because, I mean, as you know, the P&R standard, e-ticket standard and the miscellaneous data standard gets basically consolidated into a single order that is more efficient and drives back office efficiency on the other hand side, quite right. Once you've got this type of let me say, Amazon order type model, marketing and retailing obviously benefits as well. I am aware that IATA quotes these figures of 2% to 3% RASK benefit. To be honest, I find it quite early to take a view on this. But I do believe that principally, there are benefits also on the revenue side from better retailing. I think particularly for us, what I believe is good. We obviously come with scale when you think of passengers that we've got. And whenever you touch these large-scale transformations, when you get it for done at scale, it does give you normally a greater benefit. Look on the distribution, to be honest here, and large language models, I have to admit I'm not that deep into the status where we are. What I can tell you is that, clearly, we are advancing on many fronts in the digital arena to improve customer servicing, through large language model-based trainings, bots. And I don't know what the digital adoption right now is, but we are making progress on that front. But happy to come back and have a dedicated conversation on this. Operator: And the next question comes from James Hollins from BNB Paribas. James Hollins: So Till, on the turnaround update, maybe I always see a slightly in charge of this, so maybe I'm wrong. But as you see it, where have you outperformed, underperformed so far on the turnaround program? And you may not choose to answer this but if I take the Lufthansa Airline EBIT growth of EUR 250 million, which was a gross benefit of EUR 500 million. Is that 50% net versus gross benefit, a good indicator for the full year '26 EUR 1.5 billion? And then probably for Carsten and I know there's lots going on but I thought I'd better mention the strike you had in Q1. Maybe you could update on the cost of that where we are on some of the open CLAs and whether this current situation tends to lead to a bit of a backtrack from some of the union aggression? Till Streichert: Yes. So I mean turnaround, first, to give you my kind of assessment, I am happy with what we have achieved last year. Again, it's not easy to get such a large-scale program off the ground. And the EUR 500 million gross figure, as you know, has come from several initiatives. We've got EUR 700 million in the entire funnel. Several of them obviously have gained traction and delivered in 2025. Let me say, where were we strong and where maybe things will be moving in the future towards. Point where we were clearly strong and successfully executed was operational stability. You remember that was one of our big topics at the beginning of 2025. Get stability back into the production, into the system. That is good for our customers, was good for our customers. You can see that in NPS, customer satisfaction everywhere. And also in the significant benefits on the so-called IRREG cost charges and foregone revenue that is sizable. And that's a clear proof point but also on many other smaller initiatives. And again, I wouldn't speak about EUR 700 million initiatives if it wouldn't be quite granular. We've made good progress. What's ahead of us is clearly the focus on productivity. And this is why I made it also a point on my chart on my slide. And there, we will continue to move capacity into our lower-cost AOCs, Discover Airlines, City Airlines. You can see the aircraft that we are moving and also starting operations for City Airlines from Frankfurt and there with big focus for 2026 and beyond is productivity. Now to your question, gross versus net. Look, it's hard to say. To isolate it on a program level because we do have, obviously, underlying cost inflation drivers from a salary point of view, from a fees and charges point of view, and therefore, it's a bit of a harder ask to say how this -- how the gross is directly translated into a net. But I do see us on track to get the EUR 1.5 billion in 2026 delivered. Carsten Spohr: Yes. On the strikes, the number you're asking for day of strike like the 1 we just had, we probably estimated to be around [ EUR 50 million. ] You might see that's a lot less than what we had before. Why is that? Well, there's less support this time for the units going on strike, which results in more volunteers to continue operation. So therefore, we don't ground the whole fleet as we were forced to in the past but keep our most profitable routes in the area that's reducing the cost. Looking ahead, we are in constructive talks both with our cabin union, as a matter of fact happening today, and Verdi, our ground staff union and also for the cockpit union, actually, we have now 2 corporate units in Germany but for the 1 which is affected here for Unabhangige cockpit, we have offered even in a moderated fashion to talk about the bigger scheme of things, which right now has not been agreed to yet but the individual pilots very much want to stop the shrinking of the main airline, which becomes more and more obvious, as Till just pointed out with our shift of airplanes. So I'm quite optimistic that eventually, that shrinking on behalf of the pilots should come to an end, which will require us to talk on the bigger scheme of things. So I don't see any strike action like the one we saw in 2012 to 2016 or anything because there, we just now too much what the members want and believe that the answers, of course, can only be a reduction of the cost disadvantage of the main airline to the other AOCs in Lufthansa, whereas a strike itself and even the things they're asking for in the strike, and we are not willing to give in the airline with the lowest profit would increase the distance and the disadvantage on the cost side. So this will not be a long-lasting, I think, exercise. Operator: The next question comes from Harry Gowers from JPMorgan. Harry Gowers: First question, maybe just related to Jamie's question on the fuel hedging. Can you just confirm, do you fully hedge the crack component and that's all included within your comments on the March to April monthly impact? I think you said that gas oil hedging is a proxy for jet crack, and so does that type of hedging basically fully cover the price increases we're seeing in the crack spread market at the moment? That's the first one. And then second one, just on the ex-fuel unit costs. You have this comment around 2026 ex-fuel CASK is expected to be half of inflation for Lufthansa Airlines? Can we extrapolate that for the entirety, I guess, of the kind of new network airline segment? Is there any reason why those other airline businesses won't be reporting a similar cost results? And maybe just related to that, if I can squeeze 1 in, what are you assuming for the union agreements? And staff cost inflation in your overall kind of cost and EBIT guidance for the year? Till Streichert: Okay. Maybe a comment on just union agreements. I'll leave to you, Carsten, and I'll go on the first question -- on the second question first, ex-fuel unit cost. So let me be clear what I said is indeed for Lufthansa Airlines, half of inflation is our target. Now overall, as you will remember, we stayed away from giving a group guidance on CASK overall. So we limited it to a specification just for Lufthansa Airlines. Of course, all of the other airlines, our business units have got CASK saving programs in place but I don't want to give an overall cost guidance for the entire group. Going back to the first question, which is a fuel hedging, once again, we hedged gas oil 50%. So 50% is the element of our hedge. Our hedging composition included 35%. And gas oil as a proxy that is strongly correlated to jet crack but it's true currently, Jet crack is very high. We believe that the spread between jet and gas oil will come back to normal levels. And I think the spread currently is inflated mainly because of the illiquidity in the market. Carsten Spohr: Yes. Harry, if I got your question right, you wonder how union agreements would impact our guidance. So I think it's fair to say they will not impact our guidance. Where we have talks, we kind of know what we are willing to offer and how that would result in financial outputs. Of course, it's in our planning. And in the last strike we had for the pilots on the mainline, we told them that as long as the main line is not reaching its targets in terms of profitability. And that actually is the lowest profitability airline in the group. There is no any financial room for maneuver to pay even higher pension benefits, which are already higher than the ones in the other airlines. So there's also no room for additional costs here. That remains is, of course, the cost of strikes. But at the same time, the more strikes there are, the less airplane will be in that airline. So I think there's almost like a natural hedge if you want to use the term from our fuel environment. So the answer again, to your question is that there is no impact on the guidance to be expected from the current labor conflicts. Operator: And the next question comes from Axel Stasse from Morgan Stanley. Axel Stasse: I have two from me. On the first one, coming back on fuel, apologies. How much of that fuel inflation can be passed on? Obviously, you mentioned your exposure to jet and gas oil crack. But obviously, the U.S. guys are not hard at all. So if fuel goes up by 10% approximately, how much of that can be passed on? Can we assume half of it? The reason why I'm asking is because I'm slightly surprised to see you we're comfortable of providing an EBIT guidance without a lot of visibility in the near term on fuel. And I therefore assume you guys feel comfortable passing that on. So just trying to understand the extent of it. And then the second question is can you provide maybe an update on TAP, what are the latest news here? And how comfortable are you on TAP? Till Streichert: I'll take the first one, just on fuel once again. Two comments I would add in addition to what I already explained. I mean, first of all, ticket prices are made at the market level but we do see already increased yields also on the North Atlantic and the fuel price surcharges are being implemented. Now how much of that exactly I can't tell you but the situation is dynamic, and therefore, I think it is just not prudent to give you a statement on that. I think if in the future, fuel prices remain elevated, clearly, everyone and in particular, those ones that follow a no-hedge strategy or have got less hedge protection will need to pass on fuel prices. And that, in my view, provides an opportunity and allows for equally pass-through from our end of additional fuel cost. We have done first price increases already through the fuel price surcharge and have implemented them. And sorry, and just 1 more thing, Cargo. I wanted to speak about both segments. Cargo obviously works on a pass-through model as well. And there -- there is literally -- it's not on a daily basis but within a week, prices get adjusted for the input cost of fuel. Carsten Spohr: Yes. Actually, there's nothing really new on TAP. As you know, we are in the process because we believe there would be a perfect addition to our multi-hub network, also due to the fact that we are currently the weakest on the Latin American market. The overlaps are less than they would be for others, which probably has an impact on the antitrust approvals to be obtained. At the same time, there are so many open questions about the process and the outcome that it's impossible at this point to answer is creating value for our shareholders or not. If it doesn't create shareholder value, we will not do it. We don't need it. If it ends up to be a win-win of Portugal TAP and us, we will maybe see more progress here. Nothing else to add. Operator: And the next question comes from Muneeba Kayani from Bank of America. Muneeba Kayani: Firstly, Till, if I can just clarify your comments around the impact from the Middle East on kind of near-term March, April. Did you say that the higher bookings demand that you're seeing for Asia, Africa and all is compensating just the cancellation costs? Or is it compensating cancellation costs and the jet fuel higher costs on the unhedged portion? So that's my first question. And then secondly, just going back to the transatlantic and Carsten, in your experience, how long does it take for kind of U.S. airlines to adjust the capacity in such shocks on the oil price, given their lack of hedging? Till Streichert: Mona, let me take the first question, albeit I might not give you a totally conclusive answer on that. But yes, first of all, and let me go on the net booking intake and just to run you through that. And I've really taken the view on kind of what numbers do we see right now. And since last Saturday, our net booking intake has developed strongly, exactly as I said. And when we compare these net bookings which we have received between Saturday and Wednesday, end of day, for the month of March, this figure is about 60% higher than 1 year ago. And my second statement on the inflow side was, if I compare same period, those few days, net bookings for the rest of 2026, this figure is 20% higher than 1 year ago. So clearly, what I said on the negative side, the cost of the cancellations of the Middle East, we have comfortably covered. To your question now, does that cover as well the fuel cost. Look, it really depends on how long the fuel prices remain elevated because I've equally given you a view on March and March as such, while I said, nominally 20%, 25% higher fuel bill as we obviously settle the physical fuel bill with a month's delay, you can actually knock half of it off for a month, okay? So it's not that straightforward to say how all-in looks like but there are puts and takes. And I think we should clearly see both of them, albeit I'm not giving you a net figure right now because I can't. Carsten Spohr: Yes. Muneeba, Carsten, you asked for my experience, and I think the things I experience is twofold. First of all, the speed of reaction is a function of the impact of -- on the traffic. Think about 9/11, it took us all only days to come up with a different schedule when the skies reopened than the schedule we had before because it was so obvious impact was huge. I think this is a different situation here. But none of us knows how long the war will last, how long the impact will last, at which degree but I think it's worth to say that all of us have become much better in reallocating capacity to demand, also due to the lack of aircraft in general. What does that mean? When you have a route which is not performing well anymore, you can more easily find another route to provide profitability and value for your shareholders than in the past where maybe you already had loss-making routes and couldn't find something else because otherwise, we would have done it before. So I think with the profitability where it is also for the international business of the U.S. carriers, we're going to see a very market-focused reaction on both sides of the Atlantic, which fuses our optimism -- fuels our optimism, sorry, for my language. Operator: And the next question comes from Andrew Lobbenberg from Barclays. Andrew Lobbenberg: Can I ask about IATA, we haven't spoken about that beautiful pretty picture on the slide of the planes? How are you thinking about the decision to take majority in general? And then how are you thinking about it in the context of the unsettling events in the Gulf? And then can I just come back to the scale of current bookings? You've given us really precise figures on how bookings have come in for those destinations in the range of the Gulf that have gained. What has happened to booking inflows for short-haul Europe? What has happened to booking inflows on the North Atlantic in that short time period? Till Streichert: So look, first of all IATA, on it, maybe I'll just divert the sac, and just IATA has done a good 2025. Organically, they've reached breakeven on adjusted EBIT, which is positive, which is great. And you can actually back-calculate what also their overall net income was. Our 41% contributed with EUR 90 million. On our side, I do see many benefits of calling and integrate -- calling early and integrating IATA faster. We've made very good progress throughout last year. But as you can imagine, with the call option being open to be decided in June, we will keep our options open, and we continue to assess and then take a decision nearer by the time and will communicate. Secondly, on the different travel on the -- sorry, your second question was on Europe and North Atlantic in terms of sentiment, travel sentiment. We actually have so far not observed worsening of travel sentiment or also bookings in intra-Europe or North Atlantic but of course, it's to be seen. Operator: And the next question comes from Ruairi Cullinane from RBC Capital. Ruairi Cullinane: What have you done to Middle East capacity this summer? And linked to that, should we expect the EUR 5 million per week cost of cancellations to tail off even if the conflict doesn't come to an end soon? And then secondly, are you any less comfortable hedging fuel through Brent and the gas oil and leaving spread to jet fuel unhedged? Could you consider that in the future? Till Streichert: First of all, Middle East, I've given you an idea of the sizing. Last year, it was about 2% of our capacity. In Q1 normally that would have been 3%. Remember, last year, there was also a bit of on and off of flying into the Middle East, and this is why it was 2%, and we had it increased it a little bit. So I think what I've given you now is a EUR 5 million negative impact while we are not flying will rather go down because it does include, of course, a view on the cost of care. We took a view now of also those additional costs that is just on the ones where we actually need to care -- where we need to support, while also passengers guests are staying still need to be repatriated or flown back. If it stays long, we will clearly reallocate capacity. And then even this element of what I called negative impact or lost business from Middle East will obviously go away. And therewith, I would say this is not so much of an impact medium term. In terms of strategy of hedging, look, I think I've described it probably to the fullest extent I can do on this call. And we -- our hedging strategy is clearly designed through options and that's different to swaps where we want to participate, also in the downwards movement and therefore, I'm comfortable with the strategy that we have so far in place. Operator: And the next question then comes from Antonio Duarte from Goodbody. Antonio Duarte: The first one is on ancillaries. So 15% growth year-on-year, clearly doing very well, namely with Allegris rollout. Could you give us some color here where you see these terms of ranges going forward? And my second question is turning to the MRO. As you said, a bit of a margin compression seen in '25, a bit of recovery expected from your defense, et cetera. Would you be comfortable with the full recovery from the margin seen in '24? And any color on that would be great. Till Streichert: Okay. Let me make a start just on ancillaries. We have explained what we've seen on Allegris. And the additional seat options and also ancillary sales overall. If I split that, I do believe that the ancillary sales as such has got substance to continue. But of course, it's hard to be at a double-digit rate going forward, just a law of big numbers at one point in time. Therewith, I would like to go back to the Allegris element within the ancillaries. And here, we clearly see the benefit of selling the different seat options. And the main driver of that is obviously the number of aircraft coming with the Allegris cabin into it, and that has got runway and gives us longevity to continue to grow the ancillary sales category. Carsten Spohr: We always call it the big 3, Antonio, baggage, seating upgrades. And that, I think, will continue to drive ancillaries up as Till explained, with Allegris, of course, a special push. MRO, you know that in '25, MRO was suffering almost -- as the only part of the Lufthansa Group under tariffs, which, as you well know, for airplanes and engines don't apply. These tariffs, as we all know, have been ruled illegal by the Supreme Court. So at least they don't go forward. Probably there will also be reimbursements as we all know. So that will be definitely 1 of the reasons why we believe we can not only get back to '25 -- sorry, '24 margins in MRO, but we will continue to go towards the 10% we have planned for the end of the decade. And I'll leave that defense element out, which as I mentioned before, we'll see, I think, another support for the strategic development of Lufthansa Technik, even though it doesn't necessarily monetize short term. But again, we are committed to our 10% margin in '23. And some of the ramp-up costs we had in for Canada, for Portugal also won't repeat themselves. So overall, my optimism continues. Operator: Ladies and gentlemen, this was the last question. I would now like to turn the conference back over to Marc-Dominic Nettesheim for any closing remarks. Marc-Dominic Nettesheim: Thank you very much for your questions, for your interest and for the lovely discussion. We are happy to continue this from the Investor Relations side. We wish you a lovely afternoon and talk to you soon. Bye-bye. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect. Thank you for joining, and have a pleasant day. Goodbye.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Ensign Energy Services Inc. Fourth Quarter 2025 Results Conference Call. [Operator Instructions] This call is being recorded today, Friday, March 6, 2026. I would now like to turn the conference over to Mike Gray, Chief Financial Officer. Please go ahead, sir. Michael Gray: Thank you. Good morning, and welcome to Ensign Energy Services Fourth Quarter Conference Call and Webcast. On our call today, Bob Geddes, President and COO; and myself, Mike Gray, Chief Financial Officer, will review Ensign's fourth quarter highlights and financial results, followed by operational update and outlook. We'll open the call for questions after that. Our discussions today may include forward-looking statements based upon current expectations that involve several business risks and uncertainties. The factors that could cause results to differ materially include, but are not limited to, political, economic and market conditions, crude oil and natural gas prices, foreign currency fluctuations, weather conditions, the company's defensive lawsuits, the ability of oil and gas companies to pay accounts receivable balances or other unforeseen conditions, which could impact the demand for services supplied by the company. Additionally, our discussion today may refer to non-GAAP financial measures such as adjusted EBITDA. Please see our fourth quarter earnings release and SEDAR+ filings for more information on forward-looking statements and the company's use of non-GAAP financial measures. On that, I will pass the call back to Bob. Robert Geddes: Thanks, Mike. Good morning or afternoon, everyone, wherever you're at. Some introductory comments. The fourth quarter 2025 provides a great deal to discuss, both in terms of reflecting on the full year's performance and looking ahead to the opportunities and challenges that lie in front of us. The Ensign team completed the 2025 year with results that exceeded analyst estimates, both for the quarter and the full year. And most importantly, we're able to clip off an additional $80 million of debt in 2025. The Canadian business unit led the way with year-over-year EBITDA gains, while the U.S. battled great headwinds. In 2025, the team was successful in getting operators to fund roughly half of the $48 million in upgrades executed in 2025. These rigs are all tied up now on long-term contracts. The team ended the year expanding our forward long-time contract book to $1.2 billion of forward contract coverage with 60% of the fleet contracted forward. Our international business unit, which operates in Venezuela, Argentina, Australia, Oman, Bahrain and Kuwait had a share of ups and downs, which I will expand on later. For a deeper dive into the fourth quarter and full year '25, I'll turn it over back to Mike. Mike? Michael Gray: Thanks, Bob. Ensign's results for the fourth quarter and 2025 year-end reflects the benefits of our diversified operational geographic footprint. With the recent volatility in commodity prices, and -- the outlook is constructive and the operating environment for the oil and natural gas industry continues to support relatively steady demand for oilfield services. Total operating days were up in the fourth quarter of 2025 by 1%. The United States operations saw an increase of 14%, while the Canadian and international operations reported a decrease of 8%, each when compared to the fourth quarter of 2024. For the year ended December 31, 2025, total operating days were down by 3%. The United States operations saw an increase of 2%, while the Canadian and international operations saw a decrease of 3% and 15%, respectively, compared with the year ended December 31, 2024. The company generated revenue of $418.8 million in the fourth quarter of 2025, a 2% decrease compared with revenue of $426.5 million generated in the fourth quarter of the prior year. For the year ended December 31, 2025, the company generated revenue of $1.64 billion, a 3% decrease compared with revenue of $1.68 billion generated in the prior year. Adjusted EBITDA for the fourth quarter of 2025 was $107.5 million, lower by 5% than adjusted EBITDA of $113.4 million in the fourth quarter of 2024. Adjusted EBITDA for the year ended December 31, 2025, was $389.8 million, a 13% decrease compared to adjusted EBITDA of $450.1 million generated in the year ended December 31, 2024. The 2025 decrease in adjusted EBITDA is due to the decreased year-over-year activity caused by customer consolidation, economic uncertainty and volatile commodity prices. Depreciation expense for the year decreased by 3% to $345.4 million compared to $355.8 million for the year ended 2024. Interest expense decreased by 23% for the year ended December 31, 2025, compared with the same period in 2024. The decrease in expense compared to the prior period is the result of lower debt levels and reduced effective interest rates. Offsetting the decrease is the negative exchange translation on U.S.