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Operator: Good day, ladies and gentlemen, and welcome to the Levi Strauss & Co. First Quarter Fiscal 2026 Earnings Conference Call for the period ending March 1, 2026. [Operator Instructions] This conference call is being recorded and may not be reproduced in whole or in part without written permission from the company. This conference call is being broadcast over the Internet and a replay of the webcast will be accessible for 1 quarter on the company's website, levistrauss.com. I would now like to turn the call over to Aida Orphan, Vice President of Investor Relations at Levi Strauss & Co. Aida Orphan: Thank you for joining us on the call today to discuss the results for our first quarter of fiscal 2026. Joining me on today's call are Michelle Gass, our President and CEO; and Harmit Singh, our Chief Financial and Growth Officer. We'd like to remind you that we will be making forward-looking statements based on current expectations, and those statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in our reports filed with the SEC. We assume no obligation to update any of these forward-looking statements. Additionally, during this call, we will discuss certain non-GAAP financial measures, which are not intended to be a substitute for our GAAP results. Definitions of these measures and reconciliations to their most comparable GAAP measures are included in our earnings release available on the IR section of our website, investors.levistrauss.com. Please note that Michelle and Harmit will be referencing organic net revenues or constant currency numbers, unless otherwise noted, and the information provided is based on continuing operations. Finally, this call is being webcast on our IR website, and a replay of this call will be available on the website shortly. Today's call is scheduled for 1 hour, so please limit yourself to 1 question at a time to allow others to have their questions addressed. And now I'd like to turn the call over to Michelle. Michelle Gass: Thank you, and welcome, everyone, to today's call. I'm pleased to share that 2026 is off to a strong start. In Q1, we exceeded expectations across the top and bottom line, driven by every region and channel, underscoring the continued momentum of our strategies. As we've highlighted over the past few years, the strategic choices we have made to narrow our focus and maximize the potential of the Levi's brand are enabling us to pursue our highest return growth opportunities. We are becoming a more DTC-first denim lifestyle company, and it is leading to more consistent and faster growth, a much larger addressable market and higher profitability. Today, we're operating from a stronger foundation. We're executing with intention, and we have more ways to win than ever before. Before I turn to our Q1 results, I want to briefly note a leadership update. Earlier today, we announced that after a planned transition, Harmit will retire following 13 years with LS&Co. Harmit has been an exceptional partner and leader playing a central role in strengthening our financial foundation as we've accelerated growth, expanded margins and evolved into a more diversified direct-to-consumer business. The disciplined systems and high-caliber finance organization he built have positioned us well for long-term success. We've initiated a comprehensive search for our next CFO with the support of a leading executive search firm, and Harmit will continue to serve in his role until a successor is appointed. He will remain for a planned transition as an adviser to ensure continuity. Given the strength of our leadership team and the momentum in the business, we are confident in a seamless transition and remain firmly focused on executing our strategy and delivering sustainable profitable growth. Let's now turn to the details of the quarter. As a reminder, all numbers Harmit and I will reference are on an organic basis. We generated another quarter of high single-digit organic net revenue growth, up 9% and up 14% on a reported basis. We delivered double-digit top line growth in both Europe and Asia, and 7% growth in the Americas. We drove 10% growth in the DTC channel with comp sales up 7%, reflecting strong underlying demand. Our wholesale channel exceeded expectations, delivering 8% growth, fueled by strength across segments. Growth in women's continued to accelerate, up 13% in addition to 7% growth in men's. Our evolution into a head-to-toe lifestyle brand is fueling accelerated growth in tops, up 13%. And while we drove significant top line growth, we also exceeded our adjusted EBIT margin expectations and delivered double-digit earnings growth in the quarter. This strong early performance gives us confidence to take up our full year guidance. I'll now walk you through highlights from the quarter in the context of our strategies. Let's start with our first strategy, being brand-led. The Levi's brand was up 9% for the quarter as we continue to keep the brand firmly at the center of culture. Few brands can authentically play across so many facets of culture, sports, fashion and music in a way Levi's consistently does, and this was on full display during the Super Bowl. Leading up to the game, we turned the Bay Area into Levi's Home Turf with a full 360-degree activation, including exclusive product drops and live music as well as hands-on workshops and in-store celebrity and athlete engagements. We also launched a number of exciting collaborations, including a new Nike apparel capsule, and denim Nike Air Jordan 3s. We extended that energy during the game itself, launching our new global campaign, Behind Every Original, designed to unfold in chapters throughout the year. Premiering during one of the most watched moments of the Super Bowl, early results have been very encouraging, with strong awareness, brand equity lists and more than 1.4 billion media impressions generated in February alone. Featuring global brand ambassadors, Doechii, Questlove, BLACKPINK's ROSE and basketball superstar, SGA, the campaign has been recognized among the top Super Bowl ads by outlets, including Forbes, Ad Age and Fast Company. Building on the strong momentum from our campaign, we announced a multiyear global partnership with Rose, including new co-created pieces that will come to market later this year. And a prime example of Levi's showing up organically at the center of culture is Harry Styles wearing a pair of vintage 501s on his new album cover and his backup dancers, all wore 501s on stage at the BRIT Awards in February. Now turning to product where we continue to see strong growth in men's and women's and across tops and bottoms, fueled by innovation and execution. First, let's start with our bottoms business, which was up 7%. We're infusing newness across the assortment with innovative fabrics, fits and finishes throughout both our icons and fashion styles. Within core bottoms, we continue to introduce modern interpretations of our iconic 501 like our very popular 501 '90s and 501 Curve for her. And for him, the 501 Loose and 501 Thermodapt, our new climate adapting fabric innovation. Another great example of the organic strength of our core is the 25% increase in our iconic 517s, which were famously worn by Carolyn Bessette and prominently featured in the popular show Love Story. Our newer fashion forward fits across loose and baggy styles continue to deliver outsized performance. We're following the tremendously successful launch of last year's women's Cinch Baggy with an expanded assortment of Cinch Wide Leg, Barrel, Shorts and more. And for men, we introduced a new Baggy Barrel Fit, which continues to drive fashion relevance for him. Our push into categories beyond denim bottoms has expanded our total addressable market and contributed to roughly 1/4 of our top line growth with still much more opportunity ahead. Tops continue to be an important growth driver as we build out a more complete lifestyle offering. In men's, we saw continued success in polos, button downs and our newly launched quarter zips. And in women's tops, wovens, blouses and sweaters were standouts, along with our expanded selection of tees. Dresses also continued to perform well as a natural extension of our lifestyle strategy. We've sharpened our product strategy by shifting toward a more globally directive assortment. In our DTC business, we've increased product commonality to nearly 50% today. This shift has driven greater productivity through SKU reduction and enabled us to focus on fewer, bigger product stories showcasing our head-to-toe collections. As a result, we're showing up globally with more impact and consistency and with clear storytelling and stronger alignment across markets. A great example of this was the Q1 global launch of our head-to-toe Grunge Prep collection. This new aesthetic combines preppy tops like cable crew neck sweaters and rugby tees, with worn-in, grunge-textured bottoms, a cross-fit like our 578 Loose and Baggy Loose cargo pants. Blue Tab, which is the most premium expression of the Levi's brand, delivered robust growth in Q1, reinforcing our confidence in this business. We expanded the assortment, adding more women's product and lifestyle pieces while maintaining a solid foundation in premium denim. With just 1% market share of the $10 billion total premium denim market, this represents a sizable long-term opportunity for the Levi's brand. As we look to spring and summer, our global product assortment will continue to deliver against our big ideas with a unified lens. We will build on the momentum we're seeing today by expanding lightweight and linen-blend product across tops, dresses and bottoms, while also leaning into shorts, jorts and other warm weather lifestyle pieces. Now shifting to our strategy to become a best-in-class DTC-first retailer. Our global direct-to-consumer business delivered double-digit growth, up 10% in Q1. Comparable sales were up 7% this quarter on top of high single-digit growth last year. This marked our 16th consecutive quarter of positive comps as we continue to raise the bar on our retail execution. We've strengthened lifestyle merchandising and outfitting in stores, improved in-stock positions through better assortment planning and invested in training our teams with a new global selling model. In the quarter, e-commerce delivered 17% growth reflecting continued momentum as we elevate the online experience. Digital plays an important role in how consumers discover the brand and build a deeper connection with Levi's. Importantly, newer consumers engaging with us through e-commerce continue to skew younger. In Q1, 70% of new U.S. e-commerce orders came from Gen Z and millennials. This reflects our ability to connect with younger consumers as they enter the category, driven by product newness, lifestyle-led storytelling and a more dynamic digital experience. Our loyalty program also continues to be a powerful driver of consumer engagement, reaching 46 million members globally, up 17% year-over-year with more than 2 million new members added in the first quarter. Loyalty members spend about 40% more with higher transaction values and purchase frequency than nonmembers. Global wholesale continues to be an important part of our business to reach consumers around the world. Results this quarter were better than expected, up 8%, driven by strength across segments. The growth in wholesale reflects the momentum behind our lifestyle assortment, the strength of our partnerships and our commitment to reaching Levi's fans wherever they choose to shop. Now turning to our third strategy, powering the portfolio. Our international markets continue to demonstrate strong momentum, up 12%. Europe grew 10% in Q1 with growth across most major markets. Having recently visited stores across Europe, I got to see firsthand how strongly consumers are responding to our elevated denim lifestyle assortment. One of the markets I visited was Italy, which plays a unique role as a premium halo for Levi's across Europe, shaping brand perception well beyond its borders. As a global center of fashion and culture, we have elevated our presence in the market and revenues in Italy have nearly doubled since 2021. Importantly, we have continued to strengthen our #1 share in denim bottoms across both men's and women's in this market. In Q1, our value brand Signature grew 16%, reflecting impressive performance in women's. Over the past year, we have revitalized Signature through a product and brand reset, introducing compelling newness and expanding into lifestyle categories. This is translating into share gains for the brand within key wholesale accounts, a clear signal that the revitalization is resonating with consumers. Beyond Yoga was up 23% with DTC continuing to show solid momentum. The brand expands our addressable market into premium activewear, complementing our denim lifestyle portfolio. Our recently launched Seek Beyond marketing campaign and broader product offerings are gaining traction with consumers and fueling growth. While we continue to invest in the business, our operating loss narrowed in the quarter, driven by strong top line growth and gross margin expansion, reinforcing our path toward profitability. In closing, the quarter reinforces the significant progress we're making against our strategies. We're seeing the impact of becoming a more brand-led consumer-centric DTC-first lifestyle company with broad-based strength across our business. The work we've done to sharpen our focus, elevate the Levi's brand and operate with greater discipline is translating into higher quality, more profitable growth, while building a stronger foundation for the business. While we remain thoughtful about the external environment, we're confident in the direction we're headed as we move through the year and beyond. With that, I'll turn it over to Harmit to walk through the financials and our outlook. Harmit? Harmit Singh: Thank you, Michelle. I wanted to take a moment to speak about the announcement we made earlier today. After 13 years with the company, I will retire following a planned transition. This company and our people have meant the world to me, and it's been a true privilege to work alongside Michelle, our Board and all our shareholders and the extraordinary leadership team as we have transformed this company into a more diversified global direct-to-consumer business. I'm incredibly proud of what we've built together, from accelerating our growth, transforming the company into a DTC-first retailer while expanding margins and returns. What gives me the greatest confidence as I look ahead is the strength of my team and the deep talent we put in place. I'm so grateful for the support of me and the company. I'll remain fully engaged as CFO and Chief Growth Officer until a successor is appointed and stay for a planned transition. LS&Co. is stronger than ever and I have every confidence in the company's continued momentum and ability to deliver long-term profitable growth. Let's turn to quarter 1. We delivered another strong quarter, marked by high-quality, broad-based growth and stronger-than-expected profitability. Our first quarter results reflect the power of the end. While our top line outperformance this quarter was driven primarily by better-than-expected wholesale performance, DTC remained healthy. More broadly, every facet of our business has contributed to growth over the past 6 quarters, wholesale and DTC, U.S. and international, women's and men's, tops and bottoms, units and AUR. Our focus on improving flow through that is converting a higher percentage of revenue into profit enable us to exceed our adjusted EBIT margin expectations and deliver higher earnings. As planned, we leaned into A&P earlier in the year to support the launch of our '26 global campaign. Normalizing for this timing, adjusted EBIT margin of 12.5% would improve 160 basis points to 14.1%. While we continue to take a prudent approach to planning for the balance of the year, our strong first quarter results and positive quarter-to-date trends position us to raise our expectations for revenue, margins, both gross and adjusted EBIT margins as well as adjusted diluted EPS. Turning to the details of the quarter. Net revenues were up 9%, with broad-based strength across all segments and channels. Our international business contributed to about 75% of our growth. Women's accounted for approximately 55% of total growth. DTC accounted for just over half the growth. By category, tops drove roughly 1/3 of our growth in this quarter and growth was driven equally by higher volumes and higher AUR. Given the ramp-up of our distribution center in Europe last year, shipments moved from quarter 1 to quarter 2. As a result, quarter 1 '26 revenue growth benefited by approximately $30 million or about 2 percentage points. This will have an offsetting impact in quarter 2. Excluding this timing shift, quarter 1 still delivered high single-digit growth. I'll address the impact on quarter 2 in our guidance. Gross margin for quarter 1 was 61.9%, slightly better than external expectations, contracting 20 basis points year-over-year, primarily due to tariffs. The decline in gross margin was partially offset by pricing actions and lower promotional activity. We continue to closely monitor the consumer response to pricing actions and to date, we have not seen an impact on demand. From an input cost perspective, we have locked in ocean freight rates and secured cotton at favorable levels for 2026. Adjusted SG&A grew 16%, driven by higher A&P, the higher-than-expected sales volume and foreign exchange. Excluding the 160-basis points impact of A&P, we delivered 90 basis points of leverage across the balance of the business. We still expect marketing as a percentage of sales to be approximately flat year-over-year at around 7%. Improving flow-through remains a key priority, and we are taking deliberate actions to deliver it. Across the organization, we are leveraging our global talent hubs and accelerating productivity through expanded AI initiatives, allowing us to support our growing business while keeping overall head count flat year-over-year. At our recent leadership summit, we aligned our top 250 leaders around tighter SG&A discipline and a sharper focus on converting top line growth into consistent profitability. And importantly, our leadership team's incentives are directly aligned with driving both revenue growth and profitability. With respect to the status of the U.S. distribution network transformation, execution continues to progress and notably, distribution expenses versus prior year improved as a percentage of revenue. We are working towards completing the transition by midyear and costs we expect to incur are factored into our updated guide. Longer term, this transition positions our network to support omnichannel growth and drive efficiency. Adjusted EBIT margin was 12.5% in the quarter. Excluding the A&P investment, adjusted EBIT margin would have been 14.1%, substantially higher than last year and reflecting flow-through of approximately 40% from the higher revenue. Adjusted diluted EPS was $0.42, ahead of our expectation and up 11%. We ended the quarter with reported inventory dollars up 4%. We're comfortable with the quantity and quality of our inventory as we enter the spring season. Turning to shareholder returns. We took another important step forward this quarter with the successful closing of the Dockers transaction, which further simplifies our portfolio and sharpens our focus on the Levi's brand and Beyond Yoga. Our adjusted free cash flow in quarter 1 '26 was also substantially higher than last year at $152 million. This along with the net proceeds from Dockers' sale enabled us to return cash to shareholders through share repurchases. In total for the quarter, shareholder returns were up 163% to $214 million. In quarter 2, we declared a dividend of $0.14 per share, an increase of 8% year-over-year. Now let's review the key highlights by segment. The Americas net revenues were up 7%, driven by 4% growth in the U.S. and 14% growth in LatAm. This was fueled by strength across DTC and wholesale channels. U.S. wholesale was up this quarter even with our actions to rationalize certain customers. The acceleration in LatAm was driven by double-digit growth across every market, including Mexico. Operating margin contracted 260 basis points due to the timing of A&P and the impact of tariffs. Europe grew 10% with solid demand and strength across markets and channels as consumers continue to gravitate towards our head-to-toe offerings. Operating margin expanded 50 basis points, driven by gross margin expansion. Given the distribution transition we are lapping in Q1 and Q2 of '25, it is best to look at Europe on an H1 basis. We expect Europe to grow mid-single digit in the first half of the year, consistent with our guidance for the segment. And importantly, prebook for the fall and winter season is up high single digits. Asia grew 12%, fueled by growth across both channels, led by DTC, which was up 16%. Key markets like India, Japan, Korea and Turkey delivered strong results across channels and categories. China was also positive, reflecting early progress and green shoots under new leadership as actions to reset the business begin to take hold. Gross margin expansion and SG&A leverage drove 150 basis points of operating margin expansion. The Middle East, which