Verisure plc (VSURE) Earnings Call Transcript & Summary

Welcome to the Verisure Group Fourth Quarter Results 2025 Presentation. Today, I am joined by CEO, Austin Lally; and CFO, Colin Smith. [Operator Instructions] Now I will hand the conference over to the speakers. Please go ahead.

Thank you, operator. Good morning, and welcome to our fourth quarter and full year earnings call. Before we get started, just a reminder that you can find today's presentation, earnings release and financial report on our Investor Relations website, together with updated long-term trending schedules setting out our operating and financial performance. Today, Austin will begin with opening remarks and operational highlights. I'll walk through financial performance in more detail before handing back to Austin to cover strategy, priorities and outlook. So with that, Austin, over to you.

Well, good morning, everyone, and thank you for joining us on our first full year results presentation since our IPO last October. We've been looking forward to sharing this update with you today. Colin and I look forward to answering all your questions on the call this morning and to speaking with many of you personally in the next few weeks. We closed 2025 delivering a very strong fourth quarter, and that concluded another year of excellent operating and financial performance, continued margin expansion and also a year of several important milestones, including, of course, our IPO and crossing the 6 million customer mark and a rare piece of M&A in Mexico. We see the opportunity ahead of us as highly attractive, a long growth runway together with predictable, high-quality subscription revenues compounding value over time. Let's turn to Slide 2, where we present the key highlights from the quarter and the full year. Now Verisure delivered a strong close to the year. In Q4, we delivered strong top line growth, improving profitability and an important step forward on cash generation. Starting with new customers, we installed 224,000 new customers, and that was our best ever quarter, and it represented 5.9% year-on-year growth. This reflects healthy underlying demand across our footprint, strong commercial execution and improving sales productivity. Annualized recurring revenue was over EUR 3.4 billion, and that's up 12.7% year-over-year at constant currency. Now that growth rate includes around 2 percentage points from our Mexico acquisition. Now this exceeded our outlook and underscores our highly stable, predictable financial profile. Q4 also marked an important step in the group's cash generation journey. We delivered positive free cash flow of EUR 18 million, excluding net IPO proceeds, associated refinancing and the Mexico acquisition. This keeps us well on track towards becoming free cash flow positive on a full year basis in 2026. In the full year 2025, total revenue was over EUR 3.7 billion, up 10.3% year-on-year. Adjusted EBIT was EUR 953 million, up 15.5% year-over-year, with margins expanding to 25.4%. This increase in profitability was driven by strong revenue growth alongside disciplined cost management. From a balance sheet perspective, we closed 2025 with net leverage of 2.9x. This strengthens our financial flexibility as we enter our next phase of growth and sets us up very well. So we're pleased with our 2025 results. We're also in good shape looking forward. For 2026, today, we are guiding to ARR growth around 10% and adjusted EBIT margins above 26%. We're projecting being free cash flow positive in 2026, and we expect to pay our first interim dividend in the second half of the year. And Colin will talk more about that later. In the fourth quarter, we're actually reporting a strong set of results across the board. We now have the privilege of supporting around 6.2 million families and small businesses. Now while passing 6 million customers in 2025 was a special achievement, we still see it as a waypoint rather than any destination, given the scale of the addressable market opportunity and the very, very long growth runway ahead of us. New installations were up 5.9% year-on-year in Q4, as I mentioned. We reached 224,000 installations. We're basically capturing significant demand that we are generating from the investments that we make in category-creating marketing, and we're turning that into sales with a strong expansion of our sales force. Turning to the financials. Q4 group revenue increased 10.7% year-over-year to EUR 965 million, while ARR reached over EUR 3.4 billion, up 12.7% year-over-year. The recurring revenues generated by our portfolio are obviously a defining strength in our model. Finally, profitability continued to scale in the fourth quarter. Adjusted EBIT was EUR 236 million, representing year-over-year growth of 19.3%. And Q4 margins expanded to 24.5%, up almost 200 basis points year-over-year. So overall, in Q4, we made progress on volume growth and margin expansion. It was a quarter of very strong execution. And I want to take the opportunity personally to thank our teams across the company for their excellent work to close 2025 so well. I'm very proud of them. Turning to Slide 4. We increased our customer portfolio by approximately 560,000 customers over the past 12 months. Well, this is the highest year of portfolio growth on record. And the consistency of the execution is visible when you look at the quarter-on-quarter progression with significant growth in each quarter of the year. Now the consistency of portfolio expansion, it traces to disciplined new customer intake, high customer satisfaction and stable attrition. You see on the right of the slide, we set out our record of industry-leading attrition. In Q4, annualized attrition was 7.4%, and that's in line with the last 12 months average, and it remains well within our long-term attrition corridor. So with that, I'll now hand you over to Colin to walk you through the financials in more detail.