-denominated debt. G&A expense for the fourth quarter of 2025 was $14.5 million compared with $13.1 million in the fourth quarter of 2024. G&A expense totaled $55.5 million for the year ending December 31, 2025, compared with $57.4 million for the same period in 2024. The G&A expense decreased for the year due to nonrecurring expenses incurred in the prior year. Offsetting the decrease is the annual wage increases and the negative 2% translation effect on converting U.S.-denominated expenses. Net capital expenditures for the fourth quarter of 2025 totaled $35.3 million compared to net capital expenditures of $22.3 million in the corresponding period of 2024. Net capital expenditures for the calendar year 2025 totaled $183.7 million, consisting of $48.1 million in upgrade capital, $146.3 million in maintenance capital, offset by proceeds of $10.6 million for equipment disposals. The company has budgeted maintenance capital expenditures for 2026 of approximately $161.4 million and $32.8 million of selective upgrade capital, of which $24 million is customer funded. Debt repayments against debt totaled $80.3 million for the year, but we saw a total net decrease by $105 million due to foreign exchange as well as debt repayments. With the reductions in adjusted EBITDA, the stated debt reduction target of $600 million will now likely be achieved in the first half of 2026. The revision is the result of the current industry conditions and the reinvestment of capital expenditures. If the industry conditions change, this target could be increased or decreased. On that note, I will pass the call back to Bob. Robert Geddes: Thanks, Mike. Let's start with a quick reflection by region for 2025. The fourth quarter was quite active for us right across all our world as we methodically grew rig count in the high-spec triples and high-spec single rig type categories in North America. Each area had different market dynamics -- excuse me, each area had differing market dynamics at play. In Canada, we were up 3% on activity year-over-year whilst being up year-over-year on EBITDA. This is a result of our Canadian business unit continuing to focus on delivering high-spec rigs with high-performance crews. In fact, one of our new ADR HSS set a record drilling 2,500 meters in a 24-hour period. In the U.S., the market forces were much tougher and keeping rigs active meant spot pricing was falling. Rigs that have consistent work remained active and with little rate degradation. Once again, the U.S. operations team outperformed their peer group and placed 10 Ensign rigs in the top 20 across the entire U.S. for outstanding performance metrics. Our international business unit was relatively calm through 2025, and then that changed quickly at the beginning of the year, more on that in a moment. Current operational update starting with Canada. Whilst industry was down 10% year-over-year in the first quarter '26, we peaked at peaked at 51 and enjoy 43 drilling rigs active today in Canada. As we head into breakup, we expect to run 20 or so rigs over breakup similar to the prior year. We are currently upgrading one of the high-spec singles we recently brought up from California and expect to have it contracted long term for rates in the mid-20s all in. That rig should be spudding its first well by the summer. The value proposition is still valid for the client as we continue to perform by improving drilling efficiency offsetting any rate increases. Also because the rig equipment is being run closer to its technical limits more and more, rate increases are quite justified to offset the higher operating costs. We see strong support for the high-spec triples in Canada, and they operate in the low 30s all in. We continue to see the Canadian market adapt our EDGE drilling rig automation more and more every quarter. This provides a high-margin bolt-on incremental revenue stream of anywhere from $1,000 to $2,600 a day across the high-spec triples generally, and now we are deploying on to our high-spec singles. We continue to address any upgrades that operators request by assisting the capital upgrade be paid for by the operator with a notional rate increase or we adjust the day rate incrementally in order to achieve a 1-year payout or less on the incremental capital with the incremental rate increase. In the U.S., we mentioned in our last quarterly call, our rigs continue to drill more footage per day, albeit we are finding that the double-digit rig efficiency gains in years past has slowed into the single digits as we get closer to the technical limits of the rig equipment. This is good news and an indication that we are at or near a trough. Operators now focus on continued duplication of their best wells. Again, we mentioned on our last call, our position hasn't changed. Most operators are starting to look at Tier 2 acreage as we move along into the future. We also saw the U.S. hit record oil production close to 14 million barrels per day. So with the technical limits of rigs establishing somewhat of a ceiling and with Tier 1 acreage diminishing, we will need to see rig count move up if we were to hang on 14 million barrels of oil production. Current oil prices certainly helped us construct. So in the U.S. today, we have 38 high-spec Ensign rigs, mostly high-spec triples out of our fleet of 70 high-spec ADRs operating across the U.S. from California to the Rockies and down into the Permian. Our busiest operating area is, of course, in the Permian, where we run roughly 26 rigs daily and which we own 9% of that market share. We continue to increase our market share in the U.S., the result of our high-performance rigs and crews in concert with our EDGE drilling solutions technology. We saw our California business unit almost double its rig count in 2025 from 5 to 8, and we expect that we will stay at that level through 2026. Our directional drilling business unit, which is essentially a mud motor rental business that utilizes proprietary technology continues to provide some of the best motors with high-quality rebuilds and the longest runs in the Rockies. We're expecting that '26 to be very similar to '25 there. On the international front, we have a fleet of 25 high-spec rigs that operate in 6 different countries around -- sorry, outside of North America, of which 13 of those 25 are active today. At this point in time, our 7 Middle East rigs are still operating under either standby with freeze or on full operational rate. This is, of course, a day-to-day situation, which may change at any point in time. The area is what we call on yellow alert with safety of the personnel and security of the assets most important. In Kuwait, we have been successful in contract extensions on both 3,000-horsepower ADRs, taking us out into mid-2026. We started back in Venezuela and now have both rigs operating. The only 2 drilling rigs operating in Venezuela, I will point out. As you know, there is no lack of excitement in Venezuela these days, and we'll see how this area develops. In any case, Ensign has a product to fill operators' demands, and we have the on-the-ground experience that very few have in the area, thanks to our strong Venezuelan team. In Argentina, we have both our ADR 2,000 horsepower super-spec triples under contract with demand possible for additional rigs in the area. In Oman, the 2 rigs we have undergoing extensive upgrades are on budget on time with the first rig now operational and the second rig planned for April commissioning. This will add to the 3 ADRs currently under contract in Oman and bring us to 5 rigs active in the country once the last rig is commissioned. The current Middle East situation will, of course, create possible delays in the commissioning of the fifth rig in Oman, notwithstanding the general concerns in the Middle East region today. In Australia, we have 4 rigs active going to 5 by the summer and with strong bid activity, which we feel will take us to 6 rigs by year-end. Moving to well servicing. Back in North America, we have a fleet of 85 well service rigs in North America, 38 in Canada, of which we operate 15 to 20 on any given day, plus we have 47 well service rigs, primarily in the Rockies and California where we operate with high utilization rates consistently. Our U.S. well servicing business unit, which is, again, focused primarily in the Rockies in California, has come out of the gate stronger than last year and is expecting a stronger year than 2025. Our Canadian business unit focuses primarily on the heavy oil market and has been very steady with rates increasing basically in line with cost inflation protecting margins. Moving to the technology side, our EDGE AutoPilot drilling rig control system. In 2025, we increased our EDGE autopilot installs by 15% and now have our EDGE AutoPilot systems on 60% of our rigs globally. Our EDGE drilling rig controls product line continues to expand with increasing adoption of products like our ADS, automated drill system, which we doubled the number of rigs we have deployed this technology in the 2025 year. In the last call, we reported that we successfully beta tested our Ensign EDGE ATC auto toolface control in conjunction with the DGS. This paves the way for seamless control of automated directional drilling for those operators who utilize remote operating centers and utilize in-house DGS systems, direction and guidance systems. I'm happy to report that we are now fully commercial with our EDGE ATC and are charging that out on 5 rigs today. We have also initiated the development of an Ensign EDGE state-of-the-art DGS, directional guidance system. With the help of AI, our development team was able to develop a DGS ready for beta testing in less than a year and for a fraction of the cost of other DGS developments. Happy to report that we're now beta testing this on our super-spec -- one of our super-spec ADR 1500s in the U.S. With this, we'll be able to provide a complete and comprehensive drilling control system offering all the bells and whistles. With that, I'll point the call back to the operator for questions. Operator: [Operator Instructions] Your first question comes from the line of Keith MacKey from RBC Capital Markets. Keith MacKey: Maybe just to start off, Bob, if you ask me where will oil be in 1 year from now? If you asked me that about a year ago, I would have said not -- I wouldn't have said $90. But at the same time, we're hearing from most E&P operators in the U.S. and Canada that it's not necessarily going to affect the activity levels with prices even being where they are. So question for you is, what's your view on that? How long do you think it takes of high prices before we start to see an activity improvement in the U.S. based on the oil price spike that we've been seeing of late? Robert Geddes: Yes. Well, I agree with your summary there, basically that oil companies will be takers of this blip in oil pricing. I don't think it will affect activity too much if it -- but I would suggest though that if it continues for 6 months, I think it will start to attract capital, and people will go after more drilling. That's been the plan. But the question is, as you point out, I mean, last week, would I have thought oil would be $90 today? No. But -- so that's our sense on it. Short term, I see very little impact. But if it stays for 6 months, I think there's enough capital going after it that will make a good return that people will start to drill more for sure. Keith MacKey: Yes. Got it. And what about pricing? Like maybe activity doesn't change in the next couple of months, but does it give you and your competitors a bit more of a leg to stand on when you go to renew contracts now that customers have healthier cash flows? Like do you think this is at least positive for pricing? Or is it neutral for pricing, would you say? Robert Geddes: Well, I'd say it's -- our pricing is always dictated by the supply of drilling rigs. And -- but there's no question, as we're getting more calls and getting more bids, we tend to bid up. So we'll see. We'll see, yes. Keith MacKey: Got it. Okay. And just one more for me on Venezuela. Certainly, you're the only ones kind of working there now with the 2 rigs running. Can you just give us a bit of a summary on the state of the environment there with respect to the rigs that you have there, how many rigs you have, how many could work, what types of bidding or at least inquiries that you're getting now? And what's your sense of how many rigs competitors might have on the ground as well? Robert Geddes: Yes. Well, that's a big question. Just to unpack that a little bit. We've got 2 drilling rigs that have been active. I mean they're great rigs. I've been down there recently. There are, of course, over the last 5 years, a lot of the U.S. competitors have disappeared and chased away or whatever, and there hasn't been much activity. So the rigs that are on the ground are not in very good shape in any shape at all outside of the rigs that we have running. We've got kind of 3 rigs, 2 drilling rigs and kind of a deeper workover rig in the country. But we've got -- or not properly, we've got assets that we can deploy from the U.S. that can meet the needs, and we're under current conversation with some clients on that. Keith MacKey: Got it. Do you have an estimate of how many rigs you think could be deployable from the U.S. to Argentina in your fleet? Or is it too early... Robert Geddes: Venezuela? Venezuela or Argentina. Venezuela? Keith MacKey: Yes. Robert Geddes: Yes. It's -- we -- well, let's put it this way. We've got capacity. We could send 10 if we needed to. But it's -- I think Venezuela develops slowly. There's a lot going on, but it's very active. A lot of OFAC licenses have been granted to various operators, and they've been in touch. But I think it develops slowly. It's a tough place to do business as one can imagine. But right now, it seems to be a little bit of a party compared to what's going on in the Middle East. Operator: Your next question comes from the line of Aaron MacNeil from TD Cowen. Aaron MacNeil: Just more of a clarification one on the Kuwait rigs that are rolling off contract mid this year. Is this something that you reasonably expect to get renewed again once the contracts expire? Or at this point, are you trying to find sort of new homes for them? Robert Geddes: Yes. The operator has provided some indication that they might have another well behind each one of these rigs. And it's typically how they move along. They'll get close to 60 days from when the rig is going to be complete and they find another well. That's how we've been operating in the last year or 2. So they provided some indication, but we don't know with everything happening in the Middle East, everything is happening here. Aaron MacNeil: Got you. And then we saw Tourmaline cut capital earlier this week, not materially, but ARC also recently removed Attachie Phase 2 from their long-term plans. How are you thinking about sort of that deep basin and liquids-rich Montney outlook in Canada, maybe starting to see some cracks in the armor given gas prices? Like any updated views there? Robert Geddes: Yes, good question. Yes, gas prices are not helping. I got to think that liquids pricing has got to be helping. But yes, I'm not too surprised. This is the -- the dilemma Canada has, of course, is takeaway capacity, and that's another conversation. But yes, we are victims of gas prices for sure. Aaron MacNeil: Fair enough. And then maybe I'll sneak one more in to build on Keith's question. In the event that you would mobilize rigs to Venezuela, what's the rig spec that makes sense for the market? And how would you think about sort of staffing and sort of other sort of soft issues in... Robert Geddes: Yes. Well, yes, we've been in Venezuela over 25 years. Almost all of our people in Venezuela are Venezuelans. There are some people coming back. We've got a strong franchise there. The type of rigs depends on the area where we operate. They're typically 1,000, 1,500 horsepower type rigs, mostly 1,500. That's kind of the rig for the Orinoco Belt. Operator: Your next question comes from the line of Josef Schachter from Schachter Energy Research. Josef Schachter: First one on the debt side. You knocked down $100 million to that $918.6 million. How should we be looking at debt going forward? You mentioned that in the commentary that the $600 million target should be reached during 2026 first half. If you go back -- if we go back to periods when you had $80, $90 oil, let's say, post war, [ 28 ], [ 29 ], and we get there, in 2012, you had EBITDA of $561 million. In 2014, you had $537 million. If you look at and say something like you do have EBITDA [ 28 ], [ 29 ] of $500 million, would your target be to get to 1:1 debt to EBITDA? Robert Geddes: Mike? Michael Gray: Yes. I mean, ideally, that [ 1 ], [ 1.5 ] is really the target. So yes, I think once we kind of get to that, then conversations would start to change. But yes, that would be the target that we'd be looking at. Josef Schachter: So about $100 million a year then for debt reduction is still something to keep in mind for models? Michael Gray: Yes, for sure. We're still laser-focused on the debt reduction. Josef Schachter: Super. At what point would you be starting to look at increasing the amount of NCIB versus debt reduction? Is there a number that you need to reach $700 million? Is there some number out there that you need before you could start looking at the mix of allocation of capital funds flow? Michael Gray: There's a minimum liquidity on the credit facility that we have that we'd have to meet first, then we probably -- like I said the conversations at the Board level would need to take place on what would happen. But like I said the next year or 2 years are really focused on continued debt reduction. Josef Schachter: Okay. Last one for me. Given we're seeing insurance companies pulling insurance coverage for shipping, is there any concern about your rigs in the Middle East, given they're in the zone of drone attacks that insurance is -- could be an issue or the cost could get up to the point where putting the rigs in the field doesn't make sense? Robert Geddes: Yes. We've got -- we're not going to -- we don't talk in detail about our insurance programs, but we do have insurance. We're -- we've been operating in the Middle East for long periods of time, and have good protocol on keeping most importantly, personnel safe and then equipment. Where we're at in Oman and Kuwait, there's been a little bit of action, but not much. We're basically both green in that area. Bahrain or what we call yellow alert. But the rigs are -- in Oman and Kuwait are still drilling and in Bahrain, we're on basically standby with crews. So -- and it's changing every day. So tomorrow may be a different story. Operator: Your next question comes from the line of Tim Monachello from ATB. Tim Monachello: I just wanted to start, I guess, with margins. They came in a little bit above my model. And I was thinking perhaps this might be an impact of either rig mix and business mix, but maybe also just the impact of adding some of these EDGE automation systems to the fleet over time. Do you have an expectation for what the margin lift could be in sort of an otherwise flat environment for pricing just based on those EDGE automation systems and other technology additions? Robert Geddes: Yes. We've got -- I mean, we're building our EDGE rollout at about 15% per year. We have about 60% of our fleet today that is active. We have [ 100 to 160 ] rigs. So we're adding about 10 per year with anywhere between $1,000 to $1,500 a day on average. And it's all margin. It's all margin. So you can build that into the model pretty quickly there. Tim Monachello: Okay. That's helpful. And then -- most of my questions have been answered. But I guess I want to dive in a little bit into what's going on in California. It sounds like there's at least some rumblings of more oil and gas friendly policies being pushed in California. Are you seeing any changes to, I guess, your customers' expectations or activity levels or expectations for what their activity levels will be going forward in California? Robert Geddes: A little bit, yes. I mean we -- we basically are running 8 rigs now. We're down to about 4 or 5 there at the beginning of '25. So it is changing. It's opening up a little bit, and I'll say that tongue in cheek for California, but they're starting to realize that they do need a little bit more oil and gas. So operators that are in the area are able to get some permits that are allowing them to get after some drilling along with some P&A activities, which we benefit from in our service rigs. We also run a bunch of service rigs in California. We're the biggest -- one of the biggest in California as well on the service rig side, the biggest on the drilling side. So yes, it's California, but it is a little more happy face than sad face, I'd say. Tim Monachello: Okay. Do you think you'll see stronger activity levels in California on average in '26 than '25 or at least... Robert Geddes: I think we stay steady -- yes, I think we stay steady at 8 through '26 is my thinking. Tim Monachello: Okay. And then Ensign has historically been a little bit underrepresented in gas basins in the U.S. Are you making any progress in moving into gas basins or getting more activity levels in the Haynesville or talking to customers in that basin? Robert Geddes: Yes. Yes. We're seeing some bids coming out into the Haynesville, the Eagle Ford. We've got a few idle rigs that can take those bids. But yes, it's slowly moving for sure. I mean gas prices down there a little different up here, right? Tim Monachello: Okay. And then just in terms of Venezuela and the prospect of perhaps moving some idle equipment into the region for the next few years. I guess, what type of contract structures would you require for that? And what type of assurances would you be looking for to be able to deploy incremental capital or equipment into that region? Robert Geddes: Yes. Well, it's -- Venezuela is still a risky market. Let's -- it's been derisked to some extent, but it's still a risky market. We would look for long-term contracts of at least 3 years to 5 years and with some coverage on getting us in and getting us out. We work in U.S. dollars in Venezuela, obviously. And that's about all I want to disclose, but we've been working there for 25 years. So we know how to run the business there and the commercial side of it well. Operator: [Operator Instructions] Our next question comes from the line of Parvin Mamedov from Equinox. Parvin Mamedov: Congrats on the release. I had 2 [ assigned ] questions. So if I look at the international rigs that you have, I think it's around like low teens and then half of it is in the Middle East. Should I think about in terms of revenue also roughly similar breakdown, 50% of international revenues are in the Middle East and the rest is split between other markets? Robert Geddes: Mike, do you want to handle that one? Michael Gray: Yes, that would be appropriate. I said that would be appropriate. Parvin Mamedov: Okay. So sorry, I didn't hear that. And in terms of the CapEx, I expected lower growth CapEx considering that it is -- a big chunk of it was customer paid, but I don't really understand where that number shows up. How should I think about the customer paid portion of the CapEx? Do you -- is it already netted out of the growth CapEx number? Or are you going to get it this year? Like where does it show up in financials? Michael Gray: It show up through the revenue line over the course of the contract. So that CapEx is the growth CapEx number. And then the customer funded one, depending on structure of the contract will flow through revenue. Operator: Your next question comes from the line of John Daniel from Daniel Energy Partners. John Daniel: I just have 2 quick ones on Venezuela. Can you speak to just the AR collections over the last couple of years? And then has anything changed post Maduro leaving? That's the first question. And then the second would be, would you be more likely in terms of faster incremental deployments of equipment down there? Would it be workover rigs or drilling rigs? Just your thoughts. Robert Geddes: Yes. Well, let's answer the last one first, drilling rigs. In our perspective, there's some local workover rigs that I suspect the local companies will jump on to because lower capital required, less complex equipment. As far as the commercial side, since Maduro left, nothing has changed as far as our relationship with our client and how we're getting paid. And we'll see how it evolves. We've got a pretty good contract structure that we've been using for a period of time that is within the OFAC restrictions. So yes, Maduro leaving hasn't changed anything other than it appears to have more blue sky ahead of Venezuela. But on a day-to-day basis, there's not much change. Operator: There are no further questions at this time. I will now turn the call back to Mr. Bob Geddes, President and COO. Please continue. Robert Geddes: Thank you. Well, the outlook for the drilling industry remains constructive, supported by obvious stronger commodity prices and the ongoing need for reliable global energy. At the same time, the sector continues to operate within a volatile macroeconomic and geopolitical backdrop. That's obviously an understatement today. In this environment, operators will remain focused on efficiency, capital discipline, high-performance drilling contractors like Ensign, whom also have a global footprint and are capable of delivering fast, safer and more cost-effective wells on a consistent basis. We will stay active well into the future. And with that, I'll close off, and we'll look forward to our next call in 3 months. Thank you. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Eduardo De Nardi Ros: [Audio Gap] Webcast for our results, the fourth Q for this year. It's a pleasure to be with you. This event will be presented in Portuguese with simultaneous translation into English. And the links to both languages can be found on our website, the Investor Relations website. I'd also like to say that all participants will be able to watch the broadcast online as listeners. And after the introduction, there will be a Q&A session as usual and you can send your questions to our e-mail. With us today, we have Magda Chambriard the President of Petrobras, Álvaro Tupiassu, the President of Gas and Energy on behalf of Angelica Laureano, our Executive Director of Energy Transition and Sustainability; Clarice Coppetti, Executive Director of Corporate Subjects, Claudio Schlosser, Director of Logistics. Fernando Melgarejo, the Financial Executive Director of Investor Relationships, Renata Baruzzi, Director of Engineering, Technology and Innovation and Ricardo Wagner, Director of Governance and Compliance; Sylvia Anjos, Executive Director of Exploration and Production; and William França, Director of Industrial Processes and Products. So now I will give the floor to our President, Magda Chambriard for her initial considerations. Magda de Regina Chambriard: Ladies and gentlemen, good morning. It's a pleasure to be with you to present our results for 2025. And for the fourth Q of the same year. We are extremely proud of our results, and that's why I say, and I repeat that if you place your bets against Petrobras, you're going to lose and we keep saying that. Having said that, let's now start up by saying that at 2025, as you saw, was an unprecedented year in terms of the production growth in Petrobras. As you could see, over the course of the quarters, there was a constant increase in production, which is the result of a technical, secure, well-executed job done by our teams which work in an absolutely integrated manner, guaranteeing efficiency and the best possible use of our ore in our facilities of, our beds in our facilities. First, I'd like to remind you that the brand did not help us. The oil prices had -- they plummeted, but it was the growth of our production. That allowed us to mitigate this drop in production. That was a big drop in the oil prices, but we delivered an additional 11% in terms of production in 2025 when compared to 2024, achieving and surpassing our goals has been a constant thing in the company. In terms of refining capacity, platform production and oil exploration goals or goals around the allocation of new products to new markets. So I want to highlight a few of our records. The Buzios field platforms surpassed the operated production milestone of 1 million barrels per day in October 2025. And therefore, it's a goal that was surpassed before the deadline, the Atapu, and Sépia fields also reached 1 million barrels per day, and we are proud to say that this happened on December 31, 2025, showing that the Petrobras team is heads on 24/7. We're repeating into in Atapu, and Sépia, the historical milestone we reached in 2019. When it comes to nonrenewable energy, we should pay attention to this field, it was a declining field, a huge field that have been declining since 2019 that was able to go back to production levels making Petrobras proud to have 2 oil fields that produce more than 1 million barrels per day in the pre-salt sector and more oil means more cash flow, more investment capacity, more taxes and more dividends. We are proud of having surpassed these goals. We've been working hard to achieve them and to surpass other goals, and we'll move forward, accelerating deliveries whenever we have the opportunity with a full focus on safety, operational excellence and capital discipline. A recent example of this efficient approach was the conclusion, the completion of the anchoring of P-79. P-79 was the latest platform to arrive in Brazil in the last few days of this year. And after arriving, it was anchored and a record-breaking period of 12 days with 26 anchoring systems connected once again proving that we operate with excellence, planning, integration across the teams in everything we do. P-79 is already moored. And soon, it will start to operate. If we look at 2025, I need to highlight that we delivered our facilities before the deadlines. We delivered the contracts for refineries below the intended price and with that, we've been -- every day, we've been producing more. We've been producing better with fewer resources. And this is Petrobras' constant search for excellence. We used to say that tomorrow needs to be better than today. And today, undoubtedly has been better than yesterday. We also had great news about our oil and gas reserves. In 2025, we incorporated 1.7 billion oil barrels, which allowed us to achieve the highest number of proven reserves at the company for the last 10 years. We're proud of this milestone especially because last year, we achieved a record-breaking production levels, record-breaking exporting levels. And nonetheless, we guarantee a record-breaking level of reserve replacement. Our reserve replacement level and our generation of proven reserves and production have been much higher than those of our peers across the industry. In 2025, as I said, in terms of oil exportation -- exporting, it was 675,000 barrels exported per day in a year. In the last quarter of the year, the average was of almost 1 million barrels per day, which is the result of our logistic efficiency in relieving our platforms and a continuous work towards developing new markets. When I referred to almost 1 million barrels exported in the fourth quarter of 2025. I'm proud to say that it was almost because it was 999,000 barrels per day. We almost hit the 1 million mark, developing new markets, logistic efficiency to allow for these exporting levels, new high-quality products sent to the market refineries achieving a utilization factor of 92% with almost 70% of the production being comprised by diesel gasoline and QAV, which are our highest added value by products, which contributed hugely to value generation and to our sales. You can see that in spite of the drop in the oil prices, we delivered robust results with the production -- with the drop in production mitigated by the increased production and by the excellent performance of our refineries and by the expansion of the markets that our most valuable products. As I said, we sold 1,747,000 barrels per day worth of byproducts in the internal market, 1.43% higher than the same year -- the same period of the previous year, and that was fostered by gasoline and QAV that accounted for 74% of our sales. The sales of QAV aviation fuel saw an increase of 6% in the year, reaching the best performance level of the last 6 years. We keep on expanding the S10 diesel production, a high value-added diesel, and we've been advancing in the production of renewable content fuels. Our diesel containing 5% to 10% of renewable content is a reality that's being increasingly accepted by our market. We started by producing a sustainable aviation fuel SAF at the Duque de Caixas and Henrique Lage Refinery. At President Bernandes, we started the contracts for the construction of this first plant dedicated to the production of SAF and green diesel. In addition to that, we, for the first time, delivered in 2025, a bunker with renewable content to the Asian market. I've had the possibility to tell you that in the previous quarter, but we're making good money by offering bunker or navigation fuel with a 24% content of renewable fuel in the Asian market. It's a good amount of money with all of the batches having been sold quickly at high levels. In the gas market, we also had great news. The second module of the Boaventura Complex unit for processing natural gas started to operate last year, increasing the total processing capacity of the unit to 21 million cubic meters per day. We reached the milestone of 6.6 million cubic meters per day in terms of gas volume contracted in the inflexible modality. This is what a free market looks like, doubling the client database of Petrobras while still keeping our excellent service levels. This means that Brazilian companies keep on believing and betting that Petrobras is their main natural gas provider in Brazil. We will still have big growth opportunities with value generation moving forward. We've been able to combine a high-quality portfolio with high returns with an administration strategy based on discipline and capital increased operational efficiency. Petrobras is imbued with a strong purpose, which is to make this company increasingly bigger, growing along with Brazil, delivering to a Brazilian society and its investors, be they state-owned or private, the best the company has to offer. We are building a company that is profitable, increasingly diversified and prepared to lead a just energy transition as well as prepared to fight the volatility of such an unstable oil market as the one that we are now facing, generating return for our shareholders and wealth and development for Brazil. I want to thank you all for your trust, and I reiterate that Petrobras' commitment is towards an even better future for the company and for Brazil. Before wrapping up, I want to say it again, if you place your bets against Petrobras, you're certainly going to lose. I'm proud to say that. Thank you for your presence. And now I'll give the floor to our CFO, Fernando Melgarejo, who will have the honor to disclose on our behalf the financial results, which we're all very proud of. Thank you. Fernando Melgarejo: Thank you, Magda, for your introduction. I want to greet all of the directors and everybody that's watching us on this webcast, which discloses the results of the fourth Q of 2025 and the yearend closing for 2025. As President Magda said, we had an unprecedented growth in the oil and gas production in the company, which reinforces the quality of our assets as well as our capacity to have a strong cash flow generation even in face of challenging scenarios. Let's see how this reflected in our financial results in the next slide. First, let's talk about the external environment. The average Brent in 2025 was $69 per barrel, a 14% drop compared to 2024 and well below our expectations. These are factors that, by their nature, are outside of our control. What we can and should manage is our resilience in the most diverse scenarios. For that, we demonstrated the company's management capacity to extract the maximum potential from our assets. Later, we'll talk about the management levers and projects that boosted production. Our adjusted EBITDA reached $42.5 billion without considering exclusive events. The amount is $43.8 billion, which is in line with the previous year. Net income reached $19.6 billion without exclusive events, it's at $18.1 billion. Here, we left out gains from exchange rate variations and other factors that do not have a cash effect. In other quarters, exchange rate variation negatively impacted the balance sheet. This time, the impact was positive on the corporate result, reflecting the appreciation of the real against the dollar. Finally, in terms of operating cash flow, even though we are facing a scenario of a plummet in the Brent, we generated $36 billion in operating cash during the year, maintaining the results at the same level as last year, challenged by a 14% drop in Brent, which demonstrates that our result is robust, sustained by quality assets with high returns and rapid cash generation. This slide shows how we delivered these results even though there was this drop in Brent. In 2025, we recorded a growth in the sales of derivatives in the domestic market of totaling 1.7 million barrels per day. I wish to highlight the 5.2% increase in diesel sales, a result that reinforces our competitiveness and capacity to meet the demand of the Brazilian market with profitability. We achieved a refinery utilization factor of 91% with 68% of the production being comprised of higher value-added derivatives such as diesel, gasoline and QAV. Another important aspect is that 70% of the oil processed in our refineries came from the pre-salt, which contributed to the generation of higher value derivatives, reduction of emissions and to our logistical optimization. This result is aligned with our commitment to sustainability and environmental responsibility. A key factor for the offsetting Brent falls is what we achieved in 2025. We exceeded our target. So we have an x-ray of this 11% increase of our production in 2025 and the new production of the pre-salt had a vital role in these results. Buzios still delivers more than expected with productivity levels that are very high. In October 2025, [indiscernible] platforms reached a record of 1 million barrels of oil a day. In the Tamandaré, as you know, is now the platform with the highest production in Brazil with over [ 240,000 ] barrels a day. The platform reached a record of instant flow rate of 270,000 barrels a day. We have no records of a similar level -- production level worldwide. In Mero, we hit another record, [ 650,000 ] barrels, and we increased our operating efficiency everywhere between 2024 and 2025, we reached an increase in efficiency of about 4 percentage points, and this represents additional production of 100,000 barrels of oil a day. This efficiency gains is equivalent to a startup of a new production like the Maria Quiteria and the Jubarte oil field. In other words, we're delivering a new platform -- production platform with just this efficiency increase. So that means more oil with the same assets. And with that result, we want more. We are committed to doing more with less. So -- and that is for everyone here, all the officers here, our employees. That's why we have programs for operating efficiency and also to reduce losses that can be avoided. This shows our teams have reached a new efficient operating efficiency level at Petrobras. Next, please. From the beginning of our management, we have put efforts into changing the behavior of what was found in our investment in the previous years. Until 2023, we invested about 70% of our CapEx. And now recently changed in 2024 and 2025, our focus was on a profitable production increase. Our investment impacts much more than the deliveries of 2025. And that means our long-term commitment. For example, the tie-in of 77 oil wells. That was a historical milestone before the top number was 57. So we over -- more than doubled what we had before. We also reduced the risk of delays and increased the likelihood of anticipation, and this is something we've already discussed before about anticipations and forecast of anticipations. This is crucial for us to reach our production growth on our business plan. Next, please. This is why 84% of our investment was allocated in exploration and production, as we can see. So 11% in RTM and 2% in low carbon energy. In other words, [ $17 billion ] in E&P with the best portfolio in the world. We'd also like to stress that the cost of our execution projects are in -- we're in control of that. We should know that all these anticipation of projects that is something we always work for. We've always avoided as we can see on the table, a full life CapEx of our current business plan projects are slightly lower than the same period in 2025,'29. Next, on this slide, we have great news that we announced at the beginning of the year about our reserves. We added [ 1.7 billion ] additional reserve barrels, and that led us to have the highest reserves volume in the last 10 years. So -- and that's between December 21, 2025. And the replacement rate was 175%, even considering a record production in 2025. And the ratio between probable reserve and the production is below -- above what we expect, above what our peers are. So we have low cost, and this will be our -- remain our priority. Between December -- on December 31, 2025, we had $69.8 billion that our gross debt. We should highlight that over 60% of our debt, in fact, 62% comes from leasing, the platforms also ships and probes that's part of our debt. In 2025, the Almirante Tamandare recorded $2.6 billion in debt and the Alexandre de Gusmao, another $0.4 billion -- sorry, $1.1 billion. So on our webcast, we should remind you that these new leasing installments lead to production-generating assets. In other words, it generates income. The 2 additional platforms added 270,000 barrels a day in capacity only for Petrobras. When you look at our financial debt, we're still working on our debt management. Along 2025, we want the lowest debt profile. And I'd also like to highlight very successful market -- capital market operations that took place in December with our bonds that became more attractive and also liability management operations in quarter 4 with some pre-banking prepayments in banking. So we had reductions in our debt from 2025 to 2026 and our -- next, please. This quarter, the Board of Directors approved a detailed report for the payout of BRL 8.1 billion, BRL 0.62 per share that were paid in 2 similar installments in May and June. This strategy is to generate value and to conciliate investment in high-yield projects. And then we can remunerate shareholders in a competitive fashion. With regard to what Petrobras is giving back to society, it cannot be held in a single slide. Everything that is produced in this company, every platform, refinery, power plant, laboratory for every social project generates consequences for many layers of society. We want a short summary that can cascade down our Brazilian economy. So we start with investment. In 2025, as we mentioned, we invested over [ $20 billion ], increasing -- an increase of 22% with regard to 2024. We're committed to speeding up everything that we can to generate return to our investors and to society. This investment led to over 300 jobs -- 300,000 jobs. That's about 5% of Brazilian investment. Another example is BRL 277 billion. That's what we paid, including tax royalties and special interest to government, state and local governments. We also distributed BRL 45 billion in dividends, BRL 17.6 billion for the controlling group, and we also allocated BRL 2 billion approximately in social environmental investments, sponsorships and donations. These are some examples of our multiplying effect in Brazil. Finally, I'd now like to stress that we have high-quality projects that will deliver growth -- both growth and profitability. The entire Brazilian society as well as our shareholders will enjoy long term with all these benefits. I'd also like to stress that we focus on executing our business plan from 2026 to '30. We have 3 fronts. First, capital discipline; number two, greater production; and number three, higher efficiency levels. This is what we will keep seeking throughout 2026. We want results and also economic development for this country. So this is the end of my presentation. Thank you. So all the top management is here, all the directors, officers are here to answer your questions. Eduardo? Eduardo De Nardi Ros: Thank you, Magda and Fernando. We will now start our Q&A session. The first question comes from Rodolfo De Angele of JPMorgan. Rodolfo De Angele: So I think every analyst is entitled to a single question. I'd like to discuss some of your, earnings in further detail of quarter four. But as I cannot, I cannot ask a long question, I'll just ask about your current scenario. In other words, what's going on in the oil and gas industry, considering the conflict in the Middle East. We've had questions by our clients on how the situation is, especially with regard to fuel. So how is Petrobras preparing to work in this moment of uncertainty and also highly volatile prices? So now I'd like to hear from you, from Petrobras' top management, how you see your supply situation. Do you have any prospects, any strategy about prices? Can you give us your views? Is there anything going on in exports? Is it possible to increase the use of refineries in the short run? So these are some of my concerns that I can ask of you, especially short-term concerns. Magda de Regina Chambriard: Thank you. I'll start by answering the question, and then I'll ask the other officers to also give their answers in refining and finance. Yes, undoubtedly, this is a high geopolitical instability. So at this moment, we want to make sure that the company is ready for any situation, anything that may happen. So if it's USD 85 per barrel, we need to be prepared. If it's USD 55, we need to be equally prepared. I'd just like to remind you that we started last year with an oil price that was higher than $80, and we finished the year with less than $60, so that was $59. And the company delivered its results and showed that it has remained resilient and faced this price variation accordingly. At the beginning of the year, this volatility was again very high as a result of the war. But we still keep or stick to our internal policy, which remains solid. We looked at the oil and derivative pricing without transferring this volatility to the Brazilian domestic market. And this is something we've been doing several times. Last year, we delivered a great result in terms of prices. So when Petrobras looks at international qualities and the appreciation of its products and also considering its own space, in other words, how it is in the Brazilian market. This is not a concern anymore. This is an equivocal I've had many similar questions this week. So this was okay when the price of oil decreased. Will this also work when prices increase exponentially as we see it now? Yes, it will. We