is part of our Asia segment, represents about 0.5 point of total company revenues and is mostly operated as a distributor model. Now turning to guidance. '26 is off to a strong start. And as a result, we're raising our outlook across revenue, margin and earnings while maintaining a prudent view on the macro environment. As a reminder, our guidance assumes incremental U.S. tariffs on imports from China at a 30% rate, and the rest of the world at 20% and therefore, does not contemplate the recently announced Supreme Court ruling or the administration's effort to reimpose the tariffs. While this has not been incorporated into our guidance, if the 10% tariffs currently being charged stay in place for the rest of this fiscal year, we believe there could be an incremental benefit to our current outlook of approximately $35 million to COGS and $0.07 to EPS. For the full year, we are raising our expectations for both reported and organic net revenue growth by 0.5 point. We reported growth to be up 5.5% to 6.5% and organic revenue to be up 4.5% to 5.5% for the full year. The increase in our top line expectation is due to stronger-than-expected performance in the U.S. wholesale channel, and we now expect global wholesale to be up low single digits. Gross margin is now expected to be flat to slightly up versus our prior expectation of flat to prior year. Adjusted EBIT margin is now expected to be approximately 12%, up from our previous expectation of 11.8% to 12%. And we now expect adjusted diluted EPS of approximately $1.42 to $1.48, up from $1.40 to $1.46. For quarter 2, we expect reported revenues to be up 4% to 5% for the quarter and organic up 3% to 4%. As I previously mentioned, growth in quarter 2 would have been higher by approximately 2 points due to the timing of last year's distribution transition, which reinforces that there is no change in underlying demand trends between quarter 1 and quarter 2. Gross margin is expected to be slightly down due to unfavorable foreign exchange. We expect to fully offset the impact of tariffs through our various mitigation efforts. Adjusted EBIT margin is expected to be in the range of 8% to 9%. This translates to an adjusted diluted EPS of approximately $0.22 to $0.24. Let me provide some color on the margin cadence of our full year outlook. Given our Q1 results and Q2 guidance, we expect H1 EBIT margins to be in the range of 10% to 11%, and we expect accelerated margin expansion in the second half year, driven primarily by 4 factors. First, the normalization of A&P effectively pulling 1 point of A&P out of H2 into H1, behind the launch of our campaign, which was primarily expensed in H1. Two, given the seasonality of our business, which is weighted more towards the second half, the incremental volume drives higher fixed cost leverage. Three, we will begin to realize the full benefits of our pricing actions, which had not yet been implemented in H2 of last year. Fourth, lower distribution expenses as we ramp down the parallel distribution center. This positions us for H2 EBIT margins to be in the 13% to 14% range, consistent with our full year guide of approximately 12%. In summary, we delivered our sixth consecutive quarter of mid- to high single-digit growth, driven by both our wholesale and DTC channels. DTC now represents about half our business and continues to be a significant growth driver. We reported 16 consecutive quarters of comp sales growth. And as you saw in this quarter's press release, we reported comp growth of 7%. We will continue to report comp sales as part of our regular disclosures. We raised guidance, reflecting our momentum and execution against our strategies while maintaining a disciplined, balanced approach to the full year. Michelle, I and the entire executive team are committed to flowing a higher percentage of revenue to profitability, solidifying a clear path towards a 15% EBIT margin over time. And with that, I will now open up the line for Q&A. Operator: [Operator Instructions] Our first question comes from the line of Laurent Vasilescu of BNP Paribas. Laurent Vasilescu: Michelle, Harmit, congrats on a great start to the year. And Harmit, I want to quickly say, it's been a real pleasure working with you over the last few years. So Michelle, can you talk about what's driving the momentum in the business and how confident you are in sustaining that momentum, particularly with the uncertain macro backdrop in Europe and North America, which I think everyone is really laser-focused on. And then Harmit on SG&A, thank you for unpacking a little bit on the SG&A growth of up 16%. I saw in your 10-Q tonight, distribution expenses actually went down for the first time. How should we think about these distribution expenses and overall expenses for the balance of the year to get to that 1H, 2H operating margin that you laid out? Michelle Gass: Thanks, Laurent, and thanks for the questions. So I'll kick it off, and I'll hand it over to Harmit. So first off, we're really pleased to start the year so strong with, of course, a beat on the top and bottom line. But the 9% organic growth, 14%, it was high quality and directly linked to the execution of our strategy. We saw the growth broad-based across segments, channels, genders and categories. And just to share, like if we take our -- one of our key strategies, which is this pivot to denim lifestyle, we saw outperformance in the women's business, up 13%. We saw outperformance in tops, up 13%, which really demonstrates that we can grow our addressable market. And while we did this, call it the core of our business in men's and bottoms, both feel really strong at plus 7%. So strategy number one. Second strategy on this, we are becoming a best-in-class DTC retailer. DTC is continuing to fuel the growth. It was up 10%, 7% comp growth. We're very pleased to start sharing that number, and our wholesale business grew as well at up 8%. So again, this is about execution. And as we look ahead, we see a lot of runway ahead to the second part of your question, in terms of sustaining the momentum. It's the cause and effect on executing our strategies and the consumer is responding. We are very cognizant of the environment around us. But our consumer is responding to innovation, newness and Levi's as a great value. So we'll stay close. But given what we're seeing in the business and how we started this quarter, we feel very confident and hence, why we were confident enough to raise our guidance for the year. Harmit Singh: And Laurent, to your second question, first, I appreciate your remarks. I still have a job to do. We still have to deliver the year. So I'm around for a while. But to your question on SG&A, in essence, SG&A as a percentage of revenue was a little over 49%. We expect to deliver the year with SG&A as a percentage of revenue around mid- to high 49%, lower than a year ago. Just unpacking this quarter, let's start with SG&A was up 16%. A&P was -- the timing of A&P because we are assuming that we spend only 7% of revenue by the end of the year was approximately 5% of that 16% increase. Foreign exchange, it's interesting because of our global business when the U.S. dollar is weaker, which we have seen over the last couple of months, actually it's when you convert that into dollars, it impacts SG&A. That's about 4 to 5 points. And the remaining 7 points was largely driven by volume, were driven by a little bit of inflation. And what we call as we expand DTC, we continue to open doors. So overall SG&A, we believe will continue to improve as a percentage of revenue. The other thing that we -- because we've taken this to heart, which is we have to convert a higher percentage of revenue to profitability. And I shared with all of you what we are doing as a team, bringing the 250 leaders together, talking about why flow-through is important and how that acceleration of growth along with profitability really enhances and creates a lot of value for all our stakeholders. Operator: Our next question comes from the line of Oliver Chen of TD Cowen. Oliver Chen: Harmit, congrats on a really wonderful career. Regarding the guidance, it seems conservative given the 2-year stacks decelerate, and you've been posting better and solid numbers. Why wasn't the guidance higher in terms of the momentum you're seeing? And the U.S. wholesale, which parts of that business were better than expected? And do you expect that momentum to continue? And as we look forward on the -- go ahead. Harmit Singh: No, no. Oliver, go ahead. Oliver Chen: As we look forward on the margin side, what should we know about mix as you continue to make so much lifestyle progress and/or what's embedded for promotions because it's not an easy environment out there, but you're experiencing a lot of innovation and gas is on everyone's mind on a near-term basis as well. Harmit Singh: Sure. Oliver, 2 things is early in the year, we have a sizable beat. And while we haven't seen, even in quarter-to-date trends, any real change in trends. Our view is that be prudent in the outlook as we think forward. So that's really what's driving what we call a more prudent outlook. The only other thing to think about is we haven't incorporated the reduction in tariffs, which may come to pass at some stage, right? We've quantified it, but we haven't incorporated that. That gives us what I call contingency of cushion, should the environment change in any dramatic way. And so that's how we are thinking about it. The real focus of the company, as Michelle pointed out, is to continue the momentum on the top line while converting a higher piece of that revenue into profitability. We have taken gross margins up for the year from what we said flat to slightly up because we think we can fully offset the 19% increase in tariffs. We have taken EBIT margins up to the high end of the range, and we've taken EPS. So we feel generally positive from that perspective. In terms of your mix, so your question about wholesale, what really drove the beat on wholesale. And it is true that 2/3 of the beat was largely driven by wholesale and it was largely in the U.S. and Europe. And the outperformance was really -- we're beginning to see what is showing up in DTC by driving denim lifestyle now get incorporated by our partners buying more women's. Women's growth in wholesale was really strong. They're buying more tops, that's making a difference. And the good news is there's still a balance between units and AURs even in wholesale. So I think that's been the, I would say, the thought, which is start with DTC, prove it out and then showcase that so that your partners buy. And I think we're beginning to see it and it's still fairly underpenetrated. Women's in wholesale is underpenetrated. Tops in wholesale is underpenetrated. And so I think those are the factors that really, I think from our perspective, we believe there's a long runway for growth, a $6.5 billion company getting to $10 billion over time. Oliver Chen: And Michelle, one for you. Just what's ahead on your thoughts on denim momentum? Because one question is if we're at a peak place in the denim cycle, but you're doing a lot and things are changing with baggy and head-to-toe. And as you embrace loyalty, the loyalty program in AI and personalization, how might you see that manifesting and what's happening with innovation. Thank you. Best regards. Michelle Gass: You bet. I'll hit those quickly. The denim category remains healthy. It's actually accelerating here in the U.S. It's outperforming overall apparel. Clearly, as the leader in the category, we are fueling that growth through all the innovation and fashion cycles we're bringing. So we sit here today, again, we've contemplated that in our guide that we expect the momentum to our strategy is to continue. And loyalty, AI, our e-commerce business, again, up double digit, and we are now leveraging AI tools to help that consumer engagement. Loyalty, again, as we shared in our remarks, is up, again, acquired 2 million consumers in the quarter. Operator: Our next question comes from the line of Ike Boruchow of Wells Fargo. Irwin Boruchow: Congrats, Harmit, we'll miss you. But a question for you -- actually, 2 questions for you, Harmit. Can you just clarify the commentary on Europe in the second quarter. So you're basically guiding Europe organic -- constant currency revenue flat in the second quarter. Can you just quantify the wholesale, the dollars that moved into 1Q that are moving out of 2Q just so we can smooth that out. And then to Laurent's question on the DC side. What's your expectation for the remainder of the year? You're already getting scale on that line item? And it feels like a lot of the initiatives haven't really kicked in yet that should drive leverage. Just what's the expectation for leverage on that line item for the rest of the year? And then how quickly could you potentially get that line item back to 5% of sales? Is that 4 to 5 years? Or is that more like 2 to 3 years? Harmit Singh: Okay. So to answer your first question, which is Europe, I quantified it. It's about $30 million and is primarily wholesale. And so you can do the math, but that's really what -- and you're right, Europe up 10%, primarily flat in quarter 2. But for the first half, about mid-single digit. We're guiding Europe to be mid-single digit. The other pleasing fact in Europe is that our prebook for fall and winter is looking at approximately high single digits. We're feeling good about the Europe business. The team in Europe is executing really well. And so that's really what's driving the -- that's the amount, and that's what's driving the shift. To your question about the transition of the DC, I mean just think of this broadly, I would say Europe transition that began about 1.5 years ago has stabilized. You're seeing it in their results. We're doing more omnichannel fulfillment and that's making a difference. It took us a little while, but distribution costs in Europe now are scaling down as a percentage really well. U.S., we continue to be committed to reducing the transition cost as the year progresses, and we'll do it in a way where we prioritize the incremental demand that we are seeing with the costs incurred because we have seen volumes really pick up and fulfilling that has been great. As I mentioned earlier, we continue to expect the cost of additional DC to taper off as the year progresses beginning in the second half and our DC that is being run by Merck -- by Maersk really stabilized. So to your question about when do we get to 5% distribution cost as a percentage, I won't comment on the timing, but what I will say is our new supply chain leader and the new distribution experts that we've got are committed to improve both the flow-through, so we drive higher volume throughput as well as lower cost over time and built into our plan is to get from 12% to 15%. So we are committed as an organization. It's a big piece of what we are focused on. So stay tuned. Operator: Our next question comes from the line of Jay Sole of UBS. Jay Sole: Maybe, Michelle, can you just talk a little bit more about what you're seeing in the U.S.? And I think you mentioned quarter-to-date was good. We've been through Easter, how it's been? And then also, it sounds like the Super Bowl was a big event for Levi's. But I think Levi's Stadium is hosting 6 games for the World Cup this quarter. Are there plans around that? Will that impact SG&A? And what -- how should we think about that opportunity? Michelle Gass: Yes, you bet. Thanks, Jay. So first, I'll take your question on the U.S. Pleased with the start of the year in the U.S. as well. We were up 4% in the quarter, and we saw both channels performing well. This quarter, especially reflecting the strong execution that we're seeing, both in our DTC channel, strength in stores and online, driven by enhanced merchandising, we're doing expanded lifestyle assortment, and I'll get you the marketing campaign in just a minute. But clearly, it was a very unique way to start the year. We're very pleased with that. And U.S. wholesale was up this quarter, again, very strong performance with our customers. And to make note, not only in Levi's Red Tab, but in our Signature brand, our value brand, that was up 16% in the quarter. So one of the things that we've really moved to with the whole opportunity to amplify the power of the Levi's brand is to segment. So you've got your core Red Tab, which is a core of our business. You have Signature, which is accelerating. They're bringing a lot of newness and relevance to that consumer, to that value-conscious consumer. And then, of course, on the high end, early stages with Blue Tab, but we're seeing nice consumer reception. And that new business was up 40% in the quarter. So we're obviously staying close to the dynamics in the macro environment. But in terms of our consumer, we're seeing a lot of resilience there. And then to your point on the Super Bowl, I mean, we couldn't be more pleased with how our launch of our new brand campaign resulted. So we had a very unique opportunity with Levi's Stadium hosting the Super Bowl. So we were on the world stage center of culture. We leaned in. We launched our new campaign. It was the first time in 20 years. It got watched in the peak of the watch of the Super Bowl, 1.4 billion impressions. We have measured that. We've got a great return on it. And really, this is about the launch for the year. So it's a formula that works for us, tapping into global and local influencers, and we will continue to activate against sports and music. So to your point on World Cup, we do have plans for that throughout the year as well as music collaborations. And all of that is baked into our plan, which takes us to 7% for the year in terms of spend. So call it the peak of our spend was actually in the first quarter. That normalizes as we go through the balance of the year. We're seeing the results. We're getting a nice tailwind from all the brand activations. Operator: Our next question comes from the line of Brooke Roach of Goldman Sachs. Brooke Roach: Harmit, best of luck in your next chapter. It's been great working with you. I was hoping that you could unpack how you're thinking about pricing and the pricing power of the brand as you look forward into the rest of the year. Did you see any elasticity in response to some of the recent price increases? And does this give you confidence to take even more pricing in what looks to be an even more inflationary environment. Potentially offsetting that, what are your plans that are embedded in the guide for markdowns in the back half of the year? And how should we be thinking about opportunity for continued markdown reduction as you implement your initiatives? Michelle Gass: Brooke, I can -- I'll take that question. Around pricing, and I'm glad you asked it because when we think about pricing holistically, it is about the premiumization strategy that we have on the brand. Mitigating tariffs has just been one component of it, but it is about our focus on full-price selling, unlock promotions and pricing for innovation and newness. And I was just talking about even at the kind of pinnacle expression of the brand with Blue Tab, we're pricing in the $200, $300 range. So very consistent with what we shared in the past. We've been very thoughtful and targeted. We are monitoring consumer response. And to date, we have not seen an impact on demand, and you saw that in our Q1 results. And as matter of fact, growth for us in the quarter was driven equally between AUR and units, which really does speak to the power of the brand right now. But we'll continue to be very thoughtful. We're clearly operating in an uncertain and volatile time. But given the strength of the brand, we feel really good, and our consumer is responding, especially as we take those opportunities to price -- premium price or innovation in newness. I guess the second part of your question would be around markdowns. So the only thing I would say to that is as we rewire the company to truly operate the best-in-class retailer, we have new allocation systems. We have new supply chain leadership. And our execution level is improving, which you see that again in our AURs more full-price selling. So the capability of the team is really elevated around that front. Operator: Our next question comes from the line of Bob Drbul of BTIG. Robert Drbul: I guess, Harmit, I have a question for you. First of all, congratulations again, and I echo a lot of the earlier comments and sentiment. I guess on the -- you talked about ocean freight and cotton being locked through '26. Can you talk about just have there been sort of discussions around trying to -- for your vendor trying to pass through any increases away from your current locked rates? And I guess the other question is just on that is, how far are you locked with ocean freight and cotton in '26. Harmit Singh: So thanks, Bob. And you were great on CNBC earlier. But what I'd say is, and thanks for your sentiment. What I'd say is that we are locked through the end of the year on base ocean and air freight rate. There are surcharges that are imposed. Our view on the surcharges is that our guidance reflects this. Oliver talked about why you're being modest in your guidance, we are taking into account a bunch of things relative to that. To your question about vendors asking for higher prices. When we reduce the product cost in 2026, it was a combination of a couple