加载中...
共找到 39,779 条相关资讯
Sara Cheung: Good day, everyone. Thank you for joining the online briefing to discuss the First Pacific 2025 Full Year Financial and Operating Results. The results presentation is available on First Pacific's website, www.firstpacific.com under the Investor Relations section Presentation page. This results briefing is being recorded, and the replay will be available on First Pacific website this evening in the Investor Relations section. For participants from the media, please note the Q&A session is open for investors and analysts only. If you would like to ask questions, please contact us when the briefing is finished. Today, we have with us our Executive Director, Mr. Chris Young; our CFO, Mr. Joseph Ng; Associate Director, Mr. John Ryan and Mr. Stanley Yang and other senior executives from the head office of First Pacific. Over to you, John, for the presentation, please. John Ryan: Thank you, Sara. I'll just go through very quickly the First Pacific part of this presentation, then we'll move to the Q&A for you folks. Now let's begin on Page 3 with a quick reminder of some of our major investments, all of which have done pretty well in the course of 2025, and we'll discuss this later on. Now on Page 4, we've got the shape of our gross asset value on December 31, 2025. The gap was about $5.3 billion, Indofood just over 1/3. MPIC valued there at $1.3 billion, the U.S. dollar value of the pesos we paid for it when it was privatized back in the autumn of 2023. We own now about 49.9% of MPIC. You might see there that PLP's valuation has increased to $398 million, and that's because we've put some money into it to help finance the building of a new power plant, which our financial controller, Richard Chan might discuss later if that's of interest to you folks. And then, of course, there's PLDT, our 25% or so owned telephone company. And then there's the Philex Group of companies, which make up just over 10% of our gross asset value. Now let's move on to the earnings for 2025 on Page 5. Turnover was up 2%, a little over $10 billion, higher revenue at Indofood and MPIC. Decline at PLP, PacificLight Power. Contribution from operations reached a record high. I believe like the recurring profit, it's been about 7 years in a row, we've had increases in the previous 5 have been records. Indofood, PLDT, MPIC highest-ever revenues and MPIC delivered their highest-ever earnings as well. Now recurring profit, as I say, it's up a good double-digit, 10% to $740 million, up from about $673 million in 2024. Net profit was up a similar number, 10% to another record high, $661 million. Now to a matter that is dear to the heart of many shareholders. The directors approved a final distribution of HKD 0.14 a share. You folks will vote on that at the AGM. And that brings the full year distribution to HKD 0.27 a share, and that's the highest ever on a per share basis that we have ever paid out. And that, of course, fits under our progressive dividend policy where we're committed to increasing the per share amount of money we distribute to shareholders every year apart from special circumstances. As you can see on the middle chart here on the right-hand side, the increase in recurring profit was driven mostly by MPIC and Indofood, and there were little declines at PLDT and PLP. Head office cash flow, as you can see, we had about HKD $311 million of dividend income, and there are the distributions gone out to you folks. That's the biggest amount of money sent out. And then the net cash interest expense follows. And if you look deeper into this book or want to discuss it later, you'll see that our interest bill is declining along with the interest amount that we're paying. Over on Page 6, a little bit more detail on our cash flow and balance sheet. As you can see here, at the present day, we have no borrowings falling due until September 2027 when our only bond, $350 million becomes due. A $200 million that was due in 2026, as you can see, has been shifted over by 5 years to 2031. Our interest cost is around about 4.6% for the year, and the average maturity is about 3.2 years. And I would guess over the course of the next 12 to 18 months, that 3.2 is going to become a bigger number. Our CFO, Joseph Ng, will discuss that in the Q&A, if you like. Dividend income there on the bottom left shows that we've been consistently over $300 million in recent years. And very important to us is the interest coverage ratio, as you can see, was 4.5x in 2025. That's up from 4x the previous year, and that is well above our comfort level. Though it must be said, we don't have any plans for that number changing anytime soon on account of additional borrowing by us. Now I'll wind up the narrative part of this meeting with a quick look at the reason that many people are invested in First Pacific. As you can see from 2018 to 2025, we've had over a doubling of our profit at First Pacific. I think in 2018, it was around $290 million in recurring profit, and we're up to $740 million in 2025. As you can see, the exchange rates of the rupiah and the peso were down about 11% and 14%, respectively, over that time. And what this does is it illustrates quite vividly the hard currency security of putting your money in First Pacific so that you can secure the gains to be had from the fastest-growing economies in the world, which are described by the IMF over in that bottom right-hand chart, where you can see there's a doubling over the 10 years to 2030 from 2020. Let me actually very quickly go through the main companies. Indofood had record sales, as I said. Core profit was up just 1% to a highest-ever level. Many of you may have attended their investor briefing earlier today. If you haven't, we can discuss some more about their description of their earnings and predictions for the future, many of which we have put into the outlook for 2026. To speak briefly about that, there's an inference you can make that 2026 will be rather better than 2025. But of course, we have that devil in the Middle East conflict, which we don't know how it will affect any of us going forward. We can discuss this later on, if you like, but there's pretty high confidence over at Indofood. Now we're going to flip a few more pages to Metro Pacific, looking at Page 14. Record high earnings, as said before, core profit up 15%. And as you can see in the pie chart, most of it was contributed by the power company, Meralco, which is beginning to see a huge contribution from its still fairly new power generation business. They bought into a very large LNG terminal accompanied by 2 natural gas-fired power plants in Project Chromite. Stanley Yang, who worked on that transaction, can help discuss that later on. It just addresses that generation is going to be a big part of earnings growth at Meralco going forward. The newly listed water company, Meralco, also was a very big contributor to the earnings there. And then the toll roads, their contribution, as you can see, didn't grow so much as illustrated on the bottom left. And that's because we owned -- in part, it's because we owned a little bit less of it than we did earlier. Now let's dash ahead to PLDT, which is the biggest telecommunications firm in the Philippines. Service revenues, record high. EBITDA at a record high and the EBITDA margin still very strong at 52%. Core profit rose 1%, actually a similar number to Indofoods. And it was helped for the first time ever by Maya, which is the 38% owned fintech, which has -- it's the only digital bank in the Philippines, which is both owned by a telecommunications firm and has a banking license. It's a very interesting little company, and it moved into profit for the first time during the course of 2025. And the falling column chart on the bottom right there shows you the usual story. It's data that has been driving earnings growth and fixed line voice, too, in a kind of funny way. There's a big international element there. Now we'll skip past Maya and over to PLP, which had earnings slightly down. Sales were a little bit down as well. Market share is steady at 9.6%. And as you can see, the monthly average electricity prices are down quite a bit from those powerful period of earnings we had in 2023, and that's really the main driver of how their earnings have gone over the past couple of years. Net debt is absolutely negligible at less than SGD 40 million. Now over to Page 27, where Philex Mining, which has been operating Padcal for 6 decades, I think, and it's still going strong for another few years until 2028, I believe. You can see that after 6 decades, the grades of gold and copper there in the blue box, they're rather lower than you might want to see. But if you want to see better turn the page to the Silangan project, which is accelerating towards the opening of commercial operations over the next weeks and months. And you can see that the grades there in the middle box are much, much higher than what we've got going on at Padcal. We're very excited about the prospects for Silangan, and we think it's going to be a good solid contributor to First Pacific going forward and to its parent, Philex. Now I'm going to end the introduction with a quick dash to Page 52, where I would like us all to pay attention to the second line, China Securities Depository and Clearing. They're probably up at this day, close towards 150 million shares. We have now a third brokerage about to start equity research coverage of First Pacific for Mainland investors. And this has been almost entirely due to the efforts of my colleagues, Sara Cheung, who's here 2 seats away. And these new Mainland investors provide much valued liquidity to the share trading in First Pacific, and we welcome them with open arms. That's it for the opening narrative. We can move over to Q&A. Sara Cheung: [Operator Instructions] John Ryan: Jeff, could you unmute and ask your question, please? Ming Jie Kiang: Maybe starting with 2 from me. So it is all about dividends first. So I just want to check, the regular final dividends increased 3% year-on-year, which seems to be a little bit muted compared with what we saw in the past. But separately, you also pay a special dividend with respect to Maynilad's subscription shares. So just trying to check whether the regular dividend growth this time is whether a sign of caution on the outlook or whether we are trying to smooth out the total DPS growth down in the next few years, including the specials. So that's the first one. The second one would be about Indofood payout. I understand the dividend will be decided in the AGM in the next couple of weeks. So just trying to figure out, from your perspective, are you seeing any particular resistance for INDF to raise the dividend payout ratio in the future? John Ryan: Jeff, you know our CFO, Joseph Ng, he'll deal with the first question, and I'll ask our Executive Director, Chris Young, to deal with the second. Hon Pong Ng: Jeff, it's Joseph here. I think your 3% is only focused on the final, if I'm guessing your question correctly because last year's final is 13.5 and this year's final is 14. But in aggregate, if you aggregate the interim and final last year was $0.255 and this year, it's altogether $0.27 because we paid $0.13 for the interim. So there's a 6% growth, which is not the 3%, so it's not insignificant. But if you add back the so-called special distribution we make as a result of the Maynilad IPO, we pay another [ $0.15 ]. So as indicated, I think we have almost 10% growth against last year's 25.5%. So that's broadly in line with the growth in so-called recurring earnings line from last year's $673 million to this year's $740 million. So it's 10% growth in the recurring, which is a key KPI indicator for us. So broadly in line, regular growth -- regular dividend growth or distribution growth is 6%, but all in, it's 10% growth. Now with that $0.27 altogether, I think we are paying altogether about $150 million plus. And that also needs to tie to what we disclosed in the cash flow that for 2025, we have $311 million dividend income. So you can see that it's more than half of the so-called gross dividend line that we are returning to the shareholders even without including the so-called special distribution. And then you have the head office overhead and the like. And remember, Jeff, also starting from 2025 and more heavily in 2026, we need to kind of reinvest some of the money that we have from the dividend from the units and then we invest those money back to PLP to fund its equity requirement for the new gas plant there. So we try to kind of strike the balance as to what we return to shareholders, which is not a small ratio, which is quite a high ratio. If you take out the head office expenses and interest, we are returning more than 70% of free cash to the shareholders and keep a little bit for our reinvestment into the PLP gas plant. So I think that's the kind of macro thinking behind kind of fixing the final dividend at $0.14 per share and making a total of $0.27 regular and then about 10% growth in aggregate, including a special dividend we paid to the shareholders as part of the Maynilad IPO. So that's on the dividend side. On the Indofood dividends, maybe Chris could chip in and give us a bit color on that. Christopher Young: Jeff, I think the -- normally, as I think you're aware, it's a discussion with the management there at Indofood. And generally, it's a fairly constructive discussion. I think we would take into account 2 elements in considering that dividend. So I think if you look at John's presentation or you've seen the Indofood results, the recurring profit growth last year for Indofood was 1%. And the outlook at the moment looks reasonable without too much disruption from what's going on in the Middle East. But obviously, there is a bit of uncertainty. So that would be the context to the discussion, what was the underlying growth last year and what is the outlook. But as you yourself noted, that discussion will happen over the next couple of months. John Ryan: Okay. Now we'll ask Timothy Chau to unmute and ask what he's got to ask. Tak-Hei Chau: I have a couple about Middle East first. First, on Indofood. I understand just now management talked about like how the Middle East impact seems to be minimal on Indofood. But I'm just wondering if there will be any implications on the raw material cost because I think over the past year, there reportedly some kind of a raw material price hike that affected the margin. So I'm just wondering if the Middle East, if extended kind of -- being extended event, would that aggravate? And the second question also about Middle East will be on PLP because if I remember correctly, the electricity price in Singapore could actually be moved as long as the gas price is up. So I'm just wondering if there will be any positive read-through from Middle East on PLP here. Yes. And my last question is on the PLP project. So just wondering if there is a finalized budget on the potential CapEx spend on the project yet. And just now you mentioned about like how we have already been spending some -- investing some in PLP already on that particular project. Just wondering the time line of the entire CapEx and how it will be in the coming 2 to 3 years. John Ryan: Timothy, I'll take a stab at the first one and then Stan will help you with PLP. Indofood told us in their briefing this morning that as far as wheat goes, they've got 3 or 4 months of supply on hand, and they see that it looks like there's globally going to be a good crop of wheat better than the previous year in 2026. So they're not too worried about that. CPO prices are up a bit after rising 10% in 2025 to about IDR 14,100. They're around at the end of the first quarter, IDR 15,000. They are in some not feeling any particular pressure from raw material prices. And as far as the Pinehill businesses in Middle East and North Africa, they have been able to secure their supplies up to now. And there is, as of yet, no particular concern. PLP, Stan? Stanley Yang: Sure. Timothy, just to address your questions on Pacific Light, first on the electricity prices and the impact of the Middle East fuel. And for PLP, it's gas comes from a global supplier, in this case, Shell. And there is some impact in terms of some of the flow in terms of the LNG that's supplied into Singapore, some of the disruption. It's a relatively small portion, a minority. And I would say that at least for the next month plus, there's sufficient supply. But when you get beyond it, there will be some impact in terms of the supply coming in that would typically come from the Middle East. Alternate arrangements are being made. The company as well as other generators who are affected in the market are also in discussions on solutions that would help, including having some of the gas supplied by EMA and being able to run, but also others in terms of the existing contractual arrangements that they can procure in terms of their global supply. And so we think in terms of certainly the near term, there will be less impact. But as the months go by and if this crisis continues, then some of these alternatives on how the balance of gas will be filled in light of the retail contracts for the company will need to be covered. When it comes to the project itself, the project itself is looking at starting in 2029. And so the heavy lifting in terms of the construction and so forth is still to come. And so within this year, there would be an expectation of the notice to proceed, which basically kicks off the formal development and projects. And from there, the piling works and then subsequently over the next couple of years, the balance of the plant. And so that CapEx as we would look at it would be spread across the next few years up until the planned operation date in 2029. Tak-Hei Chau: On PLP, the rise in gas price, if I remember correctly, I think back in 2023, when the gas price is up, we actually have a higher profit because of the nonfuel margin being higher. So I'm just wondering if this case, given -- I mean, given the case is not as bad as like the lack of supply in gas in the end. So I'm just wondering if there will be any positive read-through for PLP in this case or we are still cautious about our outlook? Stanley Yang: I think it's too early to make a call. I think the next couple of months will be critical. I think because the company has a strong position with respect to its retail customers for this year, then there is definitely visibility, but the impact of any supply disruption, not just for our company, PLP, but also for the entire market in Singapore. The question will be the balance of any gas that comes from the affected markets, for instance, Qatar and how that would impact the entire supply. As I mentioned before, that's not the majority of the supply. It's a minority small -- relatively small percentage, but it is one that we are monitoring because that clearly, the supply in aggregate into the market has to balance with what the generation demands will be for running the plants. John Ryan: Any more questions, Jeff? I think Jeff has another question. Jeff, please unmute and ask your question. Ming Jie Kiang: So maybe switching gear a little bit to MPI, just trying to figure out how should we think about maybe the water Maynilad that business in 2026. So just trying to -- if there's any tariff adjustment, can you remind us over there, but if not, I just want to hear your maybe general assessment on MPI's 2026. That's my first question. The second would be just talking about the FP Natural Resources, which we usually do not really focus on. Just trying to understand why the loss contribution diminished in 2025? And is there any one-off events there? John Ryan: Stan? Stanley Yang: Sure. On the question of the -- you're talking mostly on the water, was it? John Ryan: Yes. If we can expect some tariff increases in 2026 following the 10% last year. Stanley Yang: This year, it's going to be more muted than the last year in terms of the tariff impact. There have been following the revision -- the revised concession agreement, a series of adjustments over a few years. Those have had the benefit in terms of the flow into Maynilad and the system. This year, it would be 4% though, is the expectation in terms of the tariff adjustment. And the business itself will continue to grow. The supply of water and the management's efforts to improve that. I think they focused heavily on the non-revenue water, which is the losses in the system and bringing that down to levels that the company has not seen ever since our existence in owning the business. And so for us, that's a big savings that helps improve the cost of the water supply and efficiency in the system. And then the management themselves are focused on continuing to improve that along with the continuation of tariffs as part of their CapEx program, which was agreed as part of the concession agreement that they revised. Those would be the key imperatives to continue to build on that business. John Ryan: Okay. Thank you. And second question. Jeff, you remind us, please? Ming Jie Kiang: Yes, the FP Natural Resources, just trying to figure out what -- why did the loss diminished in 2025 compared with 2024 and just trying to check if there's any one-off events driving the narrow losses or anything happened there? That would be helpful. John Ryan: Chris? Hon Pong Ng: Actually, maybe I could take that. It's Joseph here. Yes, I mean, that operation -- the sugar operation has -- basically has stopped. And then basically, we are laying off all stock and trying to basically sell the residual assets owned by the operation. I mean, previously, the alcohol operation and then we are in discussion of selling this kind of final set of operating asset, refinery asset with certain investors, certain buyer. So with that, actually, the scale of the operation basically stopped. So that's the reason why you see the recurring profit line, there's actually no -- without any significant amount there. But we do make some impairment provision as a result of selling those refinery assets that I mentioned because now we have identified buyer, we're in final discussion with the buyer. So we know that the final selling price of the refinery part is lower than the book value. So there's certain impairment provision mix below the line under the nonrecurring item. But above the line, there's basically no operation anymore, no significant operation. That's why you see there is very little impact to the recurring profit line. Ming Jie Kiang: Just -- I would just want to take the chance to just have one more quick follow-up or just other question. So just I want to hear our plan for refinancing the head office borrowings. So John mentioned we have refinanced the repayable loan in 2026. And just trying to figure out how do we think about the current maybe the head office net debt, cash interest coverage ratio and also our maturities schedule down the next maybe 2 years. Hon Pong Ng: Yes. As mentioned by John, we finished the refinancing of the January 2026 bank loan. We actually signed up the commitment before the end of last year. So we just draw the facility and paid off the bank loan in early January. So that's all done as far as 2026 liability management initiative is concerned. So the next one coming up from this bar chart is the bond, $350 million bond due in September 2027. Now we still have, as of today, maybe 18 months to go. So it's still early, but as part of our usual prudent financial management, we are actively looking into that and talking to a number of banks. We are getting proposals on, say, refinancing the bond with another bond. So we have received quite a number of proposals with different quotes. Now we are not in a rush to say because the whole market is so volatile. You probably understand from the market that actually both the bond investor side and many issuers are actually waiting on the sideline to see how all these Middle East crisis will turn out and how that would affect the interest rate environment in the next 6 to 9 months. And for us, I think the plan is that we have 18 months to go, but we should get ourselves ready probably when we get into the second half of this year. We will probably kind of accelerate a little bit on the preparation process and see what will be the revised kind of terms and pricing that we could get from the different banks. And in parallel, of course, we will try to explore other alternatives like syndicate bank loan if we think that those terms and pricing are more attractive. But of course, I mean bank loans will not give you the tenor that we could get from the bond market, the 7 or 10 years. As you can see from the debt maturity profile here, if you get another 5 years, probably you get into the 2021, 2022 space, which may be a bit clouded. So our preference will be still a bond. For one, the tenor; two is to diversify the credit resources so that we don't 100% rely on the bank financing. So that's the initial thinking because we always try to strike a better balance between the bank credit resources and the bond credit resources. So the preference is to go for a bond if the market is there and if the terms and pricing are palatable to us, but we never say never. We just wait until the whole market comes down a bit and the whole bond market becomes active again. Ming Jie Kiang: Maybe can I have a real quick follow-up? I promise, this is my real quick. So just as of the end of 2025, I think you disclosed 54% of the debt is on a fixed rate basis at the head office level. So is this split some sort of optimal in your opinion? Or should we be targeting more fixed rate borrowings as we think for the next maybe 3 to 5 years, given the volatile interest rate environment, sometimes we rate cut, sometimes the expectations just bounce around. So just trying to figure out the thinking here. Hon Pong Ng: Yes, Jeff, these are difficult questions because the interest rate environment is actually shifting back and talk and sometimes they say, I mean there will be one interest rate cut this year and followed by 2 next year and now they are maybe shifting a little bit, given the fact we will be shifting the position, maybe not 2 rate cuts in 2027, maybe 1. I mean all these are subject to changes since the whole market is so volatile. So with that sort of volatile situation, it's really difficult to say that we should increase the hedge ratio to a higher level or we reduce it. As of now, I think we are quite comfortable with what we have. We're probably 50% thereabout because you can't win all and you will not lose all as of now. That's what I can say for now. John Ryan: Okay. And I believe, Timothy, please unmute and ask your question. Tak-Hei Chau: Yes, sorry. Management, it's me again. Just a really quick one on potential corporate events. I think this year, a lot of different conglomerates have been -- the theme has been capital recycling, unlocking asset values. I'm just wondering, given our very diverse and broad portfolio, are we -- do you have similar stuff that the management is looking to maybe divest some kind of non-core or at least partially divest like an IPO, for example, like a Maynilad kind of thinking to really unlock the asset value and maybe pocket some kind of funds as well. Especially, I think I've read somewhere in the news about potential IPO or list or private placement for Maya. And like back in the days, I think there were also some market chatters about the private placement for MPTC back then to help relieve the financial issues for the total assets. So I'm just wondering is there anything regarding corporate events that the company is thinking about now? Stanley Yang: Certainly, as a holding company, we look at a span of initiatives, both on the M&A side, which you've seen over the last few years and also in terms of capital markets, we raised the example of the Maynilad's IPO. When it comes to, as you pointed out, Maya, it's a business that has improved quite a bit. The growth of both the wallet and then subsequently after that, taking the leadership, both in the merchant acquiring and now in the digital banking side has really pivoted that platform from what was quite small a few years ago to now the leader and continuing to grow rapidly. Whether this is the year that at this time, a listing could be done, I think we would -- management and the shareholders are always reviewing the strategic options. I think actually an interesting similar case was there was the Japanese fintech recently PayPay that just listed earlier this month. And despite the challenges of the market, Iran and so forth, actually, the price held up quite well. So I think it's fair to say that we will continue to monitor if there is an opportunity. Of course, Maya is much smaller than the one that listed in Japan, but its growth and its trajectory are moving in a very positive direction. And so we would see this as a potential as it continues to grow. Really, the question is in terms of timing. And I would say with respect to other portfolio companies and across the group, I think we continue to evaluate how we can improve the positions of them in their respective sectors. And as and when decisions are undertaken to pursue things more formally, then, of course, we will provide more guidance at that point in time. John Ryan: MPTC? Stanley Yang: I think MPTC, at the moment, the business is continue to focus on delivering this year its projects. They have quite a number of projects within the Philippines that are looking to complete. And so that's really been the focus. Also some of the deleveraging efforts of management because of the acquisitions that they've undertaken in the last few years, those are the principal initiatives looking at partners and some capital into the business to help in terms of the debt reduction of the overall roads. And then with that, we continue to also consider whatever strategic opportunities are to further enhance our position as a platform and the shareholders of our roads business. John Ryan: Thank you very much, Stan. As there are no more questions and time is getting on, we'll wind up now beginning with a reminder that we will be visiting fund managers in Europe and North America after Easter holidays. If you would like to see us, please get in touch with me or Sara or my colleague, [ fionachiu@firstpacific.com ]. These meetings have historically been quite worthwhile for the fund managers who see us because we cannot hide our feelings on our face. You'll see us coming in and we'll be feeling really, really good, and that will be important to your perspective towards our company. And now to summarize how we feel and where we think we're going, I turn now to Chris Young, Executive Director. Christopher Young: Okay. Thank you, John, and thank you for joining us on the call today. The results, as you've seen for 2025 were good and a continuation of the trend that we've seen over the last 7 years or so. However, clearly, the outlook in the short to the medium term is somewhat uncertain. However, I think we remain cautiously optimistic that given the nature of our businesses, which I think are quite defensive given the consumer-facing nature of them, that we will be able to shelter the group really from these uncertainties over the next few months or so. So we look forward to updating you again on the half year results, which I think are at the end of August 28. So until then, we will keep you informed on a regular basis. And as John and Stan will be visiting Europe and the U.S., hopefully, you will get a chance to meet with them face-to-face before that. So turn you back to Sara. Sara Cheung: Thanks, Chris. Thanks again for joining today's online briefing, and you may disconnect now. Thank you. John Ryan: Bye-bye.
Operator: Good morning, and welcome to the Genel Energy plc investor presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. And I'd now like to hand you over to Paul Weir, CEO. Good morning, sir. Paul Weir: Good morning. Good morning, everybody. My name is Paul Weir, as you've just heard, I'm the CEO of Genel Energy, and I'm joined as usual by our CFO, Luke Clements. Welcome to our 2025 results presentation. We published our annual report and our full year results last week. And in my statements, then we broadly reiterated the key messages and guidance provided in our January trading statement. Obviously, the big change since January is the security situation in the Middle East, which has resulted in our production effort being temporarily suspended on a precautionary basis since hostilities began almost 4 weeks ago. Understandably, the operator's priority since then has been the safety of its personnel. Steps have been taken, however, to maintain a state of readiness for a prompt restart, but the security situation in the region remains very dynamic and very uncertain. The focus of this presentation then is not to provide you with the Middle East security update, which wouldn't likely add to the understanding you've already had from mainstream media. Instead, we will take you through the key elements of the performance of the company in the last year, the current position of the business and the catalysts and priorities for '26. Luke and I will work through these slides. I think there's 10 or 11 basically. We'll work through those fairly briskly, and then we will be very happy to take any questions that you submit during the course of the presentation. We start with an overview of the business, and this slide pulls together some key metrics to outline the building blocks we now have in place. We ended the year with a daily average working interest production rate of around 17,500 barrels per day. Net 2P reserves of 64 million barrels and a net cash position of $134 million. EBITDAX was $43 million. Our barrels are low cost with a low emissions rate, well -- industry average target rate for 2025, which was 17 kilos per barrel and with world-class operating costs at around $4 a barrel. Even in a year that included significant production disruption at Tawke and continued domestic market pricing, the business has remained resilient, cash generative and well funded and with the potential for very significant value uplift. The key building blocks for that significant value uplift are listed at the foot of this slide. The Tawke PSC, our world-class production asset generating material free cash flow even at domestic sales prices, a significant cash holding of more than $220 million at year-end and about the same right now, ready for deployment and a portfolio with significant organic upside potential from exports resuming, Tawke drilling resuming, Oman appraisal and Somaliland drilling, all of which supports our ultimate objective of getting back to a regular dividend in time. Once we've established some geographical diversity and the further resilience that follows that diversification and repeatable cash. On to the next slide, please. This slide sets out our strategy and strategic objectives in the way that we think about them every day. The 3 familiar boxes on this slide represent our objectives in simple terms, and I've spoken about many times before, so I won't dwell on them too much. Firstly, maintaining a strong balance sheet; secondly, maximizing cash generation from the assets we have, which means investment in Tawke and resuming exports from Kurdistan. And finally, adding some new sources of cash flow in a disciplined and value-accretive manner. That order matters, but we need to do a good job in all 3 of those areas if our eventual aim to return value directly to shareholders in a regular way. Let's move into the detail on the platform now. The world-class characteristics of Tawke are well known, but 2025 again demonstrated the resilience of the combination of the assets and its operator, DNO. If you look at the production graph on the right-hand side of the slide, you can see quite clearly the effect of the drone attacks in Q3 of last year. And thereafter, you can see just how quickly production was restored to a production rate at the [indiscernible] of the year of around 80,000 barrels a day. It's also worth noting that production in the months not impacted by the drone event was actually higher than the 2024 average despite no new wells contributing to that production rate. Drilling restarted then in Q4 of '25. First Tawke well was spudded in December and immediately started delivering results. A second good production well followed in the same month, but the 2026 drilling campaign for which 2 more rigs have been mobilized to site has now been suspended given the security situation. So today, we're in a position where both production operations and the drilling campaign are temporarily suspended, and we remain on standby until such times as the operator determines that it's safe to reestablish a full presence at site and resume activity. We remain close to and very supportive of the operator on that. All that aside, when we talk about Tawke as a world-class asset, we mean 254 million barrels of gross 2P reserves, very low operating costs, low emissions, long reserve life and clear upside from drilling. Right, I'm going to pass you on to Luke now for the next couple of slides. Luke Clements: Thank you, Paul. Good morning. This slide provides the buildup of what we call production business netback. Production business netback is revenue less production asset spend. That's both OpEx and CapEx, less G&A. It tells us what funding our business is generating and making available for capital allocation outside of the Tawke PSC. And you can see that it has been double-digit millions for 2 years in a row now, having been negative in 2023 despite similar levels of revenue. So you can see that we've been working hard on our spend. So what was the income side of that double-digit production business netback made up of last year? Firstly, while Brent averaged $69 a barrel in 2025, our realized price sold was $32 a barrel with all production sold domestically. If we were exporting, we'd expect that realized price to be close to Brent. Secondly, working interest production averaged 17,500 barrels a day, lower year-on-year only because of the drone-related interruption in Q3 that Paul just mentioned. And finally, EBITDAX of $43 million. You can see our underlying EBITDAX is back to more normal levels for domestic sales at around $35 million for the past 3 years now. This underlying number excludes movement on arbitration cost accruals, which negatively impacted '24 and positively impacted '25. So the key point here is that the production business is now delivering consistent double-digit netback even at domestic sales pricing, while still funding all production activity and investment on the Tawke license and so building our balance sheet cash position and available funding. That is the product of Tawke resilience and the discipline we've applied to the business since 2022 in simplifying the portfolio, stopping non-value accretive spend, exiting licenses and reducing cash G&A. Next slide, please. This slide illustrates our balance sheet strength. We finished the year with $224 million of cash, the net cash of $134 million and gross debt of $92 million. Our cash is about the same today as it was at the end of the year, so it's around $225 million. In April last year, we issued a new 5-year bond maturing in 2030, replacing the bond that had been due to mature in October 2025. That issuance was oversubscribed, and we continue to see good support and appetite for our bonds. That issuance has reduced funding risk around delivery on our strategic objectives. This remains a very underleveraged balance sheet with significant headroom to fund investment. That matters because the cash and capacity for further debt provide us with significant optionality. We can fund the appropriate Tawke program, progress our organic growth assets and pursue value-accretive acquisitions without being forced into decisions by capital structure pressure. Next slide, please. This slide shows our primary capital allocation options when we consider the best way to deliver shareholder value. Our first consideration is to maintain the strength of our balance sheet. Then the best place to invest our capital, providing the instant significant returns is the Tawke PSC. Then we think about how best to diversify our cash generation. All 3 building blocks have to be properly managed to establish a sustainable dividend. That means not every potential project will automatically be funded and not every acquisition opportunity will be pursued. Every value creation opportunity has to compete with others within our strategic framework. The Board reviews capital allocation on an ongoing basis, and we take care to remain disciplined. I'll hand back to Paul now to talk about our acquisition strategy. Paul Weir: Thank you, Luke. So look, we want to add resilient cash-generative production or near production assets that reduce our reliance on one asset in one geography. We want something that complements what we already have and supports long-term shareholder value. During 2025, we were very active. We originated, developed and actually bid on a number of opportunities. We were involved in bilateral discussions and in broader processes, too. We've looked at opportunities within our current region and further afield. And to be entirely frank, although it's early days still, 2026 is already shaping up to be as active as 2025 was. Having said all of that, there isn't an abundance of suitable opportunities, and there's a great deal of competition for the good ones that are available. So we continue to diligently scan the deal horizon. We're trying to avoid being distracted by the current unsettling events. Patience and discipline are key. Finally, on this, and again, as we've made clear in previous presentations, we will resist overpaying to get short-term positive market reaction only to find over time that the assets that we buy are unable to deliver the value that we need. We remain very confident that we will secure the right opportunity in time. On to Oman then. On Block 54, the initial activity set did exactly what it needed to do. The reentry and testing of the legacy Batha West-1 discovery well was completed safely ahead of time and under budget. That was a low cost and very useful first step in understanding the block better. Our block is adjacent to the prolific Mukhaizna field, and we are targeting reservoirs that are proven in that neighboring field on another adjacent block, Block 4 and on legacy well logs from Block 54 itself. The immediate focus now is not to rush to a drilling location decision. Instead, we will use the data from Batha West properly to reprocess existing seismic and to acquire new 3D seismic in the most efficient and cost-effective way that we can, so that the joint venture can identify the best locations for the 2 commitment wells that we will now drill on the block. That's the right technical sequence, and it's also the right capital allocation sequence. And based on current planning, we expect those commitment wells to be drilled early in 2027. So Block 54 is exactly the kind of exactly the kind of organic opportunity that we like, modest initial capital outlay, a clear work program, data-led decision-making and meaningful upside if the subsurface case continues to strengthen. And on Somaliland on the next slide. In Somaliland, the opportunity remains for a material discovered resource addition from our existing portfolio, and we've seen steady progress towards drilling the highly prospective Toosan-1 well. Toosan-1 targets best estimate prospective resources of about 650 million barrels across multiple stacked reservoir objectives. As the first mover, the commercial terms are also very attractive, meaning that even a modest discovery would likely be commercial. Of course, wherever we find logistically will benefit from proximity to the Berbera Deep Water Port on the Gulf of Aden. In terms of drilling preparedness, the majority of the civil engineering work is complete and most long lead items are already held in inventory, but we will remain quite measured in how we talk about this. There's still work to do. That work is ongoing, and there is still a need for operational, commercial and geopolitical elements to all come together. The key takeaway for today is one of continued progress towards drilling, while we continue to invest in the well-being of our host communities there to further strengthen our social license to operate. On the next slide, we'll -- we can see -- we can sort of give you a flavor of the work that we carried out last year and through into the first quarter of '26. We've been proactive in the areas of mother child health care, educational facilities and conservation projects. And we've been reactive. Very importantly, we've been reactive in response to the very severe drought conditions that the region is now suffering. Genel has recently distributed around 9 million liters of fresh clean water in the area of our SL10B13 license. Okay. So I think we can wrap up now. This closing slide returns to our 3 strategic pillars. Firstly, maintaining a strong platform. That means protecting the balance sheet, keeping the business efficient and being careful about how we spend our money. Secondly, maximizing cash generation. That means cost consciousness, executing the Tawke drilling program well, pursuing the net amounts that are owed to us and positioning ourselves to participate in exports when the conditions are in place -- when the right conditions are in place. And finally, diversifying production and free cash flow. That means finalizing and executing the right plan for Block 54 and continuing to progress Toosan-1 and Somaliland. Most importantly, it means continuing the disciplined pursuit of value-accretive acquisitions. Those are the building blocks. They're fairly straightforward. They are mutually reinforcing and they remain the right framework for Genel's value delivery. If we execute well, we continue the journey towards a business with resilient cash flows that can support a regular dividend for our shareholders. That's our clear objective, and we are determined to get there. So thank you. That was a relatively brief run through the slides, but I want to thank you for your time this morning. Luke and I will now be happy to take any questions that you might have. Operator: Paul, Luke, thank you both very much for your presentation. [Operator Instructions] Guys, as you can see we received a number of questions throughout today's presentation. Could I please hand back to Luke to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end. Luke Clements: Thank you. So there's a few questions on security in Kurdistan, Paul, and how quickly we can restart production. I think as you said at the start, we're not really going to comment on security in the Middle East and Kurdistan because it kind of changes all the time. There is a question about once you do restart production, how quickly can you get back to pre-conflict production levels? I think it is worth you answering, Paul. Paul Weir: Well, I think we can get back to preproduction -- pre-conflict production levels very quickly indeed. I mean it's worth pointing out, and there is a little bit of an overlay here into the security question. We've shut down as a precautionary measure. We haven't been targeted, and we haven't suffered any damage during the course of the current conflict, although obviously, there's been quite a lot of ordinance heading into Kurdistan. It's not been headed at us. The point being that when we do sense that the time is right to restart all the equipment there and functional. The operator has been working cleverly to make sure that we maintain a state of readiness. And as soon as we can get boots back on the ground, we can get production away quite quickly. So I'm confident that we can resume production levels pretty quickly within a week or 2 of giving ourselves a green line. Luke Clements: Okay. So staying Kurdistan on exports. We understand that the Tripartite deal has been extended to the end of June. Has Genel approached MNR to join the deal? Paul Weir: The answer to that is no, we have not approached MNR to join the deal. I think we've made our position on the current export arrangements quite clear, but I'll repeat them just now. A number of our peers elected to participate in that arrangement. We chose not to do so. We wanted to make sure that all of the conditions within the deal were on fully before we felt able to commit to that. Primarily amongst those conditions, of course, is the top-up payments that would actually render the participants hold with respect to the PSC. So we would want to see that before we elected to try and join the current arrangements. In the meantime, we would continue to sell our product locally. Luke Clements: And there's a kind of related question, which you've kind of answered, how are other operators being paid through the pipeline. I mean, for me, Paul, that's really for others to comment on. It looks like the first part of that is working okay. But as you alluded to, we -- the top-up payment hasn't been expected yet and hasn't been paid yet, I think, is the right way to think about it. Paul Weir: Agreed. Luke Clements: Are you still a member of APIKUR? Paul Weir: Yes, we are still a member of APIKUR. Obviously, when some of the APIKUR members elected to participate in the export or the arrangements that were in place up until the facility stopped. When some of the APIKUR members elected to participate in that arrangement and others chose not to, APIKUR essentially divided into 2 counts, but APIKUR remains the trade association. It remains the forum where all of the IOCs within Kurdistan can talk together. And we have a directorship there, and we remain a part of APIKUR. Luke Clements: Okay. Moving outside of -- sorry, one more on Kurdistan. Any update on court case costs? Paul Weir: No, there isn't. And next month, our appeal against the award of the other side's costs goes to court, and we're waiting to see the outcome of that appeal before we engage with the authorities on that matter. Luke Clements: Okay. So now as on Kurdistan. How quickly can new assets? And I don't know if that means the organic portfolio or newly acquired assets, but how quickly can new assets meaningfully reduce reliance on Kurdistan? Paul Weir: Well, those new assets, if we're able to secure the kind of asset that we're looking for, those new assets can immediately reduce our reliance in Kurdistan because it's a production asset, then we benefit from a new income stream immediately. So certainly, first prize for us is securing an arrangement that gives us an alternative cash flow as soon as the transaction is completed. As far as the other -- as far as near production assets are concerned, if we were to go down that route, then it would be entirely dependent on the nature of the deal we were considering. I couldn't give a time line on that. Luke Clements: Yes. I'd just add, we've always said we want to do a bigger deal rather than a smaller deal. And you can see the cash pile we have on the balance sheet. And you can assume that an asset we acquire would have debt capacity on it as well. So you can see if you're spending that kind of money, you should be able to achieve some meaningful diversification of your cash generation. I think you probably already answered it, but can you provide an update on Toosan-1 in Somaliland? Any specific milestones before spud? Any specific time line that we want to set out? Paul Weir: No. I think I appreciate there'll be a great deal of curiosity around our progress in Toosan-1 because we talk about it and from an outside-in point of view, it may at times be difficult to see progress, but work does continue, and we are quite active on that front. Engineering work continues and procurement work continues. We've been looking at the market to -- we have most of the long lead items in place, but we've been putting together a project execution plan. We've been putting together a project plan. We've been trying to determine who are the best people to come in and help us manage that drilling campaign. And all of that continues as we speak, and we have people in-house dedicated to that task. And as with all projects of that nature, we have a stage gate process in place. So we will convene with the executive every time we reach a stage gate, and we will convene with the Board every time we reach a stage gate. And we will take a conscious decision to embark on the next stage of the process and be prepared to spend the money that's associated with that particular stage. We can't commit to a particular time line at the moment. As I said in the presentation, a number of commercial, operational and geopolitical pieces of the jigsaw need to fall into place together before we can actually define with certainty when things are going to happen. But work does continue, and we are committed to the cost. Luke Clements: Okay. Back to Oman. What is your estimate of drilling costs concerning the 2 wells in Oman? Paul Weir: Well, the wells are relatively shallow wells, and we're in an area that's well serviced by the oil industry. So services are readily available. We're competitive and they're relatively low cost. I wouldn't want to put a figure right at this moment for the well cost because, of course, that's determined to some extent by precisely where we want to drill, and we haven't determined precisely where we want to drill yet. But what I can repeat is what the cost of this entire project is going to be, and that's around $15 million over a 3-year period to Genel. That obviously started last year. So all the work that's taken place so far has been extremely well planned and very clearly executed and it's below budget. But we're expecting to spend a total of around $15 million over a 3-year period starting last year. Luke Clements: Okay. It looks like we are through the questions. Operator: Thank you both for answering those questions you have from investors. And of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which I know is particularly important to the company. Paul, could I please just ask you for a few closing comments? Paul Weir: Yes. I mean I'll close, first of all, by thanking everybody for taking -- continuing to take an interest in Genel and for taking the time to listen to us talk about our business today. I just want to close basically by reiterating the 3 main points that we wanted to land during the course of this presentation and in fact, in all our recent presentations. The first is that we have a very resilient business, and our strategic priority is to maintain that degree of resilience, protect the balance sheet. The second is to emphasize the extent to which we have potential within the organic portfolio. Oman and Somaliland, both represent very exciting potential value builders for the business, and we continue to push forward with those. But of course, the biggest story and the biggest strategic thrust at the moment is making use of our cash pile. We've been sitting on that quite patient and are waiting for the right deal. But we continue to be very, very active in the M&A space, and we continue to be extremely confident that in time, we are going to find the right deal that's going to allow us to deploy that cash. So thanks, everyone, for your time. Thanks very much for the questions, and we look forward to talking to you with more good news. Operator: Paul, Luke, thank you once again for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure it will be greatly valued by the company. On behalf of the management team of Genel Energy plc, we would like to thank you for attending today's presentation, and good morning to you all.
