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The current AI-driven market rally, led by firms like NVIDIA, mirrors the late-1990s Internet Boom but faces far less favorable economic and geopolitical conditions. Demographics, fiscal deficits, and rising debt sharply contrast with 1999, undermining the sustainability of today's elevated market valuations.
Wall Street's main indexes ended higher on Monday, with the Dow Jones Industrial Average rebounding from earlier losses as investors balanced escalating geopolitical tensions with cautious optimism that a diplomatic resolution between the US and Iran could still emerge. The S&P 500 rose about 1%, while the Nasdaq Composite gained roughly 1.2%.
Operator: Good day, ladies and gentlemen, and welcome to the Sify Technologies financial results for full year 2025-'26. [Operator Instructions] And please note, this call is being recorded. I will now turn the conference over to your host, Mr. Praveen Krishna, Head of Investor Relations. Praveen, the floor is yours. Praveen Krishna: Thank you, Ali. I would like to extend a warm welcome to all our participants on behalf of Sify Technologies Limited. I'm joined on the call today by my Chairman, Mr. Raju Vkena; and my Executive Director and Group CFO, Mr. M.P. Vijay Kumar. Following our comments on the release, there will be an opportunity for questions. If you do not have a copy of our press release, please call Luri Group, our IR agency at (606)-824-2856, and we'll have one sent to you. Alternatively, you may obtain a copy of the release at the Investor Information section on the company's corporate website at sifytechnologies.com/investors. A replay of today's call may be accessed by dialing on the numbers provided in the press release, or by accessing the webcast in the Investor Information section of the Sify corporate website. Some of the financial measures referred to during this call and in the earnings release may include non-GAAP measures. The fee results for the year are according to the International Financial Reporting Standards, or IFRS, and will differ some more from the GAAP announcements made in previous years. A presentation of the most directly comparable financial measures calculated and pestered in accordance with GAAP and a reconciliation of such non-GAAP measures and of the differences between such non-GAAP measures and the most comparable financial measures will be made available on CP's website. Before we continue, I would like to point out that certain statements contained in the earnings release and on this conference call. are forward-looking statements rather than historical facts and are subject to risks and uncertainties that could cause actual results to differ materially from those displays. With respect to such forward-looking statements, the company seeks protections afforded by the Private Securities Litigation Reform Act of 1995. These risks include a variety of factors, including competitive developments and risk factors listed from time to time. Those lists are entered in to identify certain principal factors that could cause actual results to differ materially from those described in the forward-looking statements, but are not intended to represent a complete list of all risks and uncertainties in run to the company. I would now like to introduce Mr. Raju Vegesna, my Chairman. Raju Vegesna: Thank you, Praveen. Good morning, everyone. Thank you for joining us on the call. India's digital journey continues to accelerate with renewed clarity and purpose. The convergence of resilient infrastructure, progressive policy framework and an increasingly innovation-driven enterprise ecosystem is positioning India as a corner store of the global digital space. Enterprises today are moving beyond adoption to technology optimization. This evolution is not only strengthening the businesses but also enabling inclusive growth, expanding opportunities across sectors and communities. The recent union budget has recommended a tax holiday for foreign cloud players who utilize Indian data centers to secure -- to serve global customers. This is expected to add to the tailwinds for a domestic data center growth with sustained investment in digital infrastructure and such a strong regulatory vision, India is reinforcing its credentials as a technology hub. In this environment, Sify is uniquely positioned to partner with the enterprises in their next phase of transformation, delivering integrated solutions that power growth and resilience. I remain confident that our strategic direction and combined with India's enduring strength will enable us to play a pivotal role in shaping a future-ready digital ecosystem. Let me now bring in our Executive Director and Group CFO; Mr. M.P. Vijay Kumar, to explain both the business and financial highlights for the year. Vijay Kumar. M. Vijay Kumar: Thank you, Chairman. Our businesses continued to deliver focused growth with each unit capitalizing on its distinct market opportunities. attracting strategic investments and building meaningful partnerships. Our investment philosophy remains consistent and forward-looking, expanding our data center footprint into new and emerging locations for long-term growth, augmenting capacity at existing facilities to address immediate demand and further strengthening our network and cloud interconnect ecosystem. . In parallel and more importantly, we continue to invest in our people, equipping them with the right skills, tools and processes to drive innovation, efficiency and customer success. All these initiatives are being executed with focus on cost competitiveness, cash flow optimization and fiscal discipline, ensuring that we maintain a strong financial foundation, which supports our growth ambitions. In accordance with the amendment agreement to the debenture subscription agreement with Kotak, the additional coupon payable on compulsory convertible debenture pursuant to the conversion of equity in February 2026 is recognized as expense in the statement of income. We have received the final observations from SEBI on our draft retiring prospectus for a data center subsidiary, Sify Infinite Space is limited, and we will time the issue and listing to a conducive market environment based on banker's guidance. The cash balance as at end of the year was INR 5,071 million. Let me now expand on the business highlights for the year. The revenue split between the businesses for the year was Network Services 39%; Data Center Services, 3%, Digital Services 22%. Segment revenue for the year increased 12% in Network Services, 23% in Data Center Services and decreased marginally 2% in Digital Services. Segment results for the year have increased by 91% in Network Services 24% in Data Center Colocation services and decreased 67% for Digital Services. The data center subsidiaries sold megawatts of data center capacity in the year, cumulatively sold capacity stands at 129 megawatts. And during the quarter, the data center business has contracted an additional 81 megawatts to be delivered in the coming quarters this financial year 2026, '27. As of March 26, Sify provides network services via 1,224 fiber notes, an 8% increase over the same quarter last year. As March 31, '26, Sify 10,340 SD van service points across the country. A detailed list of our key wins is recorded in our press release, now live on our website. Let me briefly sum up the financial performance for the year. Revenue was INR 4,487 million, an increase of 13% over last year. EBITDA was INR 9,871 million, an increase of 31% over last year. Loss before tax was INR 941 million and loss after tax was INR 1366 million. Capital expenditure during the year was INR 13,282 million. I will now hand over to our Chairman for his closing remarks. Chairman Raju Vegesna: Thank you, Vijay Kumar. Our businesses are mutually reinforcing pillars that together create a resilient end-to-end digital ecosystem. Strong connectivity enables scalable data infrastructure while our data centers power secure, high-performance platforms for advanced digital solutions, in turn, our digital services unlock value for enterprises and consumers driving demand across the entire stack. As India accelerates its digital transformation, this integrated approach positions us as a trusted partner at scale. It will also enhance our global credibility, building lasting image equity while strengthening our brand among investors, partners and stakeholders alike. Thank you for joining us on this call. I will now hand over to the operator for questions. Operator: Thank you, sir. Ladies and gentlemen, at this time, we will be conducting our question-and-answer session. [Operator Instructions] Our first question is coming from Greg Burns with Sidoti & Company. Gregory Burns: Could you just give us the numbers around what the existing design capacity for your data center businesses and how much operational capacity has been sold? M. Vijay Kumar: The total design capacity of the 14 facilities which are live is 188-megawatt out of which 129-megawatt of capacity is revenue generating at present . Raju Vegesna: At the end of March... M. Vijay Kumar: As of March 26. Gregory Burns: Okay. And then the 81 megawatts that you mentioned, that is contracted and in your backlog? . M. Vijay Kumar: Yes, that is the backlog. That is for new facilities, which are currently under construction, which will go live in the early part of the second quarter, and will be delivered in a phased manner to the customer. Gregory Burns: Okay. Perfect. And then in terms of CapEx, I guess it was -- I guess, $13 million this year, what is the guidance or what is your outlook for this year, about a similar level of CapEx? Or will it be increasing again this year? M. Vijay Kumar: Yes, the CapEx will be higher for this year. given that we are almost doubling our capacity, it will be significantly higher. Gregory Burns: Okay. And are you seeing any bottlenecks in terms of either energy availability or inputs like memory that might impact the pace of your rollout? M. Vijay Kumar: At present, we aren't seeing anything here. There's very good support from the union government as well as the state governments for the data center infrastructure creation in India. And in fact, as the Chairman mentioned in his remarks, the government has also gone forward with committing a 20-year tax holiday for foreign cloud service providers who host their capacity in India for serving the global market. And there are a good number of customers who are in active conversation in this to avail this benefit. . Operator: [Operator Instructions] Our next question is coming from Prateek Singh with IIFL Capital. Prateek Singh: Just taking it ahead from Greg's question, I know that we kind of in the DRHP, we have given numbers on build capacity installed and operational which was 188, 127 and 111 as of FY '25 end. And -- so I understand that 188, is still INR 188. Can you just give us a sense as to how the other 2 numbers have changed, which are installed and operational M. Vijay Kumar: Yes, the 127 meg, which is installed is at 140 and 111 is at 129 million. . Prateek Singh: Understood. And when we say that 81-megawatt is backlog, when you said early part of second quarter, by second quarter here, we mean the second financial year quarter, right? M. Vijay Kumar: Correct. Prateek Singh: So does it mean... M. Vijay Kumar: And will be delivered in a phased manner. Gregory Burns: Okay. Yes. So typically, that takes 15 to 18 months for the entire 81 megawatts on generating . M. Vijay Kumar: No. The current customer schedule is to deliver it within this financial year. . Prateek Singh: Understood. And another question is, sir, when you talked about almost doubling of capacity this year, we are talking about doubling of the design capacity, which is 188 going to almost 370, 380. M. Vijay Kumar: No, I'm talking about doubling of the revenue-generating capacity. Raju Vegesna: And also, we will build the design capacity also beyond that -- beyond 188. Prateek Singh: And just 1 last question. So given that there is so much happening, i.e., we study assembly good site also last month, and I noticed that we are also providing the opportunity of liquid cooling. So if I had to get a sense as to what kind of EBITDA per megawatt, how liquid cooling would versus the current scenario at least 1 can assume on the base basis that our EBITDA per megawatt would largely at least be what we are doing right now without liquid cooling? Or do we think that liquid cooling the EBITDA per megawatt might be a bit lower than what we are doing right now? . M. Vijay Kumar: It could be a little higher, but I think there are too much of specifics. Maybe we can have a conversation separately because customer contracts have some unique elements the way they are constructed. But typically considering higher capital deployment, you tend to get a higher return. . Operator: Our next question is coming from [indiscernible] the who is an investor. Unknown Attendee: This is Srikanth here. I almost joined all of your earnings call. I have SP1 I couldn't follow the earlier conversation because I joined late. However, my questions are more specific to the India listing. One, given that it looks like you have all the approvals now, is there any deferment in the IPO because of this whole geopolitical situation across the globe. Two, is -- has the IPO size being decided, and there have been speculations somebody is quoting one number, somebody else is quoting another number? Those two would be my specific questions. M. Vijay Kumar: Okay. So let me take the latter one. The size is already communicated as part of the DRXP. It is INR 2,500 crores of primary and INR 1,200 crores of offer for sale, a partial exit from the existing growth capital partner, Kotak. So total INR 3,700, that is already part of the DRHP filed and approved. Second, as far as the deferment is concerned, there is no deferment per se, except that we are waiting for the guidance to the bankers on the timing of the actual issuance and listing. As management, we have done our road shows, approvals are all in place. So we'll get guided with the bankers for the next steps. . Unknown Attendee: And are those numbers, what does it translate to the enterprise value of Sify Infinity space? . M. Vijay Kumar: That would be a little difficult to comment here. I think it depends on how the building process goes. And once that is done, as part of the updated DRHP would be visible. Operator: We have another question from Prateek Singh with IIFL Capital. Prateek Singh: Sir, in the last call, if I remember correctly, we had said that we are working on 2 expansions, which were 77 megawatts and 52 megawatts, if I'm not wrong. Can you just guide us as to which are the locations where these 2 expansions are coming in? Are they both in Rabale or in Nord or other places? And we also mentioned that the 77 earlier was 52% and because of higher density, it was taken up to 77%. So is there any opportunity to take this 52 that we're talking about right now to 77 or 80 also? . M. Vijay Kumar: Both of them are at Rabale, Prateek and the facility which have visited, you would have seen the construction right adjacent to the place where you had all the meetings and the facility visit. So that is the 77-megawatt one, which we'll be delivering to the customer now. And write-opposite, you would have seen the other 2 towers, which are the 52-megawatt and based on the customer engagement, it could -- the final usage of that could be higher than 52-megawatt. But at this point in time, it's been designed for that, but it has the capacity to scale up for a higher capacity. Both of them are in Rabale part of the campus. . Unknown Attendee: And this I would mission or will be... M. Vijay Kumar: Yes. 52-megawatt part of it will get commissioned this financial year and other part, the first quarter of next financial year. . Prateek Singh: Sir, you're saying something. M. Vijay Kumar: Pratik, I would invite you once again to our campus, so that you can have a good sense of the progress which has happened in those 2 facilities, which are getting ready for delivery. . Operator: Our next question is coming from Sourabh Arya with Oakland Capital. Sourabh Arya: Sir, am I audible? M. Vijay Kumar: Yes, it's good, yes. Raju Vegesna: Can you give some color for all 3 businesses going into next year? Like obviously, you were expecting the last quarter improvement in data services and even improvement in network business. So how should we think about all 3 businesses from a revenue growth and margin perspective? M. Vijay Kumar: Yes. Typically, it's forward-looking statements, Sagan we refrain from that. But I can just give you a 30,000 feet view. Our data center business growth numbers have already communicated as part of our communication as against 12-megawatt of revenue-generating capacity. We have contracted for delivery this year. already 81-megawatt of capacity is there. And as far as the network services business is concerned, it's organically growing at double-digit numbers, of course, low double-digit numbers. And that growth should happen along with the digital infrastructure consumption, which we are witnessing in the country. On the IT services business, we continue to stay focused on investing in people to build capabilities for the AI kind of infrastructure services. So a lot of work is happening over the last 18 to 24 months. And as and when the consumption picks up in the domestic market, will be ready for delivering those services. So that investment will continue to be there for some time, given the fact that we are confident about its long-term prospects. . Raju Vegesna: And on the margin side, if you could give like you were expecting breakeven of data services business. So how should we... M. Vijay Kumar: Yes. Yes, I'll not be able to give a specific quarter. There is work happening to get to breakeven. But I'll not be able to give a specific quarter when we will achieve that. . Sourabh Arya: Sure. But let's over 2 years, do you expect it to turn around or to say how should we so look at the progress of this business then. Would it be quarterly... M. Vijay Kumar: Yes, you should see quarterly improvement going forward. But I think 2 years is a very reasonable period to see that we get to breakeven. It's a very reasonable period. . Sourabh Arya: Okay. And whatever is happening in Middle East. So do you think some of the demand will shift to India? And have you started seeing it in interaction with clients there in... M. Vijay Kumar: Yes. We are seeing that happen for our data center collection business and consequently, to our network business as well. . Operator: As we have no further questions on the line at this time, I would like to turn the call back over to management for any closing remarks. Raju Vegesna: Thank you for everyone and your time on the call. Have a good day. . Operator: Thank you, ladies and gentlemen. This does conclude today's conference, and you may disconnect your lines at this time, and we thank you for your participation.
Operator: Greetings, and welcome to the Fastenal Company 2026 Q1 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to our host, Dre Schreiber. Dre? You may begin. Dre Schreiber: Welcome to the Fastenal Company 2026 First Quarter Earnings Conference Call. This call will be hosted by Dan Florness, our Chief Executive Officer, Jeffery Watts, our President and Chief Sales Officer, and Max Poneglyph, our Chief Financial Officer. This call will last for up to one hour and will start with a general overview of our quarterly results and operations, with the remainder of the time being open for questions and answers. Today's conference call is a proprietary Fastenal Company presentation and is being recorded by Fastenal Company. No recording, reproduction, transmission, or distribution of today's call is permitted without Fastenal Company's consent. This call is being audio simulcast on the Internet via the Fastenal Company Investor Relations homepage, investors.fastenal.com. A replay of the webcast will be available on the website until 06/01/2026 at midnight Central Time. As a reminder, today's conference call may include statements regarding the company's future plans and prospects. These statements are based on our current expectations and we undertake no duty to update them. It is important to note that the company’s actual results may differ materially from those anticipated. Factors that could cause actual results to differ from anticipated results are contained in the company's latest earnings release and periodic filings with the Securities and Exchange Commission, and we encourage you to review those factors carefully. I would now like to turn the call over to Mr. Jeffery Watts. Jeffery Watts: Good morning, everyone. Welcome to Fastenal Company's First Quarter 2026 Earnings Call. I am Jeffery Watts, President and Chief Sales Officer, and before diving into the results, I want to take a moment to thank our entire Fastenal Blue Team across the world for their exceptional work driving the strong performance you are going to hear about today. I also want to highlight a real success that just happened. It was our recent customer expo where we hosted over 3 thousand customers from around the globe, and the turnout and the engagement were just outstanding. We showcased our latest solutions, FMI technology, and digital tools, but what really made it successful was the quality of conversations and the strategic partnerships that were being formed and strengthened. Events like these really demonstrate why we keep gaining market share. We help customers improve their efficiency and productivity, all while becoming a trusted partner. Overall, it was a great event and one of our best ones yet. Moving into the quarter, slide three. Q1 was a very strong quarter and a great start to the year. We delivered 12.4% daily sales growth, our third consecutive quarter of double-digit growth. Now, what is important is where this came from. The industrial economy remains somewhat challenging, with U.S. Manufacturing PMI averaging around 52.6%, which is an improvement, but still moderate overall. We really did not see much of a tailwind. We gained share through focused execution. Largely, we won new business with key accounts, we expanded customer site presence, and we strengthened our value-added services and solutions. This performance was really powered by our three strategic drivers. The first is increasing sales effectiveness, and we are winning with key accounts and new contracts. We added a healthy number of new national account contracts in the quarter, keeping us on track for a goal of roughly 250 new signings this year. Our total contract count grew by almost 8% year over year to just over 3.6 thousand contracts, and about 75% of our Q1 sales came from these customers, with whom we are deeply embedded today. When we look at our customer sites spending $50 thousand-plus per month, they increased 16.3% year over year to just over 2.9 thousand sites. At 21% revenue growth, these sites now account for just over half our total sales. Our approach to enhancing our services is aligned with our strategic commitment to addressing the specific needs of our larger customers rather than focusing on a one-size-fits-all approach. By focusing more on our $10 thousands to $50 thousands-plus sites, it enables us to have greater direct integration within their facilities and deeper insights to deliver better solutions to fit their needs. This targeted focus really allows us to implement and deliver more tailored solutions to all of our customers regardless of their size. Think of it like a trickle-down effect. Smaller customers may not need all of our solutions, but they will be able to take advantage of the pieces where and when they need them. The impact of this approach can really be seen in our average monthly sales per our $50 thousand-plus sites. Not only are we adding new sites, but we are selling more to them as we increased the average monthly sales by $5.7 thousand per site per month. Lastly, expanding our markets. Our international sales teams have become increasingly more aligned, and their growth continues to accelerate. In March, the international business, primarily Europe and Asia, grew almost 24%, and even though today they are a smaller piece of the pie, performance is exactly what we want to see as we continue to invest in our global expansion. After speaking with so many customers last week from different parts of the world, one thing is very clear. Our solutions, our local presence, and our supply chains are definitely in high demand, and it is really why our growth internationally is so important to our future. Tying this all together financially, our daily sales increased 12.4% to $34.9 million per day for the quarter, and our operating margin improved to 20.3%, up 20 basis points from last year. Improvement was primarily the result of strong leverage of SG&A expenses, which I believe reflects our disciplined approach to managing costs even as we continue to invest in our strategic growth drivers. Now moving on to slide four. In the first quarter, our digital initiatives continued to gain momentum with our digital footprint daily sales up 13.6%, outpacing overall company growth. As a result, digital channels represented 61.5% of the quarter’s sales, and we remain on track to reach our digital mix goals by the end of the year. We also accelerated the deployment of our FMI, or Fastenal Managed Inventory, technology. In the quarter, we signed close to 7 thousand new FMI device agreements, about 110 per day, an 8% increase over last year. This helped expand our active device base by nearly 6% and drove almost 45% of our Q1 sales through FMI, which is up 150 basis points over last year. In short, more customers are using our on-site devices and solutions to manage inventory, which makes Fastenal Company a stickier and more efficient supply chain partner. Meanwhile, our e-business grew daily sales nicely, up almost 7% over last year. Electronic transactions account for close to 30% of our total sales, and we do anticipate digital adoption to continue to rise as more and more customers integrate their procurement systems with Fastenal Company. Our investments in technology are delivering measurable results. By expanding our digital footprint through FMI and e-commerce, we are winning new business and we are driving profitable growth. I think our priorities here are very clear: we continue to invest in tools, technology, and analytics to drive operational excellence and deepen our customer relationships. The strength of our first quarter reflects our strategic focus. We are winning with large strategic customers, we are embedding ourselves deeper through technology and service, and we are doing it with financial discipline that drives both top-line growth and bottom-line leverage. With that, I will turn the call over to Max, who will walk through the financials in more detail. Max? Max Poneglyph: Thank you, Jeff, and good morning, everyone. Overall, the quarter showed continuous progress against our strategy. We saw improving demand, solid execution across the business, and strong cash generation, even as the broader macro environment remains uneven and in some areas uncertain. I will start on the business trends and market drivers slide, slide five. During the first quarter, the industrial environment showed signs of stabilizing. U.S. PMI averaged about or above 52 for the quarter. Industrial production was slightly positive year over year in January and February. This lines up with the gradual improvement we began to see last year. As Jeff mentioned, our daily sales growth trends on a quarterly basis improved to 12.4% for the quarter from just over 11% in the fourth quarter of last year, and we continue to outperform the market. This growth was driven by a combination of new customer wins, increased share of wallet with existing customers, and pricing. Importantly, the market was not concentrated in any single customer type or end market. Customer sentiment remained generally favorable throughout the quarter. While trade and tariff uncertainty continues to be part of the backdrop, most customers are viewing this uncertainty primarily as a cost and planning issue rather than a demand issue. As a result, activity levels remained healthy and we continue to see solid engagement across our customer base. From an end market perspective, growth was broad based. Manufacturing activity remains solid, particularly in heavy manufacturing, which continues to benefit from our fastener expansion and momentum in key accounts. Heavy manufacturing represented 44% of total sales, and average daily sales growth in that segment was near the mid-teens, consistent with what we saw in the fourth quarter of last year. Construction saw 17% growth, marking a strong turnaround from previous quarters. This increase was widespread, with both large national contractors and regional firms benefiting, and activity rising across key metro areas, especially in markets with infrastructure and commercial development. We also saw jumps from other non-manufacturing end markets, including transportation, warehousing, data centers, and other industrial services, as demand improved across a range of customer types. Across materials, both direct and indirect categories grew in the low to mid-teens. Direct materials slightly outpaced indirect, supported by higher fastener penetration, improved product availability, and pricing actions. Categories like hydraulics, pneumatics, welding and abrasives, and material handling also outperformed the company average, reflecting improving underlying activity levels. Overall, while the macro environment remains unpredictable, our diverse customer base, focus on key accounts, and ongoing strategic initiatives allowed us to capture growth opportunities and continue to strengthen our market position. Turning now to slide six, margin performance and drivers. We were approximately 40 basis points below our own Q1 gross margin target, as pricing actions did not keep up with cost increases as the quarter played out. As a reminder, we said in our previous earnings call that roughly 50 basis points of margin pressure within Q4 was timing related and should be added back into our run rate, and that played out as we had expected. You may recall that these items related to timing of inventory-related working capital and supplier rebates. What impacted us this quarter in Q1 was pricing versus cost. Tariff-related costs moved through the P&L faster than our pricing, leaving us, as I said, approximately 40 basis points short of our own target, and 50 basis points year over year. On pricing, we realized approximately 3.5% year over year, and that compares to 3.3% in the fourth quarter. Not enough to offset inflation. While our pricing execution progressed during the quarter, we did not move quickly enough, related mostly to tariffs and some other items. As you can imagine, tariff uncertainty added additional challenges. In many cases, customer conversations and pricing actions took longer than usual as customers worked through their own planning assumptions. In others, these conversations were delayed as customers and suppliers await further direction on tariff changes and potential refunds. Importantly, we remain focused on maintaining pricing discipline over time. We focus on continuing to manage toward price/cost neutrality. We also experienced smaller headwinds from fuel and transportation costs and customer rebates during the quarter. Customer mix remained a structural headwind to gross margin as growth skewed toward larger customers that typically carry lower margins. On the growth side, however, these accounts are positive to operating