Thanks, Austin. Let's start by turning to Slide 6. I note that I will always refer to growth rates in constant currency where applicable. Here, we'll focus primarily on 2025 full year performance. Annualized recurring revenue increased 12.7% to EUR 3.448 billion. As Austin mentioned, ARR growth benefited by around 2 percentage points from our acquisition in Mexico. ARR is our primary revenue metric, reflecting the long-duration nature of our customer portfolio. As you will have noted, we have adjusted our definition of ARR. This now uses 12-month trailing ARPU instead of quarterly annualized ARPU. It has no effect on our reported 12.7% growth in 2025. Our objective here is to smooth the ARR growth given we take our price increase in the first quarter, and we believe this gives us a higher quality metric. This has been set out on Page 33 in our results presentation. Moving to total revenue in the year was EUR 3.745 billion, representing 10.3% year-over-year growth. Adjusted EBITDA in 2025 was EUR 1.7 billion, up 11.2% year-over-year. And worth noting that Q4 EBITDA was impacted by higher installation volumes as well as a lower capitalization. Our adjusted EBIT for the 12 months of 2025 was EUR 953 million, up 15.5% year-over-year. Our margins increased 141 basis points to 25.4%, driven by good, broad-based growth and disciplined cost management. Taking a slightly longer view, over the past 3 years, we've increased EBIT margins by 500 basis points. Geographically, margin growth was broad-based with positive margin progression in all 3 segments. In Iberia and Nordics, our longest established cluster, margins increased again to 41%. Let's turn to Slide 7, where I'll unpack our key operating metrics. Austin covered installation performance with new installations up 5.9% year-over-year in Q4 to 224,000. We were pleased with this growth, particularly given that we were lapping a strong prior year performance, which included the launch of LockGuard in France and Italy. Cost per acquisition increased 6.5% in the year, largely driven by media price inflation as discussed. In October, we began our rebrand program in Portugal, adding approximately EUR 30 to Q4 CPA. To partly mitigate increased media costs through 2025, we made progress in hardware and services procurement and in installation efficiency. Now CPA will ebb and flow quarter-to-quarter, but the key point is that we are very comfortable at these levels of investment given the significant lifetime value of customers joining the portfolio. As we've discussed before, we think about CPA and customer acquisition overall in the context of the acquisition multiple. In 2025, we were stable at around 3.7x. New customers generate a 20% IRR measured over a 15-year time frame. We continue to prioritize capital allocation towards organic growth, investing EUR 1.3 billion in 2025, which delivers predictable long-term value creation. Let's turn to Slide 8 for a closer look at portfolio performance. First, we were pleased with ARPU at EUR 46.50 in the fourth quarter. This represented year-over-year growth of 2.5% and continues our long-term track record of increasing ARPU. This growth is supported by innovation-backed price increases, increased upsell and continued avoidance of a front-book, back-book dynamic. A key part of our focus on quality intake is ensuring that new customers join at the same ARPU as the portfolio, an important and differentiating part of our model. Looking forward, our 2026 price increases were notified to customers in December with customer response so far in line with expectations. Recurring monthly costs were slightly higher in Q4 due to the impact of Mexico integration. We will aim to neutralize this impact as we implement our operating model and experience. On a full year basis, RMC was 1.6% lower year-over-year at EUR 12.20. We continue to enhance our digital-first programs, first-time resolution capability and AI tools in our contact centers to bring down costs while always aiming to add quality to the customer experience. Austin will expand on this later in the presentation. As a result, our key measure of portfolio profitability EBITDA per customer was up 3.3% in the quarter to EUR 34.10 per customer per month. And we increased portfolio margins by 108 basis points year-over-year. This is a key engine of our profitability and cash flow generation. Turning next to a few pages on cash flow. The company is moving through an important inflection point. As a reminder, our financial model targets consistent top line growth as well as delivering increased profitability and cash flow generation. Starting with the laydown of cash conversion in 2025 from the left side of the page. Once we add back customer acquisition EBITDA, D&A, CapEx and movement, and working capital, we generated EUR 1.9 billion of operating cash flow before customer acquisition. From this, we chose to reinvest just over EUR 1.3 billion into customer acquisition to replace attrition and also grow the portfolio while maintaining excellent unit economics. Excluding changes in working capital, cash conversion increased to 69%, continuing the positive multiyear trend and reinforcing the high quality and predictability of our cash flow profile. Once we include paid taxes, separately disclosed items and paid interest, we generated