Operator: Ladies and gentlemen, thank you for standing by. My name is Christa, and I will be your conference operator today. At this time, I would like to welcome you to the TOYO Co Limited Second Half and Full Year Results Financial Results Conference Call. [Operator Instructions]. I would now like to turn the conference over to Crocker Coulson, Investor Relations. Please go ahead. Crocker Coulson: Thank you, Christa. Hello, everyone. Thank you for joining us to review TOYO's 2025 second half and fiscal year results. This morning, TOYO posted both the earnings release and a related investor presentation to our website and you can find it in the Investor Relations section, investors.toyo-solar.com. With us on the call today are Mr. Onozuka, TOYO's Chief Executive Officer; Raymond Chung, the company's Chief Financial Officer; and Rhone Resch, TOYO's Chief Strategy Officer, whose appointment was announced just this morning. We also have Simon Shi, who will be available during the Q&A portion. After the prepared remarks are concluded, we'd like to open this call up for your questions. But before we begin, I want to make you aware that some statements in this teleconference are forward-looking within the meaning of federal securities laws. Although we believe the statements are reasonable, we can provide no assurance that they will prove to be accurate because they are perspective in nature. During this call, we'll also discuss certain non-GAAP financial measures, such as adjusted net income and adjusted EBITDA. We believe these measures provide meaningful supplemental information regarding our operational performance, by excluding noncash items and onetime charges that may not be indicative of our core business. Please refer to the reconciliation tables in our press release and SEC filings for the most directly comparable GAAP measures. Actual results could differ materially from those we discuss today and therefore, we encourage you to carefully review the most recent report on Form 20-F and other SEC filings for risk factors that could materially impact our results. As I mentioned, the earnings release is available today on our website at investors.toyo-solar.com. With those formalities now out of the way, it's my great pleasure to turn this call over to Onozuka-san, our Chief Executive Officer. Onozuka-san, please go ahead. Takahiko Onozuka: Thank you, Crocker. 2025 was the year of decisive action for TOYO. We doubled our operational scale while navigating one of the most volatile trade environment in decent memory. By strengthening our position as a particularly integrated solution provider, we have built a resilient foundation capable of navigating persistent market headwinds and rapidly shifting regulatory landscape. Our record-breaking revenue of over $427 million, a 142% increase over 2024 is a clear validation of our strategic pivot toward high demand and compliant manufacturing hubs. The primary engine of this growth was the rapid ramp-up of our 4 gigawatt Ethiopia facility, which was completed in October 2025 and is now running at full nameplate capacity. During fiscal year 2025, we successfully shipped 2.3 gigawatts from Ethiopia to our U.S. end customers while an additional 1.9 gigawatts of solar cells were dispatched from our Vietnam facility to international markets. As we entered 2026, Ethiopia has provided our U.S. utility scale customers with high efficiency, policy-compliant solar cell technology and we are on track to deliver 4 gigawatts of solar cell from this facility in the coming year. In the fourth quarter of 2025, we launched commercial operation at our new 1 gigawatt module facility in Houston. Last year, we delivered 249 megawatts of module, inclusive of American-made module and those supplied by our OEM facility overseas. By scaling our domestic module production, while maintaining our global reach, we ensure that TOYO can provide the right mix of products our customers require from the right location with 0 lead time friction. Our intent is to scale up production continuously in 2026 and invest to expand capacity in Houston to 2 gigawatts by 2026. In September 2025, we acquired the well-established VSUN brand from our sister company, a strategic move to streamline and unified TOYO operation by bringing the VSUN plans fully under our umbrella. We have successfully migrated the VSUN sales and marketing team, IP, brand and the certification to TOYO, and we are now innovating all existing customers to become direct customers of TOYO as we complete clarification. Acquiring the VSUN brand has allowed us to accelerate TOYO growth and gives our clients flexibility to choose the sourcing that best fits their individual needs. This acquisition was made without any dilution to TOYO shareholders, while the production assets being with VSUN. Looking ahead, we will continue to work closely with our industry partners to migrate the sourcing of key components to the U.S. wherever possible, further strengthening our supply chain and laying forth our commitment to American manufacturing. I will now turn the call over to our CFO, Rhone Resch, to review our strategy for 2026. Rhone Resch: Thank you, Onozuka-san. It's a great honor to be joining TOYO, and I look forward to meeting our shareholders over the coming months and quarters. As you know, this was a challenging year for many solar companies. To be able to more than double our revenue while dramatically increasing gross margins, EBITDA and adjusted net income validates that TOYO has the right strategy in place, combined with exceptional execution capability. Turning to our strategic road map for 2026. TOYO is entering a phase of significant operational scaling designed to meet the accelerating demand in the U.S. solar market. For the full year 2026, we are initiating shipment guidance of between 5.5 and 5.8 gigawatts for solar cells and 1 to 1.3 gigawatts for solar modules. This growth is supported by a robust order book and a favorable domestic policy environment that continues to prioritize high-efficiency traceable technology. Our primary operational focus for 2026 is maximizing our existing infrastructure. Our Ethiopia cell facility is now positioned to run at full nameplate capacity, providing the high-efficiency solar cells that are the backbone of our utility scale offerings. Simultaneously, our Houston module facility is aggressively ramping up its initial 1 gigawatt of module capacity to meet localized demand. To further solidify our domestic footprint, we plan to add an additional 1 gigawatt of module capacity in Houston during 2026, which will bring our total U.S. module capacity to 2 gigawatts. The next phase of our U.S. expansion involves building out a domestic cell production. We are currently in the final stages of the planning process and anticipate disclosing further details regarding our operational road map in the near future. Financially, we are targeting a 2026 adjusted net income of approximately $90 million to $100 million despite increasing very substantial investments in R&D and technology this year. These costs are a deliberate choice. They align directly with our core commitment to establish a robust technology leadership position within the United States. We aren't just building capacity we are building the IP foundation that will define the next generation of American solar energy. TOYO is now uniquely positioned with the domestic capacity, the traceable supply chain and the technical IP to lead this transition profitably. I will now turn the call over to our CFO, Raymond Chung, to review our financial results. Raymond? Taewoo Chung: Thank you, Rhone. So for full year 2025, revenues were $427 million, representing 142% year-over-year increase from the prior year. This growth was primarily driven by $241 million increase in solar sales and a $7.6 million increase in module sales. For the full year 2025, cost of revenue was $331 million, a 113% increase from $155 million in the prior year. Cost of revenue grew at a slower pace than revenue, driven by a higher mix of sales to U.S. end customers with stronger average selling prices. Gross profit increased by 340% to $96.3 million in 2025, up from $21.9 million in 2024. Gross profit margin expanded to 22.5% from 12.4% in 2024. Margin expansion was driven by a higher proportion of sales to U.S. end customers with stronger pricing. For full year 2025, operating expenses were $37.3 million compared to $30 million in the prior year, representing an increase of 186% year-over-year. Selling and marketing expenses were $5.9 million compared to $1.6 million in 2024. The increase was primarily driven by higher sales commissions in line with revenue growth. General and administrative expenses were $31.4 million an increase from $11.4 million in 2024. The increase was primarily due to $13.7 million in noncash share-based compensation issued to management, directors and consultants. Administrative costs also rose as the company scaled its workforce and infrastructure to support the full activation of our Ethiopia and Texas manufacturing plants. EBITDA was $95.8 million in 2025, representing a 40% increase from $68.2 million in the prior year. This was driven by record shipment volume and enhanced operational scale across our global facilities. Non-GAAP adjusted EBITDA, excluding share-based compensation and changes in fair value of contingent consideration payable to earnout shares was under $110.8 million for 2025, up by 228% compared to $33.8 million for the same period in the prior year. Net income was $37.2 million for 2025 compared to a net income of $40.5 million for the same period last year. Adjusted net income, excluding share-based compensation in 2025 and changes in fair value of contingent consideration payable related to earnout shares in 2024 was $52.2 million compared to $6 million in 2024. Earnings per share basic and diluted was $0.98 compared to earnings per share, basic and diluted of $1.09 in the prior year. Adjusted earnings per share, excluding share-based compensation in 2025 and changes in fair value of contingent consideration payable related to earn-out shares in 2024 was $1.48 per share in 2025 as compared to $0.20 per share in 2024. Turning to our balance sheet. As of December 31, 2025, the company had a $58.9 million in cash and restricted cash in total, compared to $17.2 million as of December 31, 2024. In 2025, TOYO generated cash flow from operations of $133 million with $92 million of CapEx invested across our Ethiopia cell facility and U.S. module operations. This level of cash generation provides us with a strong financial flexibility to invest in continuing to expand our fully integrated production platform in the U.S. as we expand our Made in America for American strategy. For 2026, we expect adjusted net income to reach approximately $90 million to $100 million. With that, we will be happy to address your questions. Operator: [Operator Instructions]. Your first question comes from Amit Dayal with H.C. Wainwright. Amit Dayal: Perhaps a fairly strong performance of '25 and a positive outlook for 2026. Just in the context of gross margins, can you provide any color on how we should think about gross margins now that a share of revenues could potentially come from the U.S. market? Crocker Coulson: [ Saska ], you want to translate that? And then I don't know if Simon or Raymond wants to take that question. Unknown Attendee: [Foreign Language] Takahiko Onozuka: [Interpreted] Right. So we are not currently providing our gross margins hold for the year. But as the Ethiopia facility has come to operate at full capacity and our U.S. factory has come online. We believe that we will be able to continue to achieve very competitive margins in the market. Crocker Coulson: Simon, any color you want to provide on that? Simon Shi: Sure. Thanks, Amit, for the question. I think for 2025, we achieved a cross-border average gross margin around 25%, and we -- we do hope to at least maintain these gross margin across group gross margin level going forward. And also just a remark to our -- like our CEO just mentioned, we don't really provide a breakdown of our gross margin for different markets. But we think our gross margin -- our gross margin level is higher than the overall industry number. And also the numbers we have indicated through our -- either historical number -- historical financials and in the 2026 guidance, they are pre -- they are pre the 45x, meaning the $0.07, 45x supposed to receive from -- for our manufacturing are actually not taken into account in the guidance or in the historical financials. Amit Dayal: Yes, that was I was going to ask about the credits in the U.S. market. So for 2026, will you potentially be receiving credits for the at capacity or potentially 2 gigawatts capacity? Just any color on that would be helpful. Simon Shi: Sure. Actually, we are running cautious on giving out the guidance for our Houston production. As mentioned, we are currently running -- sorry, 1 gigawatt capacity over there. And we are hoping to achieve at least 60% to 70% utilization of the capacity in Houston based on the current nameplate capacity. And the additional 1 gigawatt, as mentioned by our CEO, this is a new investment plan that's happening in progress in our Houston facility. Now we are hoping to see a pilot production for the extra 1 gigawatt from third quarter or latest the fourth quarter of this year. So that could be an actual contribution to the delivery from Houston. However, we are not taking that into account for our guidance for the moment. Amit Dayal: Okay. Understood. And just maybe last one for me. Will you be sort of hosting quarterly earnings call going forward? Or will this be sort of every 6 months? How should investors think about sort of reporting and just engagement with the investor community going forward now that the business is most sums in place to provide a little bit more comment to investors more frequently, I guess? Simon Shi: Yes, sure. Thanks. That's very helpful. Yes, Amit, the short answer is, yes, we are planning to report quarterly from this year. So hopefully, we can get our first quarter number released May of this year. And on a going forward basis, where we will continue to report quarterly starting from this year. Operator: We have no further questions at this time. Crocker, I'd like to turn the conference back over to you. Crocker Coulson: Yes. Let's just give one more chance for people to ask questions, operator. And then if we don't have further, I'll wrap it up. Operator: Absolutely. [Operator Instructions]. We have no questions -- and we have no questions. Crocker Coulson: Great. Thanks, Christa. So we appreciate everyone taking the time to join us on the call today. As you can tell, the whole team is very excited about what's ahead for TOYO in 2026 and in the years beyond. We're also thrilled to have a strengthened management team going into this year with Rhone Resch joining us, and he'll be based primarily in the U.S. So we will be more available to meet with investors going forward. If you have questions you'd like to ask that you didn't have a chance to get to on this call, please reach out to me, and I'm happy to either respond or arrange a follow-up call with management or a visit next time that we have a future trip to the U.S. Thank you, everyone, and have a fantastic day. Operator: Ladies and gentlemen, this does conclude today's call. Thank you for joining, and you may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the T1 Energy Fourth Quarter Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your first speaker today, Jeffrey Spittel, Executive Vice President, Investor Relations and Corporate Development. Please go ahead. Jeffrey Spittel: Good morning, and welcome to T1 Energy's Fourth Quarter and Full Year 2025 Earnings Conference Call. Before we get started, please turn to Page 2 for our forward-looking statements disclaimer. During today's call, management may make forward-looking statements about our business. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expectations. Most of these factors are outside T1's control and are difficult to predict. Additional information about risk factors that could materially affect our business are available in our annual report on Form 10-K filed with the Securities and Exchange Commission and our other filings made with the SEC, all of which are available on the Investor Relations section of our website. Turning to Slide 3. With me today on the call are Dan Barcelo, our Chief Executive Officer and Chairman of the Board; Otto Erster Bergesen, our SVP of Project Engineering; Evan Calio, our Chief Financial Officer; and Jaime Gualy, our Chief Operating Officer. With that, I'll turn the call over to Dan. Daniel Barcelo: Thanks, Jeff, and welcome, everyone, to our fourth quarter and full year 2025 earnings call. Our theme for today's call is finishing what we started. 25 was the year we built T1 Foundation. In 2026, we are building our G2_Austin solar cell fab to complete our vertically integrated domestic solar chain in the U.S. market that completely changed on January 1 with the implementation of new federal rules on foreign content and ownership. . Next year, 2027 is the year we intend to deliver a step-change in our ability to generate earnings and cash flow as a U.S. solar leader delivering high domestic content. While we execute these core objectives of our strategy, we also plan to stack additional EBITDA streams through organic and inorganic opportunities. During the fourth quarter and so far in 2026, we have made significant strides to realize this vision. Let's turn to Slide 4 for a review of T1's remarkable progress in the fourth quarter, during which we announced several important milestones and transactions. Building on the extended supply agreement with Hemlock, Corning, we announced the supply partnership with NextPower. Together, these relationships serve as critical building blocks to advance our vision of developing a fully integrated American polysilicon-based solar supply chain. We also executed 2 transactions to fund T1's growth and expansion plans, including a $72 million registered direct common equity offering and a $50 million convertible preferred tranche from certain funds and accounts managed by Encompass Capital Advisors, one of our founding investors. In November, I met with Vice President of J.D. Vance in Washington, D.C. to discuss the resurgence of American energy and advanced manufacturing and our commitment to establishing domestic solar supply chains. As our momentum continued to build, we returned to the capital markets in December with our concurrent common equity and convertible notes offerings, raising combined gross proceeds of $322 million and adding several new institutional investors to T1's capital structure. Capital is and will remain the lifeblood of T1's growth ambitions over the near term. The funding from the December transaction strength in T1's balance sheet position us to begin Phase 1 construction of our G2_Austin solar cell fab. Following the completion of Phase 1, we expect to begin producing high efficiency, high domestic content solar cells by the end of this year with an annual capacity of 2.1 gigawatts. Our successful capital formation initiative and the start of construction at G2 triggered an important commercial milestone when T1 announced a strategic partnership with Treaty Oak Clean Energy, highlighted by a 3-year agreement for T1 to supply 900 megawatts of G1 modules with G2 domestic cells starting in 2027. Also in December, we completed a series of transactions intended to preserve our eligibility for the Section 45x tax credits under the One Big Beautiful bill Act. Importantly, we also validated our ability to monetize the credits by completing our first sale of 45x credits to a U.S. financial institution. As we'll discuss shortly, our team at G1_Dallas continue to demonstrate their world-class capabilities during Q4. And with a factory fully operational demand for merchant volumes bolstered by customers clearing up 45x eligible inventory before year-end, quarterly production and sales surpassed 1 gigawatt for the first time at our state-of-the-art facility. Our busy fourth quarter capped off an impressive year at T1, and we were excited to carry that momentum into 2026. So with that, let's turn to Slide 5 for an update on the business. G2_Austin, our U.S. solar cell fab that is under construction, has been the centerpiece of our business plans from the start of our journey as a U.S. solar company. We believe that demand for domestically manufactured U.S. polysilicon-based solar cells is meaningfully underserved. And while G1 has been our entry point into the U.S. utility scale market, is expected to be the driver of margins, earnings and cash flow. This morning, I am pleased to report that the first phase of construction of G2_Austin is progressing on schedule. April should be a busy month on site as first deal is scheduled to be erected within the next few weeks. While we have deployed meaningful capital to advance construction of G2_Austin, our sales and finance teams have been busy working to secure an additional offtake contract and to line up capital formation options required to achieve full financial close on Phase 1 of G2_Austin. We remain in advanced discussions on both fronts and expect to close funding in April. As Evan will discuss later, we have multiple potential options to fund the first phase of G2, and we plan to select the financing pathway that provides the best balance of cost, speed, structure and quantum for T1 and our investors. Following a successful ramp-up at G1_Dallas, our fully operational 5 gigawatt solar module facility, we achieved records in production and sales in Q4 when we expanded our customer base through merchant sales. As we move through 2026 with the 3 gigawatt on either cost plus or fixed margin offtake contracts, we are seeing higher indicative pricing in the merchant market, and we expect that T1's module production costs will decline. We are maintaining our production and sales targets of 3.1 to 4.2 gigawatts for G1 in 2026, and we are growing increasingly comfortable with our ability to achieve the high end of that to target range. As near-term variables, including a potential Section 232 ruling and second half customer demand post safe harboring deadlines come into clearer focus, we will update investors with more detailed 2026 guidance. T1's profile within the industry continues to rise, yielding attractive opportunities to stack EBITDA and expand our commercial presence within the utility scale and AI development ecosystems. The deal flow we are seeing as a result of companies wanting to partner with T1, and we will continue to evaluate opportunities that fit strategically, culturally and financially with T1's priorities. T1 is an American company focused on building a critical domestic solar supply chain. But we also intend to unlock value from the legacy assets in our European portfolio, which are attracting growing interest from potential partners to support AI infrastructure. Earlier this month, we reported an important step to monetize our Nordic data center asset, the restoration of a 50-megawatt grid allowance in Mo i Rana, Norway. This initial power allowance better positions T1 to accelerate discussions to monetize this asset, and we have an application in the queue for up to 396 megawatts to unlock additional value. All these steps are intended to position T1 to generate meaningfully higher EBITDA in 2027 and beyond as we navigate this bridge year to G2. Let's turn to Slide 6, please. The ramp-up of G1_Dallas kicked into high gear in the fourth quarter, which was punctuated by record production and sales and the delivery of merchant volumes to major new customers. In roughly 1 year, the T1 operations team has taken G1 from initial production to maximum daily run rates over our 5 gigawatt nameplate capacity. With the strong finish to the year, we produced a total of 2.79 gigawatts of solar modules in 2025, meeting our annual production target. This progress reflects the talent and dedication of our people and gives us strong confidence in our ability to build on this momentum in 2026 and beyond. We believe that G1 is poised to generate improved margin performance in 2026. We expect production sales to ramp sequentially throughout the year, and we anticipate that sales and EBITDA will improve each quarter through year-end, based on our contracted delivery schedules and our expectation for reduced overall costs. The project development timelines adjusting to the new supply chain regulations, we are working with customers and anticipate moving some Q1 deliveries into Q2. T1 has 3 gigawatts of G1 modules under contract for 2026. Our supply chain team is sourcing cells through international suppliers who have certified their [ non-FIOC ] status to feed G1 during the bridge period ahead of the anticipated start of production at G2 in Q4 2026. In total, we plan to procure between 3.1 and 4.2 gigawatts of cells through our global vendor network. As we continue to engage with and qualify new cell suppliers to G1, we are growing increasingly confident in our ability to procure high-quality cells closer to the high end of this range. And with that, I'll turn it over to Otto, our SVP of Project Engineering, for an update on the construction of G2_Austin. Otto Erster Bergesen: Thank you, Dan. Let's move to Slide 7. Construction of the first 2.1 gigawatt phase of G2_Austin continues on schedule, and we're advancing towards some exciting milestones over the next several weeks, all sites. As a reminder, we're pursuing a 2-phased approach to reach more than 5 gigawatts of capacity at G2. Phase 1 will be a 2.1 gigawatt fab, which we plan to follow with a second phase of at least 3.2 gigawatts. Following the start of construction in December, our team in close cooperation with Yates Construction as our general contractor has made excellent progress. The G2 sites have been leveled, the building pad is prepared and foundation work has started with concrete works following shortly. We placed the order for structural steel back in November. The first full section is on track for delivery and erection in April, marking a key step towards our goal of producing first cells by the end of 2026. Our design team, together with SSOE engineering as our engineered record has also been working hard and clearing items of our punch list. We're currently at 90% design and have not been the production line equipment design in concert with our turnkey equipment vendor at Laplace. The comprehensive engineering work and planning that we've done over the past 15 months enabled us to start manufacturing of the production line equipment earlier this month, and we expect the equipment to arrive in the U.S. over the summer. With the support of T1's Board of Directors, we have deployed significant cash to reduce the remaining CapEx required to complete Phase 1, which now stands at $350 million. This has enabled us to place orders for critical long-lead items to protect the overall timeline. So the teams are working well together, and we have some major milestones ahead of us in the next several weeks. We look forward to sharing updates from G2 over our social media channels to document this progress. We're excited to bring this flagship U.S. solar cell fab into operation, which is expected to be the engine of T1's cash flow in the fourth quarter of 2026. And now I'll turn the call back over to Dan. Daniel Barcelo: Thanks, Otto. Let's turn to Slide 8. 2025 was a year to build the commercial foundation of T1 as a U.S. solar manufacturing leader, the capabilities our team has demonstrated both at G1 and now during the construction of G2 have been instrumental to the growth in our customer base. Our first major offtake contract for Treaty Oak source G1 modules with G2 cells and our ongoing discussions with additional potential offtake partners and merchant customers. To date, T1 has already sold and delivered modules to some of the largest utilities and developers in the U.S. without sharing names publicly. And while we continue to advance discussions related to additional offtake agreements for integrated G1, G2 modules, we are seeing indications of meaningful merchant demand for both our current G1 modules with international cells and our high domestic content modules in 2027 and beyond. Today, we are in discussions with current and potential customers for nearly 13 gigawatts of merchant sales opportunities in addition to the advanced offtake pursuits that represent more than 10 gigawatts of demand from some of the largest U.S. utilities and developers. When combined with approximately 18 gigawatts of mid-stage pursuits, we have a total opportunity set of 41 gigawatts. And with that, I'll turn the call over to Evan for a review of our financials and an update on our capital formation initiatives. Evan Calio: Thanks, Dan. Please turn to Slide 9. T1 ended 2025 with a much improved liquidity position in a fully ramped factory that hit our production targets. With equity market capitalization that expanded by more than 11x from our 2025 spring lows to the year-end, we're able to raise more than $440 million in the fourth quarter, enabling us to start construction of G2, execute a series of contracts to preserve our 45x compliance and establish a solid financial foundation for our business as we grow in 2026 and beyond. From this position of strength, we've been deploying meaningful cash from our balance sheet to fund critical stages of G2_Austin construction which reduced our remaining capital needed to fully fund Phase 1. In the coming months, we are focused on selecting the optimal solution to achieve full financial close at G2. Our first year T1 was dynamic, and there were a number of moving parts that impacted 2025 EBITDA, much of which we believe were onetime related to the implementation of new OBBBA restrictions before the start of 2026 in account for much of the miss versus guidance. The nonrecurring and unusual items included the following: an accounting classification of $34 million sales commission waiver we received. Although we previously accrued for the savings through the P&L, accounting standards would not let us recognize the reversal of this item on the P&L despite the favorable cash impact. Net sales were $16 million lower than expected from an inventory sale that was tied to changing regulatory restrictions at year-end, where we had to sell into a weak market to retain 45x, given the onetime implementation of OBBBA change. Net sales were $22.7 million lower due to customer offtake true-up. And lastly, in advance of new supply chain restrictions, we incurred $15 million and higher-than-forecasted tariffs on imported sales. Let's move to Slide 10, please. Looking ahead to 2026 and 2027, T1 is well positioned to navigate this bridge year to G2. On production, we're maintaining our guidance of 3.1 to 4.2 gigawatts as we continue to qualify new cell suppliers. We're increasingly confident in our ability to deliver towards the high end of the range in 2026. With 3 gigawatts under contract for 2026, we have solid visibility, but there's some meaningful swing factors that we expect to play out in the near term that will bring the year into clearer focus for T1. Number one, as a large buyer of U.S. polysilicon, the potential for a ruling in a Section 232 case has potential meaningful impact for our merchant capacity pricing in 2026 and beyond. Number two, as we expand our global vendor network of qualified cell suppliers, there may be potential to bring additional volumes. And three, customer safe harboring activity and projected timelines are still adjusting to the new regulatory climate. Our 2026 outlook is underpinned by several important distinctions between our position today and where we were at the start of 2025. number one, with our organization maturing and year-end contract changes, we are moving away from service agreements with Trina, which saved an estimated $30 million to $100 million at a 3 to 5 gigawatt run rate. These arise from the [ dilution ] of the trademark licensing agreement and the inapplicability of sales commission resulting from the [ dilution ] of the [ TLA ]. Number two, we entered 2026 with 3 gigawatts under firm offtake contracts, which is more than double the contract coverage we had in 2025. As a reminder, these contracts include a 1 gigawatt cost-plus contract and a 2 gigawatt fixed margin contract, both which represent superior economics compared to our full year sales mix in 2025. Number three, as Dan mentioned in the commercial update, we are fielding meaningful inbound customer interest for volumes in later 2026 as developers work down inventory and move past July 2026 safe harboring milestones. Number four, G1_Dallas started 2026 fully operational and capable of producing above nameplate capacity. Recall that installations and commissioning activity was ongoing in Q1 through 1H of 2025. So while 2026 represents a bridge to an expected step change in T1's earnings power with G2_Austin, we're confident that 2026 will be a significantly better year for T1 in terms of profitable operations. Within 2026, we're deferring some 1Q deliveries and expect a significant shift in sales volumes from 1Q to 2Q 26 due to customer requests and timelines. The shift does not change our expected 2026 revenue or adjusted EBITDA, only the timing. There are also no changes to our run rate EBITDA projections as we achieve integrated production between G1, G2 as in the table. Now let's move to Slide 11 for an overview on our capital formation initiatives. Following our successful capital raise in the fourth quarter, our finance team has been advancing multiple options to fund the remaining capital required to complete Phase 1 of G2_Austin. While speed is the essence for G2, our strengthened balance sheet has enabled us to prudently evaluate multiple funding pathways to ensure we arrive at the appropriate blend of cost, leverage, structure, duration and the potential for counterparty halo effects. To be clear, we have had opportunities to enter into transactions to fund the first phase of G2, but we have elected to pursue what we believe are more attractive options. With the capital we've already deployed at G2, we've maintained the projected schedule and timeline. So we are now targeting full financial close of the remaining $350 million at G2 in April. Our confidence in our ability to fund this phase of our growth is founded by the transformation in our investor base across T1's capital structure since last summer and the ongoing interest in partnering with T1 from a host of institutions, strategics and lenders. And now I'll turn the call back to Dan. Daniel Barcelo: Thanks, Evan. Let's turn to Slide 12. Elon Musk's recent announcement of its intention to construct 100 gigawatts of U.S. met solar capacity has been the talk of the solar industry in recent weeks. Just last week, he also announced plans to construct Terafab, a $20 billion chip facility here in Austin. While we can't speak for other companies, we believe these announcements have positive implications for the solar industry in general and for T1 specifically. Our North Star at T1 is to invest in American advanced manufacturing and to establish critical domestic supply chains to power AI, electrification and onshoring. Having much larger companies such as Tesla and SpaceX implement a similar playbook here in our home state suggests two things: T1 is on the right path, and the support that Elon's companies are likely to receive in building out domestic manufacturing in Texas should create additional momentum for landmark projects like our G2_Austin solar cell fab. And Elon selection of solar as a central pillar of power generation to support his portfolio company's growth ambitions is a landmark validation of solar as an energy source, potentially creating a rising tide effect for the domestic solar industry. Now let's turn to Slide 13. Our vision of building a fully integrated silicon-based solar supply chain in the U.S. could not be more perfectly aligned with the priorities of this country and the current administration. As shown on Slide 15. In many ways, T1 is setting the standard for reverse technology transfer, bringing cutting-edge solar capabilities back to America. This end-to-end domestic polysilicon solar supply chain will provide scalable, low-cost energy while strengthening American energy independence. By investing in a fully integrated domestic supply chain, T1 supports the U.S. polysilicon industry and ensure solar energy can free up domestically produced natural gas for export to our partners. With U.S. electricity demand surging, optimizing domestic energy resources has never been more critical. Solar-paired storage deployed directly at data centers can insulate consumers from demand-driven price spikes. And as geopolitical risk premium returns to the global energy markets, developing a domestic supply chain becomes essential to keeping energy affordable. Moreover, as AI drives a new wave of electricity demand, solar is the most scalable resource available to help power the next generation of data center infrastructure. By scaling domestic solar, T1 supports both the country's energy needs and the growth of U.S. AI leadership. Turning to Slide 14. Let's conclude with a review of T1's top priorities for 2026. Our priorities continue to evolve as we strengthen the business, but our core objective remains unchanged in building the first fully integrated U.S. polysilicon solar supply chain. To support that, we're focused on the following key initiatives: We're completing our capital formation to achieve full financial close on Phase 1 of G2_Austin and continuing to advance construction on schedule, which will position T1 to produce high domestic content modules at G1_Dallas using domestic polysilicon, wafers, steel frames and solar cells. Once G2 Phase 1 achieves full financial close, we should have visible demand for Phase I that should support offtake commitments and subsequent funding. In parallel, we are taking definitive steps to enhance T1's profitability and capital structure. We're driving efficiencies at G1 Dallas to achieve sustainable profitability and reducing unit cost of production through automation and software upgrades. At the same time, we're optimizing our capital stack, carefully managing leverage cost, complexity and ownership as our business model continues to mature. These efforts position us to deliver stronger returns while maintaining a disciplined, flexible financial foundation. Delivering long-term shareholder value is our ultimate objective as we build T1 into a cash flow engine and a leader in the underserved domestic solar cell market. We're focused on driving EBITDA and cash flow through both organic growth and strategic acquisitions while investing in high-margin opportunities that complement our manufacturing business. As a company, we're proud of what we encompassed in 2025, and we're entering 2026 with strong momentum. More importantly, we are excited for the year ahead as we move closer to our goal of creating the first end-to-end domestic polysilicon solar supply chain in the U.S., a milestone that will both set T1 apart and set a new standard for the industry. And with that, I'll turn it back to Jeff to coordinate the Q&A session. Jeffrey Spittel: Thanks, Dan. Marvin, we're ready to open the line for questions, please. Operator: [Operator Instructions] And our first question comes from the line of Philip Shen of ROTH Capital Partners. Philip Shen: First one is just on the remaining base for Phase I. You talked about closing this in April. You've had many other options, but you're waiting for -- or trying to create the right set of and sources of capital. So I just was wondering if you might be able to provide more color on what those alternatives sources might be and what the makeup might look like? And is it earlier in April, later in April? Daniel Barcelo: Yes. Thanks, Phil. We can't give too much color on this. We are confident that it will be in April. As Evan said, we have passed on certain, we'll say, higher-cost options. The state and maturity of the project continues to support this. G2, we made tremendous progress in terms of where we are with PLE equipment starting to come in, in June, July and August. So we're comfortable now in many, many conversations with many, many capital providers. They're seeing that G2 is on track. They have more confidence in what's going on in the market. They see that the G1 asset is working at a production level, albeit at lower EBITDA, which we just went through. But we see the volumes working, and there's more confidence in that base asset. So that's really giving us a lot of comfort in what we're seeing in April. We're committing to April. We're confident that we'll have April. We just can't give too much color for a few reasons there. Evan, would you like to add anything about the funding for G2, which remains $350 million. Evan Calio: Yes. is hard to give you kind of more detail. I think Dan covered it. I mean, look, we want to finance in a way that provides the most flexibility to expand G2, given all sales are through G1 is going to be a holistic type of financing. So that's important to us. And we also believe that future sales price will be above what our still attractive long-term contract offtakes, but there are a significant discount to current and what our expectations are in future. And so we want to maximize kind of our merchant exposure as we move into the year. So I think those are two additional points of color, but yes, it's hard to answer your question, were -- we got 30 days here right now. Philip Shen: Okay. No problem. Shifting over to your customer situation and kind of driving new customers, you guys talked about 2 new customers in the quarter. And you've given a lot on the pipeline. As we get through -- one, can you share who those 2 new large customers are? I think Treaty Oak might be one. And then maybe give some more color on the pipeline and maybe the cadence of additional contracts as we get through the year. Daniel Barcelo: Yes. Treaty Oak did allow for public disclosure of their name. The others prefer confidentiality so we can't talk to that. We remain close on a significant contract. We're confident that we can get that contract through. As you can imagine, there's a lot of work to be done with a new plant in 2025. with the quality in the QA/QC of that plant, which is being demonstrated. We have executed quite a bit a further deep [ FIAC-ing ] and we'll see further deep [ FIAC-ing ] proofing at the end of last year. All of those things are very important aspects for new customers to come in. So we're comfortable more and more increasingly, many more customer visits, much more interaction. As we're building with that as part of the EBITDA growth and moving away from an agency agreement from in the past, building these relationships with these customers now is important. We've had over a dozen very significant customers visiting it. All of them are very pleased with what they're seeing in terms of QA/QC, and many of them are very pleased with the progress we're making on G2. Everyone really wants a high-efficiency TOPcon cell. Everyone really likes the commercial, we'll say, maturity of the TOPcon that we're producing, and there's a lot of comfort there. Philip Shen: Okay. One last one, if I may, and then I'll pass it on. As it relates to the European assets and the recent news there, can you update us on how much cash you could raise from potentially selling those assets and what the timing might be? And possibly, could you finance that asset ahead of time so you can kind of leverage that asset value earlier and maybe take some cash up? Daniel Barcelo: Yes. We're looking at it the way you're looking at it. Those assets are legacy assets. In Norway, we have an already existing powered [ shell ] now with 50 megawatts. We're in the queue for a further 350 to 400 megawatts of power. That secondary power takes longer, but there's a pathway to that. we're active. We've hired [ Pareto ] to start marketing that. We are open to full divestment. We are open to partnership, but we're as -- soon as possible there. I'd say that's moving ready. There's a lot of interest there. That power is 100% uptime and hydroelectric power. In Finland, we are getting close to permitting on a site. This was a legacy industrial site. We took this industrial platform site. We held the option. That option, we're ready to execute that option with building permits to get close to 300 megawatts of power. That will be a brownfield site in an industrial zone. That's the same thing. It's hard to speculate at what prices we will get, but you're looking at pricing in the market right now from anywhere from $0.5 million a megawatt to $1 million in megawatt in terms of power, it's a very robust Nordic market right now, and we are very committed to divesting this as soon as possible and/or partnering to retain upside value. Operator: Our next question comes from the line of Greg Lewis of BTIG. Gregory Lewis: Dan, I was hoping you could talk a little bit about shift in IP to Evervault? And just, I guess, what, last month, there was some talk of, I guess, a CBD on India. Just as we think about that, like does -- how are we thinking about margins? And is that something that we're looking to broaden out beyond Evervault because of the margins I mean the CBD out of India? Daniel Barcelo: Yes. Well, Evervault is a Singaporean entity, and we are licensing from Evervault. I can let Andy touch more about that if it's a specific question on there. In terms of India, we don't we don't have operations in India. I think that India, AD/CVD is only going to make it harder for product to be coming through India to the United States. We have been supportive of AD/CVD cases publicly. We've been supportive of 232 very publicly. We remain optimistic that the U.S. will have a robust 232 across the chain, down to the modules, down to the products. I think that's very important for the profitability of the American solar market. So from those perspectives, we're still hopefully optimistic in terms of what's going to happen there. And Andy, do you want to touch on [ volt ] a bit about our licensing strategy? Andy Munro: Yes. Well, as you said, our license with Evervault, doesn't, in any way, result in tariffs. We're not importing anything. So that's all upside, the solar, 3 tariffs, which helps to level the playing field for U.S. manufacturers. So a core tariffs that will be implemented soon and the 232, so that's all upside and wind at our back. And what we have with Evervault is simply an IP license. And so from our perspective, that's only reducing the risk that we face going forward on the [ FIOC ] front. So further solidifies our position when it comes to compliance. We put a lot of effort into a world-class compliance program. Even without that transaction, we believe we were compliant but it's essentially the suspenders to our belt because we have taken a very conservative approach on [ FIOC ] compliance, and we're confident that we will be. We had a number of strategic transactions at year-end. That was one of them. But if you go down each and everyone of the prongs the [ FIOC ] compliance, equity debt covered to officers IP effective control and material assistance, we feel confident that we're compliant. And early this year, there was a guidance given, and that made it clear that our strategy of procuring [ non-FIOC ] cells would allow us to satisfy the material system cost ratio by providing safe harbors. And so that guidance is good news, And we welcome additional guidance on [ FIOC ] and are confident that we'll -- our world-class compliance program will ensure that we're compliant. Daniel Barcelo: Yes. I think just to close it out, there's been a tremendous amount of safe harboring in '25 that was happening, OBBBA clearly put a lot of volatility into buying and selling. They're going back to 232. There's still pressure from imports from imported modules from Asia or imported poly -- particularly from imported polysilicon from Asia. 232 for level of playing field would be very important from a margin -- from leveling the playing field and enhancing that margin. That still seems to be the key area. I'd say there's a lot of optimism in the market now that developers are hoping to see higher PPA prices rising. Obviously, the conflicts in the Middle East has been a lot of rise of natural gas. Natural gas vis-a-vis solar has been the key competitive. Solar and storage is only more competitive with higher natural gas prices at home. So there does seem to see a lot of tailwinds behind the market. Obviously, the debate between the developers wanting that margin versus the manufacturers getting that margin remains. But again, we're very optimistic that we'll see a 232 strengthen margins for American-made solar. This whole thing we've been doing is about American manufacturing as it is about American energy, and it's very important that we're restoring jobs that we're creating manufacturing jobs, and I think that's very supportive by the administration. Operator: Our next question comes from the line of Sean Milligan of Needham & Company. Sean Milligan: Evan, you went through a little quickly on the call, but I wanted to confirm, did you say that you've reduced the Trina sales and service agreement commitments for 2026 and moving forward? Evan Calio: Yes. I mean there were 23 changes that happened on January or December 31 that deleted one contract that has collateral impact into another, And that would reduce the year-over-year comparison on the fees owed under those agreements. And I gave a range of $30 million to $100 million. And just to be clear, that per year, that -- the low end is 3 gigawatts without a G2 sale. And the high end, 100 plus is 5 gigawatts with the G2 sale to dimension the range. Both those contracts are publicly filed with our deal in December, so you can kind of go through the math otherwise, but that's our -- and it's based on an estimated sales price and EBITDA, so they're estimated kind of amounts. Sean Milligan: Okay. That's coming out of the -- I just want to make sure I'm understanding this correctly. But is that coming out of the G&A line in 2026 if we look at it compared to 2025? Evan Calio: Yes. Yes. I mean, there will be -- I mean, look, I mean SG&A, it was clearly heavy in 2025. It was a ramp-up of a new asset. It was a ramp-up of a new business for T1. And it embeds a growth project, right? And so when you think of the construction of SG&A, there's a large -- and you'll see the 10-K right this evening or after the close, which you can see some of this stuff. But there's a large noncash component in your SG&A, right, that relates to largely carried by the impairment, but there's other noncash stock comp allowance doubtful accounts, other accounts and D&A, depreciation and amortization, that result in a noncash piece of about 33%. And then there's other third-party fees in there, which were 26% of that number in 2025. And that contains those contract fees, largely the commission fee that will not be -- it will be reduced in that number going forward, depending upon volume and the quantum that I mentioned to mention. So long-worded answer, yes. Sean Milligan: Okay. That's great. And then just to kind of circle back up. So that contract, I think, had a fixed margin on the gross margin side, right? Has that changed? Like how should we think about the third-party margin for 2026? Evan Calio: Yes. I mean we have 2 different contracts, right? We have a one 5-year long-term contract that underpins the financing of the asset. That is a cost-plus contract. And then we have a second 1-year contract that's fixed margin at 2 gigawatts. And neither of those contracts -- we executed 9 different contracts in conjunction with the acquisition of the asset, right? And the deletion of the contracts that I mentioned were different than the offtake contracts. So they're not -- they don't impact the contract calculations. So no change in that year-over-year. I mean, but there's a new contract. Operator: This concludes the question-and-answer session. I would like to turn it back to Jeffrey Spittel for closing remarks. Jeffrey Spittel: Thanks, Marvin. Well, thank you all for your attention and participation today. Please feel free to contact us. We will back out on the road in the next few weeks with Dan and Evan. But you know where to find us and look forward to following up with everybody after the call. This will conclude today's call. Operator: Thank you for participating in today's conference. This does conclude the program. You may now disconnect.