have no price -- internal policy of price fluctuations. There's no discussions on this matter. As for routes, we will have an explanation in further details in a minute, but we really need to keep exporting what we need to export our refinery or import what we need importing our refineries still have a growing processing capacity. Our manager, William -- Officer William will talk about that. And our cash is still on our focus. We're really concerned about ensuring that this company remains resilient, that we respect our capital discipline and that we reduce costs. We're talking about $85. A few years ago, it was $59. And now those that mentioned $55 next year. So we are indeed working hard and checking all these variables, and we want to ensure that the company remains absolutely prepared to face any scenarios that might come up along 2026 and 2027. I'll now give the floor to another director. And the second one will be [ Fernando ] who will talk about the performance of our refineries. I'd also like to remind you that when it comes to exploration production and connection between oil wells, we are ensuring increasingly greater production and our target is to have increasingly more oil wells and also to optimize our -- the production and extraction of our deposits. Everyone is working hard and together to deliver these results. So can you explain a little more about this global market, Schlosser? Claudio Schlosser: Yes. Thank you, President Mrs. President. Yes, the company has this strategic plan. So we are indeed prepared for a Brent range that is quite wide when you consider the short -- and that in the long term. Now in the short run, our situation is highly unexpected. I think we've never had such a scenario. So the regions that export 16 million in oil and an additional 5 million in petroleum products, this region will be closed. Of course, this has a huge impact. We take snapshots at different times, 10 days ago, for instance, what people said, they were talking about $50 a barrel or a surplus of 4 million or 5 million barrels available. So -- and then it all changed. So we have different focuses at different points. There are also consequences to this. When we have, for example, Brent. So the first is when you no longer have this production of oil and petroleum products. It's as though the market froze. Oil was not being paid, and we have 2 or 3 days without oil trading. That was the initial impact. So we know that we know how that works and the market is now expected to change prices or adapt to the new pricing. We have many ships that were trapped. There's also a set of ships that are unloading, so shipping -- or freight values are now adjusting. So in the short run, let's look at our snapshot again. Our current snapshot is when -- as for our oils is that this means a favorable netback to Petrobras. So we have greater margins. So when it comes to oil, I would also add the fact that the markets that we supply, they're outside of the conflict region. We're not in the Gulf region or any other region where there's a conflict. All of our flows go towards India, Europe and other areas. So we're outside of this area, which is a good position for the company. If you look at the oil, we're looking at a more interesting netback for the company in terms of shipping. If you compare Petrobras with other companies in the world when it comes to freight, Petrobras is also in a privileged position. If you look at the international market, the companies are more or less working with 5% of their own fleets and 95% with other contracts. And Petrobras is with a -- in a much better position in oil exploration, we have more than 30% of rate allocated to long-term contracts, which is also an advantage and the market average doesn't even reach 10%. So we're very well positioned in that regard. So for -- that's what I would have to say about the -- about oil. When it comes to refined products, Petrobras is having no difficulty meeting its goals. We work with an optimized business plan. We optimize all of our assets, and we have very robust assets for that, be they terminals, refineries, pipelines. So we optimize that, and we optimize the more attractive export -- importing products. And we've been able to meet our goals and the imports are in line with our plans. In gas, we -- in gasoline, we are exporting it. In LNG, we are also exporting it. We talk to the market, and there's a relevant level of importing being carried out by distributors. And the vessels that were coming towards Brazil are still coming to Brazil. And we'll get here. If you look at the entire scenario, the business plan of Petrobras and the other players is in line with our previous plans. I'd also like to say that when it comes to supply, in terms of supply, Petrobras is committed to its clients. In Brazil, Petrobras is not the only player in the supply side. We have other relevant players in Brazil. So this is our perspective when it comes to products and refined products. The long-term perspective, as I said, is well covered by the strategic planning and the short-term view has to be done on a snapshot-by-snapshot basis. Every day is a different day. We do a constant assessment and obviously, we make use of the best netback opportunities, be they related to oil exporting or more profitable imports. So this is -- these are the details of the short-term planning. We covered basically everything along with our President. In terms of refining, we're already using the logistic planning for the first Q. And the idea is that we ended the year with 91% of foot in FUT and we'll close the first Q with 95% with a very good use of refined products. We have a few scheduled downtimes, especially in 4 refineries this year and replan will be revamped and expanded, but with the monitoring of the units, we are able, if necessary, to extend the campaign period of refineries, increasing the production of the refined products. And if necessary, we're also going to do that. So we're working in a synergy with the logistics and commercialization area. And as we said, we've had an increase in the utilization factor, which is very good. It's a benchmark from a global perspective. I would say the biggest reference is strategic planning. There are no changes in that regard. We are seeking efficiency, also reducing our balance Brent to $59, as we said. And all of these optimizations are being looked into by the directors, and they can be reverted into good operational results for the company. Well, I'm talking about pricing. The business strategy of Petrobras was created for times like these where there is a huge volatility as we are seeing in the market, a huge volatility coming from unexpected facts, and this is what it was created for. The business strategy of Petrobras provides this robustness to the company when it comes to conducting its business. Eduardo De Nardi Ros: Thank you, Magda, Fernando, Schlosser, Emilia. Before we take the next question. I forgot to say -- let's limit the number of questions to 1 question per analyst, please. Lilyanna Yang from HSBC. Lilyanna Yang: First, I want to congratulate you on the greater transparency of information. And my first -- my question is the oil price is much higher than the Brent that you have in your budget, the one that outlines the investment plans. If the oil prices are still high, like that. Can you tell us what is the priority allocation of the cash flow that would be generated in excess of the budget for the first half. Just to give you a hint of what I'm looking at is -- what are the investment projects out of the $10 billion that have not been approved or the ones that you said that you want to approve but the final investment decision could be postponed. What -- or which of these projects are in a more advanced approval stage and does that include Braskem, for instance? Magda de Regina Chambriard: Thank you for your question. Great to hear you again. Our priority is capital discipline as usual. We'll always be very careful in all of our decisions. It's something very recent. The entire world is still assessing its full effects. No one is fully clear as to what is going to happen, the new Brent price levels and/or even if that applies to the short or long term. What we've discussed before, including with you and your team, is that we always focus on the scheduled investments, both in terms of our base CapEx, our target CapEx and our CapEx under assessment. This is our focus. And obviously, if there is additional revenue, we'll take care of investments, then we'll take care of the debt. We want to converge to [ $65 billion ] in 5 years. And if there is a cash surplus, we will try to anticipate it according to our capital discipline that we've been discussing. So our rationale is still the same when it comes to elevated unnecessary cash levels. If we understand that our cash flow levels are too high, we would love to distribute extraordinary dividends as long as we're sure that there will be no impact on the financial ability of our declared projects based on our '26 to 2030 strategic plan. Eduardo De Nardi Ros: Now the next question comes from Bruno Montanari from Morgan Stanley. Bruno Montanari: Going back to the first subject about the prices, just to confirm, if I understand you correctly, it's very clear that the policy does not transfer volatility to the domestic market, but the President also said that it works in scenarios of high oil and low oil price scenarios. Since the Brent has reached levels above 90 today, for how long can the company maintain its unaltered prices before that starts harming its refining margin? In other words, should we always expect the refining margin to be positive in scenarios where this margin is challenged. Is this the moment where you make the decision to adjust the prices, assuming that the prices will remain like that for weeks or months? I'd just like to understand if that's the correct way to look at the policy. Magda de Regina Chambriard: Thank you for your question. I will start the answer and then Schlosser will help me with the rest of the answer. Your sentence says something interesting. If this assumption remains like this. So I think that right now, what we're asking ourselves is what's the trend -- what's the tendency? What will that look like a few days from now? Is that a momentary spike? Have we changed our rules unnecessarily? Or is that a more persistent change that has to be faced? I would say that as of now, this question remains unanswered. But if this volatility is really this high and if the price ascent is really that high, it will certainly require quicker responses than it would require if this scent were slower. But as you said yourself, as of now, we are not sure about anything. let alone this about this assumption. Claudio Schlosser: Thank you. I think I agree with you. As you said very well, it's part of Petrobras' strategy to be the customers' best alternative. And we're constantly analyzing the international market prices, and we have to look at our position. Our exploration and production has been producing oil significantly. There has been an increase in refineries. As William said, our performance is world-class. And the main principle is not to transfer volatility. In the past, for instance, readjustments were happening on a daily basis. If anything happened in the market, that would get immediately transferred to the market, but that does not work. It doesn't work for the company. It doesn't work for society in general. So basically, what we support in terms of commercial strategy is to guarantee that. And as the President put it very well, the thing is we're talking about snapshots. In 10 days, we're talking about a completely different scenario. We're talking about [ $1 billion ] in oil floating around the world. So as I said, the strategy was created to take these aspects into account. But evidently, as you said, another variable that's part of the business strategy is financeability, which is comprised in the strategy. It's analyzed on a daily basis from a technical standpoint, and that's how we position ourselves. If you ask me, we have not adjusted the diesel prices in 300 days, even though there is an environment that's full of conflicts around the world. So given that volatility, the most important factor here is time. Eduardo De Nardi Ros: Thank you, Magda and Schlosser. Bruno, thank you for your question. The next question comes from Bruno Amorim from Goldman Sachs. Bruno Amorim: Congratulations on the solid deliveries throughout the year, especially on the production side. My question is along the lines of production. I'd like to hear take on the optionalities for anticipations and the operations of platforms. Is there a possibility of advancing them to 2026. I mean, what are the conversations with suppliers like -- so that's a more encompassing question. If there is an anticipation being considered in terms of anticipating the operations of platforms. Renata Baruzzi: As we always say, we're always trying to anticipate. For 2026, we don't consider that any other anticipation is possible for the sail away of these platforms. The P-80 will sail away in August, P-82 in September and P-83 in February of next year. What we are looking at is the anticipation of ramp-up of P-78 and P-79. For P-78, I talked about -- we talked about the mooring record of P-79. But this week, we hit a record of the first injection of gas at P-78. The shortest time we reached with our own platforms had been with P-66 at 79 days. We were able to anticipate the injection by quite a bit, and that's fundamental in order for us to proceed with the other wells. We have one interconnected well to P-78 and by stabilizing the gas injection, we'll ask for approval for a second well and so on and so forth. So for 2026, our campaign is to accelerate the ramp-up of the current platforms. Eduardo De Nardi Ros: Thank you, Renata, and thank you, Bruno, for your question. Magda de Regina Chambriard: Give me one second, Eduardo. Just a reminder, Bruno, we are talking about 2 large platforms that will go into production in a scenario where we're able -- we've been able to significantly reduce the decline in the production of the large fields. So our reserves have allowed us to reduce the decline in production. And you've seen that if you look at the production numbers from last year, we're able to reduce the decline of our fields from 2024 until today from 12% to 4% per year. If we were at 12%, we would be adding platforms with no effects on production increase. So if we are better able to manage our fields and optimize our gas injection projects, as Renata said, our water injection projects, our complementary development projects and so on and so forth. If we do that, we're able to keep the fields with a minimum amount of decline so that the new platforms really lead to an increased production. So at 4% of decline per year, more or less in the pre-salt, 2 platforms of 180,000 each represent a significant production increase for 2026. In addition to the sale away of P80 in August. It should take it 2 to 3 months to arrive in Brazil. So in -- by November, it will be moored and that also ensures that by the beginning of 2027, we'll have additional support to our production. So we have 2 large platforms that will go into production this year, changing the production levels of Brazil and another 2 for the beginning of 2027, that will also go into production, also changing the production levels of Brazil in the beginning of 2027. Eduardo De Nardi Ros: Thank you, Magda. We will now go on to our next question. That's Monique Greco, Itaú BBA. Monique Greco: I'll resume your -- the topic of our trade strategy. So when you discussed how you're dealing with volatility in the short run, so it's really interesting to see how you can ensure greater allocation of your production. So my question is now a similar question to your commercial strategy. So how are you running your commercial strategy? Are you meeting every day? Are you evaluating it weekly, every 15 days? Can you tell me more about how you've been building this answer to a question that remains unanswered. So can you give me more details about this process in order to build, to design the structure that you need to have before you decide your next move? Claudio Schlosser: Monique, thank you for your question. I'll start by discussing our process, telling you about our process, what -- how the whole company is involved in the process. So as we said, our commercial strategy, it has this goal of being the best option for our clients. That's what we want to be. We have to have a strong position. That's what our commercial strategy aims at. So what do we do? We have our technical team working on this, our domestic market commercialization, our foreign market commercialization teams. These people, they talk daily. Every day, we write reports. So again, we have follow-up -- daily follow-up reports on Brent or even the exchange rate to the dollar of our petroleum products or derivatives. It's all part of what we call our alternative cost to our clients. This is a daily analysis and reports are written and forwarded to everyone to a group, a special group with a President and the commercialization of logistics and finance officers. So we get that information every day. And this is also something we do with our officers. Our top management analyzes the scenarios, moments of crisis. So we do this much more frequently. Last week, for instance, we had a discussion with the executive directors, about the scenario or the pricing scenario. So when we have more disruption in the horizon, that means more frequent meetings. And also everything is presented to the Board of Directors. Our Board of Directors is also aware of all the conditions and what is being done in our commercial strategy. So we have daily meetings. And even when the need arises, it can -- we have more participation from the executive suite and also even the Board of Directors. I don't know if I answered your question. Eduardo De Nardi Ros: Thank you for your question. Monique, thank you, Schlosser. Now Regis Cardoso, XP, you may proceed Regis. Regis Cardoso: I have a single question. So let me now discuss your current crisis situation. In the foreign market, we see limits shut-in oil production in the Middle East and crack spread of some products abroad. So my question is, in your physical operation per se in Petrobras in Brazil, what are the consequences? What are the effects that you feel in terms of LGP or the importing of liquefied gas? LNG or what you get from the oil that you are not getting from the Middle East, how will you adapt your refineries? In other words, physically speaking, how has your operation or how have the operations been affected or maybe gasoline is less critical, but tell me about your day-to-day operations and how you're adapting and how you believe this will change or evolve over time because I know that you also have some ways of absorbing that fluctuation, but how will happen with your stocks over time? Claudio Schlosser: Okay. I'll try to be less repetitive, and I'll focus on some other details. There are some operations like we import a very specific oil used for lubricants. The oil, we have that from the Red Sea. So we have a ship in the Red Sea and they get out from the other side. Saudi Arabia, for instance, they have 2 logistic systems. The prevailing system, they get out of the Hormuz, the Strait of Hormuz, but also from the Red Sea. That's an alternative route. In terms of inventory, in oil, we have a guaranteed provision. We have a significant supply of oil with a significant inventory. And [indiscernible], we have a very long-term contract with Saudi Arabia. So this type of oil is something that is -- that we can rely on. And our planning also includes an optimized scenario with the greatest profitability. When you look at our -- and yield, when you look at our progression linear models, we have the following more interesting imports, and we may change this every day if the situation changes dramatically. So we have many opportunities, many alternatives. And this is something we're checking every day. If a new opportunity arises in oil production or petroleum products, we will make the best of that and tap into that opportunity. So if you have ships, for instance, that are sent to the U.S., but then we have a new opportunity in Africa with a much greater cash netback. So that depends on what happens on different days. As for the supply and the planning of supply, we're talking in a short term -- from a short-term perspective. And we're looking at April, let's say, we're good. We have a good position -- market position. We have the imports coming from our distributors. So this is our current scenario. And the President -- our President has discussed widely about seeking operating excellence. So in 2025, we have an indicator that was planned and what was achieved. And this has been the best results we've ever had in Petrobras' history, considering what we plan to do, this is the best results we've ever had. So the difference between what we plan and what we achieved. This -- we've achieved the best results. And that's a very relevant indicator. It means that we are highly efficient, and that means a great result Eduardo De Nardi Ros: Next question, Tasso Vasconcellos, Tasso your question you may proceed. Tasso Vasconcellos: I'd like to explore a new topic, based on some news that we saw earlier. It's about your questions about IG4 and Braskem. So what are you expecting? What is the outcome of the discussion? Is there any time line? And in addition, how about the Braskem shareholders? Do you see the equalization of the debt at that company with some capital injection? Good Petrobras participate in that process of injecting capital in any way. So -- and if that is not possible, what are the other options you've been discussing? How could Petrobras contribute at some sort of a loan or any other possibility. And now one follow-up to this point, this discussion about extraordinary is this decision to be taken just by the end of the year? Or can that be evaluated throughout the year considering our current scenario. Magda de Regina Chambriard: Okay. I'll start the answer, and I'll turn it over for Fernando to continue. I think this is for -- is up to Fernando really to answer this question. Anyway, at Braskem, we have a corporate issue at state. What's going on? There's a related party, and we have a shareholders' agreement with them. So we in other words, our partner will have the preponderance of administration. In other words, if there's an agreement between the shareholder of Braskem with IG4 who represents the banks. So this is pending approval by the CADE committee. And this hasn't happened yet. And the latest news is that this would be postponed to a month. This space is absolutely necessary for us to have a new shareholders' agreement with IG4. In other words, we can better address the synergies with the Petrobras -- between Braskem and Petrobras. In other words, today, we know the synergies are not being used the way they should. Ultimately, Braskem is leaving money on the table as these synergies are not used with a company as large as Petrobras. We believe this will be sold in the next -- in the near future. And we will finally be able to enter into that new agreement with a new partner. And the point is to maximize the synergy between the Petrobras system and Braskem to benefit both Petrobras and Braskem in addition to our shareholders, whether government or private shareholders and Brazilian society at large. Can you continue on that Melgarejo? Fernando Melgarejo: Right. Well, still about Braskem, we should remember that with the -- in our government instances, we approved prevailing right. We're just giving up the right of first choice for everything we approved. So things -- if there's nothing new, things will be as it is. This has already been decided. And as the President said, petrochemistry is one of Petrobras' interest. We see synergies in that. So we are placing our chips on this project. But we cannot speak on behalf of the company if money will be invested or not from that company to Petrobras. So we will do everything that generates value to Petrobras' shareholders. This is the logic behind it all. But everything will be communicated in a timely manner as soon as CADE approves this -- these proposals are approved. And what we are having now is the shareholders' agreement. So we need to wait now for dividends. As for your question on dividends, when we were planning our strategy, it was and it still is, of course, so we