margin due to strong fixed cost leverage, higher volumes, and improved operating efficiency. We continue to be comfortable with this trade-off given the long-term value of these relationships, and we continue to see the net positive impacts on our P&L. Fastener expansion benefits continue to provide a partial offset to gross margin pressure. As expected, these benefits will anniversary early in the second quarter, while we continue to pursue additional sourcing, pricing, and productivity opportunities across the business. As a reminder, our fastener expansion project did a number of things: it helped us capture higher-margin business and it drove cost savings initiatives. At the operating margin line, performance improved year over year. SG&A declined to 24.3% of sales compared to 25% in the same quarter last year, reflecting continued cost discipline and leverage. Importantly, we more than offset the reload of incentive compensation as well as our ongoing investments in tech, analytics, and sales support. In addition to our strong sales growth and cost management, we increased our return on invested capital by 180 basis points on a trailing twelve-month basis, which shows our continued approach to capital allocation and maximizing asset productivity. In total, our P&L performance shows that we can invest for growth while maintaining a sharp focus on profits, even as our mix evolves and we pursue larger, more complex accounts. Turning to the cash flow and capital allocation slide. Operating cash flow was approximately $378 million, representing 111% of net income. Cash generation remains strong, even as we added working capital to support growth. Accounts receivable reflects our expanding customer base and growth with existing customers. Our inventory levels show increasing efficiencies as we continue to find opportunities to optimize inventory while maintaining high availability to meet our customers' needs. Accounts payable increased more than inventory, primarily as a result of some timing items associated with both inventory and non-inventory payments. Net capital spending for the first quarter was approximately $58 million, with investments focused on strengthening our hub automation capacity, Fastenal Managed Inventory hardware capabilities, and advancing our IT infrastructure. For full year 2026, we continue to expect net CapEx of approximately $320 million as we invest in hub capacity, FMI devices, automation, and technology. These investments are designed to drive efficiency, stability, and customer value. To provide context, our average capital spending relative to sales over the last five years was about 2.5%, compared to roughly 4% in the preceding ten-year period, meaning that we go through periods of different investment run rates. As we mentioned last quarter, 2026 is a year in which we will invest at the higher end of our historical range. If you compare our 2026 estimate to the consensus revenue estimate for full year 2026, our capital expenditure range approximates 3.5% of net sales, reflecting our continued focus on investing to grow our business. We returned $296 million to shareholders during the quarter through dividends and a small amount of share repurchases, which offset dilution, totaling 87% of net income, reflecting our confidence in cash generation and our commitment to returning value to shareholders. Our capital allocation approach remains unchanged. We prioritize investing in the business where we see strong returns while returning excess cash to shareholders and maintaining a conservatively capitalized balance sheet. In closing, I will summarize my slides before turning it to Dan. The first quarter reflected steady execution across the business. We delivered strong sales growth, disciplined cost management, and solid cash generation. Operating margin expanded year on year despite higher bonuses and continued investments, demonstrating strong SG&A leverage within our P&L. This reflects our ability to effectively manage costs while supporting growth, and we continue to improve our return metrics that we believe reflect the strength and durability of our business model. That wraps up my section. Thank you, and I will turn it over to Dan. Dan Florness: Thanks, Max, and good morning, everybody, and welcome to our earnings call. I am on page eight of the flipbook. From a market outlook standpoint, as we talked about in January, we have seen some improvements in what the market is willing to give us versus create obstacles for us, although they are only now starting to be realized. After being at Fastenal Company for thirty years, blue was always my favorite color. It has become even more so in the last thirty years, and despite the fact I am from Wisconsin, red is not high on my list of favorite colors. If you look at the purchasing managers index, we have an internal grid that we have shared in the past at our annual meeting. We look at it in any month where the ISM is below 50, we color that month red. If you look at the last decade or so, you do not see much red on it until the last three years, and that was pretty constant. In fact, it was every month constant. We have had three months now where we are above 50. That generally gives us confidence of what we are going to be seeing three and four months out. From that standpoint, our outlook is positive. The other thing for me personally that stands out when I look at this quarter is that over the last six or so years, we really changed the focus of Fastenal Company and kept diving into being a supply chain partner to support businesses. Ever since we started the vending initiative about eighteen years ago, and we slowed down our openings, we have been really in that mode. We just did not always say it out loud. One of the things that struggled as we were changing our format, our public go-to-market, was our non-res construction business really suffered. If I think of it coming out of COVID, it was growing in the mid-single digits. In the 2023 to 2024 timeframe, it was actually negative mid-single digits. Through 2025, it grew about 4%. We exited the year growing almost 10%, and in the first quarter that business is growing 17%. Now, it is only 8% of our revenues. I do not want to overstate it. But it tells me a great supply chain partner is relevant to every industry out there, that we are that partner, and we can get traction in any end market. All we have to do is understand that end market, and frankly, our end market has to understand why Fastenal Company can be special for their business. It is really exciting to see. The second bullet in the market outlook talks about ongoing focus on price neutrality and managing tariff impacts. One of the things we touched on in January is a wave of cost we saw coming in late last year and early part of this year. In some ways it relates to tariffs, but I am not sure it does. It was our branded suppliers. Branded suppliers have a unique market power in that if a customer wants Brand X, that supplier can push pretty hard and say, here is where the cost is, and we will share that with the end customer to really allow them to make the decision: do you want Brand X at this price, or do you want Brand Y at maybe a different price? The branded suppliers have been very aggressive in the last six or seven months raising costs. Some of it, I am sure, is related to tariffs. They are doing some catch-up. Some of it is maybe related to true inflation. There are some commodities right now—if you are trying to source nitrile gloves, good luck, because the cost of that has gone through the roof in the last sixty days as a result of what is going on in the Middle East. What we are really aggressively doing in the marketplace is arming our customers and our teams with information to make trade-offs. We are arming them with examples of where a brand has raised the cost of their product by 6%, 7%, 8%. Maybe it is well defined, maybe it is a generic spread-across-everything type cost increase. Our job, and one of the conversations we had with our team early this morning, is I really challenged them from the standpoint of what I have seen from this group in the decade that I have been in this role. When this group needs to rise to the occasion and have communications—sometimes discussions—that are challenging, that is what we are good at, because that is being bluntly honest with your business partners. We are having some of those conversations right now, and those conversations were really challenged in the first quarter—partly challenged because of uncertainty around what the Supreme Court was going to rule as it relates to tariffs, partly challenged by fatigue of the last twelve months of the pricing actions that have been happening as supply chains have become more costly. The real challenge to the group is we need to have those tough discussions every day. Sometimes it is about price, sometimes it is about changing product, sometimes it is about changing from Brand X to Brand Y, and getting through this with our customer. Moving on to the second item, financial discipline. This organization never ceases to impress me on their ability to perform. I am really impressed with the strong cash generation in the first quarter—Max touched on that. Our capital allocation will always be focused on growth of the business, infrastructure to support that growth, technology to support the efficiency of our teams, and the information available for our customers, and ultimately strong shareholder returns. To that extent, our ROIC came in at 31% on a trailing twelve-month basis, a nice improvement over where it was a year ago and a nice improvement over where it has been for the last decade. From organizational priorities, we will continue to invest in supporting the future of our business and our customer, with an eye towards technology investments that enhance our ability to be more efficient. You saw that play out in our SG&A this quarter, despite the fact this is our final quarter of reloading bonuses because we reward heavily based on earnings growth, and that ramped up dramatically in Q2 of last year. We have now anniversaried that going into Q2 of this year. It is also about being more efficient—that puts us in a position to do special things for our customers without wearing out our teams and being able to reward those teams appropriately. Strategic progress: as Jeff mentioned, our key account strategy is performing really well. New contract wins are strong. We continue to expand our FM technology deeper and deeper into our customer supply chains, and we find success in a wide range of industries. One thing that should not be lost on anybody looking at that table on page three of our earnings release, where we look at customer sites and sales segmentation: we have really strong growth with our customer groups. Interestingly enough, even though manufacturing is 75% of our revenue, from a percentage standpoint we are seeing stronger growth in the non-manufacturing from the pure number of customers doing $50 thousands-plus. While the company might have grown at 16%, our non-manufacturing customers grew at 25%. We are discovering success across a wide range of industries and a wide range of geographies. With that, we will now open the call for questions. Operator: Thank you. Our first questions come from the line of David Manthey with Baird. Please proceed with your questions. David Manthey: Thank you. Good morning, everyone. First question: when you say pricing actions will continue at a slower pace, two questions on that. One, does that imply sequential gains of this sort of 20 basis points or less sequentially quarter to quarter from here, or should we expect that to accelerate? And then number two, if 2025 we are kind of using as a baseline, I think you talked about 5% to 8% ultimately. Is that still the case? And when would you expect to achieve price/cost neutrality? Max Poneglyph: Dave, this is Max. I will take the first part. Because we continue to drive price actions, this does not stop. We were behind where we wanted to be in Q1. Those actions will continue. Although we are not guiding toward Q2, we would do everything in our power to not see the same sequential move from Q1 to Q2. You can use that as a starting point, but it is in our ability to change that trajectory. That would come with our statements from our prepared remarks that, as Dan said, we have a team that knows how to overcome some challenges. Regarding your second question, we do not have a reason to believe that the 5% to 8% cumulative pricing estimate changes. On timing, we feel like around midyear we are going to start to see some of that plateau. We have work to do to make up for some of the traction that we lost through Q1—again, a timing item. What we cannot tell you is exactly when we recover that, but we are going after it. Dan Florness: Dave, you might notice a little trepidation on our part to answer. We probably over-answered in January a little bit and underestimated what it would be like to push a string through Q1, and it has been a slog—maybe a slug too. The 5% to 8% is a cumulative number. That will eat some into that. What we report on a year-over-year basis is not a quarter-over-quarter figure. As we anniversary going into Q2, it might not be that 5% on a year-over-year basis in any given month, but it is a cumulative piece. The real challenge we have with our folks is we need to have conversations with our customers. We have customers that had business that turned on at different points in time, so it might be some new business that turned on and the facts have changed. It is always guiding that customer to what is happening with their supply chain and how we can address that. Sometimes it is substitution, sometimes it is price changes, but it is being candid with your customer. David Manthey: Got it. Okay. As it relates to the improvement you are seeing, in the past Fastenal Company has tried to ramp headcount in anticipation of, or concurrent with, an improving macro backdrop. Should we expect a similar ramp if the backdrop continues to gain strength for you this time, or is there something different this time around? Dan Florness: I think we have really developed some nice efficiencies. We have gotten really focused on identifying role specificity within our network, and I think our teams really have good capacity built in. One of the things we have done in the last several years coming out of COVID—one part of our employee ranks that really was hollowed out was the part-time ranks. When schools go remote, it is hard to find that help, and it really dropped off. We have reloaded that portion. Our local district leaders are having conversations to understand who on their team is ready to step up and take that next opportunity on business that is turning on. Everybody is looking out and saying what business is turning on, because that is where the biggest need for headcount is. It is not always a customer whose business is up 5% or 10% because we have taken on some new products. We are really efficient at turning that kind of business on locally. Jeffery Watts: I would just add the technology and solutions we are adding, and also our customer mix, are making customers more efficient and we are making ourselves more efficient. Going back in the past, if you looked at our ramp-up in revenue and then our ramp-up in headcount, I do not think that same number correlates today as it did back then, especially with all the technology we have and the efficiencies that we are adding in. I think that is part of the reason our SG&A leverage is so good. Max Poneglyph: As a follow-on to that, Dave, we know where we need to add. We feel pretty comfortable because there are a lot of pluses and minuses—meaning we have a lot of reasons for efficiency gains, and we know where we want to plug to drive further growth. What you are seeing in the P&L in Q1 from leverage should be an expectation. We should be able to continue in that general trajectory. Operator: Thank you. Our next question is coming from the line of Ryan Merkel with William Blair. Please proceed with your questions. Ryan Merkel: Hey, everyone. Thanks for the question. I want to start on the topic of pricing and being slower to pass that on to customers. What are you doing to fix this issue? Because this is the second time in the past year that we are dealing with this. Thanks. Dan Florness: First off, I am pleased to say it is only the second time. Our goal has never been to be great at adjusting prices. Our goal is to be really great at informing our customer what is happening in their supply chain. With the chaos of the last twelve months or more, maybe that is a win. The biggest thing is really fine-tuning some of the things we are doing and quantifying it. Kevin Fitzgerald, who leads our analytics team, has been going through with our regional leaders some very specific outcomes that are needed from pricing actions we are taking. It is dividing and conquering a bit—here is where you have some flexibility, and here is where we do not. When you get pushed against the wall a little bit, you push back. Ryan Merkel: I appreciate it. It is difficult. It is a unique environment for pricing. Are you seeing suppliers continuing to push pricing? Do you expect higher inflation because of oil? Dan Florness: Yes. Are we seeing that price increase or expecting? As I mentioned in my commentary about nitrile gloves—this is not the biggest product line we sell, but it is meaningful. That price is going crazy because it is petroleum-based. It really depends on the energy or petroleum content in the product—that directly moves it. You are seeing percentages that make some of these tariff percentages we talked about in recent years look small. Again, it is a smaller category, but it is an example. Max Poneglyph: As you can imagine, it is very volatile. In a typical year, sitting here in Q1, we would at least internally know that we have had 99% of the supplier increases, if they are coming, come through. This is just unusual times. Dan Florness: I think our biggest challenge in a time like this—thinking of our supply chain teams more than our discussions with customers—is knowing where you push back and how aggressively you push back. We understand the cost components of products we source for our customers, and we can share that understanding. Where there is a commodity that is going up and it is linked to tariffs or linked to energy prices, we can assess quickly if that is real or if it is not. That determines how much you push back. Once you find the pieces that are truly legitimate, acknowledging that portion of the supply chain has become more expensive and conveying that to your customer is key. We are not delivering something unique to our customer here—they are seeing it in a lot of commodities they are sourcing outside of the Fastenal Company universe, too. Ryan Merkel: Okay. Very helpful. I will pass it on. Good luck. Operator: Thank you. Our next question comes from the line of Stephen Volkmann with Jefferies. Please proceed with your questions. Stephen Volkmann: Great. Good morning, guys. Thanks. I am not going to ask about tariffs and pricing. Let us shift to the growth side. It sounds like, from your commentary around end markets, that growth is broadening out. Are you expecting growth to continue to accelerate? We do have a little bit tougher comp in the second quarter. How should we think about the growth side going forward? Jeffery Watts: It is hard to tell right now with everything going on. We are still cautiously optimistic about the growth continuing. We are seeing that across the board. We have not seen any pullback. If you look at our April numbers, the market has continued to expand—our markets. It is hard to say what the rest of the year will look like, but right now we are cautiously optimistic. Dan Florness: I will add a piece, a data point we put in our monthly sales release: the percentage of our locations that are growing. There is always a customer or a group of customers that are down somewhere. One of our regional leaders was talking about two of his largest customers who were down 20%. There are always specific reasons. But when I look at the percentage of our locations growing, that has been stuck in the mid-60s, and that is a good place. It has been in the mid-60s consistently since last fall, whereas a year ago or more that was probably in the low 60s or upper 50s. The closer that is to 70, life gets a lot easier because you are seeing broad-based support from a geographic standpoint, which typically translates into an end-market standpoint as well. Max Poneglyph: Let me add one more quick point. If you break down our DSR run rates, you will know we are coming up on some headwinds from a pricing perspective when we comp the prior year. We are very confident in our share gain opportunities because we believe we have a great business in that space. Internally, we expect share gains to continue as they are or increase, but at the same time, when you model out, everyone is thinking about pricing as well. We started pricing in Q2 of last year, so we will start to encounter a bit of a comp item on the top line in that regard. It does not impact operating profit because our pricing mechanics were there to offset cost increases. Keep that in mind. Dan Florness: The one thing I have always counseled over the years is to focus on the sequential patterns of the business. Jeff talked about the fact that we are having really strong customer acquisition patterns. Despite adding customers at a rapid clip—which historically would pull down our dollars per customer a little bit because newer customers are not as mature as existing customers—that is not what is happening. We are adding customers at a very rapid pace, and we are also adding wallet share at the same time. Our ultimate number is expanding, and Jeff touched on that earlier. That makes me more bullish on the future. The economy is going to give or take what it gives or takes. What we take from others—from a market share gains standpoint—those are pure wins. Stephen Volkmann: Great. That is great color. I appreciate that. And Dan, you mentioned slog when you have these customer conversations. Are there competitors out there that are not raising prices as they should, or is anyone doing anything competitively that is holding this back? Dan Florness: We are all swimming in the same water, and that water has a current to it and has become more expensive. That is a lousy analogy, but we are all impacted by the same economics. Are there examples where a competitor might get really aggressive with a customer circumstance? That is always true, and there is some of that. By and large, our industry is a rational industry. The only time you see weird things—I was recently traveling in Indiana, and there is a long-term competitor that was not doing anything irrational; their business is really struggling. You see signs of that—when organizations get squeezed too much, some competitors have to downsize their operations. I saw some of that. That is one data point. I do not think there is anything irrational going on, but that does not mean we do not have circumstances where somebody is trying to elbow somebody else in a customer situation. That is the exception, not the rule. Operator: Thank you. Our next question comes from the line of Nigel Coe with Wolfe Research. Please proceed with your questions. Nigel Coe: Thanks. Good morning. I wanted to turn attention to the tariffs. How do we think about all the changes to AIPA, Section 122, and the changes to Section 232 tariffs? How does that actually go for Fastenal Company? Max Poneglyph: Nigel, if we think first of AIPA, which is making the most noise, we have said in the past that that is a much smaller portion of the total tariff landscape for us. Those are largely replaced by 122 anyway, so we do not see much activity within our P&L to speak to on that one. Even the refund noise—once again, it is a very small amount of our total business and our total tariffs. From our vantage point, it is not immaterial simply because it creates so much noise and it creates, as we said, the slog of pricing, and part of that slog is driven by the uncertainties in tariffs. I hope that gives you the context. Dan Florness: The point Max just made about the impact—it is the headline impact. When the Supreme Court ruling came out, if you are a casual observer or not really dialed in, you can look at it and say, “I thought the tariffs were ruled illegal.” It becomes an education endeavor and then a negotiation discussion, as opposed to just a negotiation discussion. The headline impact slows things down. Max Poneglyph: Just because you asked also, on 232—there was no change. Any discussion about changing it does not impact us. Section 232 does not impact us. Nigel Coe: That is helpful—so no change to 232, that is what I was asking about really. On price/cost, obviously the inventory unit cost inflation embedded in inventory coming through the P&L is a factor as well. Are we now at a point where the headwind from the inventory conversion is behind us? Max Poneglyph: We are getting close. That is what I was referring to when I was talking about the wave of costs. We have a little bit left in there, but around midyear we will have pushed all that through essentially. Nigel Coe: Okay. Thank you very much, guys. Operator: Thank you. Our next questions come from the line of Tommy Moll with Stephens. Please proceed with your questions. Tommy Moll: Good morning, and thanks for taking my questions. Contract signings have gone pretty well. Pricing discussions are behind plan. Are these two linked? As you are bringing on new contract business, do pricing discussions not proceed as fast as they might otherwise? Jeffery Watts: No, I do not think so. I think it is more the current contract customers. When we go to raise pricing, a lot of the contracts we have today have set terms in place, so we cannot change pricing for 30 or 60 days. When the Supreme Court came out with their ruling, a lot of those conversations almost got put on hold—our customers really pushed back hard. I do not think the newer business is the issue—we are pricing that in when we get the business. It is more the current contracts we have in place. Tommy Moll: Got it. That is helpful. Thank you, Jeff. A follow-up on capital allocation. On the repurchases, the dollar amount was modest this quarter, but it has been some time since you deployed capital there. Any update you can provide on the philosophy, or what was behind the decision to deploy those dollars? Max Poneglyph: Yes. First of all, it was small. We just felt as a management team that we want to start to offset dilution, and that is what you are seeing. That would be our approach going forward for a bit here. We can change our mind overnight, but what you are seeing is a simple mathematical offset of dilution. We will, as we always say, remain opportunistic—when the time comes, we will do something else. Operator: Thank you. Our next question is coming from the line of Chris Snyder with Morgan Stanley. Please proceed with your questions. Chris Snyder: Thank you. On the fastener side, the company turns inventory very slowly, and that has provided visibility into future COGS. It felt like you were always able to use that visibility or lag to appropriately balance price/cost through prior inflation up cycles—whether in 2022, 2023, or even last year. It seems more difficult now to match that price/cost for the company. Is there a reason why? Is it more education this time around because tariffs keep moving? Is that why it is more difficult to execute and realize the price, because it has been falling short of expectations for almost a year now? Thank you. Dan Florness: First off, we recently changed some of our reporting. We talk more about our direct material side of the business and our indirect material side of the business. We also challenged our analytics team to follow suit and do that in how we think about gross margin and parse out maybe the fastener business a little differently, and some product lines a little differently. What I can tell you is the struggles we have right now are not in fasteners—our margin is doing just fine there. Where some of the struggles are is in areas that have a little bit more of a branded presence, because fasteners do not really have a branded presence. There is some, but that is not where the dollars are. Our safety margin is challenged because of some of the branded presence. Our cutting tool margin is challenged because of some of the branded presence. The things you have known from us historically are true: in our fastener business, we have great insight because we have time on our side, and we can have those types of conversations with the customer. We can talk about an OEM fastener where we have four months of inventory and here is what the price is going to do at the end of that four months. You can have a different discussion because our customers know we are about managing price/cost; we are not about inventory profits in the short term. Where we are getting squeezed is on some of those branded products, where our timeline to understanding the cost change and how fast it occurs in our FIFO inventory is much different than what it is in our fastener inventory. That is where we are getting squeezed. Chris Snyder: Thank you. That is really helpful. If I could ask one on Q2: it sounds like price/cost will start getting better maybe into the back half of the year. Does Q2 get worse before it gets better? I would imagine some of the headwinds that came through on the fuel side will be bigger in Q2. Is there a little more pressure coming before we get into the recovery, or do you think Q1 is the trough of price/cost? Dan Florness: I will answer this one. As you know, we are in a leadership transition here, and Max is relatively new in his role. Based on thirty years of experience: Q2 is challenging. Q1 was challenging. Our message to our teams is: here is what is happening, here is what we need to do. I believe this team will react, but Q2 will be challenging. I personally feel good when I look out to Q3 and Q4 because I know how long it takes to do certain things. There are price discussions we have had going on since December. There are price changes that we have made—some in effect March 1, some April 1, some May 1, some June 1. As Jeff touched on, sometimes it is about contractual obligations, sometimes it is just about negotiating and finally agreeing on a price. It might be from the customer's perspective, where they have some ability on pricing and what they can do on their end. In January, the only place in my gut I did not feel good was Q1. Once we had some certainty on the Supreme Court ruling, it allowed us to understand a piece. We still do not understand some other aspects and what other challenges there will be to tariffs coming down the road. Q2 is challenging, and I believe the Fastenal Company team can pull it off. That is not a mathematical answer—that is an honest answer. Operator: Thank you. Our next questions come from the line of Patrick Baumann with JPMorgan. Please proceed with your questions. Patrick Baumann: Thank you for fitting me in. On incremental margin expectations for this year: last quarter, in response to a question, Dan suggested that high 20s on incremental margins would be possible this year. Has enough changed to alter your thinking there? You still lap incentive comp headwinds in the second quarter, which should be a nice tailwind for the business from an SG&A leverage perspective. Have the price timing dynamics had enough of an impact to change your thinking on incremental margin expectations for this year? Max Poneglyph: No, Patrick. We do not believe that is the case. There are enough efficiencies—structural, we would say—in the SG&A space. Plus, as Dan said, there are actions that we are taking to mitigate the gross margin headwind that will be in an incremental space that we had expected in the past. Short answer: we confirm our previous statement. Patrick Baumann: Thanks. One follow-up on tariffs. On Section 232, it sounds like Fastenal Company was already charging for the full customs value. Did you observe any noncompliance in the industry that would impact market dynamics in fasteners going forward regarding how competition approached charging for tariffs on imports? Dan Florness: No. The answer is no. Nothing came to our attention. Dan Florness: I see we are at four minutes to the hour. If you have any follow-up questions, I know Max is available through the balance of the day. Thank you again for joining our call today, and thanks for your support of the Blue Team. Have a good day, everybody. Operator: Thank you, ladies and gentlemen. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