Operator: Good morning, everyone, and welcome to the Xtant Medical Fourth Quarter and Full Year 2025 Financial Results. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference over to your host, Kevin Gardner of LifeSci Advisors. Kevin, please go ahead. Kevin Gardner: Thank you, operator, and welcome to Xtant Medical's Fourth Quarter and Full Year 2025 Financial Results Call. Joining me today are Sean Browne, President and Chief Executive Officer; and Scott Neils, Chief Financial Officer. Today's call is being webcast and will be posted on the company's website for playback. During the course of this call, management may make certain forward-looking statements regarding future events and the company's expected future performance. These forward-looking statements reflect Xtant's current perspective on existing trends and information and can be identified by such words as expect, plan, will, may, anticipate, believe, should, intends and other words with similar meaning. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those noted in the Risk Factors section of the company's annual report on Form 10-K filed with the SEC and in subsequent SEC reports and press releases. Actual results may differ materially. The company's financial results press release and today's discussion include certain non-GAAP financial measures. Please refer to the non-GAAP to GAAP reconciliations, which appear in our press release and are otherwise available on our website. Note that the Form 8-Ks that we file with our financial results press releases provide detailed narratives that describe our use of such measures. For the benefit of those who may be listening to a replay, this call was held and recorded on March 31, 2026, at approximately 8:30 a.m. Eastern Time. The company declines any obligation to update its forward-looking statements, except as required by applicable law. Now I'd like to turn the call over to Sean Browne, CEO. Sean? Sean Browne: Thank you, Kevin, and good morning, everyone. Thank you for joining our fourth quarter update call. As has been our practice, I will begin with a few prepared remarks about our operations, and then Scott will provide a deeper dive into the financials. We will then open the call to your questions. Okay. We again turned in solid financial performance during the fourth quarter, highlighted by $32.4 million of revenue, representing growth of 3% over the fourth quarter of 2024. Now I want -- I would note that the Companion Spine transaction closed in early December, roughly a month ahead of our original assumption, which cost us about $2 million of revenue in the quarter. Scott will provide the details, but I want to flag it upfront so the headline number is properly contextualized. Importantly, we again generated positive cash flow, adjusted EBITDA and net income, a continuation of the favorable trends we have seen over the past several quarters. Before covering the quarter in more detail, I want to briefly recap our recent sale of our noncore Coflex interlaminar stabilization assets and the international Paradigm Spine entities to Companion Spine, which closed in early December. The final purchase price was approximately $21.4 million, and I'm pleased to report that the transaction is now fully closed and settled. We use those proceeds to reduce our borrowings and strengthen our cash position, and we do not anticipate any need to raise additional outside capital in the foreseeable future. More strategically, this transaction was transformational for our company. It further sharpened our focus on our core high-margin biologics business, which is where our competitive differentiation lies and where we intend to grow. So for the full year of 2025, we generated total revenue of $133.9 million toward the upper end of our previously stated guidance of $131 million to $135 million. Again, remember, that guidance also included a full month of Coflex and Paradigm Spine revenues. And this represented a growth of over 14% for the full year of 2024. Adjusted EBITDA for the full year was $16.3 million compared to a loss of $1.9 million in 2024, a result we are very proud of and one that reflects the sustained operational discipline our team has demonstrated over the past 2 years. Our biologics product family, which is the greatest potential for growth, both from a revenue and cash generation perspective, was essentially flat for the fourth quarter of last year. We have been direct with investors that our recent emphasis on self-sustainability, positive cash flows, tighter operating discipline, in-house manufacturing was intentional, and those goals are now achieved. The strategic initiatives we implemented, our sharpened focus on higher-margin biologics, our emphasis on in-house manufacturing to improve quality and control costs and our more disciplined approach to operating expenses were all pursued with self-sustainability in mind. We are pleased to have delivered on each of them. With that foundation now firmly in place, we are turning our full attention to driving top line growth, leveraging the strength of our biologics product family. On the commercial side, we have been making measured but meaningful investments to expand our reach. In 2025 and into 2026, we have doubled the number of regional sales reps in the field. Those reps are now deployed, ramping up and calling on accounts. This year, we plan to add significant resources to our national accounts team, which will expand our ability to drive institutional adoption at scale across hospital systems and large practice groups. Together, we believe these additions will have an accelerating impact on our biologics revenue as the year progresses. We continue to invest in R&D to bring innovations to surgeons and their patients, and we remain committed to the cadence of new product introductions that has characterized these past several years. So let's talk a little bit about new product launches. Innovation remains central to our strategy, and we continue to build out our portfolio during the quarter. In December, we announced the commercial launch of nanOss Strata, our next-generation synthetic bone graft manufactured from hydroxycarbonapatite, a material with higher solubility than traditional hydroxyapatite, which is the most commonly used synthetic material. Increased solubility enhances the bioactivity of the graft, allowing for better integration and remodeling with surrounding bone tissue during the healing process. Early surgeon feedback has been excellent, and we are encouraged by nanOss Strata's prospects. We also launched CollagenX, our bovine collagen particulate for surgical wound closure designed to promote healing, prevent distance and help mitigate surgical site infection risk. What makes CollagenX particularly compelling commercially is that it is a potential add-on to virtually every case type in our existing biologics portfolio, creating meaningful attach rate opportunity across our current procedure base as well as an entry point into adjacent surgical disciplines we do not currently serve. The size of that addressable market opportunity is significant, and we are very excited about what this product represents for both patients and for our business. As we have said before, but it bears repeating, we now offer and internally produce solutions across all 5 major orthobiologic categories, which includes Demineralized Bone Matrix, cellular allografts, synthetics, structural allografts and growth factors. Additionally, with our [ Amnio ] and collagen product lines, we are also well positioned to grow in the surgical repair and wound care markets. This breadth positions us as the partner of choice in regenerative medicine, a position that has been further reinforced by the very positive feedback we continue to receive from surgeons on these recent innovations. Turning now to guidance. Our 2026 revenue outlook reflects the impact of the Companion Spine divestiture and the expiration of license revenue from our Q-code and amniotic membrane agreements, both nonrecurring items that Scott will address in detail. Offsetting these headwinds is continued anticipated organic growth in our core biologics business, which we expect to accelerate as our expanded commercial team is fully deployed and our newest products gain traction in the field. With that context, we anticipate full year 2026 revenue in the range of $95 million to $99 million. On a pro forma basis, this represents solid organic growth in our core business. We are committed to maintaining positive free cash flow at these revenue levels. And as I noted, we do not anticipate any need for any outside additional capital. Story heading into 2026 is straightforward, a focus on our core business and expanding commercial footprint, an innovative and comprehensive product portfolio and a clean balance sheet. We believe we have the right strategy, the right team and the right foundation to deliver. Now with that, I will turn the call over to Scott for a more detailed review of our financial results. Scott? Scott Neils: Thank you, Sean, and good morning, everyone. I'll start first with our financial results and then conclude by sharing some specific amounts related to our recent divestitures and license revenue for the benefit of looking ahead to 2026. Total revenue for the fourth quarter of 2025 was $32.4 million compared to $31.5 million for the same period in 2024. The slight increase is attributed mainly to higher license revenue during the fourth quarter of 2025 that Sean alluded to earlier, partially offset by declines in biologics and hardware. As Sean mentioned a moment ago, we expect that the measured investments that we're making in our field sales force on both a regional and national basis should drive accelerating biologics growth in 2026 and beyond. Gross margin for the fourth quarter of 2025 was 54.9% compared to 58% or 50.8% for the same period in 2024. The increase is primarily attributable to favorable sales mix and greater scale, partially offset by a $1.3 million inventory charge associated with the launch of the Cortera Fixation System. Fourth quarter 2025 operating expenses were $18.7 million compared to $17.9 million in the same period a year ago. General and administrative expenses were $7.3 million for the 3 months ended December 31, 2025, compared to $5.7 million for the same period in 2024. The increase is primarily related to a $1.4 million of additional expense related to various compensation plans. Sales and marketing expenses were $10.9 million for the 3 months ended December 31, 2025, compared to $11.7 million for the same quarter last year. The decrease resulted primarily from a $0.9 million reduction in commissions. Research and development expenses were $459,000 for the 3 months ended December 31, 2025, a decrease from $522,000 in the fourth quarter of 2024. Net income in the fourth quarter of 2025 was $57,000 or $0.00 per share on a fully diluted basis compared to a net loss of $3.2 million or $0.02 per share in the comparable 2024 period. Adjusted EBITDA for the fourth quarter of 2025 was $1.9 million compared to adjusted EBITDA of approximately $0.4 million for the same period in 2024. Turning now to full year results. For the full year 2025, total revenue was $133.9 million, representing growth of 14% over $117.3 million for the full year 2024. Again, our revenue for the fourth quarter and the full year 2025 were negatively impacted by the closing of the sale of our Coflex assets and international hardware business to Companion Spine in early December, which is about a month sooner than we were anticipating. The assets of the businesses that were included in the transaction were generating about $2 million of revenue per month. Gross margin for the full year 2025 was 62.9% compared to 58.2% for the full year 2024. Of this increase, 530 basis points were due to sales mix and greater scale, partially offset by a decrease of 260 basis points due to increased charges for excess and obsolete inventory. General and administrative expenses were $29.5 million for the full year 2025 compared to $28.7 million for the same period in 2024. This increase is primarily attributable to $2.4 million of additional expense related to various compensation plans, partially offset by a $1.2 million reduction in expense for stock-based compensation. Sales and marketing expenses were $45.5 million for the full year 2025 compared to $49.2 million for the full year 2024. This decrease is primarily due to reduced commission expense, $3.9 million resulting from revenue mix and $2.1 million of reduced compensation expense related to headcount, partially offset by $2.9 million of additional consulting fees. Research and development expenses were $2.1 million for the full year 2025, a modest decrease from $2.4 million for the full year 2024. Full year 2025 total operating expenses were $77 million compared to $80.3 million for the full year 2024. Net income for the full year 2025 was $5 million or $0.03 per share on a fully diluted basis compared to a net loss of $16.5 million or $0.12 per share for the full year 2024. Adjusted EBITDA for the full year 2025 was $16.3 million compared to an adjusted EBITDA loss of approximately $2.3 million for the full year 2024. As of December 31, 2025, we had $17.3 million of cash, cash equivalents and restricted cash compared to $6.2 million as of December 31, 2024. As Sean alluded to earlier, our cash balance as of December 31, 2025, excludes the $10.7 million that we subsequently received from Companion Spine and satisfaction of the unsecured promissory note of $8.2 million issued to Xtant by Companion Spine related to the Coflex transaction, plus accrued interest and related working capital and other purchase price adjustments. Net accounts receivable was $17.8 million, inventory was $30.3 million, and we had $3.8 million available under our revolving credit facility as of the end of the year. Turning now to nonrecurring revenue and related expenses for 2026. Total revenue for the business sold to Companion Spine was $20.3 million for 11 months ended November 30, 2025. We will include disclosure of the 2025 quarterly revenue amounts on Xtant's investor website. Cost of sales and operating expenses for those disposed businesses were $6.6 million and $15.4 million, respectively, for the same period. Also, with respect to the $18.7 million of license revenue recognized during 2025, please note that the related sales and marketing expense was $3.7 million. That concludes the financial overview. Operator, you may now open the line for questions. Operator: [Operator Instructions] Your first question is coming from Ryan Zimmerman with BTIG. Iseult McMahon: Scott, this is Izzy on for Ryan. So I just wanted to start out on the outlook for 2026. I know guidance excludes Coflex, Cofix and the OUS business. But I was curious if you could kind of unpack what your thoughts are for underlying organic growth, especially in the core biologics business. . Sean Browne: Scott, I'll let you dive in, and I'll add any color. Scott Neils: Sure. I think as we look out through 2026, we're going to be looking for sequential quarter-over-quarter growth, which will reflect the growing contributions of the new product offering Sean mentioned as well as the expanding impact from additions to our commercial organization. I will note, though, that seasonality will still be present. So thinking of Q3, for instance, we're likely to see less sequential growth there than in other quarters. I think maybe setting Q1 as a baseline, for example, starting biologics or with biologics to your point, I expect biologics in the first quarter to be down low double digits compared to Q1 of 2025 in response to headwinds related mainly to lost Amnio product and for hardware to be down approximately mid-teens after adjusting for the revenue associated with the divestiture in 2025. Does that help, Izzy. Iseult McMahon: Yes, that's really helpful. And then you kind of touched on it already with the low double-digit decline for first quarter. But how much of a headwind are you expecting in 2026 from the loss of the license revenue relating to the Q codes? Sean Browne: I think it's more -- okay, so first of all, all of that, the Q code revenue all goes away. However, what we are waiting to see and is still shaking out is what is the base of that business now going to be because we still manufacture a really terrific product line that will be used in advanced wound care by distributors and others. Now what's going to be different is that as this continues to shake out, more of those distributors will be using our contracts, and it will be actually [ Xtant ] brand. So we expect as the year progresses, we'll see that business begin to ramp up, and we feel good about some of the discussions we've had with many of the groups that are out there today looking for a product to sell into hospitals because, as you know, in the advanced wound care world, we're going to see a lot more patients being shifted from the non-acute facilities to acute. And so we see an upside that's going to be coming our way really starting probably -- well, I guess, guys who are in this market a little more than we are, would tell you it's probably going to be looking more like sometime in the late second quarter to the second half of the year where we'll start to see the pickup on that. But in the first quarter, we [ OEMed ] a fair amount of product for guys last for manufacturer, I should say, distributors last year under their brands. And so that business has gone away. But now the business that will come back will most likely be product that will sell under our brand, and it will be into hospitals. Does that answer your question? Iseult McMahon: Yes, that's really helpful. And then just the last one for me. I was curious how quickly you guys are expecting to see a decline in the hardware business throughout 2026. Sean Browne: I think the best way of looking at hardware is we will see a slow decline throughout the year. So yes, so I'll just leave it at that. Scott, do you want to add any color to that? Scott Neils: Yes. I'd simply say that we've already seen a decline in the hardware that remains post divestiture, and we expect that, that decline will continue at a reasonably steady rate approaching high teens in 2026. Operator: Your next question is coming from Chase Knickerbocker with Craig-Hallum. Chase Knickerbocker: Maybe I just wanted to start on kind of that cadence of biologics growth that's kind of implicit in all that commentary that you just gave. It calls for, call it, kind of last 3 quarters kind of acceleration and kind of organic year-over-year biologics growth. Sean, can you maybe just walk us through kind of which products in particular you kind of expect to support that kind of the -- just help us, I guess, bridge to their kind of by product as far as what you see accelerating growth? And then kind of same question as far as how much of that comes from your distribution network versus kind of white label contracts, white label business that you have visibility on? Sean Browne: Sure. So starting off with the different products. So all of the advanced biologics products that we're now manufacturing. So when you think about our OsteoVive Plus, which is the stem cell product, our OsteoFactor Pro which is our growth factor product, the CollagenX product we just rolled out our Trivium product, which is an advanced demineralized bone matrix product. Those are the ones that I see, quite frankly, all of them expect to grow, but those are the ones that are going to be the big drivers. And those are the ones that if you look at our funnel today, which I'm really excited about because this is something with the added sales people new opportunities that we're looking at these days is substantially greater than what we've had really, quite frankly, ever. And with this advanced portfolio, we're touching on a lot more -- a lot of areas in and around spine. So when we start looking at the number of trauma, foot and ankle and other opportunities that have come our way, it's become substantially greater. So those would be the product lines that I would say that will be driving what we see as our growth. Chase Knickerbocker: And then just as far as channel, Sean, white label versus your own distribution network? Sean Browne: So yes. So when we think again about the biologics business, we'll look at our channel or our OEM channel about 20%. Scott, is that right? About 20% of our growth this year or 5% of our overall biologics business will be in the OEM channels that maybe a little higher, like 22%. Is that about right, Scott? Scott Neils: Yes, that is about right, Sean. Sean Browne: Yes. Chase Knickerbocker: And then a couple as we think kind of longer term, Sean, as we think about kind of direct -- your distribution network, white label, potentially kind of some larger contracts with institutions, like where do you see over the medium term, your business kind of showing the most growth? Is it these white label contracts? Is it continuing to be in your distribution network? Just some thoughts there as far as kind of where you're really leaning in. Sean Browne: Yes, especially given the fact that we had -- it will definitely be the Xtant branded product working through our independent agent networks, mostly because, quite frankly, that's where we had the most significant reduction over the 2024, 2025 years in way of we lose a person didn't replace them. And so we had -- and that was strategically a choice we made. Strategy is about choices. And our strategy was we need to get to self-sustainability and that meant building products internally, being able to have our own products that we feel really good about that are advanced, give us the much higher ASPs and better margins. And so these are decisions we made. Now we've replaced and then added basically doubled the size of the sales force. And that sales force is focused on our Xtant branded products. And so when you see the growth that will be coming out, it will be coming from really what I see has been a down to flat independent agent network. We have a real opportunity to really start growing that world again. And so we're feeling really good about where that's going. Chase Knickerbocker: And then two, just to finish for me on -- maybe on hardware. That business is obviously a lot smaller than it has been for you in the past. You expect it to decline. What are your kind of plans there over the medium to long term? Is that a little bit of a melting ice cube for the business that's obviously kind of drawing down growth on the overall top line? Just kind of give us your strategic thoughts there. And then just with kind of all the movement in the portfolio, can you give us a little bit more kind of color on gross margin in 2026? And sorry if I missed that during your prepared remarks, Scott. Sean Browne: I'll let Scott address the 2026. I'll address the hardware issues. So hardware for us, where we are good in hardware, we're really good. Like we have this new Cortera line, which is outstanding. We have a cervical offering that is as good as -- it's actually better than almost anything else that's out there. So we do adult degenerative spine really well. The question is, at what point in time does this become something that becomes a strategic distraction. And at this point in time, it's still helping to set the table for some of our biologics business. So I guess the point is at what point do we kind of look at this and say, when doesn't it? And does the, I guess, the drag on growth become more than it's worth. And so we're not there right now. And -- but it is something we're looking at. So I'll -- without getting too deep into that, but that is clearly high on our strategic list of things to choose or decide. And so that's something that we'll be working on over the course of the next year or so. Scott, do you want to answer the gross profit margin question? Scott Neils: Sure. I think over the course of 2026, we're probably going to be running low 60s in terms of gross margin. As far as the puts and takes within that, -- the new product launches, these higher-margin biologics launches that we've done have had the desired effect in terms of what they've done to our overall biologics product margins. However, what we've seen out of hardware is that really the nonproduct costs, say, excess and obsolete charges, for example, have offset to some extent, the positive contributions from those new biologics product offerings. So net-net, I think we're probably running low 60s in way of gross margin during the course of 2026. Operator: Thank you, everyone. This does conclude our Q&A session at this time. This also concludes our conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation. Sean Browne: Thank you.
Operator: Welcome, ladies and gentlemen, to the earnings call of Friedrich Vorwerk Group SA regarding the full year figures of 2025. The company's CEO, Torben Kleinfeldt; and CFO, Tim Hameister, will guide you through the presentation and the figures shortly, followed by a Q&A session via audio line and chat box. Having said this, Torben, the stage is yours. Torben Kleinfeldt: Yes. Thank you very much, and also a warm welcome from my side. Welcome to the Friedrich Vorwerk Earnings Call 2025. I will, for everybody who is not in detail familiar with Friedrich Vorwerk, run you very quickly through the main topics of our company and then give you a short market update about the latest developments in our main markets. Then I will hand over to Tim for, of course, the financial figures, which are key to this meeting here. And then I will give you a business update about our current projects we are running at the moment, at least the large ones. So yes, Friedrich Vorwerk has been active since founding in 1962. So with more than 60 years of experience in the business of engineering and constructing energy infrastructure here in Germany, mainly. We can look back at numerous very successful projects in our highly attractive main market, which is natural gas transition, electricity transition, clean hydrogen transition, and of course, adjacent opportunities where we sum up our activities in district heating, CO2 treatment and transport and treatment of biomethane. Today, we are operating from 14 locations within the north, mainly in the north of Germany with more than 2,200 well-trained employees. And yes, due to the energy transition, which is still going on here in Germany, we can look back at a very strong order intake already also in 2025. So we were able to acquire projects in a total volume of almost EUR 1 billion in 2025, which is an increase of 27% compared to the figures of the year 2024. Yes, where do these order intake come from? Main customers here in our 3 markets are, of course, the large TSOs operating the energy transport grids, not only in Germany, but also in the middle of Europe. So it could be in terms of electricity transition companies called TenneT and Amprion in looking at the market in clean hydrogen transition and natural gas transition, we have customers like Open Grid Europe, Gasunie and others. But of course, you can also find petrochemical companies and cable manufacturers within our customers. Yes. So what's the latest market update. First, I want to focus on the development of -- since German government has agreed with the EU Commission to set up new power plants in Germany. These very flexible power plants are necessary to support the production of renewable energy, mainly driven by wind and solar farms. And at times, you don't have wind and solar available. You need to have an energy source, which can be ramped up very quickly. So Germany is planning to install roughly 10 gigawatts of capacity in terms of gas-driven power plants. And that, of course, is an opportunity also for Friedrich Vorwerk Group, both in pipeline construction to run new natural gas pipelines and later on also hydrogen pipelines towards these gas-fired power stations. But also, we have a division in our plant construction department, which can supply the necessary fuel gas systems to supply those turbines delivered by companies like Siemens, GE or others. Other latest developments since we have all heard that the hydrogen economy has been struggling a bit over the last month. German Parliament has passed a so-called Hydrogen Acceleration Act. Main part of that is, of course, to install the so-called core grid for hydrogen transport in Germany, which could be the nucleus to develop the hydrogen industry in Germany because it will cut off costs for transport of hydrogen when the core grid is available and consumers and also producers of hydrogen can be easily connected to this grid. But also they want to secure and make investments in hydrogen production here locally in Germany easier and more reliable for the investors. And of course, all our other businesses like natural gas transition is also still ongoing since new LNG terminals are still developed on the coast of Germany. So the Bundesnetzagentur has just published the first draft of the new grid development plan, combining the investments in natural gas grid development and hydrogen grid development. And this plan looks out to the year 2035 with still investments in the natural gas grid of roughly EUR 3 billion. And they also found out that probably developing the core grid for hydrogen will be more costly than predicted 2 years ago. So the revised plan for setting up the hydrogen core grid roughly sketches out investments of EUR 25 billion instead of EUR 20 billion, which was estimated before. So also here, in the market of natural gas and hydrogen, huge potential for our company's group. And therefore, I would like to hand over to Tim for last year's financial figures. Tim Hameister: Thanks a lot, Torben. And also a warm welcome, everyone, from my side to today's earnings call. Overall, 2025 was a fantastic year for Friedrich Vorwerk. We achieved record-breaking results across all KPIs, successfully completed 2 acquisitions, secured numerous new major projects. And last but not least, we launched our proprietary welding robot in collaboration with our subsidiary, 5C Tech. Therefore, I'm very pleased to now present these strong results in detail. In terms of revenue, we've steadily increased over the course of the financial year and delivered a fantastic final quarter, which despite the seasonal nature of the business, nearly matched the strong performance of Q3. Overall, we benefited from favorable weather conditions in fiscal year 2025, not only in Q4, but especially in the first quarter when we were able to resume work after a short winter break on many projects as early as mid-January. This point, I would also like to briefly note that the first quarter does not always benefit from good weather conditions. This year, for example, in 2026, we've seen a harsher winter again after a long time with plenty of ice and snow, particularly in Northern Germany, resulting in a question of production stoppages even in February. However, depending on weather conditions in the next quarters that are more relevant in terms of revenue and earnings, we expect to be able to offset at least parts of this effect over the course of the year. For the full year 2025, we generated revenue of EUR 704 million, representing a remarkable 41% increase over the previous year. This was primarily due to our continued success in recruiting new employees, which led to a 15% increase in the average number of employees as well as an increase in productive hours per employee, higher equipment utilization and, of course, some pricing effects. The electricity segment's share of revenue has contributed -- has continued to rise, now standing at 52%, making it the primary driver of growth in 2025. While this is largely attributable to A-Nord, we are simultaneously working on several medium-sized projects in this segment, such as BorWin6, the Baltrum HDD project and several converter stations as well. 2/3 of the current order backlog is attributable to this segment. So continued growth is expected here. At the same time, we anticipate a significant growth momentum from the Clean Hydrogen segment as larger subprojects on the hydrogen core grid are also expected to be put out to tender in the foreseeable future. Furthermore, we expect additional growth in the adjacent opportunity segments in 2027 and the following years due to the German government special fund. The development of profitability was particularly impressive in the fourth quarter with an EBITDA margin of almost 29% and EBIT margin of almost 25%, even taking into account the dilutive effect of the cost plus fee contract in our major A-Nord project. In addition to the favorable weather conditions already mentioned in Q4, our success in claim negotiations, which typically take place in the fourth quarter was a key factor in the exceptionally high margin, along with higher earnings from joint ventures, which increased by nearly EUR 10 million compared to the same quarter of previous year. Accordingly, we also concluded the 2025 financial year as a whole, thanks to our high-quality order backlog and a flawless project execution were successful. We increased the EBITDA margin by 7 percentage points from 16.2% to 23.2% and more than doubled EBIT from EUR 59 million to EUR 137 million. Despite the tremendous 40% growth, we still managed to further reduce trade working capital, which along with the higher profitability, played a significant role in improving the net cash position. As a result, we were able to increase net cash by more than EUR 100 million compared to previous year, bringing it to EUR 262 million at year's end. It should be noted, however, that the trade working capital is always at its lowest level at the end of the year and rises as the construction season progresses. These swings between summer and winter can amount up to EUR 80 million or even EUR 90 million. With regards to capital allocation, our top priority remains investing in organic growth, specifically in the purchase of new pipe layers, drilling rigs, cranes and excavators and of course, our welding robots. We've budgeted approximately EUR 50 million for this in 2026. Furthermore, we will certainly be open to pursuing a larger M&A deal again provided we find the right target and of course, at a reasonable price. And finally, we would like to share the company's success with shareholders in form of a significantly higher dividend payout, consisting of EUR 0.70 base dividend and a EUR 0.40 special dividend. Let's now take a look at the development of order intake. In addition to the conventional order intake figure, we've already introduced a new KPI last year, the total project volume acquired. This new KPI also includes a proportionate project volume from the joint ventures in which Vorwerk is involved. And therefore, in our opinion, provides a more transparent view of the actual order situation regardless of the structure of the contract. The total project volume acquired rose by 29% to EUR 991 million in 2025, while conventional order intake at EUR 538 million is around 20% below previous year. The main reasons for this are, on the one hand, a shift in the order structure towards more joint ventures, especially in H1 2025. And on the other hand, our already well-filled order book, combined with a limited capacity of our resources. The order backlog, which corresponds to the conventional order intake figure declined, therefore, slightly to EUR 1 billion for the reasons stated before. We've learned from several investors that the communication regarding order intake and the contract structure is not yet clear enough. Therefore, we are currently working on reporting an order backlog KPI that includes our share of joint venture projects as well, starting with the Q1 report. And I expect that this additional metric will provide a transparent picture for all shareholders by then at the latest. Yes, and then based on our consistently high-quality order backlog, we expect our growth trajectory to continue in 2026 with revenues in the range of EUR 730 million to EUR 780 million. It should be noted that following 2 years of very high employee growth, we intend to slow down the expansion of our workforce somewhat in 2026 to give the organization and the administrative functions the opportunity to grow at the same pace while simultaneously focusing our recruiting efforts on attracting senior construction and project managers. At the same time, revenue growth is somewhat slower in 2026 due to the higher proportion of joint ventures. And this change in the project mix also means that we are now forecasting absolute EBITDA instead of EBITDA margin, specifically in the range of EUR 160 million to EUR 180 million for 2026 as this number is unaffected by the order structure. This guidance also takes into account the slightly softer Q1 2026 due to the adverse weather conditions. With that, I'd like to hand back to Torben for the business update. Torben Kleinfeldt: Yes, Tim, thank you very much. And of course, we did pick for this meeting our most outstanding projects at the moment. Please remember that during the year, we are operating on more than 500 smaller, midsized and also large projects. So we can, in this meeting, only give you a glance of the most outstanding projects. And I would like to start with the natural gas business here. It's a project we've already been working on last year. It's the so-called EWA pipeline, which is a 48-inch pipeline running from the caverns of Etzel towards compressor station of Wardenburg. This pipeline will continue in size of 40-inch towards the station of Drohne, which is more to the Rhine-Ruhr area, so in the south of the area. We have already finished the construction on EWA last year with a pressure test and the handover to the customer. So there's already gas on this pipeline. And the WAD pipeline is construction progress at the moment. We have already started in January with the first wells on site using our new welding robot, PX2 developed by our subsidiary, 5C Tech. We have completed roughly 400 wells on the project this year. And again, with very, very low mistakes in the wells. So it's -- the repair rate is definitely under 2%, which is very good in terms of fully automatic welding. Yes, changing actually over to the next natural gas pipeline project, which is, at the moment, our still largest project executed in a joint venture between the Habau Group and the Friedrich Vorwerk Group, compromises of 2 pipelines. First, the ETL 182 with a diameter of 56-inch and the ETL 179.200, which is a 36-inch pipeline. Altogether, a mid-3-digit million euro project and both pipelines are being executed by the same joint venture combination. As you can see in the picture below, we have already started some civil works to erect the pipe yards that has been done already in 2025, and we have already received most of the project pipes, which are purchased by our customer Gasunie. And we've actually started in the latest weeks to make preparations for the first loading procedures, so for the tunnel crossings and for the horizontal directional drilling, operations are already in place and will be executed in due course of this year. And then maybe next slide, we are not only active in pipeline cable laying, but our plant division construction is also very busy with a new project at a gas metering station called Groß Koris. This is the main metering and supply station for the company, ONTRAS. Here, we have a project to renew the full installation at Groß Koris with a volume of mid-2 million-digit range. And we have to deliver the full scope of engineering and also construction activities and will then commission the new plant as is foreseen at the moment in 2028. And the system will already be constructed in a hydrogen-ready way. So later on, once the usage of natural gas in the system is over, it can be easily converted to use for clean hydrogen and meter and also regulate the hydrogen being transferred in the grid. Next project is also a hydrogen project, which we have already been working for 1.5 years. This is the so-called HH-WIN project. So the city of Hamburg is trying to set up a hydrogen grid in the Port of Hamburg. Key figures here is an electrolyzer plant, which is located at the former power -- electrical power station of Moorburg, where about 100 megawatts equality of hydrogen is being produced and then fed into the Habau Grid, so the HH-WIN grid. And Friedrich Vorwerk has already executed 3 lots of this newly established hydrogen grid. And we have been recently awarded with 2 new lots to set up this hydrogen grid. The first lot involves actually a micro tunnel of almost 200 meters where we later on install the piping DN 300 for the transfer of hydrogen. And the following lot compromises of roughly 1,500 meters of new build hydrogen pipeline. But besides those existing projects where we've already started execution, we are, of course, still busy in our estimation department working on new estimates for new projects. Just to give you a small idea what could be coming up over the next years. In terms of pure natural gas transition, we are at the moment, working on estimation for the so-called Spessart-Odenwald-Leitung, which is also DN 1000 pipeline, about 115 kilometers long for Terranets and also other projects coming up from Open Grid Europe, setting up the core grid for hydrogen here in Germany. And also for Gasunie, new projects like ETL 187, which is directly in conjunction with the current project ETL 182, is at the moment in tendering phase and execution and commissioning would then be in '27, '28. But also still very attractive is the electrical market, where we are now facing the so-called second wave of large-scale electricity highways, projects like NordOstLink Section 2, SuedOstLink and SuedOstLink+ are being tendered out over probably end of this year and beginning of next year. And these projects will be commissioned in the mid-2034s -- in the mid-2030s. So also here, a huge potential also after 2030 for our company's group. And under adjacent opportunities, we were able to already win lot of the Rheinwater transport pipeline. This is a very large diameter pipeline, 2.2 meters in diameter that will later on transfer water from the river Rhine to flood the coal mines of RWE. And at the moment, we are working on the next lot to establish this water transfer pipeline. And also a very new business to our company, the transport of CO2 is ongoing. So the first tender we have received is the CO2 link from Lagerdorf, where Holcim is operating a cement factory towards the port of Brunsbuttel is on the table at the moment. Commissioning is foreseen for 2029 and tendering phase ongoing and probably construction phase will be '28 to '29. So this, of course, can only be done if we can establish to grow our headcount and our number of employees where we were very successful last year. So today, we can look at a workforce of more than 2,200 employees. Of course, the labor market within Germany, especially due to the low capacity in building construction, we were able to employ a lot of new blue-collar workers we could integrate in our projects. And probably during this year, we will definitely have a focus on growing our engineering staff and our overhead staff on the construction site. So challenge will be also to look for well-educated project managers and construction managers to manage all the blue-collar employees we were able to attract over the last month. Yes, that's it from our side. We are happy to receive your questions either by phone or by chatbot, and happy to answer them. Operator: [Operator Instructions] And the first hand is up from Lasse Stueben. Lasse Stueben: I wanted to ask just on the Q1. Is there any more color you can give roughly in terms of what we should expect in a year-on-year comparison just to avoid any sort of nasty surprises. The second question would be, what should we expect for headcount growth broadly in '26? And then the third question is, you mentioned sort of slowing down headcount growth, but then you also said that you would be willing to do a larger M&A or potentially do a larger M&A transaction. So how do we kind of square those 2 kind of comments? Because I guess a larger M&A deal would also involve many new employees. So just any color there would be great. Tim Hameister: Well, we've seen compared to the year before, some weeks of weather-related production stoppages in February, combined with the growth of the headcount could be possible to see a rather flat Q1 in 2026 in terms of revenue growth. And as I said, which could potentially partly be offset by stronger quarters in Q2 and Q3 as the overall share of Q1 on the full year revenue isn't that relevant. Regarding the headcount growth, when we talk about slowing down recruiting efforts, this is only in terms of organic growth, meaning directly hiring people, not including any M&A. From organic growth side, we expect to grow headcount by 5% to 8% in 2026 and any M&A would be add-on, on that. And of course, usually, we also acquire project managers and the respective engineering and administrative functions when doing a larger M&A deal. Operator: And additionally and slightly regarding question in the chat. Friedrich Vorwerk is guiding for a slightly lower margin in 2026 compared to a strong 2025, midpoint of 2026 guidance at 22.5% versus 23.1% in 2025 despite continued revenue growth. Could you provide a margin bridge for 2026 versus 2025 and outline the key driving factors? Tim Hameister: Well, we've always communicated that we see the margin potential in the mid- to long term at our company between 20% and 22%. However, in particularly strong years as in 2025, it's also possible to achieve an even better margin, more than 23% due to basically a flawless project execution, good weather conditions and so on. But on the long run, we feel pretty confident with 21%, 22%. Operator: And the follow-up from the person. Could you please provide more details on the Nord-A project, specifically regarding the recent delays and their potential impact on bonus malus payments. Additionally, is there any bonus or malus effect already factored into the 2026 guidance? Tim Hameister: Yes. As we already communicated last year, A-Nord project is expected to be slightly delayed with completion now anticipated in summer 2027 instead of end of 2026 due to missing permits. We are still in discussions regarding adjustments to the bonus-related milestones. And these discussions have been ongoing for some time. We do not yet have a definite outcome on these discussions, but we remain still confident and hope to sign their respective contract amendment in the course of the second quarter 2026. And based on this information, at least a portion of the contract liability we've already included into the books since and accrued over the project duration. Part of that could be reversed once this amendment is signed in the second quarter. However, we did not factor in any positive impacts from that amendment as it is not signed yet. Operator: And for now, we have no further questions. Ladies and gentlemen, I will hold the room for another moment in case someone might be typing right now. And there is a hand up from Lasse Stueben, again. Lasse Stueben: Great. Just a follow-up on sort of -- you mentioned kind of the JV share of projects is obviously going up. Should we expect that kind of level of the JV income you saw in '25 to be roughly the same in 2026? Or how should we think about that? Tim Hameister: All the new JVs we entered into last year, we expect to -- that the net earnings of the JVs will even increase compared to 2025. Operator: And another hand up from Leon Muhlenbruch. Leon Muhlenbruch: I have a quick question regarding to the current geopolitical situation. With the energy crisis already on the way and inflation likely to rise similarly to 2022, which had a significant impact on Friedrich Vorwerk, how are you prepared for such a scenario? Torben Kleinfeldt: Well, first of all, we were able to have a better negotiation position in most of the contracts that are in the order backlog at the moment. So most of the contracts have included price escalation clauses. So we can -- on the most bigger projects, we can forward the price escalations to our customers, although, of course, not to 100% because they are mainly bound to indexes which are more general, for example, the steel index or the crude oil index, which is not always 100% equivalent to the products we are actually using in our projects. But in the end, we can at least -- we are at least in a way better position this year than in 2022. Also in 2022, most impact was from a plant construction project where we had to bring a lot of material to the project. If we look at the current large-scale projects we are operating on, it's mainly the pipeline projects where the bare pipe is supplied by our customers. So we are mainly supplying equipment and personnel, so services, which are, at the moment, not that much affected as back in 2022. Operator: Another hand up from [ Lueder Schumacher ]. Unknown Analyst: I've got a few questions on margins. One is, are there any kind of older projects which have lower margins in them that which are running out and should be supportive to the group margin outlook once they do? And what about the margins implied in the order intake? Can we assume that they should be at a premium to the margins you've seen in 2025? Or should it more be in the region of the long-term potential of 20% to 22% you've been hinting at? Tim Hameister: Well, there are currently no such legacy projects in the current order backlog, although we still have the dilutive effect from our major project A-Nord, which will run until summer 2027, where the base margin is definitely lower than the group average. Apart from that, there are no legacy projects with low margins. And well, I mean, we have already seen such strong margins in 2025. We do not expect that we can further increase this margin profile. And therefore, rather to suggest that you can assume the long-term potential at around 21%, 22% for the next years. Unknown Analyst: In your order intake you had in 2025, we should already assume this? Or is this still at the margins you've seen in '25? Tim Hameister: Well, the margin profile calculated in those projects is roughly on the same level as we've seen the year before. However, on the one hand side is the calculated margin. On the other hand side, is the actual project execution on the fields. And this has also a major impact on the earnings in the end. Operator: And we're moving on to 2 questions in our chat. Are you planning any buybacks? What are the key impacts for the Iran war for you? And what are you doing to hedge against it? For example, natural gas inflation, diesel? Tim Hameister: At the moment, there are no plans for any share buybacks. We've decided to instead increase the dividend and to also pay out the special dividend of EUR 0.40 per share. Adding on the answer from Torben regarding Iran, the major impact for us at the moment is, of course, the higher cost for fuel, especially diesel. To give you some color on that, the total cost of diesel last year was around EUR 12 million. So it's not the largest position in our P&L statement. And we've, of course, already hedged some of the amounts needed already before the war in Iran. So there will be, of course, some effect, but not a significant one. Torben Kleinfeldt: But on the other hand, the crisis also has a positive impact on the market because at the moment, customers are really pushing the projects and trying to get more LNG receiving capacity in Germany, which then, of course, also means constructing new pipelines and constructing new plants, which is then also good on the market side for us. Operator: Can you discuss your appetite to revisit medium- to long-term guidance? And what milestones would trigger an upgrade? Tim Hameister: Well, that's definitely a thing to consider this year as we are pretty well on track on the older mid- to long-term outlook. So maybe we can expect to see a new outlook in the second half of this year. Operator: Ladies and gentlemen, we still have a minute for your questions left. And if there should be no further ones, you can always get in contact with Investor Relations. And this is it. With no further questions, we come to the end of today's earnings call. Thank you very much for your interest in Friedrich Vorwerk Group SE. A big thank you also to you, Torben and Tim, for your presentation and your time. I wish you a successful day around the world and giving the last words to Torben again. Torben Kleinfeldt: Yes. Thank you very much for listening. I think especially this year, we can look at some very, very interesting projects we can execute for our customers. And please stay with us and hear the latest news from our projects in the future. Have a good time around the world. Bye-bye. Tim Hameister: Bye.
Operator: Good morning, ladies and gentlemen, and welcome to the DiaMedica Therapeutics Full Year 2025 Earnings Conference Call. An audio recording of this webcast will be available shortly after the call today on DiaMedica's website at www.diamedica.com in the Investor Relations section. Before the company proceeds with its remarks, please note that the company will be making forward-looking statements on today's call. These statements are subject to risks and uncertainties that could cause the actual results to differ materially from those projected in these statements. More information, including factors that could cause actual results to differ from projected results appear in the section entitled Cautionary Statement Note regarding Forward-Looking Statements in the company's press release issued yesterday and under the heading Risk Factors in DiaMedica's most recent annual report on Form 10-K. DiaMedica's SEC filings are available at www.sec.gov and on its website. Please also note that any comments made on today's call speak only as of today, March 31, 2026, and may no longer be accurate at the time of any replay or transcript rereading. DiaMedica disclaims any duty to update its forward-looking statements. Following the prepared remarks, we will open the phone lines for questions. I would now like to introduce your host for today's call, Rick Pauls, DiaMedica's President and Chief Executive Officer. Mr. Pauls, you may begin. Dietrich Pauls: Thank you, Morgan, and thank you all for joining us for our fiscal year 2025 earnings call. With me this morning are Dr. Julie Krop, our Chief Medical Officer; and Scott Kellen, our Chief Financial Officer. Looking back for a moment, 2025 is a year in which we made significant progress across our pipeline, achieving a number of key milestones. As most of you know, our lead candidate, DM199, is a recombinant form of the naturally occurring KLK1 protein, a serum protease that acts through the bradykinin 2 receptors in the walls or endothelium of our blood vessels to increase the level of nitric oxide, prostacyclin and endothelial-derived hyperpolarizing factor. The combination of these factors has the potential to more effectively enhance blood flow and vascular health than any other factor given by itself. We believe that this mechanism is why DM199 is so well suited to improve patient outcomes for preeclampsia, fetal growth restriction, acute ischemic stroke and other indications associated with vascular pathology. I'll now turn the call over to Julie to provide an update on our preeclampsia and stroke programs. Julie Krop: Thanks, Rick, and good morning, everyone. Starting with our preeclampsia program, 2025 marked a very strong year of progress. In July, we announced positive interim results from Part 1a, the ascending dose portion of our investigator-sponsored Phase II trial being conducted in South Africa. These results showed that DM199 produced statistically significant reductions in blood pressure and in the uterine artery pulsatility index, consistent with reductions in vascular resistance that suggest a potential improvement in blood flow to the placenta. Importantly, the interim data demonstrated that DM199 did not cross the placental barrier. These interim results were observed in hypertensive women expected to deliver within the next 72 hours. We believe these results demonstrate an on-target mechanistic response, which supports DM199's potential to be a first-in-class disease-modifying therapy for preeclampsia. Key findings from the interim analysis of Part 1a, specifically from Cohorts 6 through 9 in pregnant women with preeclampsia planned for delivery within 72 hours include the following: First, blood pressure data demonstrated clear dose-dependent and statistically significant sustained reductions in both systolic and diastolic blood pressure, underscoring DM199's potential to control maternal hypertension associated with preeclampsia. Second, DM199 significantly reduced the uterine artery pulsatility index, a Doppler-based measure of arterial resistance that suggests improved uteroplacental perfusion. Third and most importantly, DM199 did not cross the placental barrier, placing it in a unique position with respect to safety and reduced fetal risk in this highly vulnerable patient population. Through additional analysis, we have also demonstrated that DM199 does not pass to babies through breast milk, further reinforcing its confinement to the maternal circulation. This advantageous safety profile combined with DM199's novel mechanism of action may enable earlier initiation and longer treatment duration, which has the potential to drive meaningful prolongation of pregnancy without added safety burden. We believe the observed improvements in vascular resistance reflect restoration of normal endothelial function, consistent with an on-target mechanistic response to DM199 therapy. By improving endothelial health, DM199 has the potential to address the underlying vascular dysfunction driving the disease that should result in stabilization of maternal vascular pathology and prolonged pregnancy as opposed to current therapies that simply manage symptoms. Taken together, the ability to reduce blood pressure, improve uterine placental perfusion and restore endothelial function reinforces our belief in DM199's potential to be a first-in-class disease-modifying therapy for this life-threatening condition for which there are currently no approved treatment options. During the fourth quarter, under the leadership of Professor Cluver, enrollment continued in the Part 1a expansion cohort, which will include up to 12 additional patients to provide us with a more comprehensive data set. We anticipate completion of this cohort in the first half of 2026. Protocol amendments are being finalized for Part 1b and 2 of the study. Part 1b will enroll up to 30 hypertensive women with late-stage preeclampsia expected to deliver within 72 hours to further confirm the Part 1a results. These participants will receive continuous IV administration of DM199 that will be titrated to maintain blood pressure in the targeted range. Part 2 will enroll up to 30 women with early onset preeclampsia, who are candidates for expected management where the therapeutic goal is to prolong the pregnancy as long as possible while also providing increased blood flow to promote larger, healthier babies. These protocol amendments represent refinements to the previous treatment regimens based upon learnings from Part 1a. The fetal growth restriction cohort will be enrolling patients without preeclampsia, but with impaired placental function, further expanding the potential application of DM199 across placental vascular disorders. The first patient in that cohort is anticipated to be dosed in Q2 2026. Importantly, we have also recently received regulatory clearance from Health Canada to initiate a global Phase II clinical trial of DM199 in early onset preeclampsia. This is an important regulatory milestone for our PE program. We are currently finalizing plans to commence site activation in the second half of the year. We intend this trial to be a global Phase II study. It is an open-label dose-finding trial designed to enroll approximately 30 participants with early onset preeclampsia between 24 and 32 weeks of gestation. This expected management population represents patients with the greatest unmet medical need where safely prolonging pregnancy can have the most meaningful maternal and neonatal impact. The study will evaluate the safety, tolerability and preliminary efficacy of DM199 with dosing anticipated to continue until delivery. We are assessing 3 dose levels to inform dose selection of the optimal regimen for Phase III. Primary study endpoints include maternal pharmacokinetics and further confirmation that DM199 does not cross the placental barrier, an important safety consideration for both regulatory review and patient acceptance. In addition, we will evaluate clinical and biomarker outcomes, including prolongation of pregnancy, blood pressure control, uterine artery blood flow, circulating pathogenic biomarkers and renal function. We are also preparing to seek approval to expand the study to include sites in the U.K. And with respect to the additional reproductive tox study in rabbits requested by the FDA, preliminary results from a dose range finding study in rabbits suggests that rabbits may not be a suitable animal model for reproductive toxicology studies with DM199. This is likely due to an unusual immune response to the recombinant human protein unique to rabbits that has not been seen in rats, monkeys or humans thus far. Most importantly, from our perspective, there were no teratogenic effects observed in the approximately 200 pups or baby rabbits produced in a prior study. This included no external visceral or skeletal malformations. We are currently evaluating an alternative animal model to address the FDA's request, and we will work with FDA to find a solution in parallel to initiating the Phase II trial in Canada and other potential jurisdictions. Turning to our ReMEDy2 trial. 2025 was also a good year for our stroke program. Over the past several months, we have intensified our engagement with study sites to share best practices and build friendly competition. We've also added additional resources to support sites through the enrollment and follow-up process, and we continue to work on additional ways to support our study sites. These activities, along with increased site activations globally have resulted in encouraging enrollment momentum over the last few months. At present, I'm very pleased to report that with these additional efforts in the United States and Canada, along with expansion into the U.K. and Europe, we have achieved almost 70% of the required enrollment of 200 participants for the interim analysis. We currently have close to 61 active sites, including 4 in the U.K. and an additional 12 across Europe, and approximately 25 more sites are expected to activate in the coming quarter. With our recent progress, we are reiterating our guidance to complete the interim analysis by the second half of 2026. Since the last earnings call, an independent Data Safety Monitoring Board meeting was conducted after the enrollment of 100 patients. Following review of the safety data from these participants, the independent DSMB unanimously recommended that enrollment continue without modification. I will now turn the call back to Rick. Dietrich Pauls: Thanks, Julie. We're also pleased to note the paper titled Endothelial Triple Pathway Basal Relaxation as an adjuvant strategy in resistant hypertension was recently published in the Journal of Hypertension. The article authors included Dr. Luke Laffin, a recognized key opinion leader in the treatment of resistant hypertension. This publication underscores the need for new treatment approaches to lower blood pressure in patients with chronic kidney disease. It also highlights findings from our prior Phase II REDUX trial, which demonstrated DM199's ability to significantly reduce blood pressure in patients with elevated levels over a 3-month treatment period. DM199 was also observed to lower serum potassium levels in patients whose potassium levels were elevated, placing these patients at risk of developing hyperkalemia. We look forward to sharing more on the potential use of DM199 to control blood pressure in patients with chronic kidney disease in the future. I would like to now ask Scott to review the financial results for the quarter. Scott Kellen: Thank you, Rick, and good morning, everyone. We announced our full year financial results for 2025 and filed our annual report on Form 10-K yesterday. As of December 31, 2025, our cash, cash equivalents and short-term investments were $59.9 million. Current liabilities were $5.1 million and working capital of $55.5 million compared to cash and investments of $44.1 million, current liabilities of $5.4 million and working capital of $39.2 million as of December 31, 2024. The increase in cash and short-term investments is due to the net proceeds received from the sale of common shares in the company's July 2025 private placement and under its at-the-market offering program. We feel confident about our cash position and anticipate it will fund our planned clinical studies and corporate operations through the end of 2027. Net cash used in operating activities for the full year 2025 was $29.1 million compared to $22.1 million for the full year of 2024. This increase is primarily a result of the increase in net loss for the full year of 2025 as compared to the prior year period. Turning to the income statement. Our research and development expenses increased to $24.6 million for the year ended December 31, 2025, up from $19.1 million for the prior year. This $5.5 million increase is driven by a combination of factors, including the continuation of our ReMEDy2 clinical trial and its global expansion, the expansion of our clinical team in both the prior and current year periods and increased noncash share-based compensation costs. These increases were partially offset by cost reductions related to manufacturing process development work performed and completed in the prior year period. Our general and administrative expenses were $9.8 million for the full year 2025, up from $7.6 million for the full year 2024. G&A expenses increased by $2.2 million due to a number of factors, including increased noncash share-based compensation expense, increased personnel costs, increased investor relations expenses and increased patent prosecution costs. With that, let me ask the operator to open the lines for questions. Operator: [Operator Instructions] Your first question comes from Stacy Ku with TD Cowen. Stacy Ku: So we have a couple. If we could just stay with preeclampsia for now. The first question is on kind of your update with the rabbit preclinical trials for the U.S. IND approval. So just help us understand what are your early thoughts on the alternative species with the FDA? Are there -- what other preclinical models are best for reproductive tox studies? So that's the first question. If you could maybe further elaborate there. And then as we think about the ISP and clearly, a lot of great signals that we're going to get -- continue to get there, what key learnings are you hoping to carry into the early onset preeclampsia kind of cohort? As we think about Part 2 and Part 3 so fetal growth as well. Is there any potential that we can get an update later this year? So just help us understand where you all are in potential timing there? And then, of course, ahead of the U.S. trial, Julia, we kind of heard all the high level of preparation ahead of moving forward in the U.S., but just help us understand how our conversations progressing? What criteria is the team focused on when it comes to enrolling the right preeclampsia study investigators. And then if I could sneak in a tiny question on CKD. Clearly, a big opportunity. When could we expect a detailed plan or a more detailed plan for pursuing DM199 in treatment-resistant hypertension in CKD patients? Dietrich Pauls: So I'll start off maybe with the CKD, the fourth question is that we're very excited about the opportunity for our drug to lower blood pressure. We've clearly seen it in numerous trials. I think there's a huge clinical need, in particular in patients with chronic kidney disease as many of these patients have elevated levels of potassium that puts these patients at risk of hyperkalemia. So I think first, we can treat these patients, control their blood pressure when they frankly don't have a lot of options and what we did see in our previous trial, the ability to lower potassium levels, which could be a very exciting opportunity. Right now, really the focus though is on our preeclampsia and stroke program. And at the appropriate time, we'll look at potentially advancing into CKD. But right now, we want to make sure we're really focused here near term on our other 2 programs. And then maybe I'll hand it off to Julie. Julie Krop: Yes. Stacy, all very good questions. I think it's premature right now to tell -- to say exactly which species that we're going to focus on. We want to first be able to -- we submitted a package to the FDA, and we're having a discussion with them further on appropriate models. There are several appropriate models we're considering. But again, we'll hold back until we will give an update once we have that discussion. And then with regards to your question around what have we learned from previous cohorts, I think I think we understand the PK better after running the initial studies. And one -- one of the learnings we're taking forward is for our early onset studies using the subcutaneous only and probably reserving the IV for the later onset as we've been doing previously. So that was one element. I think as far as site selection, we are highly focused on selecting sites that have both experience with preeclampsia studies as well as a practice that's well suited for early onset expectant management, which is something -- some sites are very adept at and other sites are more conservative about when to deliver patients. So again, it's that tight rope between treating -- between the mother's health and the baby's health and making sure that we select centers that are comfortable keeping the mother even though there's some severe -- there's potentially severe complications going on, it feels like they can stabilize them enough to prolong the pregnancy. So those are kind of the considerations that we're focused on. Operator: Your next question comes from Josh Schimmer with Cantor. Joshua Schimmer: Two quick ones. For the evaluation of DM199 in earlier onset preeclampsia, how do you think about the potential risk of the protein crossing the placental barrier at that stage? And what evidence do you have to suggest that it in that setting as well will not cross in any meaningful extent to the placenta? And then for the interim analysis for the Phase II/III stroke program, what are the potential outcomes there? Are there stopping criteria either positive or negative or resizing criteria? Maybe you can share a little bit more about what you expect the interim to inform? Dietrich Pauls: Sure. Thanks, Josh. So starting off with the early onset and crossing of the placenta. We don't think it will happen. I mean we've done now over 35-plus patients with more late onset preeclampsia where we didn't see this crossing. To cross the placental barrier is about -- the size to cross will be about 500 daltons, where our protein is about 26 kilodaltos, so 50x larger. So it would be very shocking if it did occur. We also did an earlier study in the rat model, we also did not see it. So it's just -- I think we're at this point here, another check the box, but we feel very good the fact that in the South African patient population, we didn't see it. With regards to your second question, the ongoing Phase II/III stroke program, for the interim analysis, first off, if we're not seeing a drug effect, we will terminate the study for lack of efficacy. Otherwise, there'll be a resample size and the sample size will range from 300 to 728. How we designed this trial, and we believe a base case that if we're seeing a drug effect that's comparable to our Phase II, which is comparable to the many studies that have been shown with the human urinary form of the study in China. Looking at the modified ranking score of 0 to 1 as the primary endpoint, we're anticipating that if we see, again, a drug effect comparable, we'll be looking at something ideally in the 300 to 350 range. If we need to go above 500 patients, we'll have to really evaluate the next steps for the program in light of the high prospects we think as well for the preeclampsia program. Operator: Your next question comes from Thomas Flaten with Lake Street. Thomas Flaten: Just a question on the Part 1a expansion cohort. It strikes me that it's taking a bit longer than I might have thought in my mind given how many patients Dr. Cluver sees on a weekly basis. Is this a slow and deliberate approach she's taking? Or has something else been going on there? Just some additional color on that expansion cohort would be great? Dietrich Pauls: Sure. Yes, it's a good question. It really has been a result of some staffing challenges that Cathy Cluver has had at her site. We've recently provided some additional financial support. And with the hiring of a couple of new nurses just in the last few weeks, we anticipate that enrollment is going to pick up again. Thomas Flaten: And then following on from that, if I understood the press release and your commentary correctly, are Parts 2 and 3 -- are Parts 1b and 2, sorry, dependent on the completion of the expansion cohort? Or will they initiate prior to the full completion of that cohort? Dietrich Pauls: Those -- so we've made a few protocol amendments that are going through shortly. And so we're anticipating later in Q2 that those 2 cohorts should initiate. Part 1a expansion study is ongoing and will be completed as well in Q2. Thomas Flaten: Got it. Understood. And then just a quick one on ReMEDy2. You mentioned some acceleration or some momentum building. I was wondering if you could just give us a sense of in the first quarter of this year, how many patients did you enroll compared to what you did in the fourth quarter of last year, just to give us some kind of scope and scale of that momentum? Dietrich Pauls: Yes. I would just say at a high level, the enrollment increase really has been more so it's been this year. So even going into the end of 2025, it was still relatively slow, but it really has picked up substantially in the last month, last 2 months. But really, the more recent months is where we've seen the really uptick. And that also correlates to where we've had the increase in sites and all the work that Julia and her team have been doing has been wonderful. And I think we're now starting to see the benefits of all that work. Operator: Your next question comes from Matthew Caufield with H.C. Wainwright. Matthew Caufield: For the ReMEDy2 trial, there had been some prior discussion of some challenges with stroke enrollment formally being slower in the U.S. due to initial triage in the community hospitals. Kind of thinking bigger picture, do you ultimately foresee any limitations for real-world access if or when DM199 could ultimately be approved for the AIS indication? Dietrich Pauls: Yes. Good question. So I think there's a difference between the challenges that we had been seeing with enrolling at more of these hub-and-spoke hospitals. But ultimately, for commercialization, the wonderful thing about our drug is the safety profile should be great in being able to be used very broadly at small community hospitals and big academic centers. So I think that the previous challenge we're having is really more with enrolling patients at the large academic centers. But in terms of -- again, at the commercial side, I think it will be a wonderful drug because of that safety profile. Operator: Your next question comes from Chase Knickerbocker with Craig-Hallum. Chase Knickerbocker: I was just hoping to work one more in on the nonclinical side here. Can you just maybe walk us through kind of the differences in your prior nonclinical rabbit study that you had kind of mentioned where you didn't see any toxicity in this one? Was there kind of a different species used here? Or maybe just kind of your biological rationale as to why this antibody response arose? Dietrich Pauls: Yes, Julie, can you take that one? Julie Krop: Yes. So that's a very good question. The first study was a different gestational age time period for the pre- and postnatal rabbit study. We studied an earlier -- I mean, a slightly later gestational age as well as a slightly different duration of treatment, different doses. So it's hard to explain. We did see maternal toxicity in that study as well. It wasn't quite as significant. But I think the difference here and the issue really with the FDA is not related to concern on the part of the fetus -- I mean, sorry, the pups, if you will. The pups really did not show any increase in malformations or teratogenicity from the control group in either study. But I think the concern with the FDA is finding a NOAEL effect dose where they don't see any adverse effects and the maternal toxicity that we saw, which we believe is due to immunogenicity, which is not uncommon to see in rabbits and immune responses very quickly to human proteins. So I think really, it was in both studies, we weren't -- we had maternal toxicity. So I don't think they were really that different other than gestational ages being different and the FDA wanting us to dose primarily after the first trimester after the development -- the early development of the fetus because that's closer to the way we're going to dose humans. So it just turns out, I think the rabbits just are not a good species, and we're going to just have to do it in a different species. Chase Knickerbocker: Got it. And then just maybe a little bit on time lines as far as when you'd expect to get that feedback that you need to continue with the different species or just kind of color from FDA on what they would like to move forward. Do you have a meeting scheduled in Q2? Maybe just walk us through time lines there. Julie Krop: So we are going to -- we'll provide an update as soon as we have something to update. I don't think we're giving a forecast yet until we understand and get alignment from the FDA on the path forward. Chase Knickerbocker: Understood. And then just last for me, Rick, on the stroke timing, could you just give us a little bit more color as to kind of what you're seeing from an enrollment rate perspective? I mean, is it kind of being driven by kind of breadth increasing? Or is that depth really kind of increasing as we thought it would to kind of drive this acceleration in enrollment in the stroke study? Dietrich Pauls: Yes. And it's a combination of, in particular, over the last few months, an increase in the enrollment rate per site and also for a greater number of sites. And then with being at 61 sites now and having sites having a chance to be in the trial and understand some of the challenges and opportunities of running the trial. And then I think also having a number of sites that are also on the verge of coming on board here in the coming weeks, we feel good about reiterating our guidance for this year. Operator: That concludes our question-and-answer session. I would like to now turn the conference back over to Rick Pauls, DiaMedica's President and Chief Executive Officer, for closing remarks. Dietrich Pauls: Well, thank you all for joining us today. We greatly appreciate your interest in DiaMedica and hope you enjoy the rest of the day. This concludes our call. Thank you. Operator: This concludes today's call. Thank you so much for attending. You may now disconnect, and have a wonderful rest of your day.