need to be really careful about the foreign political situation, and they still have a perspective on our prices. So we considered this, and we have a basis CapEx, a target CapEx. In other words, we need to be flexible enough to add new projects, start working on new projects. In other words, our focus is on the execution of the projects we already have to begin with. And with a new Brent, nothing will change in the conduction of our projects, the Brent that we are testing. They're still at $50. This does not change. We need long-term resilience. That will not change in all our governance instances or levels. We also have greater return for any new investment. So we're trying to optimize or to achieve the greatest return on investment. And if it gets to $110, so we need to have the levels that we expect. And then we are also evaluating how feasible those projects are. That's a new governance level here. And then if they also see if there's a surplus in cash every quarter, this is calculated. And we not necessarily have payouts next month or in the next quarter or next year. It's too early to be able to state anything. If we have surplus cash, of course, we'd love to pay that out as long as it does not impact our long-term sustainability. But it's too early to say anything about that. And the practice of evaluating surplus as our strategic agenda is. This is the best thing Petrobras can do to discuss our extraordinary dividends. Eduardo De Nardi Ros: Thank you, Magda, Fernando and Tasso. Now the last question of our webcast by Gabriel Barra of Citi. Gabriel Coelho Barra: Well, my question is about this situation of higher oil prices and the equatorial margin. This is a very important topic in my opinion. There was the issue of the leaks that's already been solved. Now can you tell me about your time line in your exploration schedule. So when we have the first figures for the projects in the region? And can you -- also in a higher oil price scenario, can you -- and as Fernando mentioned, that won't change your long-term perspective much, I believe. Now do you -- are you considering any short-term hedging as we have a more stressed oil scenario. We don't talk much about hedging for Petrobras. Other companies do this more often. So maybe can you talk about all these points? Magda de Regina Chambriard: So I'll talk about the hedge. We have no hedge strategy being assessed. So far, we haven't had any strategies for hedging. And our opinion is that we shouldn't apply any hedging to the oil prices. That's a long-standing rationale that we still consider to be valid. The hedging cost nowadays would probably be a huge and to apply hedging to the amount of oil that we produce would be unfeasible. Talking about the equatorial margin, Sylvia? Sylvia Couto dos Anjos: Gabriel, about the equatorial margin, we can say that we made a great achievement, haven't obtained our license. We are now drilling. We've advanced. We are now introducing the -- implementing the BOP. And in very few days, we'll go back to production and we expect to reach the reservoir interval in the second quarter of 2026. When we acquired these blocks, we entered into a minimum exploration commitment. We have to drill this well plus another 7 to ensure that we're adequately exploring the region. Just to reiterate, the equatorial margin has a big potential. It's different from our other pre-salt fields. It's reservoirs are very similar to what we find in the -- such as basin in the post-salt. And we -- any assessment of what we're going to do is highly result dependent. So for this well, the results of a single well do not allow us to assess the exploration. President Magda, just to say that in the Campos Basin, we came to the first discovery after 9 wells. And here, we're going to assess the oil system, the results of well whether it produces oil or not, that does not indicate that we are performing an exploratory assessment. There is a huge potential the equatorial margin is not there by itself. It's aligned with major discoveries that were -- that occurred in Africa back in 2010 and 2012 and their equivalent to the discoveries of Guyana, our oil system will assess if this generator is equivalent to the La Luna generator of Venezuela and the efficiency of the oil system and if the migration generation were adequate so that we can achieve the accumulation that we expect to achieve. But the results only make sense after the discovery. And once the discovery occurs, the exploratory assessment and then only can we think about the production system that will be adequate. But let's root for this well, which is the world's most famous well. Everybody asked me about it. My -- even the janitor asked me what about ROL? So yes, that's a route for yet another discovery. Eduardo De Nardi Ros: Thank you, Sylvia and Fernando. Thank you, Barra, for your question. This is the end of our Q&A session. If you have any additional questions, please send them to our R&I team. We'll be happy to answer your questions. I will now give the floor to the Petrobras President, Magda Chambriard for her final comments about the 2025 results. Magda de Regina Chambriard: We are very proud of the results we're delivering. Petrobras is extremely proud of its integrated work and the delivery capacity of the Petrobras team. Over the course of 2025, we became Latin America's biggest company, which required a lot of work, a lot of efforts dedication and a lot of purpose to turn this company into Latin America's biggest company, we've been able to do that. So let's maintain our mission and purpose. The company is a strong cash generator. Our processes are solid. Our procedures have proven correct and effective, and this is what we're going to keep chasing. We are committed to providing the best possible production by our pre-salt giants. We've just made an important discovery in the Aram reservoir. It hasn't been tested yet, but we've seen a beautiful flame indicating that that's yet another pre-salt reservoir that's emerging with a beautiful flame produced by gas and condensate. Along 2025, we made 5 discoveries, not as big as the pre-salt. I would say that there are midsized discoveries that will require development efforts on our part. And we are considering all of them along with a complementary development project for 2P Buzios. And for the fields in general, both from the pre-salt and the Campos Basin with capital discipline and with the certainty that producing is not enough. We need to produce a value to our refineries and find the best possible markets for our products in the world. This is what we're doing, and that we'll keep on doing and this is how we should look at Petrobras and understand that this team is really committed to delivering what they promised. So let's keep doing this. Thank you very much. Eduardo De Nardi Ros: Thank you, Fernando. Any final words? Fernando Melgarejo: Well to wrap up. Thank you, Magda. Thanks, everybody. It's great to be with you, and to the investors, we are constantly available to ask to answer your questions over the phone or in person. As a take-home message, I want to say that a wrong strategy in a commodity company at a time of high volatility may bring about huge difficulties for the future of the company. That is why our Administration principles are based on 3 important pillars, regardless of the price of Brent, whether it's going up or down, which is capital discipline operational efficiency in all of our processes and the search for production increase. Eduardo De Nardi Ros: Thank you, Fernando. Once again, I thank you for your attention. This presentation will be available on our Investor Relations website soon, and the audio track will also be available to you. Thank you. Have a great day, and see you in the next webcast.
Operator: Good day, and thank you for standing by. Welcome to the Q4 2025 Aecon Group, Inc. Earnings Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Adam Borgatti, Senior Vice President of Corporate Development and Investor Relations. Please go ahead. Adam Borgatti: Thank you, Deani. Good morning, everyone, and thanks for participating in our year-end 2025 results conference call. Joining me today are Jean-Louis Servranckx, President and CEO; Jerome Julier, Executive Vice President and CFO; and Alistair MacCallum, Senior Vice President, Finance. Our earnings announcement was released yesterday evening, and we posted a slide presentation on our website, which we'll refer to during this call. Following our call, we'll be glad to take questions from the analysts. [Operator Instructions]. As noted on Slide 2 of the presentation, listeners are reminded that the information we're sharing with you today includes forward-looking statements. These statements are based on assumptions that are subject to significant risks and uncertainties. Although Aecon believes the expectations reflected in these statements are reasonable, we can give no assurance that the expectations will prove to be correct. Before moving to our financial results, I'll first turn the call over to Jean-Louis to highlight a few of Aecon's important accomplishments in 2025. Jean-Louis Servranckx: Thanks, Adam. As noted on Slide 3, 2025 was a transformative year of growth and significant milestones for Aecon with record revenue of $5.4 billion and backlog additions of $9.5 billion, supported by a balanced and derisked backlog profile. Revenue grew 28% over 2024 with 84% of the $1.2 billion increase in revenue through organic growth. Revenue from U.S. and international markets also increased by $386 million or 87% in 2025 over 2024. We delivered our strongest safety performance in over 5 years while maintaining disciplined risk management across major projects and programs. We further advanced our nuclear leadership in North America with our partnership selection to deliver the G7 first grid-scale Small Modular Reactor or SMR at the Darlington Nuclear Generating Station. We also commenced the definition phase of the Pickering Refurbishment Program and an Aecon partnership was awarded a development phase contract at Energy Northwest's Cascade SMR project in the U.S. Backlog growth was also highlighted by Aecon's largest contract award to date, the Scarborough Subway Extension progressive design-build project, adding approximately $2.8 billion under a collaborative target price model. We expanded strategically through the acquisitions of Bodell Construction, Trinity Industrial Services, and KPC Power and Electrical Services. We strengthened our leadership team with the appointment of Thomas Clochard as Chief Operating Officer and received industrial recognition with gold stages on Renew Canada's Top 100 Infrastructure Projects list, reflecting our involvement in 17 ranked projects, including four of the top five. And as noted on slide four, we achieved significant operational milestones, including completing the world's largest nuclear refurbishment program at the Darlington Nuclear Site ahead of schedule and below budget in early 2026, providing a model for major nuclear projects on a global scale. Substantial completion was achieved on the Finch West and Eglinton Crosstown LRTs, which were two of the three remaining legacy projects. And we delivered Canada's largest battery energy storage facility, the Oneida Energy Storage Project. I will now turn the call over to Jerome for our financial results, and we'll return to address our outlook at the end of the call. Jerome Julier: Thanks, Jean-Louis, and good morning, everyone. I'll speak to Aecon's consolidated results, review results by segment, and address Aecon's financial position. Additional information has been provided to help clarify the underlying results, excluding impacts from the legacy projects and divestitures. Detailed reconciliation tables are included on slides 15 through 17 in the conference call presentation. Turning now to slide 5. On a reported basis, record revenue for the year of $5.4 billion was $1.2 billion, or 28% higher compared to 2024. Adjusted EBITDA of $235 million compared to $83 million last year. An operating profit of $87 million compared to an operating loss of $60 million in 2024. Adjusted EBITDA and operating profit in 2025 were negatively impacted by $94 million in legacy project losses, compared to legacy project losses of $273 million in 2024. Adjusted diluted earnings per share for the year was $0.40, compared to adjusted diluted loss per share of $0.99 in 2024. As only noted, reported backlog of $10.7 billion at the end of 2025 was a record year-end level and compared to backlog of $6.7 billion a year ago. New contract awards of $9.5 billion were booked in the year compared to $4.7 billion in the previous year. Now looking at results by segment. Turning to slide 6. Construction revenue of $5.4 billion in 2025 was $1.2 billion or 28% higher than the previous year. Revenue was higher in all sectors, with the largest increase in nuclear operations, driven by a higher volume of refurbishment, new build and engineering services work in Ontario and the United States. Higher revenue in industrial was driven by an increase in field construction work on critical mineral facilities in Western Canada and incremental revenue in the U.S. from the Bodell and Trinity acquisitions completed in the third quarter of 2025. Revenue was also higher in urban transportation solutions, primarily from an increase in subway and commuter rail system projects. In civil operations, higher revenue was mainly due to an increase in power and rail projects and from major project work performed internationally, partially offset by a lower volume of highway, road, and bridge building activity. In utility operations, higher revenue was due to a higher volume of gas distribution work in Canada and electrical work in the U.S., partially offset by a lower volume of telecommunications work and battery energy storage systems work as our team successfully delivered 3 grid-scale projects in the year. On an as adjusted basis, construction revenue was $5.3 billion in 2025 compared to $4.1 billion last year. Turning to slide 7. Adjusted EBITDA of $220 million compared to $34 million last year. The primary driver of the increase was lower losses from fixed-price legacy projects in the year. On an as adjusted basis, the Adjusted EBITDA was $315 million in 2025. Turning to slide 8. Concessions Adjusted EBITDA for the year was $57 million compared to $87 million last year, driven by lower income from O&M activities and a decrease in management and development fees related to concession projects nearing or achieving substantial completion of construction activity in 2025. The book value of equity of our concessions portfolio at year-end was $251 million, up 7% versus the end of 2024. On slide 9, we brought together the as-adjusted information to exclude impacts of the legacy projects and divestitures to provide insight into the underlying performance of the business. For the construction segment, on an as-adjusted basis, Adjusted EBITDA was $315 million in 2025, representing a 6% margin and $8 million increase over 2024. On slide 10, at the end of 2025, Aecon held core cash and cash equivalents of $94 million, which excludes $393 million of cash, representing Aecon's proportionate share held in joint operations. In addition, at December 31, 2025, Aecon had committed revolving credit facilities of $1 billion, of which $257 million was drawn and $4 million was utilized for letters of credit. Aecon has no debt or working capital credit facility maturities until 2029, except equipment loans and leases in the normal course. Aecon's board of directors approved an annualized increase to the dividend of $0.01 per share, resulting in a quarterly dividend of $0.1925 per share. The dividend will be paid on April 2, 2026 to shareholders of record on March 23, 2026. At this point, I'll turn the call back over to Jean-Louis to address our business performance and outlook. Jean-Louis Servranckx: Thank you, Jerome. Turning now to slide 11, Aecon continues to build resiliency through a balanced and diversified work portfolio. In 2025, roughly 55% of Aecon's construction revenue was related to power and utility services across the nuclear, civil, utilities, and industrial sectors, with nuclear representing the largest share. This represents a purposeful transition in our business, with the percentage of power activity increasing significantly over the past five years. Approximately 30% of Aecon's construction revenue was derived from power and utility services in 2020. Through our growth and diversification, Aecon is a profoundly different company now than we were several years ago. Turning to slide 12. Demand for Aecon services continues to be strong. With backlog of $10.7 billion at the end of 2025, recurring revenue programs seeing robust demand and a strong bid pipeline, Aecon believes it's positioned to achieve further revenue growth in 2026 and is focused on achieving improved profitability and margin predictability, all while improving the risk profile of our business. Recurring revenue was $926 million in 2025. The proportion of recurring revenue from utility services increased from $610 million to $728 million, an increase of 19% over 2024. Recurring revenues are typically executed on a non-fixed price basis, with the majority being over and above our reported backlog figures. Turning to slide 13, Aecon expects 2026 revenue to exceed 2025 levels based on Aecon strategic positioning in sectors with attractive demand profiles and a healthy pipeline of project opportunities tied to power generation, critical resource development, mass transit infrastructure, water, and defense. In the concessions segment, Aecon continues to focus on opportunities to add to the existing portfolio of Canadian and international concessions to support trends in aging infrastructure, mobility, connectivity, energy, and population growth. Beyond the fixed price legacy projects, we believe that the deliberate shift towards a greater weighting of improved risk-adjusted programs in combination with a strong focus on operational excellence, is anticipated to support a stabilization and gradual improvement of Adjusted EBITDA margins in the construction segment in 2026. Aecon plans to maintain a disciplined capital allocation approach focused on long-term shareholder value through acquisitions and divestitures, organic growth, dividends, capital investments, and share repurchases on an opportunistic basis. We are focused on making strategic investments to support our strong growth, whether through the concessions portfolio to provide access and entry into new markets or to increase operational effectiveness. Our overall look for 2026 is very positive. We are extremely excited about the momentum we have built and remain focused on executing our strategy to drive long-term shareholder value. I want to express my sincere thanks to our growing team for their resilience, high professionalism, and safety always mindset that has positioned Aecon for what comes next. Thank you. We'll now turn the call over to analysts for questions. Operator: [Operator Instructions]. And our first question comes from Sabahat Khan of RBC Capital Markets. Sabahat Khan: Great. Just you provided a bit of color on the sort of the opportunities ahead. I was hoping you could dig a little bit into some of the announcements we've been seeing from the Canadian government on the infrastructure side. Just hoping you could provide a bit of color on behind all these headlines, where are we in maybe some of these projects hitting the bidding process? Are you bidding on some of these already? Maybe if you could just tie in the announcement from the other day related to NORAD as well. Just curious to get some more color on that project. Jean-Louis Servranckx: Yes. I will take this one. First of all, as an introduction, where we are today is a result of being extremely serious and focused about our strategy. We are extremely disciplined with this. We are now following our plan 2024 to 2027. We had an update mid-2025. Basically, where we are today belongs to 4 vectors. The first one was Aecon has to become a powerhouse. As I've noted during my speech, we are now a little more than 55% related with power. It's an incredibly important shift for our company that was before much more road and bridges. Point number 2, Aecon has to become what we call a sovereignty champion. We are coming to your questions. You probably have noticed that we were among the first five project of nationally important that were defined with the Contrecoeur port in Montreal and the SMR construction, I mean, in Darlington. We also announced a few days ago that we had been awarded this Arctic Over-the-Horizon project. This project was a target for Aecon. I mean, we wanted to come back to Defence Construction Canada. We have not been there for quite a number of years because the jobs were much more refurbishments of buildings, hangars, and not that much infrastructure. We decided that we had to be back. We have been awarded the first two pieces of this job. Ultimately, there will be several others for what has been announced as a total size that could be $3 billion to $5 billion. It's a complex project. We are leader. We want it with an outstanding scoring result. It's a purely collaborative job. It means that we first have a validation phase, then we have a development or a detailed definition phase, then we have construction that should begin in 2027. It was very important for us, and we got it. Third point of our strategy, we'll come back to this. Aecon has to be a national and a local strong player in the US. We'll come back to it. Number four, Aecon has to become more international, what we also have been doing. I hope I've answered your question. Sabahat Khan: Yes. Just, maybe a bit more, if I could follow up there on just behind some of these initial projects, have you seen an uptick in bidding activity, or are these projects still initial phases? Just wondering sort of when some of the other larger projects or some of this investment might hit the ground? Jean-Louis Servranckx: When you discuss with Defence Construction Canada, or you also can go to their website, I mean, obviously, the number of project that are now on the list and that will be put on the market, I mean, during the few years to come has been multiplied by quite an interesting factor. We are tracking this. Of course, you have also, for example, learned about Alto, I mean, the high speed train with the first phase between Montreal and Ottawa. I mean, this is a pure kind of project for which Aecon is excellently positioned now. Sabahat Khan: Great. And then just my last question. Obviously, you're talking a bit about the power opportunity and the business here. Can you maybe just rehash sort of the utility strategy? Is that something that is it more growing it via some of these power project opportunities? How big of a role would M&A play in that? Maybe just a little bit of color there, and I'll pass along. Jean-Louis Servranckx: I mean, obviously, the power part of utilities is growing and is growing well. Our utility sector is also about gas. It's also about telecom. It's also about fiber to the home and those kind of activities. Power is what is growing. At the same time, in United States and in Canada, I mean, basically, the main topic of today is about electricity addition. This is the wave, and we were not wrong 3 years ago when we just called this and decided to focus our efforts on this part of the link. This being said, as I've always told you, Aecon has to stay balanced. It has to stay balanced between the different core competencies that we have. It's about urban transportation, it's about industrial, it's about nuclear, it's about utilities, and it's about civil. We have to keep balanced, but we know that the wave is about power. Jerome, you want to add something? Jerome Julier: Sure. Just to close the loop on it, on the utility services side of the business, the capability that we have both in Canada and the United States centers around grid-scale, battery storage, substations, distribution, transmission. Now increasingly, electrical testing, verification, meter replacement with the new team that's joined us. Our perspective is we want to continue to build capacity to serve these end markets. There's an undeniable growth trend, even in the more bearish case for power demand. We just see an enormous opportunity for us to continue to build out that area. We'll do it organically. We'll do that through M&A to the extent the opportunities fit our buy box, our culture, and our safety record. We continue to view it as an area of opportunity for