of things. First was rationalizing the SKUs, moving out of unproductive SKUs. It was about driving higher globally directive assortments, which is having more of a common line, which drives more leverage through volumes. And cotton, obviously lower than a year ago, really helped. And so we're very thoughtful because we've got vendors who have been with us for years, and we introduced some newer competition. So right now, we are not seeing it. If you think of the futures of cotton, as you look at '27, they're largely consistent with what we believe. And our view is that product costs over time because we are not rationalized all our SKUs. We haven't rationalized all our fabrics yet. We're driving to more of a tighter go-to-market calendar. It was 16 months, it's close to 13, and we're trying to drive that I think all those are different levers that we have that over time can continue to drive product cost in the right direction, which is lower, not higher. Operator: Our next question comes from the line of Rick Patel of Raymond James. Suraj Malhotra: This is Suraj Malhotra on for Rick Patel. Harmit, thanks for everything and best of luck. So looking at the 4.5% to 5.5% organic revenue growth guidance for fiscal year '26, how should we think about the split between unit growth and AUR growth, especially given the pricing actions taken year-to-date? Harmit Singh: Yes. Thanks for expressing the sentiment. Same here. You guys have been great. The way we are thinking about it is an even balance between units and AUR. The reason -- the question is why are we selling more? It's largely because we are expanding our addressable market. Addressable market, which is $100 billion for denim. And you've heard me say before, we're trying to bust the myth that we're not only about denim. Now that addressable market is up 15x because we're getting into things like non-denim bottoms, skirts and dresses for her, expanding our tops offer. So that's why we feel selling more, and we are adding a lot of new stores to selling more along with higher AUR is probably what's going to happen through the year. Where does that balance go over time, I think it's something that we will reinforce as we guide annually. But that's how we're thinking about it. And that's what I would suggest as you model both that. Operator: Our next question comes from the line of Paul Lejuez of Citi. Paul Lejuez: Harmit, best of luck. It's been a pleasure working with you. If we go back to the first quarter, I'm just curious how things look on a monthly basis, how much of the quarter was driven by December results versus the months that followed. Maybe if you can tie that into what you said about quarter-to-date, I think you said you haven't seen any signs of a change. Curious if you could talk about that by region, if there are any places that you might have seen an acceleration or deceleration relative to either the first quarter as a whole or the exit rate? Harmit Singh: Yes. Thanks, Paul. As you know, we don't get into the level of details. I'd say on the quarter-to-date trends, they remain positive and support the guidance that we laid out for you. In terms of trends in quarter 1, I think we ended the quarter at 9%. January, February, largely in line with that. So it was not like it was way off of -- either higher or lower. Do remember that the trends acceleration in the quarter, as you think about timing, we had the Chinese New Year timing and then the Easter timing in Europe. That does impact it. So January, February, probably a little higher than December because of that. Chinese New Year is largely towards the end of the quarter. Dalston was largely a January, February piece. But our guidance for quarter 2 really reflects how we started the quarter. Paul Lejuez: Got it. And then any change to your macro view by region? Harmit Singh: Asia has started really strong, Paul. Asia really started strong, which is great. China, we didn't talk about China. I think I mentioned it was positive for the first time in a long time. We've got a new team there. They're resetting the business. So our view is -- and Asia, we are underpenetrated, right? It represents about 20% of the business when half the world's population is there. And you've seen the operating margin in Asia, we take the last 3, 4 years, improve as we drive more volume leverage. Outside that, Europe and U.S., largely consistent. And so nothing apparent right now. I think the consumer continues to be resilient. Importantly, they are continuing to gravitate to newness. And our product pipeline is really strong, and Michelle referenced in her prepared remarks. And so I think if there's a way we can bring -- continue to bring newness in, which we believe we can, and drive that at good value price points, I think we could continue the momentum and that's what's reflected in our full year guidance. Operator: Our next question comes from the line of Adrienne Yih of Barclays. Adrienne Yih-Tennant: Let me add my congratulations on the quarter and also your future, Harmit. And my question is it remains on international and the strength that you're seeing there. I guess where are you seeing kind of the most surprise in terms of growth acceleration? And how does your go-to-market strategy differ by region, say, like wholesale versus DTC? Harmit Singh: Yes. So I'll just give you a quick perspective across the 3 regions. If you take the Americas and U.S. in particular, it was primarily wholesale. But now this balance is shifting to more of a balanced business between DTC and wholesale. And it's not coming at the cost of wholesale, DTC is growing at a much stronger phase, and we're now opening. We have about 70, 80 full-price stores in the U.S. We're probably going to be opening 10, 12 stores a year for the next couple of years and doubling that. Asia is 60% direct-to-consumer and 40% wholesale, and that is primarily how we think the business grows. Most of our new stores are actually opening in Asia. And Europe is little higher on DTC than wholesale, but the product is largely a Tier 1, Tier 2 product. So very harmonious between the 2 channels. And I haven't spoken about Latin America, which is another big opportunity for us to grow. I mean they've been growing double-digit for a while and the team there is doing a great job. So as we think about different regions, that's the mix. I mean our view is Asia, you grow that in the high single digits. That was reflected in our guidance. Europe in the mid-single digit, that's reflected in the guidance. And Americas, low to mid-single digit, that's reflected in the guidance. Operator: Thank you. At this time, I'd like to turn the floor back over to the company for any closing remarks. Michelle Gass: I want to say, thanks, everyone, for joining the call, and we look forward to speaking with you again at the end of Q2 in July. Thank you. Operator: Thank you. This concludes today's conference call. Please disconnect your lines at this time.
Curtis Schlaufman: Hi, everyone, and welcome to the DeFi Technologies 2025 Fourth Quarter Financial Review and Shareholder Call. I'm Curtis Schlaufman, VP of Marketing and Communications. Joining me on the call today are Chief Executive Officer, Johan Wattenstrom; Chief Financial Officer, Paul Bozoki; and President, Andrew Forson. We'll begin with opening remarks from Johan Wattenstrom followed by a review of our fourth quarter and full year 2025 financial results from Paul and then an update on growth initiatives and strategic priorities from Andrew. After that, we'll open up the line for Q&A. [Operator Instructions] We won't be able to get to everything. And if you want your -- if we don't get to it on this call, please do e-mail ir@defi.tech or curtis@defi.tech, and I'll get to your questions as soon as possible. But then we'll invite some of our analysts on the live to ask questions with the management team. Before we begin, I'd like to remind everyone that certain statements made during today's call may constitute forward-looking information under applicable securities laws. These statements include, but are not limited to comments regarding expected financial performance, business development, strategic initiatives, market expansion, product growth and future opportunities. Forward-looking statements are based on management's current expectations and assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied. With that, I'll turn it over to our CEO, Johan Wattenstrom. Johan Wattenstrom: Thank you, Curtis, and thank you, everyone, joining us today. As many of you know, as a co-founder, I've been very much involved in the business since its inception and stepped into the CEO role during the fourth quarter. I'm very encouraged by where the business stands as of today and by the foundation we built for the next phase of growth. Our 2025 results reflects the strength of the platform we have built and the progress we have made over the last several years. If you look at our IFRS revenue trajectory, the scale of that process become very clear. In 2021, revenue was $15 million. In 2022, it was a negative $14 million. In 2023, it was $10 million. In 2024, it increased to $31 million. And in 2025, it reached a record USD 99 million. That progression is important because it shows how far the business has evolved. We have built DeFi Technologies into a much broader, more durable and more scalable platform. We are not reliant on any single product, revenue stream or market environment. We have built a business with multiple pathways for growth, and we believe we have never been better positioned to scale the platform and capitalize on the opportunities ahead. At the center of the group is Valour, our digital asset management business. Valour gives investors regulated access to digital assets through traditional financial infrastructure. And today, the platform includes more than 100 listed ETPs across multiple exchanges globally. That geographical reach, combined with the breadth of products we offer, continues to set us apart in the market. What makes our model especially compelling is its vertical integration. We do not simply earn management fees on AUM. We monetize those assets across multiple activities, including staking, lending and market making. That gives us multiple revenue streams from the same base of assets and allows us to monetize more efficiently than a traditional asset manager. The capital we raised has strengthened the model even further. It has enhanced our ability to increase monetization across the platform and across the balance sheet, particularly by expanding the trading, hedging and market making infrastructure that supports Valour's issuance stack and allows us to earn additional income on AUM more efficiently. During the quarter, we continued executing against several important priorities. First, we expanded the Valour product platform and ended the year having achieved our goal of reaching 100 listed ETPs. That milestone reinforces our position as one of the most diversified digital asset ETP issuers globally. The product expansion continues into high value-added products, including more institutional investment exposures. Second, we remain focused on broadening the investor base that can access the platform. Today, the majority of our AUM is still driven by retail investors, but a major priority going forward is increasing institutional participation for structures such as UCITS, AMCs, hedge fund structures, fund of funds, on-chain distribution and other investment vehicles that can access larger pools of capital. Third, geographic expansion remains an important opportunity. Europe remains our core market and main focus. We continue to see significant growth potential in jurisdictions across Europe. Outside Europe, we continue to expand into select regions where we access -- where access to regulated digital assets investment products remains limited. Brazil is an example of that. And we also continue to advance our discussions into other locations in Latin America, Asia, Africa and the Middle East. And finally, our financial position remains a major strategic advantage. We have never been better positioned from a balance sheet perspective. We ended the year with approximately USD 178.7 million in total cash, treasury and venture portfolio value and effectively no debt. That fortress balance sheet gives us the flexibility not only to support the business through volatility, but also lean into opportunities and aggressively pursue our business goals in any macro environment. Even in a prolonged crypto winter, that financial strength allows us to continue increasing monetization across our AUM and balance sheet, invest through the cycle, diversify revenue streams, accelerate strategic growth initiatives and pursue attractive acquisitions or investments in assets that may become available at compelling valuations. In other words, we believe our balance sheet allows us to be proactive rather than reactionary and position us to emerge even stronger as the digital asset markets recover. More broadly, we are building for the convergence of decentralized finance and traditional capital markets. We see a significant long-term opportunity to create the products, infrastructure and institutional rails that we believe will transform capital markets over the next 5 to 10 years. We are entering 2026 from a position of strength with a proven business model, optimized monetization and the financial flexibility to invest in the next phase of growth. We believe we are still in the early stages of building the institutional gateway to the future of finance. With that, I'll turn it over to Paul to walk through the financial results. Paul Bozoki: Thank you, Johan, and good morning, everyone. I'll begin with an overview of assets under management. DeFi closed December 31 with AUM of $622.3 million. Average AUM throughout fiscal 2025 was approximately $809.9 million. During the year, Valour also achieved net inflows of $110.1 million into its ETP products, reflecting continued investor demand despite market volatility. Turning to revenue. DeFi generated record full year revenue of $99.1 million for fiscal 2025. For the 3 months ended December 31, 2025, revenue was $20 million. On the profitability side, net income and comprehensive income for fiscal 2025 was a record $62.7 million. For the fourth quarter alone, net income was $28.9 million. These results reflect the earnings power of our platform and the resilience of our diversified model across market cycles. Within Valour, our Q4 effective staking and lending income was 4.7% on the $728.3 million average Q4 AUM, an increase from the 3.4% realized during Q3. While we staked approximately 44.4% of our AUM at the end of Q4, our average staking during the quarter was approximately 70%, which contributed to the higher earned staking yield. Staking was reduced at December 31, 2025, to allow for coin transfers for audit purposes to verify our ownership. We adapt our staking percentage in sync with market conditions and internal risk management policies to ensure we can meet ETP commitments on a timely basis, and we generally stake between 60% and 70% of our AUM. Our Q4 effective management fee yield was 1.2%, consistent with earlier quarters in 2025. We remind investors that we do not charge management fees on our main Bitcoin and Ethereum products, which reduces our effective management fee income from the typical 1.9% we charge on most altcoin ETPs. We closed Q4 with 102 products and reached our 100 product goal during October 2025. Stillman Digital is also an important part of the platform. That business is not dependent on cryptocurrency prices being strong, but rather on trading volatility and institutional activity. Stillman had an exceptional Q4 with revenues of $3.3 million, up from $2.2 million in Q3 2025. Stillman's full year 2025 revenues totaled $9.6 million, and we expect the grid business to grow by 15% to 20% in 2026, irrespective of whether crypto prices increase. This growth is expected to be driven by a combination of more effective monetization of existing flows, enhanced customer acquisition workflows, leveraging AI for outreach and customer onboarding and expansion into new geographies. Stillman is positioned well both domestically in the United States where the majority of business is and in international markets through its regulated Bermuda entity. As previously discussed, the timing of DeFi Alpha transactions remains opportunistic and is dependent on market conditions, and some of these opportunities have been deferred. Turning to operating income. Q4 operating income was $7 million, and operating income for the 12 months ended December 31 was $46.5 million, reflecting our continued focus on profitability. Operating income declined by $2 million from Q3 2025 due to lower crypto prices and lower average AUM in the fourth quarter. Q4 IFRS net income after tax came in at $28.9 million with full year IFRS net income after tax came in at $62.7 million. In terms of our crypto investments, the company's venture portfolio now consists of 12 private investments with the largest being our 5% stake in AMINA Bank, which makes up 83% of the portfolio's fair value. AMINA Bank continues to perform exceptionally well, although its AUM did decline to CHF 2.7 billion at the end of Q4 from CHF 3.5 billion at the end of Q3, in line with the fall in crypto prices during the fourth quarter. To reflect the compression in EV to AUM multiples and lower crypto prices, the company recorded an approximately CHF 11 million noncash mark-to-market negative adjustment for its investment in AMINA Bank. Our most recent investment was in Stablecorp, the issuer of the QCAD Canadian-dollar stablecoin. Following a multiyear regulatory approval process, we are pleased to hear that in Q4, Stablecorp received a final receipt for its prospectus, qualifying the distribution of QCAD tokens under Canada's current regulatory framework for stablecoins. This milestone establishes QCAD as Canada's first compliant CAD-denominated stablecoin and reflects -- represents an important step in expanding regulated digital asset infrastructure in the country. We're proud to be early backers of this project alongside the likes of Coinbase and Circle Ventures. The company did not make any new investments during the fourth quarter. We continue to believe AMINA will be a successful long-term investment and the addition of Stablecorp further strengthens the strategic positioning of our venture portfolio. Turning to the balance sheet. As of December 31, 2025, the company held $113.8 million in cash and USDT/USDC, including $91.2 million of cash. Digital asset treasury holdings totaled approximately $35.5 million, and the venture and private portfolio was valued at approximately $29.4 million. Together, total cash, treasury and venture portfolio value stood at $178.7 million at year-end. That financial position gives us a high degree of flexibility. It supports continued investment in platform growth, product expansion, strategic infrastructure and opportunistic capital deployment while also reinforcing the strength and durability of the business. As we look ahead, our focus remains on scaling the core drivers of the platform, expanding monetization across AUM, supporting institutional product development and maintaining disciplined capital allocation. At this point in time, the company is declining on providing guidance for 2026, given the general market volatility caused in part by the war in Iran and in particular, volatility in crypto prices since Bitcoin peaked on October 10, 2025. The company reminds investors that it is exceptional financial strength with $113.8 million of cash in USDT/USDC on hand at December 31 in the event of a prolonged market volatility to focus on executing its objectives as outlined by our CEO, Johan, earlier to build long-term shareholder value. With that, I'll turn it over to Andrew. Andrew Forson: Thank you, Paul. As Johan mentioned earlier, one of the key opportunities ahead of us is continuing to deepen engagement across our ecosystem and provide greater transparency into how regulated capital is positioning across the digital asset market. We spent considerable effort building our brand and generating institutional visibility for DeFi Technologies and Valour in global investor circles. In 2025, we onboarded buyers from regions as far reaching as Saudi Arabia, Hong Kong, Japan, Brazil and more. This process continues. Our focus is to ensure our companies have adequate visibility in all potential markets where our existing ETPs and future UCITS, AMC and custody solutions will be distributed. We have also put great emphasis on building systems to onboard investor capital to our existing ETPs as well as any potential future structured instruments we create. Lastly, we wanted to ensure that DeFi Technologies, our platforms, our data and our operations are able to communicate their value and offer unique takes on the massive amount of data we generate to media, digital asset issuers and foundations, investors and the growing world of AI. Some of the tangible steps we have taken over the course of 2025 are as follows: in October 2025, we launched 2 products on the London Stock Exchange. In December 2025, we successfully listed 5 ETP instruments and the DeFi Technologies DEFT shares on the B3 Exchange in Brazil, which represents the first time in the history of the company, we