Operator: Hello, everyone, and thank you for joining us for the Marti Technologies Full Year 2025 Conference Call. Before we begin, I'd like to mention that today's earnings release and slide presentation are available on Marti's Investor Relations website at ir.marti.tech, where you'll also find links to our SEC filings, along with other information about Marti. Joining me on today's call are Oguz Alper Oktem, Marti's Founder and CEO; and Cankut Durgun, Marti's Co-Founder, President and COO. Before we begin, I'd like to remind everyone that statements made on this call as well as in today's earnings release and accompanying slide presentation contain forward-looking statements regarding our financial outlook, business plans, objectives, goals and strategies and other future events and developments, including statements about the market and revenue potential of our services. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. These risks and uncertainties include those described in our filings with the SEC, today's earnings release and the accompanying slide presentation and are based on current expectations and beliefs as of today, April 13, 2026. In addition, our discussion today will include references to certain supplemental non-GAAP financial measures, which should be considered in addition to and not as a substitute for our GAAP financial results. We use these non-GAAP measures in evaluating and managing Marti's business and believe they provide useful information for our investors. Reconciliations of the non-GAAP measures to the corresponding GAAP measures, where appropriate, can be found in today's earnings release and slide presentation as well as our filing with the SEC. With that, I'll turn the call over to Alper. Oguz Oktem: Thank you all for joining us today for Marti's Full Year 2025 Earnings Call. Marti continues to position itself as Turkiye's leading mobility super app with a single integrated platform offering 8 services and operating across 20 cities nationwide. These services include car, motorcycle and taxi ride-hailing, motorcycle and car delivery as well as our owned and operated e-bike, e-mobile and e-scooter fleet. In 2025, we successfully scaled into a true multiservice mobility platform. We expanded our ride-hailing footprint into 16 additional cities, significantly increasing our addressable market and strengthening our network density. At the same time, we successfully launched delivery services in Istanbul, marking a major step forward in executing our multiservice mobility platform strategy. 2025 also included a pivotal milestone for Marti. It's the first full year of platform monetization. We delivered breakthrough revenue growth with revenue more than doubling to $39.2 million and exceeding our guidance by $5.2 million. This strong performance was driven by robust customer adoption and increased monetization across the platform and the momentum we are seeing supports our confidence in delivering $70 million in revenue for 2026, that's 7-0, 70. At the same time, we made meaningful and accelerated progress towards profitability. Gross profit margin improved dramatically from negative 15.5% to 61.1%. We're really proud of these guys, demonstrating the operating leverage and scalability of our platform model. This also reinforces our path towards sustainable profitability as our network continues to mature. Additionally, our adjusted EBITDA loss narrowed by 37% to $12.1 million, exceeding our guidance by $4.9 million. We are targeting to achieve $1 million of positive adjusted EBITDA in 2026, representing a $13.1 million improvement. Overall, we believe that our continued execution across monetization, geographic expansion and multi-service integration is strengthening our financial performance and positioning Marti to capture Turkiye's large and emerging mobility opportunity with increasing efficiency and resilience. We are the #1 urban mobility app in Turkiye across both iOS and Android platforms. We are also the only operator operating car- and motorcycle-hailing service at scale and the largest 2-wheeled electric vehicle operator in the country, complemented by our on-demand delivery services. We reached 160.2 million all-time trips and 7.4 million unique platform consumers since our launch. Our ride-hailing service continues to scale rapidly and as of the first quarter of 2026 has reached 3.8 million all-time unique ride-hailing riders and 490,000 registered drivers. These metrics reflect the strength of our multiservice platform, combining mobility and delivery and our ability to consistently scale both supply and demand in a highly dynamic market. Although we're the youngest player in Turkiye's urban mobility market, we are the clear market leader. It is also important to note that of the top 5 urban mobility apps in the country, 4 are operated by local players. This is in line with global benchmarks, which gave -- which have demonstrated that local companies often win in the mobility because of the operational advantages, deep local market knowledge, regulatory agility, stronger consumer and driver relationships, tailored service offerings, trust and brand perception. By the end of '24, we had already established a strong ride-hailing presence across 4 of Turkiye's largest cities, that's Istanbul, Ankara, Izmir and Antalya, creating a solid foundation for scale. Building on this foundation, 2025 was a year of rapid expansion as we accelerated the execution of our '25/'26 investment plan and significantly broadened our geographic footprint. Today, Marti operates in 20 of Turkiye's largest cities, representing approximately 80% of the country's GDP, marking a step change in the scale and reach of our platform. The strategic expansion is a key milestone in our long-term vision. We're not only increasing our footprint, but also building infrastructure, network density and operational capabilities required to make Marti the go-to mobility platform across the country. Our ride-hailing service continues to outperform our growth targets, supported by strong execution across city expansion, platform improvements and organizational scale. As of December 31, 2025, all-time unique ride-hailing riders grew 103% year-over-year from 1.7 million to 3.4 million. All-time registered drivers in the same period grew 72% year-over-year from 262,000 to 450,000. On a 2-year basis, this growth translates into 161% compound annual growth rate in riders and 105% compound annual growth rate in drivers between 2023 and 2025, highlighting the sustained momentum of our platform expansion. Importantly, we had already achieved our 2026 first quarter targets by mid-March, demonstrating the strength and acceleration of our growth trajectory. Building on this momentum, we have set new higher targets going forward. We've set targets for 4.3 million all-time ride-hailing riders and 530,000 registered ride-hailing drivers by June 30, 2026. This continued outperformance reflects our ability to efficiently scale both demand and supply supported by improving network density and platform efficiency. At the same time, 2025 marked the first full year of our platform monetization with the introduction of dynamic pricing and improved matching algorithms, representing a key inflection point in our business, driving higher efficiency and improved rider and driver satisfaction. Throughout 2025, the behavior of our consumers and drivers support our decision to offer multiple services through our platform. Our multiservice offering is being further strengthened by the launch of our deliveries with a strong adoption across both consumers and drivers. Starting with our ride-hailing consumers, we are seeing clear evidence that consumers prefer a multiservice experience. 35% of our car-hailing consumers and 82% of our motorcycle hailing consumers use these services after previously being introduced to Marti by using another Marti service. Our existing services serve a highly effective consumer acquisition channel for our new services. Furthermore, 15% of our car hailing consumers and 72% of our motorcycle hailing consumers secondly use other market services on our platform. This highlights strong cross-service engagement. On the driver side, we are also seeing rapid early adoption in our delivery service. Despite delivery being launched only in the final quarter of 2025, 31% of motorcycle hailing drivers and 9% of car hailing drivers have already performed delivery trips. This demonstrates strong supply side flexibility and willingness to adopt new services such as deliveries. Multiservice consumers also generate greater economic value for our platform. Trips per consumer are 4.4x higher and revenue per consumer is 3.6x higher for multiservice consumers compared to consumers who use only one single service. We believe these dynamics reinforce our strategy of investing in the balanced growth of our ride-hailing delivery, ride-hailing, delivery and 2-wheeler electric services within a unified platform. Strong revenue growth from our first full year of platform monetization, the launch of ride-hailing in 16 additional cities, the introduction of delivery service in Istanbul, strong operational efficiency initiatives and AI-enabled cost reduction initiatives drove a significant improvement in our gross profit margin. As a result, our gross profit margin improved sharply from negative 15% in 2024 to positive 61% in 2025, will bring a $26.9 million gross profit uplift -- sorry, $26.9 million gross profit uplift. Going forward, we will continue to pursue disciplined growth with a clear focus on profitability, operational efficiency and prudent capital allocation. We achieved accelerated growth and substantial scale in consumers and drivers with limited capital investment. This demonstrates our strong commitment to capital-efficient growth, supported by meaningful cross-service efficiencies across our platform. Moving forward, we intend to make targeted investments to leverage multiple growth opportunities. These include increasing organic growth in existing cities, improving our consumer and driver experience, initiating loyalty program incentives, selectively expanding into new cities to serve a greater share of Turkiye's urban population, increasing our take rate and further refining our dynamic pricing and matching algorithms. We believe these initiatives will position us well to capture an estimated $4 billion annual revenue opportunity in the ride-hailing business in Turkey. Here's how we calculate the size of the revenue opportunity, that $4 billion figure. With every global benchmark, we see that the introduction of ride-hailing service into a market uncovers unmet demand significantly eclipsing the demand for taxi service prior to the introduction of ride-hailing. This is because ride-hailing offers a significantly better, more accessible consumer experience than taxis across all dimensions, including vehicle availability, price and driver and vehicle quality. As an example, in the city of New York, ride-hailing increased the size of the taxi market by 1.6x. There were approximately 800,000 daily taxi trips in Istanbul, our largest city when we launched our ride-hailing service. We believe that what happened in New York City is now happening in Istanbul, and we expect there to be 1.3 million daily ride-hailing trips in Istanbul at steady state. Istanbul's taxi market accounts for about 35% of the entire country's taxi market. So assuming similar market dynamics in Turkiye's other cities, we project that there will be eventually about 3.9 million daily ride-hailing trips in Turkiye. This is about 1.4 billion trips a year, approximately $13 billion of potential gross annual booking value, $13 billion. At an assumed take rate of 30%, which is industry standard, in line with global benchmarks, this equates to $4 billion of total annual revenue potential for Turkiye's ride-hailing market at maturity, and we expect Marti to capture a significant portion of that revenue. We're working really hard at it. I'd now like to turn it over to my partner, Cankut, to present our financials. Thank you. Cankut Durgun: Thank you, Alper. Turning to our 2025 full year results. We delivered strong growth across our platform while continuing to improve profitability. We increased our total trips 60% year-over-year from 31.7 million in 2024 to 50.8 million in 2025. This was driven by an increasing number of ride-hailing trips as a result of higher usage in our existing cities, successful new city launches and growing cross-service adoption on our platform. The number of unique platform consumers who used our services at least once during the year increased 44% year-over-year to 3.1 million. This growth was also primarily driven by a higher number of ride-hailing consumers. Trips per unique platform consumer rose 11% to 16.5, reflecting improved service availability and cross-service platform usage. As shared earlier in the presentation, the number of unique ride-hailing riders that have used our service since its launch increased from 1.7 million to 3.4 million, while the number of registered drivers increased from 262,000 to 450,000 in 2025. As a result of the gradual decommissioning of our existing 2-wheeled electric vehicle fleet, our number of average daily 2-wheeled electric vehicles deployed decreased from 32,600 in 2024 to 23,200 in 2025. On the financial side, revenue more than doubled to $39.2 million, representing 110% year-over-year increase. This strong growth was primarily driven by the successful completion of our first full year of platform level monetization, the scaling of our platform, the introduction of dynamic pricing and increased consumer engagement across our multiservice platform. We also delivered meaningful cost reductions. Cost of revenues declined 29% to $15.3 million, driven by operational efficiencies across our multiple services, lower depreciation costs, reduced field logistics costs and several AI-enabled cost reduction initiatives inside the company. As a result of strong revenue growth, increasing scale and meaningful cost reductions, we turned our gross profit from a loss of $2.9 million in 2024 to a profit of $24 million in 2025. Our gross profit margin improved sharply as a result from negative 15% to 61%. Our general and administrative expenses also decreased 43% from $49.2 million in 2024 to $28.1 million in 2025. This was primarily driven by lower share-based compensation expenses and lower insurance costs. Excluding share-based comp, general and administrative expenses increased to $16.8 million in 2025 compared to $12.1 million in 2024. And this increase is in line with the scaling of our organization to support the growth of our multiservice platform. As a result, our adjusted EBITDA improved by $7.2 million from negative $19.3 million in 2024 to negative $12.1 million in 2025. We believe that the accelerating performance of our services represents a pretty important milestone for our growth and profitability. By the end of 2026, we expect once again to close to double our annual revenue to $70 million in 2025 and to reach positive adjusted EBITDA. This guidance reflects the continued execution of our 2025 and 2026 investment plan, including continued investments in our ride-hailing business, the further growth of our delivery service, cost-efficient scaling and the build-out of our organizational capabilities to support a larger operational footprint. We thank you for participating today and for listening to our performance and our future investment plans and would like to answer any questions that you might have. Operator: [Operator Instructions] Our first question today is coming from Rohit Kulkarni from ROTH Capital Partners. Rohit Kulkarni: Congrats on 2025. I guess to kick things off, maybe talk about what you're seeing in Istanbul versus all the other new cities that you've added, specifically with growth and how profitability in the core city proportion of rides compared to all the new cities that you had added last year? Oguz Oktem: Great question. Well, first of all, we're really surprised because our initial assessment a few years back about the distribution of potential future trips between Istanbul and the other cities was much more lopsided towards Istanbul. As you know, Istanbul is a 20 million city, that's 1/4 of Turkey, but it is the financial and cultural capital. It's just -- as a result, you always tend to, I guess, exaggerate the potential of Istanbul and downplay the potential of the other 80 cities in Turkey. However, we're really positively surprised by how large the demand is outside of Istanbul. I believe right now, Istanbul is close to 50% of our business and the other 50% comes from the other 80 cities, and we've only launched around 20. But there's a lot more cities that we're going to launch, and we expect Istanbul to go down to 35% eventually. Rohit Kulkarni: Okay. Great. And I guess a question on the multiservice offering. Now you have motorcycle card as well as delivery. Maybe talk about how does that affect both the driver and rider acquisition? And how do you think of kind of the potential revenue per consumer as you fully ramp multiple services across all the cities that you have? Oguz Oktem: Yes. I mean it's just -- it's fairly simple really. The more services you have, the more offerings you have for both consumers and your drivers, right? I mean as you add deliveries, for example, you're offering your drivers not only ride-hailing customers or ride-hailing business, but on top of that, you're giving them potentially a few delivery opportunities a day, right? And I mean, giving -- having received the offer of being able to do more business, drivers are happy. At the same time, the consumers that come on to the platform, give their credit card information or like sign up their social security number and whatnot, they don't do it for a single service. They look and they see that there are other available service that they could use and utilize and enjoy. As a result, it actually accelerates the natural progression of a double-sided marketplace business model. The more drivers you have, the more consumers you have and the more consumers you have, the more drivers you have. As you build on your platform with different business models, you keep your drivers and your users engaged and your double-sided market dynamic plays out even faster. People like our platform and migrate towards you. That's why we're the largest mobility player despite being the newest one in the country. Cankut Durgun: Also, Rohit, like the statistics we shared, right, like the fact that, for example, 31% of motorcycle drivers who have performed sort of a ride-hailing service with motorcycles have already performed deliveries, keeping in mind that this is based on 3 months of data, right? This is the tail end of 2025, that -- I was impressed by that figure. I wasn't expecting such high sort of cross utilization, but that does show that drivers are willing and able to perform multiple services. And that's probably largely a function of sort of the earnings opportunities being roughly similar across the 2, right? If you think of sort of the average sort of ride-hailing fare versus the average delivery fare, given that those are sort of similarly -- similar numbers and given that the time that a driver needs to spend in both cases, right, in ride-hailing going to pick up the rider and then sort of taking them to their destination versus in a delivery, picking up the package and then delivering it to its destination, it's similar time, similar earnings opportunities. So we do see, especially on the motorcycle side, we see sort of clear cross usage for our service. The other question you had on the -- with respect to the previous question you had, you also asked about sort of monetization. What's important to keep in mind is as of the end of last year, right, we were only monetizing in 3 cities. And therefore, there is -- and part of sort of the growth that we foresee in 2026 as well as in other years is the fact that we will be rolling out monetization in additional cities beyond sort of the initial 3 that we had in 2025. Rohit Kulkarni: Okay. Great. And one last question, and then I'll get back into the queue is around regulatory framework and any potential changes that you might anticipate with the ridesharing or just your overall business, do you have any updates to share how we should think about that? Cankut Durgun: We've been working on a regulatory front for several months now. Since 2025 is when we really began pursuing the regulatory outcome. And this is a sort of long-term effort, right, creating laws that enable ride-hailing at the national level. It's somewhat analogous to what we achieved on the 2-wheeled electric vehicle side, which is something that we also embarked on 3 years after launching the 2-wheel electric vehicle category. However, it's somewhat different, right? And the areas where it's different is that, one, it's a much larger market, right? Ride-hailing is a much larger market than 2-wheeled electric vehicles. And two, there's also many more interested parties in that market. And as a result of those, it takes more time, but we continue to be active across sort of ministries at the national level working on the regulatory side. Operator: Our next question is coming from Jack Halpert from Cantor Fitzgerald. John Halpert: I've got 2, please. So first, can you just kind of help frame any exposure the business might have to the kind of ongoing conflict in the Middle East more recently? Have you seen any disruptions to services or maybe impact of fuel prices, how to kind of think about that? And then second, you noted loyalty programs as a growth driver going forward. Can you kind of talk about your progress there, maybe where you think consumers will take advantage of this and how it can sort of drive your cross-service usage, which has obviously been a pretty important lever for the growth story? Oguz Oktem: Thank you. Well, first of all, thank God, our country is not involved in any of the ongoing conflict in the region. We're sitting very comfortably at home. What's happening around us is very unfortunate. It's a tragedy really. Nobody likes to see anybody dying, but Turkey is safe and we're completely unimpacted by what's going on. The only thing that obviously impacts us like the rest of the world is how this is going to affect energy prices, as a result, how it's going to affect food prices; and as a result, how is it going to affect general inflation. It obviously has 2 effects. One, it increases the cost per trip for our drivers as gas prices go up, that obviously eats into their margin. But with our dynamic pricing algorithms, we always make sure that our match rates are at our target of around 95%. So sometimes we raise the price, sometimes we lower the price, but we always reach that 95% figure. However, that being said, this also increases the average price of a ticket, average trip. And that eats into the consumers' budget. And as inflation also builds up, this creates a downward pressure on demand, but that is a global issue. It's has nothing to do specifically with us. If anything, because we are still at the beginning stages of scaling this business, which is a paramount need in the city of Istanbul in terms of transportation, it's akin to us selling water in the desert at this point because we've talked about the taxi shortages in Istanbul and how tough it is to get around the city. Our services are in high demand, and I don't think we're going to see any significant effect in terms of both demand and supply for our ride-hailing business. To your second question, to increase loyalty, both on the consumer and the driver side, we were trying to build a successful and numerous CRM team in-house that use AI, segment our data and offer a lot of different offerings and campaigns and loyalty schemes to our consumers and drivers, and they've performed really well over the past few months. That team was built essentially around 6 months ago. Now they're working at full scale. And we certainly see usership numbers. For example, rides per trip per driver or rides per trip per consumer per month, stuff like that go up significantly over the past few months. I'd like to -- maybe I'll share those some other time. I don't have them in front of me. But yes, our loyalty programs are at full speed ahead as well. Cankut Durgun: Let me just add something -- a bit more data on the fuel side, Jack, because that's -- the impact that it does have is, again, on fuel prices, but that also is a very limited impact. And the reason is, I mean, Turkey actually has a subsidy fund for energy price volatility. And this is something that wasn't created just for this crisis in particular, but it has existed for decades. And the reason is because oil is priced in dollars and the Turkish lira tends to depreciate relative to the dollar. And as a result, this fund has always been in place to counteract the potential short-term volatility in oil prices. And I didn't check this week. Oil prices are sort of real time sort of -- based on a few tweets sort of oil prices can go in either direction these days. But when I last checked last week, I saw that since the beginning of the crisis, oil prices had gone up about 45%, 50%, but gas prices for Turkish consumers had gone up only 9%. And the delta there is because of the government's subsidization, right? And if you think about sort of our drivers, right, if you say fuel, for example, is, let's say, 20% of their cost base, a 9% increase in something that is 20% of your cost base comes to sort of a 2% increase. And that's the reason why we are really not feeling any impact so far. The question, of course, is how long is this conflict going to last and how -- what are the more sort of long-term oil prices going to be. Our government certainly, as a result of this fund that they have had in place for a while now and their correct sort of use of it in this particular crisis, I believe that as long as this crisis lasts sort of months rather than years and as long as the oil prices remain sort of similar to the levels at which they are currently at, it's going to have absolutely no impact on our business. But if this crisis lasts several years and -- or it deepens in terms of the ultimate outcome that it has on oil prices, that's when we would look at -- follow that closely and take precautionary measures if it's deemed necessary. Operator: [Operator Instructions] Our next question is coming from Sam Dufault from Oak Ridge Financial. Sam Dufault: Congratulations on the year-end results. My question is around the guidance for '26 around the $70 million revenue number. You mentioned 3 cities were monetized in '25 and additional cities anticipating to be monetized in '26. Of those 17 remaining cities, how many do you guys anticipate bringing online in 2026? And at what point in the year? And then in that $70 million revenue target, does that include delivery services? And if not, how do you see that shaping up long term as a percentage of overall revenue? Cankut Durgun: Yes. So it does include delivery services, right? It's a company-wide revenue target that we shared. And the moment when delivery, however, is going to be sort of having a much larger impact, it's important to clarify sort of the nature of the delivery services that we're offering now, right? The nature of the delivery services that we're offering now is rapid intercity parcel deliveries. We are not competing in the food delivery or the grocery delivery space, at least directly, right? So could a consumer theoretically request a delivery to be made from a restaurant or a grocer on our app? Yes, they could, but we're not listing like restaurants. This isn't the equivalent of like a DoorDash in the U.S. It's more similar to a courier intercity parcel delivery service. As a result, the volume that we're targeting right now is a much smaller base of volume and the eventual revenue impact as a result of the delivery business is also going to be a reflection of that. Now in the future, do we have the ability to take the initial position that we have built in this delivery space, take the additional utilization that we're offering to our drivers, both motorcycle and car drivers, and then once we built the demand for a delivery service, then go back to the supply side and onboard merchants directly, that is, of course, a possibility, but that's something that's going to play out over time, not immediately in 2026. With regards to your other question about the monetization of our cities, we look at certain key metrics prior to embarking on monetization. And those metrics are primarily tied to the level of demand that we can drive to each ultimate driver, right? As that level of demand increases to a level where they are able to earn a significant sort of earnings by driving for our app, that is the moment when we look to turn on the monetization switch. And that's something that we anticipate sort of turning on monetization for further cities in 2026. And those are part of the increase in the guidance -- the revenue guidance that we have shown. However, the ultimate timing and the ultimate sort of specifics of which of those cities will be monetized, that's something that we look at on a case-by-case basis by looking at some of the metrics that I shared. Sam Dufault: Got you. And you spoke on the regulation front as well. Assuming some form of regulation gets passed and competitors enter the market, how do you see that impacting your customer acquisition cost and your cash spend? Do you anticipate needing additional cash or capital raising to meet that additional spend? Or at that point in time, do you anticipate kind of the results from operation funding that additional spend? Cankut Durgun: We benefit in both ways is the way that I look at it, right? On one end, yes, the regulatory outcome is a positive one because it fully legitimizes the business. And that does create probably overnight sort of additional supply and demand and that, therefore, propels the growth of the business more importantly. However, in the current status quo, the benefit, as you highlighted, is that our growth comes at -- in a very, very sort of capital-efficient way. And so we sort of win in both scenarios is the way that we look at it. When the eventual competition enters the market, whether that is pre or post regulatory outcome, then we do believe that the continued sort of capital efficiency that we will have as a result of having built such a large first-mover advantage, right, will be one that will allow us to continue to grow sort of relatively capital efficiently. Yes, CACs and driver acquisition costs will increase