Operator: Good morning, and welcome to JBS Fourth Quarter and the Year of 2025 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. Any statements eventually made during this conference call in connection with the company's business outlook, projections, operating and financial targets and potential growth should be understood as merely forecast based on the company's management expectations in relation to the future of JBS. Such expectations are highly dependent on the industry and market conditions, and therefore, are subject to change. Present with us today, Gilberto Tomazoni, Global CEO of JBS; Guilherme Cavalcanti, Global CFO of JBS; Wesley Batista Filho, CEO of JBS USA; and Christiane Assis, Investor Relations Director. Now I'll turn the conference over to Gilberto Tomazoni,, Global CEO of JBS. Mr. Tomazoni, you may begin your presentation. Gilberto Tomazoni: Good morning, everyone. Thank you for joining us today. We closed 2025 with a consistent performance and our continued progress in building a stronger, more efficient company. In the fourth quarter, we recorded a revenue of $23 billion with an EBITDA margin of 17.4%. For the full year, revenue reached $8 billion, a company record with a consolidated EBITDA margin of 7.9%. This scale and the diversity of our multi-protein and multi-geography platform remain our greatest strength, allowing JBS to navigate industry cycles or any disruption while capturing structural growth in protein demand. In both the fourth quarter and the full year, JBS delivered record sales with positive consolidated results, reflecting the resiliency of our global platform. Net income totaled $415 million in the quarter and the $2 billion for the year, representing year-over-year growth of 15%, earnings per share of $1.89 per year. Free cash flow was $990 million in the quarter and $400 million for the year. Return on equity reached 25%, and the return on investment capital was 70%. Our leverage ratio at the end of the fourth quarter was 2.39x in line with our long-term target. We also maintained a very strong debt profile with an average debt maturity of approximately 15 years and average cost of the debt of around 5.7%. No significant maturity in the short term. These strong results reflect our consistent performance in a year marked by a challenging environment in some global protein markets. In the United States, the cattle cycle remains under pressure with a limited supply and high cost. This is expected to continue in the coming quarters. Despite this environment in U.S. beef sector, our global results remained positive reflecting the resilience of our diversifying platforms. Australia was one of the highlights of the year. With a strong EBITDA growth and margin expansion as well as the top line growth of 30% year-over-year in the fourth quarter. Our Australian business benefit from the currently imbalance between global supply and demand of beef. Combining with a strong execution and support solid profitability and reinforce the role of region in balancing our global results. In Brazil, the beef business operates with a historical margin range supported by strong export and steady domestic demand. The fourth quarter was particularly strong with the top line sales growing 26% year-over-year. At the same time, livestock productivity continued to improve. Country recorded highest beef processing volume in its history at around 42 million heads. This reflect a total gain in production and reinforce and Brazil growing role in a global supply. In this context, Friboi delivered solid results. with growth in both export and domestic sales volume increase in key international markets, including Mexico, Europe and United States. While the business also strengthened its presence in Brazil, programs such as Friboi+ continues to deepen client relationship and support growth in the domestic market. At Seara, we continue to advance our strategy and strengthening brands and expanding high value-added products. In recent years, Seara has expanded its portfolio entering new categories and strengthen in connection with the consumers. The business is now one of its strong moment in brand perception supported by innovation, execution, a more differentiated product mix. In the United States, our chicken business continued to benefit from the strong demand in both retail and food service. Pilgrim's delivered volume growth above the industry average in segments such as case ready and the small bird. The big birds segment also improved performance through better yields, mix and cost efficiency. Brand diversification continues to progress and Just Bare surpassed $1 billion in retail sales reflecting the strength of our brand strategy and the significant opportunity we see to capture further growth across our modern high-value prepared foods portfolio. In U.S. Pork business, performance remained stable, and the business closed the year with solid margins, supported by disciplined operation and balance supply and demand. Also, in 2025, we completed the dual-listed process, a milestone at the company's history and became a nice listed company and strengthened our capital market position. Since then, we have seen a clear improvement in how the market values the company. Our trading multiply and expanded reflect greater visibility and investor confidence although we still trade at a discount to our global peers. Liquidity also has increased significantly with average trading volume up approximately 3x compared to the prior listing levels. At the same time, our shareholder base has become more global and diversified. U.S.-based investors now represent nearly 70% of the company free float. Overall, this change reinforced our position in global capital market and support the next phase of growth. Global protein consumption continues to grow, supported by demographic health awareness and demand for balanced diets. JBS is well positioned to meet this demand across markets and channels. Our structure remains clear. We will continue to strengthen our brand, expand our value-added portfolio and develop solutions that make protein more accessible and more convenient everyday life. Thank you again for joining us today. And now I will turn the call over to Guilherme, who will walk through our financial results in more detail. Guilherme Cavalcanti: Thank you, Tomazoni. To the operational and financial highlights of the fourth quarter and fiscal year of 2025. Net sales reached a record of $23 billion in the quarter and $86 billion in 2025. Adjusted EBITDA in IFRS totaled $1.7 billion, which represents a margin of 7.4% in the quarter and $6.8 billion in 2025 with a margin of 7.9%. Adjusted EBITDA in U.S. GAAP totaled $1.5 billion which represents a margin of 6.5% in the quarter and $5.8 billion in 2025 with a margin of 6.7%. Adjusted operating income was $1.1 billion with a margin of 4.7% in IFRS and 4.8% in U.S. GAAP in the fourth quarter. In 2025, adjusted operating income was $4.5 billion in IFRS with a margin of 5.2% and $4.4 billion in U.S. GAAP with a margin of 5.1%. Net income was $415 million in the quarter and an earnings per share of $0.39. For the year, net income was $2 billion and earnings per share of $1.89. Excluding the nonrecurring items, adjusted net income would be $500 million and earnings per share of $0.47 in the quarter and for 2025, $2.2 billion with an earnings per share of $2.10. Finally, return on equity was 25% and return on invested capital was 17%. Free cash flow in fourth quarter 2025 reached $990 million compared to $906 million in the fourth quarter 2024. The main positive drivers were related to the deferred livestock, particularly in U.S. and inventories, reflecting strong revenue growth during the period. Despite an $850 million in working capital consumption in 2025 the cash conversion cycle remained resilient and in line with prior year's levels. For the full year, free cash flow totaled $400 million. When we visited free cash flow breakeven, IFRS EBITDA exercise for 2025, the initial estimate EBITDA to a breakeven level was around $6 billion. However, considering the actual results, the EBITDA breakeven would be approximately $300 million lower. The main difference came from working capital, as mentioned earlier, mainly reflecting the deferred livestock effect and a decrease in inventories. On the other hand, CapEx came in about $100 million above estimates as we executed $1.1 billion in expansion CapEx during the period. We also saw a higher number of biological assets, largely driven by the increasing livestock volumes and prices, while the remaining items came in broadly in line with our estimates. Finally, the higher cash tax paid in 2025 were mainly related to the tax payments associated with the results of 2024. For 2026 and for the purpose of the EBITDA cash flow breakeven exercise, we can assume capital expenditures of $2.4 billion of which $1.3 billion is for expansion and $1.1 billion is for maintenance, interest expenses of $1.15 billion and leasing expenses of $500 million in a consolidated effective tax rate of 25%. Just to highlight, it is still too early to estimate the variation in working capital and biological assets as there are many factors beyond our control. such as grain and lifestyle prices. However, if you consider the same amount of working capital consumption in biological assets of 2025, EBITDA cash flow breakeven would be $5.7 billion, in line with 2025 numbers mentioned above. On Page 24, we present our historical free cash flow breakdown to help analyst forecast. Our leverage ended the year at 2.39x, in line with our long-term target of keeping net debt to EBITDA between 2 and 3x. In 2025, we also strengthened our balance sheet by extending our debt maturity profile, reaching an average debt term of approximately 15 years and an average cost of 5.7%. We have no significant debt maturities until 2031. The coupons of our debt are below treasury until and including 2032 maturities with 32% of our gross debt maturing beyond 2052 and approximately 90% of the total debt is at fixed rates. It's worth mentioning that despite the 8% increase in net debt in the last 3 years, net financial expenses remained at the $1.1 billion per year. Our $3.5 billion in revolving credit lines and $4.8 billion in available cash provides us the flexibility to continue executing our expansion CapEx, value creation products and shareholder returns while maintaining a healthy and robust balance sheet. For this reason and given our strong cash position and leverage, we announced last night, the payment of $1 per share in dividends to be paid in June 17. With that in mind, I would like to turn the operator for a question-and-answer session. Operator: [Operator Instructions] We have our first question from Lucas Ferreira with JPMorgan. Mr. Ferreira, you may go ahead. Lucas Ferreira: I have 2. The first one, if you can give us an update on the business environment for PPC, especially in the U.S., but there were some renovation works at the Russellville plant wondering if those are completed. If operations remain fine, if this could be an issue at all for the quarter as well as any update you see in the market regarding crisis. It seems that we are in an environment of a bit more supply than the first quarter of last year. So if you see how robust is the market and how balanced the market today? And the second question is on the U.S. beef operations. We saw a pretty steep recovery in beef spreads over the last few weeks. So to what you attribute this, obviously, demand remains strong, but there have been some capacity rationalizations in the industry. Any updates on the Greeley situation will also be welcome with regards of what -- how that impacts your business and how you see the market for U.S. beef for now? Gilberto Tomazoni: Lucas, thank you for your question. And I will start here to talk about update in terms of Pilgrim's and after that, Wesley will give us the perspective of beef in U.S. As you mentioned before, we completed the transformation of 3 plants of Pilgrim's already completed it. One, we transformed from big bird to case ready because we have a strong demand in the retails, and this strategy will support the retail growth of the demand of chicken. In the other 2 plants, in reality is not a transformation. It's adequate to produce the raw material for our prepared business. Before we sell -- we sell the breast to the market because we are not able to deliver the appropriate cuts that our prepared food needs. Now we invest in machines and we are not need to sell and buy and rebuy the raw material. Now we deliver direct to our prepared business. This, of course, we catch the margin of the third party I think and we are keep best quality and be able to react quickly in case of the increasing demand. And I understood that as a second point that you mentioned about supply/demand. I can say to you, the demand for chicken meat in U.S. is not just in U.S. It's a global demand is very high across all the chains. And if you take in consideration in U.S. the chicken placement in the beginning of the year, grew around 3% and the price of chicken breast increased in the market. But this shows that a balance in supply and demand because we increased 3%, the placement of chicken and at the price of the breast increased. And if you -- USDA forecast for this year is that it will be 2% growth in chicken supply. If we grow 3% in the price market increase, we can anticipate if the forecast 2% will be a very good year for Pilgrim's in U.S. I think this is 2 components. The verticalization of our raw material production, we get more margins in prepared. In the growth of our prepared business in Pilgrim's Just Bare have a strong demand and we are investing in new factories. We see that this year will be a good year for Pilgrims. Wesley Mendonça Filho: Lucas, fourth quarter was a pretty good quarter given the market conditions on the beef side. It's common knowledge that given the market data that first -- at the beginning here of the first quarter has been really tough, really, really difficult, very challenging. Probably the most challenge we've seen in this industry in a very long time. I don't know if there is any other time that we had such, actually a negative spread for January and February ever. And it seems now that current data shows that March is showing that it's going to be a little bit -- it's going to become better, sharply better than where we were from January and February. But let's see what comes out of that. When we are -- one of the things that has happened in this scenario that we have very low cattle availability and very low processing volumes is that the market has become more volatile than we're used to in this market. You see big fluctuations in cutout, big fluctuations in cattle, more so than what we're used to. So that's just an effect of having such a small volume. If you -- if the volume is a little bit higher, it has a big impact and it's become a little bit more volatile. When it comes to the striking really, it's very difficult to forecast how that a strike would go on. We have a very good deal in front of that local. We actually just did a national deal with 14 other unions in red meat -- 14 other locals from the same union in red meat, and it's a historic union company deal. We have a variable pension plan. That's the first time in forever that the industry has brought back pension, something like that for people when they retire for our team members. So we have a very good deal, actually, even -- I think I would say it's probably one of the most innovative deals that we've had in a long time in this industry. So let's see. We think that we hope this gets resolved as soon as possible. Operator: Ladies and gentlemen, we have Mr. Gustavo Troyano from Itau would like to ask a question. Gustavo Troyano: My first question is on Seara and related to chicken supply here in Brazil. We acknowledge that discussions on the supply side should always be on a relative basis to demand, which seems quite strong at this point. But just wanted to get your updated thoughts on the balance between chicken supply in Brazil, what to expect going forward as we move into the second quarter of 2026, if you guys are expecting the chicken supply increase to outpace demand in a way that we could see some profitability compression going forward. So that would be the first question. And the second one, still on U.S. beef and a follow-up on the first question actually is, would you say that the current balance between slaughtering capacity in the U.S. and demand and cattle availability will imply some capacity adjustments going forward from other players or even from you guys. So what could you say on further capacity adjustments going forward because cattle availability is restricted right now. So just wanted to get your updated thoughts on that as well. Gilberto Tomazoni: Thank you, Gustavo. Talking about chicken in Brazil and Seara and after that Wesley will complement the answer about beef in U.S. When you chicken in Brazil, the balance between supply and demand for chicken is still not very clear to us. In one hand, we have strong and growing international demand and new cases of poultry farming influenza in several countries with culture that produce as a competitor of Brazil. And this could boost demand even further. The other hand, we have 2% to 3% increase the chick placement up to February. This is as a reasonable limit for growth in Brazil. There is some news that chicken breeder stock has increased. In this scenario, it's difficult to predict the unfolding events if production of exceed market capacity. But in this case the industry, the sector, the industry has many of tools to manage this. For example, we can export more fertile eggs, we can reduce the average age of the breeding stock. We can reduce the weight of the birds among others, means that so far, the market is very balanced in the market, and we see a strong demand in the international market. If -- because if you look for the breeders can increase more the volume domestic market, each industry needs to take its own decisions. But they have a lot of ways to manage of this supply because chicken is not still in the farm. It still place it. It is in the genetic I can say -- I can talk to you about what -- in our side, how we are -- what we are doing. We are focused on strengthening our export leadership. We have -- and enriched our value-add mix in domestic market. I think it's the both strategy we have. We have well positioned in international market and well positioned domestic market, and we are at value and be more innovative in terms of the way that you present the product to the consumers. Wesley Mendonça Filho: Gustavo, on the U.S. beef, this question about capacity adjustments, it's very difficult for me to answer about, especially when it's something that's not related to our business directly, right? So it would be a competitor. It's very difficult for me to respond on that. . It's clear that there is more capacity in the U.S. than there is kind of available in the U.S., not too many years ago, 4 years ago, had processed 33 million head, and now we're going to be below 27 million. So we're around 27 million, sorry. So that itself shows that yes, there is excess capacity. Having said that, it's very difficult for me to respond about something that's regarding other companies. Operator: Our next question comes from Lucas Mussi with Morgan Stanley. Lucas Mussi: My first one is related to Brazil beef in Australia. If you could talk to us a bit about how you're thinking about the export environment in the context of Brazil and also Australia eventually reaching the limit of the export quota to China? How are you thinking about how volumes are going to behave, perhaps in the second half of this year? What are you thinking about your options here and potential impact to the business divisions and the second one, one for Guilherme. If you could share more details on derivative lines on your P&L that went a bit lower this quarter, that would be helpful. And also, I know that there's still -- we're still a bit early to talk about concrete working capital expectations for this year. But if you had to evaluate looking at where commodity future is today or grains for livestock. What would be your assessment on working capital potential as things stands today for the year, maybe a little bit below 2025, in line with 2025, if you have any on working capital. Gilberto Tomazoni: Thank you, Lucas, for your question. Let me to separate. I think in Australia and Brazil, that is a different scenario. Australia, we are not seeing any challenge in terms of the -- after the quota of Australia to China because Australia is a strong market demand and has a very strong presence in Japan and Korea and all of the Asian markets and U.S. as well and Europe, then Australia is easy to manage the volume for each one of these markets that we are not really worried about this situation. In Brazil, may be more complicated. But our I will talk related to that. But our Friboi team is very confident that they will be able to deliver in this year 2026, this resulting with the line that the last year. Why we are confident on that. Global demand for protein is high, especially for beef. China's quota, if you talk about -- we are expecting to end by the midyear. And in reality, we don't know how China will manage this volume restriction. I believe that some countries will likely not be able to complete their quotas. But this is -- we cannot speculate, but this is a fact. Regarding this situation, Friboi has developed a new international market, new sales chain and investing heavily in value-added and combined with customer service. An example of this strategy is the program of Friboi+ now I think last week at the supermarket conventional in Rio de Janeiro, Nielsen, you know Nielsen, gave a presentation comparing a store with a regular butcher shop to one with Friboi+ and the results showed that the start with the program has a higher revenue and 40% higher overall sales, not just the butcher area, the overall sales, that it's a strong program to support the growth of our customers. And at the same time, the retailers now face a challenge because they need to improve the quality of the sales in the stores because this shift for more protein, this program, what GLP1 and so on, that is booming the consumption of protein they need to enhance the portfolio in the retail. And in our program is, I think it fits perfect with this trend in the necessity of the supermarket. The other point, I believe in the second half of the year, when the supply of feed lot in Greece, this coinciding with the end of quota of China, which is large -- and we know that China is the largest pork selling channel, the price of cattle will likely be affected. I think this will be correlation because of that we are so confident that we are able to deliver this year and results in line with last year. Guilherme Cavalcanti: So on the derivatives line, what you saw there is any sort of derivatives that's not related to the operations. And the recent volatility in currencies and other commodity prices make this number higher despite we have a very limited VaR for those type of derivatives. Now on the working capital side, so far, what can I say, it's only about the -- what we've seen in the first quarter. So first quarter 2025 we have a slightly lower working capital consumption than in the first quarter of 2024 despite the $200 million higher impact of the deferred livestock. So again, it's too early to say for the whole year. But if considering just the first quarter, we had a little lower consumption of working capital. It doesn't mean a lower cash consumption, given that the operational side is slightly worse. Operator: Our next question comes from Thiago Duarte at BTG. Mr. Duarte? Thiago Duarte: Yes, two follow-up questions going back into U.S. beef and then Seara. Wesley mentioned the strong quarter considering the circumstances that you had. But I'm still wondering what do you believe justifies that performance? I mean, Q-over-Q margin rebound, it's not something typically happens considering the seasonality in Q4 and even looking at the industry cut out spread. So my question, you mentioned the volatility has been something that's even higher than usual and maybe that has something to do with a particularly good quarter in Q4, but if you could elaborate a little bit more on what you think justifies that in this quarter in particular. And a follow-up question on Seara. I think Tomazoni talked a lot about chicken demand and protein demand in general. So my sense is that what really drove this very good margin at the Seara division in the quarter was really related to chicken, fresh chicken in natural chicken exports as opposed to the domestic prepared food portfolio. So my question is really if that understanding is accurate in terms of, again, natural margin versus prepared food margins for Seara in the quarter? Wesley Mendonça Filho: So especially when the market has such a volatility in cattle prices and cut out values it's very possible, especially when you look at just the quarter, right, that you have a quarter that you position yourself really well and other ones that you position yourself a little bit worse. And between quarters, you could have those -- just from a positioning perspective, it could be either have a very good -- look really good or look a lot worse than you expect? And just given this such intense volatility that more than we were expecting, I saw some reports maybe question a little bit about if there was any hedging or derivatives there, there was nothing significant from that perspective. I think it's just when markets are more volatile, and you make position selling out -- selling product upfront and all of that, sometimes you get good position sometimes could get worse. I would -- I think the best way to look at performance is look at overall longer term than just one quarter, one quarter could kind of misleading positive or negative either way in this sort of business, especially with the sort of volatility that we've been having on cutout and cattle price. Yes, that's in that foundation. Gilberto Tomazoni: Thiago, let me make some assessment position about what you said, if the margin, if you understood well, you asked for the margin of prepared foods in domestic market and versus to export chicken -- commodity chicken to international market. If you take just in consideration, the margin, yes, the margin of international chicken was higher than the margin of prepared in domestic market. But say that, we improved the margin of the prepared food and domestic market. If you remind some quarters ago, I mentioned that we are advancing as a process to improve our price management in order to get the real value of the brand in domestic markets. And this is a continuous process. We are now focused on taking the advantage of we have the perception of the brand, we have Seara in the market. The penetration of the brand and the rebuy of the brand from the consumers. And we are strengthening our process in order to get this value. And because of that, we are continuously improving the margin in domestic market. But yes, you are right. If you compare this quarter, the margin of international market for chicken was higher than the margin of prepared in domestic market. Wesley Mendonça Filho: Thiago, just to complement something on beef that I meant to say and I forgot. For sure, this comparison quarter-by-quarter could create some -- a little bit of that when it comes to position, positioning of how you sell forward and how we buy and all of that. But having said that, we are very satisfied with the way we are operating. There are still opportunities for sure. There's things that we're working on. But when we compare our operations, just the things that -- how we are running our plants and how we are running our sales strategy, our procurement strategy, compared to a few years ago, we think we've made a lot of progress, and I think we're doing a lot better than we've been doing in the past. Operator: Next is Isabella Simonato from Bank of America. Isabella Simonato: First, on the working capital for the quarter, right? You mentioned the deferred payment of livestock as well as inventories. Can you just give a little bit more details on the inventory performance and versus where you were expecting, right, when you mentioned in Q3 for the remainder of the year. What changed? And what can -- how can that -- if there is any impact to be postponed or translated into 2026 performance? And second, on Seara, you were mentioning right, Tomazoni, about the margins in Brazil. Can you comment how you're seeing Brazilian consumers behaving in the beginning of the year if there is room to increase a little bit prices and if volumes have picked up, we noticed that retailers were running with lower inventories in the end of 2025, and there was any significant change in behavior in the beginning of the year? And finally, if you could give us a brief overview of how are your grain inventories and how you're seeing feed costs for the remaining of the year? Guilherme Cavalcanti: So on the working capital cycle, Isabella. So every fourth quarter is a quarter that we decrease inventories, and we'll review them in the first quarter. And the same happens to the livestock, which we postponed payments from 1 year to the other. Between 2024 and 2025 and '26 we postponed this year $600 million in livestock. Last year, we had postponed $400 million. So we had a $200 million better impact on the fourth quarter. That will be a $200 million worse impact in the first quarter that I mentioned in the previous question. And that is in the inventory side, the same thing. We are seeing the same level of inventory rebuild that we saw in the last years. Gilberto Tomazoni: Isabella, thank you for your question. When you look for -- we have two separate questions. One is, if I understood well, one is related to the behavior of the consumer and domestic market with Seara. We see that the market starts a little bit weak in the beginning of the year in January but they're back, now we are -- when we look for our sales, we are growing the sales compared to the last year but deep with different mix with a value-add mix growing much faster than the low -- the traditional and low value-added it's difficult to say what is value added or not value-added it's prepared. But say, look, the traditional, they are selling less than the innovation. We have a huge growth in the innovation line with high-protein products, air-fry products designed for air fryers, clean label product, this kind of innovation. They grow much faster than the other ones. But average, when we compare this year with the last year, we are growing, even some challenge and some different chains, but it's growing. But it start as just to be clear, we start very tough, very tough in the beginning and recover. Now we are -- our sale is higher than the last year for prepared. And when you talk about the cost, I think you will talk about grains because there is a lot of consideration. We have different views in terms of corn and soybean meal with these 2 key elements for our feed. In the corn market, we see an upward trend. We should expect higher costs in 2026. And due to -- if you look for reducing the global stock and solid demand, increased crude oil price that boost in ethanol margin as well the cost and availability of fertilizers. U.S. acreage at risk given the soybean ratio. And the second crop in Brazil, in face of some climate risk. That we are, I think, is we expect higher costs for corn. In the soybean mill, we see price stability and do the -- if you look for the crush margin, they are positive and as the crush margin positive, we result in as abundant supply. And in the other part, weak Chinese demand to the tight pork margin in the market. But I think it's for soybean meal, we need to monitor U.S. acreage issue in the biofuel policy. But anyway, our outlook remains bearish. Operator: Our next question comes from Henrique Brustolin with Bradesco. Henrique Brustolin: I have 2. The first on U.S. beef Wesley, if you could comment about the Mexico cattle imports, right? They have been shut for a while now. Maybe this could be a discussion the reopening could be a discussion amid the higher prices in the U.S. So it would be great to hear your thoughts in how relevant that could be in shaping the outlook for 2026 if we saw a reopening of the animal imports from Mexico to the U.S.? That will be the first one. And the second is a quick follow-up on Seara but Seara has been through a very big investment cycle over the past few years. It would be great just to hear how those investments have already ramped up and what would you expect for volume growth into 2026 as probably you complete the ramp of some of those plants? Wesley Mendonça Filho: Henrique, so on Mexico, it's difficult to tell when that's going to reopen. I mean it's very meaningful. It's 1.2 million to 1.5 million head per year. So it's more than the size of a double-shift plant, right. So it's a big bottom and it's very important, especially to the south of the U.S. I mean the USDA is doing -- I mean, it's doing a good job in doing all we can to keep the disease outside of the U.S. They are working on the sterile flies and all of that. And Mexico, obviously, is also trying to get this result as soon as possible. But for me to be able to tell you like I hope that this would get resolved within the year, but I have no way to forecast and to even have an indicator of if that's going to really happen anytime soon. But it's really important is probably the most important short-term change that could happen to this whole beef supply and demand equation. The most relevant in the short term for sure, it's this whole Mexico thing. It's very important, especially for the south of the U.S. But again, it's very difficult for me to tell you a forecast. I hope it opens this year or as soon as possible, but very difficult forecast. Gilberto Tomazoni: Henrique, about the investment of Seara, all of them will be completed this year. And when completed the additional capacity will be around 10%, 13%. I will say 10%, 13%, but can depend on the mix. There's some mix that is less volume, high value, but it depends on that. But you can consider 10%, 13% in terms of volume capacity growth. Operator: Your next question comes from Benjamin Theurer there with Barclays. Benjamin Theurer: Yes. Just following up real quick on the CapEx side. I think you said about $1.4 billion for expansion. I mean, I know there is a lot that Pilgrim's Pride has part of that and share of it with their outlook in terms of CapEx. But could you remind us a little bit about some of the other projects you're currently talking and working around as it relates to capacity expansion aside from what Tomazoni just mentioned on Seara. That would be my first question. I have a quick follow-up as well. Guilherme Cavalcanti: Ben, so basically, the Pilgrim's Pride expansion on the prepared food parts on the rendering facilities, the pork sausage plant in Iowa. But the ones that we announced. Also the Oman project, we also announced a plant in Paraguay. Cactus, Texas, also on the beef side, so everything that we've been announcing. And of course, all these capital expenditures are phased out throughout the years, and that's the portion for 2026. Benjamin Theurer: Okay. Perfect. And then as you kind of like look from just general capital allocation, I mean, obviously you announced the $1 dividend per share in the very large CapEx program. We're seeing a bit more activity right now as it relates to M&A activity within food companies in generally but particularly between European and North American companies. So just wanted to get your latest as to your willingness or the opportunities you might be seeing on growth through M&A, which obviously has always been part of JBS's DNA to grow . Guilherme Cavalcanti: We're always looking at opportunities through our plan everywhere in the world, but there's nothing that we are looking very keen at the moment, and that's the reason that we increased our organic growth because we are not seeing many opportunities on the acquisition front. So I think that I would say there's nothing that we could say that we expect to announce or anything in terms of M&A. So that's why we were -- we increased expansion CapEx, and that's why we are returning capital to the shareholders. And given that our net interest expenses continues to be at the $1.1 billion level, we are very comfortable with this capital allocation. Operator: Our next question comes from Thiago Bortoluci with Goldman Sachs. Thiago Bortoluci: Congrats on the results. I have two follow-ups. The first one this is on volumes, right? Tomazoni, you have been very vocal on the solid momentum for global protein markets. And to be honest, when I look over the last few quarters. Obviously, a lot of debate on the margin cycles, but volumes and top line has been consistently surprising everyone to the upside. And I think it might be a continuous source of upside going forward. It's difficult to break out for us your sales component between volume and pricing. But internally, from a volume perspective, could you please share with us what business unit segments and destinations are the ones that are contributing the most with your growth and which regions make you more excited with the opportunities for 2026. Particularly, if you could also comment on the opportunities in Africa. I know you announced a few things last year. Just an update here, and then I can follow up with my second question. Gilberto Tomazoni: Thiago, thank you for your question. If I understood well, you talk about Seara or you talk over about... Thiago Bortoluci: Volumes. Overall. Gilberto Tomazoni: Okay. Overall. Okay. Overall, we see that the demand, when you say all of the market, it's not just because we try to simplify, but it's the reality. We have a strong demand in Europe. Friboi increased a lot of the sales of red meat in Europe as Seara increased in volumes in Europe. And the demand in chicken in Europe mainly is driven by some influence in some countries. And the demand for beef is because the beef production in Europe decreased. And I think it's not just Brazil, sell more in Europe and Australia sell more. And in Australia and the U.K., now they have a new agreement. And this is -- the demand is -- we are expecting to grow the demand from beef in Europe. The other part, we see demand in all of the Asia. Take China out of this the component of Asia, but all of the Asia, the demand is growing for chicken. And for beef as well, we see the demand and the market -- this is not new markets. We open a lot of new markets, but in traditional markets like Japan, like Korea, we increased the volume from the market. And I believe this is the trend. It's not a trend because price. It's a trend because the demand decrease in the local production decreased, decreased because of the cycles there or because of some disease in the market. We see Middle East now we are facing a war there, but the flow of the product to the market didn't change so far. They changed the logistic of vessels there, the logistics of internal logistics, we need to change port and when you change port, we need to use trucks to deliver the product to the customer. But the flow is still there. The demand is there. Because of this, we are investing in the Middle East, new factory opened some months ago in Jeddah and the investment we have announced in Oman because the demand is strong. The U.S., there is a strong demand for beef as Australia, Brazil, sell a lot streamers and from U.S. When we say a lot more than before, I would not say compared to the production in the matter. Sales compared to what previous forecast. If you look, we are not seeing that one market is the restriction. We see the demand for all of the markets. Even in Brazil, the demand in Brazil for protein is high. Look for what is the -- how Brazil have grown in terms of the number of fed processed in Brazil is amazing. And what is this? This is because the global demand for protein because there is a reason we have been talking before about that. There is a trend it's not a trend, it's a structural change in the demand of the market because of regulatory guidelines in U.S., they change the guidelines and they put -- they need to add more protein to need to go to 1.1 grams per kilo per 1.62 grams per kilo. You can manage how much we need to produce to fulfill this market that we -- that there is a lot of the health habits that for young generation for old generation, there's a new medicine technology, this GLP-1. And combined all of this, the demand is very high, very high. I don't know if I answered your question, Thiago. Thiago Bortoluci: Perfectly, Tomazoni. This is very helpful. On the second one, still talking about the conflict in the Middle East. Obviously, this is an ongoing situation. But could you help us framing the impact so far in your freight expenses -- and by freight, I'm mentioning seaborne freight, but also truck freight in Brazil and maybe a sensitivity of how this could impact your profitability if sustained going forward or how you plan to pass this along? Gilberto Tomazoni: Thiago, I think I just mentioned before, the flow, the product to go to the market didn't change. Didn't change from Brazil. Didn't change from Australia and any of the other markets didn't change. We keep supplying the market. We have -- what we saw the growth -- the cost, we have a contract with the marine agents and they put extra cost because of the risk to navigate in these regions. And this is one of the cost. The second cost is the cost that we need to change the port -- some -- the destination of the product, some destination will change from one port to the other port. And when we change the destination for the different part, we need to have the truck transportation because to there is not -- there is no closer to the customers, then we need to have this cost of transportation. But so far, this -- all of these costs was beared by the market. We not see impact in our results. Thiago Bortoluci: This is also true in Brazil. Tomazoni, with diesel prices. Gilberto Tomazoni: No. In Brazil, we see the increase of price of diesel. And we see that increase in terms of the cost of freight. I talk about the Middle East, but when you look for Brazil, yes, you are right, increase the cost of the freight. I think if the crude oil keep this price and depends on how far the development of this war, I believe that other costs will be increased, the cost of packaging and what is depend on the oil will be increased as a raw material. I think this will be the impact, I think, the fertilizer will be impacted, and then it could be -- then I mentioned before, when they talk about the cost of the corn because the fertilizer will be higher, the availability of fertilizers, maybe the use of fertilizer will be reduced and then the productivity of the crop will be low. But it's -- I believe it's too early to predict. Too early because you don't know how will be the end of this war. I think this is -- I saw this impact in the short term, but could be back if they end the war. I think it would all be back. It is -- I think this is a situation that we are -- how we are looking and act in this situation. Operator: Mr. Benjamin Mayhew from Bank of Montreal would like to ask a question. Benjamin Mayhew: Can you hear me okay? Yes. Gilberto Tomazoni: Yes, good morning. Benjamin Mayhew: So a lot has been covered already, but I'd like to ask a high-level question to begin. So in looking at 2026 versus 2025, just across your global segments, where do you see pockets of improved market fundamentals and where do you see pockets of maybe not so strong fundamentals throughout the year? So we'll start there. Gilberto Tomazoni: Ben, thank you for your question, Ben. I think it's a rule of improvement we've seen in all of our business units because we have a methodology that mapping the gaps. It's a one of the model that we work. All business units need to understand, need to know very well, where is the opportunity to improve, then we call mapping the gaps and when you look -- when you have the budget, we go there and see the gaps, and we forecast in our budget, some gap up in the -- each one of the operation. And it's not just for the business, but -- we got the business because we deploy each one of the process and subdivisions of the business. That is when you look -- if you look it's a huge opportunity we have yet because that new technology, a new way to do the things. We are closing the gap. We open a bigger gap, and this is the way that we see -- or get operational excellence. I think this is the mentality and the mindset for all of the business. But if you go to a structural, we see that Brazil is 1 of that has a huge opportunity for growth in terms of meat, beef in Brazil, I think, is if you compare Brazil and U.S., brazil has more than double of the [indiscernible] than U.S., more than double. And we produce just this year or last year, Brazil produced a little bit more meat than U.S. It means that -- if we are able to get the same productivity in the U.S. or can double the production in Brazil of meat. Then we see Brazil in terms of red meat huge opportunity in the future for growth. But it's not just for growth [indiscernible] all of the protein produced in Brazil is very competitive because we are grain competitive in terms of the cost of the grain. We are very competitive. We have good quality management. And I think it's -- Brazil is one. We see U.S. good opportunity. Chicken U.S. performed so well, and we see that demand in the U.S. for chicken grow before U.S. export a lot of red meat [indiscernible]. Now I think it's a huge chunk of the volume for red meat is [indiscernible] in the market because they start to appreciate the product made by red meat from chicken, say, leg meat. This is I think in U.S. is an opportunity for growth for chicken for pork demand. In U.S., we have -- if you look for the result of our pork business, they are a very consistent results for a long period of time, well managed business. And we see that we can grow in our pork business because U.S. is very competitive to produce chicken and pork. So look, it's difficult for me because I'm booming in all of the markets that we are present. Australia, we see -- we are very excited with the pork business there. We are delivering a great result there. The Australia import -- Australia now import pork meat but Australia export grain. When you export grain, the price of grain is international price, that does not make sense that you export grain in pork meat. You can produce meat there. And we are investing in our pork business, build farms and improving the operation, the productivity of the operation. Then we are so, so excited with the opportunity for Australia. And our salmon business, we have announced an investment to improve more than 50% of our capacity of salmon in Tasmania. So we see Europe. Europe, I think, is an opportunity of our growing chicken, mainly in chicken and value-added. We are excited because we are in a segment, in a sector that is growing. It's a protein. And we -- we have our global platforms that we can easily meet this demand, I think is -- we have a good situation an advantage to take the opportunity and transform this opportunity result to the company. And I think it is -- I don't know if I answered your question . Benjamin Mayhew: Yes, you did. And I really appreciate all the detail. That's very helpful context. So my second and last question would just be around the beef cycles. Just wondering if you're seeing a little bit more progress on U.S. heifer retention. So wondering about that. Also, curious about your thoughts on the durability of the Brazil cycle and then, of course, the Australian cycle. So if you could just kind of summarize that quickly, that would be amazing. Wesley Mendonça Filho: Thank you, Ben. So yes, we are seeing the herd review more actively in Canada. We're