a net cash outflow for the year of EUR 54 million. Note that this excludes net IPO proceeds and associated refinancing and our Mexico M&A. As Austin noted, the company was free cash positive in the fourth quarter, reflecting the progress made in strengthening our cash generation profile. Let's move to Slide 10. Next, I wanted to quickly summarize the key building blocks of our cash flow generation road map and update you on progress. Starting with financing costs, we are well on track to land within our target range of 4% to 4.5% weighted average cost of debt in 2026. As we move through our next refinancing in the coming months, we expect to deliver savings at the upper end of the range previously guided of EUR 200 million to EUR 220 million based on 2026 versus 2024 net interest cost. On operating cash, we delivered against our working capital commitments. We guided positive working capital in the second half of 2025, and we delivered with a EUR 67 million inflow in the second half. This reflects our usual seasonal reductions in inventory levels, together with good progress across payables and receivables. Next, capital efficiency continues to improve. Our portfolio reinvestment rate declined from 60.8% to 59.6%. Put simply, this means that the cash generated from our portfolio is growing faster than the cash deployed to acquire new customers. This acquisition and acquisition intensity is particularly pronounced in more scaled markets, and we see this trend continuing in future. Lastly, CapEx intensity reduced from 27% to 26.2% year-over-year. We're tracking well towards medium-term guidance of around 25% capital intensity. Let's turn next to Slide 11 on deleveraging. We made further progress reducing leverage in the fourth quarter. We were at 3x pro forma for IPO, paying down around EUR 2.7 billion of debt. At the end of December, leverage has reduced further to 2.9x due to continued earnings growth against a stable net debt balance. The group benefits from a well-diversified debt complex. Our debt maturity profile is well staggered and our debt structure approximately 65% fixed. This offers us the balance sheet flexibility to support continued growth investment. This progress has been recognized externally. Moody's and S&P both upgraded Verisure 3 notches to Ba1 and BB+, respectively, reflecting improved credit quality, stronger cash flow visibility and a more balanced financial profile. Moving next to Slide 12, I wanted to take the opportunity to recap our approach to cost capitalization. On the left of the page, we set out the components within our CPA. We capitalize around 35% of gross CPA costs. This capitalization rate has reduced from 41% in 2021. The costs capitalized are customer hardware and variable sales commissions. We make a deliberate business model choice to retain ownership of hardware in our customers' homes. Retaining ownership of hardware is common in subscription businesses. It allows us to provide maintenance and firmware upgrades at no additional cost to the customer and to ensure we are enhancing resilience and cybersecurity. We operate a closed system, which is owned by the company. This choice to retain ownership leads us to capitalize the cost of the alarm equipment. We also capitalize variable sales commissions paid to our sales teams. These are 100% variable commissions and do not include commissions paid in order to reach a monthly minimum wage level. These are variable costs incurred to obtain a contract and must be capitalized under IFRS 15 guidelines. On the right, I wanted to remind you of the useful economic life periods we apply. These take a conservative approach, particularly in the context of our 15-year average customer lifetime. For customer hardware, we depreciate over 8 to 9 years, which includes writing off assets when customers cancel. For variable commissions, we adopt a 10- to 12-year amortization time frame, again, well below our 15-year average customer life. Let's now turn to 2026 outlook on Slide 13. In 2026, we expect ARR growth around 10%, supported by continued broad-based growth. We expect adjusted EBIT margins above 26% as another year of quality growth is augmented by effective execution on cost. As discussed, we expect to be free cash flow positive in 2026 as structural improvements in reinvestment rates, working capital and financing costs continue to flow through. We expect to initiate an interim dividend in the second half of 2026. This is expected to be based on a payout ratio of between 30% and 40% of H1 2026 adjusted net income. This will represent a key milestone for Verisure and will mark the next phase in the financial evolution of the company, combining continued growth and margin expansion with a progressive and sustainable shareholder returns profile. We reaffirm medium-term guidance and remain highly confident in our targets, around 10% annual ARR growth, revenue growth tracking up to 100 basis points below ARR growth, and progressive adjusted EBIT margin expansion towards 30% over the long term. This is our clear financial model, and outlook and medium-term guidance are in line with our commitments at IPO. Strong and consistent top line growth, expanding profitability and increasing free cash flow support accelerating returns to shareholders. I will now hand back to Austin.