relative to their current levels. But what's important to note is that sort of the reason why many ride-hailing firms in markets larger than Turkey spent sort of billions of dollars competing and growing is because they started neck and neck sort of within a few months of each other in their respective markets. In the case of Turkey, as of right now, we have like a 3-plus year head start, right? And while you, therefore, might expect a competitive market in Turkey to spend, let's say, adjusting sort of what was spent in some other larger markets than Turkey, which was billions of dollars, you might expect Turkey to spend sort of hundreds of millions of dollars. We remain confident that as a result of our first-mover advantage, we will be able to keep a number in the tens of millions of dollars. However, this is all a function of what the eventual competition is going to be like and what the spending of that competition is going to be like at that time. Operator: Your next question today is coming from Poe Fratt from Alliance Global Partners. Charles Fratt: The first of which is you mentioned AI helping you reduce costs. Can you expand on that statement? Cankut Durgun: So we just went over 2 weeks ago, roughly, a pretty comprehensive presentation of the impact of AI across sort of departments. And whether it's in the chatbot that's been built for our call center and customer service operations, whether it is in the use of AI for driver identification, right, on both the individual side as well as the vehicle side, whether it's the use of traditional sort of -- those are sort of like specific to our business examples. Then there's the obvious one, which is just coding tools and the tremendous uplift that those tools produce for companies' software developers, right? So far, we have always used those as a source of additional output, right, rather than trying to sort of reduce inputs, although there are many companies that are also reducing the inputs. But what we're trying to do, given that we're growing so fast, so far, we've sort of used them as a way to increase the outputs of the existing teams that we have in the organization and -- while complementing it with sort of ride-hailing specific use cases. Oguz Oktem: I'd like to add something. This is probably my like 12th or 13th year running tech companies and start-ups. The pace at which we produce code and improve our products has increased exponentially over the past 6 months. Stuff that used to take 5 months, a year, 6 months, whatever, to code and to see the final product now takes weeks, sometimes days. It's not only the speed at which software output is produced, but also the quality. Our coders used to just write the code themselves. Now, they have AI produce the code and then they just act like architects. This improves small mistakes and general quality, improves design, improves UX, improves UI, just made every single coder exponentially better than what they used to be 6 months ago. So I think the biggest change that we see is the quality and just the pace at which we improve ourselves, which given the fact that we are an upstart in the ride-hailing sector compared to the global giants out there, it actually helped us bridge the gap between the quality of our product and the quality of the best products out there in the market. It just shrunk significantly. So this has been great for us. Our dynamic pricing algorithms to just how our app functions, just the look and feel of our app has caught up to the rest of the world much faster than it would have had, had there not been the AI revolution in software engineering. Charles Fratt: Great. That's really helpful. And then my second question goes to -- and you mentioned it, Cankut, but take rates. Could you talk about take rates in the third quarter, fourth quarter or an exit rate and compare them to what's built into your guidance for 2026? Cankut Durgun: We do continue to include both sort of increased monetization in cities that we currently do not monetize as well as sort of gradual increases in the take rates over time, whether that's sort of in the results in 2025 or for our 2026 forecast. But we still compared to sort of the global benchmark, right. The global benchmark that we share is 30%, in excess of 30%. And we continue to remain very, very far away from that figure, and we have ample upside to -- even in the monetized cities, increase monetization levels. Charles Fratt: If I could try to pin you down a little bit more. I think the last time we talked about take rates, they were high single digit, low double digit. Is that a fair range right now? Or could you just help me understand where you are in that process of trying to get to that global target? Cankut Durgun: Relative to what we shared last, there haven't been significant changes. Oguz Oktem: That's a very important point, right? Our projected revenue for this year is $70 million, and the take rate is lower single to -- higher single to lower double digits. And the take rate is completely within our control. It's just we adjust it so that we don't curb growth when we don't have to. But if we were to step on the accelerator on the take rate, our financial profile would be very different this year. We kept saying this last year because we didn't start monetizing. And we said that the financial profile of the company is going to be very different once we start turning the dials on the take rate. And you see the results this year right before your eyes from negative 15.5% to positive 61.1%. Those numbers could be significantly better if we decide to check up our take rate, which is -- which can be done within a few minutes once we decide to do so, but we're just optimizing for growth right now. Charles Fratt: Great. Just to clarify, though, you don't have any increase in your take rates built into your 2026 guidance? Cankut Durgun: We do have small increases built in. The timing thereof, again, is going to depend -- it's on a case-by-case basis. We look at the driver metrics in each city and whether it's the turning on of monetization or whether it is the increase of the take rate in that particular city, it is a function of the sort of underlying driver dynamics in that city. But it's still very small percentages, right? We're nowhere near the global benchmark of 30%. We're not going to get even close to that this year. Then again, we could if we wanted to, which would have -- which would double, quadruple our revenues. Operator: Our next question is coming from Sid Havaldar from Crescent Enterprises. Siddharth Havaldar: Congratulations on the growth so far and a stellar FY '25. My question is more surrounding the growth and understanding that beyond the geographic expansion, is there sort of a plan to continue expanding the incentives program and then the impact that would have on sort of the cash outlay and ultimately sort of the cash requirements of the business? Oguz Oktem: Well, we keep saying this and every single time. Realize that we have actually understated the reality of the situation. Turkey is such a large market, and it is so deprived of these services for the past decade or so when these services exploded elsewhere in the world, but Turkey was left behind. The potential of the market just keeps increasing and increasing again. And I said this, but I want to underline this before. Had you asked me as the Founder and CEO of this business, what would Istanbul's share be in ride-hailing in Turkey before we launched this business, I would have said 65%, 70%. We're now down to 45%. I mean the market is so large. The opportunity is so big, right? Right now, what we're calculating is like a 13% possible GMV. And like we're nowhere near reaching that potential even closely. The growth potential is maybe tenfold at this point. So there is no other business line or no other geography in the world where a company like ourselves could go and achieve higher growth rates. So that's why we're digging deep in this market, and we see that the market is rewarding us every single time we go deeper and deeper. Cankut Durgun: The other way to look at this is also in terms of sort of what the capital outlays are, right? I mean, we shared how we reached 60% gross profit margin this year, right? If you assume 60% gross profit margin on $70 million of revenue, that's $40 million of capital prior to fixed costs and marketing essentially. And therefore, we will, of course, if we are going from there to sort of positive EBITDA rather than sort of a large positive EBITDA, that is because from a marketing perspective, from sort of a continued organizational development, especially in some of the new cities that we're launching perspective, we are continuing to invest at a level which shows that the business, even with the current level of monetization has the ability to be profitable while also signaling that what we believe, which is that as revenue levels increase and as the need for below the line additional investments is reduced in some new cities and from an organizational perspective, that can give you a sense of what we believe the sort of -- the reason we believe that the EBITDA margins of a ride-hailing business in Turkey will be at least as attractive, if not more attractive than the EBITDA margins of ride-hailing firms globally. Oguz Oktem: The bottom line is very simple. I fully agree with Cankut. It's that while growth is cheap with no rival in sight, we're growing to be able to make life hard for our rivals and competitors when they emerge. That's what we're doing right now. Otherwise, the financial profile will be very different than what you're seeing right now. Siddharth Havaldar: Okay. That's very helpful to understand. And then just lastly, I think from understanding the cash position today and what we can expect sort of towards the end of 2026 and sort of the capital bridge for that as you look to achieve profitability? Cankut Durgun: So I think we shared that we finished the year with about $8 million of cash. And we also shared how we do have 2 convertible notes outstanding. One of them is a note that we signed on in April 2025. And we have the ability to draw down. We have drawn down $13 million from that note and have the ability to draw down a further $10 million. And if necessary, for the business in light of the sort of, one, sort of the existing cash flow generation, but two, also our growth plans, we have the ability to draw down on that during the course of the year. So we don't see any additional capital needs beyond the existing capital that we already have in place, both within the company as well as available for drawdown should we choose to in 2026. Operator: We've reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments. Cankut Durgun: We're all good. Thank you very much, everybody, for listening. Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.
Operator: Good morning. My name is Katie, and I will be your conference facilitator today. I would like to welcome everyone to the Goldman Sachs First Quarter 2026 Earnings Conference Call. On behalf of Goldman Sachs, I will begin the call with the following disclaimer: The earnings presentation can be found on the Investor Relations page of the Goldman Sachs website and contains information on forward-looking statements and non-GAAP measures. This audio cast is copyrighted material of the Goldman Sachs Group, Inc. and may not be duplicated, reproduced or rebroadcast without consent. This call is being recorded today, April 13, 2026. I will now turn the call over to Chairman and Chief Executive Officer, David Solomon; and Chief Financial Officer, Denis Coleman. Thank you. Mr. Solomon, you may begin your conference. David Solomon: Thank you, operator, and good morning, everyone. Thank you all for joining us. In the first quarter, we delivered a very strong performance, generating net revenues of $17.2 billion, net earnings of $5.6 billion and earnings per share of $17.55. All 3 of which were the second highest in the history of Goldman Sachs. As a result, we delivered a return on equity of 19.8% and an ROTE of 21.3%. These results reflect the strength of our global franchise and the depth of our relationships and our ability to execute for clients while maintaining a strong focus on risk management in a highly dynamic environment. 2026 began with a degree of optimism. Markets hit record highs, confidence continued to build with most clients focused on growth, strategic activity and capital deployment. As we've said, things were only moving in a straight line. And as the quarter progressed, the macro environment started to weigh on sentiment, volatility increased meaningfully with concerns around AI-driven disruption, sectors like software, heightened uncertainty in parts of private credit and the conflict in the Middle East. Against this backdrop, our performance underscores the importance of having a scaled, diversified and global franchise that can support clients across a wide range of market conditions. Operating as a leading global financial institution requires deep expertise, long-term investment and a culture grounded in risk discipline. This is what differentiates Goldman Sachs and what clients rely on, particularly in periods of uncertainty. We pride ourselves in being a trusted adviser and providing timely and differentiated insights. This quarter, we have large-scale calls and events, reaching tens of thousands of clients across the firm. We also saw elevated engagement with our digital channels, including Marquee, with monthly average users up over 30% year-over-year and our global investment research portal which saw its second highest single day of client activity in early March. Beyond analysis and insight, our people operating as One Golden Sachs delivered for clients in real time as conditions evolve quickly. In Global Banking and Markets, we delivered record quarterly revenues, reflecting strong client engagement across our franchise. Elevated uncertainty led to clients -- led clients to actively reposition portfolios driving strong flows across FICC and equities. We supported our clients' intermediation and financing needs across asset classes, deploying our balance sheet in response to demand. In our commodities franchise, we acted as an intermediary for our clients of its significant moves in energy markets, including a record monthly increase for [indiscernible] crude in March and price surges of 60% in European gas market. Importantly, the growth of our financing business has added further balance to our performance, reinforcing our ability to perform consistently across cycles. In Investment Banking, we remain the #1 M&A adviser globally. Clients continue to turn to Goldman Sachs for advice and expertise regarding their most important strategic transactions. I made a backdrop of accelerating technological change and industry disruption. This includes the announced $43 billion merger of Unilever's food business with McCormick, [ Sysco's ] $29 billion acquisition of Jetro Restaurant Depot and Cortera Energy's $26 billion sale to Devon Energy. While market conditions tempered execution for IPOs and sponsor activity broadly, we believe that activity levels will rebound once conditions stabilize. As you remember, our backlog closed 2025 at its highest level in 4 years. Even with exceptionally strong revenue production, our quarter end backlog remained extraordinarily robust. In Asset & Wealth Management, clients continue to choose Goldman Sachs or the quality of our advice and our long-standing investment track record. We generated $62 billion long-term fee-based inflows, including $22 billion in wealth management flows. The consistent inflow momentum throughout the quarter, including during the heightened volatility in March underscores the strength of our client relationships built on trust and long-term performance. We are pleased to have closed the acquisition of Innovator in the second quarter, which adds an additional $31 billion in assets under supervision across a suite of over 170 ETF focused on defined outcome strategies putting us in the top 10 of global active ETF providers. In alternatives, we raised $26 billion across asset classes with private credit strategies generating $10 billion. We recognize that the private credit industry has been an area of increased focus in recent months. Our 30-year track record of performance in private credit is characterized by rigorous underwriting, selective deployment and disciplined portfolio construction. And our largest non-traded BDC, as an example, we saw net inflows of over 7% this quarter, reflecting divested investor demand for experienced investment managers who have navigated multiple rate and credit cycles. Looking forward, our predominantly institutional drawdown structures as well as the breadth of our origination funnel give us the flexibility to continue to patiently and selectively invest capital. Overall, we feel good about the long-term opportunity in private credit and our ability to deliver attractive risk-adjusted returns for clients. Let me spend a moment on capital and regulation more broadly. We've been consistent in our view of a strong, well-capitalized banking system in the U.S. is essential and that strength has been clearly demonstrated across multiple stress periods. At the same time, we have also been clear that the regulatory framework needs be transparent and calibrated appropriately to achieve its objectives. Getting this right matters to the real economy, well-calibrated framework enables banks to provide liquidity, support lending and capital formation and serve clients more effectively. Ultimately, a strong U.S. banking system supports growth, competitiveness and economic resilience. Against that backdrop, we're encouraged by the direction of regulatory reform, including the recent Basel III finalization and G-SIB surcharge reproposal, while the rule-making process is still underway, and we plan to participate in the comment period, we believe this direction is positive for the banking system as a whole, better aligning regulatory outcomes with actual risk. All in, we continue to see the potential for more constructive backdrop this year. The combined effects of fiscal stimulus and developed economies, ongoing AI-related capital investment and a more balanced regulatory agenda in the U.S. are powerful forces. At the same time, the geopolitical landscape remains very complex, and the ultimate impact of higher energy prices on inflation and growth is yet to be determined. We believe Goldman Sachs is extremely well positioned to navigate this current environment. And on the short term, we are also investing for long-term growth, including through One Goldman Sachs 3.0. As I mentioned, clients seek our views and analysis around a range of topics, including AI, and we were able to speak to these trends from firsthand experience as we thoughtfully implemented new technologies across our 6 initial work streams and around the firm more broadly. We remain confident that over time, One GS 3.0 will drive stronger operating leverage, greater resilience and improved efficiency and returns and allow us to continually elevate service to our clients. These efforts build on the strength that differentiates Goldman Sachs. As we demonstrated this quarter, our deep client relationships, global platform and strong risk culture position and strong risk culture position us to serve clients with excellence while creating long-term value for shareholders. With that, I'll turn it over to Denis to walk through our financial results in more detail. Denis Coleman: Thank you, David, and good morning. Let's start with our results on Page 1 of the presentation. In the first quarter, we generated our second highest net revenues of $17.2 billion as well as our second highest earnings per share of $17.55, which drove an ROE of 19.8% and an ROTE of 21.3%. Let's turn to performance by segment, starting on Page 3. Global Banking & Markets produced record revenues of $12.7 billion in the first quarter and generated an ROE of over 22%. Turning to Page 4. Advisory revenues of $1.5 billion rose 89% year-over-year on higher completed volumes. We remain #1 in the league tables for M&A with a lead of $150 billion in announced volumes versus our closest peer. Equity underwriting revenues of $535 million were up 45% year-over-year on better convertibles results while debt underwriting revenues of $811 million rose 8%, driven by better investment grade and asset-backed activity. We ranked first in equity and equity-related underwriting and ranked second in high-yield debt underwriting and leveraged lending. FICC net revenues were $4 billion. Within intermediation, revenues in rates and mortgages were significantly lower versus the first quarter of last year as results were impacted by a tougher market making backdrop. This was partially offset by significantly better results in currencies and commodities, illustrating the benefits of having a global diversified franchise. We produced FICC financing revenues of $1.1 billion. We remain confident in our ability to prudently grow this business over time. Equities net revenues were a record $5.3 billion. Equities intermediation revenues of $2.7 billion rose 7% even versus very strong results last year, driven by better performance in cash products. Record Equities financing revenues of $2.6 billion were 59% higher year-over-year with particular strength in Asia amid another record for average prime balances in the quarter. As we highlighted in last quarter's strategic update, Asia is one of the key growth opportunities for our FICC and equities businesses. And while there's still work to do, we're pleased by the progress to date. Across FICC and equities, financing revenues of $3.7 billion rose 36% versus the prior year and comprised nearly 40% of total FICC and equities revenues. Let's turn to Page 5. Asset & Wealth Management revenues were $4.1 billion. Management and other fees were up 14% year-over-year to $3.1 billion, primarily on higher average assets under supervision. Incentive fees were $183 million, up year-over-year despite the volatile environment during the quarter. Private banking and lending revenues were $638 million. Higher lending results were more than offset by the impact of NIM compression as we grew deposits in a more competitive rate environment in order to fund broader firm activity. Consistent with our growth strategy, we also expanded our lending to ultra-high net worth clients with balances rising to a record $46 billion. Now moving to Page 6. Total assets under supervision ended the quarter at a record $3.7 trillion. We saw $62 billion of long-term net inflows across asset classes representing our 33rd consecutive quarter of long-term fee-based net inflows. Turning to Page 7 on alternatives. Alternative AUS totaled $429 billion at the end of the first quarter, driving $597 million in management and other fees. Gross third-party alternatives fundraising was $26 billion in the quarter, putting us on track towards our annual fundraising expectations. On Page 8, Platform Solutions revenues were $411 million in the quarter, down year-over-year, reflecting the move of the Apple portfolio to held for sale. We expect revenues for the rest of the year to run lower, in line with seasonal trends in the business. On Page 9, firm-wide net interest income was $3.7 billion in the first quarter. Our total loan portfolio at quarter end was $253 billion, up versus the fourth quarter, primarily reflecting growth in corporate and other collateralized loans. Our provision for credit losses of $315 million reflected growth and impairments in our wholesale lending portfolio. Turning to expenses on Page 10. Total quarterly operating expenses were $10.4 billion, resulting in an efficiency ratio of 60.5%. Our compensation ratio net of provisions was 32%. Non-compensation expenses were $5 billion, with the vast majority of the year-over-year increase driven by higher transaction-based expenses tied to robust activity levels, particularly in equities. As David referenced, we are thoughtfully building out our One Goldman Sachs 3.0 work streams, and our early learnings have reinforced the need to double down on the foundational elements of our infrastructure. We are, therefore, accelerating our investments in cloud migration, and in the accuracy, completeness and timeliness of our data. These investments are critical to optimizing the deployment of AI solutions across the firm, which will allow us to unlock greater productivity and efficiency opportunities over time. Our effective tax rate for the quarter of 13.2% benefited from the impact of employee stock-based compensation. For the full year, we expect a tax rate of approximately 20%. Now on to Slide 11. Our common equity Tier 1 ratio was 12.5% at the end of the first quarter under the standardized approach, 110 basis points above our current capital requirement of 11.4%. We saw attractive opportunities to deploy capital across the firm including in prime brokerage and acquisition financing. These activities, in addition to the increase in market risk RWAs amid higher market volatility consumed a portion of our excess capital. Additionally, we returned $6.4 billion to common shareholders, including record common stock repurchases of $5 billion and common stock dividends of $1.4 billion. We will continue to dynamically deploy capital to support our client franchise while also returning capital to shareholders. As David mentioned, we're encouraged by the direction of the recent Basel III finalization and G-SIB surcharge re-proposals, which reflect a more balanced and risk-sensitive approach than earlier iterations. In conclusion, our performance reflects the diversification and strength of our leading client franchises, which enable us to serve clients in a volatile market. We are confident in our ability to continue to support our clients as they navigate this dynamic operating environment. With that, we'll now open up the line for questions. Operator: [Operator Instructions] We'll take our first question from Glenn Schorr with Evercore. Glenn Schorr: So I guess I would love it if you could expand a little bit on, let's just call it, balance sheet strategy because I see you deploying capital, it's reducing the denominator. But when the CET drops 180 basis points, a lot of people ask questions. So let's just go towards the deposit strategy, deposits grew a lot. I'm assuming that's to finance -- equity financing. So I'm curious how you think about the trade-off of lower NII and asset and wealth, but growing financing. And I guess that feeds into our Asia strategy. So sorry to put a bunch in there, but it all overlaps each other. So maybe you could just expand a little bit on that. Denis Coleman: Sure, Glenn. So I think I would take you back to our strategic update that we gave at the end of the year, where we tried to lay out our expectations for how we were going to respond to the changes in the capital regulation. And then in particular, we'd be focused on deploying into the client franchise to support a bunch of our more durable revenue stream activities with lending being at the top of the list. And as we sit now at the end of the first quarter, you will see that we significantly expanded our activities in equities financing, and a particular area of strategic focus was Asia, something that we also did call out at that time where we had identified a competitive gap, we saw an attractive opportunity and with the excess capacity that we saw ourselves with, we deployed into that with clients and grew our revenues. You also note that we recorded a record level of lending balances in private wealth. We continue to grow FICC financing, we grew our corporate balances, acquisition financing. All of these were the items that we called out as the priority areas for deployment, and we saw opportunities over the course of the quarter to do that. I would be remiss if we didn't mention that we also aggressively return capital to shareholders at the record level of buybacks. So the balance sheet growth was largely in support of those client activities that I just referenced. Separately, you're right, we did have significant deposit raising activity over the course of the quarter. That remains a strategic source of funding for us that we continue to grow. A lot of that growth did derive through the [indiscernible] platform, which is a benefit to the firm. Some of that activity supports activities in AWM, but as you call out, it supports overall firm-wide lending activities, and it was a strategic priority for us to extend more lending on behalf of clients across the firm and we try to finance it as efficiently as we possibly can. Glenn Schorr: Okay. Maybe the [ two-second ] follow-up is the net of that is -- I'm going to ask it is the question is just is all the net of that deployment at -- in lending, will that come at ROEs that are in line with your long-term goals? Denis Coleman: So you'll obviously see that the ROE performance for the firm, the ROE performance for Global Banking and Markets, north of 22% in the case of Global Banking and Markets, where a lot of that deployment is happening. So across our portfolio of activities, we are generating very attractive returns on that incremental amount of lending activity. Operator: We'll take our next question from Ebrahim Poonawala with Bank of America. Ebrahim Poonawala: I guess I just wanted to take a step back, a lot happened during the quarter. So David, I appreciate your remarks around the 30-year track record for Goldman and private credit. But if you don't mind, I think there is a sense that private credit is a significant growth driver for Goldman. For our benefit, given just the growth in this asset class, give us a sense of how you see this potentially impacting sponsor activity when it comes to M&A IPO. As we think about the next year, FICC financing has been a big focus with investors around how that growth may slow down. So would love some color around how you think this actually coming home to impacting your growth outlook? And if anything, on credit that you're particularly watching out for? David Solomon: Sure. I mean it's a big picture question, and I could -- I appreciate the question, and I could talk about it for a long time. I think there have been attempts to try to put this in perspective. I know the media headlines have driven an enormous amount of negative sentiment around private credit. My own view is it's important to really distinguish between different markets and really try to put it all in perspective. I think you guys know this that their private credit and the broadest definition you could possibly come up with is about $3.5 trillion of assets. But the thing that's been getting a lot of focus is direct lending and direct lending is about $1.6 trillion to $1.7 trillion of assets, of which the retail channel for that direct lending business is about 20% or about $230 billion of NAV. There are obviously as high redemptions in certain peer managed funds. These peer managed funds have been concentrated in retail outflows as opposed to institutional outflows. And one of the things that we're seeing that's just interesting that's quite constructive for our business is that spreads are becoming more lender friendly. And so when you look at our first quarter 2026 subscriptions in our GS credit BDC, 40% of them were from institutions, many of whom are first-time investors on our platforms, including insurance companies, banks, pension funds. And when you look at our broad platform, it's over 80% institutional partners very, very broad, very, very diverse. And we've been growing it over a long period of time. You obviously saw our positive inflows of what we raised privately in the quarter, we