seeing that in the dairy business as well in the U.S., which also obviously impacts the overall supply. When I look at the USDA data, it shows that I think we are retaining heifers, but it's relatively slower than we expected. But I think it's -- all the economics are there, everything should be there for us to be doing that. Actually, I have an information that's pretty interesting is the beef cow slaughter in 2025, for full year, we processed 2.3 million head. In 2022 was 3.9 million heads. So we're almost half of what the beef cow slaughter was in 2022. I think those things -- that information is important, and it shows that if it wasn't for -- to keep more females for breeding, we wouldn't see such a sharp decrease in -- it's almost half of what it was in 2022, not too long ago. So I think that there is some information that kind of makes us more optimistic, but obviously, it's lower than we would wish. Gilberto Tomazoni: Then related to Australia, we see we are in the middle of the cycle in Australia. And back to Brazil. Brazil, we see that the reduction of production in terms of the number of cows but the other side, we have a different force. The Brazilian -- if you look Brazilian and compared to U.S., or compared to Brazilian -- cannot need to compare to U.S. You can compare it for the high level of productivity in Brazil producers and the average of Brazil. The average of Brazil, they bring to harvest if at 4 years age in -- but the good producer or the modern farmers. They live 2 years to get the product finished, to get the cattles finished means that at the same time, we have a reduction in the age of the cattles. And this combined with increased a lot of feedlot in Brazil. The feedlot in Brazil was not well developed. Now you can see a lot of feedlots in Brazil. And the other part, we have an improvement in genetic improvement nutrition the Brazilian ethanol, corn ethanol industry, now they deliver good byproduct from the ethanol that is DDG, it is support a lot to grow the growth of improvements in feed. We see that we are -- I think Brazil will be able to manage this situation and postpone the cycle, the cattle cycle, that is normal cattle cycle. Operator: Our next question is from Heather Jones with Heather Jones. You may now go ahead and Mrs. Jones. If you're trying to speak you might be on mute there, Mrs. Jones. For the moment, we'll move on to the next question on the list, which is Leonardo Alencar from XP Investimentos. Mr. Alencar? Leonardo Alencar: I'd like to go -- wanted to talk back to U.S. beef discussion. And then we mentioned many points on the supply side. I wanted to focus probably more on the demand side. So if we can get -- First, a view on the resilience of beef prices. We've been seeing some amazing beef prices in the beginning or even before the spring season. So just to understand if you -- this is this is feasible or even if it's possible for us to expect higher price throughout the next few months. There was an interesting change in choice and select spreads. I don't know if there's any signal that point, if you could provide us with more information. And this discussion on the product of USA label, I understand it's really new. But if you have any early -- any views on that would be interesting as well. And then on the second point, maybe more like an exercise here. I understand that we've been discussing value-added products and processed goods and that U.S. is the main focus for that. But you already have a lot of revenue on that channel. If we split that from the commodity business in U.S., would you say the performance for -- even from the end of 2025 or 2026, maybe better than the commodity business. It is possible to do that exercise? Wesley Mendonça Filho: So demand is -- it remains pretty strong for beef. Obviously, supply is pretty short. But it seems like beef continues to be very resilient. It seems like ground beef is especially ground beef. We've always measured ground beef versus chicken breast versus pork loins. And it seems like the demand for beef in general, just there is -- obviously, there is a little bit of a substitution with other proteins, but the demand for beef stays still remains and remains pretty strong. So we see that going forward. And all these labor requirements and all that, it's something that we're always -- whenever something changes, we discussed with our retailers and see what our customers and see what are the impacts and cost of that. But it's not something that I'm super concerned right now. Leonardo Alencar: Okay, in the value-added products? Wesley Mendonça Filho: Sorry, that value-added question was about which business unit? Sorry, I missed that. Leonardo Alencar: Exactly not related to a business unit. If you could split, remove or suggest value-added products and remove from the commodity business, would you say 2026 is expected to be better or not on that part of the business? Gilberto Tomazoni: Look, our focus is to increase value-added, in brand is the focus that investment, if you look for an investment we have done in the past, we prioritize the value-added product. And because it's we take the advantage of verticalization of the product. And the second 1 is a higher margin and more stable market that value add is one of our priorities. Leonardo Alencar: Okay. And just 1 more follow-up here. On this split up deal that was being discussed in the U.S. government, I understand it's more noise than anything, but any comments here? Wesley Mendonça Filho: It seems like it doesn't have a lot of support in the -- so right now, it's not something that we're concerned about, Leonardo. Operator: We have Mrs. Heather Jones back online, if you would like to go ahead with your question Mrs. Jones. Unknown Analyst: Are you able to hear me now? Gilberto Tomazoni: Now, yes. Operator: Seems we have some connection issues on Mrs. Jones' side, so we'll continue for now with our next question from Guilherme Palhares with Santander. You may go ahead, Mr. Palhares. Guilherme Palhares: Over the last couple of years, one of the main points here of the investment thesis of JBS has been a bit of the geographic diversification, right? And you do report each of the businesses individually in terms of Australia, Brazil, the U.S. I just wonder if you could share a bit what is -- I think U.S. is a good indication there. In terms of the supply to the market, how much of beef meat in the U.S. is being sold through JBS. Do you know a bit how much do your selling today that it's coming from Brazil and Australia? Just to give the point here is a bit of food security, right? So having this geographic diversification, how much you can maintain supply even when the cycle conditions are not there. So if you could give us some color there, I think it would be appreciated. And the second question here, Tomazoni, over the last 2 years, you guys entered in a new protein, which is table eggs, of course, you still have a minority stake on the investment there. But I just want to hear a bit your thoughts going forward with this year behind you? What is your impression there? And how much -- how big is the opportunity there? Wesley Mendonça Filho: Sure. It's very relevant to have access to import meat from the Australia from Brazil when -- especially in periods of time when there is a shortage of beef in the U.S. So that does help, and it's I mean, and obviously, the volumes at Brazil and Australia produce are significant. So it's -- so it's -- there is not -- there isn't a supply problem when it comes to that. Having said that, the U.S. is a very, very, very competitive place in the world, probably one of the most competitive places in the world the American rancher is one of the most -- are among the most capable in the world to produce beef and high-quality beef. And so obviously, the shortage is a situational thing right now, but the U.S. it's a country that doesn't need to import in the long run, it doesn't need to depend on import. It doesn't need to have imports to be able to supply its own demand. It should be able to, in the long run, to be able to have its -- for the domestic production to supply its domestic market and actually be an important exporter of beef, like it's always been. Obviously, in the short term, we have the situation that we're importing a little bit more beef than usual. But -- and it's useful to have that when there is a shortage because the demand is still there. But the U.S. is a very, very productive place and doesn't need -- for beef and it doesn't need doesn't -- in the long run, shouldn't depend on imports. Gilberto Tomazoni: And Guilherme related to table eggs, we are -- we enter in the segment because it's -- we see that the affordability of the protein, so one of the more affordable protein in the market in and we before to enter we study these categories, and we are excited the first impression, the first movement we have done is to buy a company in the U.S. and to -- we are building farms in Brazil, we are excited with the business. This is one of the businesses you want to grow. Guilherme Palhares: Okay, Tomazoni. And just one follow-up there. You guys are also entering in the U.S., right? So what is also out there that you want to do on table eggs that you think it is a relevant market that you can play and make a difference. Gilberto Tomazoni: Look, we just buy this farms in U.S., and we are without I would say that the population of the chick. Now we are populate our farms and we are excited with this. I think is this -- we are on their strategy with both with Mantiqueira because Mantiqueira has the know-how and this accelerate all of our lands in the market. Operator: Our next question comes from Pooran Sharma, you may go ahead -- with Stephens, you may go ahead, Mr. Sharma. Pooran Sharma: Can you hear me okay? Gilberto Tomazoni: Yes. Pooran Sharma: A lot of good content covered. So maybe I could just focus on the first question, maybe just on your U.S. pork business. We've been hearing from U.S. hog producers that they expect disease impacts to be the same, if not worse than last year. I was just wondering if you can kind of share what you've been hearing regarding hog disease pressure in the U.S. and if you would expect that to weigh in on margins in FY '26? Wesley Mendonça Filho: Yes, it could be. And the margin impact -- it's not necessarily that it's -- it depends on how and when it does impact, it doesn't necessarily mean that it's actually a negative impact. It could actually -- we could have a short term -- obviously, we're not expecting disease, and we don't want disease. And we do everything we can not to have them. But in the short term, you actually could have actually a higher -- given a shorter supply, you could actually have a better margin if that happens. Pooran Sharma: Okay. I appreciate the color there. And my follow-up, maybe just wanted to further on some of the comments you made about the listing on the NYSE. You mentioned stock has seen some liquidity and valuation benefits but that you're still expecting to get more. And in the past, you all have talked about, I think, index inclusions and the potential for -- to get into some of those and the timing to get into some of those. So I think as we're looking in FY '26, I was just wondering if you could maybe give us an update on what's out there in terms of inclusion on some of these passive indices? Guilherme Cavalcanti: Okay? So on the multiple side, if you look at our enterprise value EBITDA forward-looking, we are trading higher than we used to trade before the listing. So there was a multiple expansion already, but we still traded at a discount to our peers. One of the reasons is also the index inclusion. There was a research that was sent last -- yesterday from Stephens. Saying that according to what we released on our financial statements in terms of information of revenues and assets breakdown. We should be included in the Russell, which is next June, and it could bring around 14 million shares demand from passive funds. But it's out of our control. We cannot guarantee that but that's what is in the short term. On the longer term, at some point, most likely beginning next year, we will start to find -- to make files of 10-Ks and 10-Qs instead of 6-K in order to be eligible to the S&P family. So then I think 2027. So I think this year, Russell is the plan. Next year, the plan is to be on the S&P family. First on S&P 400. And once we reach it $22.7 billion market cap, that's the threshold for the S&P 500, although, again, it's not in our control. It's their committee decision for shares inclusion. Also worth mentioning that our average daily trading volume is 3x higher what it used to be before the listing. And the Brazilian investors fell to 10% of our free float. And the U.S. investment today, it's already 70% of our free float. Operator: And our next question comes from Ricardo Boiati from Safra. Ricardo Boiati: One. My first question goes to Wesley. I wanted to circle back to the U.S. business. You, in fact, already answered part of my question here, which related to the competitiveness of the U.S. ranchers, right? We are seeing very favorable conditions, right, for a faster herd rebuilding in the U.S. with the beef prices, the cattle prices. My question here would be exactly when you look from the ranchers' perspectives, right, we see some concerns that labor, even succession plans could be an issue for the ranchers longer term. You expressed a very strong positive outlook for the U.S. beef industry, which is very, very good. So I would ask you to elaborate a little further on the drivers for the industry especially from the ranchers' perspective, right? Is there anything that could prevent a more robust business expansion for the ranchers, anything that could be a risk in the horizon? So that would be the first question. And the second one, just more broadly looking at the current market environment. the risk environment globally. Does this situation here of increased volatility could imply an even more conservative approach when it comes to the balance sheet of the company? It's quite clear that the balance sheet is very strong. I mean, in terms of leverage, in terms of debt maturity, you already showed this in details. But the very short term, the current environment, does it imply an even greater conservativeness from your side or nothing relevant so far? Wesley Mendonça Filho: Ricardo yes, there is -- obviously, there is issues that are very relevant, succession is always very relevant, and labor and all that. But at the end of the day, I have a pretty simple view of this. It's the -- and obviously, like interest rates are relevant as well when it comes to herd rebuild, right, because you have to carry more working capital and livestock and all of that. But at the end of the day, I think it's pretty simple. The U.S. has the nature, has the culture, I mean in nature, I mean, like just environment, right, just the natural resources to do it, to have a thriving beef production, it has the culture to do it. It has the infrastructure like no other countries. So at the end of the day, we remain very optimistic about it in the medium long run. Guilherme Cavalcanti: In terms of balance sheet, I think it's worth mentioning that sometimes you should not look at the net debt absolute value itself. But not even on the net debt to EBITDA, I think it's where I mentioned that in the last 3 years, we increased our net debt in 8%. However, financial expenses stayed the same. So through like big management exercises, we've been able to despite increases in net debt to keep the same level of interest expenses. So our capacity of debt repayment didn't change. So as long as we have this comfortable debt capacity repayments, we have no -- not been needed any restrictions in terms of our return to shareholders or our growth given that we have discovered. And also, as I mentioned before, we don't have significant maturities in the next 5 years. which gives a lot of comfort that we don't need to go to the market at any interest rates. Our cash position is also -- we ended the quarter with $4.8 billion which is around $1.5 billion higher than what is our minimum cash given our cash conversion cycle. So again, we have a lot of questions that currently, we don't need to be restricted in any of our initiatives. Operator: Our next question comes from Igor Guedes with Genial. Igor Guedes: Can you hear me? Gilberto Tomazoni: Yes. Igor Guedes: Okay. I would like to talk a little about Seara. Regarding the first part of the question, this quarter, we saw a resumption of shipments to China after several months of suspension due to avian flu last year. I'd like to understand how the resumption went for you guys? The resumption happened around November. So it didn't cover the entire quarter for Q1 '26, should we expect an even stronger quarter in terms of volume? Is this recovery gradual? Or do you believe the full effect has already being captured in 4Q? And the second part of the question, I'd like to understand from the perspective of breaking down the positive impact -- we have volume growth as well as price improvements realized through premiums paid on certain chicken cuts standard for China, such as chicken feet, given the increase in volume, there is also an effect of improved fixed cost dilution. So my question is, if you could break it down a bit, what we saw in terms of margin improvement what influenced it the most? Was it the increase in volume, the price improvement or the fixed cost dilution? Gilberto Tomazoni: Igor, is not a simple answer for you. If you talk about the volume to China, when opened this helped a lot in terms of profitability because we have the best market for chicken wings and for chicken feet is China. Then we increase in terms of -- we -- feed don't produce were not market to deliver all of the production. But then we do open the markets, they improve volume and improve price. And about wings, they improved the price because the value of the wings in China is higher than the other markets, means that we are -- we got part of the benefit because it was in November, I think it was October, November, and now we have got the benefit in the -- in this first quarter of all of the benefit. When you talk about what is important, the cost of dilutions of price, of course, the impact of the feed, it's a huge impact in terms of profitability because these represent 60% of our cost of chicken goes to feed, around 50. This is huge that is more than to get increased the volume to compensate this is, of course, volume compensate but not able to compensate all of these costs. Operator: Our next question comes from Priya Ohri-Gupta with Barclays. Priya Ohri-Gupta: Great. I hope you can hear me. A lot of questions have been asked at this point. I would just like to ask 2, first, around just the capital allocation. You've already announced the $1 dividend per share that's going to be paid in June. That works out roughly to what you've been indicating for some time now around the ability to consistently pay about $1 billion to shareholders. Is that sort of how we should think about the dividend for the entirety of the year? Or is there room to potentially increase that with a second payment later in the year? And then relatedly, how should we think about share repurchases? Just given that you guys did do about $600 million in '25. And then I'll ask my follow-up. Guilherme Cavalcanti: Priya. So at this moment, we are sticking to what we will try to do as long as our leverage ratio allows to have the $1 billion per year in dividends. So I think this $1 billion is what we plan to pay this year. And then depends on how much excess cash or cash flow generations, then we can reevaluate a share repurchase again or not. But that do depend on the cash generation in the next quarters. Priya Ohri-Gupta: Okay. Great. And then I know you're pretty clear just now about not having any maturities in the next 5 years or so, and so you don't have any real need to come to market. But some of your bonds do become callable later this year and into early next year. Is there a scope for you to think about addressing those or consider other liability management? Or is this the rate backdrop that -- or would this rate backdrop not necessarily went? Guilherme Cavalcanti: Now the callable bonds, they have very low interest rates. So it's not worth it. The coupons are below treasury. But there's opportunities to decrease interest rates and extend maturities on the '34 and '33 maturities. So maybe I think -- it could be -- liability management could be targeted on those 2 bonds, '33 and '34 which has high coupons and higher than what we could be issued today at 30 year, for example. Operator: And next, we have Mr. John Baumgartner with Mizuho. John Baumgartner: Two for me on North America. First, on the value-add side. I mean traditionally, there's been a focus on value-add through M&A. More recently, you've gotten involved in CapEx to build the Italian meats business. But I am curious, alternatively, I know you had a relationship with Wendy's. You had done some test marketing of Wendy's burgers last summer. I'm curious what you sort of learned from that test market? And how you think about maybe licensing third-party brands to get those value-added brands in-house in lieu of making expensive acquisitions or even investing to build brands from scratch? Wesley Mendonça Filho: So look, we're looking at we obviously look at every option. For us, greenfield has made more since recently just because of valuations and the price of building some of these things. And actually, some of these businesses that we did greenfields. It's better to do to have a new plant instead of buying old assets. And so that was very specific to those greenfield acquisitions or greenfield projects, sorry. The project we won is what was very interesting was very -- it worked out well, and it's great partners. But it's an option as well, but it's not -- we'll look at that, too. But we've seen that it's not necessarily, as you mentioned, expensive as kind of prohibited to build brands. Look at what we've done at just there, right? It's we never had an the earnings call or Pilgrim's hasn't had an earnings call that they said that they were -- had invested -- the results were good for 1 reason, had a negative impact because we were building brands, right? We build brands as we build the business and it was sustainable in itself. So nowadays is a $1 billion brand. So it's in revenue. So I think it's possible to do those 2 things at the same time. John Baumgartner: Okay. And a follow-up also in North America. Guilherme, I think you mentioned there's really no imminent M&A on the horizon here, but I am curious on the egg industry, seeing where prices are for eggs, I'd imagine there's a fair amount of distressed profitability in the industry. I'm curious, looking at producer capitalization, that business specifically relative to beef, pork, other species, where you've made acquisitions at the down trend -- the down point in the cycle. How do you think about this profitability issue in eggs right now, maybe accelerating your ability to build out and maybe be opportunistic and acquire some assets in eggs. Guilherme Cavalcanti: John. So basically, it all depends on having the opportunity at the asset price. So sometimes it's not related to the current egg price and we're always looking at opportunities. So it's difficult to say and then that's our approach. It has to be an accretive acquisition. Operator: Ladies and gentlemen, there being no further questions, I would like to pass the floor to Mr. Gilberto Tomazoni. Gilberto Tomazoni: I would like to thank everyone for joining us today and all JBS team members for their dedication, the commitment to deliver the results. Let me close with 3 key points. First, though, we delivered record revenue of $86 billion and 13% growth for the prior year, reflecting the strength of, and the consistent of our global platform. Second, return, we continue to operate with a strong capital discipline with return on equity at 25% and return on investment cut out at 17%. Third, earnings per share, EPS reached $1.89, up 15% year-over-year, growing faster than net income and reinforce our focus on shareholder value. As we look ahead, we haven't changed our focus, execution, efficiency and disciplined capital allocation. That is what allowed us to deliver consistent results and build long-term value. Thank you. Operator: This is the end of the conference call held by JBS. Thank you very much for your participation, and have a nice day.
Operator: Welcome to the earnings call of Aumann AG regarding the full year figures for 2025. The company's CEO, Sebastian Roll; and CFO, Jan-Henrik Pollitt, will guide you through the presentation and the figures shortly, followed by a Q&A session via audio line and chat box. Having said this, I'm handing over to you, Sebastian. Sebastian Roll: Good afternoon, everyone, and thank you for the kind introduction. I'm pleased to have you with us today. And for those I haven't met yet, my name is Sebastian Roll, and I'm the CEO of Aumann. So joining me in the call today is our CFO, Jan-Henrik Pollitt. So we really appreciate your time and your interest in Aumann. In the next few minutes, we will guide you through a brief overview of Aumann, the latest developments in our E-mobility and Next Automation business and of course, our financial performance in 2025, where we delivered strong results in a challenging market environment. So let's start with a quick look at our business model. So we design and build high-end fully automated production lines tailored precisely to the needs of our international customers. With decades of experience in automation, industry leaders around the world trust Aumann to deliver innovative solutions. One of our competitive advantages is staying ahead, especially in fast-growing markets, enabling us to quickly provide customized solutions. This is why the automotive market, especially the E-mobility sector remains so attractive to Aumann. In addition, the robotics and automation market is growing rapidly, driven by demographic change, labor shortages and cost pressure. These trends also drive our Next Automation segment, allowing us to use our automation expertise in many industries beyond automotive. So let's take a quick look at Aumann's solutions. So our portfolio ranges from modular solutions and complex process solutions to fully integrated large-scale production solutions. At the modular end, we provide standardized cell systems. They enable our customers to adapt quickly and cost efficiently to changing market demands. Building on this, Aumann designs production lines for more complex processes, including technologies such as winding, coating and testing. The aim is to implement special process steps in the most efficient way. Moreover, Aumann offers fully customized large-scale solutions built to maximum output while ensuring high quality. Thanks to Aumann's wide range of solutions, we can fully support different production strategies of our customers. So this slide here shows how Aumann became a technology leader in E-mobility. Starting from the traditional automotive business, E-mobility was identified as a growth market. Through targeted M&A, Aumann took the first step into E-motor technologies. Building on our know-how, we developed different solutions for the rotor, quickly followed by solutions for the stator and finally, full E-motor assembly. After the E-motor, we leveraged our expertise to develop large-scale production solutions for battery modules and packs. In addition, we introduced our own modular systems, for example, in inverter assembly, but also very useful in the field of Next Automation. Furthermore, we have expanded into converting technology, enabling us to offer, in addition, production solutions for electrode manufacturing. Aumann is a leading provider of turnkey solutions in E-mobility. This illustration here shows the drivetrain of a fully electric car and most of these components can be produced on Aumann production lines. From the outset, we have focused strongly on the E-drive unit. Even today, our customers still use different approaches to stator and rotor design. As a turnkey provider, we offer the latest production solutions for both. Beyond that, we have expanded our portfolio with modular production systems, for example, for electronic components such as sensors or, for example, such as inverters. This enables us to offer flexible and scalable solutions perfectly tailored to each customer's needs. Let me now turn to our battery portfolio. Here, Aumann benefits from its strong position in energy storage. We cover the full range from battery modules and packs to cell-to-X solutions. This expertise allows us to meet customer needs and develop new solutions for next-generation battery technologies. Let's look at the E-mobility market today and in the future. BEV, or battery electric vehicle sales continues to gain traction. In 2025, more than 13.7 million were sold worldwide. So this means a plus of 30% in comparison to 2024. China stays in the lead with 9 million units, but Europe follows with strong growth, reaching more than 2.2 million units with 26% increase compared to 2024, including Germany with an impressive 43% growth. The U.S. market, which currently shows the lowest volume in comparison, remains at least stable at 1.2 million units. By 2030, BEVs are expected to make up 40% of sales by 2035, even 2/3. So overall, rising BEV sales and a more stable geopolitical situation are expected to drive new investments in the near future. So let us now turn to our key commercial focus in 2025. As mentioned earlier, we are expanding beyond the automotive sector and focusing more on industries that need greater efficiency, higher productivity and less manual work. At the same time, rising labor costs and the shortage of skilled workers are accelerating the shift towards automation. In this context, we have moved, as you know, our Next Automation segment from an opportunistic to a strategic approach. This segment focuses on growth industries beyond automotive, such as defense, aerospace and life science. So let's take a closer look. In our Next Automation segment, we have defined 3 strategic growth areas. Aerospace, as you know, is gaining momentum. Demand in civil aviation is rising. Boeing and Airbus are forecasting more than 40,000 new aircraft over the next 20 years. Against this backdrop, Aumann is preparing its reentry into aviation, offering solutions to support production ramp-ups with initial orders already secured in early 2026. At the same time, defense budgets are boosting. Drones combines exactly what we do best: electric motor, battery packs and full system integration, including end-of-line testing just like in E-mobility, same technology, new applications. Therefore, we easily developed integrated drone assembly lines and secured our first orders in 2024 (sic) [ 2025 ]. Besides aerospace and defense, clean tech is also good. Here, Aumann has acquired a double-digit million order in energy infrastructure, delivering flexible assembly and test lines for medium voltage circuit breakers. Finally, life science. So this sector benefits from long-term trends such as an aging population, strong investment levels and attractive margins. In 2025, Aumann entered the pharma market with solutions for producing skin delivered patches and oral thin films. Now I would like to hand over to Jan. Jan-Henrik Pollitt: Yes. Thank you, Sebastian, and also a warm welcome from my side. I would now like to share with you the financial figures of the year 2025. Let me start with a brief overview. We entered the year aware that revenue would face a decline, primarily due to a softer order intake in 2024. At the same time, we remain fully committed to implementing every possible measure to protect our margins and sustain strong profitability. It is also important to highlight, particularly in the automotive sector, that investment behavior continues to be very cautious. This trend is visible across the full spectrum of OEMs and suppliers. Against this backdrop, in 2025, revenue reached EUR 204 million, 35% below the previous year. Profitability remained strong with a double-digit EBITDA margin of 13.8%. Order intake totaled EUR 147 million, down 26% year-over-year. Order backlog decreased from EUR 184 million to EUR 122 million at year-end 2025. And our balance sheet remains robust with a net cash of EUR 148 million. With this foundation, let us now dive into the details. Across segments, we achieved a revenue of EUR 204 million, representing a year-over-year decrease of 35%. The main driver of this decline was the E-mobility segment, where revenue decreased by 37%. Revenue in the Next Automation segment also declined from EUR 53.8 million to EUR 40.2 million, mainly because the prior year included a larger contribution from a major photovoltaic project. For 2025, we had initially expected revenue of approximately EUR 210 million to EUR 230 million. Based on early projections in January, this estimate was refined to EUR 205 million. With the audited figures now available, we ended the year 2025 at EUR 204 million, closely matching this guidance. Looking ahead, we will now turn to the profitability and earnings performance to provide a complete picture of the financial results. Despite the decline in revenue, our profitability remained robust, demonstrating the resilience of our business model. EBITDA came in at EUR 28.2 million, down 21% year-over-year. EBITDA margin increased from 11.5% to 13.8%. This reflects the strong execution, especially in our E-mobility segment. Key drivers of this solid performance include a high-quality and well-diversified order backlog, strict cost discipline across all projects, capacity adjustments aligned with the subdued market environment, and an above-expectation Q4 with some larger E-mobility orders completed ahead of plan. Based on these dynamics, we raised our initial EBITDA margin guidance of 8% to 10% in January to 14%. With the final margin at 13.8%, we outperformed last year by 2.3 percentage points, underlining the operational strength of our segments. With profitability well established, let's now turn to order intake. As already mentioned, the overall investment climate remains challenging. Our business relies on our customers' CapEx, and especially for large-scale projects, long-term forward-looking decisions are essential. Many industries, particularly automotive, are currently not making these kinds of commitments, which affect our markets. However, we are not standing still. Internally, we continue to optimize costs and adjust capacities. Externally, we are actively developing new sales opportunities and pursuing M&A leads. We see clear opportunities to grow, and we are confident these initiatives will deliver value. In 2025, total order intake declined 26% year-over-year to EUR 147.5 million. The Next Automation segment is showing strong progress. Order intake increased 54% year-over-year to EUR 56.5 million. Our sales pipeline is also growing, demonstrating the potential of the Next Automation initiatives to drive future revenue. As a result, total order backlog declined from EUR 184 million at year-end 2024 to EUR 122.2 million at year-end 2025. However, the Next Automation segment continues to gain momentum with its order backlog increasing 39% to EUR 47.9 million. While the overall backlog is below our desired level, both volume and quality of the backlog are solid. And we have, of course, continued to account for this backlog conservatively in our financial statements. Let me now move to the next slide and walk you through the segment figures, starting with the E-mobility segment. In the E-mobility segment, order intake of EUR 91 million is 44% and under the previous year due to the mentioned market conditions. As a result, order backlog decreased by 50% to EUR 74.3 million. At the same time, revenue decreased by 37% to EUR 163.8 million. EBITDA is declining at a slower rate than revenue by minus 21% to EUR 26.6 million, which means a strong margin of 16.2%. In the Next Automation segment, order intake increased year-over-year to EUR 56.5 million as the new positioning is opening new markets. End of 2025, order backlog amounted EUR 47.9 million. Revenue decreased 25% year-over-year to EUR 40.2 million. And the EBITDA margin increased by 2 percentage points to 12.8%, which leads to a total EBITDA of EUR 5.1 million. Before we take a closer look at the balance sheet, let me provide a brief overview of our group cash flow in 2025. Cash flow from operating activities reached EUR 38.4 million, reflecting the strong results for the year and the EUR 50 million reduction in working capital compared to 2024. Importantly, we returned EUR 23.3 million to our shareholders through dividends and the share buyback program, underlining our commitment to delivering value to investors. As a result, cash and cash equivalents, including securities, remain at a record high level of EUR 152.8 million. By the end of December 2025, our balance sheet continues to be in a good shape with an equity ratio of 66.7% and EUR 153 million cash, of which EUR 148 million are net cash. Our financial foundation will continue to allow us to respond flexibly to market opportunities, to drive the expansion of the Next Automation segment, both organically and through M&A activities, and to ensure further shareholder participation through share buybacks and dividends. Following the successful year 2025, we will propose a dividend payment of EUR 0.25 at the AGM, which is a further modest dividend increase compared to the previous years. And of course, we currently have an existing authorization to acquire treasury shares up to 10% of share capital. This provides the company with flexibility to act opportunistically in the market, and at the same time, it ensures that we can continue to participate our shareholders in the company's success. To conclude, we would like to provide our guidance for 2026. We expect a mixed, but well balanced development across our segments. E-mobility revenue is likely to decline due to a lower starting order backlog. In Next Automation, we see continued positive momentum. Overall, the group enters 2026 with an order backlog of EUR 122.2 million. We expect total revenue of around EUR 160 million with an EBITDA margin of 6% to 8%. Our diversified business model provides stability and supports a resilient and profitable year. Let me now hand over to Sebastian again. Sebastian Roll: Yes. Thanks, Jan. So let me briefly summarize. 2025 was a challenging year for Aumann. Revenue dropped to EUR 204 million as investments across the European automotive sector remained weak. So despite these headwinds, we delivered a strong operating performance. We reduced capacity, further increased the flexibility of our cost structure and achieved additional cost savings in project execution. As a result, we reached EUR 28 million EBITDA, achieving an EBITDA margin of 13.8%, a strong indication of improved efficiency and profitability despite lower volumes. Thanks to these, we proposed a dividend of EUR 0.25 per share, continuing to provide an attractive return to our shareholders. Looking ahead to 2026, we are facing a decline in revenues again. Nevertheless, we are targeting a profitable EBITDA margin of 6% to 8%. So also in 2026, as Jan mentioned, our financial position is strong with high liquidity. That clearly sets us apart from most of our competitors and gives us the freedom to shape 2026. Last year, Next Automation developed strongly. This confirms that our diversification is working. Our clear goal is to accelerate this growth, both organically and through M&A. So thank you very much for your attention. We are happy now to take your questions. Operator: [Operator Instructions] What will be recurring revenue after sales services next year and in year 2025? Jan-Henrik Pollitt: Yes. The recurring revenue from after sales and services is approximately 10%. What we see in investment reluctance phases like 2025 and maybe also in '26 that some customers have higher volumes of retrofits of production lines, and this could, as long as the general CapEx is low, give maybe an additional increase on the aftersales side. Operator: How do you view Aumann's competitive position in the European EV ecosystem? And to what extent our increasingly aggressive Chinese entrants reshaping pricing, technology and market share dynamics? Sebastian Roll: Maybe starting the question with the question of competition out of China. So I mean maybe in comparison to other sectors, so we are dealing with China competition, I would say, the last 10 years. So there's nothing new. I also would add that there are not any changes concerning the competition out of China. Our business model is to be the front runner for the first very important, let's say, 1 or 3 lines, especially start of production of new EV is very important, for example, like it was in the new class for BMW. And I mean, in this area, the customer still is buying, let's say, more or less confidence, and this is our business model. So for the fourth, fifth, sixth line, there might be competition out of China. But then normally in normal market conditions, we are already ahead in new projects. Operator: And could you please give us more details on M&A environment and activities in Americas, which can give us inorganic growth? Sebastian Roll: Yes. So M&A, as you know, is an important pillar of our strategy, that's for sure. That's not new. So as we said also in other calls before, so we switched a little bit the direction. So we are now looking especially for targets in the area of Next Automation. That's where we would like to expand our portfolio, and that's clear our target for 2026 to acquire a company in this area. Operator: And the next question is slightly similar. Could you please elaborate further on the target focus, the size, geography and technology? Sebastian Roll: Yes. So geographically, it is still, for sure, the United States. So that's something we would like to enter. Therefore, we need a hub which is close to our technology, maybe a little bit similar. Within the European area, we are more searching, as I said, for additional technology and for additional customer relationships within the Next Automation. So looking in, as we said before, aviation, defense or, for example, life science as well. Operator: And with our large M&A, your capital structure looks rather inefficient and the share price level low. Any further buybacks to be expected? Jan-Henrik Pollitt: So there is no current decision on further buybacks. But as we have shown in the presentation, we have authorization for another 10% buyback of our share capital and we will decide if necessary on that topic. Operator: What is the potential revenue that can be achieved with the current personnel and corporate structure? Jan-Henrik Pollitt: Yes. So we adjusted capacities during 2024 and 2025. We didn't adjust directly on the EUR 160 million revenue guidance, which we have for '26. We still have a bit more capacity in-house so that we can hope for the rebound in order intake and scale up fast again. So if we don't see a positive effect, then of course, we will also use 2026 to further adjust capacities. We will also have the one or other topic in '26 where we see a few adjustments necessary but not larger ones. And as soon as the market rebounds again, that we are able to do like EUR 160 million to maybe EUR 240 million, EUR 250 million revenues again. Operator: You already answered one of the next questions. Have you continued to reduce the number of employees year-to-date? Jan-Henrik Pollitt: Yes. As said, we had some smaller adjustments, not like bigger topics, but small adjustments here and there. So we continue to make some homework, but no big issues. Operator: And there are 2 questions left. Any new strategic industries, markets, or processes that Aumann is looking on? And can you say something about order intake in Q1 and the sales pipeline? Sebastian Roll: Yes. I think what we tried to show in the presentation in a little bit more detail to give to give some ideas in Next Automation. So Next Automation for us is important. For us, it was important, especially that we had this growing market or that we had really acquired one big project, but also some minor projects in the fourth quarter of 2025. So I think you have seen that I think in the middle of the year, we are roughly 20% higher in order intake in Next Automation. After the third quarter, it was roughly 35% higher. And now after the last quarter, overall, we are 55% higher. So that means that the sales pipeline, especially in Next Automation is rising. This takes a little bit of time step by step. But as I said, for us, really important was to have, for example, this big project within the infrastructure area, yes? So in our point of view, a really nice project in the infrastructure, but also in clean tech and also in aviation. So in all these areas, now we have the first projects. In infrastructure, we even have this big project. So this is important for us. And you have to have in mind that, unfortunately, this order intake in Next Automation takes more time than in E-mobility because, as I said, the industry is new. We have the customers that are new or the products are new. And this will take a little bit of time also in 2026. So we will not see the big recovery in the first quarter, but we will see step-by-step a very increasing Next Automation. Operator: Thank you very much. And with an eye on the time, we have the last questions. There are 3 questions in a row, and I will take them one by one. The first is, Aumann reports EUR 12.2 million in securities apparently in the form of bonds. What specific type of bonds are these? Jan-Henrik Pollitt: These are government bonds and corporate bonds, but each with good credit ratings. Operator: And can you provide any information regarding order intake in the first quarter of 2026 broken down by segment? Jan-Henrik Pollitt: Honestly speaking, not yet. Operator: We expect significant working capital effects in cash flow in 2026? Jan-Henrik Pollitt: Yes. We finished the last 2 or 3 years at relatively low working capital levels. So each year, we expected a little bit working capital increases, but managed to hold the working capital at that low level. For '26, from today's perspective, I would see some working capital increases maybe back to a level of 15% to 20% of revenue. Operator: And the last question, can Next Automation reach similar EBITDA margin levels at the currently higher ones of 16% E-mobility? Sebastian Roll: Yes, in general, of course. So we had this high EBITDA margins, especially in E-mobility in 2026 (sic) [ 2025 ]. As said, we finished a project better than expected, which boosted the EBITDA margin end of the year, especially in Q4. For 2026, both segments will be a little bit lower in margins due to the decline in revenue. But in general, we are trying to maintain a good and profitable margin level in both segments. And as we said in the other segments like -- or the other industries like aviation or life sciences, there are also good margins to reach and achieve. Operator: Thank you very much. Ladies and gentlemen, we have come to the end of today's earnings call. Thank you very much for your interest in the Aumann AG. A big thank you also to you Sebastian and Jan-Henrik for your presentation and your time. Should you have any further questions, ladies and gentlemen, you are always very welcome to place them to Investor Relations. I wish you all a successful day around the world, and handing back over to Sebastian for some final remarks. Sebastian Roll: Yes, I hope that we have shown that Aumann will stay strong also in 2026, in unfortunately another challenging year for our industry, but we are focusing on what we can control. So that means internally, we are continuously optimizing our cost structure, we are building our sales opportunities in Next Automation. And for sure, we have an eye on M&A activities. So thank you very much for your interest.