have products listed outside of Europe. These products were launched in a period of declining digital asset prices and significant market instability. In the instance of both London and Brazil, in March and April of 2026, we define the processes and teams required to steadily attract capital to our products listed in those markets. Our capital markets distribution work is being executed with an eye towards supporting the distribution of our UCITS products. This is especially the case in Brazil and Latin America. To drive inflows and AUM growth in our core Nordic and European markets, in March 2026, Valour engaged a Chief Revenue Officer, who is focused on growing the AUM, distribution networks and institutional adoption of the full range of Valour products. In Q3 2025, we introduced our own events, marketing and communications platform that enables us to interact directly with institutional investors in a low-cost, cost-efficient manner. We have used this platform to promote our stock to institutional investors, interact with foundations, promote our ETPs, engage with our portfolio companies, discuss listing opportunities with regulators and build our mailing list, which now numbers over 40,000 entries. For the first time in the company's history, our sales, marketing and growth initiatives reach all inhabited continents. We are a global company. Our approach serves the dual purpose of promoting our core Valour products, making strategic introductions to Stillman Digital as well as helping communicate the DeFi Technologies vision and DEFT stock opportunity, which is widely available internationally given our NASDAQ uplisting. Our growth activities identify listing opportunities for our ETPs and distribution and partnership opportunities for Stillman Digital and our prospective products like UCITS. In Q4 2025, we built out a complete business intelligence system that provides granular views of our inflows, competitor analysis and product consumption. This information helps us to make better product and sales targeting decisions whilst helping us understand exactly what is selling and where. Our work with data and international expansion, events, marketing and visibility has enabled us to create innovative data-driven products like our DEFT Valour Investment Opportunity Index that have helped and we anticipate will continue to help us directly attract capital to our existing suite of 102 ETPs. Our work with our data, events and listings enables us to provide a compelling narrative to foundations and large holders of digital assets to invest them with Valour in a manner that directly increases our assets under management. This approach is appreciated by foundations and institutional investors since we are able to show how their investment provides a positive impact and signal to capital markets for their chosen digital asset. These innovations also lay the groundwork for the development of tokenized products, which will help us to introduce new pools of capital to our existing portfolio of products. Our strategic priorities remain clear. We are focused on continuing to expand distribution, entering new markets, broadening our institutional product set and strengthening the infrastructure that supports long-term monetization across the business. We believe DeFi Technologies is building not just products, but the broader institutional infrastructure and framework that will support the next phase of digital asset adoption and integration with capital markets. We are better positioned than ever to provide global visibility and execution support to the vision outlined by our CEO, Johan. With that, I'll turn it back over to Curtis for Q&A. Curtis, I believe your audio might be unmute. Curtis Schlaufman: Yes. Sorry. Apologies for that. So we'll go into a few questions from the chat. [Operator Instructions] First question from Niko Graseck. What do you plan to do with a big amount of cash, Johan? Johan Wattenstrom: Yes. I think we have communicated consistently since we raised the money, but I'm happy to repeat here. We obviously are focusing on organically building our business vertically as before. We are in the process right now of productifying, I would say, a lot of the IP and tech we already have in the group. So we are building our own -- the Valour Funds is a new business unit we are launching, Valour custody and so forth. So we are basically taking technology we already have in-house, and we are productifying it in terms of, for instance, the fund units that will incorporate both the usage funds, other types of funds in Europe, hedge funds, for different types of strategies geared towards different types of investors. We will use some of the funds towards seeding those. We are always keeping some cash at hand for opportunistic opportunities that pop up. We have historically seen some really good opportunities. We -- like with Stillman, we have -- we're always reviewing new opportunities like that. And I would -- should add also, we are actually monetizing that cash at the moment. They're not just lying around. So it's kind of -- we are actively working with that money. The cash also enables us to do Alpha trades in a more efficient fashion and also to go after Alpha trades we could not go after without the cash. So it's kind of a multitude of uses cases from seeding, investing in our own organic growth -- looking at opportunities, we're not really actively looking for anything. We're obviously looking for something that really fits into our structure with high synergies. But we're always looking at new cases. We will probably not do a lot of new venture capital investments, but it's mainly to drive organic growth, geographic expansion and be able to trade more efficiently. We do a lot of high ROI trading in our treasury. We are incubating trading strategies and so forth, which is a great use of cash until we need it for actually building the business. We are not using it to throw money at new markets, new products we don't really see any traction from really. I think maybe that's enough for, yes... Curtis Schlaufman: Yes. And just to provide a bit more context, last crypto winter bear market, the company was $40-plus million in debt, and we were effectively working for survival to bring the company out of those tranches this time around, of course, robust balance sheet. We can be a shark or more aggressive on the potential acquisitions of cheaper assets this time around. And then, of course, as Johan mentioned, we are using a lot of that cash to ramp up our monetization levels to increase revenue of our current core operations. So that's -- we're putting it all to work, and we'll continue to look for opportunities that will continue to grow the business and add additional revenue streams. Second question from Simon Partington. Why was AMINA Bank taken down so much? You bought it when it was CHF 1 billion in assets and you're now holding it at cost. There has to be value creation from CHF 1 billion to CHF 2.7 billion since purchase. Paul? Paul Bozoki: Yes. I'd remind everybody, we bought it in 2020, '21, which was also a large run-up in crypto. And now we're in a pullback. EV enterprise value to AUM multiples have compressed. So AMINA, just for everybody's benefit, AMINA is doing very well in growing its AUM. As we said, it's CHF 2.7 billion, is down in the quarter in line with Bitcoin. But there's been a compression for valuations of asset management companies as we've seen in DeFi stock, and I think all crypto investors that hold the usual names are well aware of the compression in the crypto equity. So AMINA Bank, even though it's private, is not immune to that, and our valuation reflects that. And likewise, we do carry at fair value. So to the extent crypto prices come up, their AUM increases and there is an expansion in EV to AUM multiples, we would, of course, write it up. Noncash adjustment, I'd like to remind people of that, and we're long-term holders. Curtis Schlaufman: I got a few questions about the NASDAQ listing status. I'll go over that really quickly. So we do have 180 days to regain compliance of trading back over $1. We do think we're extremely undervalued here and should already be trading well north of $1. If you look at the sheet here, we took effectively the average trailing P/E of Bitcoin miners, crypto exchanges and other businesses, NASDAQ-listed companies, companies on the S&P 500 and New York Stock Exchange. And the average multiple that many public companies are trading at is 24x. We're trading 4.8x at a $300 million market cap on a trailing P/E basis. So we're -- even if you were to cut our earnings in half, we're still tremendously undervalued. Based on our balance sheet and our revenue, we would qualify for an additional 180-day extension. It's effectively giving us well over a year to regain compliance over $1. I think we're still of the mindset that we want to continue to increase our revenue and revenue generate or revenue-generating capabilities and let our balance sheet and revenue speak for the share price. So it's a matter of just getting our story back out there and turning around the narrative in that sense. If we have any other announcements regarding that, we will make that known to the public. So as of right now, it's just getting the name of the company out there. Hopefully, crypto prices turn around here, Bitcoin and the rest of digital assets recover, and that will be much more helpful for the broader picture. Let's do another question from Andrew and Johan. Can you comment on when we can expect ETP volume and traction in Brazil? What's nice to see are the One Valour staking ETPs on Frankfurt, showing some buys, for instance, the ICP staking product. When can we anticipate breakthrough in Brazil? Andrew Forson: Yes. Thanks, Curtis. And that's a great question. We have taken an approach of being very, very conservative in that we do not want to be throwing massive amounts of capital at expansion efforts at a time of extreme macroeconomic volatility and compressed digital asset prices. Now that we have had an opportunity to see how the markets have settled, we believe that there is somewhat of a bottom associated with digital asset prices subject to the current macroeconomic environment. We've taken the approach of building the organic teams in each one of these markets so that we are ready to grow adoption of our ETPs and primarily be in a position so that we can have long-term quality distribution partners in markets like Brazil, the U.K. and Germany. What that means is it will take time to grow, but we are already seeing growth. We just initiated our capital markets activities in these markets pretty much last month in the month of March. Had we not listed at the time that we did list, and this is a critical point, it is possible that given the change in digital asset prices that if we had delayed the listing, we may not have been eligible to list today. So it was a prudent choice to list when we did list. And now we are working through with the understanding of what the market is now with building out the teams. We have the people in place very economically in a very cost-efficient way, and we're well positioned for long-term growth. And that growth does not just factor in our ETPs. In every one of these markets, we also try to attract buyers for DeFi Technologies DEFT stock, and we have also been forward-looking to ensure that our partners in the form of Stillman, our subsidiary in the form of Stillman Digital and our future products will also have proper distribution networks. So our perspective is slow and steady, be cost efficient, focus on prudent business, not allocating capital in a way to get a quick hit in markets that are not necessarily beneficial in the digital asset space in terms of market values, but we are committed to doing a good job in all of these markets, and we're already seeing traction already, particularly within the last month. Curtis Schlaufman: Great. I'll invite Ed Engel, analyst at Compass Point to ask a few questions. Ed? Edward Engel: A couple of questions for me. I think in the past, you've talked about -- you've got about $44 million of kind of core OpEx if you exclude stock-based comp? What AUM level do you need to be at on a fee basis to reach breakeven? Paul Bozoki: That $44 million for 2026, we feel is now $36 million. So $30 million of operating general and admin is the target for the year, plus $6 million for the fees and commissions. So that translates into $425 million for the AUM, assuming I get $11.5 million from Stillman to get the number. So $425 million at a 5.8% monetization plus 11.5% on Stillman will get -- will cover us, so the breakeven. So long-winded way of saying $425 million. So we're fine. It's on our website for everybody. We're at $460 million as of yesterday of AUM. And that's on the Valour website. Any investor can see at any time. Edward Engel: That was very helpful. And then I know sometimes reporting prelim stuff and non-prelim stuff, it gets a little hairy. But at the end of the year, you disclosed that you had $138 million of net inflows in 2025. And then I think yesterday, you said $110 million net inflows. In the fourth quarter, did you still have net inflows? I know the numbers were prelim versus not, but were there still net flows in the report? Paul Bozoki: Yes, plus 6. Edward Engel: Okay. Perfect. Okay. Paul Bozoki: 110 is the right number for the full year. That's in our cash, yes. Edward Engel: Okay. That's great. And then I guess on DeFi Alpha, just -- I mean, is it fair to assume that in a crypto winter, there is probably less near-term opportunities for that business? Johan Wattenstrom: Yes. I think it's fair to assume. I think for at least a few of them. I think there have been new opportunities on our radar here, which might be actually doable in this climate. But I would say, in general, we are also on our side, less keen to do it because we have a certain capacity per coin to pursue these trades without any market risk. And obviously, with higher markets, we will make much, much more on the trades. So yes, there's less opportunity. There is still opportunity. Some new opportunities have come up. But I would say we are less aggressive at these levels. And obviously, with the market come back, we will be focusing very hard on these transactions. But -- so it's from both sides, not only the counterparties, it's only also from our side because if we do trade here and Solana then goes up 4x to the former high, then we lost -- yes, we only own 25% of what we could do, for instance. But yes, it's -- in general, it's true. It's less opportunity because of these reasons. But also, it doesn't mean it won't happen. We have other opportunities at these levels that we are looking at, at the moment. Curtis Schlaufman: And then Mike Grondahl from Northland. Mike Grondahl: I just want to circle back to -- I think it was $44 million of OpEx that it sounds like you've reduced. Are you saying it's good to think about that level, Paul, that $36 million for 2026? What would push it higher? Any chance of pushing it lower? Paul Bozoki: Yes. Great question, Mike. We're cutting the marketing. Just for everybody, in our MD&A, I've got the detailed breakout of the $34.2 million full year operating general and admin costs. And in 2025, we did spend $8.8 million on marketing. That is most of the savings that's going to get the $34 million down to $30. Our professional fees in 2025 were $5.3 million. We also think we'll do a bit better, but I will caution people that we're still dealing with the class action lawsuit, and that's not inexpensive. So I'm not counting on large savings there. The savings will come out of the marketing spend that went along with the NASDAQ listing last year. Johan Wattenstrom: Yes. And a comment on the marketing. I think we've become more aggressive on the marketing and PR. It's that the spend goes down. It's just that we stopped doing some bad marketing that we have looked -- analyzed in the past and seen that the effect is really low, but it's super expensive. So I think we are actually doing more marketing, more aggressive in the market that matters, but we do it at a much lower cost. Andrew Forson: Yes. Just to support what Johan is saying, that reduction in marketing cost is really enhancing efficiency. We have our own platforms for communicating directly with institutional investors without having to allocate a lot of money. As a matter of fact, in some instances, we get sponsorship revenue to run some of our events where we speak to people. And with the addition of a Chief Revenue Officer in our core markets, we're doing -- I just got off a call with them. We're doing very direct-to-market communications with brokerages and platforms to enhance our visibility and all of this is at minimal to no cost. So the marketing is strong. It's how the allocation is happening that will realize significant efficiencies. Mike Grondahl: Okay. And then just maybe one more. The $114 million cash balance, I'm trying to understand how much of that you use in operating the business month-to-month? And how much of that is extra, if you will, or a little bit of excess capacity? Is there a way to frame that? Paul Bozoki: Mike, the $36 million that we just talked about, that's cash burn that needs to be covered. The rest of the money, the rest of it is really working capital on the balance sheet. Mike Grondahl: Got it. So Paul, another way of saying that is you do need about $100 million to run the business. Paul Bozoki: Well, okay, for everybody, just -- our burn rate is $36 million. And we talked that if we have $425 million of AUM and Stillman is good for $11.5 billion, we're breakeven, okay? So that's breakeven. We're at $460 million. So we're making a little bit of money even today in the bear market. The managing the AUM, and we've talked to the analysts, there's about 5% of the AUM is needed in working capital. So on $400 million, that's $20 million. And why does the AUM need some working capital? It's because we're collecting mainly Swedish kronas in Sweden. We've got to convert that to U.S. dollars, get it to a crypto exchange, buy the crypto -- and then similarly, when people cash out, you got to sell the crypto, USDT, send it to the broker, convert to Swedish crowns, pay them out. So there is a -- you need some flow for that. So that flow is about 5%, right? So on $1 billion, ideally, you have $50 million of flow. And when we raised the $100 million, that was also one of the things we put in the prospectus is more working capital so that we can grow. And then trades take working capital. So they just -- you need working capital in the business. Mike Grondahl: That's helpful. I just wanted to understand. Johan Wattenstrom: Mike, just additional there. We don't need $100 million for that. And also, it's not linearly going up with the AUM. So it's -- if we have a super high AUM, that doesn't mean if we double the AUM, that does not mean that the turnover or the inflows, outflows double. So it's -- we might go up from $20 million to $30 million or so. It's not that it doubles if the AUM goes up. So if it's a $5 billion, we still don't need more than probably $50 million in working capital for the trading. We also have third-party market makers. So it's we have a lot of ways of managing that besides our own working capital. It's obviously nice to have, but it's not a must-have with this type of working capital. And when we have this access to working capital, there's other things we can pursue in type of different trades opportunistically and so forth, but it's not a must-have for running the business. Curtis Schlaufman: That's it. All right. Allen Klee from Maxim. Allen? Allen Klee: You talked about how you wanted to get more institutional flows and products. Could you expand on that a little bit of like the type of products that you're thinking about for '26? Johan Wattenstrom: Yes, of course. So the demand we have from the institutional side is basically in other -- some of them can invest in ETNs as well, other than normal ETNs, exchange of notes or the asset-backed ones. But quite a few of them prefer funds either of a CCAF type or a usage type within Europe. A lot of them also can invest obviously normal hedge funds, Cayman-based funds. So the most of the demand is for those types of vehicles. And yes, and some of them even want to invest through tokens or vaults on-chain. So that's something we also obviously are looking at developing. So it's most of those vehicles. So some of them already can invest in what we have for sure or the competitors have like the ETNs, but we are -- we see a lot of demand for the UCITS for the CCAF and for the normal hedge funds. So that's what we're building right now and soon we'll have available. Allen Klee: Would these products be available on the exchanges that you work with? Or is this outside of the exchanges? Johan Wattenstrom: These will firstly be marketed to fund platforms globally. The UCITS funds are eligible for listings, but we will probably do that in Phase 2. There's a still a bit of a pushback from the regulatory authorities in Europe on this area. So we can't really push too quickly to not make ourselves enemies. But so they will first be available on fund platform. So available also for retail to save for pensions and so on, but on fund platforms with broker-dealers, banks and so forth, and all the major fund platforms