feel we're very well positioned and actually the opportunity set to some degree, is improving. I know people are very focused on the cycle, and they should be. This has been a long period of time ex the COVID shutdown been a long period of time without, what I call, a normal credit cycle, meaning a meaningful slowdown in the economy, or a recession. Whenever you have a meaningful slowdown in the economy or a recession, there are higher loss levels in diversified credit portfolios. I think risk management and portfolio construction are very important in places where people haven't followed their portfolio construction carefully and they've gotten overweighted to a particular sector. They'll obviously have more headwinds. But I don't -- I think one of the things that's really not getting a lot of attention is if you do have a cycle, what does that look like? And so if you take a very tough cycle in the global financial crisis, the cumulative default rates across the entire leverage lending space, the entire leverage lending space during the global financial crisis was 10%, recoveries were about 50%, so the cumulative loss was 5% to 6% against coupons of 9% to 10%. And so that is the business model of this. I think institutional investors understand that. I think there's going to continue to be some noise around the retail space. I think you should watch that carefully. But I think this continues with any sort of medium-term or longer-term view to be a very, very attractive platform for us, and we are very confident that we have significant runway to further scale our business toward our $300 billion target. We've seen significant fundraising across the oil platforms, including this past quarter, $10 billion in credit. And so we're going to continue to grow our institutional business and take a long-term view, but it remains -- I wouldn't say it's a huge growth channel for us, but it's a business that's growing, and we think has good secular construct for a scaled platform like ours. Ebrahim Poonawala: Very comprehensive. If I can -- a quick follow-up. Banks EUs were in D.C. on Friday around concerns around some of the AI-driven risks to banking infrastructure. Anything you can share with us in terms of like is this something extremely different than what banks have had to deal with over the last decade. To the extent you can share any color, I think that would be helpful. And what -- how do you perceive the risk to Goldman Sachs? David Solomon: Yes. So thank you for that. Obviously, something we're focused on. I just -- I want to start by saying that cybersecurity has long been at the core of our business, and we have for a very, very long time for enormous resources forward to think constantly about cybersecurity risk in our business, and it's something we've invested significantly and continue to invest in. And it's been widely reported that the large bank CEOs happened to be in Washington for a regular meeting of the Financial Services Forum and so we were asked to come up with a treasury. By the way, it's not the first meeting that, that group has gone over to treasury to talk about cybersecurity risk over a number of years. So my first point is this is something the industry is focused on. It's something we're focused on, and there's nothing new in that focus. Obviously, the LLM are making rapid progress, and we're hyper-aware of the enhanced capabilities of these new models. With the help of the U.S. government and the model publishers, we are very focused on supplementing our cyber and infrastructure resilience and this is part of our ongoing capabilities that we have been investing in and are accelerating our investment in. We're aware of [indiscernible] and its capabilities. We have the model. We're working closely with Anthropic and all of our security vendors to kind of harness frontier capabilities wherever it's possible, and this will continue to be an important focus, but it's not new that as technology evolves, and we have to continue to upgrade for cyber risk and make sure we're at the forefront of that. Operator: We'll take our next question from Erika Najarian with UBS. L. Erika Penala: David, if you could just unpack a little bit your outlook on the pipeline. I know back in February, we talked about the sponsor community and your thoughts on valuation versus timing. Obviously, a lot has happened more on the negative since then on valuation. But maybe just on top of how your thoughts are relative to timing. I mean, despite the conflict in the Middle East markets near all-time high. So I would love your thoughts on that. David Solomon: Sure. And I appreciate it, and I realize, Erika, as this is getting a lot of attention. And I'd just say, first of all, the environment for investment banking activity continues to be incredibly robust, particularly M&A activity. And I do think, as I talk to CEOs, of course, they're watching what's going on geopolitically. But that's also balanced by the fact that they see an opportunity during this period of time to drive scale and scale creation in businesses with significant technological change, and they are focused on that. And that candidly trumps some of the geopolitical risk is they have the opportunity to do consolidating trades. And you saw that in the first quarter, you saw more large-scale strategic M&A. We highlighted at the end of the first quarter, the high level of our backlog, the highest level in 4 years. And then you saw extraordinary accruals during this quarter in M&A. And you also saw extraordinary replenishment, okay? The backlog really did not move very significantly at all even though we had extraordinary accruals. And so we continue to see significant activity on the M&A front. And I don't see, unless the overall environment got much, much worse. I don't see that slowing based on what we see at the moment. That said, there is no question that with the conflict in the Middle East, IPO activity slowed a little bit, particularly in March. I do think there's a very full pipeline. And at the end of the day, equity markets have been extremely resilient and if that resilience continues, I do think you'll see IPO activity accelerate again. There are some very large IPOs that are lined up, and my expectation is a number of them are going to come because it's important for those businesses and for the capital formation around those businesses for that to happen, and they are also less sensitive to kind of short-term geopolitical trends. I do think that the level of uncertainty is higher, so we have to watch that carefully. Certainly talking actively to CEOs and CEOs are looking carefully at how what's going on, particularly with commodity prices is translating into the economy and into consumer demand. I think it's fair to say that people did not see that really translating through in the first quarter, but that doesn't mean that people aren't extremely cautious about whether or not it will translate through in the second quarter. My guess is to the degree that energy prices remain high, you will see that translate through a little bit. But at this point, the underlying economy still remains relatively robust. But if the resolution of the conflict drags, that probably will be a headwind in some of these areas particularly inflation trends as we get further into the second and the third quarter. And so we'll have to watch that quickly. At the moment, M&A and capital markets have been pretty resilient to that, and the environment continues to be quite constructive. But of course, I don't have a crystal ball. I and also all the market participants are watching and adapting as they see things unfold. L. Erika Penala: And just to follow up, on Ebrahim's line of questioning because I think it's so important for the stock and the stock of your peers. But given everything you said, David, during the financial crisis, the [indiscernible] loss rate in leverage lending was 5% to 6%. You're seeing more lender-friendly threads, no issues in fundraising, especially on the institutional side. It seems that if we do have a regular waste cycle or even just something sector-specific like software in terms of marks, that the ultimate loss to Goldman will be de minimis but the opportunity in terms of spreads and market share could be notable. Is that the correct conclusion? David Solomon: I'm going to make a couple of comments on that and also -- I'm going to ask Denis to make a comment just about historical losses. But I think, Erika, you understand it right. Remember, we're generally dealing with institutions. And one of the things that happened. We had a slowdown in the economy or a recession where credit spreads widened. The business actually for institutional investors, becomes more attractive. And that is a point in time, institutions rely on Goldman Sachs who's been at this for a long, long time to have the judgment to be more cautious on their deployment when spreads are historically tight and more aggressive on deployment when spreads are historically wide. And one of the things that I picked up and talked about a lot over the course of a number of years because we haven't seen it, a lot of the alpha that's generated in credit businesses comes from how the investors manage restructuring and buy in when things are tough, but we haven't had a cycle like that. I do think we all have to recognize that this has been a very long credit cycle and when credit cycles go on longer, market participants, this is a generalization, this is not the way we think about the business, but spreads get tighter, market participants get more aggressive to deploy capital. And so when you do have a cycle turn in a recession, you will see higher losses across the space than you would have had if it was a shorter cycle. And so we have to be cognizant of that. That said, we feel very good about the way we're positioned, very good about our track record, very good about our flows. And to the degree there was a cycle, we'd actually view it as an opportunity for Goldman Sachs. Denis, maybe you want to comment a little bit more on historical loss rates. Denis Coleman: Yes. I mean, Erika, I could add for you another area that we get questions for obvious reasons is across the FICC financing, the asset secured lending portfolio of the firm where a lot of those clientele are in the alternative space. And we have a big diversified business that we've been growing and it's providing part of the ballast to our overall GBM revenues, but if we look back over the course of history on our FICC financing activities, our life-to-date realized losses, if you exclude some direct commercial real estate, life-to-date realized losses are 0. So that's obviously a "nexus" with private credit as a subcomponent of that portfolio and people ask about it a lot. And that may not always be the case. But so far, the way that we underwrite that portfolio, the way we run the stress is, the way that we focus on our collateral protection, our covenant structures or margining capabilities. That portfolio has realized losses of 0. Operator: We'll take our next question from Mike Mayo with Wells Fargo. Michael Mayo: Can you comment on the increase in the provisions in Global Banking markets. It seems like that increase was a lot more than the growth in the balance sheet and that the increase is almost equals what like I guess, like [indiscernible] the increase from last year. So is that -- at some degree is consistent with the growth in the balance sheet. But to what degree are you putting aside extra provisions per problem losses due to macro concerns or things that you're seeing out there? And to what degree maybe you're sending a signal, hey, things might not remain as good. Denis Coleman: Sure. Appreciate that question, Mike, and you actually answered it for yourself, but I'll do it for you back. So the composition of that PCL build was, in part, attributable to growth. So as I went through earlier on the call, we grew lending activities in the first quarter across the firm. That increased lending activity attracts provisions. We also did have impairments, single name impairments across the portfolio, which we have typically, we have those impairments as well, and we have adjustments for the overall operating environment and the outlook. So it was really the combination of those 3 things that come together for that PCL build. I kind of answered it on the previous question, but if there was a question as to whether that PCL relates to private credit somehow or relates to our FICC financing business, the answer is no. It was growth across the various lending streams, at least not from a default or credit impairment perspective, that sort of broader lending growth in the GBM segment. Michael Mayo: And then a separate question to what point -- at what point the investors kind of put their pencils down. It sounds like they're not that people are still trading and engaging and have high activity levels. But do you see a difference between the engagement with corporates as opposed to everybody else in investors and the whole ecosystem. In other words, my question really is our corporate is more engaged and is there some derisking out in investor land? David Solomon: So -- so first, at a high level, Mike, I think people are very engaged, okay, across the franchise. Corporates, investors, very, very engaged. I think it's an interesting moment because there's so much going on in the world of technology and innovation and so much around that space that people are extremely engaged in understanding how that creates opportunities for enterprise, how that shifts investment theses and we're not seeing any decline or pencils down, as you suggested. I will say the corporate world, and I highlighted this before, is incredibly engaged right now because they don't operate in the short-term noise, they operate over the long term. And they believe they have an opportunity to drive scale and consolidation and they haven't had it for a previous administration. And so they're focused on that. I expect that to continue. Obviously, and as I said before, I don't have a crystal ball, if the macro situation gets bumpier for a short-term period of time, that can have short-term effects on investor behavior. But I'd say at this point, people are very actively engaged. And look, we're only a couple of weeks into the quarter, but the quarter has started with very significant engagement across all aspects of the business. Quarter started in a positive way. We'll see. Level of uncertainty is higher. But at the moment, the engagement is pretty high. Operator: We'll take our next question from Steven Chubak with Wolfe Research. Steven Chubak: So I'm going to take this in a slightly different direction. I wanted to ask on the efficiency outlook. You'd indicated some front-loading of infrastructure investments, cloud migration in advance of AI-driven investments that you plan on making? Just given all the investments that you cited in terms of what you're deploying on the platform. How should we think about the trajectory of non-comms. That $5 billion baseline is a little bit higher than what we've seen in recent quarters. And just bigger picture, how that informs the timing for when you can reach that 60% efficiency goal or if it impacts it at all. Denis Coleman: Sure. Thanks, Steve. It's Denis. I'll take that. So obviously, we continue to make progress on the efficiency ratio overall, slight improvement on a year-over-year basis, and we remain laser-focused on driving towards a 60% level. We did have a higher level of non-compensation expenses. But if you pull apart the year-over-year delta, it was rough magnitude, $650 million of the $750 million increase was attributable to transaction-based expenses. And we talked about how we've been growing the overall activity, particularly across equities, particularly in Asia. If you look at some of the [ BC&E ] expenses, if you look at the stamp duty expenses, we have some distribution fees in AWM, there were high levels of client activity that we executed across the quarter and some of that comes with transaction-based expenses. So we remain focused on doing what we can on the unit cost elements of transaction-based expenses. And as in prior years, have dedicated work streams to driving benefit from a unit cost perspective, but the overall volumes which is reflected in the record results for the equity business, obviously came with transaction expenses. As it relates to the overall investment profile, we are continuing to make investments to drive longer-term efficiencies and the more we focus and do work on it, we appreciate that having greater capacity to migrate activities to the cloud and to harness a lot of value from data sense orders for investment now to drive unlock in future periods. So that also features in our thinking. But at the same time, we're looking at other areas where we can reduce expenses. So there's categories of our overall operating expenses, which we're moving down by more than double-digit percentages on a period basis as we look to get more efficient. So there's puts and takes across it, and we remain focused on driving towards a 60% efficiency ratio. Steven Chubak: And for my follow-up, just on the Fed's capital proposal, I was hoping you could provide some at least preliminary guidance on the 3 bigger buckets of proposed changes, whether it's the adjustments to the RWA calculation first. Second, the G-SIB surcharge and the proposed changes there? And then third, how the elimination of double counting could provide some relief going forward? I'm just trying to gauge like how that informs where you're comfortable running on CET1 versus the current ratio of 12.5%. Denis Coleman: Okay, sure. So as David said in his remarks, we're following the reproposals closely. We do expect to comment. We are encouraged by the direction of travel, but we will have comments, and we think there is room for further improvement. Double count is definitely an area of focus for us, particularly as it relates to op risk. We think there's further enhancements that can be made to FRTB and CVA across the proposals. We think GSIB, again, making progress, perhaps not recalibrated as far as it could have been, but making the right directional changes. As it relates to impact on the firm and how we're calibrated, we start the second quarter at 12.5% from a CET1 perspective, 110 basis points of cushion, which basically at the, call it, the wide end or just outside our typical operating range, and we think that's an appropriate level. It gives us capacity to step in and support the types of client activities that we continue to see coming through the franchise gives us capacity to continue returning capital to shareholder. And I would say, finally, based on everything that we see, we think is a prudent place to be as some of those regulatory proposals get refined and finalized. Operator: We'll take our next question from Brennan Hawken with BMO Capital Markets. Brennan Hawken: David, you spoke to strategic activity and how robust it is in banking. Curious to hear your thoughts and what you've been seeing as far as sponsors are concerned. We've heard a great deal in recent years about building pressure for sponsors to sell. And so how big of a setback is the valuation reset and tighter financing markets that cohort? David Solomon: Yes. I mean, Brennan, this is something that continues to get lots of attention. And it's sponsor activity out of the private equity section of sponsors and again, I want to highlight that that's a small universe when you think about overall capital markets activity broadly, that sponsor activity has been slower. I do think it will continue to accelerate. But it's -- when you look at the overall performance, again, I think one of the things we just want to highlight, we've been working very hard for the last 7 or 8 years to really build a larger, much more scale diversified business with more steady streams in it. I think this quarter is a great, great example. There was not -- sponsor activity did not accelerate this quarter the way we might have thought given the way things felt when we had the last earnings call in January. But at the same point, it was the best global banking and markets quarter ever for the firm. And so it was a very, very good quarter, even with weak sponsor activity. It's a big, broad, diversified business. Obviously, there's a tailwind that's coming when sponsor activity turns on. It will turn on. These sponsors do not own the capital, the LPs on the capital. They will have to return it to them. So it's been slower than we'd expect, but the business is big and broad enough and diversified that even with that slower sponsor activity, it's not had a big impact on the overall business. Denis Coleman: The other thing I would add, a lot of those comments relate to monetization and exit activity, which we're very focused on, which ripples through the firm in a variety of places. But at a certain point, you have asset price adjustments in one industry or another, and all of a sudden, it presents opportunities for sponsors to actually redeploy some of the dry powder that they've been husbanding for some period of time. All of a sudden, public to private become back and focused and so while there could be given the uncertainty of the war, some slowdown in IPO type monetization, that doesn't mean that the sophisticated sponsors of the world aren't thinking much like some of the well-capitalized corporates as to whether or not they can't take advantage of some of the dislocation. So there's multiple ways to think about it. Brennan Hawken: Great. And Denis, I'd love to follow up on your comments on FICC financing. Do you have any color on what proportion of your fixed financing exposure is tied to direct lending counterparts? I know it will probably fluctuate within a range, but maybe a rough idea of how to think about the bookends. Denis Coleman: So it really is a question of categorization. So there are underlying sponsors and all managers to whom we extend our FICC financing from like -- we think about it on an underlying asset class perspective because a lot of these bilaterally extended loans are collateralized by an underlying pool of loans to discrete end markets, residential, mortgages, consumer finance assets, private credit assets, private equity assets. So we run capital call facilities. These are all subcomponents of FICC financing and the entire book is well diversified against each of those end asset class pools, and we underwrite the loans on -- with different sort of underwriting and risk parameters based on stresses we see for the various sort of end and asset class. So I don't think it -- first and foremost, we run it on a diversified basis, but it doesn't lend itself to the same kind of sort of portfolio concentration risk, if you have idiosyncratic bilateral structured credit extension, where you have the capacity in each discrete situation to set the protections that you think are appropriate for the underlying risk. Operator: We'll take our next question from Manan Gosalia with Morgan Stanley. Manan Gosalia: I just wanted to follow up on the expense question. The comp ratio on adjusted revenues was down from the usual 33% in the first quarter. I know you typically true up based on the environment at the end of the year. But is the year-on-year change so far being driven by One GS 3.0 and the AI investments you're making? And is it a signal for the direction for the full year? Denis Coleman: Thanks, and welcome to the call. Look, on the comp ratio, we grew our revenue significantly. And we remain, as I said earlier, very, very focused on driving the firm towards a 60% efficiency ratio. So given the uptick in revenue, given our outlook, we did bring the ratio down 100 basis points versus where we had set it in the first quarter last year, but we have a different amount of revenue and a different outlook. We obviously will adjust that as we go through the year based on our expectations for the full year. But currently, that's our best estimate for how we expect to pay. We remain to be -- we remain very much pay for performance. That underpins everything. Talent remains very dear, and we're very focused on attracting and retaining the best talent. That's what's required for us to deliver these results for clients. But we're also focused on operating the firm as efficiently as we can. So 32% is our best estimate balancing those objectives. Manan Gosalia: Great. And can you expand on what drove the weaker [indiscernible] intermediation revenues this quarter? You noted lower rates, mortgage and credit, was that driven by a tougher year-on-year comp? Was it specifically driven by the higher geopolitical risks or is there any specific client behavior that you're seeing that may spill into the rest of this year? Denis Coleman: Sure. Thanks, Manan. So we say many times on this call, we look in particular at components of our FICC portfolio we remain very, very committed to having a leading presence across all of the sub-asset classes and continuing to do that on a global basis. In the last quarter, in the first quarter of this year relative to the first quarter previously, we saw significant increased activity and more strength in the commodities business and more strength in the currency business, but mortgages and rates were lower. That was basically just a function of the overall environment making markets. We have big activities across all of those activities. We remain actively engaged with clients. But our performance in rates and mortgages were relatively lower. Performance in currencies and commodities was relatively stronger. David Solomon: I think it's just also -- I'd just add, Manan, it's also -- a lot of this has to do with expectations that are set in the research community. This FICC performance still has to be put in context, it was the tenth best FICC quarter ever out of 100 and some-odd quarters. And when I look at the scale and the diversity of the business, it's performing very, very well. So we obviously had a very, very strong comp in the first quarter last year. It is 29% better than the last quarter we had in the fourth quarter of the year, but it was close to a top decile sick quarter, certainly the top quartile in quarter. And what you're seeing, if you go back. Again, I want to go back and highlight, we've worked hard to scale the business, make it more diversified. If you go back 15, 20 years ago, we could not have a quarter like this with a quarter where FICC looked a little bit weaker because FICC was such an important component of the business. It's now a much more diversified business. FICC performed well in the quarter. and you look at the overall performance, the overall performance was obviously quite strong. Some quarters, it's going to be stronger here, stronger there. Operator: We'll take our next question from Dan Fannon with Jefferies. Daniel Fannon: In terms of private banking and lending, you talked about some of the moving parts in terms of deposit spreads as well as higher lending balances. So curious about the outlook there? And what is a reasonable goal as you think about penetration of lending within your wealth business? How to think about that in terms of the aggregate opportunity? Denis Coleman: Great. Thanks very much. So look, I think our performance in that piece of AWM is in line with what we've been trying to achieve. So obviously, continue the lending penetration, record balances of $46 billion. I think we still have a long way to go. I think there's a lot more that we can do for clients in that segment, and we are making progress, but it's going to take time to actually meet the -- all of our ambitions for penetrating that segment. We're aggressively offering the capabilities. I think more and more clients are coming to appreciate the value that it adds. So we feel good that we've taken that to record levels. We think there's a lot more to do. And we also remain very committed to growing the deposit balances across the segment. We're also able to do that very, very successfully. There is an impact from the more competitive environment for deposit raising. And we do expect that will persist as a headwind for much of 2026. But we would expect as we move into 2027 will be back growing that segment, high double digits from a sort of durable revenue perspective, our aggregate durable revenues in AWM were up high single digits for this most recent period, but it was a function of sort of more strength on the management fee line and less performance in the private banking and lending line, and we'd expect that to improve towards the end of the year heading into 2027. Daniel Fannon: Great. And as a follow-up, obviously, a strong quarter on fundraising for the alts again. Can you talk specifically about what strategies in credit got you the $10 billion. And as you think about the rest of the year, do you see credit as being as big of a contributor to growth or given some of the headlines and dynamics that likely is to see some moderation? Denis Coleman: So coming out of our strategic update, we obviously gave guidance in terms of the aggregate assets under supervision target that we put out there for 2030 of $750 billion. We put out that annual fundraising target of [ 75 to 100. ] Our platform is highly diversified. So we have success raising across corporate equity strategies, across credit strategies, across real estate across hedge funds, et cetera, et cetera. And within credit we have a variety of different strategies that we can raise on based on level of the capital structure type of risk profile, geographic location of the fund, et cetera. So we have multiple -- sort of multiple pillars that we're focused on continuing to drive the alts fundraising. It can vary from quarter-to-quarter in terms of putting together the full year results. Operator: We'll take our next question from Devin Ryan with Citizens. Devin Ryan: Just another question on artificial intelligence. Obviously, I think investors are going business by business, just trying to understand implications. And so good just to hear how you're thinking about what businesses will be most impacted and just whether AI overall is an accelerant for Goldman Sachs like it has been -- or technology cycles in the past have been? And just how you're thinking about it even broad strokes would be helpful. David Solomon: Yes. Yes. I appreciate the question, Devin. And it's -- I am hugely forward leaning on the power of this technology to accelerate growth and efficiency in Goldman Sachs allow us to more aggressively invest in growth in areas of our business where, for a variety of reasons, over the course of the last 5 years, we've been more constrained than I think we're going to be for the next 5 years. I think this is true not only with Goldman Sachs, I think this is true with lots of other businesses with enterprises broadly, and as enterprises take advantage of that, that spurs activity that feeds in the Goldman Sachs ecosystem. So I do think as in other technology supercycle, this is extraordinarily constructive for Goldman Sachs. It's one of the reasons why when I think about firm over the next 3 to 5 years, and I think about the growth trajectory of the firm that we're driving for, I can't -- I don't have a crystal ball to predict short-term uncertainty and short-term volatility, but I have a high degree of confidence. When I look out over 3 to 5 years as to how we can continue to grow the firm, serve our clients more broadly accelerate our investment in areas of business where we see real opportunities to grow. And then I'd point to one like private wealth, for example, where we see still very, very significant opportunities given the nature of our private wealth franchise to growth. It will not