capital deployment for sure. Operator: And our next question comes from Yuri Lynk of Canaccord Genuity. Yuri Lynk: Just want to dig in a little bit on the outlook for construction segment Adjusted EBITDA margin. Calling for some stabilization here, after a number of quarters of decline, and then maybe some improvement in the back half of the year. Maybe just what are the puts and takes that get us stable here, and then what could possibly drive some upside in the back half of the year on the margin? Jerome Julier: For sure. The message is simply that the direction of travel for like the construction margin, whether you look at it on a reported or Adjusted basis, that the message is very much consistent, is stabilization on the direction of travel with the potential for improvement. That's largely a function of through 2025, the business has moved the type of execution that's flowing through and being recognized into revenue away from some of the progressive elements and fixed price contracts, which generally carry higher margins. You know, in some ways on fixed price, certainly higher risk to a much more stable risk-adjusted return that we view as very attractive from an Aecon perspective. We've now reached that point where we've stabilized that transition. You know, the vast majority of our work is done under more appropriate contract structures. The risk-adjusted margin profile that we're recognizing is strong, given the contract structures that we're in front of. The improvement is going to stem largely from operational efficiency gains, improved cost and schedule performance on our jobs. As well as the drop off of legacy and then the Western Civil area that's added a dilutive impact to the overall margin profile in '25 and late '24. I think from that perspective, it's a mix of factors, but I think all of this is in the context of a business that's continues to grow quite well. We think there's good torque in that message. Yuri Lynk: Are those Western Civil contracts still dragging or they're finished or stable? Jerome Julier: Our view is we have a handle on their completion and finalization, we're going to continue to just to close them out, right? They're effectively I think backlog wise, we're probably talking kind of sub $100 million here. Same thing on the legacy side, sub $100 million in the context of $5.4 billion of overall rev. We're feeling better about it. Yuri Lynk: Last one for me, just on the bookings, I mean, a huge bookings year, 2025. Safe assumption that we're not going to get to that level of bookings in '26. Can you just remind us of any progressive contracts that might be suitable to be booked in '26? Like I'm thinking Pickering is probably one, but any help on just how we think about the new awards outlook this year. Jean-Louis Servranckx: I will take this one. Yes, you're right. I mean, the increase in our backlog, I mean, in 2025 is mainly due to big chunk, I mean, of job. I mean, we told you about Scarborough. What is coming now, I mean, obviously Pickering is an important one. We are also on Winnipeg on a very interesting wastewater treatment plant where we are finishing the development phase. We are also working, you probably remember on a fish passage and a civil job in the United States, I mean, over Hanson Dam, that should most probably come to our construction backlog. We are waiting, I mean, for a few results, or eventual awards on some UDS projects on which we have been bidding during the last months. Operator: Our next question comes from Chris Murray of ATB Cormark Capital Markets. Chris Murray: Maybe kind of following on, kind of what to expect in 2026, especially on the revenue line. Certainly really strong revenue growth through this year. You know, there's a few projects that we've been in. Actually, I was thinking of the Ontario GO Electrification project as well. You gave the indication that you expect revenues to be higher in '26 and '25, which given where the backlog is, that's I guess probably what we should have been expecting. But I'm just trying to gauge how you think the magnitude's going to show up. I can't believe that this 20% clip on year-over-year growth is going to continue, but maybe if you can characterize it a little bit better, that would help us kind of shape our view. Jerome Julier: Sure thing, Chris. The growth in '25, I mean, we'd likely describe as exceptional, rather than just very good. 8-plus percent of that was organic, which is roughly $1 billion. You know, just the growth that Aecon produced in 2025, if that was its own business, would've been a top 20 construction company in Canada, that was formed out of Aecon. We are not anticipating that level next year. Our commentary in the outlook is formed on the basis of, number one, the backlog, number two, really strong recurring revenue programs across the business, but you know, in particular the Utilities group. Number 3, all sectors are really well positioned for where demand trends exist today. If we look, 2025 was effectively a flat or down year in construction in North America, except for a select few sectors, and those sectors were the 5 sectors in which we're involved. 2026, we continue to see good outlook. You know, overall general industry trends, people are calling for something in the order of low mid-single digit growth. Again, we think we can, we can handily beat that, but we're not going to get to the level we got in 2025. I don't anticipate that absent some significant M&A. We're expecting another good year after an excellent year, but not we have to temper expectations, right? We can't expand our human capacity and deliver the amount of skill trades, that we use as the basis for business, at that clip on a continual basis, right? We need to be smart about it. Chris Murray: Okay. Maybe if I ask the question a different way. If I think if I look at your backlog kind of characteristics today, you've got about $3.6 billion that looks like delivered or planned for the next 12 months. $1 billion of probably recurring revenue that's in the pipeline. How should we think about at least even with the project demand in here, is it fair to think, like what would be about the right number to think about stuff that you can actually book and execute in the same year, kind of on a normal run rate? Maybe that's a different way to think about this. Jerome Julier: Yes. If I gave you that, we'd be plugging to the revenue number that we have in our business plan, which we're not going to disclose. The opportunity set is strong at both procurement, go get change orders, ability to expand in existing projects and secure additional work packages. If you go back historically, it's a relatively broad range that we've been able to pull together across the years. You know, 2025, if you look at where we were in 2024, obviously that kind of go get element was quite strong. I don't think it'll be as strong in '26, if you want to try to track back against that. Chris Murray: Okay. Next question really quick. You know, just we're starting to see another one of these, kind of legacy issues, getting solved, I guess, in the quarter. Can you just give us any color around the solution and if it had any material impact on the numbers in the quarter? Jean-Louis Servranckx: Maybe I just begin with where are we physically on those job, and then Jerome will add a few figures that are all in our report. As you have noticed, we are now substantially completed on Finch and Eglinton LRT, following what we call the revenue service demonstration, which is an extremely complex demonstration of the capabilities of all the systems we have been building. This is done on those two LRT. Our maintenance and TTC operation is going quite well. We are very happy about it. Gordie Howe, we are nearing substantial completion. It's about finalizing operational readiness of all our systems and finalizing the onboarding of all border agencies and installation in their office. I've read a few comments. Just to be clear, substantial completion is totally separated from opening of the bridge. It means that we are now in the last centimeters to go to substantial completion. The opening of the bridge is a different topic. We are on those three job finalizing our commercial discussion with all our clients. I mean, we have no disputes. We are under discussion, and we think that within the next few months we will be over with that. A few figures? Jerome Julier: Financially, the legacy projects had a negative impact of $6 million in the quarter, Chris. Total for the year was $94 million. It's obviously substantially less than what we had last year. The big focus in 2026, as Jean mentioned, is the successful delivery of the final project and then the closeout of the commercial terms associated with all three. Given where we stand today, I'm not sure it's actually additive or constructive for the overall Aecon discussion to zoom in too much on these items. Like, we're getting basically narrowing down the level of outcomes, so not immaterial, but like less material levels. What we might likely do in '26 is just report everything all together and then close out this chapter. Like, we're in the twilight phase of the legacy. We're focused on what comes next, around some pretty stellar opportunities that we're in execution and procurement on. I think we're going to want to talk a lot about that in '26 and a lot less about this very difficult phase that I think the team's done an extraordinary job managing through. Chris Murray: Okay. Great. I probably asked the question a little bit wrong. I was actually more curious about the Rio Tinto agreement and just if that had any material impact on the quarter. Jerome Julier: If it was material, we would have disclosed it. No. That's just another successful completion by our operational legal team to settle a dispute or claim situation with a client and it's closed off. I think from a macro level, if you kind of take it out a little bit, the real message here is that Aecon does a really good job at managing risk exposures and reducing the overall enterprise level risk that we're putting forward. In '24 to '25, the business has been in a better position in '25 to '26. Again, we think we're in a better risk-adjusted position. The idea is creating a more boring, more stable, more predictable Aecon from a financial perspective, and then a more exciting, more thrilling Aecon from a perspective of the people who work and you know, a very dependable Aecon from the perspective of our clients. I think we're advancing along all three of those. Operator: And our next question comes from Michael Tupholme of TD Cowen. Michael Tupholme: My first question is just about the nuclear, the nuclear business. Obviously a key growth area for Aecon in 2025, and it was your most important growth area in the year. I guess as we look to 2026, the question is, beyond executing on the substantial volume of nuclear work that you already have in hand, what should we be watching for and expecting as far as nuclear developments and progression in terms of new nuclear opportunities, in 2026? Jean-Louis Servranckx: Okay. As an introduction, I just want to come back to this incredible news about Darlington refurbishment. I mean, in February of 2026, we just finalized the refurbishment of the 4 reactor under budget and 4 months ahead of schedule. I mean, it's extraordinary. You cannot imagine the number of calls and questions that we are receiving. I mean, something like this is the first time we have good news on a big nuclear project for the last 20 years. How did you do it? We are extremely proud because Aecon, during the last 8 years on this project, was on the critical path of its execution. It's a very good news for the nuclear industry to have been able to demonstrate that when it is well organized, it works. Obviously, I mean, on refurbishment, we are still on two major programs. I mean, Bruce, with 4 reactors to complete up to 2032, and Pickering, I mean, 4 reactors, we have just begun the development phase and turbine up to 2035. Regarding new construction in Canada, we are working on the first unit of the small modular reactor, the 300 megawatts from GE Hitachi. A completion forecasted around 2030. It's going well. We have, at this stage, something like 1,100 people, I mean, between staff and workers on site. Nothing has yet been decided regarding new big nuclear in Canada in terms of technology from OPG or from Bruce. We are working with those two utilities on the development phase with various options. In United States, I mean, we are working on three different topics. Major component replacement, mainly with Dominion, but also now with Energy Northwest. Second vector is the Department of Energy on their national lab in Savannah River. The third one you have noticed we have been awarded for Energy Northwest. I mean, the collaborative de-development to complete the planning, the design, and the construction of a 12x 80-megawatt X-energy reactor with Kiewit and Black & Veatch. It's just beginning. We are at planning and then pure definition phase, but it's a new build. What's important with this is to say that Aecon is technology agnostic. I mean, we work for CANDU and we're extremely strong, I mean, with CANDU. We work with GE Hitachi. We are beginning with X-energy. We have been working in the past, and we are working today with Westinghouse. It just means that we are ideally positioned for what is coming. Michael Tupholme: That's helpful. Maybe just one quick follow-up on that response. As far as the Energy Northwest Cascade Advanced Energy Facility opportunity, is that something that as you move through this next phase, you could get to the point you're at where you are booking more meaningful amounts into backlog in 2026, or is that a beyond 2026 opportunity? Jean-Louis Servranckx: So it's going to be beyond. I mean, at the moment, we are at pure definition phase. I mean, it's a new kind of reactor. This will require, I mean, some time just to get it well in the box between the next phases will be launched. Michael Tupholme: Got it. Thank you. Then maybe for Jerome, you have a few questions about 2026 revenue outlook. I think you provided us some good information. The question is really about as we look beyond 2026, obviously, all of the transformation that's occurred at the company and the focus on different vectors has been done with a longer-term view. Can you talk about what sort of visibility you have into revenue growth and beyond 2026 as you look to 2027 and future years? You talked a moment ago about sort of 2026 being able to hopefully do better than industry-level growth. How do we think about sort of that period beyond '26? Jerome Julier: There's a few things. One, we've done a good job building out the stable recurring revenue side of the business on the utilities front. We see opportunities to build out there. The next component is if you look at our backlog, something in the order of $5 billion of the backlog is executable effectively kind of beyond the two-year period. The way we define backlog, Mike, as you know, is it needs to be a project that has been awarded with costs and scope and schedule. It's really kind of a air quotes hard backlog definition. We have visibility for financials that extend beyond based on the projects that we're in procurement on, right? For instance, Arctic Over-the-Horizon, that will not enter backlog until we exit the validation phase. But we have a pretty good handle given the work that's been done by the big construction teams as to what that could look like. Where we sit today, we one, items that have been we've effectively secured but not entered into backlog, recurring revenue, pipeline of work, just overall trends in the sectors where we're present, the inbounds that we're receiving from a demand perspective gives us a strong degree of confidence that the business is positioned where it ought to be positioned. And so you're probably looking for something a little bit more than that other than to say that, like, we feel, we feel pretty good about the trajectory that Aecon's on today, and an ability certainly in the medium term to outpace the overall industry. Operator: And our next question comes from Frederic Bastien of Raymond James. Frederic Bastien: Guys, it's been almost 2.5 years since Oaktree made its strategic investment in Aecon Utilities. How would you grade yourself or Aecon on a report card with respect to that investment, and what can we be looking forward to in the future? Jerome Julier: So the utilities business has been performing well in the context of a very difficult regulatory environment in Canada. When Oaktree entered into the equity of Aecon Utilities, we were facing some pretty good demand tailwinds not shortly thereafter, telecom regulations, OEB regulations. A lot of the core markets where Aecon Utilities has historically been focused, were just faced with customer profile, reducing CapEx to redeploy to other jurisdictions based on regulatory challenges in those markets. The team did a very good job reimagining where they could put their resources. In the context of a business that was very heavily focused on pipeline and telecom, what we saw in 2025 was the addition of the Xtreme group in Michigan provided very strong growth in the United States. Our execution on 3 major grid-scale battery projects, which is an internal partnership between industrial and utilities, all those got done with just extraordinary schedule and cost performance. Then we also had KPC and then Ainsworth added to the mix as well. Overall, though, the performance in a very tough environment where we operate wasn't bad. Wasn't bad at all. Like the team is. We're very proud of what they've been able to produce. Oaktree's a constructive partner. They've got a very good read on aspects of the market in the United States, which when combined with our own intel and perspectives gives us a very good growth algorithm for that market. I mean, we're not going to give ourselves a letter grade, but we're happy with how it's worked out. Frederic Bastien: Great. I think one of the options that you would be contemplating further down the pipe is potentially turning this Aecon Utilities into an IPO. What are your thoughts there? Jerome Julier: Our focus with the business is to continue to grow and build out the recurring revenue programs and expand its diversification from a market client and geographic perspective. First things first. Frederic Bastien: Okay. We saw obviously the recurring revenues types of utilities go up nicely year over year. What's behind the? There was a drop if you look at the other side of the recurring revenue pie. There's been a drop from about 50%. What's in that? What's in there as well? Jerome Julier: So that would capture a variety of items ranging from aggregate sales, but most of the change that we've seen on that level relates primarily to some of the progressive design phases that were more active in 2024 that have effectively flipped into construction now. When we think about some of these collaborative projects that we're on and we're expanding kind of design and pre-construction resources where it's not tied to backlog, but it's kind of like an ongoing recognition of revenue, it falls into this bucket from a kind of disclosure perspective. Then as those projects have flipped into construction, it's now just moved into another part of the business. You know, it's less here, but more elsewhere. Operator: And our next question comes from Krista Friesen of CIBC. Krista Friesen: Congrats on the quarter. Obviously, a number of opportunities in front of you guys, whether it's utilities, nuclear, defense, build Canada. How are you feeling about your capacity? Maybe that's the labor force. To ask it a different way, what do you feel is your limiting factor when you're looking at all of these opportunities? Jean-Louis Servranckx: Obviously, construction, I mean, as I used to say, is about people and processes. Here, we have to be careful about people availability. At this stage, we have no issue. I remind you that we have extremely strong relation with the trades community and the trade unions. We have been able because it was part of our strategy and we had quite a good view about what was coming to discuss with them and to be ready. We do not have at this stage issue. For example, our workforce in the nuclear to finish Bruce and Pickering is extremely strong. I mean, not only in Canada, I mean, in United States we have something like 1,500 workers in our nuclear sector, very much loyal to the company. I would tend to say, so far, so good. The battle on the staff and the executive, I mean, has always existed between company. It's an open market. The fact that Aecon, I mean, has a bright future, is helping us a lot to be able to attract, to train, to retain, a lot of new and former executives. At this stage, I will say I'm not that worried. We are extremely focused on the contract mode of our new project, of our backlog, and I think we have done quite a good exercise to de-risk. You remember that we have inverted, I mean, our proportion of fixed lump sum costs and collaborative progressive variable costs. This is what I can say to you at this stage. Krista Friesen: And maybe just thinking about defense specifically, do you feel that you have all the capabilities that you would like to have to execute on these defense projects? Or are there M&A opportunities to build out your expertise in that space? Jean-Louis Servranckx: I mean, for what we have at the moment, I mean, specifically Arctic Over-the-Horizon Radar Program, I mean, we are ready. We are ready. I mean, It was a target, and we have been preparing this extremely carefully. Obviously, you have heard that there is going to be 4 new bases, I mean, for aircraft in the northern territories. We're not going to take and win those 4 job. We don't want to. I mean, we are extremely careful. We are not looking at M&A to be able to execute those jobs. Operator: And our next question comes from Maxim Sytchev of NBCM. Maxim Sytchev: Jean-Louis, maybe, first question for you. I mean, nuclear right now is 30% of the business, and given the visibility of all the new build stuff that's coming up, and I mean, obviously the construction revenue sort of attached to it, is it conceivable we could be driving like maybe close to half of revenue in 5 to 7 years from nuclear for Aecon? Is that too aggressive of a potential assumption? Jean-Louis Servranckx: I think it's too aggressive, Maxim we just have to realize when we speak about new build and new technology, for example, or upgraded reactors, I mean, it takes quite a lot of time to take them from definition or planning phase toward construction where the bulk of the revenue is. This will take time, and that's good. That's good for us. I think that the 50% is too much aggressive. This being said, I come back to the fact that we want to be balanced. We want to be balanced because, I mean, we don't have in hand the control of all the parameters. We think we have a good mix at the moment. We worked a lot to modify it. It may grow, I mean, on the nuclear side, but not at up to the level you have been citing. Jerome Julier: And then just to layer on top of it, all other sectors are also growing, right? And so if we were in a dynamic where we only had one shining star in the constellation, it probably wouldn't be a crazy assumption. The fact that all five of our sectors in the construction segment are very well-positioned, I think reduces that impact quite materially. Maxim Sytchev: Yes. Okay. That's fair. And then quickly just in terms of potential M&A in the U.S., I mean, I presume anything in the utilities power space still commands pretty lofty multiples. I'm just wondering what are your thoughts there and what are you seeing on the ground while obviously benefiting from your own multiple expansion? Any comments would be great. Jerome Julier: Sure. Multiples are strong and it's a reflection of the dynamic in that market. It's very clear the people who have the ability to service utilities are doing quite well now in the context of the CapEx budgets that the utilities need in order to keep pace with the demand profile. You know, part of that is clearly tied to compute consumption, whether it's for AI or kind of Bitcoin mining or whatever it is that is running through those server farms. Part of it's also reindustrialization, which I think we shouldn't lose track of. You know, the administration's policies are focused on onshoring a lot of that productive capacity, and that just consumes a ton of energy as well. Yes, the multiples are expanding. Yes, it's creating a acquisition. We need to be very specific with what we want to target. We have very particular parameters and ways that we approach it. You know, we generally don't want to find ourselves in a situation where we're bidding for businesses that are mercenary or private equity rollovers. Like, it just. This is a challenging dynamic. We need to have businesses that will be additive to Aecon, from a not just revenue and EBITDA and earnings perspective, but they need to be additive from a capability standpoint, safety standpoint, and team standpoint. Like, our job is to find the way. If you look at the average multiples that we've, we pay for M&A, over the last dozen acquisitions that the company's done, they tend to be appropriate for what we trade at the Aecon level. Our job is to thread the needle and finesse that. Like, that's why, if people want to go pay whatever the multiple that Quant is trading at, they can easily go do that. If they want to find a better way of doing it, that's our job. Operator: I'm showing no further questions at this time. I'd like to turn it back to Adam Borgatti for closing remarks. Adam Borgatti: Thanks very much, and I appreciate everyone's attention and interest. We're available for follow-up calls at any time. I wish you a great rest of you speak with you soon. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Guilherme Paiva: Good morning, ladies and gentlemen, and thanks for standing by. As a reminder, this conference is being recorded. Its broadcast is intended exclusively for the participants of the events and may not be reproduced or retransmitted without the express authorization of Embraer. This conference call will be conducted in English, but please let me say a short announcement for Portuguese speakers. [Foreign Language] My name is Gui Paiva, and I'm the Head of Investor Relations, M&A and Venture Capital for Embraer. I want to welcome you to our fourth quarter of 2025 earnings conference call. The numbers in this presentation contain non-GAAP financial information to help investors reconcile Eve's financial information in GAAP standards to Embraer's IFRS. We remind you Eve's results will be discussed at the company's conference call. It is important to mention that all numbers are presented in U.S. dollars as it is our functional currency. This conference call may include statements about future events based on Embraer expectations and financial market trends. Such statements are subject to uncertainties that may cause actual results to differ from those expressed or implied in this conference call. Except in accordance with the applicable rules, the company assumes no obligation to publicly update any forward-looking statements. For detailed financial information, the company encourages reviewing publications filed by the company with the Brazilian Comissao de Valores Mobiliarios or CVM [Operator Instructions] Participants on today's conference call are Francisco Gomes Neto, President and CEO of Embraer; Antonio Carlos Garcia, Chief Financial Officer; [ Baltasar de Sousa], Corporate Communications Manager; and myself. This conference call will have 3 parts. In the first part, top management will present the company's Q4 results. In the second part, we will host a Q&A session only for investors. And last but definitely not least, in the third part, we will host a dedicated Q&A session only for the press. It is my pleasure to now turn the conference call to our President and CEO, Francisco Gomes Neto. Please go ahead, Francisco. Francisco Neto: Thank you, Gui, and good morning and good afternoon to everyone. It is a pleasure to be here with you to share Embraer's fourth quarter and full year 2025 results. 2025 was a remarkable period for our company. We met our deliveries guidance on the operational side, while we outperformed the expectations on the financial side. This performance reflects a longer trend. Embraer has been able to deliver 2 digits of revenue growth over the past 3 years despite the supply chain challenges. 2025 was also a marquee period for the E2 program with strong sales across all continents, which has consolidated further the E2 platform as a benchmark in the small narrow-body segment. At the company level, our record revenue and backlog provides strong visibility to investors about our ability to deliver sustainable growth for many years to come as we have robust processes and governance in place. We have made significant progress across the production chain through closer collaboration with suppliers, process digitalization and investments in artificial intelligence tools. The production level initiatives have now been extended across all our platforms, and they should help support production stability in 2026 and onwards. We are well positioned in strategic markets, supported by partnerships under discussion with global players in India, Mahindra and Adani Group and in the U.S., Northrop Group. These partnerships reinforce our strategic position and support long-term growth potential across both our Commercial Aviation and Defense segments. To conclude, all our business units are performing very well with solid execution and bigger backlogs. During the quarter, we saw a strong sales momentum across all business units. In Commercial Aviation highlights included new orders from TrueNoord for 20 E195-E2s, Helvetic Airways for 3 E195-E2s as well as 4 E175 orders from Cote d'Ivoire. In Executive Aviation, revenues reached an all-time high of circa $750 million as we delivered 53 business jets, the highest number ever in a single quarter. In Defense & Security, we reinforced our global footprint with Sweden's order for 4 KC-390 plus 90 options. And Portugal signed a 6 aircraft order along with 10 options for NATO countries. Finally, in Service and Support, we signed an E195-E2 pool program with Airlink and the maintenance service extension with the Republic for its E1 fleet. Let me now walk you through our sales performance for the full year. During the 12 months, Commercial Aviation recorded 157 E2 new orders across all continents, plus 140 options. In addition, the E1 program reinforced its market position with 64 new orders plus 68 options. These achievements increased the division's backlog to $14.5 billion with an impressive 2.8:1 book-to-bill ratio. In Executive Aviation, total sales reached approximately $2.3 billion, supported by strong demand across the portfolio, including the continued success of the Phenom 300, now the world's best-selling light jet for 14 straight years. The backlog in the division now stands at $7.6 billion, supported by a consistent 1.1:1 book-to-bill ratio. Defense & Security achieved another strong year with 5 KC-390 aircraft sold to 2 NATO countries, plus 19 additional options and 10 A-29 Super Tucanos sold to Uruguay, Panama and Sierra Nevada. The business unit closed the quarter with a $4.6 billion backlog and a 1.4:1 book-to-bill ratio. Finally, in Service and Support, the sales momentum remained strong. During the year, the program added approximately 75 aircraft and the Executive Care program signed another 37 new contracts. As a result, the business unit finished the quarter with a $4.9 billion backlog and a 1.2:1 book-to-bill ratio. Together, these results drove a consolidated 1.7:1 book-to-bill ratio for Embraer in 2025. I will now move on to our operational results for the year, and my comments will reflect year-over-year comparisons. In Commercial Aviation, revenues increased by 7%, driven by higher volumes. The adjusted EBITDA margin improved from 2.5% to 2.7%, supported by lower expenses. Executive Aviation, revenues increased a significant 25%. The adjusted EBITDA margin increased from 11.7% to 12%. The gains recorded from higher volumes, pricing and operating leverage more than offset the negative impact of U.S. tariffs. Moving to Defense & Security. Revenues grew 36%, mainly because of higher KC-390 and A-29 Super Tucano volumes. The adjusted EBITDA margin improved from 6.2% to 7.9% as a consequence of operating leverage and client mix. In Service and Support, revenues rose 18%, driven by higher volumes and the ramp-up of the OGMA GTF engine shop. Adjusted EBITDA margin decreased from 16.5% to 15.5%, mainly because of the ramp-up of new operations. Before I conclude, I would like to share a brief update on EV's steady progress. The first flight of EV's eVTOL prototype in December 2025 marked an important milestone. Since then, our full-scale prototype has run 28 missions for a total of more than 1 hour in over flights. The program continues to advance through flight tests towards certification in 2027. Antonio Garcia: Thank you, Francisco. Good morning and good afternoon to everyone. I'd like to start by highlighting that despite a year marked by challenges and volatility, the company remains focused on disciplined execution, delivering results in line with its commitments. Let's now take a closer look at our financial results for the fourth quarter and full year 2025. All my comments will be based on year-over-year comparison unless otherwise noted. Turning to next slide, I will start with deliveries. In the last quarter, Embraer delivered 91 aircraft, 32 commercial jets, 53 executive jets and 6 defense related. This represents a 21% increase with Commercial Aviation deliveries up 3% and Executive Aviation up significant 20%. More importantly, for the full year, we delivered 78 jets in Commercial Aviation for a 7% increase and in line with our 77 to 85 aircraft guidance for the period. Meanwhile, in Executive Aviation, we delivered 155 jets, up a relevant 20% during the period and at the high end of our 145 to 155 aircraft guidance for the year. In Slide 12, backlog and revenue. Our company-wide backlog reached $31.6 billion during the quarter, up a significant 20% and higher than our previous record. The backlog for Commercial Aviation and Defense & Security increased plus 42% and plus 10%, respectively, for support plus 7% and for Executive Aviation plus 3%. In addition to our firm backlog, we currently have approximately $20 billion in options held by our customers. These are not included in our backlog, but they represent a meaningful upside potential over the coming years. As these options are exercised, they could support a significant expansion of our backlog, potentially profit towards $50 billion over time. Beyond the size of the backlog, it is also important to focus on its quality and overall composition. The current backlog reflects a more attractive customer mix, which positions the company for a more favorable firm margin profile perspective over time. Any financial impacts from this mix will continue to depend on execution, delivery phasing and external factors. Moving on to revenues. Our top line increased 15% and almost reached $3 billion in Q4 '25. From a business perspective, our revenue remained well diversified across segments. Commercial Aviation accounted for 37%, Executive Aviation, approximately 30%, Service and Support around 20%; and Defense & Security 13%. Our top line of $7.6 billion for the full year was above the high end of our guidance, an increase of plus 18% when compared to 2024. Moving to the next slide, please. We generated $298 million in adjusted EBITDA in Q4 '25 with an 11.3% mark and $889 million in the year with an 11.7% mark. compared to 12.1% margin a year ago if we exclude the onetime impact of the Boeing agreement. Slide 14, adjusted EBIT. Now adjusted EBIT was $231 million for the quarter with an 8.7% margin compared to 11.5% in the same period a year ago. As we highlighted in our last earnings call, we expected a relevant impact from U.S. imported tariffs in Q4. In addition, we faced additional infrastructure-related costs, which weighed on margins. Tariffs totaled $27 million during the period and nonrecurring infrastructure costs reached $20 million. For the year, we generated $657 million with the same 8.7% margin, in line with last year if we exclude the onetime Boeing gift and surpassing the upper end of our 8.3% guidance for 2025. This performance was achieved despite the impact of U.S. import tariffs and reflects our discipline in our ongoing cost reduction initiatives and efficiency gains. Let's move now to the next slide. Embraer generated $738 million in adjusted free cash flow in the quarter, mainly supported by operations, higher number of aircraft delivered and sales campaign. For 2025, we generated $491 million in adjusted free cash flow and helped the company to cover on average close to 60% of its EBITDA in free cash flow over the past 3 years. The 2025 figure compares to $676 million in 2024, which includes a one-off $150 million inflow related to the Boeing agreement. We exceeded our guidance of $200 million or higher, supported by our continued efforts to reduce working capital requirements. Looking now at our investments, excluding Eve, we allocated almost $100 million during the quarter. The figure includes $27 million in CapEx, $34 million in addition to intangibles, $12 million in the Pool program to support new contracts and $27 million in research. On a yearly basis, Embraer stand-alone invested a total of $383 million in 2025, 10% lower compared to $428 million in 2024. Our capital allocation continues to be geared towards segments with higher returns, such as Executive Aviation Service and Support, mainly in U.S. We continue to see our CapEx run rate at close to $400 million per year in the near future. In Slide 16, adjusted net income. Our adjusted net income was positive $153 million for the quarter, supported by a 5.8% adjusted margin compared to 7.5% in the same period last year. Meanwhile, we ended the year with $253 million in the adjusted net income compared to $461 million in the prior year. We finished the year with a 3.3% adjusted margin. It was lower than 7.2% recorded in 2024. I would like to emphasize the decline was mainly driven by the onetime $150 million impact from the Boeing agreement, less favorable net results and U.S. import tariffs. Turning to next slide, let me walk you through the financial bridge from our reported EBIT in 2025 to both reported and adjusted net income. We finished the year with $608 million in EBIT after accounting for $340 million in net financial mainly inflated by the mark-to-market gains of our share price in our stock-based compensation plan, $91 million in tax credit and $7 million in minority interest. We arrived at $352 million in reported net income. To arrive at adjusted net income, we exclude extraordinary items. These adjustments included a negative $137 million related to deferred taxes, which was partially offset by a positive $38 million from [indiscernible] results. With that, we get $253 million in adjusted net income for the year. Looking at the evolution of our earnings per share, we have seen solid sequential improvement over the past few years. EPS was negative $0.2 per ADS in 2021, improved to $1.4 per ADS in 2024 if we exclude the one-off related effect and reached $1.9 per ADS in 2025. This trajectory highlights the structural improvements in profitability and the progress we have made in strengthening the company's earnings profile over the past few years. In Slide 18, financial position. We continue to strengthen our balance sheet throughout the year. And as a consequence, our liquidity position has increased significantly our stand-alone net debt decreased by $220 million, reaching a net cash position of $109 million at the end of 2025. The solid position of our balance sheet ensures the company remains well prepared to navigate potential volatility ahead. Consequently, our leverage position, excluding if improved further from 0.1x net debt to EBITDA to 0.1x net cash to EBITDA by the year-end. As a reminder, in the third quarter, we announced a new liability management initiative, which was fully executed. The average maturity of Embraer debt without Eves increased to 9.1% from 3.7 years, significantly improving our debt maturity profile. Today, 96% of our debt is long term, which provides us with financial flexibility. Importantly, these actions also led to a reduction in our average cost of debt, which declined to 5.5% from 6.2%, further strengthening our financial profile. Slide 19, shareholder remuneration. We declared a total of BRL 568 million in 2025 in shareholder remuneration, combining interest in equity and dividend. This amount corresponded to BRL 0.78 per share and represents a dividend yield of approximately 0.9%. As a reminder, this distribution should be complemented by an additional dividend to ensure compliance with the minimum 25% net income distribution required under the Brazilian corporate law. The full amount will be paid in a single installment following our 2026 Annual Shareholders Meeting. Slide 20, guidance. Before I present our 2026 guidance, I would like to remind you, Embraer has delivered its financial estimates year in and year out since 2021, reflecting a disciplined approach to planning and execution. Now to conclude my presentation, let me go over the details of our 2026 guidance. In terms of operations, we forecast Commercial Aviation should deliver between 80 and 85 aircraft. Meanwhile, for Executive Aviation, we forecast 160 to 170 jets, representing a year-over-year increase of approximately 6% in both segments based on the midpoint of the range. Turning to financials. We forecast a consistent double-digit growth. We estimate top line to settle between $8.2 billion and $8.5 billion, with the midpoint of the range, 10% higher than what we generated last year. We forecast EBIT margin between 8.7% and 9.3% for the year, which would imply around $750 million at the midpoint of the range and approximately 15% higher than the adjusted $657 million EBIT generated in 2025. Finally, if we move to free cash flow generation. We estimate an adjusted free cash flow without Eve of $200 million or higher for the year. Remember, our midterm goal is to convert 50% of our EBITDA in free cash flow. If we look from 2024 to 2026, we should generate circa $1.4 billion or more in free cash flow, which is 50% of circa $2.8 billion implied EBITDA by our 2024 and 2025 and our 2026 guidance. It is important to highlight this guidance reflects our assessment of the operating environment prior to February '20 before the latest round of changes to U.S. import tariffs. We are taking a conservative approach at this point in time because of decreased policy uncertainty and prefer to wait for additional visibility before making any changes to our outlook. We will update or reiterate our 2026 guidance on a quarterly basis as the year goes by. Let me stop here, and now I hand it back to Francisco for his final remarks. Thank you very much. Francisco Neto: Thank you, Antonio. To conclude, 2025 clearly marked the consolidation of our strategy across all businesses. In Commercial Aviation, record orders supported the consolidation of the E2 platform as they reinforced its global relevance and provided long-term visibility for the business. In Executive Aviation, strong retail and fleet demand supported by higher delivery volumes reflected the strength of our portfolio, which was further reinforced by the recent announcement of the next generation of the Praetor 500E and 600E. In Defense & Security, we continue to advance KC-390 campaigns globally, including key strategic opportunities. In Service and Support, the growing footprint of our operations is strengthening our ability to generate recurring revenues. Our continued focus on driving efficiency and financial discipline across all areas of the company is paying off as our best-in-class operations and services that support our customers. Looking ahead, we expect substantial growth over the midterm, while we prepare the company for a more ambitious long-term expansion, supported by a new generation of products and technologies, always grounded in our culture of safety first and quality always. With that, I would like to move on to the Q&A session. Operator: [Operator Instructions] We remind you again, this conference is being recorded. This broadcast is intended exclusively for the participants of this event and may not be reproduced or retransmitted without the express authorization of Embraer. We also highlight this conference call is being conducted in English with translation to Portuguese. Please let me say a short announcement for Portuguese speakers. [Foreign Language] [Operator Instructions] The first part of the Q&A session will be exclusively for equities research analysts and investors. The second part of the Q&A will be only for the press. The first question comes from Marcelo Motta with JPMorgan. Marcelo Motta: The question is regarding the strategic partnerships that the company have been announcing. So just wondering if you can provide us an update on the stage of it once in India for the commercial and for the defense and also in the U.S. for defense. Francisco Neto: Thank you, Marcelo. Francisco speaking. Good question to start the Q&A today. So yes, we are focused on strategic partnerships to support long-term growth for Embraer. And the 2 main ones are India, where we have been working 2 fronts, the MTA, mid transportation aircraft with India Air Force that we've been working for a few years already and a more recent partnership, this one with Mahindra. So we expect an RFP from the customers still this year. And the second one is with the Adani Group is to focus on the executive civil aviation to improve connectivity between smaller cities in India. Both opportunities can bring a relevant business and potential growth for Embraer. So again, defense, we expect RFP for this year. And civil aviation, we are still building the case, but we have said that if we get orders still in 2026, can do the rollout of jets by 2028 in India. In the U.S. -- sorry, thank you, Antonio. In the U.S., we are -- we announced recently the partnership with the Northrop Grumman to develop the boom capability for the C-390 as an option for -- to complement the tanker fleet of U.S. Air Force with our KC-390. This we don't have a time line defined it, but we are working very hard. We recently took the KC for demonstrations in the U.S. Operator: The next question comes from Kristine Liwag with Morgan Stanley. Gabrielle Knafelman: This is Gaby on for Kristine. Just a follow-up on the Northrop Grumman partnership. On the partnership around adding BOM capability to the KC-390, could you provide any more detail or color on the structure of the partnership and how responsibilities are being split strategically, how significant is adding a boom for the KC-390s competitiveness, particularly in the context of [indiscernible]? And how should we think about the potential size of the opportunity over time? Francisco Neto: Thank you for the questions, Kristine. So at this point, we have signed an MOU with Northrop Grumman and the main focus is the collaboration to enhance the capabilities of the KC-390 Millennium focusing on the integration of an autonomous boom refueling system and agile combat employment solutions. This is designed to meet the future needs of U.S. Air Force and allied nations, not only U.S. We don't have a time frame defined yet, but the main purpose is really to engage this discussion with the U.S. Air Force and have the KC-39 to complement the fleet they have. We don't see this collaboration, our strategy is based on the premise that it does not compete with the KC-46 or any other strategic tanker, but rather, it's a complementary capability. And our intention, if we get a sizable order, this aircraft will be assembled and produced in the U.S. We don't know the size yet, and we don't have a clear view about time frame, Kristine. Gabrielle Knafelman: Great. And just a quick follow-up, if I can. Can you just provide a quick update on the supply chain environment across both commercial and Executive Aviation? What are the major constraints you're still seeing? And what areas have you seen improvement in? Francisco Neto: Last year, we face some issues in supply chain, but even then we -- as a company, we were able to overcome the issues and deliver the aircraft in the year. This year, we see the supply chain improving, but it's still with a few bottlenecks that we want to be even more proactive this year than we were last year to anticipate all the issues and act with greater effectiveness. And we have started doing that already in January. And yes, we are -- I'd say, we are monitoring the situation, but we are positive that this year is going to be better than last year. Operator: [Operator Instructions] The next question comes from Myles Walton with Wolfe Research. Myles Walton: Great. I was hoping you could