in Europe and globally where we can get in. And the hedge funds, obviously, is a little bit of a different game where we will get into the major databases of hedge funds. We will also talking with a lot of fund of funds and it will be more of a roadshow type of marketing. But for the other types of funds, there are a lot of really big platforms with access for both retail and institutions. Allen Klee: My last question, you were talking before about the cash you need to run your businesses. And could you just touch on regarding to Stillman kind of the cash you kind of need to support the trading there? Johan Wattenstrom: They are actually self-supporting. We don't need to support them with additional operational capital from DeFi and we are supporting them in growth initiatives that they're working on to get more licenses statewise in the U.S. to get the licenses in the UAE and so forth. Areas where they already have an established base of clients. But yes, they actually -- they are growing, but they're also making a lot of money, and we don't need to -- so far, if there are more opportunities, we can allocate to them. But so far, they've been self-sufficient in working capital in regards to the group. Curtis Schlaufman: And now Kevin Dede from H.C. Wainwright. Kevin Dede: So curious to know if you have an ETP launch target for this year versus the 100 or so you expected to have at the end of last year. Johan Wattenstrom: Yes. The quick answer to that is no, we do not have a target. And I think the explanation is that last year, it was -- we thought as a strategic goal to have a really broad portfolio of ETPs. The broader portfolio of single underlying assets we have, the more alpha type trade we can pursue without any market risk and the more connection we get, obviously, with the foundations and the broader ecosystem within those assets. So it was a strategic goal at that point. I would say we'd cover most of the high-quality top 100 assets as of today. So we're not listing -- there's no more that we just need to list like we had to have 25 first half year or something. It's more just driven by what type of business deal opportunity we see and what type of different type of ETPs, more value-added types of ETPs where you could see leverage ETPs, it could be volatility target ETPs. It could be total return and others with a dividend for some foundations and so on. And also actively managed everything from funds to actively managed certificates to tokens -- so we're not pursuing just products that we, from a qualitative standpoint, see are high value-added where we can have good margins that takes us where we want to be from a product standpoint, from a qualitative perspective. We don't have any quantitative goals for this year. I think we actually -- we cover what we need to cover. Now it's more focused on creating high value-added type of strategies and investment exposures plus also making all the ones we have available in other types of -- new types of vehicles to provide access for new pools of money. So no, we don't have a quantitative target. Kevin Dede: Okay. Thanks, Johan. Paul, I may have misunderstood some of your comments. I understand no guidance. But I also thought I heard expectations for 15% to 20% growth. And I was hoping you could straighten that out for me. And are you talking about AUM, revenue, earnings? Or did I just mishear you completely? Paul Bozoki: Yes. We -- I guess you got us, Kevin, that we are a little bit -- there's some inconsistency there. So we are suggesting that Stillman will grow at 15% to 20%. So that just for clarity is Stillman, -- we're not providing on the consolidated company, which is Valour, right, is the balance, given crypto prices and the outlook. It's just -- we're waiting on that before putting out a number on where we think Valour is going to go. Kevin Dede: Do you think you'd be able to zero in on it? And about the time frame you talk about March quarter? Paul Bozoki: Let's -- I think probably the summer, guys. March quarter is here in a month. I don't personally believe anything will change in a month, but let's -- we understand that the analyst community would prefer guidance. And to the extent we're comfortable in putting out a number, we will likely do so, okay, guys? So likely not in a month, but... Kevin Dede: I think -- I don't want to step beyond my bounds here, but I think the analyst community is facing the same variables that you are and the market is highly volatile. So appreciate the feedback on that, Paul. One last thing, just on marketing, I'd like to clarify expectations on spending. I understand that you're winding it down, but you're also trying to address the institutional market. And I heard comments regarding more efficient spending, but it's not clear how that happens. Andrew Forson: Kevin, is this with regards to marketing? Kevin Dede: The marketing spend. Yes. Andrew Forson: No, I was just going to say that as opposed to using a broad brush large expense program, as Johan was discussing the fund programs, for instance, if we are going to speak to institutions, we don't necessarily have to allocate significant capital to a newsletter program. We can actually invite the institutions into a room and speak to them directly. And we can find that, that costs us a great deal less but gets us more direct interaction and helps us to close deals, which is something -- I'm not just saying that anecdotally, it's something that we've done. I think we actually have deals closing well, today. So this sort of thing, of course, we can leverage broad-based investor type marketing. But given the new products that we're looking at, given the volatility in the market, given the fact that we do have 102 digital asset underlying ETPs, which is the largest portfolio of such product mix in the world, our next phase is to not only prepare the groundwork for new products that are going to be made available on institutional platforms, but also make institutions more aware and help them to onboard their capital directly. And so it's a little bit more of a focused and a soft touch direct approach, and that also enables us to work globally and within different countries within Europe. So it's slightly different. Instead of a media spend, it's more targeted direct face-to-face with investors and allocators. Johan Wattenstrom: Yes. The cost we see is much less for the institutional approach where we do -- we are in databases. We are on the platforms, and we do a lot of roadshows person to person. That costs very little in comparison with some unrelated promotion campaigns that might have happened in the past that we will not repeat. So that's very different. And also when it comes to social media marketing on ETPs on how we market in our core market for the products, we also deploy AI to a huge extent right now in a lot of the creation and distribution and research. But it's basically a few very high-cost promotion campaigns that were done in the past that we don't like and we will not do again, and that was a lot of money. And we're expanding the campaigns to promote our brand recognition and also for the individual products to retail, that is expanding. Also the institutional outreach expanding a lot, obviously, but the cost is much lower. I think it just reflects that we paid far too much for campaigns in the past for -- basically in the North America. Curtis Schlaufman: I think I can equate to more of like it was a throwing paint at the wall. And over the past few months, since then, we've gotten a lot leaner and more targeted in our marketing efforts. Kevin Dede: So less. Yes, less just spilling paint and more Banksy. Curtis Schlaufman: Yes, more Banksy. Andrew Forson: Yes. I mean Curtis and Kevin, now when we meet with people, we have their contacts. We're able to follow up. So we are actually able to have face-to-face discussions, figure out what their capital allocation plans are going to be 2 quarters hence, and follow-up and that can result in a multimillion dollar deal as opposed to just putting something out there that may sound good and feel good, but it costs so much money and it's hard to measure the return -- it's also hard to ensure that investment happens. And going forward with things like UCITS and whatnot, this sort of efficiency with distribution. I mean, UCITS is a gold standard that has applicability internationally. So now we know who we can speak with in different markets once these products are launched, and it also gives us the opportunity to explore different markets for existing ETPs, but more efficiently so. Curtis Schlaufman: All right. I think that wraps up the analyst questions. Any final analysts that didn't get a chance. I'm not seeing any. So I think we're all set here. We'll let you go about a couple of minutes early. If we didn't get to your question, please e-mail me curtis@defi.tech. I will get to it as soon as I can. Thanks again for everyone who joined. We do appreciate your time, and we do appreciate your continued support. Again, Andrew, myself, Johan, Paul, any questions you have, we make ourselves widely available. So if you need clarification on anything, please do reach out. I think most of you know me pretty well by now. So I don't really say no to answer any questions. So there should be no excuse for folks saying that we're not paying attention, curtis@defi.tech. Thanks again, everybody. Enjoy the rest of your day, and we'll chat with you again in a few weeks.
Operator: Good afternoon, and welcome to Phoenix Education Partners Second Quarter Fiscal 2026 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Beth Coronelli, Vice President of Investor Relations. Please go ahead. Elizabeth Coronelli: Thank you. Welcome to the Phoenix Education Partners' Second Quarter Fiscal 2026 Earnings Conference Call. Speaking on today's call are Chris Lynne, our Chief Executive Officer; and Blair Westblom, our Chief Financial Officer. Before we begin, I would like to remind everyone that certain statements and projections of future results made in this presentation constitute forward-looking statements that are based on current market, competitive and regulatory expectations and are subject to risks and uncertainties that could cause actual results to vary materially. Listeners should not place undue reliance on such statements. We undertake no obligation to update publicly any forward-looking statements after this presentation. The risks related to these forward-looking statements are described in our filings with the SEC, including our most recent Form 10-K, Form 10-Q and other public filings. We will also discuss certain non-GAAP financial measures. You should consider our non-GAAP results as supplements to and not in lieu of our GAAP results. Reconciliations to the most directly comparable GAAP measures can be found in our earnings release and SEC filings. Unless otherwise noted, comments on the call will focus on comparisons to the prior year period. We also direct you to the supplemental earnings slides provided on the Phoenix Education Partners' website. I'll now turn the call over to Chris. Christopher Lynne: Thank you, Beth, and good afternoon, everyone. We appreciate you joining us. Today, we'll walk through our results for the second quarter of fiscal 2026 and the continued progress we're making on our strategy. Guided by our mission, we remain focused on advancing student success through flexible, career-relevant education for working adults. Our students balance professional and personal responsibilities as they pursue their education and our strategy remains centered on supporting their success through personalized technology-enabled programs. Fiscal 2026 also represents an important milestone for the University of Phoenix. Later this year, we will celebrate our 50th anniversary, marking 5 decades of serving working adult learners while continuously adapting to the evolving needs of the workforce. Our commitment to student satisfaction is reflected in the recent Encoura Ruffalo Noel Levitz priorities survey for online learners, a national study spanning 150 institutions and approximately 90,000 learners, which shows consistently high satisfaction among currently enrolled online students. The university administered through the Noel Levitz platform, the survey to a random sample of 20,000 actively enrolled associate, undergraduate, graduate and doctoral students representing each college and degree level with approximately 2,500 students responding. The university performed above the national averages across all 26 measured attributes, with 85% of our students reporting being very satisfied or satisfied with their online university experience compared to 73% of students in the national benchmarked institutions. These results combined with strong retention results, underscore our commitment to delivering strong student outcomes and ensuring that working adult learners develop skills that translate directly into their careers. Turning to our results. The second quarter reflects continued progress across our key priorities, enrollment growth driven by record retention, margin expansion and a strong balance sheet that gives us the flexibility to invest in students and return capital to shareholders, all underscoring the durability of our model and commitment to student success. For the quarter, average total degreed enrollment was up 1.8%. Net revenue was down 0.4% and adjusted EBITDA was up 7.8% from the prior year. Average total degreed enrollment was driven by strong retention trends. Our retention rate from the most recent annual cohort was 76.6%, up approximately 500 basis points from the prior year and significantly improved from the 59.7% retention rate from the annual cohort ending in 2017 prior to our transformation. This sustained progress reflects the continued disciplined execution of initiatives across the student life cycle aimed at enhancing engagement, persistence and ultimately, student outcomes. Net revenue was in line with expectations and adjusted EBITDA outperformed as a result of disciplined cost management and lower bad debt expense. Our employer-affiliated or B2B channel continues to be a meaningful growth driver. Employer-affiliated students represented 35% of total enrollment in the quarter, up from 31% in the comparable period in 2025, reflecting continued expansion of both existing and new employer relationships. This channel now represents over 1/3 of our total enrollment and helps reinforce the durability of our revenue as B2B students typically have higher retention. We are seeing increasing demand from employers seeking to upskill and reskill their workforce, and our flexible career relevant programs are well positioned to meet that need. We align our curriculum to in-demand skills, with students building verified job-relevant capabilities throughout their coursework, an approach that differentiates us with both employers and individual learners. We also enable our students and alumni to showcase these capabilities through shareable employer-informed skill badges and have now issued over 1 million of these digital badges to date. Complementing our B2B momentum, we are continuing to invest in technology and artificial intelligence to better serve students and employer needs. We are making meaningful progress deploying AI across the university. Examples include an AI-assisted student onboarding experience, delivering 24/7 support for students and faculty, increasing adviser productivity, expanding our software development capacity and driving greater efficiency and credit evaluation. We are using AI-driven personalization to enhance engagement and student support as well as improve conversion in our marketing and enrollment funnel. We believe these initiatives are contributing to our performance and will continue to support margin improvement. We are also investing in how the university shows up across the next generation of search and discovery platforms. As social media and AI increasingly shape how prospective students explore and evaluate their education options, we continue to optimize our presence across these emerging interfaces and ensure our outcomes-focused content reaches students wherever they are and wherever they begin their journey. We believe that our response over time has been effective as evidenced by our leading brand position across marketing platforms. While underlying demand for our brand remains strong, we experienced changes to search algorithms, which affected our marketing funnel. As we've done consistently for years, we proactively leveraged our leading brand, targeted content and digital expertise to adapt and optimize within the shifting marketing environment. As we headed into the third quarter, we have continued to see healthy underlying demand and are encouraged by the early signs of improvement in the marketing funnel from our proactive initiatives and our ability to maintain our brand leadership position. We also believe the university is well positioned for the needs of today's workforce. We are in the early stages of what many are calling the great reskilling of the American workforce. Estimates suggest that 60% of the global workforce will need to acquire new skills by 2030 to remain competitive in an AI-transformed economy. We believe the majority of jobs in the future will be held by workers fluent in AI. The workers most affected by this change are mid-career adults who need flexible career-relevant education that fits around their professional and personal lives, the exact population this university has served for 5 decades. We have been committed to the AI fluency of our students since we adopted the ethical use of AI by all of our students in our skills aligned curriculum approximately 2.5 years ago. And we will continuously adapt our curriculum and thoughtfully add AI skill development related to specific disciplines and careers that are rapidly evolving in their use of AI. Our progress is demonstrated by the reporting from 79% of the students surveyed in the most recent Ruffalo Noel Levitz priority survey for online learners that they are satisfied with their confidence applying AI tools in real-world scenarios. As we enter the second half of the year, underlying demand and retention remains strong, we remain focused on disciplined execution and thoughtful investment to support student outcomes and financial performance. Our approach continues to be guided by our mission to enhance the adult learner experience, including strengthening engagement and retention. With that, I'll turn it over to Blair. Blair Westblom: Thank you, Chris. Net revenue for the second quarter was $222.5 million, down 0.4% compared with $223.4 million in the prior year period, reflecting the impact of discounts. Average total degreed enrollment increased 1.8% for the second quarter to approximately 82,600 students compared to 81,100 in the prior year, driven by strong retention trends. Net income attributable to Phoenix Education Partners was $10.8 million or $0.28 per diluted share compared to $16.1 million or $0.43 per diluted share in the prior year. The decrease was primarily driven by higher share-based compensation expense associated with our IPO. Adjusted EBITDA for the second quarter increased 7.8% to $34.8 million compared to $32.3 million in the prior year. Adjusted diluted earnings per share was $0.58 in the second quarter compared to $0.56 in the prior year. Adjusted EBITDA margin for the second quarter expanded to 15.7%, up from 14.5%, driven by lower bad debt expense, primarily due to higher retention, partially offset by an increase in costs attributable to being a public company. For the first 6 months of fiscal 2026, net revenue was $484.5 million, an increase of 1.3% compared to $478.1 million in the prior year. Average total degreed enrollment was up 2.9% for the first 6 months to approximately 84,100 students compared to 81,700, reflecting continued strength in retention. Net income attributable to Phoenix Education Partners was $26.2 million or $0.68 per diluted share compared to $62.5 million or $1.66 per diluted share in the prior year, with the year-over-year decrease primarily driven by share-based compensation expense associated with our IPO. For the first 6 months, adjusted EBITDA increased 7.4% to $110 million compared to $102.4 million in the prior year, and adjusted diluted earnings per share was $1.97 compared to $1.92 in the prior year. Adjusted EBITDA margin for the first 6 months increased from 21.4% in the prior year to 22.7% in the current year, representing a 130 basis point improvement. These results reflect the increase in net revenue as well as lower bad debt expense, primarily due to higher retention and lower financial aid processing costs. We continue to maintain a strong balance sheet with substantial liquidity and no outstanding debt. As of February 28, 2026, total cash and cash equivalents and marketable securities were approximately $252.1 million compared to $194.8 million at the end of the prior fiscal year. The increase was primarily driven by approximately $80 million of cash generated from operating activities, partially offset by approximately $10 million of capital expenditures and previously announced dividend payments. Our capital allocation priorities remain unchanged: investing in student success and our technology platform, maintaining a strong balance sheet and returning capital to