be a straight line whenever you have acceleration in new technology, there are going to be bumps and there are going to be risk issues and there are going to be recalibrations. I'm sure we'll see that in the coming years as it scales. But the power of the its technology, the ability to use it in an enterprise to remake processes, to create efficiencies and also create more capacity to invest in growth. I can't find a CEO that's not talking about that and all of that with a medium-term lens when you get out of the short-term moment in noise is incredibly constructive for Goldman Sachs. Devin Ryan: Okay. A quick follow-up, Denis, just on Asia and the success you've been having there. You obviously really positive progression over time here. So just the gap that you talked about that you're closing, where are you in that? Is there still opportunity to accelerate? Or if you kind of close that gap with the big step-up that you had this quarter? Denis Coleman: So we think we've made progress, but we are constantly reassessing each and every region of the world and each subproduct line gap that we think we may have relative to the potential. There were constraints on the aggregate quantum and type of resources that we could deploy to accelerate those activities, given some of the changes in capital rules, we moved quickly to do that for clients in the first quarter, and you can see it coming through in the results. I would expect versus what we're looking at, we would have closed the gap, but I do expect there's still a lot more for us to do. So I think good progress but more to do across Asia. Operator: We'll take our next question from Matt O'Connor with Deutsche Bank. Matthew O'Connor: I want to follow up on AWM, the long-term flows. You showed on Slide 6, just really good balance between the 3 channels. But I wanted to kind of dig into what's tracking a little bit better than what you laid out last quarter. I think you were targeting about 5% flows. We've got 3 quarters in a row of about 7%, a little boost from the deal this quarter. But just overall, it seems like it's tracking better than that target you had and wondering what the drivers of that are? Denis Coleman: Sure. So we -- that was one of the new targets that we put out in the strategic update just to both focus your attention on the overall quality of our wealth business and frankly, focus our people internally on that target as well. It is an annual target. We do have a 5% [indiscernible] annual target. First quarter delivered 9%. So you're right, we're quite significantly ahead of the target in one quarter, but that could ebb and flow from one quarter to the next. But I would say we're -- to David's comments on sort of just thinking about overall levels of engagement across the firm. That's not confined to traditional realm of investment banking or even FICC and equities. There's strong levels of engagement across our Asset and Wealth Management business, and we're seeing good support across the wealth channel, happens to be well ahead of target for this quarter. but we'll be continuing to focus on driving it as high as we possibly can over the balance of the year. Matthew O'Connor: And then any early benefits from those 3 deals and partnerships that you've announced the last few months, [indiscernible], Industry and Innovator, I think Innovator just closed. So -- but any early benefits from those? And how should we think about the opportunity maybe going forward? David Solomon: Yes. We feel very, very good. We obviously disclosed Innovator in the last week. We feel very, very good about the partnership and the 3 deals -- and the 2 deals, excuse me. And we're integrating the teams. The teams are very excited and very focused on being here. I think the cool thing we mentioned in the script about Innovator is it immediately positions us as 1 of the top 10 active ETF providers. And the obviously, in the active ETF space continues to be very, very good secular growth. I think with what's going on in technology, the strengthening of our positioning around the venture community through industry ventures. We're seeing enormous synergies in the business. And by the way, synergies in the wealth business do out of that platform coming on board. But look, this is new, and I don't want to overstate it, but we feel very, very good about the decisions we've made on both the partnership with T. Rowe and the 2 acquisitions, and we'll report as we have more substantive things to tell you. Operator: We'll take our next question from Gerard Cassidy with RBC Capital Markets. Gerard Cassidy: Denis, you touched on in your comments about your CET1 ratio that you folks have used the capital to grow the businesses across the firm and you specifically highlighted acquisition financing. Obviously, as David pointed out, you guys are the leader in M&A advice. Can you share with us the November changes to the leverage ratios that the regulators did away with, has that helped you guys become more competitive in acquisition financing? And second, how much of the acquisition financing do you try to keep on your books? Or do you try to syndicate it out to participants? Denis Coleman: Sure. I appreciate those questions, Gerard. So what goes hand in glove with the uptick in strategic activity that David has been discussing and with a particular focus on the corporate sector is that a lot of those transactions require large-scale capital commitments. That's really what I'm referencing with respect to acquisition financing. Yes, the changes in the capital regulations give us more flexibility to deploy into that but they're also a timing element. So in the same way that you can have an announced M&A transact, you can report on announced volumes, you don't recognize revenue until that M&A transaction closes. If you take on risk in an acquisition finance book and you have that exposure on your books, you need to set aside the appropriate amount of capital, but you won't be recognizing revenue necessarily until the transaction funds or closes. So there are timing mismatches or things to be aware of with respect to those items. As it relates to acquisition financing, our general philosophy is to facilitate the transaction to underwrite and distribute the paper into long-term holders of that loan or bond instrument. We do retain some exposures to clients or as part of an overall relationship banking philosophy. And from time to time, we can hold other exposures as well, but the general base case assumptions that we underwrite to distribute for most of the acquisition financing activity. Gerard Cassidy: Very good. And then to follow up on your comments that you made about the PCL. You obviously identified the 3 areas of what drove the PCL on a year-over-year basis, loan growth, the single name impairments and then the operating environment. Can you give us more color on the single name impairments, what types of credits were impaired? And then just from a technical standpoint, do the impairments go through the net charge-off line? Or is it through another line on the P&L? Denis Coleman: Thank you, Gerard, for your question. The growth piece is across the board. The impairment piece is actually several very small sort of names. I don't think it's particularly thematic. And then we have a sort of a general. We look at the overall operating environment, and we want to make sure we have calibrated the appropriate amount -- the appropriate amount of reserves given the environment that we see. Operator: We'll take our next question from Chris McGratty with KBW. Christopher McGratty: I want to go back to the change in the CET1 180 basis points linked quarter. Certainly, I understand buybacks a piece a bit, but I was wondering if you could unpack or elaborate just a little bit more on the RWA growth by product, anything unusual in the quarter, the $85 billion or so. Obviously, I appreciate trading assets can move around. But I'm just trying to fully understand the capital message relative to the 12.5% that you're at right now? Denis Coleman: Sure. Believe it or not, I use words, but all those words calibrate to numbers. So the drivers of the CET1 delta of 180 is related to buybacks. And on RWA, it resides with the biggest buckets are growth in prime financing, acquisition financing and then market risk RWAs. Those are the 3 big buckets on the RWA side and then add on to it the record level of return of capital to shareholders, and that's what explains the quarterly delta in CET1. Devin Ryan: Okay. And the 12.5%, roughly 100 basis points is a reasonable buffer? Denis Coleman: It's 110 right now, and we think that, that's a reasonable buffer that gives us flexibility along each of the 3 principal vectors that I identified, more client activity, more return of capital to shareholders and appropriate flexibility regardless of how the current proposed regulatory rules pan out. Operator: We'll take our next question from Saul Martinez with HSBC. Saul Martinez: I wanted to go back to the equity results and the strength there and ask a question that I expect you guys are tired of answering, but the durability of that, what is durable versus what is extraordinary. Your equity financing revenue, $2.7 billion this quarter, that's more than double what it was in the first quarter of '24. And the intermediation income is also well above what it was even 5 years ago, 6 years ago, 2021 in the initial phases of the pandemic. But in balance sheets are expanding. You mentioned investor engagement remains robust. But is there a way -- how do you think about the risk here to this level of revenues? What is extraordinary versus what is durable? And I guess, a different way of asking maybe what kind of environment would be needed to see a reduction, lower results? And what kind of environment would be needed to see sustaining these results and even growing from here, albeit with much more tough -- much more difficult comps. So I know a lot in there, but just the whole question of durability versus what's extraordinary, what your thoughts are there? Denis Coleman: Sure. I appreciate it. I think there's a couple of underlying drivers. So if you take -- the way you frame your question, take a multiyear trend market caps around the world are expanding, equity trading activity and the participation by a broad range of our clients has been expanding. We have had a concerted effort to improve our market share position with leading clients across both FICC and equities. And we have been consistently fueling some of those activities with balance sheet and capital commitments to support those client activities. It's jumping off the page given some of the most recent increases, which again, are a function of stepping up some of the capital deployment to support that activity. and then the certain subsegments of the world that are very, very attractive. So you have a slight shift in the mix profile. So those are all the factors that are driving those activity levels consistently higher. The flip side is also possible where you see significant drawdowns or much less active environment, clients were looking for a lot less by way of equity financing from us, then those activity levels would reverse. But despite all of the various types of volatility we've seen over the last quarter and the last number of years where markets go up and markets go down and clients lever up and clients lever down, there still is a tremendous amount of demand from clients for us to step in and support them with financing, and we work very, very hard to both support clients but also be disciplined and thoughtful about how and to whom we extend what types of financing so we can continue to also deliver attractive returns to shareholders. Saul Martinez: Okay. That's helpful. Maybe just a quick follow-up then on the question of FICC results this quarter, obviously, some softness in rates and mortgages. It sounds like this is more of a more generalizable about -- related to the market backdrop as opposed to anything Goldman specific? Is that right? And I did notice that bars and rates did go up quite a bit. It was an area of softness just any color there as to whether there's a reason for that divergence that is notable? Denis Coleman: Sure. So you're right, borrowing up across rates, borrowing up across commodities. VAR, as you know, is a calculation that has a rolling 30-day contributor based on volatility and volatility across rates and commodities in the first quarter went up, and that is what mathematically drives the change in the VAR ratio. Operator: Thank you. We'll go next to Mike Mayo with Wells Fargo. Michael Mayo: Just a follow-up on the sponsor activity. And what percent is the sponsor activity of your investment banking activity? I know you said it still hasn't come back and that's potential upside in the future, but is it like 10% or 20% or historical 33%. Where is that right now? David Solomon: Yes. I don't -- it's not a number we've disclosed, Mike, but obviously, in an environment where we posted an M&A quarter like the M&A quarter that we posted, it's a smaller percentage, a meaningfully smaller percentage. I'm not suggesting that it's not a meaningful business for the firm, but it's not a number that we've specifically disclosed and I would say it moves around based on activity levels and based on what's going on. But again, I come back to a point, sponsor is important. It's a huge client base. We do a lot with sponsors. By the way, we did a lot with sponsors this quarter, but it is a big diverse business. And you look at the overall performance, we can have one sector be weaker than we would have liked and still have very strong performance. And so this is an example where we had very strong banking performance with a weaker sponsor performance than I might have thought 3 months ago, but it didn't affect the overall strength of the banking performance. Michael Mayo: And to be fair, you've talked about sponsors for a few years. Look, your mergers are there, you're #1, we get it, but you've talked about sponsors for a few years and you had another CEO talk about over 10,000 large companies that remain private, even with record high stock markets. So why is that? David Solomon: Why do they remain private? Michael Mayo: Yes. David Solomon: Yes. I mean, look, I mean, a couple of things. And first of all, Mike, I think one of the things that's just interesting to put it in perspective, is when we're talking about sponsors in this context, I think you're talking about private equity. And so remember, sponsors do a lot of things. They do infrastructure, they do real estate. They do credit. I mean it's a bigger thing. But if we look at -- they do growth equity, when you look at private equity, the rough enterprise value, meaning equity and debt of all the private equity-owned companies is like $4 trillion. So it's less than one in video. So let's just start there when we're talking about capital and capital flows to put that in some perspective. I think one of the reasons why the private equity firms have been slower to monetize is the economic incentives that are set up, given the optionality to [ wait ]. And we had a dynamic where values and private equity portfolios got marked up meaningfully in 2020 and 2021 because of that cycle and making no comments on where they're marked it raised expectations around monetization and people are waiting. And by the way, as the economy grows, the world grows, a lot of these businesses do grow into those valuations. And the way the incentive system works, they really -- really the only optionality LPs have to put pressure on GPs is to not participate in the next month. And so I do think there's some pressure that's mounting. I do think you'll see more activity, but at the end of the day, they've been a little -- they've been slower and they've been taking that optionality. Now that said, I think a lot of activity will come over time. We're very well positioned for it. And again, I just want to when you look at this whole ecosystem and how things are working, it's a pretty constructive investment banking ecosystem at the moment. Obviously, if the sponsors in private equity turned on, it would be even more constructive for us. But it's pretty constructive at the moment as we look at it. Operator: Thank you. Ladies and gentlemen, that will conclude our question-and-answer session and also concludes the Goldman Sachs First Quarter 2026 Earnings Conference Call. Thank you for your participation. You may now disconnect.
Operator: Good afternoon, and welcome to Infleqtion's Full Year 2025 Financial Results and Business Update Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference call over to Marcus Kupferschmidt, Head of Investor Relations and Strategic Finance. Please go ahead. Marcus Kupferschmidt: Good afternoon, and welcome to Infleqtion's Full Year 2025 Fiscal Results and Business Update Conference Call. Thank you for joining us today. My name is Marcus Kupferschmidt, Head of Investor Relations and Strategic Finance. Before we begin, I would like to remind you that this conference call may include forward-looking statements. These statements are subject to various risks, uncertainties and assumptions that could cause actual results to differ materially. These factors are detailed in our Form 8-K and other filings with the SEC, which are available on our website at ir.infleqtion.com. We undertake no obligation to revise or update any forward-looking statements, except as required by law. During today's call, we will also reference certain non-GAAP financial measures. We use these measures because we believe they provide additional insight into the underlying operating performance of the business. This non-GAAP financial information should not be considered in isolation or as a substitute for GAAP results. Reconciliations between GAAP and non-GAAP measures can be found in today's press release and in our SEC filings. Joining me today are Matt Kinsella, our Chief Executive Officer; Ilan Hart, our Chief Financial Officer; and Pranav Gokhale, our Chief Technology Officer and General Manager of our Quantum Computing business. Following our prepared remarks, we will open the call for questions. As a reminder, a replay of this call will be posted on our IR website, along with our Form 8-K and presentation materials. And with that, I'll turn the call over to Matt Kinsella, our Chief Executive Officer. Matthew Kinsella: Thank you, Marcus, and good afternoon, everyone. Thanks very much for joining us for Infleqtion's first business update as a public company. We appreciate your time today and your interest in Infleqtion. We're excited to work with all of you over the coming years and hopefully, decades to continue building a deeper understanding of Infleqtion, our platform and the opportunity ahead. Today, we'll have a slightly different agenda than a typical earnings call. Since we're new to the public markets, I think it will be beneficial to spend a little time describing Infleqtion's strategy, our technology and our business model. So with that in mind, we'll spend maybe the first 15 minutes or so giving an overview of Infleqtion and then we'll move to a walk-through of our 2025 financials. Then we'll provide 2026 guidance and open it up for questions. One quick public service announcement. For those who did not join our March 11 inaugural Analyst Day, I'd highly recommend you watch it and use it as a resource going forward. A recording can be found in the Investors section of our website. So with that said, Infleqtion is a quantum technology company with a very differentiated approach. From day 1, we have been building a broad platform across computing, sensing and timing, all tied together with software. This approach is possible because our underlying quantum modality, neutral atoms, is highly flexible. Everything we do is done at room temperature, allowing us to build a range of products that can be deployed in real-world settings. We have followed a tried and true strategy of commercialization and market adoption by pointing this powerful neutral atom core at markets like timekeeping and sensing, where we have true quantum advantage today, monetizing there and all the while building towards the crown jewel, fault-tolerant gate-based quantum computing with true commercial advantage. In many ways, we're following in the footsteps of NVIDIA. Just like they pointed their core GPU at the gaming, the crypto mining markets, the physics markets while building towards their crown jewel of large language models and AI, we're pointing our powerful neutral atom core at near-term markets like timekeeping and sensing while building toward fault-tolerant quantum computing. And excitingly, neutral atoms are leading the way on most of the metrics that matter to get to commercially useful quantum computers and the time lines are shrinking. Critical to our strategy is that the underlying components, the physics, photonics, engineering and software are all the same across our products. That gives us a highly leveraged and efficient operating model. It truly is a platform. The Infleqtion advantage starts with our technology and our team. We're the first mover in this Nobel Prize winning neutral atom technology with our founder, Dana Anderson, helping to pioneer it at CU Boulder over the last 40 years. We also have a world-class Quantum team across 4 countries with more than 160 PhD physicists and engineers, over 235 patents issued and pending, hundreds of customers, hundreds of sensors and cores deployed in the field and several quantum computers sold and deployed. There is a lot to like about neutral atoms. They offer a differentiated and compelling combination of advantages. I'd like to say that atoms are nature's perfect qubits. They're inherently identical. They operate at room temperature, and they deliver long coherence times, precise control and native all-to-all connectivity with a clear and credible path to Sqale. Importantly, atoms are not just exceptional qubits. They're also nature's perfect sensors and nature's perfect clocks. That dual capability is fundamental to our strategy. As highlighted on the bottom row, we believe neutral atoms are the only commercially viable modality that can address both quantum computing and the broad sensing market, full stop. What that means in practice is we can build a single scalable platform that serves both computing and sensing applications. That platform leverage drives a more efficient capital model, faster iteration across products and a broader set of end markets from the same core technology. We believe that combination of platform leverage, capital efficiency and multi-market applicability is what makes neutral atoms not just scientifically compelling, but commercially advantaged. At the center of everything we do is a single neutral atom quantum core powered by lasers that underpins both our computing and sensing products. That matters because we're not building separate systems for separate markets. We're building one scalable platform that can address multiple large adjacent opportunities. In quantum computing, the goal is clear: unlock capabilities beyond classical systems, solving problems that CPUs and GPUs simply cannot. Based on estimates from McKinsey, this is a $130 billion market by 2040. And Pranav will go deeper on computing, but the key point is that this is not just a better product, it's an entirely new paradigm. On the sensing side, the model is more straightforward. It's largely a replacement cycle. We're delivering step function improvements in precision and resilience, in many cases, 10 to 1,000x better than existing systems. And that enables us to address real urgent needs today from GPS denied navigation to contested RF environments across defense, commercial and space. McKinsey estimates the sensing market at $30 billion by 2040. But given the performance delta and the replacement dynamic, we believe the opportunity could be meaningfully larger. So stepping back, I want you to remember one core underlying technology platform, multiple large markets. Now let's get down to the product level. Our platform gives us powerful leverage. One neutral atom foundation and one software layer support multiple technologies across computing and sensing with products tailored to use cases from timing and radio frequency to inertial sensing and quantum computing. Together, this allows us to deliver orders of magnitude improvement where classical systems fall short while giving customers a path to start with one capability and expand to others over time. Importantly, there is a high degree of integration across all our products. The core operating functions of our sensing system directly inform and support our computing road map, creating meaningful technical and development synergies across our product suite. We covered this all in detail at our Analyst Day for those interested in going deeper. Logical qubits are the key to the kingdom in quantum computing and the clearest measure of the industry's path to quantum advantage. They are what move the industry towards reliable, scalable systems that can solve commercially meaningful problems. No one on the planet publicly demonstrated logical qubits until 2023. Infleqtion delivered 2 logical qubits in 2024, 12 logical qubits in 2025. We are on track to deliver 30 in 2026 and 100 in 2028. For those of you new to Quantum, the CTO portion of our March Analyst Day provides a very succinct overview of logical qubits. While logical qubits remain our key milestone in computing, our sensing business is already demonstrating the real-world advantages of Quantum today. Our quantum sensing technologies are finding product market fit across a range of use cases, especially in environments where classical infrastructure is vulnerable, unavailable or has reached its performance limits. What Quantum brings to these applications is a step change in precision. And in many of these environments, better precision translates directly into better performance, better resilience and better outcomes. Across timing, quantum RF and inertial sensing, we are seeing demand in mission-critical environments where precision and resilience matter most. We recently announced a game-changing partnership with Safran, a global leader in timing, navigation and defense technology with the availability of a quantum-enabled precision timing solution that integrates our Tiqker optical atomic clock with Safran's White Rabbit and Secure Sync systems. We believe this is the first partnership of its kind anywhere, combining Quantum precision with proven mission-critical timing infrastructure in a deployable offering. That's an important proof point that our sensing platform is technically differentiated and increasingly in demand. Customer and partner validation are among the strongest signals of progress in the business. We have already delivered and sold 2 quantum computers, including the first system installed and operational at the U.K. National Quantum Computing Center and a 500-qubit system delivered in Japan to the Institute for Molecular Science. We are also expanding through partnerships such as our work with the Illinois Quantum and Microelectronics Park. We continue to expand our footprint in space and government programs with our technology operating on the International Space Station since 2018 and NASA selecting Infleqtion to develop the Quantum Core for the Quantum Gravity Gradiometer or QGG Pathfinder mission. We believe the breadth and scope of these field deployments are a substantial competitive advantage and that our proven ability to deploy systems in real-world environments is becoming an increasingly important differentiator as the market accelerates across a wide range of use cases. Infleqtion is the only quantum company to bring a single quantum platform to operate across sea, sky, land and space. Our Cold Atom sensor technology is already on the International Space Station and the next Cold Atom lab upgrade is on its way there this week. We are also seeing that platform extend in the maritime environment, including our recent Royal Navy Excalibur trial, where ticker was deployed on an underwater autonomous vehicle to support GPS-free navigation. So with that broader platform context complete, I'd like to turn this over to our Chief Technology Officer and General Manager of our Quantum Computing business, Pranav Gokhale, to share an update on our quantum computing platform. Pranav Gokhale: Thanks, Matt. We made strong computing progress in 2025 in the first few months of 2026, and we remain on track toward our key milestone of 100 logical qubits in 2028. We are very proud of the milestones we published, record commercial neutral atom gate fidelity, the first-ever material science application powered by logical qubits is the world's first execution of shores algorithm for decryption using logical qubits, which helps inform enterprise on the urgency of transition to quantum-safe encryption. Our work reflects the deep technical progress required to turn fault-tolerant quantum computing from aspiration into demonstrated capability. The recent attention generated across our field only reinforces why we are investing so deeply in this work. In March, we took our prior 12 logical qubit work to the next level of sophistication by executing a biomarker discovery application on our Sqale quantum computer for our Wellcome Leap Q4Bio customer. Importantly, this work highlights the hybrid interplay between GPU and QPU, where the GPU can serve as a training engine for new AI models and the QPU can serve as the inference engine, much as we are seeing specialized training and inference chips emerge in [ classical ] AI. We were also pleased to be featured at NVIDIA's GTC conference last month, where NVIDIA's booth showcased Infleqtion Sqale quantum computing hardware and our approach to hybrid quantum flexible computing using NVQLink. Within our software team, we are gaining experience in bolstering market credibility through customer engagements across both quantum and classical domains with important use cases, including AI for sensor data fusion and RF spectrum awareness. Our IP portfolio continues to grow, including new proprietary methods that translate into differentiated system performance. Our March 2026 paper on dual species gates demonstrates one example of that work. More broadly, these advances are helping us improve system performance and move towards faster time to solution for end customers. We do not think about quantum in isolation. We see a broad horizon of computing use cases, and we prioritize hybrid workflows where CPUs, GPUs and QPUs work together to overcome bottlenecks in run time and energy for important applications. CPUs and GPUs have already transformed what is possible in computing, and we believe QPUs can extend that curve by unlocking classes of problems that classical systems cannot solve efficiently alone. This is especially important in areas like chemistry, materials and security, where hybrid architectures can open up important new classes of applications. As you may have seen in the news recently, the potential of quantum computing in areas like security and decryption continues to advance as qubit requirements keep coming down. More broadly, we believe the entire field is pulling in the time line for important applications, and that is another example of how hybrid quantum possible architectures can expand what is computationally powerful and possible over time. One such application area is artificial intelligence. While AI is a revolutionary technology, it is also exposing the limits of current compute. We see bottlenecks in memory, in the quality of training data and in the ability of today's models to fully capture physical dynamics. We believe Quantum can help