Well, thank you, Colin. Let's turn to Slide 15 and get into the strategy review. Now hopefully, for many of you, you'll recognize this slide from previous calls and also from the meetings that we had together during the IPO. It summarizes our very sure tried and tested playbook. And I'm now in my 12th year as CEO, and this is basically how we have been driving the company forward for those years. It's our key to unlocking growth. First, I want to start on innovation, which remains our most differentiating strategy. Our proprietary tech stack delivers a superior proposition with innovative products, and it supports premium pricing. 2025 saw the full launch of LockGuard and the introduction of GuardVision, our new AI-backed outdoor camera detector. Actually, it's the strong innovation program that gives us such confidence also for 2026 and beyond. Now in 2025, we invested well over EUR 300 million, around 8% of sales in category-creating marketing to drive demand and to ensure that we remain top of mind, #1 for customers as a trusted brand as the security destination. Now our 12,000 security experts in the field, our go-to-market muscle are a huge competitive advantage. That ensures that we deliver a fast response, able to offer customers a booking within 24 hours. And it's that speedy execution that contributes strongly to our conversion and sales productivity. Customer experience is also super important. Our first-class customer service supported by AI, data and analytics, that's one of the factors that keeps our attrition role and ensures that we are ready to protect our customers when they need us most. In Q4, we supported our customers in over 104,000 incidents that required intervention by police, fire, ambulance or a guard, delivering when it really matters most. Our model about deter, detect, verify and intervene. Verification, it's a key edge that we have, again, based on data and analytics, but that enables us to provide the intervention service, and we know that, that's the part of the outcome-related business that we have that customers value most. Now as always, this is underpinned by our excellent culture and talent. Verisure is recognized as an outstanding employer. We are either Great Place to Work or Top Employer or both in all of the 18 countries in which we operate. We just achieved an all-time high sustainable engagement in our Annual Employee Survey, reflecting a highly engaged team of over 30,000 colleagues. Now let's move to Slide 16 and remind ourselves of the long uninterrupted track record of double-digit growth in recurring revenue. In 2025, we reported over EUR 3.4 billion of recurring revenues. Now we grow because our customers choose to stay with us month after month, year after year. And as they stay with us, we continue to innovate, to add pricing and importantly, to maintain very close control over the cost to serve. We remain the clear category leader. We're approximately 5x larger than our closest competitor, and we continue to capture around 2/3 of the net category growth as we have done for the past decade. We still operate in very underpenetrated markets. We develop and we deploy a differentiated customer proposition. That's enabled by our vertically integrated technology model. And we've demonstrated time and again, resilience to significant macro events over 3 decades. On Slide 17, we look at the scale of the future opportunity. Even in our most established markets, Iberia and Nordics, penetration remains low. Of the total addressable market of 56 million homes and small businesses, we estimate only 10% penetration and 29% of what we call the Serviceable Addressable Market or the SAM. The SAM is an important concept for us because it captures significant reductions that we make around housing topology and customer affordability. Other Europe represents a very significant growth opportunity for us. This contains some of Europe's largest economies. And the segment size is larger than the entire U.S. market and with low penetration at only 4% of the TAM or 9% of the SAM. And if you look over the past 2 years, this other Europe segment delivered 50% of our total portfolio growth. The opportunity here is very material. For example, to illustrate, by reaching the penetration levels that we already see in Iberia and the Nordics, that would add well over 15 million additional customers into the category. And given that we take 2/3 of the category growth, the opportunity for Verisure particularly is significant. Now that 4% penetration across our footprint, that compares to 23% penetration in the U.S. market. And let me repeat, as we said at the time of the IPO, we see no structural reason why our footprint cannot reach U.S. levels of penetration. Turning to costs on Slide 18. This slide demonstrates clearly our decade-long cost management track record. We