shareholders. Consistent with these priorities and our belief in the long-term value of our stock, today, we announced the authorization of a $50 million share repurchase program by the Board of Directors. This authorization provides flexibility within our capital allocation framework and the ability to manage dilution effectively over time. During the quarter, we paid a dividend of $0.21 per share. And today, we announced another quarterly dividend of $0.21 per share payable in May. We expect to continue to pay quarterly dividends of approximately $0.21 per share or approximately $0.84 per share annually, subject to Board approval. We will also continue to actively evaluate M&A opportunities that would be complementary to our existing platform and align with our capital allocation strategy. With respect to our fiscal 2026 outlook, we are reiterating our net revenue guidance of $1.025 billion to $1.035 billion and adjusted EBITDA guidance of $244 million to $249 million. As discussed, underlying demand and retention remains strong. We are maintaining our net revenue guidance, but currently expect to trend toward the lower end of the full year range, reflecting the near-term marketing dynamics discussed. Given our execution to date, we are confident in our adjusted EBITDA outlook and believe we are trending toward the upper end of our guided range. This reflects disciplined cost management and efficiencies driven by our strategic and operational initiatives, including AI and technology-enabled capabilities, which we expect to support margin expansion over time. We operate from a position of financial strength, supported by strong cash generation and disciplined capital allocation. We are confident in the long-term durability of our business and remain focused on execution while continuing to invest in student success and long-term value creation. I'll now ask the operator to begin the question-and-answer session. Operator: [Operator Instructions] Your first question comes from the line of Jasper Bibb with Truist. Jasper Bibb: I wanted to follow up on some of the marketing themes you discussed. Can you maybe give a little bit more detail on the trends you've seen over the past couple of months on starts or application growth as the company navigated the channel shift you discussed from Gen AI to search or search AI, I'm sorry. Christopher Lynne: Yes. Jasper, this is Chris. Good to hear from you. Yes. So we've been navigating changes to online search for quite some time now. And coming into the quarter, we did experience another algorithm shift in AI search on Google, which had an impact to how prospective students were navigating their search process. We responded to it quickly and working with Google to understand, and this is something we're very good at. We've done for years to understand these algorithm shifts. And an example of some of our responses to that. We are learning that the AI overviews on Google now are more reliant as a primary source on YouTube. And for many years now, we've been #1 in our sector in social media. We've developed a lot of outcomes-based content that is out there that's really generated strength for us. And so one of the things we did is we migrated a lot of that content over to YouTube. And so we made changes like that, that have -- we talked about in our opening remarks that we've seen improvements in some of these recent trends coming into Q3 back in line with the trends that we were expecting for this year. To answer questions directly about applications, really, this happened going into our January enrollment period. So there was some impact on the January enrollment. And the way I would characterize it is we're seeing healthy demand at the top of the funnel. We're seeing changes in how that demand is coming to the university through multiple channels. And we've been reacting to those changes to make sure that we meet the demand where it comes to us effectively. And we feel like we've responded well in line with how we've been managing these types of changes over time for the last several years and are happy with the trends that we're seeing going into Q3. Jasper Bibb: That all makes sense. And I'm not sure how much you can address this, but I think the education department changed the rules around private equity ownership in this space. The company's majority shareholder is obviously a private equity firm. Does that change anything on how they think about their investment or time line there that they've conveyed to you? Christopher Lynne: The short answer is no. And I think the changes you're referring to are related to the program participation agreements. And we just entered into a 6-year agreement last year. And based on any of the guidance received, we don't anticipate any impact. Operator: Your next question comes from the line of Alex Paris with Barrington Research. Alexander Paris: Congrats on the outperformance in the quarter. Just to clarify your answer on the previous question. Chris, you said coming into the second quarter, these changes were made at online search, and it had an impact on Q2 enrollment? Christopher Lynne: Yes. It was ahead of the January enrollment season later in January, we saw some impact, which ended up being, we believe, a result of an algorithm shift in Google's AI overviews. When we were seeing that, that was in the late or early winter, so November, December time frame. Early on, it looked like some seasonality that we were trying to understand, we later recognized that the algorithms did shift and so the way we responded to that was multifold. We had a lot of responses, really just continuing to do a lot of the same things that we've been doing for years. I think one of the more material changes we made was learning that Google had shifted to YouTube as being a primary source for the AI overviews. And despite the fact that we were very strong in content across social media, we weren't where we can be with YouTube. So we made some large shifts in the January and February time frame to address that. And when I mentioned that we're seeing trends return back to trends we expected for the year, that began to occur back in early March. Alexander Paris: Okay. Got you. I just wanted to clarify that. So you saw the initial impact early in the second quarter, you made some changes and then early here in the third quarter, month of March, you're seeing some improvement? Christopher Lynne: Yes. I would say the impact was noticeable really in the later part of the second quarter, but the algorithm shift happened in the early part of the second quarter. Alexander Paris: Okay. Got you. So the shift early in the quarter, the impact late in the second quarter and then here early in the third quarter, you're seeing some improvement in response to some of the changes that you've made, you think? Christopher Lynne: Yes. I mean we've seen continuing through all of this, we've seen strong demand for our brand, which is the very top of the funnel. One of the most effective ways of looking at that is just the inquiry searches for our brand on Google. And then the next measurement we look at is how that demand comes to us on our website, and it comes from various channels. And we've seen strength in how that inbound demand is coming to us. That's returned back to what I would call normal relative to our recent history here in the early part of Q3. Alexander Paris: Got you. And then so the second question is for Blair in your comment regarding revenues and the guidance for the balance of the year, you said that revenue should trend to the lower end of the full year range because of some of these marketing issues? Blair Westblom: Yes, that's right, Alex. As discussed, we would expect revenue to come in, in the lower part of the range just given the marketing dynamics that we've observed. Chris, is there anything you'd like to add to that? Christopher Lynne: Yes. I mean the way we looked at it is we took the best information available. We didn't feel based on that, that we should change the range, but we did want to guide to the lower end given these dynamics we saw in Q2. Alexander Paris: And again, it sounds like conservatism, given you said that things have kind of returned to normal here in, I don't know, month of March or early April? Christopher Lynne: I would call it, Alex, prudent. I mean we -- I think you'll learn the style of this management team over time. We try to be prudent. I would also say that there's always a cycle time. So when you see demand, it works its way through the funnel. And so I think it's prudent because we're seeing what we need to see, but we also know that there's seasonality in terms of when students actually begin their classes. And so we took that all into consideration with our guidance. Alexander Paris: Okay. That's great. And then just to button it up. Adjusted EBITDA, on the other hand, is trending towards the upper end of the full year range, and that's due to cost management as well as lower bad debt related to the better retention. Do I have that right? Christopher Lynne: Yes, absolutely. And it's also a reflection of the good work that our teams are doing, leveraging our technology and AI solutions. That's been a big part of our story for years. And we're seeing nice traction in getting efficiency. You heard it in our opening remarks that our story has been -- we've been effective at gaining improvement in student outcomes while reducing the cost to deliver those outcomes. And we continue to see the ability to do that, not only improve retention, but improve the efficiencies in generating these results. And we believe that we're going to maintain those types of efficiencies through the remainder of the year. Alexander Paris: Your next question comes from the line of George Tong with Goldman Sachs. Keen Fai Tong: Can you provide an update on your fraud prevention initiatives and your estimate of how much of an impact that is currently having on enrollment performance? Christopher Lynne: George, yes, thanks for the question. Very similar to last quarter. We feel really good about the infrastructure that we put in place last year. If you recall, we did see a lot of friction as we were putting the infrastructure in place. And then in Q4 of last year, we made a choice to include some of the analytical detection and verification processes at the top of the funnel. And we saw a lot of friction in Q4. That improved significantly coming into Q1. It's improved even further into Q2. What I would say today is we have a very strong, agile system of detection based on strong analytics and prevention with verification, fraud detection with our bank accounts that's working very well. We think that this is doing a couple of things. While there is a lot of UEA activity in the marketplace, we are seeing evidence that as it relates to us, while we still see a lot of volume try to get into our funnel, it's dissipated quite a bit. So we do think that our systems of controls have deterred the volume from trying to penetrate our university as often. And we've gotten better and better at that balance of reducing friction significantly for well-intended students so that they can have a normal process of working their way through the enrollment process. So we feel really good about where we're at. We have it under control through Q2. It's a day-to-day thing, but our systems are great. And I would say there is a little bit of friction that will exist as long as this activity exists in the marketplace, but it's not something that we consider material to date. Keen Fai Tong: Got it. That's helpful. And then your retention rate expanded quite a bit, 500 bps year-over-year in the quarter. Can you elaborate on the initiatives that drove this level of improvement and if this rate of improvement is sustainable or more onetime in nature? Christopher Lynne: Yes. Thanks for that question. I'll say there's a -- we're in the probably eighth year, if I'm doing my math, our ninth year of a transformation that we've been talking a lot about. We've seen many, many years of consistent meaningful improvement in our retention rates, which ultimately will lead to stronger and stronger graduation rates. And it's a myriad of things. I mean we've built a technology digital-first platform inside and outside the classroom that leverages our data in really powerful ways to predictively meet our students when and where they need us with solutions. And we have hundreds of solutions that we're constantly focused on that are removing friction or finding ways to get more effective outcomes to our students. Some of the bigger needle movers we talked about were mobile-ready courses in those early courses where students are acclimating into the institution. That's had a meaningful uptick because as they have success in those early courses, they get more confident and then they end up persisting. If they can get first -- through the first 2 or 3 courses, they persist at much higher rates and graduate much higher rates. Dispersed by course we've talked about in the past has also been a really meaningful needle mover. But there's numerous other things, and that's part of our story. Like we're really excited about this moment where -- at which AI technologies are we're in a position to leverage these technologies in ways to continue to do what we've been doing, which is improve these retention outcomes for our students and satisfaction outcomes while reducing the cost to deliver them. And we're seeing an acceleration of AI initiatives across the Board from our AI-assisted student onboarding to human-in-the-loop solutions that are taking cycle times and supporting our students down considerably while getting to more effective solutions in a much more efficient way. Examples are our transcript evaluations. We've seen those cycle times improve. We still have our transcript evaluators in the process, but we're leveraging AI and other technologies to make that process much more effective or call summarizations that we're leveraging across our student-facing positions that enable us to take many, many minutes, sometimes more than 10 minutes out of the preparation process of supporting a student and put us in a position to give them even better support, leveraging AI to better summarize where we are with that student and what next steps we should be taking. So we expect it to continue. Now in terms of the onetime, 500 basis points improvement for undergrad programs in fiscal '25 was an enormous improvement. We're very proud of it. I would not expect that year-to-year. That is really -- you don't see that often. You get a 100 basis point improvement in any given year, and that's a pretty meaningful jump. But we have continued to improve versus last year. So we do expect to continue to improve retention going forward. That's a really important part of our strategy. Operator: Your next question comes from the line of Griffin Boss with B. Riley Securities. Griffin Boss: I just want to jump right back into that discussion on retention, more so directed at the expansion of your employer-affiliated students or the B2B segment, if you will. So we've talked about this plenty in the past. I'm just curious, I mean, you've expanded that from what was it 31% a year ago, now it's a 35% of total enrollment. Where -- can you just remind us where you think that, that level can go or maybe what you aspire to do? Obviously, this is a big strategy for Phoenix in terms of retention. But you've talked about in quarters past how this -- you could see kind of overall revenue growth trailing enrollment growth given some of the Myriad things that you've discussed today on top of B2B. But is that going to continue into -- past the third quarter at this point? Just kind of where you're at on the B2B initiatives at this point? Christopher Lynne: Yes. Thanks, Griffin. I really want to address 2 parts of your question. One, where we're going with our B2B growth; and two, the relationship between revenue and enrollment because I want to be really, really clear on how I think you should be considering that. In terms of B2B growth, I mean, this is a big part obviously, we've discussed for a while of our long-term strategy. We think we're well positioned to meet the reskilling needs of employers and their employees who are working adult students. And we're positioned well to continue healthy growth in that segment. We increased the size of our account management teams this year by about 25%. We're seeing the benefit of that, both in expanding growth within existing relationships as well as growing new employer relationships as well. And we believe we can continue healthy growth in that area. We're not in a position to give you a long-term view on that, but we have a -- well over a majority of our students are working adults. We have over 2,500 employer alliances that cover a large percentage of the market share of employed work in adults. So we do think that there is strong upside in growing that channel. In terms of the revenue and enrollment relationship, we do have a discounted rate on average for B2B. And I think we mentioned that in our opening remarks. That's been very much in line with our expectations. And just as a reminder, our B2B students retain at higher rates. It's a very durable revenue stream. And over time, they have very similar profitability characteristics as our B2C students. And the bigger the channel gets, the more effective it is at reducing the acquisition cost of growing that channel. So we feel really good about that being in line with expectations. But the other relationship between revenue and enrollment to keep in mind that I talked about in previous quarters is last year, we had a higher volume of students enter our risk-free period. This is not anything to do with B2B, but we had a larger percentage, and we offer a risk-free period to students that have certain risk characteristics that don't correspond to higher retention rates. So we offer them the opportunity to try our courses out before they enroll. That did result in more of those students deciding to enroll, but not persisting beyond their initial courses. So I mentioned this early in the year for a reason because we anticipated in this quarter and in Q3 that would affect we have atypical relationship between our average enrollment and revenue as a result of that experience last year. We're not having that experience this year. We have students that -- in terms of student mix that we expect to persist much longer, but it is affecting that trajectory in Q2 and Q3, and we expect that to reverse back to more normal trends in Q4. Operator: Your next question comes from the line of Jeff Silber with BMO Capital Markets. Ryan Griffin: This is Ryan on for Jeff. I had a question. I know business and IT are big program concentrations for you. I was wondering if you're seeing any shifting degree preferences from students as some of the newer students might be fearful about the potential Gen AI impact. I know we saw some of that in the fall clearinghouse data. So curious as it relates to your business. Christopher Lynne: Yes. Thanks, Ryan. Yes, we're looking at that very closely. I think what I'd like to point out that we feel really good about is we made multiyear investments in aligning all of our curriculum to career relevant skills. And that's across all of our programs. We're very comfortable with the breadth of our program offerings, including our business and IT programs. And what that means is that in every course a student takes, they can earn verified skills that map to the career relevant skills that employers need today. We've embedded AI fluency into the skills aligned curriculum over the last 2.5 years. And so we feel very good about the differentiation of our programs from a skills alignment and the relevancy to the workforce needs today. And we're seeing that -- we believe that's evident in the growth that we're seeing directly in the B2B relationships because these -- we're growing existing relationships where we still compete against other universities and colleges, and we're able to expand our growth, and we believe that differentiation is a very helpful driver to that growth. And we're seeing growth in all of our programs. One of the strong trends I also read about is in health care and nursing. That has been a nice tailwind for our health care programs and nursing programs. Health care employers are the largest segment we have across our B2B portfolio, just under 30%. But we're seeing growth of all of our programs within that segment. And many of our programs are business and IT because there is demand from those employers and those employees. So we feel comfortable with where we're at as it relates to the University of Phoenix's programs. Ryan Griffin: And I appreciate the color on the B2B enrollments and the strength of those relationships. I'm just wondering how you're thinking about the non-B2B degreed enrollments? And are you investing there? And how has that kind of been trending? Christopher Lynne: Yes. So we have variability between B2C and B2B throughout the year. We're comfortable with the demand we're seeing across both programs, both channels. We think that if we're meeting the needs for employers and workers, we're meeting the needs for those that don't have benefits under employers and are working mid-career working adults. So we feel like that differentiation is helpful across B2C and B2B, and we feel