address these gaps at multiple levels through quantum-inspired techniques that can improve workflows today, quantum sensors that can generate higher quality training data and ultimately, QPUs that can enable new classes of physically accurate applications. Let me now turn to our quantum computing road map, which we first introduced in early 2024. We delivered 2 logical qubits in 2024 and 12 logical qubits in 2025 ahead of schedule. We remain on track to deliver 30 logical qubits in 2026 and 100 logical qubits in 2028. We believe 100 logical qubits is the point at which Quantum begins to unlock transformative applications in areas like material science and AI. We do not believe the Quantum Advantage path is hardware alone. We believe it requires hardware, software codesign, and this is where Superstaq comes in. Superstaq helps customers unlock value across CPUs, GPUs and QPUs while enabling us to deliver value today as we build toward long-term Quantum Advantage. Our computing platform is already reaching customers through deployed systems and cloud access. That includes operational deployments in the U.K. and Japan, a planned 50-plus logical qubit system with the Illinois Quantum and Microelectronics Park and broader access to Sqale through Superstaq and CUDA-Q. Infleqtion is delivering value today while building towards fault-tolerant quantum applications. We expect the first of those applications to emerge in material science around the end of the decade and then broaden into other high-value computational domains. Let me share a strong example of how our hybrid and quantum-inspired work is already being applied to real customer problems. For the U.S. Army, we are working on a program called SAPIENT or Secure AI for position, navigation and timing focused on resilient edge AI navigation and timing in adversarial environments. We are seeing a real increase in GPS denial across both civilian and military environments, making resilient P&T much more important. The key point is that insights from our quantum computing work can already be applied on edge GPU platforms today, delivering strong performance in GPS denied environments. With that, I will now turn this back to Matt. Matthew Kinsella: Thanks, Pranav. A recent example that brings together the breadth of our platform is Golden Dome, where Infleqtion was selected as one of only a few quantum technology companies eligible to compete for work under the Missile Defense Agency's SHIELD program. SHIELD is an IDIQ for an indefinite delivery indefinite quantity contract vehicle with targeted spend up to $151 billion. Our proposed solution reflects multiple parts of our platform applied to a mission-critical defense problem, including ticker for enhanced radar capabilities, distributed timing in GPS-denied environments and extreme precision in synchronization across the entire system. QRF for hypersonic threat detection and contextual machine learning and quantum computing for predictive threat tracking and decision-making. In a Golden Dome-style missile defense architecture, picosecond level synchronization is critical because distributed sensing and fire control nodes must calculate the speed and trajectory of hypersonic threats with extreme precision to support coordinated detection, tracking and intercept decision, and that is not something legacy timing solutions can reliably provide. We believe this highlights the growing applicability of Quantum technologies to mission-critical national security threats. Space remains a particularly important market for us and a major area of growth. Infleqtion has partnered with NASA for over a decade and first put our Quantum technology in space on the ISS back in 2018. That deep foundation and history helped lead to our selection by NASA's Jet Propulsion Lab to develop the Quantum core for the Quantum Gravity Gradiometer Pathfinder mission. This mission will place the world's first quantum gravity sensor in space to measure changes in earth's gravitational field with high precision, allowing for the detection of important activity on or below the earth surface. More broadly, we see space as a particularly strong application area for quantum sensing and mission-critical infrastructure. The U.K. is emerging as one of the most important quantum markets globally with a commitment of up to GBP 2 billion. We discussed our history in the U.K. at length at our Analyst Day. But to recap, we have been in the U.K. for more than a decade, winning and delivering contracts across sensing and computing. We believe that track record positions Infleqtion well in the U.K. as we continue to grow our presence in Oxford and support the country's long-term quantum ambitions. On the computing side, the U.K.'s ProQure initiative is intended to support large-scale quantum computer deployment in the early 2030s. On the sensing side, the U.K. has committed more than GBP 400 million to sensing, navigation and enabling capabilities. Taken together, we believe this positions Infleqtion well across 2 of the U.K.'s highest priority quantum domains, quantum computing and quantum sensing. Now putting my former investor hat on, I tend to evaluate technology companies through 3 lenses: technology, execution and capital. We believe today's presentation has shown both the strength of our technology and our ability to execute. And on the financing side, 2 months ago, we listed on the New York Stock Exchange and raised $515 million in net proceeds with virtually no redemptions. We believe that result reflected strong confidence from the investment community. We also recognize that confidence comes with great responsibility. We intend to be disciplined in how we deploy capital to maintain a high degree of financial control and bring rigor to commercialization through clear metrics, operating cadence and an ROI-driven mindset. Across the business, our core platform is already gaining traction in multiple markets. We are one of the few companies in the industry with quantum computing, sensing and software capabilities, all built on a deeply integrated and capital-efficient neutral atom platform. Now before I turn it over to Ilan to flesh out 2025 financials in detail, I'm going to touch on 2025 at a high level. 2025 was a pivotal year for Infleqtion, and we strengthened the business materially. We won important new programs, expanded key customer and partner relationships, reduced operating loss, improved operating cash performance and strengthened the balance sheet. We exited 2025 in a strong position operationally and financially even before our transition to a public company in early 2026. Revenue in 2025 was $32.5 million, driven by new program awards and growing customer demand. Importantly, all of our revenue was organic and generated by our Quantum business. We secured several important new contracts, including NASA's QGG Pathfinder program and ARPA-E's first contract for power grid optimization through quantum computing, while beginning to fulfill the Department of War procurement contract for precise timing. We continue to expand relationships with strategic partners such as NVIDIA, SAIC and Safran. With that, I'll turn it over to Ilan to take you through the 2025 financials in more detail. Ilan Hart: Thanks, Matt, and good afternoon, everyone. I will now walk you through highlights of our GAAP and non-GAAP results for 2025 compared with 2024. As Matt noted, we delivered revenue of $32.5 million in 2025, 100% organic and entirely from Quantum. Our business continues to be anchored by national security use cases. Approximately 70% of 2025 revenue came from U.S., [ 30% ] from the U.K., 11% from APAC and 4% for the rest of the world. Year-over-year performance was driven by strong execution across key U.S. programs. Looking ahead, you should expect some variability in our geographic revenue mix from year-to-year as the number, size and timing of program wins continue to evolve across geographies. Our GAAP loss from operations narrowed to $35.3 million in 2025 compared with $53 million in 2024. On a non-GAAP basis, operating loss improved to $28.1 million in 2025 compared with $35.7 million in 2024. Our 2025 non-GAAP results exclude stock-based compensation of $3.1 million and a onetime noncash accrual of $4.1 million related to contingent payout from a 2024 acquisition. Our 2024 non-GAAP results exclude stock-based compensation of $3.7 million and a onetime impairment of assets and goodwill of $13.5 million. The improvement in non-GAAP operating loss reflects higher revenue and improved operating leverage. Cash burn was approximately $36 million in 2025. Net cash used in operating activity was $24.1 million in 2025 compared with $32.5 million in 2024, representing an improvement of $8.4 million year-over-year. Capital expenditure in 2025 remained relatively modest at a few million dollars. We continue to expense R&D as incurred with no capitalization of R&D or development costs. We exited 2025 with $63 million of cash and cash equivalents and no debt. Including net proceeds from the February 2026 financing, we have a pro forma cash balance in excess of $550 million. Looking to 2026, we expect a modest increase in cash burn from 2025 levels as market signals give us more confidence to invest ahead of accelerating market momentum. We're deploying capital selectively and strategically across R&D and go-to-market with clear return thresholds and specific objectives, partially offset by higher net interest income. Even with this step-up in spending, our cash burn remained low relative to peers. I will now turn the call back to Matt. Matthew Kinsella: Thanks, Ilan. And with that, let's turn to guidance. For 2026, we are guiding to revenue of approximately $40 million. That outlook reflects continued momentum across the business, building on the programs and partnerships we established in 2025. And as Pranav noted earlier, we remain on track to deliver 30 logical qubits in 2026. We view that milestone as an important indicator of our technical progress. Infleqtion is entering 2026 as a stronger company with a differentiated platform across computing and sensing, growing customer traction and a much deeper capital base to support execution. And with that, we will open up the line for questions. Operator: [Operator Instructions] Our first question comes from the line of Tyler Anderson with Craig-Hallum. Tyler Perry Anderson: First and foremost, I was wondering what is the first thing that a quantum computing IT person asks you when you're having issues with your quantum computer? Matthew Kinsella: Oh boy, I don't know, Tyler, what is it? Tyler Perry Anderson: Have you tried turning it off and on at the same time. Back to the real questions. So within the sales guidance for 2026, how should we think about the balance between products and service revenues and the gross margin either from that perspective or an overall for 2026? Matthew Kinsella: The way I would take that, Tyler, is I wouldn't focus too much on the product versus services split. That's really more of an accounting standard. I don't really look at the business that way. And so I think -- and there's all sorts of intricacies on how you classify one thing versus the other. So I would just think of it as revenue going forward. I'm not trying to punt the question. It is actually how I think about the business. And I wouldn't say there's much gross margin differential between the way those 2 things are classified. So I would think about you're looking at our historical gross margins and probably think about them in the ballpark like going forward. Ilan, do you add anything to that? Ilan Hart: Yes. All I can say, thanks, Matt, is that if you think about our long-term business model, you think about it, we believe that it's really best-in-class semiconductor gross margin. That's what you need to think about long term. But as mentioned in the short term, it's going to be based on historical gross margins. Tyler Perry Anderson: Okay. And then is there any cadence to this revenue or seasonality? Ilan Hart: I would say that it's more about -- in our business is how we win contracts with both government and commercial. And you might see some variability quarter-over-quarter, but we don't have the seasonality like a traditional semiconductor business at this point. Matthew Kinsella: Yes, I wouldn't think about too much seasonality. I think relatively even across quarters, Tyler. Operator: Our next question comes from the line of Jesse Sobelson with BTIG. Jesse Sobelson: Just following up on this $40 million guide here. I know you just mentioned not splitting between services and products. But maybe could we ask how much is expected from the sensing business versus computing or potentially how much comes from software versus hardware? Matthew Kinsella: I can give you a couple of nuggets to maybe help you think about that one. And historically, call it, 2/3 of our revenue has come from sensing, 1/3 from computing roughly. And I'd anticipate it to look probably reasonably similar to that going forward with some pretty wide error bars, especially around computing because those can be lumpy when you land a computing sale. And so I think for the near term, though, you should think about it being roughly in that range with computing sometimes flexing up to more depending on if we sold a quantum computer or multiple quantum computers. As we get closer and closer to commercial advantage with computing, I believe you'll see the mix shift to compute being the majority and possibly the super majority. Jesse Sobelson: Okay. Great. A quick follow-up here, maybe not so quick. But what do you make of the recent [indiscernible] work suggesting lower resource requirements for breaking ECC and potentially a faster path for arriving at [ CUDA ]. Does this -- have you seen this change how customers are thinking about the urgency of adopting quantum computing and migrating to a post-quantum encryption protocol? Matthew Kinsella: Pranav, why don't you take a crack and I've got a couple of thoughts, too. Pranav Gokhale: Sure. We are excited about these developments. We think they reinforce the promise of neutral atoms. I'd say this from personal background to having done a lot of my PhD work in superconducting qubits and now having shifted into neutral atom qubits. We celebrate Google doing in many ways the same, and we feel very strong and committed about the pathway for neutral atoms. With Shor's algorithm for decryption in particular, we put out a paper in September 2025, which is under review for publication right now. And it shows the first ever demonstration of Shor's algorithm with logical qubits. So we have been raising the alarm bell that there is urgency of migration that this technology is coming very fast. And we've been working with enterprise to make sure that they're prepared for this migration to post-quantum cryptography. So there's a with the Shor's algorithm piece, I think there's a changing evolution of how fast it's approaching, and it is one-to-one connected with the progress of neutral atom quantum computing in our view. Matthew Kinsella: And the only thing I'd add is just -- I've said this before, but looking back on when I first invested in Infleqtion and comparing that to today, and that was back in 2018, it's just been astounding the progress that neutral atoms have made on the quantum computing front. And I think [indiscernible] Starting to work in neutral atoms and the [indiscernible] paper being on neutral atoms as well are 2 proof points to that. And then I'll just reiterate what Pranav said that we showcased Shor's algorithm on logical qubits last year, and the number of logical qubits needed to crack Shor's algorithm are just getting -- or to run Shor's algorithm are getting smaller and smaller and smaller. And if you look back a couple of years ago, it was without millions of logical qubits, so it's come down by orders of magnitude. So [ CUDA ] is getting closer. Operator: Our next question comes from the line of Antoine Legault with Wedbush Securities. Antoine Legault: Ilan, clearly on your presentation earlier, much lower cash burn than peers. Is there an opportunity to maybe step up R&D spend or sales and marketing, particularly now that you're a public company? Maybe tell us a bit more about your disciplined approach to OpEx? Or maybe put differently, are you able to do more with less? Ilan Hart: So as we mentioned earlier, both in the Analyst Day in our remarks, we are -- intend to increase our investment modestly this year and really look at the momentum in the market. So yes, we are going to continue to invest in R&D and CapEx in those areas where it's going to advance our technology and give us competitive advantage. So that's been our philosophy. We continue to be disciplined with some clear KPIs, but we do intend to increase our cash burn this year. Matthew Kinsella: And Antoine, what I'd add to that is just the biggest takeaway is we're not going to make any decisions without really running the numbers to make sure we see a great return on those investments. And it is highly possible we'll see that be the case. And so we've left the investment somewhat nonspecific for a reason because we might see those opportunities to invest more aggressively. But at the highest level, R&D is going to drive both our creation of high-quality logical qubits on the computing side and then also the shrinking and costing down of our sensing products to get them out into the field in greater numbers, and we'll be very focused on doing both of those things. We do have inherent advantages. The neutral atom modality is just capital efficient to begin with because we're working with atoms. They're given to us effectively for free for the nature. But we understand that investment is going to drive our forward progress. So -- but we will be disciplined as we make those decisions. Antoine Legault: Understood. And last one for me. I know Matt, you've talked about sort of an upcoming radar upgrade cycle. The recent geopolitical events accelerated any of those discussions that you might have been having with customers? Or are you seeing kind of an increase in interest for your products? Matthew Kinsella: So the way I would answer that question is the events of -- from the geopolitical perspective have definitely increased the awareness of a need for Quantum's capabilities as it relates to those types of equipment like radar. And a great example is traditional radar emits a signal. And so therefore, it can be detected. If you were utilizing Quantum RF, it could be receiving signals without emitting and therefore, not be detected. And so there's already been a lot of conversations going on about this, Antoine. And so I do think it's raised things and accelerated them a bit. But honestly, like we've been having these conversations for a long time about this type of stuff. Pranav, would you add anything to that? Pranav Gokhale: No, I think that covered it. Operator: Our next question comes from the line of Atif Malik with Citi. Atif Malik: Just have a question on the customer pipeline. If you can talk about the mix of that pipeline between compute and sensing. And also if there is some sort of a point that you can give on the annual conversion of that $300 million-plus customer pipeline you talked about at your Investor Day, given the mix of several government and university multiyear contracts. Matthew Kinsella: Ilan, do you want to take a crack? Ilan Hart: Yes. So I would say, as Matt mentioned before, we expect the majority of our revenue and booking to come from sensing, at least this year. Matt mentioned 2/3, 1/3 that continue to be the trend. And that's until we reach the point that Pranav mentioned in 2028 when we reach 100 [indiscernible] logical qubits, that's the point that you'll start to see a significant shift toward compute revenue versus sensing. So that's how you think about our business between the next 2, 3 years between sensing and compute. Matthew Kinsella: And then if I just try to isolate that into the pipeline, I'd say the pipeline probably is actually maybe even a little more skewed to compute only because they are very large numbers. The compute sale could be tens and tens of millions of dollars. And so to the extent that there's some of those in the pipeline, that does skew to compute. But I still think it's in that -- it's roughly in the 2/3, 1/3 bucket. So the pipeline roughly tracks our bookings and revenue as well. And then in terms of conversion, there's all sorts of lengths of contracts in that pipeline. And so it's hard to really infer like what the conversion rate of that pipeline would be or how that would matriculate from bookings to revenue. Operator: Our next question comes from the line of Troy Jensen with Cantor Fitzgerald. Troy Jensen: Congrats on all the momentum and success here recently. Pranav, for you, can you talk about the fidelity level of the 12 qubits and the 30 that you'll be introducing this year? Pranav Gokhale: Yes, sure. So in our previous demonstration of 12 logical qubits, which we put out into paper in September of 2025, we showed that the logical performance, the logical fidelity for state preparation was significantly improved by a multiple over the underlying physical fidelity. So we're already at a point on this iceberg code, it's called where we're getting better logical than physical performance. It is our desire to get the same out of 30 logical qubits this year. And we recently showed a block post about 2 weeks back that again showed 12 logical qubits, but as they referenced during this call in a more sophisticated fashion. And one of the really neat things there is that our logical qubit and [ codings ] are capable of running circuits much, much more efficiently than our physical qubits can. So whenever we're talking about logical qubits, we are referring to significant suppression of the logical error rate with respect to the physical rate. And as I'm sure you'll appreciate, that is critical to actually getting useful customer performance for logical qubit systems. Troy Jensen: Yes. Yes, exactly. And then how about your physical to logical ratio now and where you think it could be a couple of years out? Pranav Gokhale: Great. This is one of the beautiful benefits of neutral atom quantum computing. We see a path where even with known architectures, there's 24:1 ratios of physical qubits to logical qubits, and that would belong in something called a quantum memory hierarchy. There's recent work, which we and others have been pioneering using a software package that we released recently called QLDPC, which shows the pathway to even as few as 3 to 4 to 5 physical qubits per logical qubit. And this is all possible because our neutral atom systems feature all-to-all connectivity and the ability to bias our errors in a direction that is easily fixable -- getting a little [indiscernible] here, but it's called a [indiscernible] and it's one of the approaches that we can further reduce the ratio between physical qubits to logical qubits. Just going back to one of the previous questions on Shor's algorithm. This is why the resource requirements for a lot of quantum applications have come down dramatically in the last couple of years, and we expect the same to happen for other applications like material science, like chemistry, like AI. Operator: Our next question comes from the line of Peter Peng with JPMorgan. Peter Peng: Just on KPIs, what are some of the metrics that you guys want us to focus on that things are on track? I think from a technical side, whether it be logical qubits, gate performance and so forth or customer counts. Maybe just help us think about what are some of the key KPIs we should be focused on. Matthew Kinsella: Sure, Peter. I would focus you on really just on 2. I think you should focus in on our ability to execute against our guidance from a revenue perspective, and that should show you that we can run a tight ship and that the opportunity is real to monetize on the sensing side of things. And then to us, the metric that matters the most that really encompasses all the other metrics that are out there for quantum computing is logical qubits. So I would just keep you focused on that one. There's a number of other things that are going on below the surface, whether it's physical qubits or the quality of those qubits to Troy's question, but I think the logical qubits is really the number that encompasses. It brings it all into one metric. So those are the 2, I'd keep you focused on. Peter Peng: Got it. Okay. And then just on thinking about longer-term revenue trajectory. I think 2028 sounds like it's going to be a pretty big Infleqtion point for you guys with the 100 logical qubits and then you're really scaling 2030. Maybe talk about some of the TAM that you can unlock with these new systems? And how should we think about either market share or revenue trajectory as you unlock these new markets? Matthew Kinsella: So at the highest level, the way I think about the opportunity from a TAM perspective is we have really an upgrade cycle that we can run on the sensing side of the business. And so we can create clocks, we can create RF antenna and we can create inertial sensors that can do things that classical versions of those types of products just can't do. So truly 10 to 1,000x improvement in performance. And so there's good data out there about the market sizes for those types of traditional technologies. But then you also are creating brand-new markets by having the ability to have better than GPS precision timing locally. So I think take that for what it's worth and how you're trying to build the market opportunity for sensing. On computing, it's a little harder to predict because in many ways, we're blazing new trails and creating new brand-new compute paradigms. But the markets will start knocking down once we get to commercial advantage in computing are first, the material science world, so helping people build new materials by combining molecules together in a much, much faster iteration cycle and then the drug discovery world and then ultimately, new capabilities will be unlocked. And those are absolutely massive markets. And in many ways, I feel like the quantum industry does itself a disservice by using terms like material science because it sounds nichey. But in reality, it's some absolutely massive percentage of GDP. It's truly anything we build. So absolutely massive markets to unlock. And then between now and then on compute, there is a great opportunity to continue to sell compute systems into the market, even though they're not yet commercially useful. And so you're right, after we get to commercial usefulness in 2028, I think we'll see that compute opportunity grow exponentially. Operator: Our next question comes from the line of Troy Jensen with Cantor Fitzgerald. Troy Jensen: I dropped off there, but I did have a follow-up. I want to get in for Matt. Is the Golden Dome comments, I guess, to my knowledge, I didn't think the administration had really flushed out their plans for Golden Dome. So can you just dive into what you were mentioning on Golden Dome a little bit? Matthew Kinsella: Sure. So what they've done is they've funded an IDIQ, an indefinite quantity, indefinite delivery contract vehicle, which is a very flexible way for the government to deploy capital. And so it's a much more quick and efficient way to get the system up and running. And they've already started to host events to get the word out as to what it is they're looking for. And then they're starting to let approved vendors into this IDIQ, which is called SHIELD, and I forget what that acronym stands for. So they're moving actually at quite a rapid pace to start to attempt to deploy this, and it will be multiple years in the making, and they won't be deploying the $151 billion all at once. But I've actually been pretty surprised at how rapidly they started to put the infrastructure in place, meaning the contract vehicles, the dollars to start to actually deploy this type of technology. And what we know at the highest level is it will be a system that will cover the nation that will be a number of sensors that have to be integrated together from a timing perspective so they can communicate with each other. And then really, ultimately, the goal is to intercept incoming threats and take them out as fast as possible. So they have been moving more rapidly than I would have thought, honestly, Troy. Operator: Our next question comes from the line of Jesse Sobelson with BTIG. Jesse you seem to be still muted on your end. Jesse Sobelson: Guys to jump back in the queue here. I just had 2 follow-ups. It's clear that the industry is moving on from focusing on physical qubit count and shifting towards more of a logical qubits and application level performance analysis. How do you think about the trade-off of investing R&D and scaling the qubit count with your platform versus improving error rates? Matthew Kinsella: Pranav? Pranav Gokhale: One of the great things about this climate error correction technology is that it allows us to trade quality with quantity. So for instance, if we have a lot of qubits, we can use those to virtualize a small amount of very, very high-quality qubits or medium amount, et cetera. So in general, where we've seen across modalities, the bottleneck so far has been on quantity. It's generally accepted that one needs a few thousand as many as 100,000 physical qubits to get to sufficient logical qubits. If we have 99.99% physical fidelities, the number of physical qubits that we need is less. But it's quite easy on neutral atoms to Sqale two thousands of physical qubits. So I guess the direct answer to your question is that our preferred path is to focus now that we have good enough qubit fidelity to focus on the quantity. And we have right now the commercial neutral atom record for a number of qubits, 1,600. And we have a lot of conviction that we're going to keep getting into the multiple thousands of physical qubits, that gives us a very natural path to suppress our error rates to very, very low levels so we can run applications without needing to perfect every bit of physics to get to higher fidelities. And then the last thing I'll add is because we can have a certain tolerance always for errors, that creates a path that's quite unique for us to get to eventually field deploying our quantum computers, not today our first order priority, but there is a world where we would want to take our quantum computers to real field deployed settings the same way our clock used to live on a dinner table size device. Now it has been put on SUVs, shipped to data centers, it's subject to vibrations, et cetera. So prioritizing quantity over quality for our next development path enables us to expand these market domains. Matthew Kinsella: Said another way, we're at the quality levels where you can actually start to solve quality from a logical qubit perspective with quantity. Operator: That concludes the Q&A session. I would like to pass the call back over to Matt for any closing remarks. Matthew Kinsella: Thank you, everybody, for joining the call, and thanks so much for all the great questions and for everyone's continued interest in Infleqtion. As I said at the beginning, I'm really excited to work with all of you over the coming years, and I really do appreciate your partnership. 2025 was an important year for the company. We strengthened the business, we advanced the platform, and we enter 2026 with great momentum and a strong capital base. As we said before, we remain committed to disciplined investment, customer and program expansion and continued technical leadership across computing, sensing and software. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you, everyone, for your participation.