Operator: Good morning, and welcome to the Genel Energy plc investor presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. And I'd now like to hand you over to Paul Weir, CEO. Good morning, sir. Paul Weir: Good morning. Good morning, everybody. My name is Paul Weir, as you've just heard, I'm the CEO of Genel Energy, and I'm joined as usual by our CFO, Luke Clements. Welcome to our 2025 results presentation. We published our annual report and our full year results last week. And in my statements, then we broadly reiterated the key messages and guidance provided in our January trading statement. Obviously, the big change since January is the security situation in the Middle East, which has resulted in our production effort being temporarily suspended on a precautionary basis since hostilities began almost 4 weeks ago. Understandably, the operator's priority since then has been the safety of its personnel. Steps have been taken, however, to maintain a state of readiness for a prompt restart, but the security situation in the region remains very dynamic and very uncertain. The focus of this presentation then is not to provide you with the Middle East security update, which wouldn't likely add to the understanding you've already had from mainstream media. Instead, we will take you through the key elements of the performance of the company in the last year, the current position of the business and the catalysts and priorities for '26. Luke and I will work through these slides. I think there's 10 or 11 basically. We'll work through those fairly briskly, and then we will be very happy to take any questions that you submit during the course of the presentation. We start with an overview of the business, and this slide pulls together some key metrics to outline the building blocks we now have in place. We ended the year with a daily average working interest production rate of around 17,500 barrels per day. Net 2P reserves of 64 million barrels and a net cash position of $134 million. EBITDAX was $43 million. Our barrels are low cost with a low emissions rate, well -- industry average target rate for 2025, which was 17 kilos per barrel and with world-class operating costs at around $4 a barrel. Even in a year that included significant production disruption at Tawke and continued domestic market pricing, the business has remained resilient, cash generative and well funded and with the potential for very significant value uplift. The key building blocks for that significant value uplift are listed at the foot of this slide. The Tawke PSC, our world-class production asset generating material free cash flow even at domestic sales prices, a significant cash holding of more than $220 million at year-end and about the same right now, ready for deployment and a portfolio with significant organic upside potential from exports resuming, Tawke drilling resuming, Oman appraisal and Somaliland drilling, all of which supports our ultimate objective of getting back to a regular dividend in time. Once we've established some geographical diversity and the further resilience that follows that diversification and repeatable cash. On to the next slide, please. This slide sets out our strategy and strategic objectives in the way that we think about them every day. The 3 familiar boxes on this slide represent our objectives in simple terms, and I've spoken about many times before, so I won't dwell on them too much. Firstly, maintaining a strong balance sheet; secondly, maximizing cash generation from the assets we have, which means investment in Tawke and resuming exports from Kurdistan. And finally, adding some new sources of cash flow in a disciplined and value-accretive manner. That order matters, but we need to do a good job in all 3 of those areas if our eventual aim to return value directly to shareholders in a regular way. Let's move into the detail on the platform now. The world-class characteristics of Tawke are well known, but 2025 again demonstrated the resilience of the combination of the assets and its operator, DNO. If you look at the production graph on the right-hand side of the slide, you can see quite clearly the effect of the drone attacks in Q3 of last year. And thereafter, you can see just how quickly production was restored to a production rate at the [indiscernible] of the year of around 80,000 barrels a day. It's also worth noting that production in the months not impacted by the drone event was actually higher than the 2024 average despite no new wells contributing to that production rate. Drilling restarted then in Q4 of '25. First Tawke well was spudded in December and immediately started delivering results. A second good production well followed in the same month, but the 2026 drilling campaign for which 2 more rigs have been mobilized to site has now been suspended given the security situation. So today, we're in a position where both production operations and the drilling campaign are temporarily suspended, and we remain on standby until such times as the operator determines that it's safe to reestablish a full presence at site and resume activity. We remain close to and very supportive of the operator on that. All that aside, when we talk about Tawke as a world-class asset, we mean 254 million barrels of gross 2P reserves, very low operating costs, low emissions, long reserve life and clear upside from drilling. Right, I'm going to pass you on to Luke now for the next couple of slides. Luke Clements: Thank you, Paul. Good morning. This slide provides the buildup of what we call production business netback. Production business netback is revenue less production asset spend. That's both OpEx and CapEx, less G&A. It tells us what funding our business is generating and making available for capital allocation outside of the Tawke PSC. And you can see that it has been double-digit millions for 2 years in a row now, having been negative in 2023 despite similar levels of revenue. So you can see that we've been working hard on our spend. So what was the income side of that double-digit production business netback made up of last year? Firstly, while Brent averaged $69 a barrel in 2025, our realized price sold was $32 a barrel with all production sold domestically. If we were exporting, we'd expect that realized price to be close to Brent. Secondly, working interest production averaged 17,500 barrels a day, lower year-on-year only because of the drone-related interruption in Q3 that Paul just mentioned. And finally, EBITDAX of $43 million. You can see our underlying EBITDAX is back to more normal levels for domestic sales at around $35 million for the past 3 years now. This underlying number excludes movement on arbitration cost accruals, which negatively impacted '24 and positively impacted '25. So the key point here is that the production business is now delivering consistent double-digit netback even at domestic sales pricing, while still funding all production activity and investment on the Tawke license and so building our balance sheet cash position and available funding. That is the product of Tawke resilience and the discipline we've applied to the business since 2022 in simplifying the portfolio, stopping non-value accretive spend, exiting licenses and reducing cash G&A. Next slide, please. This slide illustrates our balance sheet strength. We finished the year with $224 million of cash, the net cash of $134 million and gross debt of $92 million. Our cash is about the same today as it was at the end of the year, so it's around $225 million. In April last year, we issued a new 5-year bond maturing in 2030, replacing the bond that had been due to mature in October 2025. That issuance was oversubscribed, and we continue to see good support and appetite for our bonds. That issuance has reduced funding risk around delivery on our strategic objectives. This remains a very underleveraged balance sheet with significant headroom to fund investment. That matters because the cash and capacity for further debt provide us with significant optionality. We can fund the appropriate Tawke program, progress our organic growth assets and pursue value-accretive acquisitions without being forced into decisions by capital structure pressure. Next slide, please. This slide shows our primary capital allocation options when we consider the best way to deliver shareholder value. Our first consideration is to maintain the strength of our balance sheet. Then the best place to invest our capital, providing the instant significant returns is the Tawke PSC. Then we think about how best to diversify our cash generation. All 3 building blocks have to be properly managed to establish a sustainable dividend. That means not every potential project will automatically be funded and not every acquisition opportunity will be pursued. Every value creation opportunity has to compete with others within our strategic framework. The Board reviews capital allocation on an ongoing basis, and we take care to remain disciplined. I'll hand back to Paul now to talk about our acquisition strategy. Paul Weir: Thank you, Luke. So look, we want to add resilient cash-generative production or near production assets that reduce our reliance on one asset in one geography. We want something that complements what we already have and supports long-term shareholder value. During 2025, we were very active. We originated, developed and actually bid on a number of opportunities. We were involved in bilateral discussions and in broader processes, too. We've looked at opportunities within our current region and further afield. And to be entirely frank, although it's early days still, 2026 is already shaping up to be as active as 2025 was. Having said all of that, there isn't an abundance of suitable opportunities, and there's a great deal of competition for the good ones that are available. So we continue to diligently scan the deal horizon. We're trying to avoid being distracted by the current unsettling events. Patience and discipline are key. Finally, on this, and again, as we've made clear in previous presentations, we will resist overpaying to get short-term positive market reaction only to find over time that the assets that we buy are unable to deliver the value that we need. We remain very confident that we will secure the right opportunity in time. On to Oman then. On Block 54, the initial activity set did exactly what it needed to do. The reentry and testing of the legacy Batha West-1 discovery well was completed safely ahead of time and under budget. That was a low cost and very useful first step in understanding the block better. Our block is adjacent to the prolific Mukhaizna field, and we are targeting reservoirs that are proven in that neighboring field on another adjacent block, Block 4 and on legacy well logs from Block 54 itself. The immediate focus now is not to rush to a drilling location decision. Instead, we will use the data from Batha West properly to reprocess existing seismic and to acquire new 3D seismic in the most efficient and cost-effective way that we can, so that the joint venture can identify the best locations for the 2 commitment wells that we will now drill on the block. That's the right technical sequence, and it's also the right capital allocation sequence. And based on current planning, we expect those commitment wells to be drilled early in 2027. So Block 54 is exactly the kind of exactly the kind of organic opportunity that we like, modest initial capital outlay, a clear work program, data-led decision-making and meaningful upside if the subsurface case continues to strengthen. And on Somaliland on the next slide. In Somaliland, the opportunity remains for a material discovered resource addition from our existing portfolio, and we've seen steady progress towards drilling the highly prospective Toosan-1 well. Toosan-1 targets best estimate prospective resources of about 650 million barrels across multiple stacked reservoir objectives. As the first mover, the commercial terms are also very attractive, meaning that even a modest discovery would likely be commercial. Of course, wherever we find logistically will benefit from proximity to the Berbera Deep Water Port on the Gulf of Aden. In terms of drilling preparedness, the majority of the civil engineering work is complete and most long lead items are already held in inventory, but we will remain quite measured in how we talk about this. There's still work to do. That work is ongoing, and there is still a need for operational, commercial and geopolitical elements to all come together. The key takeaway for today is one of continued progress towards drilling, while we continue to invest in the well-being of our host communities there to further strengthen our social license to operate. On the next slide, we'll -- we can see -- we can sort of give you a flavor of the work that we carried out last year and through into the first quarter of '26. We've been proactive in the areas of mother child health care, educational facilities and conservation projects. And we've been reactive. Very importantly, we've been reactive in response to the very severe drought conditions that the region is now suffering. Genel has recently distributed around 9 million liters of fresh clean water in the area of our SL10B13 license. Okay. So I think we can wrap up now. This closing slide returns to our 3 strategic pillars. Firstly, maintaining a strong platform. That means protecting the balance sheet, keeping the business efficient and being careful about how we spend our money. Secondly, maximizing cash generation. That means cost consciousness, executing the Tawke drilling program well, pursuing the net amounts that are owed to us and positioning ourselves to participate in exports when the conditions are in place -- when the right conditions are in place. And finally, diversifying production and free cash flow. That means finalizing and executing the right plan for Block 54 and continuing to progress Toosan-1 and Somaliland. Most importantly, it means continuing the disciplined pursuit of value-accretive acquisitions. Those are the building blocks. They're fairly straightforward. They are mutually reinforcing and they remain the right framework for Genel's value delivery. If we execute well, we continue the journey towards a business with resilient cash flows that can support a regular dividend for our shareholders. That's our clear objective, and we are determined to get there. So thank you. That was a relatively brief run through the slides, but I want to thank you for your time this morning. Luke and I will now be happy to take any questions that you might have. Operator: Paul, Luke, thank you both very much for your presentation. [Operator Instructions] Guys, as you can see we received a number of questions throughout today's presentation. Could I please hand back to Luke to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end. Luke Clements: Thank you. So there's a few questions on security in Kurdistan, Paul, and how quickly we can restart production. I think as you said at the start, we're not really going to comment on security in the Middle East and Kurdistan because it kind of changes all the time. There is a question about once you do restart production, how quickly can you get back to pre-conflict production levels? I think it is worth you answering, Paul. Paul Weir: Well, I think we can get back to preproduction -- pre-conflict production levels very quickly indeed. I mean it's worth pointing out, and there is a little bit of an overlay here into the security question. We've shut down as a precautionary measure. We haven't been targeted, and we haven't suffered any damage during the course of the current conflict, although obviously, there's been quite a lot of ordinance heading into Kurdistan. It's not been headed at us. The point being that when we do sense that the time is right to restart all the equipment there and functional. The operator has been working cleverly to make sure that we maintain a state of readiness. And as soon as we can get boots back on the ground, we can get production away quite quickly. So I'm confident that we can resume production levels pretty quickly within a week or 2 of giving ourselves a green line. Luke Clements: Okay. So staying Kurdistan on exports. We understand that the Tripartite deal has been extended to the end of June. Has Genel approached MNR to join the deal? Paul Weir: The answer to that is no, we have not approached MNR to join the deal. I think we've made our position on the current export arrangements quite clear, but I'll repeat them just now. A number of our peers elected to participate in that arrangement. We chose not to do so. We wanted to make sure that all of the conditions within the deal were on fully before we felt able to commit to that. Primarily amongst those conditions, of course, is the top-up payments that would actually render the participants hold with respect to the PSC. So we would want to see that before we elected to try and join the current arrangements. In the meantime, we would continue to sell our product locally. Luke Clements: And there's a kind of related question, which you've kind of answered, how are other operators being paid through the pipeline. I mean, for me, Paul, that's really for others to comment on. It looks like the first part of that is working okay. But as you alluded to, we -- the top-up payment hasn't been expected yet and hasn't been paid yet, I think, is the right way to think about it. Paul Weir: Agreed. Luke Clements: Are you still a member of APIKUR? Paul Weir: Yes, we are still a member of APIKUR. Obviously, when some of the APIKUR members elected to participate in the export or the arrangements that were in place up until the facility stopped. When some of the APIKUR members elected to participate in that arrangement and others chose not to, APIKUR essentially divided into 2 counts, but APIKUR remains the trade association. It remains the forum where all of the IOCs within Kurdistan can talk together. And we have a directorship there, and we remain a part of APIKUR. Luke Clements: Okay. Moving outside of -- sorry, one more on Kurdistan. Any update on court case costs? Paul Weir: No, there isn't. And next month, our appeal against the award of the other side's costs goes to court, and we're waiting to see the outcome of that appeal before we engage with the authorities on that matter. Luke Clements: Okay. So now as on Kurdistan. How quickly can new assets? And I don't know if that means the organic portfolio or newly acquired assets, but how quickly can new assets meaningfully reduce reliance on Kurdistan? Paul Weir: Well, those new assets, if we're able to secure the kind of asset that we're looking for, those new assets can immediately reduce our reliance in Kurdistan because it's a production asset, then we benefit from a new income stream immediately. So certainly, first prize for us is securing an arrangement that gives us an alternative cash flow as soon as the transaction is completed. As far as the other -- as far as near production assets are concerned, if we were to go down that route, then it would be entirely dependent on the nature of the deal we were considering. I couldn't give a time line on that. Luke Clements: Yes. I'd just add, we've always said we want to do a bigger deal rather than a smaller deal. And you can see the cash pile we have on the balance sheet. And you can assume that an asset we acquire would have debt capacity on it as well. So you can see if you're spending that kind of money, you should be able to achieve some meaningful diversification of your cash generation. I think you probably already answered it, but can you provide an update on Toosan-1 in Somaliland? Any specific milestones before spud? Any specific time line that we want to set out? Paul Weir: No. I think I appreciate there'll be a great deal of curiosity around our progress in Toosan-1 because we talk about it and from an outside-in point of view, it may at times be difficult to see progress, but work does continue, and we are quite active on that front. Engineering work continues and procurement work continues. We've been looking at the market to -- we have most of the long lead items in place, but we've been putting together a project execution plan. We've been putting together a project plan. We've been trying to determine who are the best people to come in and help us manage that drilling campaign. And all of that continues as we speak, and we have people in-house dedicated to that task. And as with all projects of that nature, we have a stage gate process in place. So we will convene with the executive every time we reach a stage gate, and we will convene with the Board every time we reach a stage gate. And we will take a conscious decision to embark on the next stage of the process and be prepared to spend the money that's associated with that particular stage. We can't commit to a particular time line at the moment. As I said in the presentation, a number of commercial, operational and geopolitical pieces of the jigsaw need to fall into place together before we can actually define with certainty when things are going to happen. But work does continue, and we are committed to the cost. Luke Clements: Okay. Back to Oman. What is your estimate of drilling costs concerning the 2 wells in Oman? Paul Weir: Well, the wells are relatively shallow wells, and we're in an area that's well serviced by the oil industry. So services are readily available. We're competitive and they're relatively low cost. I wouldn't want to put a figure right at this moment for the well cost because, of course, that's determined to some extent by precisely where we want to drill, and we haven't determined precisely where we want to drill yet. But what I can repeat is what the cost of this entire project is going to be, and that's around $15 million over a 3-year period to Genel. That obviously started last year. So all the work that's taken place so far has been extremely well planned and very clearly executed and it's below budget. But we're expecting to spend a total of around $15 million over a 3-year period starting last year. Luke Clements: Okay. It looks like we are through the questions. Operator: Thank you both for answering those questions you have from investors. And of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which I know is particularly important to the company. Paul, could I please just ask you for a few closing comments? Paul Weir: Yes. I mean I'll close, first of all, by thanking everybody for taking -- continuing to take an interest in Genel and for taking the time to listen to us talk about our business today. I just want to close basically by reiterating the 3 main points that we wanted to land during the course of this presentation and in fact, in all our recent presentations. The first is that we have a very resilient business, and our strategic priority is to maintain that degree of resilience, protect the balance sheet. The second is to emphasize the extent to which we have potential within the organic portfolio. Oman and Somaliland, both represent very exciting potential value builders for the business, and we continue to push forward with those. But of course, the biggest story and the biggest strategic thrust at the moment is making use of our cash pile. We've been sitting on that quite patient and are waiting for the right deal. But we continue to be very, very active in the M&A space, and we continue to be extremely confident that in time, we are going to find the right deal that's going to allow us to deploy that cash. So thanks, everyone, for your time. Thanks very much for the questions, and we look forward to talking to you with more good news. Operator: Paul, Luke, thank you once again for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure it will be greatly valued by the company. On behalf of the management team of Genel Energy plc, we would like to thank you for attending today's presentation, and good morning to you all.
Sara Cheung: Good day, everyone. Thank you for joining the online briefing to discuss the First Pacific 2025 Full Year Financial and Operating Results. The results presentation is available on First Pacific's website, www.firstpacific.com under the Investor Relations section Presentation page. This results briefing is being recorded, and the replay will be available on First Pacific website this evening in the Investor Relations section. For participants from the media, please note the Q&A session is open for investors and analysts only. If you would like to ask questions, please contact us when the briefing is finished. Today, we have with us our Executive Director, Mr. Chris Young; our CFO, Mr. Joseph Ng; Associate Director, Mr. John Ryan and Mr. Stanley Yang and other senior executives from the head office of First Pacific. Over to you, John, for the presentation, please. John Ryan: Thank you, Sara. I'll just go through very quickly the First Pacific part of this presentation, then we'll move to the Q&A for you folks. Now let's begin on Page 3 with a quick reminder of some of our major investments, all of which have done pretty well in the course of 2025, and we'll discuss this later on. Now on Page 4, we've got the shape of our gross asset value on December 31, 2025. The gap was about $5.3 billion, Indofood just over 1/3. MPIC valued there at $1.3 billion, the U.S. dollar value of the pesos we paid for it when it was privatized back in the autumn of 2023. We own now about 49.9% of MPIC. You might see there that PLP's valuation has increased to $398 million, and that's because we've put some money into it to help finance the building of a new power plant, which our financial controller, Richard Chan might discuss later if that's of interest to you folks. And then, of course, there's PLDT, our 25% or so owned telephone company. And then there's the Philex Group of companies, which make up just over 10% of our gross asset value. Now let's move on to the earnings for 2025 on Page 5. Turnover was up 2%, a little over $10 billion, higher revenue at Indofood and MPIC. Decline at PLP, PacificLight Power. Contribution from operations reached a record high. I believe like the recurring profit, it's been about 7 years in a row, we've had increases in the previous 5 have been records. Indofood, PLDT, MPIC highest-ever revenues and MPIC delivered their highest-ever earnings as well. Now recurring profit, as I say, it's up a good double-digit, 10% to $740 million, up from about $673 million in 2024. Net profit was up a similar number, 10% to another record high, $661 million. Now to a matter that is dear to the heart of many shareholders. The directors approved a final distribution of HKD 0.14 a share. You folks will vote on that at the AGM. And that brings the full year distribution to HKD 0.27 a share, and that's the highest ever on a per share basis that we have ever paid out. And that, of course, fits under our progressive dividend policy where we're committed to increasing the per share amount of money we distribute to shareholders every year apart from special circumstances. As you can see on the middle chart here on the right-hand side, the increase in recurring profit was driven mostly by MPIC and Indofood, and there were little declines at PLDT and PLP. Head office cash flow, as you can see, we had about HKD $311 million of dividend income, and there are the distributions gone out to you folks. That's the biggest amount of money sent out. And then the net cash interest expense follows. And if you look deeper into this book or want to discuss it later, you'll see that our interest bill is declining along with the interest amount that we're paying. Over on Page 6, a little bit more detail on our cash flow and balance sheet. As you can see here, at the present day, we have no borrowings falling due until September 2027 when our only bond, $350 million becomes due. A $200 million that was due in 2026, as you can see, has been shifted over by 5 years to 2031. Our interest cost is around about 4.6% for the year, and the average maturity is about 3.2 years. And I would guess over the course of the next 12 to 18 months, that 3.2 is going to become a bigger number. Our CFO, Joseph Ng, will discuss that in the Q&A, if you like. Dividend income there on the bottom left shows that we've been consistently over $300 million in recent years. And very important to us is the interest coverage ratio, as you can see, was 4.5x in 2025. That's up from 4x the previous year, and that is well above our comfort level. Though it must be said, we don't have any plans for that number changing anytime soon on account of additional borrowing by us. Now I'll wind up the narrative part of this meeting with a quick look at the reason that many people are invested in First Pacific. As you can see from 2018 to 2025, we've had over a doubling of our profit at First Pacific. I think in 2018, it was around $290 million in recurring profit, and we're up to $740 million in 2025. As you can see, the exchange rates of the rupiah and the peso were down about 11% and 14%, respectively, over that time. And what this does is it illustrates quite vividly the hard currency security of putting your money in First Pacific so that you can secure the gains to be had from the fastest-growing economies in the world, which are described by the IMF over in that bottom right-hand chart, where you can see there's a doubling over the 10 years to 2030 from 2020. Let me actually very quickly go through the main companies. Indofood had record sales, as I said. Core profit was up just 1% to a highest-ever level. Many of you may have attended their investor briefing earlier today. If you haven't, we can discuss some more about their description of their earnings and predictions for the future, many of which we have put into the outlook for 2026. To speak briefly about that, there's an inference you can make that 2026 will be rather better than 2025. But of course, we have that devil in the Middle East conflict, which we don't know how it will affect any of us going forward. We can discuss this later on, if you like, but there's pretty high confidence over at Indofood. Now we're going to flip a few more pages to Metro Pacific, looking at Page 14. Record high earnings, as said before, core profit up 15%. And as you can see in the pie chart, most of it was contributed by the power company, Meralco, which is beginning to see a huge contribution from its still fairly new power generation business. They bought into a very large LNG terminal accompanied by 2 natural gas-fired power plants in Project Chromite. Stanley Yang, who worked on that transaction, can help discuss that later on. It just addresses that generation is going to be a big part of earnings growth at Meralco going forward. The newly listed water company, Meralco, also was a very big contributor to the earnings there. And then the toll roads, their contribution, as you can see, didn't grow so much as illustrated on the bottom left. And that's because we owned -- in part, it's because we owned a little bit less of it than we did earlier. Now let's dash ahead to PLDT, which is the biggest telecommunications firm in the Philippines. Service revenues, record high. EBITDA at a record high and the EBITDA margin still very strong at 52%. Core profit rose 1%, actually a similar number to Indofoods. And it was helped for the first time ever by Maya, which is the 38% owned fintech, which has -- it's the only digital bank in the Philippines, which is both owned by a telecommunications firm and has a banking license. It's a very interesting little company, and it moved into profit for the first time during the course of 2025. And the falling column chart on the bottom right there shows you the usual story. It's data that has been driving earnings growth and fixed line voice, too, in a kind of funny way. There's a big international element there. Now we'll skip past Maya and over to PLP, which had earnings slightly down. Sales were a little bit down as well. Market share is steady at 9.6%. And as you can see, the monthly average electricity prices are down quite a bit from those powerful period of earnings we had in 2023, and that's really the main driver of how their earnings have gone over the past couple of years. Net debt is absolutely negligible at less than SGD 40 million. Now over to Page 27, where Philex Mining, which has been operating Padcal for 6 decades, I think, and it's still going strong for another few years until 2028, I believe. You can see that after 6 decades, the grades of gold and copper there in the blue box, they're rather lower than you might want to see. But if you want to see better turn the page to the Silangan project, which is accelerating towards the opening of commercial operations over the next weeks and months. And you can see that the grades there in the middle box are much, much higher than what we've got going on at Padcal. We're very excited about the prospects for Silangan, and we think it's going to be a good solid contributor to First Pacific going forward and to its parent, Philex. Now I'm going to end the introduction with a quick dash to Page 52, where I would like us all to pay attention to the second line, China Securities Depository and Clearing. They're probably up at this day, close towards 150 million shares. We have now a third brokerage about to start equity research coverage of First Pacific for Mainland investors. And this has been almost entirely due to the efforts of my colleagues, Sara Cheung, who's here 2 seats away. And these new Mainland investors provide much valued liquidity to the share trading in First Pacific, and we welcome them with open arms. That's it for the opening narrative. We can move over to Q&A. Sara Cheung: [Operator Instructions] John Ryan: Jeff, could you unmute and ask your question, please? Ming Jie Kiang: Maybe starting with 2 from me. So it is all about dividends first. So I just want to check, the regular final dividends increased 3% year-on-year, which seems to be a little bit muted compared with what we saw in the past. But separately, you also pay a special dividend with respect to Maynilad's subscription shares. So just trying to check whether the regular dividend growth this time is whether a sign of caution on the outlook or whether we are trying to smooth out the total DPS growth down in the next few years, including the specials. So that's the first one. The second one would be about Indofood payout. I understand the dividend will be decided in the AGM in the next couple of weeks. So just trying to figure out, from your perspective, are you seeing any particular resistance for INDF to raise the dividend payout ratio in the future? John Ryan: Jeff, you know our CFO, Joseph Ng, he'll deal with the first question, and I'll ask our Executive Director, Chris Young, to deal with the second. Hon Pong Ng: Jeff, it's Joseph here. I think your 3% is only focused on the final, if I'm guessing your question correctly because last year's final is 13.5 and this year's final is 14. But in aggregate, if you aggregate the interim and final last year was $0.255 and this year, it's altogether $0.27 because we paid $0.13 for the interim. So there's a 6% growth, which is not the 3%, so it's not insignificant. But if you add back the so-called special distribution we make as a result of the Maynilad IPO, we pay another [ $0.15 ]. So as indicated, I think we have almost 10% growth against last year's 25.5%. So that's broadly in line with the growth in so-called recurring earnings line from last year's $673 million to this year's $740 million. So it's 10% growth in the recurring, which is a key KPI indicator for us. So broadly in line, regular growth -- regular dividend growth or distribution growth is 6%, but all in, it's 10% growth. Now with that $0.27 altogether, I think we are paying altogether about $150 million plus. And that also needs to tie to what we disclosed in the cash flow that for 2025, we have $311 million dividend income. So you can see that it's more than half of the so-called gross dividend line that we are returning to the shareholders even without including the so-called special distribution. And then you have the head office overhead and the like. And remember, Jeff, also starting from 2025 and more heavily in 2026, we need to kind of reinvest some of the money that we have from the dividend from the units and then we invest those money back to PLP to fund its equity requirement for the new gas plant there. So we try to kind of strike the balance as to what we return to shareholders, which is not a small ratio, which is quite a high ratio. If you take out the head office expenses and interest, we are returning more than 70% of free cash to the shareholders and keep a little bit for our reinvestment into the PLP gas plant. So I think that's the kind of macro thinking behind kind of fixing the final dividend at $0.14 per share and making a total of $0.27 regular and then about 10% growth in aggregate, including a special dividend we paid to the shareholders as part of the Maynilad IPO. So that's on the dividend side. On the Indofood dividends, maybe Chris could chip in and give us a bit color on that. Christopher Young: Jeff, I think the -- normally, as I think you're aware, it's a discussion with the management there at Indofood. And generally, it's a fairly constructive discussion. I think we would take into account 2 elements in considering that dividend. So I think if you look at John's presentation or you've seen the Indofood results, the recurring profit growth last year for Indofood was 1%. And the outlook at the moment looks reasonable without too much disruption from what's going on in the Middle East. But obviously, there is a bit of uncertainty. So that would be the context to the discussion, what was the underlying growth last year and what is the outlook. But as you yourself noted, that discussion will happen over the next couple of months. John Ryan: Okay. Now we'll ask Timothy Chau to unmute and ask what he's got to ask. Tak-Hei Chau: I have a couple about Middle East first. First, on Indofood. I understand just now management talked about like how the Middle East impact seems to be minimal on Indofood. But I'm just wondering if there will be any implications on the raw material cost because I think over the past year, there reportedly some kind of a raw material price hike that affected the margin. So I'm just wondering if the Middle East, if extended kind of -- being extended event, would that aggravate? And the second question also about Middle East will be on PLP because if I remember correctly, the electricity price in Singapore could actually be moved as long as the gas price is up. So I'm just wondering if there will be any positive read-through from Middle East on PLP here. Yes. And my last question is on the PLP project. So just wondering if there is a finalized budget on the potential CapEx spend on the project yet. And just now you mentioned about like how we have already been spending some -- investing some in PLP already on that particular project. Just wondering the time line of the entire CapEx and how it will be in the coming 2 to 3 years. John Ryan: Timothy, I'll take a stab at the first one and then Stan will help you with PLP. Indofood told us in their briefing this morning that as far as wheat goes, they've got 3 or 4 months of supply on hand, and they see that it looks like there's globally going to be a good crop of wheat better than the previous year in 2026. So they're not too worried about that. CPO prices are up a bit after rising 10% in 2025 to about IDR 14,100. They're around at the end of the first quarter, IDR 15,000. They are in some not feeling any particular pressure from raw material prices. And as far as the Pinehill businesses in Middle East and North Africa, they have been able to secure their supplies up to now. And there is, as of yet, no particular concern. PLP, Stan? Stanley Yang: Sure. Timothy, just to address your questions on Pacific Light, first on the electricity prices and the impact of the Middle East fuel. And for PLP, it's gas comes from a global supplier, in this case, Shell. And there is some impact in terms of some of the flow in terms of the LNG that's supplied into Singapore, some of the disruption. It's a relatively small portion, a minority. And I would say that at least for the next month plus, there's sufficient supply. But when you get beyond it, there will be some impact in terms of the supply coming in that would typically come from the Middle East. Alternate arrangements are being made. The company as well as other generators who are affected in the market are also in discussions on solutions that would help, including having some of the gas supplied by EMA and being able to run, but also others in terms of the existing contractual arrangements that they can procure in terms of their global supply. And so we think in terms of certainly the near term, there will be less impact. But as the months go by and if this crisis continues, then some of these alternatives on how the balance of gas will be filled in light of the retail contracts for the company will need to be covered. When it comes to the project itself, the project itself is looking at starting in 2029. And so the heavy lifting in terms of the construction and so forth is still to come. And so within this year, there would be an expectation of the notice to proceed, which basically kicks off the formal development and projects. And from there, the piling works and then subsequently over the next couple of years, the balance of the plant. And so that CapEx as we would look at it would be spread across the next few years up until the planned operation date in 2029. Tak-Hei Chau: On PLP, the rise in gas price, if I remember correctly, I think back in 2023, when the gas price is up, we actually have a higher profit because of the nonfuel margin being higher. So I'm just wondering if this case, given -- I mean, given the case is not as bad as like the lack of supply in gas in the end. So I'm just wondering if there will be any positive read-through for PLP in this case or we are still cautious about our outlook? Stanley Yang: I think it's too early to make a call. I think the next couple of months will be critical. I think because the company has a strong position with respect to its retail customers for this year, then there is definitely visibility, but the impact of any supply disruption, not just for our company, PLP, but also for the entire market in Singapore. The question will be the balance of any gas that comes from the affected markets, for instance, Qatar and how that would impact the entire supply. As I mentioned before, that's not the majority of the supply. It's a minority small -- relatively small percentage, but it is one that we are monitoring because that clearly, the supply in aggregate into the market has to balance with what the generation demands will be for running the plants. John Ryan: Any more questions, Jeff? I think Jeff has another question. Jeff, please unmute and ask your question. Ming Jie Kiang: So maybe switching gear a little bit to MPI, just trying to figure out how should we think about maybe the water Maynilad that business in 2026. So just trying to -- if there's any tariff adjustment, can you remind us over there, but if not, I just want to hear your maybe general assessment on MPI's 2026. That's my first question. The second would be just talking about the FP Natural Resources, which we usually do not really focus on. Just trying to understand why the loss contribution diminished in 2025? And is there any one-off events there? John Ryan: Stan? Stanley Yang: Sure. On the question of the -- you're talking mostly on the water, was it? John Ryan: Yes. If we can expect some tariff increases in 2026 following the 10% last year. Stanley Yang: This year, it's going to be more muted than the last year in terms of the tariff impact. There have been following the revision -- the revised concession agreement, a series of adjustments over a few years. Those have had the benefit in terms of the flow into Maynilad and the system. This year, it would be 4% though, is the expectation in terms of the tariff adjustment. And the business itself will continue to grow. The supply of water and the management's efforts to improve that. I think they focused heavily on the non-revenue water, which is the losses in the system and bringing that down to levels that the company has not seen ever since our existence in owning the business. And so for us, that's a big savings that helps improve the cost of the water supply and efficiency in the system. And then the management themselves are focused on continuing to improve that along with the continuation of tariffs as part of their CapEx program, which was agreed as part of the concession agreement that they revised. Those would be the key imperatives to continue to build on that business. John Ryan: Okay. Thank you. And second question. Jeff, you remind us, please? Ming Jie Kiang: Yes, the FP Natural Resources, just trying to figure out what -- why did the loss diminished in 2025 compared with 2024 and just trying to check if there's any one-off events driving the narrow losses or anything happened there? That would be helpful. John Ryan: Chris? Hon Pong Ng: Actually, maybe I could take that. It's Joseph here. Yes, I mean, that operation -- the sugar operation has -- basically has stopped. And then basically, we are laying off all stock and trying to basically sell the residual assets owned by the operation. I mean, previously, the alcohol operation and then we are in discussion of selling this kind of final set of operating asset, refinery asset with certain investors, certain buyer. So with that, actually, the scale of the operation basically stopped. So that's the reason why you see the recurring profit line, there's actually no -- without any significant amount there. But we do make some impairment provision as a result of selling those refinery assets that I mentioned because now we have identified buyer, we're in final discussion with the buyer. So we know that the final selling price of the refinery part is lower than the book value. So there's certain impairment provision mix below the line under the nonrecurring item. But above the line, there's basically no operation anymore, no significant operation. That's why you see there is very little impact to the recurring profit line. Ming Jie Kiang: Just -- I would just want to take the chance to just have one more quick follow-up or just other question. So just I want to hear our plan for refinancing the head office borrowings. So John mentioned we have refinanced the repayable loan in 2026. And just trying to figure out how do we think about the current maybe the head office net debt, cash interest coverage ratio and also our maturities schedule down the next maybe 2 years. Hon Pong Ng: Yes. As mentioned by John, we finished the refinancing of the January 2026 bank loan. We actually signed up the commitment before the end of last year. So we just draw the facility and paid off the bank loan in early January. So that's all done as far as 2026 liability management initiative is concerned. So the next one coming up from this bar chart is the bond, $350 million bond due in September 2027. Now we still have, as of today, maybe 18 months to go. So it's still early, but as part of our usual prudent financial management, we are actively looking into that and talking to a number of banks. We are getting proposals on, say, refinancing the bond with another bond. So we have received quite a number of proposals with different quotes. Now we are not in a rush to say because the whole market is so volatile. You probably understand from the market that actually both the bond investor side and many issuers are actually waiting on the sideline to see how all these Middle East crisis will turn out and how that would affect the interest rate environment in the next 6 to 9 months. And for us, I think the plan is that we have 18 months to go, but we should get ourselves ready probably when we get into the second half of this year. We will probably kind of accelerate a little bit on the preparation process and see what will be the revised kind of terms and pricing that we could get from the different banks. And in parallel, of course, we will try to explore other alternatives like syndicate bank loan if we think that those terms and pricing are more attractive. But of course, I mean bank loans will not give you the tenor that we could get from the bond market, the 7 or 10 years. As you can see from the debt maturity profile here, if you get another 5 years, probably you get into the 2021, 2022 space, which may be a bit clouded. So our preference will be still a bond. For one, the tenor; two is to diversify the credit resources so that we don't 100% rely on the bank financing. So that's the initial thinking because we always try to strike a better balance between the bank credit resources and the bond credit resources. So the preference is to go for a bond if the market is there and if the terms and pricing are palatable to us, but we never say never. We just wait until the whole market comes down a bit and the whole bond market becomes active again. Ming Jie Kiang: Maybe can I have a real quick follow-up? I promise, this is my real quick. So just as of the end of 2025, I think you disclosed 54% of the debt is on a fixed rate basis at the head office level. So is this split some sort of optimal in your opinion? Or should we be targeting more fixed rate borrowings as we think for the next maybe 3 to 5 years, given the volatile interest rate environment, sometimes we rate cut, sometimes the expectations just bounce around. So just trying to figure out the thinking here. Hon Pong Ng: Yes, Jeff, these are difficult questions because the interest rate environment is actually shifting back and talk and sometimes they say, I mean there will be one interest rate cut this year and followed by 2 next year and now they are maybe shifting a little bit, given the fact we will be shifting the position, maybe not 2 rate cuts in 2027, maybe 1. I mean all these are subject to changes since the whole market is so volatile. So with that sort of volatile situation, it's really difficult to say that we should increase the hedge ratio to a higher level or we reduce it. As of now, I think we are quite comfortable with what we have. We're probably 50% thereabout because you can't win all and you will not lose all as of now. That's what I can say for now. John Ryan: Okay. And I believe, Timothy, please unmute and ask your question. Tak-Hei Chau: Yes, sorry. Management, it's me again. Just a really quick one on potential corporate events. I think this year, a lot of different conglomerates have been -- the theme has been capital recycling, unlocking asset values. I'm just wondering, given our very diverse and broad portfolio, are we -- do you have similar stuff that the management is looking to maybe divest some kind of non-core or at least partially divest like an IPO, for example, like a Maynilad kind of thinking to really unlock the asset value and maybe pocket some kind of funds as well. Especially, I think I've read somewhere in the news about potential IPO or list or private placement for Maya. And like back in the days, I think there were also some market chatters about the private placement for MPTC back then to help relieve the financial issues for the total assets. So I'm just wondering is there anything regarding corporate events that the company is thinking about now? Stanley Yang: Certainly, as a holding company, we look at a span of initiatives, both on the M&A side, which you've seen over the last few years and also in terms of capital markets, we raised the example of the Maynilad's IPO. When it comes to, as you pointed out, Maya, it's a business that has improved quite a bit. The growth of both the wallet and then subsequently after that, taking the leadership, both in the merchant acquiring and now in the digital banking side has really pivoted that platform from what was quite small a few years ago to now the leader and continuing to grow rapidly. Whether this is the year that at this time, a listing could be done, I think we would -- management and the shareholders are always reviewing the strategic options. I think actually an interesting similar case was there was the Japanese fintech recently PayPay that just listed earlier this month. And despite the challenges of the market, Iran and so forth, actually, the price held up quite well. So I think it's fair to say that we will continue to monitor if there is an opportunity. Of course, Maya is much smaller than the one that listed in Japan, but its growth and its trajectory are moving in a very positive direction. And so we would see this as a potential as it continues to grow. Really, the question is in terms of timing. And I would say with respect to other portfolio companies and across the group, I think we continue to evaluate how we can improve the positions of them in their respective sectors. And as and when decisions are undertaken to pursue things more formally, then, of course, we will provide more guidance at that point in time. John Ryan: MPTC? Stanley Yang: I think MPTC, at the moment, the business is continue to focus on delivering this year its projects. They have quite a number of projects within the Philippines that are looking to complete. And so that's really been the focus. Also some of the deleveraging efforts of management because of the acquisitions that they've undertaken in the last few years, those are the principal initiatives looking at partners and some capital into the business to help in terms of the debt reduction of the overall roads. And then with that, we continue to also consider whatever strategic opportunities are to further enhance our position as a platform and the shareholders of our roads business. John Ryan: Thank you very much, Stan. As there are no more questions and time is getting on, we'll wind up now beginning with a reminder that we will be visiting fund managers in Europe and North America after Easter holidays. If you would like to see us, please get in touch with me or Sara or my colleague, [ fionachiu@firstpacific.com ]. These meetings have historically been quite worthwhile for the fund managers who see us because we cannot hide our feelings on our face. You'll see us coming in and we'll be feeling really, really good, and that will be important to your perspective towards our company. And now to summarize how we feel and where we think we're going, I turn now to Chris Young, Executive Director. Christopher Young: Okay. Thank you, John, and thank you for joining us on the call today. The results, as you've seen for 2025 were good and a continuation of the trend that we've seen over the last 7 years or so. However, clearly, the outlook in the short to the medium term is somewhat uncertain. However, I think we remain cautiously optimistic that given the nature of our businesses, which I think are quite defensive given the consumer-facing nature of them, that we will be able to shelter the group really from these uncertainties over the next few months or so. So we look forward to updating you again on the half year results, which I think are at the end of August 28. So until then, we will keep you informed on a regular basis. And as John and Stan will be visiting Europe and the U.S., hopefully, you will get a chance to meet with them face-to-face before that. So turn you back to Sara. Sara Cheung: Thanks, Chris. Thanks again for joining today's online briefing, and you may disconnect now. Thank you. John Ryan: Bye-bye.