like we see plenty of evidence of that in our demand framework. Operator: Your next question comes from the line of Stephanie Moore with Jefferies. Stephanie Benjamin Moore: I wanted to appreciate all the feedback this afternoon. Maybe you could talk a little bit about the competitive landscape right now. You talked a lot about the investments that you've made, specifically kind of targeting from a marketing standpoint. But maybe just give us an update on just how you would characterize the pulse of the overall competitive landscape. And then as you think about your strategy over the course of the next 1 to 2 years, what we could expect to see as you continue to look to differentiate yourself? Christopher Lynne: Yes. Thanks for the question. We have a very large addressable market, both students with some or no college, some college degree or some college credits that want to complete their degree and those that have no college credits and want to complete their degree. And for a lot of those students, we may not be competing with anyone except for motivating them to pursue getting skills that could advance their careers. So we tend to focus on what are the needs of those potential students that we can support. Students have a need for skills today. They want career-relevant skills that not just wait for a degree, but that they're getting skills along the way that have value in the workforce. We believe that we're delivering on that in a very differentiated way. Each course, they're getting skills in weeks, not years. That's one of our primary campaigns. And we don't have many competitors that can say the same thing based on the substance of what they deliver. And so we think that, that positions us very well to meet the needs. There's also other things that we do very well at saving time and money. We're very effective at helping students with previous college credits, leverage those college credits to save time and money. So we make sure that we differentiate the experience that those students have and getting credit on the front end. The more effective we are there, the better we compete with other institutions like ourselves. There's a lot of flexibility, our empathetic support process is something that busy working adults who are a little bit cautious about pursuing college again. They see that as a very strong value proposition. So the more effective we are at telling people what we do really well and helping them understand how we do it better than our competitors tends to help us be effective in the marketplace. And we just continue to lean into those distinctions effectively in our marketing efforts. Stephanie Benjamin Moore: Got it. And just as a follow-up, I mean, I think we're all a society thinking about the way we use education is differently now with AI. So I guess maybe just to wrap it up, I mean, do you feel like there's a strategy in which you can kind of advertise your approach not only to everything you just outlined, but that in Gen AI world, maybe how you pursue education could be different? I guess I'm just a high-level question if that is. Yes. Christopher Lynne: I'm thrilled you asked it. Look, we think the evolution of AI is extremely powerful to our business model and how we serve our students. We talk a lot about that. But to answer your question, when you look at the workforce trends, what's existing today and where the world is going, and we talked about this in my opening remarks about this great reskilling as they call it, we're living that. I mean this is a rare moment where we're looking at our own institution and working on reskilling our entire employee base to help them leverage tools that magnify their ability to pursue the goals that we have. There's a lot of organizations like us that have a big vision. And the use of AI is powerful at a person level, at a workflow level and at a corporate level in helping institutions get to the visions that they have. So the entire workforce is going to need these skills in order to drive the goals of tomorrow. And we know that the workers that are fluent and are capable in using AI are going to have the jobs of tomorrow. We're extremely well positioned. We think this is a tailwind for the university. We adopted AI into our curriculum almost 2.5 years ago. We were a first mover here. Now all institutions are trying to figure out how to do this. Our students are gaining fluency in AI. We're getting deeper and deeper into looking at what our employer partners and industry councils are looking for in the workplace and building those technical skill needs into our program. So we think we're well positioned to help our students gain skills for tomorrow. We also think our differentiation is we understand the adult learners. So when you look at the learner today, more and more learners are becoming what we have served for almost 5 decades, an adult learner that is constantly looking to upskill that values the pursuit of a degree, but they're working, they have responsibilities along the way. AI has changed the game so much. The speed and movement of skills in the workforce is going to cause more and more learners to look like our learners, and we're well positioned to deliver value. And we know they want value along the way as well as through the degree, and we have a curriculum that offers them skills along the way as well as the degree. So we think we're very well positioned within the trends that we're seeing in the workforce today as it relates to the AI. Operator: That concludes our question-and-answer session. I will now turn the call back over to Chris Lynne for closing remarks. Christopher Lynne: Thank you. Our results this quarter reflect continued progress in executing our strategy. We remain confident in the strength of our mission, the resilience of our model and our ability to continue to deliver strong student outcomes. I want to thank our faculty and team members for their continued dedication to our mission and commitment to student success. Thank you for joining us today.
Operator: Thank you for standing by, and welcome to Skillsoft's Fourth Quarter Fiscal 2026 Results Conference Call. [Operator Instructions] Please note that today's call is being recorded, and a replay of the call and webcast will be available shortly after the call concludes for a period of 12 months. I would now like to hand the conference over to your first speaker today, Nick Teves, Investor Relations. Thank you. Please go ahead. Nick Teves: Thank you, operator. Good day, and thank you for joining us to discuss our results for the fourth quarter ended January 31, 2026. Before we jump in, I want to remind you that today's call will contain forward-looking statements about the company's business outlook and our expectations that constitute forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, including statements concerning financial and business trends, our expected future business and financial performance, financial condition and market outlook. These forward-looking statements and all statements that are not historical facts reflect management's current beliefs, expectations and assumptions and therefore, are subject to risks and uncertainties that could cause actual results to differ materially from the conclusions, forecasts, estimates or projections in the forward-looking statements made today. For a discussion on the material risks and other important factors that could affect our actual results, we refer you to our most recent Form 10-K and other documents that we file with the Securities and Exchange Commission. We assume no obligation to update any forward-looking statements or information, which speak as of their respective dates. During the call, unless otherwise noted, all financial metrics we discuss other than revenue will be non-GAAP financial measures, which are not prepared in accordance with Generally Accepted Accounting Principles. For example, listeners should be cautioned that references to phrases such as adjusted EBITDA and free cash flow denote non-GAAP financial measures. Non-GAAP financial measures should not be considered in isolation or as a substitute for GAAP financial measures. Presentation of the most directly comparable financial measures determined in accordance with GAAP as well as the definitions, uses and reconciliations of non-GAAP financial measures included in today's commentary to the most directly comparable GAAP financial measures is included in our earnings press release, which has been furnished to the SEC on Form 8-K and is available at www.sec.gov and is also available on our website at www.skillsoft.com. Following today's prepared remarks, Ron Hovsepian, Skillsoft's Executive Chair and Chief Executive Officer; and John Frederick, Skillsoft's Chief Financial Officer, will be available for Q&A. With that, it's my pleasure to turn the call over to Ron. Ronald Hovsepian: Thanks, Nick, and good afternoon. Thank you to everyone for joining us today. Over the past 18 months, we have worked through two important and related efforts at Skillsoft. First, we undertook a strategic transformation to reposition the company for where the market is going. Second, during FY 2026, we made meaningful operational progress against that strategy while navigating a very challenging external environment. Let me start with the strategic transformation. We began with a comprehensive assessment of the market, where the customer demand was heading and where Skillsoft could differentiate in a durable way. That work confirmed 3 foundational assets in the business: our content, our platform and our data. Those assets give us a credible foundation to evolve from a traditional learning company into an AI-native skills platform built for the enterprise needs. From there, we put in place a clear transformation plan and applied sharper prioritization with greater discipline to capital allocation. Using that same discipline, we reduced gross costs by approximately $45 million and reinvested roughly half of that into areas that we believe would matter most for long-term value creation, primarily go-to-market capabilities and AI-driven product innovation. FY 2026 was about turning that strategy into execution. And I want to be clear on the context. We made progress while operating against a backdrop of significant macro and geopolitical uncertainty. Earlier in this year, bookings were affected by executive orders, DOGE-related actions and broader disruption in parts of the government market. As the year progressed, that uncertainty was compounded by additional global geopolitical instability and a more cautious enterprise spending environment. Despite that, we made substantial operational progress. We advanced our product road map, including the release of an upgraded version of CAISY, our AI simulation offering. We announced our new AI-native platform in September, and we brought it to general availability in February. Since launch, we have secured 15 paying customers, and we are also using the platform internally in our own operations, which is helping us refine the experience and accelerate learning from the market while becoming more efficient as a company. At the same time, we continue to simplify and focus on the business. We further streamlined the cost structure, improved efficiency and maintained prioritization and disciplined capital allocation with the outcome of generating positive free cash flow. Just as important, FY 2026 demonstrated the financial durability of the business as we operated with discipline and continue to fund our transformation in a highly uncertain environment. That same discipline also led us to initiate a strategic review of Global Knowledge, which remains underway as we continue to focus capital and management attention on the areas of the portfolio with the strongest growth, margin and cash flow characteristics, particularly TDS. As we sit here today, I think there are 3 things that matter most. First, the strategic transformation was necessary with the AI disruption. And that transformation is well underway as we reposition the company around AI-native and AI-enabled skills platform model. And that positioning is increasingly resonating with customers. Second, FY 2026, we represented substantial operational progress. We improved focus, advanced the platform, made the cost base leaner and more directed, strengthened execution discipline and delivered positive free cash flow, all while continuing to manage through a meaningful market disruption. Third, we're beginning to see evidence that this work is gaining traction. Our platform is winning customers. Our AI capabilities are seeing strong engagement, and we believe our TDS Enterprise business has reached a revenue inflection point. When we look at the market, many companies are talking about skills and many of them are talking about AI. What we believe differentiates Skillsoft is our ability to bring together content, platform, data and AI in a way that is usable, governed and scalable for the enterprise. Our differentiation comes down to 3 things. First, our skills intelligence. We have a deep and structured body of enterprise learning data mapped to roles, domains and job-relevant use cases, which gives us a meaningful foundation for a skills-based development. Second, the integration of content, platform and data. We are not offering a narrow point solution. We are delivering an integrated system that can help customers move from learning activity to workforce capability and measurable outcomes. Third, our ability to operationalize AI in the enterprise environments. Customers are not looking for AI as a feature by itself. They are looking for trusted partners that can help them apply AI securely, responsibly and in ways that improve workforce readiness in a measurable way. All of this is delivered through our AI-native skills (sic) [ Skillsoft ] Percipio Platform, which brings together learning content, skills data and measurement into a unified system. It can serve as the front end of a learner relationship or as the back end of the skills management process, giving customers flexibility in how they deploy it in their enterprise environments. That is exactly how we are seeing it in the market. One concern we sometimes hear is whether AI could reduce the relevance of categories like ours. What we are seeing suggests the opposite. AI is increasing the urgency of workforce readiness. It is widening the skills gap faster than many organizations can close it and driving demand for solutions that can translate into AI true role-based execution. This is not just conceptual, it is showing up in customer behavior in platform usage and in buying decisions. For example, one of Singapore's largest telecommunications providers selected Skillsoft through a competitive RFP process to support an AI-led workforce transformation mandate, not simply to extend a content relationship. Across the organization's entire user base, Skillsoft is helping support role redesign, develop AI capabilities and embed learning into the flow of work. Early activation includes persona-based learning for an internal AI academy and pilots around AI augmented job redesign. We saw something similar with a large global health care organization, which entered into a multiyear partnership with Skillsoft to help operationalize an AI-first operating model. They are using Skillsoft to translate AI advancements into role-specific capabilities and move from fragmented learning approaches toward a more centralized and business-aligned skills model. We're also seeing a strong signals in our own engagement data. AI skill benchmark completions increased 994% year-over-year. AI content completions increased 261% year-over-year. AI Journey completions increased 222% year-over-year. CAISY learners increased 146% year-over-year and CAISY launches or engagement increased by 341% year-over-year. To us, that matters because it reflects active scaled behavior tied directly to workforce transformation. It suggests that AI is not displacing the need for skills development, it is increasing it. And as enterprise move faster on AI, they're also becoming more aware of the risks of moving without verified workforce capability. AI without demonstrable skills can create a real business risk, including poor decision-making, compliance exposure and lower productivity. That is the one reason buyers are becoming more focused on ROI, measurable outcomes and trusted platforms that can support enterprise execution at scale. So when I step back, I would frame FY '26 this way. It was a year of significant strategic and operational progress in a highly uncertain environment. We continued transforming the company. We advanced our AI-native platform and broader AI capabilities. We sharpened the operating model. We demonstrated financial durability, we improved execution discipline, and we began to see clear evidence of the traction in the market. There's still work ahead, but the direction is increasingly clear. We are building a more focused company, a more differentiated AI-native platform in a market where the need for skills-based workforce transformation is growing, and that demand continues to build. We believe Skillsoft is increasingly well positioned to translate that market shift into durable growth. With that, let me turn the call over to John to cover our financial results in more detail. John? John Frederick: Thank you, Ron, and good afternoon, everyone. As a reminder, and as noted at the opening of the call, consistent with prior quarters, this section covers non-GAAP measures unless otherwise stated. During mid-fiscal '25, we presented our strategic and financial road map to the Street. For fiscal '25 through fiscal '26, our stated financial objectives were: first, $45 million of annualized expense reduction in fiscal '25. This was achieved. Second, margin expansion in fiscal '25 and '26. This was also achieved. Third, return to top line growth in fiscal '26. This was achieved for TDS Enterprise, but not for Learner or for GK, which informed decisions around the latter 2 businesses. And finally, fourth, positive free cash flow generation in fiscal '26. This was achieved for fiscal '25 and for fiscal '26. While macroeconomic disruption and minor operational time delays impacted bookings and revenue during fiscal '26, the company delivered on its structural objectives of cost reduction, margin expansion and cash generation, validating that the transformation strategy presented at Investor Day is indeed on track. Now turning to the results. Revenue for TDS was $102.6 million for the fourth quarter, nearly flat year-over-year, with growth in our Enterprise Solutions business offsetting a continued drag from our B2C learner product. Global Knowledge revenue of $28 million in the quarter was down approximately $2.9 million or 9.4% year-over-year. The trends we've seen earlier in the year for demand and instructor-led training have continued. Total revenue of $130.7 million in the fourth quarter was down $3.1 million or 2.3% year-over-year. Our TDS LTM dollar retention rate, or DRR, as of the fourth quarter was 98% compared to 105% in the prior year quarter. Customer retention improved year-over-year, while customer upgrade rates declined more, reflecting a challenging year-over-year comparable period. Going forward, we believe that the release of the new platform should enable us to move back to historical upgrade rates and beyond. Now I'll walk you through our expense measures, which taken as a whole, continue to see year-over-year improvements. Cost of revenue was $34.2 million in the fourth quarter or 26% of revenue, up 2.5% year-over-year, reflecting higher labs and certification spending resulting from higher customer utilization. We have changed the way we structure some of these agreements to avoid these overruns in the future. Content and software development expenses of $12.8 million in the quarter or 10% of revenue were down approximately 5% year-over-year. These improvements largely reflected productivity gains from leveraging AI and sharper focus. Selling and marketing expenses of $37.5 million in the fourth quarter or 29% of revenue were down approximately 5.6% year-over-year, resulting largely from lower program spending, reflecting our drive for capital allocation discipline. General and administrative expenses were $15 million in the fourth quarter or 11% of revenue, down approximately 13% year-over-year, reflecting lower headcount and vendor spending, continuing our drive for a leaner, more efficient cost structure. Once we complete the GK strategic assessment process, we believe we can streamline the cost structure further. Total operating expenses were $99.5 million in the fourth quarter or 76% of revenue and were down $4.3 million or 4.2% year-over-year. Adjusted EBITDA of $31.2 million was up approximately 4% compared to $29.9 million last year, with adjusted EBITDA margin as a percentage of revenue for the quarter at 23.9% compared to 22.4% last year. We estimate that TDS contributed approximately $33 million to EBITDA, driving most of the improvement in both EBITDA dollars and EBITDA margin. GAAP net loss was $36.7 million in the fourth quarter compared to a GAAP net loss of $31.1 million in the prior year period. The increase in GAAP net loss resulted primarily from an intangible impairment charge and higher restructuring expenses, offset somewhat by lower expenses. GAAP net