Operator: Thank you for standing by. At this time, I would like to welcome everyone to the iQSTEL Investor Conference call to discuss Q4 2025 and full year 2025 financial results. [Operator Instructions] I would now like to turn the conference over to Ethan Walfish, Head of Investor Relations. Sir, the floor is yours. Ethan Walfish: Good morning, and thank you for joining iQSTEL's Fourth Quarter and Full Year 2025 Earnings Call. Joining me today, I'm pleased to have Leandro Iglesias, Chief Executive Officer; and Alvaro Cardona, Chief Financial Officer. The recording of today's call will be archived and available in the Investor Relations portion of our website for a minimum of 30 days. During the call, we will make forward-looking statements such as dialogue regarding our revenue expectations or forecast for remaining quarters in the full fiscal year of 2026 and 2027. These statements are based on our current expectations and information available as of today and are subject to a variety of risks, uncertainties and assumptions. Actual results may differ materially as a result of various risk factors that have been described in our periodic filings with the SEC. As a result, we caution you against placing undue reliance on these forward-looking statements. We assume no obligation to update any forward-looking statements as a result of new information or future events, except as required by law. In addition, other risks are more fully described in iQSTEL's public filings with the U.S. Securities and Exchange Commission, which can be reviewed at www.sec.gov. Yesterday, April 6, 2026, the company filed with the SEC its Form 10-K for Q4 and full year 2025 and afterwards issued a press release announcing those financial results. So participants of this call who may not have already done so may wish to look at those documents as we provide a summary of the results on this call. With that, I will now turn the call over to our CEO, Leandro Iglesias. Leandro Iglesias: Thank you very much, Ethan. Thank you. Let's talk a little bit about the strategic overview of the company. And 2025 has been a year of strong execution and continued growth for iQSTEL. We have successfully expanded our global business platform, reaching approximately $316.9 million in revenue, representing 11.9% year-over-year growth while strengthening our equity position by 37%. But more importantly than the numbers, we have built a high scalable global commercial platform. Today, iQSTEL reached over 600 of the largest telecom operators worldwide, has access to approximately 2.3 billion end users through our customers, operates across 21 countries and multiple regions. This is not that just a telecom operation, this is a global distribution platform. Over the past year, we have grown from tens of million dollars in revenue to a current $400 million run rate revenue, building the foundation for the next phase of our company. We are entering nowadays in the new stage of the company that we name the transition of the company. This transition phase has the first phase was about building the platform and scaling the revenue. And the second phase where we are today is about expanding the EBITDA and profitability. Our core businesses, Telecom and FinTech are already generating over $2.7 million adjusted EBITDA, providing the strength of our model. Now also operating with clean capital structure with no convertible notes and no warrants. This gives us a very solid foundation to grow efficiently and create shareholder value. From an operational perspective, we continue to improve both scale and efficiency. SMS traffic increased from 13.9 billion to 17.4 billion messages, representing 25.18% growth, reinforcing our focus on higher-margin services. At the same time, gross margin improved significantly, increasing 26.28% from 2.74% to 3.46%, driven by a better service mix, increased focus on higher margin segments, and operational efficiency improvements. Additionally, our company routing and platform consolidation strategy are contributing directly to margin expansion. I want to take a moment to emphasize what we believe is the most important asset of our company is our business platform. We already have trusted relationships with global telecom partners, a proven B2B sales engine and a global footprint. This allows us to deploy new service globally, scale quickly without heavy investment and increase revenue per customers. And this is what makes iQSTEL unique. This margin growth strategy, we are leveraging this platform to introduce high-tech, high-margin services, including artificial intelligence, cybersecurity, digital health. These services share key characteristics. All of them have recurring revenue models, higher margin and strong scalability. And most importantly, they can deploy through our existing customer base. We don't need to build a distribution channel. We already have it. We are particularly excited about our entry into the digital health market. This is a multibillion-dollar global opportunity driven by aging populations, rising health care costs and the shift toward remote care. By leveraging our telecom platform, we believe that we can become in a key distribution channel for digital health services globally. Even under conservative assumptions, including penetration of less than 1% of our reachable base of 2.3 billion users, this represents a multibillion-dollar revenue opportunity over time. And this is a very important step in our transformation into a high-tech platform company. We will provide more details on this vertical in the near future. Looking forward, our strategy remains clear: achieve $1 billion in revenue within the next 24 months, expand EBITDA through higher margin services and continue strengthening our balance sheet. We believe that we are in a very strong position to execute this plan. In summary, we have built the platform. Now we're expanding the margins, and we are entering in a new high-growth vertical. We believe that this combination creates a very compelling opportunity for a long-term shareholders and value creation. Thank you. Alvaro Cardona: Thank you, Leandro. From a financial perspective, we are pleased with our performance during 2025. For 2025, iQSTEL delivered another year of scale expansion and margin improvement, driven by disciplined execution across all business lines. Revenue reached $316 million, up 12% year-over-year with iQSTEL contributing 39% of total revenue and validating our acquisition strategy with immediate material impact. Our gross margin increased 14%, raising to $9.46 million, supported by the shift toward higher-margin SMS and fintech revenue as well as routing efficiencies across the group. SMS volume surged 25%, reinforcing this margin trajectory and positioning us for continued expansion. Telecom remains a profitable engine, generating $1.9 million in operating income, while Fintech delivered $27.9 million in its first full year, an important diversification milestone that strengthens our revenue mix and reduces dependency on legacy voice. We closed the year with positive working capital of $1.56 million, a stable liquidity position, better operational controls across subsidiaries. Integration synergies from iQSTEL and GlobeTopper are already flowing through P&L, and we expect additional leverage as we scale artificial intelligence commercialization. Our financial posture is clear. We are growing, we are expanding margins. We are building a more diversified, higher quality revenue base. The foundation is in place for continued acceleration. We remain focused on operational discipline, efficiency and profitability. Operator: Thank you, Alvaro. And with that, we are now ready to take questions. [Operator Instructions] Your first question comes from Barry Sine with Litchfield Hills Research. Barry Sine: A couple of questions, if you don't mind. First of all, a very exciting announcement on digital health care, and I'm looking forward to the additional details, but a couple of questions on that. So if I think about that market, obviously, a huge market. One opportunity is obviously telemedicine, although you do need to have -- still have a human licensed doctor on the other end. You talked in your announcement about data over IoT devices for health care monitoring and also predictive technology. Could you give us a little more and I guess you're going to roll out more information at the telecom conference in May in Washington. Could you give us a little more information on what you're looking to do, what those services are likely to entail? Will they be telemedicine? What are you looking to do in health care? Leandro Iglesias: Thank you very much for being here and asking this question. Well, listen, we are really excited about this opportunity. We are in the process to adding value to our current business relations that we have with the largest telecommunications companies around the world. And basically, one of the things that we identified is that all of them went for -- are needing services for the aging people in order to supervise the information, the detail signals of the aging people where they are, if they sleep in the floor or something. And in that sense, today, we issued a press release because we reached an MOU with a Taiwan company that is providing not only the technology, they provide the devices for all the aging people that basically they are entering in gathering the information using the telecom networks and the offering to the end users in the telecom and the mobile users to using like a watch or another devices, gather information about all the vital information and gather this information into an AI platform and analyze the situation and call to emergencies or asking for supervising and this kind of services is that we are going to offer. At this point, we reached an agreement already an agreement with this company. We are working on the products and services, and we are planning to launch them in 40 days in the International Telecom weeks in Washington. And our idea is to offer to our customers a solution for -- they can offer to the end users and taking advantage that we have built these relations that our customers trust in us and we are going to offer something very valuable for the end users that is collecting data and monitoring the health of the aging people. So that's the strategy that we are following. At this point, we are working in the portfolio of products that we are going to launch and preparing all the marketing materials, but we are really excited about this opportunity, Barry. Alvaro Cardona: Let me add something about this, Barry. Remember, we have 600 interconnection agreement with the biggest mobile and telecom operators around the world. They serve 2.3 billion end users. So just imagine the huge opportunity that we have here by providing our customers, the telecom operators, the opportunity to pass through their end users these kind of services and devices. This is where the opportunity lies. Barry Sine: Okay. That's very helpful. I wanted to also ask a question. If we look at the results that you've just reported, and I haven't read the 10-K yet seen the 10-K yet, and that will have a lot more detail. But over the last couple of years, you've done a number of acquisitions. I don't know if my number is right, but I count 9 major acquisitions. And you still -- when we talk, they were different software platforms. You were looking to, first of all, get everything onto an integrated voice platform, then you were going to do SMS next. If you could give us a sense of where we are on that integration process, what are the financial impacts? Are there still margin improvements to come in 2026 and future as a result of that integration? Is it all done? And then also on those prior acquisitions, you have a lot of acquisitions where you initially bought 51%, but you have the rights to go up to 49%. Where are we on that process? And particularly the one I'm really interested, obviously, is Qxtel. So if you could talk a little bit about that, please. Leandro Iglesias: Sure, Barry. But, this is not a question. This is like 3 questions. Probably, we are going to try to address all of them. Ethan, our first -- let's start talking about the minority interest acquisition that we are in the process to perform. In some of the companies that we acquired at 51%, we have been working with them in the process to complete the acquisition of the minority interest because our vision is to create one single big corporation with all the services in order to reduce the technical and technological platform costs, reduce the executive payroll, increase the synergies, maximize the opportunities between the different markets and different traffic that we have in the switch. So this is something that we are in the process, and we are going to execute this plan this year. Our idea is to close those acquisitions, and we have the goal to take the control about the 100% the companies that are going to represent the 95% of our revenue and the 95% of our EBITDA and net income and cash. So it is something that is going to happen this year. And this is something that is very valuable to us in order to gather all of our operations and create the maximum synergies possible. But at the same time, we have been working on getting one single platform for all the subsidiaries. At this point today, we have 3 full subsidiaries running in the same platform that is Qxtel, Etelix and Swisslink. They are running in full in the whole business for the voice, and we are moving the SMS business to this year. That's the plan. So we are going to have like 95% of the revenue and the EBITDA in one single platform, too. So our idea is clear, is to create a corporation having everything in one platform and increase the synergies and reduce the cost. The initial impact that we have [indiscernible] for having all the companies in one single platform is in 2 avenues. The first avenue is in cost reductions about the technological side. And the second avenue is about the synergies that you are going to create and having this seamless management through the different companies and interconnections and all the things. Listen, we have been doing this process for almost a year. We started in 2025. And this process has been a complex process. Remember that when we say that we have 600 high-value interconnections with the largest telecommunications companies around the world, we are talking about technical interconnections, security standpoint, commercial standpoint, agreements standpoint. So to move everything to one single platform is something that we started. And listen, we don't want to miss anything of the opportunities in this process, and this has to be done seamless in order for our customers and our vendors and our employees, too. So at this point, the plan is having the 100% of the companies for the 95% and 95% of the revenue and the EBIT and the net income and the 95% of the revenue is going to be in one single platform. And we are in this process. And I'm giving you a number that is our expectations, I believe that Alvaro could break down this number, but we think that we are going to save around $500,000, $0.5 million per year just in savings and cost reductions for having everything in one single platform. I don't know, Alvaro, if you can give more details about all this strategy. Alvaro Cardona: Sure. Barry, there is a figure that you will see in the 10-K that is the intercompany revenue has showed in a couple of tables in the 10-K. And that number went from $22 million in 2024 to $41 million in 2025. So we almost doubled the business that is being done among all our subsidiaries. That means in practical sense that, for example, Ethan if he sending traffic to Swisslink or Qxtel or Whisl or Smartbiz, taking advantage of better cost termination and better quality. So that's a clear example of how we are managing the synergies among all our subsidiaries. That is also impacting our gross margin percentage that increased 26% from 2024 to 2025. So synergies are there. We are proving our business model is working and as Leandro mentioned, we are just in the first phase. Now we are implementing a reduction in operational costs, administrative costs. We are finalizing the integration in just one switching platform for all subsidiaries or most of them. So I think the numbers are ready and are already impacting our financial results. Barry Sine: Okay. That's very helpful. My next question, you have recently publicly laid out a road map for acquisitions in 2026. And Leandro, I know that in the past, almost all of your acquisitions, maybe all of them, have been of companies where you've been in the business for many decades and you've made a lot of relationships. And most of the acquisitions in the past have been companies that were run by people that you've known and worked with for many, many years. Is that still the model? And then the acquisitions that you laid out for this year, are you still leveraging that? And then how many more of these do you have in your back pocket that you could pull the trigger on companies where you know the CEO, you work with them and you could grow the company through acquisition? Leandro Iglesias: Thank you, Barry. You put me in a tough situation tearing this to the -- let me try to say -- answer this without saying something that I cannot say. Well, listen, the path of our company is clear. We have the intention to acquire a couple of companies, and we have the goal to reach the $50 million EBITDA run rate for this year. So to do that, we have 2 acquisitions in the radar. One has been already negotiated. We are entering in the purchase agreement, but it's something that we are going to do this year that is going to be a new thing for the shareholder is when we are going to send a proxy to the shareholders explaining all the economical behind this acquisition to get the approval from them. That's the first thing. But each of them is going to add around $5 million to $6 million EBITDA. And in both cases, we are talking about 3 to 4 years payment terms, contingency to results. So it's something that is not going to put pressure in our cash flow and it's going to be very manageable for us, those acquisitions. And in one of the companies is the same case, Barry is people that I have been working with them for 10, 15 years. And the other is a company that we has been introduced by one of our subsidiaries and has a very, very strong value because it's going to add like 8 countries in penetration or something, and we are really excited about this process. But listen, the new here in this process is that we are going to file this to the -- in a proxy and asking the -- explaining to the shareholders that what is going to be the decision and what the economical is going to be with this acquisition, and they are going to vote about this. And we are on track on this. Listen, we have like the current business that we have, we are in the process to having all the business move to one single platform, the minority interest acquisition and third one complete those acquisitions with this. And listen, the big picture of this is that this picture is going to be that we are going to have present around 30 countries around the world, and we are going to have like 50 to 700 largest interconnections and business relations with the largest telecom companies around the world. And we are really excited about this, all this process and everything. But listen, we have been working like in telecommunications, adding fintech services. At the same time, we have a lot of products and services with AI that we have launched and we start to generate the traction, the commercial traction for them because we want to be perceived by the market like a high-tech telecommunications company, and we are adding AI services over our current services. But more than this, in this event in Washington, we are going to launch our cybersecurity solutions for the telecom industry because we have [indiscernible] company that is Cycurion that we are going to use their platform to sell to our customers to. And in addition, we are going to launch our digital health services, too. So we are in this process of growth, creating new verticals and taking advantage of the business relations that we have. If I have to say something summarizing like a pitch elevator about our company, our company is way more than a telecommunication and technology company. Our company is a very sophisticated business distribution channel around all the largest telecommunications companies around the world that we have been building these relations for years, selling millions of dollars, they trust in us. And this is the right time to take advantage of those B2B relations with the top executives on those companies and start offering, high services and high technological services and high value, high margins. And we are like in this point that the company is going to start to generate new revenue streams with high margin, and we are really excited about all this process. In addition, of course, of the things that I said about the acquisitions and growing our current business and improving the platform, everything. We are in this turning point for the company, for the growing and the things that we are going to be because we have something very vulnerable. Listen, you have maybe you try to build all those relations and maybe you need years and invest millions of dollars to try to build those relations. And this is the business relations that we have is the real value of our company nowadays and it's going to be -- right now, the management is working to take advantage of this and explore it. Alvaro, I don't know if you want to add anything at this point? Alvaro Cardona: No, I think you summarized it very well. Barry Sine: And one more question, if you don't mind, Leandro, you just mentioned that you're looking to have a presence in 30 countries. One of those countries, Venezuela is obviously very important to the company as well as to the executives personally, and we've seen some very positive changes recently in Venezuela. Do you see opportunities as a result of the changes that are happening in Venezuela that you can -- that iQSTEL can take advantage of? Leandro Iglesias: Sure. Well, listen, when we were talking about 30 countries, we are thinking in 8, 9 countries in other continents in different than America. But Venezuela is a particular case because Alvaro and I were born in Venezuela even though I moved from Venezuela 12 years ago, I have been living in other countries in Spain. So because Spain is like the center of our operation because we have operations in 21 countries and it's strategically for the operation. But talking about Venezuela, at this point, we are exploring things and we have been evaluating to start to exploring what are going to be the participation of iQSTEL could have in Venezuela nowadays. To be completely honest, all the meetings that we have had, they see that being a NASDAQ U.S. company or the current political trend that Venezuela has is a strength to be completely honest. And but listen, we want to -- whatever we are going to do in Venezuela is something related with technology and high technological services, high-margin services. And we want to be sure that it's going to be a solid step whatever we are going to do. But of course, Barry, to be completely straightforward, we are evaluating this, but we haven't start with this -- bring this to the Board of Directors, yes, because we want to have the whole plan development before to start moving ahead. It's just a nothing that we are evaluating so far. I don't know, Alvaro, because this is part of the things that you are leaving that you can say, Alvaro please. Alvaro Cardona: We are keeping an eye on the situation and how it's been developing. Of course, we have direct contact with CEOs and the C levels in the telecom operators in Venezuela. We used to do business with them, with all of them in the past. And of course, the opportunity is there, and we are going to take advantage of our knowledge of the market and our connections. And of course, if that bring value to our business, we are going to do it for sure. Operator: [Operator Instructions] That concludes our question-and-answer session. I would now like to turn the conference back over to Leandro Iglesias, President and CEO, for any further remarks. Leandro Iglesias: Thank you. I truly believe I want to say something to take away of this call. And we are in the process to improve the communications with our shareholders and creating value for our shareholders. We added a professional IR firm to improve the communication. And we are going to start to giving these earnings calls on a quarterly basis with the intention to having the opportunity to all the shareholders asking us about the company and everything. And we are going to be keeping working on this path. But listen, and to take away of this call, I want to say something. We have been developing this great company that we have, creating 600 business relation with the largest telecommunications companies around the world, and we have the 2.3 billion of end users to reach through them. And more than this, I want that you see iQSTEL more than a telecommunication company that is entering in fintech and in other technologies. iQSTEL like a general powerful distribution channel to the largest telecommunications companies around the world to offer them high-tech, high-margin services. Listen, we already have in the company think that maybe you need years and millions of dollars to invest to create those relations and maybe you cannot make it, and we already have in the company. And we are right now in the process to taking advantage of all those relations, improving value-added services and high technology services to our customers, and we are really excited. And we are pretty sure that sooner than later, the market is going to understand that the real value of our company is not just the revenue and all the things that we have. Commercial business platform that we have at this distribution channel, and we are really excited about the launch of cybersecurity in 40 days and the launch of digital health services because in the case of digital health services, and we issued a press release today about this, just using conservative projection, it's a multibillion business opportunity for us. And we are in this point where the company is going to turn in the corner and start growing the business in a very fantastic way. And over the next months, you are going to see the transformation where the company is nowadays, where the company is going to be becoming in a $1 billion revenue company, and we are really excited because of the moment that we are living nowadays. Alvaro, do you want to add anything? Alvaro Cardona: So basically, say thank you to all the people that joined the call. We are very pleased with your presence here. And we are working hard to continue doing business every day for the good of our shareholders. And basically, thank you for your support and for looking after our company. Goodbye, everybody. Leandro Iglesias: Goodbye, and thank you very much for supporting and attending to this earnings call. Thank you. Operator: This concludes today's call. Thank you so much for attending. You may now disconnect, and have a wonderful rest of your day.
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