have an always-on approach to cost management, and we have reduced recurring monthly costs by around 1% per year on average over the past decade. Well, in 2025, we delivered EUR 80 million in cost savings. And in 2026, we'll go again because cost discipline is deeply embedded in our operating culture and it's a core enabler of our growth model. Now we are relaunching our cost program in 2026, putting AI at the center because we see significant opportunities to further reduce cost to serve through AI deployment at scale. While continuing to enhance the customer experience, we're very excited about the progress that can be made here. Now talking more about AI. On Slide 19, we wanted to set out a number of AI opportunities and most are either already launched or about to scale. Owning end-to-end technology, that's again a business model advantage here. We have over 85 million devices, providing real-time data from over 6 million customers from front end to back end. We have access to broad data that can be brought together from audio visual data to usage profiles to customer data such as contact propensity. Now that puts us in a very strong position. With a relative market share of 5x and with the best training data set for algorithms, we think that our competitive advantage here on the core of detection, verification and intervention increases over time. Now we've got specialist engineers at our 3 technology hubs in Geneva, Malmo and Madrid. And they're working with AI tools to ensure that we are at the forefront of innovation here. I mean remember, we have 1,700 members of our technology team in the company. So we are very well set with innovation and to make the best of these possibilities. If I take verification and the accuracy of verification, computer vision AI embedded in cameras and detectors has already reduced alarm triggers by just under 30%, actually by 28%. Well, that's very important. It enables us to verify incidents more accurately and quicker. And obviously, it lowers the operational workload. Now AI-backed knowledge tools are already shortening call handling times. And we're improving our diagnostic-based solutions for maintenance issues so that we can actually solve problems for customers over the air without having to send a maintenance engineer. Now results here are very, very encouraging. Another topic coming from this, for example, was an 11% reduction in the number of guard callouts that we had to execute in Q4 2025 because of how we got better at false positive elimination. Now our speech analytics-based sentiment engine analysis, which is very interesting, is now analyzing more than 250,000 customer conversations every month, and we will go further. Sentiment analysis is a very important tool because it allows you to enable earlier, but also more broadly, any signs of invisible detraction, which means that we can get in there and we can solve the customer's problem, we can turn around the customer sentiment, and that obviously has a positive effect on our ability to manage attrition. AI at scale, it complements the hands-on human approach of our skilled rapid responders, our agents, our security experts in terms of what they provide to our customers. Already present, already contributing, but it still remains a further significant opportunity for us across our operating model. Let's go to Slide 20, I want to talk about our 3 priorities for 2026. I mean the first is deliver another year of high-quality growth. And that includes continue to deliver on installation growth and pricing, innovating on products and services and also integrating our Mexico acquisition, where we plan to restart the growth engine. The second, it's to renew momentum in cost efficiency with a deep focus on AI-based opportunities, but with no compromise on the customer experience. And third, as Colin noted, we are entering a new phase focused on sustainable and progressive returns. We've strengthened our cash generation profile, making progress in the fourth quarter. As Colin mentioned, Verisure is evolving rapidly into a more balanced financial model where we combine sustained growth with expanding margins and cash returns. And finally, in summary, we're very pleased with our 2025 performance. But more importantly, we look ahead to 2026 with very strong confidence because of the penetration opportunity, because of our business model, because of our quality execution and because of the strength of the innovation program that we have. Now our 2026 outlook, it's consistent with the medium-term guidance that we set out last summer, ARR growth of around 10%, adjusted EBIT margins above 26%, and a key year as we become free cash flow positive. We also stand fully behind our medium-term guidance. Now with that, I will hand back to the operator, and Colin and I look forward to taking your questions.