Operator: Good afternoon, everyone, and welcome to NIKE, Inc. Third Quarter Fiscal 2026 Conference Call. For those who want to reference today's press release, you will find it at investors.nike.com. Leading today's call is Paul Trussell, VP of Corporate Finance and Treasurer. I would now like to turn the call over to Paul Trussell. Thank you, operator. Paul Trussell: Hello, everyone, and thank you for joining us today to discuss NIKE, Inc.'s Third Quarter Fiscal 2026 results. Joining us on today's call will be NIKE, Inc. President and CEO, Elliott J. Hill, and EVP and CFO, Matthew Friend. Before we begin, let me remind you that participants on this call will make 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 NIKE, Inc.'s reports filed with the SEC. In addition, participants may discuss non-GAAP financial measures and nonpublic financial and information. Please refer to NIKE, Inc.'s earnings press release or NIKE, Inc.'s website, investors.nike.com, for comparable GAAP measures and quantitative reconciliations. All growth comparisons on the call today are presented on a year-over-year basis and are currency neutral unless otherwise noted. We will start with prepared remarks and then open the call for questions. We would like to allow as many of you to ask questions as possible in our allotted time, so we would appreciate you limiting your initial question to one. Thank you for your cooperation on this. I will now turn the call over to NIKE, Inc. President and CEO, Elliott J. Hill. Elliott J. Hill: Thank you, Paul. Last quarter, we said we were in the middle innings of our comeback. Since then, we have continued to take meaningful actions to improve the health, quality, and foundation of our business. While we are not satisfied, I am confident that our progress in the areas we prioritized first through our Win Now actions point to where we are ultimately heading across our portfolio. Because of the scale and breadth of the NIKE portfolio, that progress will not happen all at once. We have approached this comeback deliberately across brands, sports, geographies, and channels, with some parts of the portfolio moving faster than others. One of the most important actions we took this quarter was further removing unhealthy inventory of our classic footwear franchises from the marketplace. That created roughly a five-point headwind to our reported results. It was intentional. It was necessary. And while it weighed on the quarter, it is improving the health of the marketplace, the quality of our revenue, and the foundation for more sustainable growth ahead. As we were removing unhealthy inventory, we focused first on the areas that create the greatest impact. We focused on our sport offense in Running, our largest performance sport, and in Football, the beautiful global game. We focused on athlete-centered innovation, building platforms that can scale across multiple sports and price points over time. We focused on our wholesale business, the environment where the majority of our consumers shop, where we needed to prove we could compete and win back market share. And we focused on paying it all off in North America, our largest geography that drives nearly half of our business. These are the dimensions that are furthest along, and each is absolutely essential to turning around this company. At the same time, other parts of the portfolio, including Greater China, Converse, and Sportswear, are still earlier in their comebacks. We have new leadership in place, clearer strategies taken straight, and structural changes underway designed to strengthen these businesses over the long term. We are moving with urgency. We are not simply fixing what needs to be fixed. We are building, brand by brand, sport by sport, country by country, partner by partner. We are reshaping our marketplace, rewiring how we operate, and investing in the technology platforms that we expect will help us serve more consumers better and run our business more effectively. These actions will continue to create near-term pressure, but we believe they are the right actions to strengthen NIKE for the long term and create more durable value for shareholders. This is complex work, and parts of it are taking longer than I would like. But the direction is clear. The urgency is real. And the foundation is getting stronger. By the end of the calendar year, we expect to have finished our Win Now actions. Aged inventory across the marketplace will be healthy, allowing our sports teams to consistently flow athlete-led, innovative, and coveted products in all sports across our three brands, including NIKE Sportswear and Jordan Streetwear. Our marketing teams will be creating even more locally relevant, inspiring stories in key countries and cities around the world. Our account teams will be elevating those stories and our brands at point of sale with consumer-right assortments and presentations, which will all result in more balanced, profitable, and sustainable growth across the integrated marketplace, owned and partnered, digital or physical. And because we are now far enough into the work and clear enough on the path ahead, this fall, we will share a more detailed long-term view of the business at an Investor Day at the Phil H. Knight campus in Beaverton. We look forward to sharing more about the future of NIKE later in the calendar year. Turning to the quarter. I will start with the dimensions that I consider to be progressing fastest in the comeback. NIKE Running was the first team to move into the sport offense. They created a clear product construct based on athlete insights, segmented and differentiated assortments across an integrated marketplace, and elevated our presence and storytelling at retail. The consumer is feeling the impact of the full offense, with NIKE Running up over 20% for the quarter. NIKE Running has created the roadmap for other sports to follow. Global Football is the next sport to fully transform into the sport offense. For the 2026 World Cup, it starts with our footwear construct that successfully launched the Tiempo in Q3, and we will unveil the new material in June. In apparel, we will deliver AeroFit kits for our competing NIKE federations, including a Jordan away kit for Brazil. We are also utilizing the World Cup as an opportunity to catalyze the Football marketplace for quarters to come. By the end of the tournament, we will have elevated our presentation in more than 5,000 Football doors around the world, with wholesale partners and NIKE Direct. Because winning in Football goes beyond winning the World Cup. We win through the clásicos, the derbies, and Copa, with colleges and youth clubs in every neighborhood, season after season. In innovative product, we are back to leading big ideas for our industry. In just one quarter, we delivered both footwear and apparel platforms with deep insights that leverage years of scientific research from our labs, owned IP, and advanced manufacturing. Our new NIKE MIND platform, with over 150 patents filed globally, was the highlight of the quarter. Designed to help athletes clear away distractions pre- and post-competition, the MIND won. Sold out. All geographies. We responded by doubling production of NIKE MIND over the next two seasons to meet demand from more than 2 million consumers who signed up for “Notify Me” on nike.com. Following NIKE MIND, we introduced several early-stage innovation platforms this quarter. We used NIKE Air for the first time ever as a self-inflated thermal layer in apparel, unveiled a new liquid Air Max platform that is low to the ground and moves naturally with the foot, and we delivered AeroFit for Football, our new elite apparel cooling platform that increases airflow by 200% over regular Dri-FIT. It will expand into multiple sports, including NIKE Running in the fall. These platforms are scalable foundations for growth that we can extend into multiple sports and price points over time. Recently, our leadership team reviewed our full innovation agenda for 2027 and 2028 by brand and by sport. That focus is showing up in sharper athlete insights and more complete head-to-toe solutions, and we are excited to share a vision for the future of sport with you this fall. And, yes, innovation sparks demand. But products alone do not deliver long-term growth. For years, we were running a NIKE Direct-first offense. Now we are rebalancing our offense through an integrated and elevated marketplace, and running a Key City offense. These moves require us to rewire our supply chain and upgrade our technology platforms. You saw the early signs of those actions this quarter, and it is a critical step in our return to double-digit EBIT margins. Many of our Win Now actions are being paid off first in North America. One of our strongest executions this quarter was the NBA All-Star Weekend, which connected us to consumers and drove full-price sell-throughs while deepening our wholesale partnerships in Los Angeles with Shoe Palace, Dick's, and Foot Locker. The experience set the tone for how we will show up in LA for the World Cup, Super Bowl, and the 2028 Olympics. Across all dimensions in North America, our wholesale momentum is accelerating. It is sporting goods. Dick's and Academy are leaning in with us to tell more sport performance stories. We are building long-term plans with Foot Locker and JD in athletic specialty. And we are fully committed to our partners in running specialty, Football specialty, and city specialty through our investments in product innovation and presentation. Ultimately, this is about creating a more profitable business model for both sides of the partnership. In NIKE Direct, we have elevated our own experiences, setting the standard for how our brands show up in the marketplace. We have intentionally cleaned the market in all channels. The teams are hyper-focused on consumer-right assortments and presenting them in environments that tell our best innovation stories, all with the goal of accelerating sell-through. If Running shows what our sport offense can do, North America shows the power of our complete portfolio in an elevated, integrated marketplace. From here, we expect that to translate into consistent growth in North America. I will finish with the areas of our business that are earlier in the journey, starting with our growing portfolio of emerging brands. This quarter, we tapped into the energy of the Winter Olympics in Milan and Cortina to build excitement around ACG. It was a world-class execution that showcased the ACG logo on all Team USA athletes. We executed creative brand marketing, including an experiential chain from Milan to the Alps called the All Conditions Express, and we elevated our presentation in more than 600 retail doors around the world, including a stand-alone ACG door in Beijing. The NIKE ACG team is committed to serving the outdoor athlete by creating the world's most innovative footwear, apparel, and accessories, building our presence authentically over time by supporting world-class racers and events, and building long-term partnerships with the retailers who authentically serve outdoor athletes. The outdoors is a tremendous opportunity for NIKE as we bring excitement and a fresh perspective to the consumers and the industry. In NIKE Sportswear and Jordan Streetwear, our teams are moving from playing defense to playing offense. Matt shared last quarter that by the end of this fiscal year, we will have intentionally reduced over $4 billion of revenue from the peak levels of classic footwear franchises. A cleanup of that scale is significant and has taken several quarters to execute. From here, we are investing in a more sophisticated city offense, one that incubates new styles through different consumers and channels, account by account. And as you know, there is both an art and a science to seeding, igniting, and scaling new Sportswear styles. A great example this quarter is the strong sell-through we drove around the globe with a more thoughtful approach to the reintroduction of the Air Max 95. That city-led approach is especially important in EMEA, where we lack a fully integrated marketplace and it has been one of our biggest hurdles. The team is responding with a more complete street-up model, working more closely with wholesale partners to improve point-of-sale storytelling and seeding in the community. In EMEA, you will see us show up more as a local NIKE. Greater China, too, will benefit from a more local approach and closer connection with the consumer on the ground. We have become clearer on the structural challenges in China and the channel dynamics in the marketplace. We are taking action to clean the marketplace, tighten execution across digital and physical retail, and rebuild the brand locally through sport. It will take time, but we remain confident that serving 1.4 billion potential athletes in China is one of the most powerful opportunities in sport. In Converse, the team took some decisive steps this quarter to bring the brand back to a healthy business. Converse is a beloved brand that serves a distinct consumer through their connection to creative culture, music, and youth. Converse will remain an important part of the NIKE, Inc. family, and we are excited about its long-term prospects. Overall, the work is not finished. But the direction is clear. Our teams are moving with focus and urgency, and our foundation is getting even stronger. I am going to pass it over to Matt, and I will come back on to close out the call. Matthew Friend: Thanks, Elliott, and hello to everyone on the call. As Elliott outlined, we are seeing real progress across the business. Our initial focus on sport was important because it sets a strategic repositioning of our brands. Momentum in Running continues to be strong, and we expect Football, Training, and Basketball to return to growth over the next few quarters. Yet sport dimensions currently represent less than half of our total portfolio, and Sportswear continues to be a headwind to revenue growth, as it declined low double digits in the quarter. In the marketplace, relationships with our wholesale partners are strong, and our ways of working look very different than they did 12 months ago. Order books are growing, and we are taking back shelf space. However, sell-through trends are not yet where we want them to be. Despite making progress versus a year ago, digital is still too promotional. Markdowns across the marketplace remain elevated. Our teams are pulling levers to manage inventory and protect brand health, but this continues to be a headwind to gross margin profitability. While our comeback is taking longer than we would like, we are confident we are on the right path, and we have a clear set of plans in place to complete our Win Now actions by the end of the calendar year. Now let me turn to our third quarter results. For this quarter, revenues were flat on a reported basis and down 3% on a currency-neutral basis. NIKE Direct was down 7%, with NIKE Digital declining 9% and NIKE stores down 5%. Wholesale grew 1%. Gross margins declined 130 basis points to 40.2% on a reported basis, primarily due to 300 basis points associated with higher tariffs in North America. SG&A was up 2% on a reported basis versus the prior year, due to employee severance charges we incurred in the quarter. We also had other income from legal settlements. Our effective tax rate was 20%. Earnings per share was $0.35. Inventory decreased 1% versus the prior year, with units down mid single digits. Let me provide some additional context on the $230 million charge we incurred this quarter due to employee-related severance costs, primarily in Supply Chain and Technology. During the pandemic, we accelerated investments across Supply Chain and Technology to support a larger digital and direct business. Those investments also resulted in a higher fixed cost base that weighed significantly on our EBIT margins as revenue came down. Given the strategic shifts we have made to serve a more balanced and integrated marketplace, we have begun to take meaningful steps to reset our cost base to improve NIKE's long-term profitability. Our specific actions in the Supply Chain will lower costs, streamline operations, and reduce capacity in our distribution network. Over time, we will shift our Supply Chain network to become more of a variable cost versus the higher fixed cost structure we have today. In Technology, we continue to optimize our workforce, rationalize programs, and leverage new advanced capabilities. We also right-sized operating costs at Converse this quarter, which was included in this charge as well. We continue to evaluate opportunities related to Supply Chain, which could result in additional financial impacts in future quarters. While we believe the actions taken this quarter will represent the largest financial impact, we expect benefits from these actions to begin in fiscal 2027 and continue to build through fiscal 2028. Now I will turn to performance in the geographies, including key highlights and actions we are taking to drive progress against our Win Now actions. In North America, Q3 revenue grew 3%. NIKE Direct declined 5%, while NIKE Digital was down 7%. NIKE stores were down 1%. Wholesale grew 11%. EBIT declined 11% on a reported basis. North America is leading our comeback and is well positioned to sustain the momentum as we move forward. Running and Global Football grew double digits, with Basketball up high single digits, while Sportswear declined double digits. Our digital business improved sequentially throughout the quarter, driven by strong launch and growth in key sports, as well as continued improvement in average retail discounts. Wholesale revenue growth was driven by new distribution and lapping marketplace management actions with existing partners in the prior year. While sell-through has been below plan, sell-through improved in February, and we drove positive growth in all channels in the geography for the first time in two years. Inventory dollars grew low single digits, while units were down high single digits, with the spread primarily due to tariffs. Closeout units remain low, and the mix is healthy. From a margin recovery perspective, North America gross margins declined 360 basis points versus the prior year, despite nearly 650 basis points of gross impact from new U.S. tariffs. Underlying profitability has now improved over three consecutive quarters, giving us confidence that we can recover the transitory headwinds to margin associated with our Win Now actions. And last, we are increasingly confident we are on track to return to balanced growth in North America across both NIKE Direct and wholesale channels in the near term. In EMEA, Q3 revenue was down 7%. NIKE Direct declined 13%, with NIKE Digital down 6% and NIKE stores down 20%. Wholesale was down 4%. EBIT increased 7% on a reported basis. EMEA presented both progress and challenges in the quarter, and the team continued to take action in a highly promotional marketplace. Our performance business continued to build momentum, led by double-digit growth in Running. Sportswear was down double digits, and sell-through has not tracked with sell-in expectations. Promotions across the marketplace were up versus the prior year as partners manage inventory. We were also more aggressive with promotions on NIKE Digital at the end of the season, which resulted in higher markdowns and a higher off-price mix. Inventory grew double digits versus the prior year, with units up mid single digits. Given the softness in Sportswear, traffic patterns, and promotions across Europe, as well as recent disruption in the Middle East, we anticipate ending the fourth quarter with elevated inventory. In Greater China, Q3 revenue declined 10%. NIKE Direct declined 5%, with NIKE Digital down 21% and NIKE stores up 1%. Wholesale declined 13%. EBIT increased 11% on a reported basis. This quarter, we made forward progress in Greater China. Running grew double digits in the quarter, and we also saw growth in Tennis, Golf, and ACG, and Kids was flat. Sportswear declined double digits as expected. Wholesale sell-in was managed down, while seasonal sell-through rates sequentially improved. We expanded our NIKE store pilot to 100 doors, including our House of Innovation door in Shanghai, obsessing store assortments, storytelling, and replenishment, and this resulted in traffic and comp sales improving versus the prior year. We implemented shifts to manage our brand presence differently across all digital platforms, pulling key styles off discounts, resulting in higher full-price realization for these styles. Inventory was down mid teens versus the prior year, with units down more than 20%, and partner inventory also declined double digits. With new leadership now in place, we expect to take additional actions to improve our position in the coming quarters. We will continue to reduce near-term sell-in to align with full-price demand, clean up the digital channel, and reduce the amount of aged inventory in the marketplace. We expect these actions will continue throughout fiscal 2027 and remain a headwind to revenue growth, while profitability should bottom sooner as marketplace management makes progress. In APLA, Q3 revenue was down 2%. NIKE Direct declined 8%, with NIKE Digital down 12% and NIKE stores down 3%. Wholesale was up 3%. EBIT declined 4% on a reported basis. In the quarter, we saw bright spots: Running up double digits and growth in Training and Football, while Sportswear declined double digits. We had a strong launch of NIKE Skims in Australia and Korea, and launched new Cricket footwear innovation at the T20 Cricket World Cup. NIKE flagship stores in Tokyo and Seoul drove positive growth for the quarter. While inventory grew high single digits versus the prior year, units declined low single digits, as the team made progress in certain countries. Closeout mix remains elevated, and the team is focused on the actions to address excess inventory over the coming quarter. We expect performance across territories in APLA to remain mixed in the near term. Now I will turn to our outlook. You heard Elliott say that while our comeback is taking longer than we would like, we have a clear set of plans in place, and we expect to complete our Win Now actions by the end of the calendar year. Over these next nine months, there will continue to be puts and takes across the revenue and gross margin lines of our business. At the same time, we are even more confident in where we are headed. Therefore, we want to provide greater visibility to how we see the business trend from here through the end of this calendar year. We expect revenues to be down low single digits versus the prior year, with gains in North America offset by declines in Greater China, driven by intentionally reduced sell-in and marketplace management actions over that period. While the tariff environment has been uncertain, assuming no significant changes, we expect Q2 fiscal 2027 to be the final quarter where higher tariffs continue to be a material year-over-year headwind to gross margin. We expect gross margin expansion to begin in the second quarter due to actions to mitigate tariffs and recovery of transitory impacts from Win Now. We expect earnings to be flattish with gross margins beginning to inflect and disciplined SG&A management, setting the foundation for earnings recovery from there. We also recognize that the environment around us has become increasingly dynamic, and we could experience unplanned volatility due to the disruption in the Middle East, rising oil prices, and other factors that could impact either input costs or consumer behavior. We are focused on what we can control, and these assumptions reflect the macro environment as it stands today. Now I will share a specific outlook for Q4 fiscal 2026. We expect revenues in Q4 to be down 2% to 4%, with modest growth in North America despite lapping a value liquidation in the prior year, largely offset by declines in Greater China and Converse. We expect Greater China to be down approximately 20% in the fourth quarter, reflecting reduced sell-in that we highlighted last quarter, as well as accelerated actions to clean up the marketplace. We anticipate a two-point benefit from foreign exchange. We expect sequential improvement in gross margin, with Q4 down approximately 25 to 75 basis points, including 250 basis points due to higher tariffs in North America. We expect Q4 SG&A dollars to be flat to down slightly. We expect other expense, net of interest income, to be an expense of $15 million to $25 million in the fourth quarter. And we expect our full-year tax rate to be in the low 20% range. And last, we will return to providing full-year and long-term guidance at our Investor Day in the fall. With that, I will pass it back to Elliott. Elliott J. Hill: Thanks, Matt. Before we move to your questions, I want to leave you with an image that stayed with me from this quarter. I was in Barcelona meeting with athletes and leaders from FC Barcelona, a partner of ours since 1998, and I stood on the pitch at Camp Nou. If you have ever been there, you know it is more than a stadium. It is one of the most imposing stages in sport, a place built for pressure, belief, and unforgettable moments. And right now, Camp Nou tells another story too. Above the pitch, there is scaffolding. In the corners, there are cranes. Entire sections are unfinished. The stadium is being rebuilt tier by tier, piece by piece, to accommodate over 100,000 supporters. The work is still underway, capacity right now is limited, and it requires patience and perseverance. And still, the supporters are in full voice. The players are still stepping onto the pitch, focused on competing and winning. And all around them, the work is transforming what their home, their club, will become. What stayed with me was the reality of both things being true at once: competing today while building for tomorrow. FC Barcelona did not choose between performing in the present and preparing for the future. They are doing both at the same time. Standing there looking up at the Hatfield Stadium, it occurred to me this is NIKE right now. We are taking deliberate actions that we believe will restore the health and quality of our business, even when these actions create pressure in the near term. We are removing what is not working. We are rebuilding parts of the foundation that needed to be rebuilt. And at the same time, we are continuing to innovate, to compete, and to create for the future. That takes conviction. It takes patience. It takes belief. And it takes focus. Camp Nou is being rebuilt not for the next match. It is being rebuilt for the next era. That is exactly how I think about the work we are doing at NIKE. I came back to help return this company to greatness and to build it the right way for the long term, to protect what has always made NIKE special, and to modernize it for a new generation of athletes and consumers. So while the work is not finished, the direction is clear. Our focus is clear. And our comeback is within reach. And this fall, we look forward to sharing a fuller view of that path ahead at our Investor Day. With that, let us open it up for questions. Operator: We will now begin the question and answer session. To ask a question, press star then the number one on your telephone keypad. We kindly ask that you please limit your initial question to one. Our first question will come from the line of Lorraine Hutchinson with Bank of America. Please go ahead. Lorraine Hutchinson: Thanks. Good afternoon. The performance in EMEA seems to have decoupled from some of the early successes you have seen in North America. How do you diagnose the problems, and what is the strategy to fix it? Matthew Friend: Well, Lorraine, as I highlighted, EMEA presented both progress and challenges in the quarter. And I think that as we have implemented the Win Now actions across that geography, we are seeing growth in performance. We are seeing Running up double digits, and we are really excited about the plans that we have got in place for the World Cup, as well as the way that we are setting up the marketplace for both upcoming product launches in both Running and in Training. This quarter, we highlighted that we did not see sell-in where we were hoping sell-in to be specifically on our Sportswear business, and it is really connected to a theme that we have been talking about for several quarters. We have highlighted some of the macro pressures that we have been seeing in EMEA over the last few quarters, and specifically that marketplace has seen challenges in traffic and also a higher level of promotional activity. And so this quarter, as we saw sell-through trending below our expectations, we saw our partners start to be more promotional, and we also were more promotional to manage inventory across this large marketplace. And this quarter, we also experienced traffic disruption from the Middle East, and we also are taking that into consideration as we are thinking about where this business stands and also as we look forward. So we have been aggressive, as I mentioned, with our teams pulling levers in order to keep this marketplace clean and healthy. Our closeout mix is at a really good level, and while we expect to exit the fourth quarter with elevated inventory in EMEA, we are confident, given the size of the issue and the way that our teams are responding, that we will be able to continue to work through the Win Now actions in this geography as well by the end of the calendar year. Elliott J. Hill: And, Lorraine, the only thing just to add to that, we do have a new leader in place. I have tremendous confidence in Cesar Garcia. He is a 25-year NIKE veteran. He has deep and broad product and market experience, and he is a tremendous leader. The team is really focused from a product perspective, and Matt touched on some of this, moving from being so Sportswear-reliant to also being really focused in on performance, where we have growth in Running, Training, and Football. So I like what they are doing there. They are now getting back to driving a more elevated and integrated market, and then they are focused on making sure we have the right assortments in those doors, elevating the presentation, and driving sell-through with our strategic partners. And so overall, I am really pleased with the actions that the team are taking. Operator: Our next question will come from the line of Adrienne Eugenia Yih-Tennant with Barclays. Please go ahead. Adrienne Eugenia Yih-Tennant: Thanks for the forward guidance, actually. That is my question. It is going to be so you are talking about the end of the calendar year, but your quarters kind of split the calendar year kind of in the middle. So I am wondering if we should be thinking about revenue, you said down low single digit for that horizon, with North America up and improving, which would suggest that Greater China is meaningfully negative, probably climbing from that negative 20. So just a little bit help there with the shaping and what is that? Is it February? The earnings being flattish would suggest, you know, 15% maybe haircut, you know, to where I mean, significantly more than where the Street is. So, again, is that flat for the fourth quarter on EPS through the February? And then should we think about the May of that year sort of having a big inflection? Sorry for all the kind of convoluted questioning, but thank you. Elliott J. Hill: Yeah. Adrian, I am going to jump in first. I see Matt wrote down all the questions, so I think he is ready. But here is what I want to make certain that everyone here is on the call. We are even more convinced now that the Win Now actions were and remain the right strategic moves. We have made meaningful progress improving the health, quality, and foundation of our business. We talked about that. And really, the areas that we said we were going to make the most progress, the ones that we knew made the most impact, are some proof points that the actions are working. If just at a high level to go through the actions, we first said culture was number one. We have the teams galvanized around sport and growth. Product was the second one. We are driving the sport offense. We just moved into sport offense in September. Spring 2027 will be the first quarter where we will have product flowing into the marketplace from the sport offense. And Running is a proof point this quarter. It is up double digits. NIKE Football is also getting back to growth. We have innovation coming. We talked about MIND and AeroFit. The wholesale business is back to growth. And we are paying it off in North America. So I am really pleased with those proof points that the Win Now actions are making an impact, and know that we are moving quickly against Greater China, Converse, and Sportswear. We have new leaders in place. We are creating thoughtful long-term strategies. And we are making structural changes. And what I want to leave you with before I hand it over to Matt is that these are deliberate actions. And we are not just fixing. We are building, brand by brand, sport by sport, country by country, and partner by partner. And I will acknowledge that parts of it are taking longer than I would like, but we believe in the direction. We are moving with urgency, and the foundation is getting stronger. So I feel great about that. Matthew Friend: And, Adrian, on the specific guidance question, what I would say is that we have been providing 90 days of guidance for the last five quarters since Elliott returned, and we have been consistently asked for greater visibility as we had confidence in the trajectory of the business. And, you know, while this comeback has taken longer than we would like, with North America's continued momentum and a clear plan in place through the remainder of the calendar year, our approach to providing guidance for the calendar year is really about pulling up at this moment and providing transparency to the financial trajectory of the business over the next nine months. So I think of it as it includes this quarter, and then it carries through over the next nine months. And we are lining that up with the timeline that we have set to complete the Win Now actions by the end of the calendar year. Specifically, your question about some of the elements of shaping, without getting into specifics of November versus December, what I would say is that we expect revenue to be down low single digits over this period. We do expect the momentum to continue in North America, and so we are planning for modest growth in North America, even as we continue to lap the value liquidation that we have been doing this year. That is going to be offset by headwinds in Greater China, and that is partly related to what we have been talking about, which is continuing to reduce the sell-in so that we would meet full-price demand, and also some of the actions that we are continuing to take in the marketplace in order to be able to clean it up. But I think the important point is that we expect margins to inflect, and that is a big moment, I think, in Q2 for us, as we have been navigating through the costs associated with the Win Now actions and dealing with the newly implemented tariffs. I think our confidence in margins inflecting positively in Q2, while we are managing SG&A tightly, really sets the table for inflection in earnings as we go from there. Operator: Our next will come from the line of Simeon Siegel with Guggenheim Securities. Please go ahead. Simeon Siegel: Thanks. Hey. Good afternoon, guys. Matthew Friend: Hey, sir. In the spirit of all this information, which, again, thank you. I know you guys do not normally give this detail, but any color you can share on DTC gross margins or just any way to think about the health of that channel? I know I have gotten a lot of questions around wholesale growth versus DTC declines. Just might be helpful to hear a little bit more about the quality of those DTC sales versus the reported declines, Elliott. And then, Matt, just could you quantify the severance booked into the operating overhead this quarter? The full $230 million? I am just trying to think through the change in operating overhead on a recurring basis, how you are thinking about operating overhead expenses next year as you further variabilize P&L? Thanks, guys. Elliott J. Hill: Yep. Thanks, Simeon. Let me jump in, and then, Matt, I will let you take the specifics around the DTC questions. But here is what I want to make sure that everybody on the call understands. We had been servicing our consumers with a direct-to-consumer model, and now we are moving to serve consumers wherever, however they choose to shop with us. We want to make certain that we are managing our business across a balanced and integrated marketplace. That is the strength of NIKE, when we are able to have a portfolio of places that we serve to consumers. And we are making certain that we segment and differentiate the assortments across multiple channels. NIKE Direct is certainly a part of that, but we are also making certain that we serve consumers in specialty sporting goods, athletic specialty, department stores, family footwear, and digital and physical. That is the power of NIKE, and I think we are doing a much better job of working directly with our partners, developing long-term plans, and making certain that we gain back shelf space and ultimately share. So again, yes, DTC is critically important to our success moving forward. I want to make sure you hear me say that. But, also, I want to make certain that you hear that an integrated and balanced marketplace is also critically important. Matthew Friend: And specifically to your question about the quality of the DTC business, what I would say, Simeon, is that North America is the geography where we saw the most improvement in the quality of the business in Direct, and specifically I am really talking about digital. We did, with our focus on sports, see strong results across our NIKE stores around the world, lining up against sport and getting behind key sport moments. But on the digital side in North America, we saw continued improvement in the gap between wholesale and Direct. And when we look at the quality of that business in North America, we continue to be encouraged. I mentioned a couple things on the call, but we saw sequential growth throughout the quarter driven by strong launch—that is across both NIKE and Jordan. We saw growth in key sports on digital, and we saw continued improvement in average retail discounts in North America. We saw demand on the NIKE app grow in Q3 in North America, and, as I mentioned, we saw sell-through overall in the marketplace in North America in February inflect up, and it was the first time in two years that we saw positive growth in all channels. So that includes wholesale and across Direct. And so we continue to be encouraged that as we are getting deeper into our Win Now actions, we are getting closer to balanced growth between wholesale and Direct in the North America marketplace. And that is the playbook that we intend to take, that we are taking, to Europe, to APLA, and to Greater China, and what we are focused on executing through the balance of the calendar year. Operator: Our next question will come from the line of Michael Binetti with Evercore ISI. Please go ahead. Michael Binetti: I guess just to clean up if the negative 2% to 4% in fourth quarter is reported or currency, and then I guess, bigger picture with revenues down 2% to 4% and North America growing modestly, China down 20%. You did not guide the EMEA in the fourth quarter, but it seems like triangulating somewhere close to down mid singles, down a bit, despite the World Cup. Maybe just the shape of the major puts and takes in EMEA in fourth quarter since the revenue rate changed so much in third quarter? And I guess the follow-up there is the margins in EMEA were surprisingly strong in third quarter despite the revenue decline. Could you just comment there on maybe any color on whether those positive offsets continue? Matthew Friend: Yeah. The comments that I made on EMEA in the third quarter definitely inform the way we are thinking about the fourth quarter. We expect to continue to see growth in the performance dimensions. We are incredibly excited about World Cup. I mentioned that we have got strong double-digit growth in Running, and we are excited about upcoming product launches in both Training and Running. Training is the second biggest performance category, and it is super important to continue to build momentum as we continue to drive our Training business across all sports. The real change in the quarter was sell-through on the Sportswear side. And so our outlook reflects a modification that takes this into consideration in terms of our expectation of the Sportswear business in Q4 because we are managing the marketplace carefully. We have also taken into consideration not only what we have seen in the Middle East as it relates to traffic, but also our expectations of the disruption of that in this marketplace based upon what we can see today. And so that is really the other factor that we have taken into consideration in this fourth quarter guidance. But we continue to be encouraged by the momentum in North America. We have got a strong order book for summer. We are seeing positive signs in sell-through. We are not seeing a consumer reaction to what is going on in the Middle East at this point in time in North America. And so our teams are continuing to work hard to connect with consumers and to continue to rebuild back brand momentum across that geography and the rest of the geographies. Operator: Our next question will come from the line of Brooke Roach with Goldman Sachs. Please go ahead. Brooke Roach: Good afternoon, and thank you for taking our question. Elliott, Matt, was hoping to get your latest thoughts on the opportunity to stabilize the Sportswear business. How much additional reset activity is needed in the Classics franchise by geography? Are you seeing any green shoots in the North America Sportswear portfolio that gives you confidence that the strength in performance can translate to better momentum in Sportswear over time? Thank you. Elliott J. Hill: Yeah. Thanks, Brooke. Here is how I would think about it, and I said it in the prepared remarks, but we are definitely moving from defense to offense in both NIKE Sportswear and Jordan Streetwear. We have to think about both of those, especially as you think about North America. Let me first start with where we prioritized, and we did prioritize our performance business. And we felt like we had to get performance products right because sport is what drives our authenticity. It is our important difference and distinction. It drives our best products and storytelling. And, ultimately, sport is what creates a halo over the Sportswear and Streetwear businesses. And so we really got after the sport business through the and Running, a complete offense, making sure that we had innovative product driven by athlete insights. And now, as you are hearing from Matt and me, we are paying it off across the integrated marketplace. So it is working on the sport side. In terms of how we are doing on the Sportswear and Streetwear side, here is what I would say. And I did use the specific, where we intentionally pulled back, which created about a five-point headwind this quarter, of removing unhealthy inventory from those Classics. And what I would say is that the Air Force 1 and the AJ 1, they stabilized this quarter. And so we are seeing month-to-month improvement in full-price realization in those two franchises. And I also want to make sure that you hear me say that we see that as a positive because we believe these icons will always be staples for the consumer. We are still stabilizing the Dunks. We have a little bit of work to do there. But at the same time, the green shoots, as you call them, we are starting to see the team create some buzz around our business this quarter. We had some really good and tremendous launches: AJ 11 Gamma, the AJ 5 Wolf Grey, the NIKE Air Max 95, and all of them had a high full-price realization and really strong sell-through. So the Sportswear team is moving to playing offense, and what you will see from us is that team taking insights from the consumers that they serve and focusing on creation around comfort, innovation, and, yes, we will continue to leverage our unmatched vault. And so I am really pleased with the progress that the Sportswear and the Streetwear teams are making. But we still have work to do. And I call that out that we still have work to do, but I am confident in the actions that we are taking and pleased with the way the consumer is responding. Operator: Our next question will come from the line of Brian William Nagel with Oppenheimer & Co. Please go ahead. Brian William Nagel: Hey, guys. Thanks for taking my questions. So, Elliott, the question I wanted to ask, I mean, you have mentioned several times in your comments that you are heading in the right direction, but the process is taking longer than you initially expected. So the question is, as you look at the reasons for that, is it more internal, or is it more external? The environment in the different geographies or whatever has proven more challenging for the turnaround efforts here. Elliott J. Hill: Brian, I think the easy answer for me to say is a little bit of both. Here is what I would say. The starting point for each geo or each country was at a different place. And, by the way, each marketplace has a different structure as well. And so we had to make certain that we truly understood where each country and each marketplace was in terms of their performance across the entire integrated marketplace—again, NIKE Direct all the way through the different channels. And so I think the easiest way to think about it is, the comeback is substantial, and, at our size and scale, building for the future takes time. And it has taken longer than I would like. But what I would tell you is we got our teams reorganized from a product perspective as well in September, and Spring 2027 will be the first time we see the fruits of those teams working together. But in the end, I am pleased with where we are headed. And I think everybody, when I came into this role, said, “Hey, it is going to take two years.” And that is what we are tracking right now. So a little bit of both, Brian. We do have some external factors that we are having to deal with while we are in a major comeback. But that is no excuse. We are controlling what we can control. We are getting our teams lined up internally around product and the consumer and storytelling. And then we are getting our country teams lined up around driving a more integrated and elevated marketplace. And, ultimately, that is what is going to pay dividends for us and build the foundation for future growth. Operator: Our final question will come from the line of Matthew Robert Boss with JPMorgan. Please go ahead. Matthew Robert Boss: Great. Thanks. So, Elliott, if we take a step back, just update us on health of the global Sportswear backdrop, or where does your outlook for the industry stand today relative to when you took the helm? And then, Matt, on low- to mid-single-digit constant currency revenue declines for the back half of the year, is there a way to parse out self-inflicted headwinds or maybe where you see underlying demand exiting this fiscal year, and what have you embedded for overall sell-through rates through the balance of the calendar year just relative to the pressure that you cited that you have experienced to date? Elliott J. Hill: Matthew, let me take—so I think the easiest answer on Sportswear is that it will remain a very large part of the overall industry, and it will be critical to our success moving forward. So we are taking a streets-up approach to this and making certain that we help this big, giant business feel more local. And, again, it takes time to seed, ignite, and scale product over time, but returning to a healthy Sportswear business is essential and vital to our comeback because it will continue to be a critically important part of the overall market and overall part of our growth. So, with that said, I am incredibly positive on the athletic industry overall, not just in Sportswear, and we see it as a tremendous opportunity for us to continue to drive growth in an expanding market. Matthew Friend: And then, Matt, to your question on sell-through assumptions—maybe let me hit revenue first. For the first half of next year, I think it is safe to look to the range we provided for Q4 as a guide for what we are expecting for revenue for those last two quarters. And I think it is really highlighted by the trends that we have talked about. It is North America continuing to sustain momentum. We expect to see more balanced growth across channels. Given where inventory is in the marketplace, we expect to continue to see improvement in underlying profitability in that geography, and the top line will be tempered a little bit, like we have been talking about, because we are anniversarying quite a bit of off-price liquidation in the prior year. But it is a healthier business. It is a more profitable business. And it is a sustainably growing business across all channels of the marketplace. As you go outside the U.S., I think that we have been clear that we believe that we can complete the Win Now actions in EMEA and APLA by the end of this calendar year. That is how you should read what we are communicating. I think that will continue to be us going deeper on cleaning up the marketplace, especially digital. And quarter by quarter, we are planning for improvements in sell-through. As it relates to Greater China, we are managing sell-in. And by managing sell-in, we expect to continue the trend, like we saw this quarter, of sequential improvement in sell-through rates. And so we are managing supply in order to be able to continue to shift the mix of inventory in that marketplace to be more full price and more healthy. And that is why I gave the commentary around, while the actions we are taking will create a headwind to revenue in Greater China, we do expect to see profitability bottom faster because it is going to be a healthier, more profitable business as we set that foundation for much more balanced growth as we go forward in China. Operator: And that will conclude the question and answer session and our call today. Thank you all for joining. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the Constellation Energy Corporation Business and Earnings Outlook Conference Call. [Operator Instructions] As a reminder, this call may be recorded. I would now like to introduce your host for today's call, Tim Flottemesch, Vice President, Investor Relations. You may begin. Tim Flottemesch: Thank you, Carmen. Good morning, everyone, and thank you for joining Constellation Energy Corporation's Business and Earnings Outlook. Leading the call today are Joe Dominguez, Constellation's President and Chief Executive Officer; and Shane Smith, Constellation's Chief Financial Officer. They are joined by other members of Constellation's senior management team who will be available to answer your questions following our prepared remarks. We issued a presentation and 8-K this morning, all of which can be found in the Investor Relations section of Constellation's website. The release and other matters, which we discuss during today's call, contain forward-looking statements and estimates regarding Constellation its subsidiaries that are subject to various risks and uncertainties. Actual results could differ from our forward-looking statements based on factors and assumptions discussed in today's material and comments made during the call. Please refer to today's 8-K and Constellation's other SEC filings for discussions of risk factors and other circumstances and considerations that may cause results to differ from management's projections, forecasts and expectations. Today's presentation also includes references to adjusted operating earnings and other non-GAAP measures. Please refer to information contained in the appendix of our presentation for reconciliations between non-GAAP measures and the nearest equivalent GAAP measures. I'll now turn the call over to Joe. Joseph Dominguez: Thanks, Tim. Thanks, Carmen, for getting us started. Good morning, everyone. Thank you for joining us, and thank you for your continued interest in Constellation. We're thrilled to be speaking with you for the first time since closing the Calpine transaction. As you can imagine, both companies are filled with people who just want to get on with it. And so we talked for a while and getting on with it is fun for us. We're excited to be where we are. As always, I want to start by thanking the 16,000 women and men across the combined companies for all the hard work that brought us to this moment. We couldn't be here without them. Let's begin on Slide 6. Today, Shane and I intend to do more than provide 2026 guidance. We're going to provide a longer-term and more comprehensive update on the business, describe what makes Constellation special and explain why we think Constellation has unmatched opportunities to grow, beginning with a 20% CAGR on base earnings growth through 2029. As you will see, this longer-term visibility into how we see our earnings through 2029 admittedly uses some conservative assumptions. But what we're trying to do here is establish a baseline and then quantify and describe for you some of Constellation's many actionable opportunities to improve earnings materially beyond this baseline and ultimately to repeat double-digit annual base earnings growth into the next decade. In his part of today's talk, Shane will walk you through some of the EPS sensitivities that we think you will find very interesting. Before we move into the business update though, I want to say that we're not going to be announcing a new data economy deal today, nor can I comment much on Amazon's community night last week in Maryland, where they described a large data center project next to our Calver Cliffs Clean Energy Center. I recognize that the last time we spoke, I indicated that we expected to be done with an important transaction by this call, but we're not ready to announce anything today. There are 2 reasons for this. First, there is clearly more scrutiny on data center development. And so we think it's really important that data center announcements occur when all stakeholders, including supportive policymakers and community leaders, are present and prepared to discuss the elements of these important transactions so that all of the community benefits are clearly understood. Obviously, earnings calls give us a limited opportunity to do that. Second, since our last call, and as you're aware, hyperscalers have announced a new pledge in response to President Trump's executive order, which required us to rethink and renegotiate some of the terms of the PPAs we were working on to anticipate any outcomes of the PJM rule-making process. With regard to President Trump's executive order and the resultant PJM regulatory proceedings, our sense is that data center development will benefit from regulatory clarity, and we now have strong momentum to get just that. All of you know regulatory clarity helps deals get done. Importantly, for you, our owners, we're not waiting on regulatory clarity or certainty. Regardless of how the PJM proceedings resolve, Constellation can structure deals now to power America's growth in AI with our firm and clean nuclear power. But not every deal is going to look the same because our customers are expressing different approaches to how they intend to manage future regulatory requirements. Some of our customers will meet future regulatory requirements by pairing our nuclear power with Constellation's ability to bring incremental capacity through batteries, demand response, upgrades and gas-fired generation. I'll talk a little bit more about that capacity in a moment. This combination gives customers the clean firm power and price certainty they want and also allows them to meet any new regulatory requirement for peak energy capacity. Other customers are willing to pay for backstop capacity from PJM and buy power and attributes from us. This is the way we typically contract with our C&I customers where they buy capacity from the PJM market and buy energy and attributes directly from us. Finally, some customers are willing to flexibly respond or curtail during peak hours by using on-site backup generation or by reducing demand. And what excites us is that the very AI technology that we're powering is now being used to better dispatch the power system and manage data center load at peaks. You might have seen an announcement we made with NVIDIA, Emerald AI and other companies last week, where we are pioneering new technology that will allow the data centers to move data projects from one data center to another at a peak. So for example, if you have a data center operating in Philadelphia and you're approaching a peak demand hour, you would transfer that work through -- at the speed of light through fiber optics to other data centers around the country that aren't in a region that's experienced a peak energy demand. So we think these companies are evolving in the way they're able to manage their demand at peak through a lot of different resources. And it's important to get this right because there have been a number of recently released studies, the Brattle Group put out one just this last month, that says that the best way we can make bills more affordable for all customers is by ensuring that the grid is better utilized during the 99% of the hours of the year when there's surplus wires and generation capacity, while at the same time, providing flexibility during these less than 1% of the hours when system demand is at its highest. According to Brattle, getting this right can unlock tens of billions of dollars in annual consumer savings, and we believe will result in a paradigm shift in how policymakers and customers view data center development, changing the perception of data centers from cost causers to potentially cost reducers. Although sometimes it seems longer, we have to keep in mind that we remain in the early stages of the AI data center boom. People naturally question the durability of the demand and strategies like ours, from DeepSeek to FERC's rejection of the [ Talen ] interconnection agreement and now the executive order, we've had bumps in the road where enthusiasm and value momentum either stalls or retrenches. We see this as the natural course of things. But it's important that in each instance, we and our partners found solutions and momentum resumed. Two things are occurring simultaneously that give us great confidence. First, the growth we're seeing is like nothing we've seen before. And second, the cost of replacement megawatts for any kind of firm power generation is now multiples of what it was less than a decade ago. You're going to see this in one of our later slides. I talked in a previous earnings call about combined cycle machines having replacement costs at around $2,500 a [ KW ]. I now see that more like $3,000 based on what I'm hearing at CERA and other conferences. And we think both the demand being real and the cost of replacement generation means that an incumbent coast-to-coast fleet of the best and most unique assets like ours are going to do exceptionally well. And that's what we have here. Constellation's industry-leading balance sheet also gives us a competitive advantage in serving customers and protecting against increases in the cost of debt. We have the ability to opportunistically grow through M&A and fund growth capital projects [ like our operates ] that easily exceed 10% unlevered IRRs. Finally, our balance sheet and strong cash flows give us the ability to return value to you in the form of more buybacks. Today, I'm pleased to share that Constellation's Board has approved an increase in our buyback authority to $5 billion, underscoring our confidence in the strategy. The path ahead is exciting. The demand is real, and our competitive position is excellent. We're excited about the future we're building and confident in our ability to deliver. Turning to Slide 7. While market attention understandably focuses on the large hyperscaler deals, the value of nuclear energy is not limited to any single customer segment. That value is broadly accessible, and recent developments in New York reinforce that point. Since we last spoke, Governor [ Hochul ] in the State of New York extended the Zero Emission Credit Program, recognizing both the value of nuclear energy and the essential role that our Upstate facilities play in meeting New York's climate and reliability goals. This extension preserves more than 3,000 megawatts of clean, reliable energy that will power New Yorkers through at least 2050. This is a meaningful development, and the average pricing, which is shared in our appendix, is an important validation of the long-term value of our nuclear fleet to ordinary families and businesses as well as the data economy customers. As I mentioned at the outset today, we want to give you a baseline for Constellation's performance through 2029 as if we did nothing more, in the way of hyperscaler deals and the way of contracting investing growth, buybacks or refining our Calpine synergies. But of course, we expect to do more on all of these fronts. We know that signing long-term deals is a focus for our investors, and it's our focus too, and we will execute. We think our historic performance in executing these contracts is the best indicator of future results. So we show here on this slide that Constellation and Calpine have executed deals for over 10,000 megawatts of our fleet, serving a wide range of customers, all at compelling prices that provide the reliability and price visibility our customers are looking for, as well as the revenue certainty that we desire. These deals are not concentrated in 1 region or 1 type of customer. They span multiple generation technologies, deal configurations, customer types and markets. But it shows here that we have a proven ability in our teams to structure long-term agreements, particularly when it comes to clean megawatts. We have now signed long-term agreements with multiple hyperscalers, commercial customers, the U.S. government, the State of New York and municipal and utility customers across America. This is a level of customer diversity that reinforces the strength and flexibility of our platform. Our natural gas fleet has added even more optionality, and you saw that in some announcements from Calpine. We have successfully delivered solutions at both ends of the spectrum to meet speed to power and grid connection for data economy customers for long-term capacity and reliability agreements for our end-use customers. And while no deal is the same, all deals share 2 defining characteristics. First, trust. Customers trust that we're going to be able to deliver for decades. Second, fair and premium value. Each agreement reflects a tailored solution that meets a specific customer need and solutions that solve real problems in returning -- in return for good pricing. Moving to Slide 8. Over the past year, we have reached agreements for an additional 36 million megawatt-hours of our clean energy that will flow in 2030. As you see in this update, we've increased the total amount of energy we will have under long-term contract in 2030, from 12 million megawatt-hours to 48 million megawatt-hours or roughly 25% of our available clean firm output. But even after that, we still have about 147 million megawatt-hours available for contracting, an opportunity no one else can match. Indeed, if you combined all of the available nuclear power owned by all of the other competitive market participants in the U.S., the total amount would be about half of what Constellation still has available for clients. As we move forward and integrate Constellation and Calpine commercial teams this year, we're bringing together under one roof 2 of the preeminent teams in the business when it comes to meeting clients' needs with tailored long-term contracts. And clearly, they're going to have plenty of megawatts to work with. I would ask that you bear a few additional points in mind as you wait for this opportunity to manifest. First, all of our contracted nuclear generation is supported by the production tax credit which grows with inflation and is guaranteed by the federal government. This structure ensures stable, predictable revenue regardless of near-term economic conditions or market volatility, while at the same time allowing us to retain the optionality to fully participate in market upside as supply-demand fundamentals continue to improve. Second, as we face potentially higher inflationary environmental drivers, the PTC automatically adjusts for inflation, making Constellation stock a unique and safe investment in a pro-inflationary environment. The baseline of earnings growth that we're showing you today conservatively assumes 2% inflation. But if instead of 2% inflation were 3% or 3.5% as some are predicting in light of the Iran contract, the PTC cap for 2031, for example, would move from $50.88 per megawatt-hour to $52.88 at 3% and $56 at 3.5% inflation, a more than $5 a megawatt-hour jump in the tax credit available to our full open position. The third factor I'd like you to keep in mind is that the demand is real. And it's so big that really smart people are literally discussing shooting data centers into space to solve for energy and infrastructure constraints. I could assure you that despite some of the PJM rule-making complexities, we have far more efficient and achievable solutions than launching data centers into outer space. Fourth, we think the climate imperative is not going to go away. There is enduring value for being clean and being able to provide firm and clean energy together. Large customers are not wavering on their long-term commitments to clean and no one can better serve that need than Constellation. Moving to Slide 9. The quality and diversity of our agreements demonstrate our flexibility place megawatts where they create the greatest value. And I fully expect the team to continue reaching agreements with customers in multiple ways. For hyperscalers and data center developers, our offerings include virtual [ PDAs ] or co-located data centers at our site. If customers need load enabling support whether through new supply demand response or transitional power, we have the ability to answer that call. For enterprise-wide C&I customers, we offer long-term contracting options at scale that help them meet their sustainability goals with dependable zero carbon power. We can provide long-term energy capacity and clean energy agreements for states, utilities, government and co-op customers that desire visibility. Taken together, this is the