loss per share was $4.19 compared to $3.75 loss per share in the prior year period. Adjusted net income of $11 million in the fourth quarter compared to adjusted net income of $17.5 million in the prior year. Adjusted net income per share of $1.26 in the fourth quarter compared to adjusted net income per share of $2.11 in the prior year. Now moving to cash flow and the balance sheet highlights. Free cash flow for the quarter was $26.5 million compared to $13.2 million in the prior year period. As a reminder, last quarter, we highlighted delayed collections in the third quarter would be recaptured in the fourth quarter, which, in fact, happened, driving a portion of the improvement. GAAP cash, cash equivalents and restricted cash was $104.5 million at quarter end. Total gross debt on a GAAP basis, which includes borrowings under our term loan and accounts receivable facility was $578 million at the end of Q4, down slightly from approximately $581 million at the end of fiscal '25, reflecting normal amortization. Total net debt, which includes borrowings under our term loan and accounts receivable facility, net of cash, cash equivalents and restricted cash was approximately $474 million, down from approximately $477 million at the end of fiscal '25, reflecting our positive free cash flow for the year, which came in just above the high end of our expectations at $6.5 million. We continue to make progress on our strategic assessment of GK that we announced in our Q3 earnings call. We're in active discussions with multiple parties, having completed a recent bid date. However, the conflict in the Middle East has had meaningful impacts on our process given GK's direct exposure to the Middle East, fears of global economic issues and some potential buyers being physically located in the market. We will keep our stakeholders updated on this, and we are working quickly with speed and certainty as key guardrails in our assessment. That said, there can be no absolute assurance of a successful transaction. Looking to fiscal '27 guidance. For TDS, we expect revenue for the full fiscal '27 year of between $388 million and $406 million and adjusted EBITDA between $108 million and $116 million or around 28% of revenue. Putting aside GK, we expect free cash flow in the range of $14 million to $22 million for TDS. With that, operator, please open the call up to questions. Operator: [Operator Instructions] And our first question comes from the line of Ken Wong with Oppenheimer & Company. Hoi-Fung Wong: Great to see a solid close to the year, guys. Ron, maybe starting with you. When I look at the TDS guidance, it does show a slight decline. Can you talk through some of the business dynamics that you're seeing, some of the -- maybe how that progression could look through the year? And then, John, to the extent that you can maybe comment on the levels of conservatism or some of the assumptions that are baked into that guidance, so we have a sense of kind of the -- how qualified that number could eventually settle out at? Ronald Hovsepian: Thanks, Ken. Great to hear your voice. The key business dynamics that you're asking about that are influencing are some historical pieces that I'm looking at my teammate, John, and he'll walk you through them so you can bridge them as part of it. So we've got some historical pieces with the normal things you're seeing. I'd just remind everybody, when we came into the year, we were driving our strategic transformation and that operational turnaround. We've made really good progress against that as part of it. So now we're shifting to the phase here where we're going to start to focus on the growth. That will show up actually first in bookings before it shows up inside of the revenue number. And the revenue had some headwinds and other dimensions that I'm looking at John to cover with you so we can bridge those numbers to you to make it clearer of where we're going. But the market is definitely slowed and focused on it right now. Customers are thinking. That plays right to our core strategy of that learning unified platform, the Skillsoft Percipio Platform, unifying all their skills management needs. That's definitely been the conversation. As we said, we've now signed up 15 customers on to that strategy and that journey with us, all paying customers, which is great. So I'll flip it over to John to fill in the rest of that guidance dimension for you, and then we can come back to it more, Ken. John Frederick: Ken, thanks for asking the question. So if you break down TDS, we have 2 components of it. We have a consumer business, we have an enterprise business or an enterprise solution, if you will. When you think about the relative size of those 2 components, consumer is about 9% of the total and Enterprise is the rest just to contextualize it. When you look at the midpoint of our guidance, we're down about $7 million year-over-year at the midpoint. Nearly all of that is as a result of our consumer business. The enterprise business has actually been performing reasonably well. It hit the inflection point. We've talked about that. So we're pretty happy with that. Some of the headwinds that we saw earlier in the year, namely some of the churn in some of our government federal clients put a bit of a bookings headwind going into fiscal '27, as Ron was commenting on the fact that you really have to get the growth out of bookings first before you get it in revenue. We had a bit of a headwind from that. We think that we can overcome most, if not all of that and perhaps grow from a revenue basis in enterprise, but we'll continue to have -- we're planning for a continued decline in the consumer business. Hoi-Fung Wong: Got it. Okay. That's fantastic. I appreciate that. And I guess maybe just continuing down that thread, like you guys highlighted some macro geopolitical uncertainty. Obviously, you've got a new platform out there that probably takes a little time to ramp. Should we assume that you have an elevated level of conservatism in that guide relative to how you guys typically approach it? What's the right framing of the setup on numbers here? John Frederick: Yes. I think the range that we put out, I think, is pretty reflective of what we're seeing in the market right now, which is really a couple of components. At the low end of the range, we're thinking about things like pressure from the Middle East, most notably at the low end of guidance. At the high end of guidance, we're assuming that we can temper the decline in the consumer business and that we have a well-performing Middle East business. So just to kind of think about the two ends of the spectrum that kind of informs where we could end up and it actually gives you a way to track how we're doing through the year. Hoi-Fung Wong: Got it. Okay. Fantastic. And Ron, you touched earlier on some of the customer engagement on the AI side and north of 200% on a few of your key KPIs there. Any thoughts on how the time line might look when you move from activity to workforce transformation and then hopefully, workforce transformation leads to monetization. Like what's the path forward on that particular time line? Ronald Hovsepian: Yes. It's a multidimensional time line. So to your first part of the time line, we're already collecting from those customers in those numbers I just gave you, right? So we're already getting some of that revenue as part of that journey. Two, when we structured it was we wanted the customers to really begin to use it. So we were more open about the usage of how they were approaching it versus trying to hit them with all usage fees we were driving adoption as part of it at these early customers that we had as part of our journey. So as I think about that part of the road map, we structured our pricing and packaging to make sure that we got the customers adopting and going. So we're in the early days of that. Those pieces associated with it after these early parts of what we're talking about, then get into the full migration where the customer can then sell, and I'm jumping all the way to the end of the journey, which for a customer could really range from anywhere from 6 months to 2 years as a large customer is going on one of those large migrations. But the correlation would be they move from multiple hundreds of thousands of dollar type customers to multiple millions of size customers as we go on our journey. And as you know, each leg -- each leg of the adoption gathers more impact and more holding power for us with the customer. And what I'm more excited about in some of the numbers as we go forward when we start showing some of those will be around how they adopt our strategy around our custom content, their content and building that. That's still the early days on that piece. Everything else is really driving engagement on the products that we got out last year. And then we'll continue to report back to you these pieces and put it together in a more broader mosaic. But the ultimate life cycle that I look forward to packaging up here once we get more data will be that life cycle journey, where do I have the customers at this stage, then going to the next stage to the next stage to the next stage. And we think of those stages in four big chunks, and we can walk you through what those are after on that one, Ken, but happy to. I do see -- I'm focused on the enterprise and larger enterprises, I see that those turning into multimillion dollar contracts per year with our customers in terms of upside which I think is where you're saying, hey, Ron, how fast can you get there? And then how much is it worth at the end? Hoi-Fung Wong: Understood. Perfect. I appreciate the context there, Ron. And I think one piece of the guidance that I thought was particularly attractive was you're still projecting for increased EBITDA, free cash flow despite a slight downtick in TDS. I guess as we think about that the spend numbers there, do you feel there is sufficient investment to provide growth? And you -- I think, John, you mentioned that once you guys potentially clear GK off the deck, there's maybe room for further improvement. Maybe dive into those 2 pieces, if you could. John Frederick: Sure. Happy to. So one of the interesting things that isn't completely visible in the numbers is we have been fairly successful in reducing costs on a year-over-year basis. We have that grow under year-over-year where costs are -- you get the rest of the costs that you reduced in the prior year. So we have a little bit of a tailwind from that. We're taking those benefits, and we're investing in growth. We're investing in things like marketing programs. We're investing in the platform. So everything that we're doing at this point is reorienting our spend towards the areas of the business that we think will grow the fastest. When you think about what's possible on the other side of the GK, there's really two big components. One is the trap costs that are in the business. We believe that by the end of the fourth quarter, we can get those out of our run rate, assuming we can get to a satisfactory transaction between now and then. And then as you simplify the business, it gives us the ability to refine the rest of the cost structure over time because it's just a simpler business to run. Hoi-Fung Wong: Got it. Okay. Very helpful. And then I realize we're not focused as much on GK anymore with you guys looking to exit that business. But while it declined, it does appear that maybe we found some footing at the $28 million revenue run rate level. I guess is that a fair assumption? And again, just to the extent that you guys can talk on how GK tracked relative to expectations, would just love to get a sense of whether or not that business has stabilized. John Frederick: So I think, as you know, we're giving guidance on TDS with respect to the historical, I think -- we would have liked to have seen a little bit more progress in the fourth quarter. One of the challenges for that business, though, is the process itself. And that process, along with 20% of our business being in the Middle East, the combination of those two things put some pretty intense pressure on the business. Now having said that, I think the team did a good job of absorbing those fundamental challenges. So thanks for the observation. For sure, I think they'll appreciate that. I think that the business has the ability to grow. I think if we had more time and we -- this was on the same pace of performance as TDS. We'd have a demonstrable reason to keep the company or keep the business in the company because we do like that learning modality. But I think we've also concluded that from a learning modalities perspective, we can partner and get that piece and including GK being a partner on the other side of what happens. If I drill down into the individual pieces of GK, the EMEA business is really starting to look like a good performer. We're very excited about that. In the Middle East, notwithstanding what's going on in the world, we're seeing some solid progress there. In North America, that's the place where we have a bit of work to do to repair the business. Hoi-Fung Wong: Got it. Okay. Perfect. And then shifting back to the core TDS side. You touched on the DRR, slight downtick sequentially, down year-over-year, not an area where you guys expect to live forever and there's a path upwards. Ron, do you feel you guys have the appropriate product set, the appropriate go-to-market that we can see DRR return to that 105 level, again, maybe not this year, but down the line? And then for you, John, I guess, how should we think about that trajectory? Again, not a specific quantification of what that number could be. But I mean, should we assume that the path forward will be -- will hopefully be at least a little bit of an upward trajectory? Ronald Hovsepian: Yes. As John pointed out in his prepared remarks, there was a headwind from the prior year comparison that was there. And then there was some of the headwinds that happened as part of the year that we had pointed out as part of that overall journey. When I look forward, when you combine that and I look forward to where we can go, absolutely, I do see us have the ability to recover to those historical patterns that we were operating in as I look ahead. So to me, having -- as we layer more of the bricks down and this big foundation that we poured last year, those pieces will just continue to build our story, and that should directly tie to DRR from my perspective with these customers, especially as we've shared with you, we've got a good group of customers that are very loyal. We've got a good group of customers that are very engaged. And those 15 customers that are signed up for the -- paying customers have signed up for the new platform journey in the very early days here is a real good testament to that opportunity to improve that DRR as we go on that journey as the first green shoot, let's call it, Ken. Hoi-Fung Wong: Fantastic. Ronald Hovsepian: So maybe I'll just say, John, do you want to add to that? John Frederick: Yes. So let me come in over the top on that on a couple of things. So as you drill into DRR, so you look at the fiscal '25 period, the fourth quarter of fiscal '25, we had an outstanding quarter from a DRR perspective, and that was on the strength of some very large upgrade deals that we had at the end of that quarter. As we proceeded through the year, we had the challenges from some of our federal customers and just some of our larger customers really screwing down on expenses because of economic uncertainty. That drove much of what we saw in our upgrade performance. So interestingly, the thing that I liked about the fourth quarter of this year was we actually saw some strengthening in our retention rates, our customer retention rates. So that part with lower churn was very exciting for us. The much lower upgrade rates, I think as we get past -- we lap the federal business comps. As we go into the year, it will be a little bit easier for us to kind of get back to those levels and get back to the 100% and above as we proceed but we really needed 2 elements. One is for the new product to be in market and showing well. I think we're seeing that with 15 customers who are paying for the platform. We needed really the marketing to wrap around that so people knew we had a new product and it was demonstrably different in the marketplace. I think the combination of those 2 things, along with lapping some of the churn that we had in fiscal '26 should really help our DRR in the upcoming year. Hoi-Fung Wong: Got it. And then last one for me. Just when you look out at the competition, both old and new, how would you say you guys are stacking up? I guess any concern that against some of the prior softness that hopefully we're going to lap, like any confidence -- what's the confidence that, that is not driven by competition? It's more a dynamic of macro? Ronald Hovsepian: Yes. So from my perspective, as I look at the market in total, customers are going to make some big shifts in these next 5 years, and some of them are going to come sooner than later. When I look at the competition from that perspective, AI will be that catalyst, and it will come in both the agentic workflow, way people consume content and learning experiences that will all tie together. At the end of the day, skills management for the companies is going to be the new high order for what customers have to get done. That requires a unified platform system that allows a customer to manage that full life cycle and at the learning level, right, not at the system of record down at the HRIS level, they can complement each other. But it's really how do I take my company on that learning journey. What I see in the market today is a series of point solutions in the market. And I see some people after our announcement last September scrambling to try to fill in some of the cracks around that on their platform stories because their platforms are narrow, their point solutions. I'm an LMS. Now I want to be a talent management system. So what I'm seeing right now is the normal repackaging of the marketing and the materials around it. In general, I'm actually more comfortable that there's more point solutions that the customers will want to learn to over time, migrate into a full skills life cycle management, which our skills management positioning will be excellent as we progress on that journey as I look at it. So I remain very optimistic that this piece of it is going to be very, very move with great velocity for us. And let's just get these early wins as part of it as part of the overall journey. So to me, it's a logical aggregation opportunity for us -- for the customer, excuse me, to then make that migration from point solutions. My life experience has been point solutions to suites to platforms as part of the journey. And again, I'm in the learning space. I'm not taking on anything with HRIS or anything like that. But in that learning space, you have to train humans and AI now. You have to manage humans and AI now. You have to bring all those pieces together. We've got a skills ontology of 20 years around content and learning. We've got the skills ontology of how to do roles assessment. That's how we're winning these deals. That's our data. And that's why I made the comment around our platform, the data that we have along with the platform, along with the content is actually the winning hand, right, much like the media market, right? Oh, it's all content, it's all content. No, no, no, it's all platform. No, no, no, it's actually both. We have streaming, right? Putting all three together to me is going to be the key of this market, and that's what we have. Hoi-Fung Wong: Got it. Really appreciate the thoughtful response there. That's it on my end. Ronald Hovsepian: All right. Thanks, Ken. John Frederick: Thank you, everyone. Operator: And with that, there are no further questions at this time. I'd like to turn the call back over to Ron Hovsepian for any closing remarks. Ronald Hovsepian: Thank you. As I look back at the 18 months ago when we started the journey from our overall reporting perspective at Investor Day, we've made a ton of progress on the strategic transformation. Still more work to be done. But as I look forward, where we positioned ourselves with AI and how we think about AI as part of the customer's journey, as I just said, the journey for the AI human part of it and the agent part of it is going to play a key role for us and a key role with the customer. We're as well positioned as anybody with what we're doing with our skills intelligence, what we're doing with our content, what we're doing with our platform and ultimately bringing all that together with the data that we have here over many, many years. So as I look at '27, it's a year of growth. We're going to try to prove ourselves growth in the revenue. And then as we hit the end of the year, we'll start to really begin to look at what that backlog growth looks like because we're seasonally loaded to the back end, it will show up in that backlog number as we look into the end of the year. So with that, I say thank you. Stay tuned. I look forward to reporting more about our growth and where we're going as we move forward. Operator: Thank you. And with that, ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time, and have a wonderful rest of your day.
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