[Operator Instructions] The next question comes from Annelies Vermeulen from Morgan Stanley.

I have 3 questions, please. So firstly, you sound fairly confident on positive free cash flow for 2026 and beyond. So could you perhaps talk about what underpins that later in the year and how that opens up opportunity for additional shareholder returns beyond the dividend you expect to do later this year? Secondly, I just wanted to touch on the change to the calculation of ARR that you disclosed today. Could you just unpack a little bit exactly what you've changed and why and what, in particular, has prompted you to change it now? And then thirdly, on the acquisition of Mexico, could you walk through the impacts this has had on attrition, RMC, ARPU, et cetera, in Q4 at the group level and what you're doing to bring these metrics closer to group averages?

Okay. Thanks, Annelies. Let me start with your first one in terms of free cash. And I think, look, we've got good confidence here. The company is performing exactly in line with where we said we'd be, and we are now moving through our cash inflection point. Over the past 12 months, we've set out on a number of occasions, the pathway to becoming free cash positive. We've talked about working capital normalization, and we were pleased to see delivering a positive working capital in the second half of 2025. Our portfolio reinvestment rate is reducing as we scale. And that's important as we are investing a lower proportion of portfolio cash into customer acquisition. And then, of course, finance charges and interest rates are tracking, as I noted earlier on, towards EUR 220 million per year reduction, which is at the top end of guidance at the IPO. And these 3 elements, I think, have been consistent on that pathway towards free cash flow positive. We're also providing further assurance today as we share our 2026 outlook and that we're expecting to pay an interim dividend in 2026 and also deliver a free cash positive year. And I think this symbolizes very clearly our moving into a new phase of progressive sustainable returns alongside growth and margin expansion. And I think to your final -- the final part of the question. I think beyond, as we've talked before, we see scope for significant acceleration in cash flow generation and significantly increasing returns into the future. Let me go next to the question on Mexico, and then I'll come back to ARR. So look, on Mexico, it's important to note right at the top that we are pleased with what we found so far. Mexico is a high-quality profitable asset. It secures scale in that market from the off and gives us immediately a #1 position. The portfolio size is exactly as we'd expected, 125,000 customers that we've now added into our portfolio. In terms of metrics, it's a mix. So we see positive impacts on ARR, as we noted earlier on, around 2 percentage points. Adjusted EBIT is immediately accretive so we added around 2 percentage points to our Q4 EBIT growth rate due to Mexico. And our ARPU in Mexico is slightly above the group average. It's more at European levels of ARPU. On the flip side, we've got some temporary mix headwinds. Attrition basically is in line with LatAm levels, and it gives us a headwind of around 5 to 10 basis points. And Mexico also has slightly higher RMC. And we think that, that is around EUR 0.15 at a group level. And I would look on that as an opportunity as we begin to deploy our operating model and our playbook, we want to quickly work towards bringing down those Mexico RMC levels. The other element financially that's important is the CPA upfront revenues are lower in Mexico. This has historically been a high ARPU, low upfront market, and that impacts our CPA upfront. So we're confident that implementing our operating model will reduce these temporary mix impacts over time. But as I say, we're generally happy with the asset and the acquisition price, and we really do look forward to restarting growth in the country. And as a reminder, as we've said many times, we are highly, highly selective on M&A and no one should read into this any kind of change in strategy. We're primarily an organic growth company. If I just pick up the change to the ARR definition, as I talked about in the script, we have basically adjusted the definition here from end-of-period portfolio multiplied by in-quarter ARPU annualized and we've changed that to end-of-period portfolio multiplied by trailing 12-month ARPU. And we've basically done that because that smooths out the metric. We think it gives a more reflective higher quality view on our ARR. It means that there is no difference in any given quarter between the quarterly number and the year-to-date number. And I think importantly, as I noted, there is absolutely no change in the definition and the 12.7% growth rate by moving from one to the other. And just as a reminder, we have put a page explaining this and unpacking it in our results presentation. So we see this as an obvious and something that will end up giving us a higher quality ARR metric going forward.

The next question comes from Joachim Gunell from DNB Carnegie.

Can you please provide some color on the geographic performance here when it comes to which markets are tracking ahead of your internal expectations and conversely, if you are seeing performance fall short of plan in any of your particular regions?

Sure. Well, why don't I start with that, and then I'm sure Austin will add. I mean I think other Europe remains our largest growth opportunity. Other Europe in terms of its size and scale is 3x the size of Iberia and Nordics and penetration of the TAM is still very low at only around 4%. So other Europe delivered 50% of the company's growth over the course of 2025, and that's the same contribution that it made in 2024. As a reminder, this includes Europe's 4 largest economies. So we have U.K., we have Italy, we have Germany and we have France. And as I say, we look forward to further growth in that region, and we're seeing really good performance there. I think in terms of -- just to add some color on Spain. Spain delivered the highest ever installs in its history in 2025. So we absolutely see no abatement in Spain's growth, and it goes, frankly, from strength to strength. And then LatAm, of course, which remains around 9% of the group's revenue, that will increase slightly as we add Mexico, so maybe adds 2 points to that contribution. But we're seeing good growth in LatAm nonetheless. We do, however, remain as we've said before, very, very selective and very choiceful about the quality of customers that we add from Latin America.