touch on the margin outlook by segment, maybe just a little bit more color below the surface. Pretty good to have margin expansion. I think service and support probably going against you. And I think I heard that the tariffs are in the guidance, and I would imagine those would be incremental year-on-year given a full year of effect. So maybe just talk to what the margins would be without tariffs? And then also any color of where the uplift is happening within the segments? Guilherme Paiva: Myles, thanks for the question. This is Gui. I think one way to kind of think about the outlook for margins is to account that last year, we paid $54 million in tariffs. And we are carrying over around 2025 from inventory into '26. So if you adjust for that, we are probably looking for something close to 75 to 100 basis over time as both of them unwind. And... Antonio Garcia: Myles, it's Antonio speaking. Just to complement, I would say, overall picture, we -- if you see what we have reported and the trajectory that we are right now and the huge impact on tariffs was in Executive Aviation, and we delivered the same number we delivered last year and percentage-wise, which means it doesn't matter if you have tariffs or if we have a crisis, we always find a way to compensate. And I would say, if we take service and Executive Aviation is already on double-digit space on the margin profile, and we are moving towards defense, I would say, it's up to speed also to go also to double digit, I would say, then we keep on our challenge here with Commercial Aviation to move to mid-single digit. I would say, on a consolidated level, we are coming closer to double-digit EBIT margin for this company here. Myles Walton: Okay. Great. And then maybe just one other one on cash flow performance in the fourth quarter. Is this similar to last year where some of the defense orders came through with higher advances? Or were there other attributes driving the performance? Antonio Garcia: I would say, some effects. We -- for sure, we have -- we delivered more than 90 aircraft in Q4. That's -- and especially in commercial aviation, where the -- when we deliver, get more cash than compared with the others because of the size of the advanced payment and by delivery, we get more money. I would say 2, 3 effects, a lot of deliveries concentrated in Q4. And luckily, we got some final anticipation and advanced payment from defense customer, if you -- and to be honest, also nice sales campaign in December on Executive Aviation, I would say, some up altogether, we brought this nice development in Q4. You know that it's hard for us to predict. That's why you see the guidance 200 plus again, but it was more or less the same as happened in 2024. Operator: The next question comes from Noah Poponak with Goldman Sachs. Noah Poponak: Just wanted to follow up on the delivery projections and profile here. I know at commercial, you've talked about getting back above 100. I hear you -- it sounds like supply chain is still a bit of a hurdle. I guess it's a little surprising to see the low end of the guidance pretty much flat. Maybe you could just talk about the hurdles left to get back to 100, when you think you can get there? And then on the executive side, similar question. I know you've talked about potentially expanding capacity to get to 200 there. What's the latest thinking and time frame to get to those types of numbers on the executive side? Francisco Neto: Thank you, Noah. Francisco speaking. Yes, I understand your point, but we are very focused this year to be from the mid to the high end of the guidance in terms of commercial aviation deliveries. And I said before, we believe we are better prepared this year with the supply chain to get there, while we are preparing the ground to reach 100 aircraft probably in 2027. We are working in that direction and not confirmed yet for sure, but we are working in that direction to create capacity to be there by '27, maximum 2028. We believe 2027 will be feasible. Same on the Executive Aviation. We are working in 2 fronts. We are expanding capacity in some bottlenecks of the production. We have been doing that already for a couple of years, while we work on improving efficiency in our production lines. So now we produce one Praetor or one Phenom in half of the time that we used to do back in 2021. So we are moving -- I'd say we're moving fast to reach those targets, production targets in the next years. Antonio Garcia: And we have orders for that. Francisco Neto: And we have order for that with the best news, right? Yes. Noah Poponak: Okay. Great. And how does the rate of growth in services that you've embedded in this initial 2026 guidance, how does that compare to what you saw in 2025? Antonio Garcia: We -- Noah, this is Antonio speaking here. It's nice to talk to you again. We are seeing Service and Support -- Service and Support also in the double-digit space in regards to growth, I would say. And to be honest, it's growing faster than the aircraft division because we have other contracts as well. And that's why we see even a fast speed growth for Service and Support comparing to -- with the aircraft delivery on the other 3 segments. I would say, more than double digit for Service and Support to move forward for the next 2, 3 years. Operator: The next question comes from Lucas Marquiori with BTG Pactual. Lucas Marquiori: I just wanted to follow up on the tariff discussion and actually try to understand what's the situation there. I know there's different sections of investigations and that, I mean, our latest understanding was that this is 0 now. I just wanted to confirm that. And for how long should it remain that way? Or what's the bureaucratic there that we need to see happening for that to change? And also, if there is any difference in tariffs for Embraer versus its main rivals or its main peers, if there's any kind of a dislocation of competitiveness or actually an improvement in competitiveness because of the 0 tariffs right now. Just wanted to hear your thoughts on that one. Francisco Neto: Lucas, thanks for your question. Well, first, yes, we confirm that all Embraer aircraft engines and parts are exempt from the 10% tariffs as of February '24. Yes, we still have some inventory that we paid the tariff in U.S. inventory, but we'll deal with that during the year, and this is already included in our projections. Of course, we welcome the level playing field in our industry since Embraer was the only manufacturer to pay tariffs on aircraft exports before. And this outcome will benefit our U.S. customers. So airlines, they can renew -- they can keep their plan to renew their fleet of jets, and we'll keep buying a lot of U.S. parts because more than 40% of our aircraft has a U.S. content. So I think the decision was very positive and it will benefit not only Embraer, but U.S. customers and suppliers as well. What was the -- how long this will take, this question? Antonio Garcia: 232, 301. Francisco Neto: We expect this to be a long-term decision. And about the sections, 232, 301, we are now monitoring the topics very closely and while we keep focus on our regular business. But so far, we don't expect any big changes, but this geopolitical situation is a little volatile. But let's see, we are now very optimistic that this will remain, and we will continue to reinforce our position and the aerospace industry position in the U.S. as well. Antonio Garcia: And Lucas, Antonio speaking here. We did -- we ran an assessment and we came to a conclusion. It's too early to bet to stay or is going to revert in another section here. That's why when you see our guidance profile, as of today, we see more upside than downside because we are not paying tariffs. But we have to wait because we don't want to -- it could be very complicated and volatile as we are seeing the word every single day. Operator: The next question comes from Alberto Valerio with UBS. Alberto Valerio: I would like to talk about the orders for the year. What should we expect? We should expect 1x book? Or do you think that it could be even more, but the guidance of commercial and executive is still having some supply issues on it included? Antonio Garcia: Alberto, Antonio speaking. You asked about our expectation for new sales company or just... Francisco Neto: I didn't get your question. Alberto Valerio: Exactly, exactly. So what should we expect in terms of book-to-bill for the year, if it will be one time or if we can expect a little bit more than the guidance, for instance, [indiscernible] on the commercial jets because you have still some supply issues for the year? Francisco Neto: Well, first of all, Alberto, I mean, we had stellar year last year in terms of sales of E2, right, 157 new sales plus 140 options. This brings a lot of confidence in the platform for the future, and we keep selling the E1s as well. For this year, as I said before, we are preparing to increase our production output for E-Jets for the next years. So we expect this year -- we are working in various sales campaign, and we expect the book-to-bill again above 1:1 for this year in terms of sales. And I mean, supply chain, as I said before, we are working now this year, again, very, very close to the supply, especially the pacers in order to mitigate the issues, delivery this year, the guidance, we expect from mid to high end of the guidance and prepare the company to increase the production in the following years for E-Jets. Operator: The next question comes from Andre Mazini with Citi. André Mazini: So 2 questions. The first one around defense and geopolitics, of course, that's a hot topic. So will it make sense to accelerate defense applications for Eve? Would that increase LOIs, predelivery payments and even get maybe to breakeven faster? I know Eve have their own earnings call, but I think it's pretty important for Embraer as well. So I wanted to hear your thoughts on that. This is the first one. The second one about the buyback program just announced. If you can read it, the buyback program as meaning that over the next 12 months, right, the duration of the program, you prefer to allocate capital in Embraer stock rather than going for a large new programs such as a new airframe and et cetera? And more generally, how do you think about the trade-offs of buyback, plowing money back into the company and new development -- plowing money back into buybacks, right, or new developments on aircraft, airframes and whatnot? Francisco Neto: Thanks, Andre. I answer number one, and then Antonio and Gui will answer number two. So Eve now, we are very focused on the certification process of the Eve, the product we have, the EV 100. And I know they are discussing all the opportunities. But at this point of time, they are really focused on the certification of the program until the end of 2027. I think for more questions, I recommend you to go to the Eve presentation, they will give you more details. Antonio Garcia: And Antonio speaking. In regards to the buyback, it's quite simple. We -- if you see the material fact issue, we are considering to replace the equity swap we have in the market. Basically, what we are doing are just changing, reducing the active swap into share from the treasury in order to hedge our long-term incentive program. It's going to be much more faster than 12 months, probably going to take 1 or 2 days to be concluded. That's more or less -- we are not increasing the shares, just changing from active swap to a share buyback. And we do not -- today, the company does not do this buyback in regards to total shareholder remuneration just to hedge the long-term incentive plan. Guilherme Paiva: And also just to complement, the company continues to invest heavily on the businesses that we have the higher ROIC, and that includes Executive Aviation and services. Operator: The next question comes from Luiza Mussi with Safra. Luiza Mussi Tanus e Bastos: Just a follow-up question because we saw some media reports yesterday indicating that India actually has opened a bid for like 60 units from military aircraft and the total contract value will be $11 billion. I mean, could you share like your perspectives on this deal in terms of how you expect the competitive dynamics to evolve? And how could you differentiate yourself like from the other competitors? Francisco Neto: Luiza, thanks for the question, Francisco speaking. We are very excited about this opportunity because we believe we have the best value proposition for India with our product, the [ KC-390 ]. It is very competitive, very modern, exactly for that segment. And we have also been working with Mahindra with a lot of activities to be compliant with Made In India expectations from them. So again, we are very excited and working very hard to win that business. That will be a very important step for the KC program. So yes, this is -- the original plan was from India is to buy from 40 to 80 aircraft. So 60 is the midpoint. And yes, this will generate billions of dollars in terms of revenue opportunity. Operator: The next question comes from Lucas Laghi with XP Investments. Lucas Laghi: Two quick follow-ups. First one on the Services division. I mean, margin performance is very strong. Just trying to understand what has been the main drivers this quarter. I mean you mentioned materials, for example. Just trying to understand if this -- I mean, should you continue to work with 20-ish percent EBIT margin going forward? I mean is this assumption that we should guide for -- in the upcoming years? And a follow-up on the guidance for 2026 regarding -- still regarding the margin. But I mean, we estimate around $90 million of EBIT impact considering a 10% tariff, which you mentioned that you included as an assumption for your guidance. So just to understand if that is the level of impact that we could consider as an upside given that you are -- I mean, merged in a current 0% tariff environment. So just to understand the size of the upside potential regarding EBIT for this year in this tariff topic. Antonio Garcia: Lucas, this is Antonio speaking. Thanks for the nice question. To be honest, I would love to take the 20% margin for Q4 for Service division and move forward, but not now. What's happened in Q4, we have a lot of bad guys throughout the year and then has been compensated in Q4 also with compensation for suppliers, this and this. That's why we see this nice 20% margin in Q4. For sure, we are not happy with 15%. We are moving towards a bigger number, but I would say, for your assumption here, 15%, 16% is okay to move forward. But we do see improvement, but not in the pace that we should assume already for 2026. And for the tariffs, I would ask Gui. Guilherme Paiva: So I think for 2025, we paid $54 million. And as I mentioned, we have about $25 million in inventory. So you can use that $80 million as a good proxy. But we're going to unwind that in '26 and in '27, right, because the inventory impact will hit us in '26 and will be only unwound in '27. So I would expect 2/3 of the benefits to come in this year if the status quo is maintained for the tariff, and we hope it does, with the balance 1/3 being upside for '27. Operator: Our next question comes from the chat and is from Andre Ferreira with Bradesco BBI. Congratulations on the results. The guidance assumes tariffs. So to confirm, if it is exempt, is there upside to the margin numbers? Would that translate in any way to the delivery guidance as well? Guilherme Paiva: Andre, thanks for the question. I think we just answered that with Lucas in the previous question. So let's move on to the next, please. Operator: The next question is also from the chat with -- it's from Kristine Liwag. Following up on the supply chain question, there's a public dispute between Airbus and Pratt about engine deliveries. For your commercial delivery outlook in 2026, how much conservatism is built into your assumption? And is Pratt able to support? Francisco Neto: Thanks for the question. Yes, I think as I said before, we have some bases that we are working on very closely in 2026. But I mean, we have been working in a very collaborative way with our suppliers, I mean, trying to help each other. And again, we are very confident that we will deliver the aircraft we are planning for the year, and we don't have any big issues with Pratt this year. They are doing that. Operator: Thank you very much. This concludes the question-and-answer session for equity research analysts and investors. Now we will start the Q&A session dedicated to the press. First, we will answer questions in English and then we will answer questions in Portuguese. We will also answer questions sent via the platform chat. [Operator Instructions] The first question comes from Pablo Diaz. Unknown Analyst: Can you hear me? Francisco Neto: Yes, we can. Unknown Analyst: Just wondering about the joint venture with Adani in India and the new line -- production line for the E175. Wondering if that production line is going to be focused on the E1 and if there is any possibility for that line to later migrate to E2 providing the certification process is retaken. Francisco Neto: Pablo, thanks for the question. At this point of time, we have -- we don't have a joint venture yet. We have signed an MOU with Adani to explore the opportunities in this civil aviation. And at this point of time, focus on the E175 E1. Operator: The next question comes from Curt Epstein with Aviation International News. Curt Epstein: I was wondering if you could detail the impact on your Executive Aviation division by the tariffs over the past year. Guilherme Paiva: I think the easy way to think is that out of the $54 million that we paid in '25, about 80%, 85% of that was in our Executive Aviation division. Antonio Garcia: For 9 months. Guilherme Paiva: Yes. Antonio Garcia: Starting April onwards. And for the whole year, should be something like $60 million to $70 million, but today, you are back to 0, Curt. Operator: This concludes the question-and-answer session in English for the press [Operator Instructions] [Interpreted] Our first question is from the chat by Nelson [ Doring ]. We'll see the first Gripen being delivered in the 25th of March in Gaviao Peixoto. Congratulations, Bosco and the defense staff. Is Embraer going to be a part of the Gripen agreement in Colombia and other potential contracts? Unknown Executive: [Interpreted] Thank you for your question. No, we haven't established any contracts. However, we do have a good collaboration with Saab. We are working with them to cooperate with them and if possible, to bring the assembly of these aircraft to Gaviao Peixoto because we have installed capacity, it would be good for us and for them, but we don't have any subcontracts that we have entered into yet. Operator: [Interpreted] We have no audio from Mr. [ Nascimento ]. So our next question, again from Nelson [ Doring ] also came through the chat. How does Embraer see the landscape for raw material supply as aluminum and titanium as critical elements for engines and avionics, both for military and civil aviation. Unknown Executive: [Interpreted] Nelson, thank you again for your question. 2026, in our calculation should be better in terms of supply when compared to 2025. There will still be some difficulties in terms of parts, but raw material is not one of the difficulties. I think as for raw materials, we are quite comfortable with the current inventory we have. And there is another item that we are monitoring quite closely to ensure not only the year's total production, but a better production of aircraft production throughout the year. So again, we are working very closely with suppliers since the beginning of the year, and we are quite positive and comfortable when it comes to aircraft delivery for 2026. So we'll try again. Operator: [Interpreted] Next question from Mr. Nascimento for Vale Trezentos e Sessenta News. Jesse Nascimento: [Interpreted] I do apologize for my mistake. It was something related to my own equipment. I have 3 basic questions, Francisco. The first question is whether Embraer in the period where tariffs were implemented, I know that you -- you had a meeting with the representatives of the Brazilian Foreign Relations Office in New York in an attempt to align the issue of tariffs. So this is question number one. If you want, I can ask the 2 other questions later on. Unknown Executive: [Interpreted] When in fact, Embraer did not take direct part in that event. I mean, we just did a follow-up, but we were not there at the time. What we did was try to facilitate the event, but we didn't have any direct participation. Jesse Nascimento: [Interpreted] And my second question is about the recent decision by the U.S. when the President was questioned by the courts that said that he couldn't charge the tariffs, that the tariffs were unconstitutional. Do you think that Embraer could try to collect the tariffs that were charged unduly? And how much more of the tariffs were charged? Unknown Executive: [Interpreted] In terms of recovering the money paid in tariffs, we are monitoring the situation, trying to understand what our peers will do and what kind of outcome they will get from there. So then we will decide what to do. I mean, in terms of what has been paid, we already paid $80 million. Jesse Nascimento: [Interpreted] Okay. So finally, Francisco, we see the war escalating in the world and countries trying to strengthen their defense. I mean -- and Embraer with KC and Super Tucano should fit into that scope. My question is whether Embraer is developing or thinking about developing new equipment for the defense side to probably serve some worldwide need. Unknown Executive: [Interpreted] [indiscernible], right now, our focus is in selling our equipment. KC is a new product that was launched in 2019. And also taking this opportunity with -- I mean, sales of Super Tucano and also some of our equipment from Atech, one of our subsidiaries. But right now, there is nothing being developed at the moment. Operator: [Interpreted] Our next question comes from the chat from Chandu Alves from Ovale. Do we know the deadlines of the RFP for 60 jets for India? How long is this process going to take? When are we going to get an answer? And who is competing for this? Unknown Executive: [Interpreted] Right. First question. We're keeping an eye on this, but we can't control their deadlines. Of course, the clients from India are going to set their deadlines. We expect to see an RFP this year a request for proposals. This is an important step for aircraft selling because competitors will be showing their RFPs and then they will have some time to go over them. Of course, right now, we have no visibility over that. And our competitors are Lockheed Martin from the U.S. with the 630 hectare and Airbus in Europe with A400. Operator: Our next question is from Leda Alvim, Bloomberg News. Leda Alvim: [Interpreted] Could you please confirm the values that we have in paid tariffs for now? If you could break it down by segment, that would be useful. Antonio Garcia: [Interpreted] Leda, this is Antonio. In total, we already paid $80 million. 85% of that is for Executive Aviation and the rest of it is for service and support. So $80 million so far is everything we've paid since April 2025. And since February '24, we went back to 0, but we still don't know what's going to happen from now on. Operator: Next question also from the chat from Paulo Ricardo Martins with Folha de Sao Paulo. Paulo Ricardo Martins: [Interpreted] How can the war in Iran impact Embraer? Could it jeopardize the delivery of aircraft for the Middle East? Unknown Executive: [Interpreted] Ricardo, thank you for your question. Ricardo, thank you for your question. At the moment, we are just monitoring the situation very closely. Our main focus and #1 focus is with the people we have in the region because they are experiencing the situation day-to-day. We are they're trying to cater to their needs and the expectations of the families. We are also taking care of our suppliers, both direct and indirect in the region. And so far, we haven't seen any critical issue that could compromise our deliveries. And we are not seeing any impacts in deliveries or even short-term sales. So the focus now at the moment is just to monitor the situation so as to help us take mitigating actions in due time so that we can deliver whatever we are launching for this year. Operator: Ladies and gentlemen, thank you very much. That concludes the Q&A session of today's conference call. And this concludes Embraer's conference call. Thank you for joining us, and have a very good day. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]