I would just add on Q4, one of the things that pleased me and in fact, I gathered the team together this week at our headquarters to personally thank them for Q4 because of how broad-based the demand generation and the progress was across the company in Q4 and actually, particularly in our major markets that really move the needle. I mean that's one of the reasons you get to that very, very strong 5.9% installation growth in the quarter.

Great. And so on the attrition and cancellation side, it looks as we have this slight uptick in the quarterly attrition annualized, right? This should be, of course, boosted by ADT, I would assume. So just help us here because on a headline basis, it looks like your absolute number of cancellations accelerate. They grow 12% a year. They used to grow high single digits. So how much of this -- I mean, can you just disclose what's the performance of, say, Verisure, excluding ADT Mexico in this figure?

Yes. I mean let me pick that one up. And as I said earlier on, on a previous question, we have Mexico contributing between 5 and 10 basis points to the quarterly churn in Q4. I think if we step back from that and we look at the year, we're at 7.4%. That's down 3 basis points, so broadly flat on a year-over-year basis. But importantly, it stays and it remains in what we believe to be a world-class attrition corridor and something that really does differentiate us as a business. It then in turn gives us our 15-year average customer lifetime, which is such an important part of our growth model and also our ability to generate cash in the future.

I'll also add that we're not satisfied with that level actually, right? I mean it's well within our corridor, but we've got plenty of ideas coming that we're going to work on. And I'll give you some examples. I mentioned sentiment analysis already in my presentation, right? We're screening 250,000 customer calls every month. We ask customers for a Net Promoter Score but sometimes a customer who's dissatisfied gives you a neutral score because they don't want to get the operator, for example, negative feedback. Well, you get a more accurate screening of sentiment using AI in that way, and we can actually go back and maybe use the word rehabilitate the customer. We think over time, this has got the potential actually to reduce attrition because you end up with less detraction. Colin has mentioned in previous calls, using deep analytics to identify warning signs. If a customer is coming on to the website multiple times per month to check the bill, that's a warning sign. That's an indicator that maybe the customer is questioning the outlay. We're also looking at things like change in alarm usage. Somebody who used to use the alarm every day and who starts to use it less frequently, Why? We also know that, that's a warning sign for attrition. Well, in that situation, you can actually step in and you can talk to the customer and you can explain to them about night mode and the scheduling features and you can try to promote more usage. I mean we actually know that higher usage lowers attrition. I mean, full stop. I mean, it's one of the key levers. I've also talked in previous calls that we still have an opportunity on things like home moves. I mean home moves are one of the main attrition reasons. Well, we shouldn't lose customers who move home. I mean in an ideal world, we would do a much better job in some cases of managing that customer interaction. We've also talked in previous calls about the role of LockGuard. We've demonstrated in the market that actually it's an attrition reducing initiative because people are interacting with the front door many times per day. So I mean, attrition broadly flat, but a real focus area for us to figure out ways in which over time, we do better. But again, I repeat what Colin says, it's even at that 7.4% level, we think it's a best-in-class metric.

Perfect. And just finally, just coming back to that earlier question. Since there's a lot of debate with regards to cash flow trajectory, can you just say anything with regards to how you think about gradual improvement quarter-over-quarter throughout 2026 or if we should expect more of a call it H2 heavy improvement?

I mean I think in terms of cash flow, I think it's a great point and cash by quarter will be a bit lumpy. And it's primarily driven by 2 things. I think, firstly, the interest that we pay on some of our debt instruments, the coupon tend to kind of be paid more focused on Q1 and Q3. So that's one point to bear in mind. The second point is that as we have done over the last number of years, we tend to build inventory in the first half of the year, and we tend to then consume inventory in the second half of the year. And that's exactly what we saw, for example, when we looked at the fourth quarter performance, where I think it was around 44 million of our working capital support from inventory reduction. But that is seasonality, and that is what we should expect to see as well going forward.

The next question comes from Suhasini Varanasi from Goldman Sachs.

Just a couple for me, please. You've given an EBIT -- adjusted EBIT margin guidance of above 21% -- 26%, but that does leave quite a lot of leeway. It could be 26.1%, 26.5%, 26.9%. So perhaps could you maybe share some color on this and whether you expect margins to expand every quarter in 2026? The second question is just a minor one on the reclassification of D&A. I think there was 16.8 million reclassification that moved between, I think, core D&A and SDI. Just want to understand what that was, please? And how should we think about EBITDA margin and D&A as a percentage of sales for 2026?