broadest and most capable suite of energy solutions available in the competitive market today, and it gives us multiple pathways to place our clean megawatts at a premium. Turning to Slide 10, I want to pivot here to PJM. As I mentioned at the top of the call, there's a need for regulatory certainty. And we're finally seeing greater alignment among stakeholders on core priorities that need to be addressed. We see an engaged FERC that's rightly pushing for clarity on the rules. And we see a visible time line for resolution this year. We all agree on some key points. Demand forecasts have to be accurate. We need to ensure that large load customers cover their infrastructure costs. We need to provide avenues for competitive solutions, understanding that utilities alone can't do this. And we know that customers need to be flexible at peak. We're on a path between PJM and FERC to have these core issues resolved. We are also seeing efforts underway at EPA to alleviate constraints on the use of backup generation so that data centers can better manage peaks and agree to curtail at peaks. But make no mistake, as we await regulatory clarity, customers are moving forward, and we have solutions available that anticipate any reasonable outcome, from providing backstop generation to simply incorporating a PJM backstop capacity cost in our agreements. Moving to Slide 11. At the top of the call, I spoke about the importance of managing peak energy demand while taking advantage of the surplus we have in wires and generation capacity that exists in the system about 99% of the time. This chart shows PJM's low-duration curve and illustrates the point that the system has massive unused capacity for most hours of the year. Last year, half of all hours saw more than 40% of available generation sitting idle. And 80% of the time, 30% of our resources were unused. The same is true for the wire system where transmission capacity is designed, as you know, for a handful of peak hours, and therefore, by definition, is vastly underutilized when the system is not at peak. The Brattle report that I mentioned shows how small improvements in system utilization could drive meaningful benefits for existing customers, extrapolating that a mere 10% improvement in system utilization could yield up to $17 billion of annual utility bill savings. These are huge numbers for American families and businesses. The shadow box explains Brattle's point in their own words. So basically, what they're modeling here is spreading, like peanut better, some of the fixed costs of the system, whether they be wires [ or ] generation among many more kilowatt hours. And the reason we want to make you aware of these studies is because obviously, there's this growing narrative that data centers are bad for customers. It's based on the peak energy power issues we've been talking about. And that negative reaction is causing policymakers and investors to worry about grid-connected data centers. But we think that's an overreaction. We think a more nuanced view is that if we do this right, the opposite is true, that data centers could actually bring costs down. And I'm pleased to see this message starting to go through the policymaker communities. Turning to Slide 12, it's all about bringing solutions at peak, and Constellation is willing to bring new megawatts to the grid and Constellation has and will continue to do its part. Last year alone, we placed 750 megawatts of battery storage, renewable resources and expanded geothermal capacity into service. Calpine brings us that ability to use batteries and other devices we weren't fully using at Constellation. Looking at just the balance of the decade, we have the flexibility to add new megawatts through multiple channels. I'm not going to drain this, but you could see here the license extensions. You see Crane. I'm going to talk about Crane a little bit more here in a moment. We have 400 megawatts of new gas generation coming online this year, plus another 1,400 megawatts of idled turbines. We have 1,100 megawatts of uprates. We have 9,600 megawatts of additional batteries we could deploy. And we're trying to get to 1,000 megawatts of demand response that is actionable for data center customers to reduce peak demand concerns. On Crane, we talked this week about PJM studies that indicate interconnection could be delayed into the 2030s. I want to assure you we are working on that with PJM, and we continue to expect to start this unit in 27. Today we will be filing at FERC a request to be able to transfer capacity injection rights from our [ Eddystone ] unit to Crane to facilitate restart in '27 according to our plan. David Dardis is here and can talk more about that to the extent anyone has questions. But taken together, Crane and all of our capabilities have the inherent ability to add about 10 gigawatts of support to the grid at exactly the right moment. And we're excited to be able to offer this to our data center customers to pair with our clean and firm nuclear power. Now moving on to the next slides. Before I turn it over to Shane, I want to use the next few slides to remind you of the capability and scale we have at Constellation post the Calpine acquisition. Starting with integration, our efforts are well underway, and the enthusiasm across both teams is tremendous. The energy and engagement we're seeing gives us real confidence in what we're going to be able to accomplish together. With the combination, we now have true coast-to-coast scale and a platform that is the envy of every other player in the market. That reach, paired with the quality of our assets and duration of our assets, gives us a great foundation for growth. Our leadership team is aligned and moving quickly. A top priority is capturing the best of both organizations, aligning operational and commercial best practices to elevate performance across the board. This includes finding new ways for our commercial platforms to give customers unique and innovative solutions. And we're already realizing the benefits of upgrading Calpine's credit profile. Beyond lowering borrowing costs that Shane will talk about, an investment-grade balance sheet allows us to pursue commercial opportunities that were previously out of reach for the Calpine commercial team. In short, integration is progressing as planned. The momentum is real. The teams are energizing, and we're ahead of schedule. Turning to Slide 15, this chart shows you what being the most important player in every market looks like. We are the unrivaled leader in serving commercial and industrial customers, delivering more than 190 million megawatt-hours of energy, nearly twice as much as the next largest supplier in the competitive market. We serve more than 80% of the Fortune 100. These are strategic customers, and they want a partner who could solve complicated challenges in multiple jurisdictions for firm, low and zero carbon energy. And that's exactly what our platform delivers. Our suite of solutions, from short or long-term carbon offerings, access to renewables through our core product, or innovative demand response participation with partnerships with [ Grid Beyond ] and others, gives us strategic capability to meet regulatory requirements as well as customer needs. We can meet customers wherever they are on their sustainability journey. And importantly, demand for these advanced offerings continues to grow. Compared to 2024, we saw a 300% year-over-year increase in carbon-free product placements, a clear signal that our product offerings are appealing to the customers that need these services. Turning to Slide 16. Constellation is now the largest private sector power producer in the world, generating nearly 300 million megawatt-hours annually, with 2/3 of that being carbon-free. We produce over 35% more carbon-free firm power than the next largest producer whose output includes intermittent clean renewables. Importantly, even after integrating the largest natural gas portfolio, we still maintain the lowest carbon intensity among the top 10 power producers in the country. The reason for that is our nuclear assets as well as the fact that the assets that we bought from Calpine are efficient machines. This is a special portfolio of assets that provides a foundational competitive advantage that's durable for the long term. Moving to Slide 17. Everything we do at Constellation is supported by the bedrock of operational excellence, and it applies to everything we do. For our nuclear fleet, we run these assets better than anyone. We've been doing that for well over a decade, and we consistently outperform the industry in both capacity factor and outage duration. And that operational excellence delivers real tangible value to the grid and to our owners. On a fleet of our size, outperforming the industry's average capacity factor by roughly 4 percentage translates into roughly 8 million megawatt-hours of additional clean reliable generation every single year. That's effectively the output of 1 nuclear unit. And that's what happens when scale meets world-class operations, backed by a culture to keep doing it every single day. And we're not just running our plants better, we're innovating too. In 2028, Constellation will begin using new fuels to transition its remaining fleet of 8 pressurized water reactors from 18-month refueling cycles to 24-month refueling cycles, significantly reducing future O&M costs for outages and increasing the amount of power available on the grid. And pending NRC regulatory approvals in 2028, Constellation will load the first full core of accident-tolerant fuel, fulfilling a long-term promise that industry has made to America. Moving to Slide 18, I want to talk a little bit more about the gas fleet and some opportunities we see here. On the left-hand side of the slide, you'll see that 80% of our natural gas fleet is comprised of modern combined-cycle and co-gen assets. These are highly efficient, low heat rate units that operate far more hours than traditional peaking resources, and they form the backbone of the flexibility of the grid. As system conditions change, whether driven by load growth, renewable variability or tightening reserve margins, this is the fleet that's uniquely positioned to respond, delivering reliable, cost-effective power precisely when it's needed. On the right-hand side of the chart, I want to share an opportunity we see. Today, combined-cycle units across the ERCOT system have excess capacity roughly 90% of the time. That underscores the point I just made that these units today are underutilized. But as new load comes on, particularly these large baseload data centers, CCG utilization is expected to move significantly higher by 2030. This increase benefits the system by meeting rising demand in the most efficient way while also providing upside for us through increased economic output. That represents a significant value-enhancing shift for assets that have more to contribute to the grid, and Shane will quantify that sensitivity in his remarks. Over time, that increased utilization and improved dispatch economics translate into meaningfully higher and durable earnings. With that, I'm going to turn it over to Shane to provide the financial update. Shane Smith: Thanks, Joe, and good morning, everyone. Before I turn to the financial update, I want to take a moment to acknowledge our 2025 results. Last year, we delivered adjusted operating EPS of $9.39, that once again exceeded the midpoint of the guidance range we set at the beginning of the year. That marks 4 consecutive years every year since becoming a public company that we have beat. With 2025 now behind us, I also want to echo my appreciation for the collective effort of our teams that make these results possible, working tirelessly to position Constellation for long-term success. Beginning on Slide 20, we are initiating our 2026 adjusted operating EPS guidance at $11 per share to $12 per share. This range is consistent with the $2 of EPS accretion we shared when we announced the Calpine deal. But it doesn't tell the full story. Our underlying business is performing better than originally projected, allowing us to overcome 2 headwinds related to the acquisition. First, as part of the settlement with the DOJ, we were required to divest more assets than we originally anticipated, notably the highly efficient York 2 and Jack Fusco stations that are both meaningful earnings contributors. We are also assuming all of the asset sales close in the third quarter versus our original assumption of year-end, creating a bit of an earnings hole. Second, depreciation expense related to purchase accounting is higher than we expected at deal case as we had to mark the acquired assets to fair value at the time of close. As we have all seen, the value of generation assets has increased considerably since we announced the transaction in January of 2025 and that higher value is resulting in higher noncash depreciation expense. When we announced the deal, we also targeted at least $2 billion of annual incremental free cash flow, which we continue to expect even absent the cash flow from the additional asset sales. I'm also excited to share that we are increasing our share repurchase authorization to $5 billion, enabled by our strong balance sheet and significant free cash flow while still growing our dividend and reinvesting $3.9 billion in growth projects that deliver compelling returns of at least 10% on an unlevered basis. The increase in the buyback is a strong vote of confidence in the outlook for our business. Finally, Moody's and S&P reaffirmed our credit ratings, supported by our strong cash generation, long-term contracted cash flows and clear deleveraging trajectory. We remain committed to returning the balance sheet to our target credit metrics by the end of 2027. On the following slides, I will walk through our base and enhanced earnings outlook that now includes Calpine, how to think about upside earnings opportunities and our capital allocation strategy. Turning to Slide 21, I want to provide a short review of our base earnings framework and discuss how we are incorporating the Calpine portfolio. The goal of base EPS is to highlight our earnings that are consistent, visible, straightforward to calculate and that will grow over time. The components of our base earnings are well defined. First, long-term contracts from our generation fleet that provide durable and predictable cash flows. Second, our available nuclear generation that is priced at the PTC 4, assuming a 2% inflation adjustment over time. Third, for our nonnuclear fleet, we anchor to minimum expected gross margin and volume grounded in historical experience. And finally, commercial unit margins and volumes that use a 10-year historic and forward weighted average. Taken together, these elements provide a transparent and repeatable foundation that supports visibility today and growth over time. Detailed modeling tools for base earnings can be found starting on Slide 32 in the appendix. Constellation's enhanced earnings capture value generated above our base assumptions that we will constantly deliver but is not always easily modeled as a P times Q. This portion of earnings reflects contributions from a variety of sources, such as revenues from power and capacity above the PTC floor for our nuclear output, higher spark spreads in our base assumptions, commercial margins above the 10-year average and a host of other opportunities that come with the scale and depth of our portfolio and customer-facing business. In 2026, enhanced earnings will represent approximately 40% of total EPS. Over time, we expect enhanced earnings to represent more like 30% to 35% as base EPS grows, and hence, it contributes less on a relative basis. Turning to Slide 22, our base earnings are expected to grow from a range of $6.65 per share in 2026 to a range of at least $11.40 per share to $11.90 per share in 2029, representing at least a 20% compound annual growth rate over the period. As we have discussed in prior guidance updates, our growth will not be linear. Year-to-year results will fluctuate based on the timing of long-term contracts going into effect, the roll-off of Illinois CMCs, inflationary adjustments to the PTC and the impact of our nuclear refueling outages, which vary in number and costs depending on the year. Despite that variability, we have a highly visible path to base EPS growth at a 20% CAGR over the next 3 years and continued growth of at least 10% compounded annually on a rolling 3-year basis. Importantly, this outlook reflects only the long-term agreements for our nuclear and natural gas units that have already been announced, the base assumptions discussed on the prior slide and current market conditions for enhanced earnings. The optionality embedded in our fleet, which represents a meaningful upside opportunity, is not reflected in this guidance. Turning to Slide 23. Let me provide context and add dimension to the optionality that remains in our business beyond our base earnings starting point. Long-term contracts for our nuclear natural gas generation command a market premium from customers seeking reliable megawatt-hours, supported by the depth and strength of our portfolios. To put that into perspective, a deal on each gigawatt of nuclear could increase our base earnings between $0.40 per share and $1 per share at full run rate, translating to a 1% to 3% increase to our growth rate over the period. A reminder that the assumption in base earnings is at the PTC 4, so the sensitivity being reflected here is relative to that price, not to the forward curve. Our natural gas portfolio has significant optionality as well. Contracting an additional gigawatts through long-term agreements could also result in an incremental $0.20 to $0.50 of base earnings per share, adding another 1% to 2% to the growth rate. Additionally, as Joe discussed earlier, in a period of increased load growth, grid needs will be increasingly met through higher utilization across our fleet driven by dispatch economics. A modest 1% to 2% increase in natural gas fleet capacity factors would lift base EPS by $0.10 to $0.20, which is roughly 1% to our growth rate. This higher utilization translates directly into stronger and more durable earnings while also improving overall grid efficiency. As demand continues to grow, we expect more customers to see clean megawatt-hours and reliability solutions, both of which are in high demand, yet of finite availability. The optionality of our fleet, including the ability to combine clean generation with natural gas solutions, is unmatched, and it is a key reason for bringing Calpine onto the Constellation platform. Similarly, expanding the adoption of premium-priced products and cross-selling opportunities across our commercial business can drive higher unit margins that could have a meaningful impact on our 2029 base earnings and growth rates. The nuclear PTC inflation adjustment, a unique protection backstop by the U.S. government and particularly valuable in the current market environment, could provide a meaningful tailwind if inflation remains above 2%. A 100 basis point increase to our 2% inflation assumption would add approximately 100 basis points to EPS CAGR through 2029. Continued investment in compelling growth projects alongside disciplined share repurchases has the potential to drive meaningful value creation in a relatively short period of time. We are actively working to execute across all of these levers to deliver results beyond our current projections. Turning to Slide 24. Constellation's disciplined approach to capital allocation has been a hallmark of our success over the past 4 years. Since our time as a public company, we have consistently demonstrated an ability to create shareholder value while preserving the financial flexibility required to pursue strategic opportunities as they arise. This balanced approach has also allowed us to navigate evolving market conditions, address regulatory requirements and invest in growth at compelling returns. It also strengthens the long-term durability of the business. Going forward, we will continue to apply the same principles that have guided our decisions to date: maintaining balance sheet strength, prioritizing growth at double-digit unlevered returns, and returning capital to our owners through dividends and share repurchases. This continuity reflects both our confidence in the strategy and the results it has delivered. On Slide 25, the portfolio we own and operate today is significantly larger and more diverse than where we started 4 years ago, and we are confident we can deploy growth capital organically and through strategic acquisitions at compelling returns. Our strategic acquisitions of Calpine and the South Texas project have expanded our generation fleet, increased scale and enhanced our ability to serve a broader and more diverse customer base. We are growing organically through the restart of the Crane Clean Energy Center, nuclear uprates and operating license extensions, reinforcing our commitment to delivering clean, reliable and dispatchable power. These investments are particularly important as demand accelerates across a more data-driven and increasingly electrified grid where reliability, carbon-free electricity and long-term price certainty are becoming increasingly valued by customers. Looking ahead, our growth capital plan remains firmly anchored in value creation. We expect to invest approximately $3.9 billion during 2026 and 2027 to add new megawatts and enhance performance and longevity of the existing fleet across all fuel types. In addition to the nuclear investments, we are placing more than 600 megawatts of new natural gas, battery, wind and solar capacity into service in 2026, further diversifying our portfolio and supporting growing customer demand. Collectively, these investments reflect our continued focus on capital efficiency, asset optimization and long-term earnings durability while continuing to strengthen our unique position in the market. Turning to Slide 26. Our strong free cash flow over the next 2 years has some unique characteristics related to the acquisition. Let me take a minute to walk through 2026 and 2027 and then explain how to think about it on a forward basis. When accounting for the expected after-tax proceeds from the sales of the PJM and ERCOT assets, we expect to have $13.6 billion to deploy over the next 2 years. I spoke to the $3.9 billion of identified growth that will be accretive to long-run base EPS CAGR. Additionally, we will continue to grow our dividend at 10% per annum, and we have earmarked $3.4 billion to delever the Calpine debt stack to meet target consolidated credit metrics by the end of 2027. We then have authorization of -- we then have authorization for $5 billion in share repurchases, which, for planning purposes, we assume to happen by the end of 2027. We of course retain flexibility on execution, especially as we continue to prospect for strategic and accretive growth opportunities. On a forward basis, we expect free cash flow before growth to follow the trajectory of our base EPS. After rightsizing the balance sheet by year-end 2027, we expect to have additional leverage capacity supported by increasing cash from operations while maintaining our Baa1 and BBB+ leverage profile. Turning to Slide 27. We have long highlighted our investment-grade balance sheet as a core competitive advantage, one that enables us to capitalize on market opportunities and execute complex transactions. We have seen 2 recent tangible examples of how this strength continues to differentiate Constellation. In January 2026, as part of the $2.75 billion issuance to replace Calpine sub-investment grade debt at the Constellation level, we issued a 40-year tranche with a 5.75% coupon. This is certainly unique in the competitive power sector, demonstrating the strong vote of confidence from fixed income investors in the long-term cash flow generation and risk profile of Constellation. An additional vote of confidence came from the U.S. Department of Energy in its $1 billion loan in support of the historic restart of the Crane Clean Energy Center. The DOE highlighted Constellation's financial strength as a key determining factor in the award and underscores continued federal support for nuclear energy as a critical source of clean and reliable power. Finally, as expected, S&P and Moody's affirmed Constellation's credit ratings, reflecting the combined company's strong cash generation and our clear plans to deleverage by 2027. In addition, Calpine's ratings were upgraded to investment grade following the close of the transaction. The rating agencies emphasize the geographic diversification, irreplaceable asset base and the strength of the combined portfolio, as well as Constellation's track record of disciplined capital deployment and commitment to balance sheet targets. While expected, these favorable assessments position us well to pursue additional strategic opportunities going forward. Thank you all for your time today. 2026 marks the beginning of another new and exciting chapter for Constellation. I think we have a truly unique investment thesis, a highly visible and predictable trajectory for base earnings to grow 20% on a compounded basis through 2029, a coast-to-coast fleet of nuclear, gas-fired and geothermal generation assets ideally positioned to meet growing customer demand, and growing free cash flow that can continue to be deployed to create value for our owners, whether -- or both via accretive growth and by via returned to owners via buybacks and dividends. Put all this together and you can see why we have a truly compelling growth story into the next decade. With that, I will now turn the call back to Joe. Joseph Dominguez: Thanks, Shane. Good job. So folks, we couldn't be more excited about where Constellation is headed. We're built on a foundation of strong growth, unmatched scale, geographic reach and truly irreplaceable assets, all supported by a commercial platform that sets us apart. Our base earnings will grow more than 20% through 2029. And as Shane said, we intend to replicate double-digit growth after that. And we see a number of meaningful opportunities even through 2029 to improve and outperform our trajectory. We'll continue to take a disciplined, practical approach to capital allocation, deploying our substantial free cash flow in ways that create long-term value for you. We'll keep executing with customers across the data economy and beyond, securing durable premium price agreements for our clean reliable megawatts. We'll expand the contributions of our natural gas fleet, meeting customer needs in ways that were not possible before. We will preserve and expand generation supply in the markets we participate. And we will keep working closely with federal, state and local policymakers and market regulators to drive common sense solutions, solutions that will allow America to grow and also reduce the burden on American families. Thanks for your time. We have the whole management team here, and we look forward to your questions. Operator: [Operator Instructions] Our first question is from David Arcaro with Morgan Stanley. David Arcaro: Joe, could you maybe comment on, in maybe a little bit more detail, if you could, just what's the status of discussions you're having with other hyperscalers? You did mention 1 that may be possible opportunity in Maryland here. But just more broadly, if you could touch on what's the status, how close, how advanced how broad across your portfolio that you're in discussions here for in terms of data center contracting? Joseph Dominguez: Well, I want to avoid, David, promising delivery dates here because we all know that there are bumps that, unexpected and otherwise, that occur in these transactions. But I think it's fair to say that there continues to be strong interest in clean and reliable power. But look, the data economy customers are very conscious of either being flexible at peak, using backup generation, some of the AI technologies that move data demand around. And so we're certainly seeing that in our conversations. I think there could be a point in time where the flexibility that data centers have at peak will be substantially greater than what we've seen historically. And then we have ongoing conversations with customers that just want to buy energy and capacity from us. They'll absorb whatever the backstop proposal is. And here's what I would say. I would say that those conversations grew more complicated after the executive order as we found solutions, and delayed some of the transactions. But I see the momentum resuming. David Arcaro: Got it. That's helpful. And a bit of a follow-up on your comments there too. Is flexibility and/or additionality, is that really the path forward here? Curious if -- as we maybe think about the backstop procurement, just how does that interact with the potential to bring new megawatts onto the grid or being flexible? Joseph Dominguez: Yes. I think it is, David. I think there has been, since we announced the strategy, overhang of do we have enough peak capacity in the system. And so that ambiguity is going to be addressed, hopefully, here by FERC in a way that gives our customers clear line of sight that if they're going to rely on the backstop capacity auction, what the cost of that is going to be and what the terms are going to be for them. Other customers are going to look at the ability to either bring batteries, demand response, new gas-fired generation or some of this AI flexibility I just mentioned into play to manage the peaks. But if you manage the peaks, right, what we're really talking about is the capacity slice of what we have to offer. And I see a potential where we're going to do the same thing we've been doing with C&I customers historically. And that is we sell our capacity into the market, and our customers are buying a capacity product from PJM. That could be that backstop capacity, or they could bring their own capacity or flexibility, as I mentioned. But what is uninterrupted is the other 99% of the hours, the energy and the attributes they need to meet their goals for firm and reliable and clean power. Operator: Our next question comes from Steven Fleishman with Wolfe Research. Steven Fleishman: I'm sure there'll be other questions on that topic, so let me just maybe move to a different one. Capital allocation, so one point of clarity. In the plan to '29 and outlook that you have, what are you assuming or doing with cash in '28 and '29, just in the plan, the growth rates, et cetera? Yes. Shane Smith: Steve, it's Shane. There's nothing planned with regard to accretion relative to that free cash flow. So that's all upside opportunity for how we deploy it. It's essentially earning interest income at the current assumption. Steven Fleishman: You're just having it sitting cash effectively. So any use of capital better than that is accretive. . Shane Smith: That's right. Joseph Dominguez: Correct. Shane Smith: That's what leads to the $0.50 upside you see on the sensitivity table, is we think there's a meaningful opportunity to find opportunities above that low threshold. Steven Fleishman: That's helpful. And then maybe related to that then, Joe, over the last 3, 6, 9 months, you've mentioned renewables a couple of times. You did talk again here a little bit about nuclear. Could you just, maybe on those specific topics or others other than new gas, that you could talk to kind of what are you seeing there, what are -- how are you looking at that? Yes. Joseph Dominguez: No, no, I'm sorry, complete your question. I thought you were... Steven Fleishman: No, no, that's it. I'll leave it there. Joseph Dominguez: Okay. Yes. So look, on new nuclear, we're continuing to look at both large reactors and small modular reactors. I think the last time we talked, I commented that we have to have really clarity on 3 things. One is, what's it going to cost and what the schedule is going to be? Obviously, a number of the new reactor designs, particularly on SMR, still have a bit of work to be done in their design and regulatory approval journey. We've got to get to the other side to make sure that we understand that. We need to understand the operating cost of these machines. And while we continue to chip away at that, I am not yet at a confidence level where I could say to you that we are committed on a path to new nuclear. I think we just -- we need a lot more data before we could get there, and some of that is just going to have to play out over time. In the case of renewables, what I'm really looking for here, Steve, is to have the capability with battery storage and other renewables as well as gas-fired gen, to really facilitate these transactions that are the core of our growth strategy, these deals with hyperscalers and C&I customers. So what we're thinking about there is capability that gives us some peak capability or some incremental new capability. That is a deal sweetener. And that's kind of our focus on renewables, what platforms might we add to the business that give us that incremental capability to do the things our customers want. It is a secondary objective to have another means of deploying some of the vast amounts of free cash flow that Shane alluded to. But I've said this before and I stick with it, the returns on renewables are often underwhelming when we're looking at some of these deals. So in other -- in order for a platform to be something we're going to want, it has to come with it the ability to unlock our essentially contracting of 147 million megawatt-hours of nuclear. And that's where we see some potential value. But I don't yet see a platform that is attractive enough and is going to meet our threshold for 10% unlevered IRRs. We'll continue to search for that opportunity, but we're not there. Steven Fleishman: I have one last question on the capital allocation and I'll then turn it to others. Just going back to -- so obviously, your free cash 2029, you're just leaving in cash. How about just like balance sheet targets? Because your EBITDA is going up a lot, '28, '29, so just what should we be using? Because there could be just balance sheet cash or leverage capability too that grows. Just any view of kind of leverage targets? Shane Smith: Yes. I mean we'll continue in the long run kind of -- I think it's fair to assume that 2x debt to EBITDA, Steve. So with that rising EBITDA that will -- to follow the base EPS trajectory, if you will, from your modeling, you can assume that if we're levering at 2x EBITDA, we'll have significantly more leverage capacity in '28 and '29 than were reflected in '27. Operator: Our next question comes from Shar Pourezza with Wells Fargo. Constantine Lednev: It's actually Constantine here for Shar. You noted 9 gigawatts of additionality including the nuclear relicensing. Do you see that as enough offering for hyperscalers looking to contract? And maybe is there a rule forming around matching new and existing capacity 1:1? Or is there a lower mix [ palatable ] similar to the [ Vistra ] deal earlier this year? Joseph Dominguez: Yes. I think on what's going to ultimately come out of the PJM process, I think we're still -- we're going to still await clarity, I think it's more about just managing the peak and whether the customer is willing to take interruptible service or not. As to whether the 10 gigawatts is enough, I think there's going to be instances where we'll partner with another party. We've shown that with [ DR ], for example, where they bring the incremental capacity. And we have another company that's partnering with Constellation. I could see that happening with natural gas development projects or other things, where we'll be more aggressively working with other companies that have acute position in a particular area. And then we're going to fill in our energy and our attributes into that contract. So in answer to your question, I'm not sure that the 10 gigawatts is enough or rightly placed. We may have to supplement that. And I spoke a moment ago in response to Steve's question about continuing to search out platforms, renewable battery storage platforms, that may add some incremental capabilities. So I think it's a hell of a good start, but I don't think it's a finished story. Constantine Lednev: Excellent. And in regards to the 147 million megawatt-hours that you called out, obviously, a really big number, is there kind of a level of interest that you would highlight in more immediate term versus long term and maybe an order of preference by region, especially, as you mentioned, with the kind of reforms going on at PJM? Joseph Dominguez: I don't think we could get into that level of detail here yet. There's interest in kind of across the board in different places, and it's different types of interests that we get. But we don't yet have, hey, this is the number of megawatts we're going to be able to do at this point in time in a particular geography. Constantine Lednev: And maybe just quick follow-up on PJM, is there kind of a level of interest in the reserve backstop auction? What's CEG's position kind of going into the potential procurement later part of the year? Joseph Dominguez: Yes. I would simply say I think there is certainly a level of interest in it, but we have to see the details. Operator: Our next question comes from Angie Storozynski with Seaport. Agnieszka Storozynski: So my first question is about the free cash flow generation. I'm just wondering what kind of assumptions you're making about cash taxes in that $8.4 billion free cash flow assumption for '26 and '27? Shane Smith: We're in the low teens from an overall effective cash tax rate in the front 2 years, Angie. Agnieszka Storozynski: Okay. I mean that low teens as in like based on net income? So... Shane Smith: Yes. Actually, if you convert -- instead of using your book tax rate, if you use the cash tax rate, it would essentially be at that lower -- in the low teens. Agnieszka Storozynski: Okay. Because that number looks a little bit low, just as I was looking at your free cash flow generation for Constellation standalone, you were already in around, I think, $3.5 billion range on average per year. So the Calpine accretion with some tax benefit should have been -- should have boosted the free cash flow generation more. I mean so what am I missing? Is it the interest expense? Is it that there are no tax efficiencies related to this transaction? Shane Smith: Yes. I think one, the 3.5% is probably a little bit too high. Two, there's still some ongoing CTAs regarding the integration in the front years that we need to be mindful of. Three, there might be probably higher maintenance CapEx than you may have had in your model. So those are a few of the variables that I think are leading to some of that delta. But it's not off of what we anticipated. Agnieszka Storozynski: Okay. And then secondly, when I'm looking at Slide 32, the assumptions, the modeling assumptions for '26 and '27, so just wondering how you flow through the sale of PJM assets. It doesn't seem like it's having any benefit on either O&M or other like cost items. Is it just because, again, you're taking an additional time for Calpine's ownership and thus higher cost? Because I would have expected that there is some cost benefit by divesting these assets. Shane Smith: Yes, there's a little bit of a lumpiness year-to-year on O&M for some onetime things. It's dependent upon nuclear fuel outages and things like that. So it's not always easy to look at just a 2-year view and say, "Well, if these are coming out, I wouldn't see this material delta year-over-year." So there's some more intricacies to it that create some lumpiness besides just looking at 2 years and trying to adjust for inflation. Agnieszka Storozynski: Okay. And then just one big picture question, Joe. I mean we've had a lot of announcements -- semi-announcements about new build in PJM. How do you see those potential capacity additions? I mean as you said, the cost basis is pretty high. And I'm not quite sure if there is offtake agreement behind this potential CapEx on the gas-fired side. But are you concerned that there could be some, I don't know, noncompetitive entrants into the PJM market, which in turn would suppress both energy and capacity prices? Joseph Dominguez: Yes, Angie, I think 2 things have happened in that space. We saw kind of a wave of interest in legislation that would allow the utilities to return to building generation. And I thought that was a risk to the market. I think favorably, we haven't really seen that gain traction anywhere, and people seem to be rejecting that idea. So since the last time we talked, probably improvement in terms of that risk vector. There have been announcements for things that are, at least based on what we understand about the projects, that are going to exist off the grid. And so there doesn't seem to be to us any meaningful impact that those things will have on energy and capacity markets. But we're still looking at that. Frankly, what we have on some of this stuff is just press releases and not much more. So a more fulsome answer would require us to kind of understand what's going on. And I don't know what's real or not real. There's a lot of press release activity going on all over the place about different things that, I think you correctly point out, might add some noncompetitive supply, whether energy and capacity into the market. But who knows how long it's going to take to actually build that stuff or, frankly, whether it's real and it has offtake agreements yet. We're seeing the same thing, but I can't really give you anything meaningful on that because I don't understand the details yet. Operator: Our next question comes from James West with Melius Research. James West: Joe, thanks for all the great details this morning. One of the things I wanted to ask about that I think gets under-recognized by the market overall is the increased demand on your capacity is leading to much better durability in your earnings. And I wonder if you could comment on that. And one, if you agree with that. But two, if you could comment on how that creates -- is creating durability and how we should think about that durability. Joseph Dominguez: Yes. I mean -- so I think about it in a few ways. On the nuclear side, you all understand what we're doing. We're taking the production tax credit and we're modeling that as the base earnings. So there's obviously -- what we're seeing is power prices in certain regions exceeding that, and so giving us some additional opportunity above the production tax credit floor price. So we're seeing a bit of that. We're also seeing it in terms of the gas-fired generation being dispatched more often. So that would translate into what I would think of as a tailwind for enhanced earnings more than for base earnings. Where it kind of converges though is that in long-term contracting, in the mind of the customer, ultimately, it's about doing better than they're going to do over the long term with the variability in the market. So I think that -- I think the fundamentals that you're talking about are actually driving people to want to secure long-term contracts at prices that we would then put into base earnings and making the base earnings more durable in that sense. But I really think the way we've explained it here is probably the best way. And that's to give you this baseline that we think of as durable and then quantify for you some additional opportunities on top of that. And in terms of the way I kind of simply think about the stock and the value we're trying to deliver to owners is we're taking a look at the S&P, and we're saying, what's the average multiple in that S&P? And then underneath that, what are the growth rates for different companies? What are their cash flow capabilities? What's their long-term durability to have assets that are going to be around for decades? And that's where we're trying to distinguish ourselves, as always being better than that average. That's the philosophy of the company. So that when we show up and we present to you, look, in a very conservative way, we see a 20% CAGR. What we're saying is go look for other opportunities in the S&P, and we bet that our opportunity is going to be better than other things that you could find. And then you layer on top of that kind of catalysts for even better performance, some of which would land in base earnings, like PTC increases as a result of inflation, some of it would land in enhanced earnings. But to give you a page here, and Page 23 does this, to say, look, here are the opportunities we're going after. And if we realize those opportunities, here's what it's going to mean on top of what we just talked about. James West: Okay. Makes sense. And then maybe just a quick, Joe, a quick follow-up for me. You've mentioned the PJM clarity. When do you expect to have clarity in that market? I mean I know you're very close and you're working with the federal government and all state regulators and everybody is trying to come to that moment. When do you expect to see that happen? Joseph Dominguez: Look, I expect to see that this year. I mean that -- again, these things are out of Constellation's control. But what I'm seeing is a FERC that's highly motivated to get this done and administration that believes that leading in the data economy and this important part of innovation is essential to America going forward. So they want to have this clarity. And then obviously, have other market participants like us, the utilities, everybody's pushing for some clarity here so we know the rules of the road going forward. And so look, I'm hoping all of that pressure drives us to a place where we get that clarity from FERC this year and it clears up questions in the minds of customers and others. Operator: Our last question comes from Julien Dumoulin-Smith with Jefferies. Julien Dumoulin-Smith: A couple of things real quickly. First, some of the nuances here. I think it says that '27 assumes average shares outstanding are held flat. Are you guys assuming this $5 billion buyback is executed in the core EPS? I just want to clarify that real quickly. And then separately, I think Steve got at this a little bit, but how do you think about capital allocation and further buybacks as maybe a policy for beyond the '27 period, like '28, '29? Is there a ratio? Is there a payout? Is there something that -- to give people a heuristics on that front? And then I got a quick follow-up. Shane Smith: Julien, it's Shane. So let me take the first part. I mean we did not reflect an assumption on how many shares we would repurchase, in part to not overly signal to the market what our strategy is here. We want to preserve flexibility there. So I trust you all can make some assumptions on how we would probably allocate that over the next 21 months or so. But our '27 share count is not reflected on an assumption of what we take out before year-end '26. Secondly, let me make sure I hit your question there. But I think it's consistent with what we've done to date. I mean we're -- as Joe hit on, we think we have a number of opportunities to bring new megawatts to the grid in a variety of different areas. We obviously are looking for some policy clarity here as well as customers that want the long-term contracts. And so our priority is on identifying growth at double-digit unlevered returns. To the extent that doesn't present itself as an opportunity, we're very comfortable acquiring our shares at this price. And we think we have a lot of cash flow ultimately to end up doing both. But we won't make an ill-informed investment decision because we feel the money has got to go somewhere. We're very confident in reacquiring our shares. Julien Dumoulin-Smith: Awesome. So the EPS guidance per se doesn't include the buyback, but the 20% EPS CAGR in the more -- in the broader sense does. And then if I can, just to follow up on this, you have this 10% rolling CAGR. Can you describe a little bit about how to think about that? And obviously, you talked about a base EPS number there too. Is this 10% rolling supposed to be like off of that '29 that we should be thinking about, implicitly growing 10% from '29 onwards? Or is this more, hey, next year, when you roll the plan from '27 to 2030, you should be kind of thinking about it being more in the 10% ZIP code? I just want to clarify how you're thinking about that. I think I get the concept, but I want to make sure we're crystal clear about what you're suggesting here is growth kind of implied beyond '29. Shane Smith: Sure. So let me clarify on your first point, there is no benefit in the 20% base EPS CAGR from capital allocation for the share repurchase. So that is all upside. That's all reflected in the $0.50 upside on Slide 23. Secondly, when we recalibrated the base EPS CAGR of 20% on a 3-year view, we are projecting to roll that forward and a commitment to essentially grow base EPS CAGR at 10% each rolling 3-year cycle. And that's kind of our minimum target, Julien. What I'd say is, again, that Slide 23 that shows the optionality, we're assuming that we're going to execute on some of those levers and ideally have a higher growth rate than the 10%. But we're saying we have great line of sight that if you start next year, looking at following 3 years and so forth, that we have good line of sight into a rolling 3-year view of a 10% base EPS CAGR. Julien Dumoulin-Smith: All right. Perfect. So again, stress, no buyback reflected in any of this '26 onwards. More to the point, the rolling piece is truly genuinely a rolling 3-year average, and that's the minimum here. But if you thought about '27 to 2030 here, again, obviously, you've got a plus at the end of that 10%. Don't necessarily take it too literally. Shane Smith: I think you've got it. Julien Dumoulin-Smith: Awesome. All right. Excellent, guys. I really appreciate it. Operator: This concludes the Q&A session, and I will turn it back to Joe Dominguez for closing comments. Joseph Dominguez: Great. Well, thank you, again, all of you for joining us. We've got a lot of work still in front of us to integrate Calpine. The future is very bright. Hopefully, we've given you something here this morning that allows you to understand what the baseline strategy is for the company and what we intend to return to our owners in terms of value and the many upside opportunities. Thanks again for participating, and have a great day. Operator: And ladies and gentlemen, thank you for participating in today's call. This concludes today's program. You may all disconnect. Everyone, have a great day.
Operator: Good afternoon. My name is Dave, and I will be your conference operator today. At this time, I would like to welcome everyone to Jushi Holdings, Inc.'s Fourth Quarter and Full Year 2025 Earnings Conference Call. Today's call is being recorded. I will now turn the call over to Trent Woloveck, Co-Chief Strategy Director. Thank you. Please go ahead. Trenton Woloveck: Good afternoon, and thank you for joining us today on Jushi's Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Trent Woloveck, and I am the Co-Chief Strategy Director at Jushi Holdings, Inc. With me on today's call are Jim Cacioppo, our Chairman and Chief Executive Officer; Michelle Mosier, our Chief Financial Officer; and Jon Barack, our President and Chief Revenue Officer. This call is also being broadcast live over the Internet and can be accessed from the Investor Relations section of the company's website at ir.jushico.com. In addition to the company's GAAP results, management will provide supplementary results on a non-GAAP basis. Please refer to the press release issued today for a detailed reconciliation of GAAP and non-GAAP results, which can be accessed from the Investor Relations section of the company's website. Additionally, we would like to remind you that during this conference call, we will make forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. Although Jushi believes our estimates and assumptions to be reasonable, they are subject to a number of risks and uncertainties beyond our control and may prove to be inaccurate. We caution you that actual results may differ materially from any future performance suggested in the company's forward-looking statements. The risk factors that may affect actual results are detailed in Jushi's Form 10-K and other periodic filings and registration statements, which may be accessed via EDGAR and SEDAR as well as the Investor Relations section of our website. These forward-looking statements speak only as of the date of this call, and Jushi expressly disclaims any obligation to update this forward-looking information. I will now turn the call over to Jim. James Cacioppo: Thank you, Trent, and thank you, everyone, for joining our call today. This afternoon, I will provide a high-level overview of our performance for the fourth quarter and full year 2025, followed by an update on our recent refinancing. I will then discuss key regulatory developments, including progress towards adult use in Virginia before turning to our operational execution across the business and broader industry dynamics. I will conclude with a review of the regulatory landscape across our key markets before turning the call over to Michelle for a detailed financial review. Beginning with our financial results, revenue for the fourth quarter was $68.3 million, representing year-over-year growth of approximately 4% compared to the fourth quarter of 2024. On a full year basis, revenue increased to $262.9 million, up just over 2% from 2024. While the top line growth remains modest, these results reflect continued stabilization across our retail footprint. Contributions from new stores opened throughout the year and enhanced product availability and quality driven by improved operational execution at our grower-processor facilities. Gross profit for the fourth quarter was $28.6 million, representing 41.9% of revenue compared to $25.4 million or 38.6% of revenue in the prior year quarter. For the full year, gross profit was $114 million or 43.4% of revenue compared to $118.3 million or 45.9% of revenue in 2024. While margins were down modestly on a full year basis compared to 2024, the year-over-year improvement in the fourth quarter reflects the benefits of ongoing operational improvements at our grower-processor facilities, which have driven product quality improvements, yield and potency gains and better product mix. These benefits were partially offset by promotional retail activity amid ongoing pricing pressure in certain markets. Adjusted EBITDA for the fourth quarter was $13.9 million, representing a margin of 20.4% compared to $8 million or 12.2% in the prior year period. The improvement reflects the cumulative impact of the operational turnaround we began executing in late 2024, continued discipline around cost structure and better utilization of our production footprint as well as $3 million of employee retention credits recognized in the quarter. For the full year, adjusted EBITDA increased to $50.3 million, up from $46.2 million in 2024, with margin expanding to 19.1% from 17.9%. Full year results include approximately $10.6 million of employee retention credits recognized during 2025. Building on this strong operating foundation, we took an important step subsequent to year-end to strengthen our balance sheet and position the company for the next phase of growth. On March 27, 2026, we refinanced our existing term loan and second lien notes, which had outstanding principal balances of approximately $46 million and $86 million, respectively, and were scheduled to mature within the next 12 months. We completed the refinancing through the issuance of a $160 million first lien secured term loan due in 2029 with a 12.5% coupon structured as interest-only payments over the 36-month term. The proceeds were used to fully repay the existing term loan and second lien notes, including accrued interest and related fees with excess proceeds to be used for general corporate purposes. The transaction was completed with the participation from a syndicate of lenders, including our 2 largest shareholders, myself included. As part of the refinancing, I contributed additional capital, increasing my overall position relative to my prior participation in the first and second lien debt, reflecting my continued confidence in the strength of our business and our long-term strategy. Overall, the refinancing strengthens our balance sheet and improves our financial flexibility. Importantly, this financing was completed without issuing any warrants or equity-linked securities, unlike prior debt transactions, resulting in no dilution to shareholders. Additionally, the new term loan provides $13 million of incremental liquidity to our balance sheet and includes a single financial covenant requiring the maintenance of a minimum cash balance, which we believe provides a meaningful flexibility going forward. With a stronger balance sheet and improved liquidity in place, we believe the company is well positioned to capitalize on several growth opportunities ahead, including the anticipated transition to adult use in Virginia. In Virginia, several bills were introduced during the 2026 legislative session, including HB642 and a Senate companion SB542 as well as SB671 that established the framework and sequencing for a regulated adult-use market. Earlier this month, the Virginia legislature reconciled the competing bills via conference committee and sent the final bill to the governor for her signature. Under the reconciled bill, all existing medical operators will transition to a dual-use license with applications expected to be released on or before September 1, 2026, and license issuance on or before December 1, 2026. Converted licenses will pay a $10 million conversion fee subject to an agreed-upon payment plan with the regulator. Retail sales are expected to commence on January 1, 2027. We are encouraged by the regulatory process made and are very excited about the opportunity to transition Virginia to adult-use sales on January 1, 2027. In preparation, we are expanding cultivation capacity at our current facility and exploring development of a second cultivation site to support future demand. Importantly, our manufacturing and retail infrastructure are currently prepared to support adult-use sales with minimal incremental capital investment. In markets that have expanded from medical only to also allow for adult-use sales such as New Jersey, the overall market increased significantly following the transition. Based on publicly available data, when comparing annualized medical sales prior to the launch of adult-use with the first 4 full quarters of adult-use sales, total market revenue increased by approximately 3.2x. Assuming a similar market response, we would expect Virginia to experience comparable growth as adult-use sales begin. We also want to thank Speaker Scott, Madam Chair Lucas, Delegate Krizek, Senator Aird and countless others for their leadership in advancing this legislation and positioning Virginia to become the first southern state to pass an adult-use cannabis program. We are hopeful that Governor Spanberger signs the bill within the next couple of weeks. Stepping back, 2025 was a year of execution and recovery relative to 2024. We focused heavily on rebuilding operational consistency, improving product quality and aligning capital allocation with high-return opportunities. While the macro environment remains competitive and price constrained, particularly in adult-use markets, we believe the business is now meaningfully stronger than it was a year ago. From a macro perspective, the competitive landscape remains tight. Pricing pressure persists across most markets, driven by supply imbalances and consumer value sensitivity. At the same time, enforcement against illicit and intoxicating hemp products remains uneven in certain regions, and we continue to engage constructively with regulators and policymakers on these issues. Against this backdrop, our strategy remains centered on execution, quality and disciplined capital deployment, prioritizing margin, cash flow and long-term value creation. Operational execution at our grower-processor facilities was the most important driver of improvement in 2025. Investments in genetics, facility upgrades and enhanced cultivation and production practices translated into materially better yields, higher potency and improved product consistency. In the fourth quarter, average yield across the portfolio increased approximately 28% on a per square foot basis year-over-year, alongside an increase in [ AB bud ] flower production across the portfolio. Potency remained strong in the mid- to upper 20% THCa range. Together, these improvements supported a more favorable product mix across both our retail and wholesale channels. We continue to deploy high-return capital into our grower-processor footprint to meet current demand in Virginia, Pennsylvania and Ohio. In Virginia, we brought one additional flowering room online during the fourth quarter of 2025, adding approximately 3,000 square feet of canopy within our existing footprint. Additionally, we are planning to add 2 more flowering rooms of similar size within the existing footprint over the course of 2026 and early 2027, increasing canopy by approximately 33%. In conjunction with this canopy expansion, we are adding hydrocarbon extraction capabilities to support a broader mix of higher-value concentrate products, process more throughput and expand product selection for patients and consumers. We are also in the design phase for a new 65,000 square foot warehouse expansion in Virginia that would roughly double our canopy there and support expanded processing capabilities. In parallel, we are evaluating a potential expansion of our mortgage and other possible traditional financing options to support this build-out. In Pennsylvania, Phase 1 of our cultivation expansion involved converting a legacy flower room into 3 modernized flowering rooms, effectively creating new productive capacity. Two of those rooms completed their first harvest in January, and the third room is on track to complete its first harvest shortly. Phases 2 and 3 involve reengineering unutilized space with the potential to add approximately 4 additional flowering rooms and increase total canopy by roughly 40%. We have begun ramping up Phase 2 by completing targeted prework and other sequencing activities while deliberately limiting capital deployment at this stage. This approach is intended to shorten the time line required to bring capacity online once there is greater visibility into adult-use sales in Pennsylvania. Importantly, these activities are being funded from our existing balance sheet, and we would not pursue additional financing to fund these projects until there is clear regulatory direction. In Ohio, canopy increased approximately 2.4x year-over-year, allowing us to expand production capacity while maintaining quality and consistency across the facility. We are in the design phase for a warehouse expansion that would add additional canopy, though we would only proceed if market conditions and cost of capital are favorable. Turning to retail. Since the end of the third quarter of 2024, we have added 8 retail locations through the end of 2025, including Toledo, Oxford, Warren, Mansfield and Parma in Ohio, Linwood in Pennsylvania, Peoria in Illinois and Little Ferry in New Jersey. As of year-end, we operated 42 retail stores across our footprint. Subsequent to year-end, we opened an additional location in Springdale, Ohio in January of 2026, and we entered into an agreement to sell our Peoria, Illinois location, subject to regulatory approval. We are actively evaluating 4 to 5 potential store relocations to improve profitability, and we continue to evaluate retail license and store acquisition opportunities in Ohio, Massachusetts and New Jersey. We will not be moving forward with the previously contemplated Mount Laurel, New Jersey location following our termination of the underlying transaction. At year-end, Jushi had approximately 1,288 employees compared to 1,234 employees at the end of 2024. During this time, we grew from 38 stores to 42 stores while maintaining lean staffing levels and driving productivity improvements across the network. While our store count increased by approximately 11% year-over-year, headcount only increased by approximately 4%, reflecting our ability to scale efficiently. The performance underscores the effectiveness of our corporate and retail operating model and the execution of our leadership team. Commercially, we are evolving into what we believe is a genetics-driven product strategy. We've made substantial progress building a robust genetics pipeline and rolled out new strains across all our grower-processor facilities in 2025, with plans to refresh approximately 20% to 30% of our cultivator menu annually. We believe this disciplined approach to genetics supports product differentiation and strengthens our competitive position across markets. We also continue to see growth in our private label portfolio during the fourth quarter, supported by ongoing innovation across both emerging brands such as Hijinks and Flower Foundry and established brands such as Seche and The Lab. During the quarter, we added approximately 280 new unique SKUs, including new offerings across these brands. These launches reflect our continued focus on refreshing assortments, expanding premium and value offerings and meeting evolving consumer preference. As we aim to provide patients and guests with enhanced variety and as part of our ongoing focus on retail execution, we are exploring an e-commerce AI agent to drive growth, further optimize online ordering and recommend our expanded product offerings. On the regulatory front, in Pennsylvania, the state continues to face a significant budget gap and progress toward passing an on-time and balance budget remains an ongoing challenge. While adult-use legalization efforts have not yet produced enacted legislation, there has been movement on establishing a dedicated regulatory framework for cannabis oversight through SB 49. During the fourth quarter, bipartisan legislation to create a stand-alone Cannabis Control Board advanced out of the Senate Law and Justice Committee and is now awaiting consideration by the full Senate. The proposed Board would oversee the existing medical marijuana program and align state regulation of intoxicating hemp products with federal regulations. We continue to monitor these developments closely as regulatory clarity will be important for long-term planning. In Virginia, in addition to the adult-use bill, legislation was passed strengthening enforcement around intoxicating hemp products via SB 543, which enhances the enforcement authority and HB 26 and SB 62, which updates unlawful cannabis criminal penalties. In Ohio, the state enacted SB 56, which updates the regulatory framework for cannabis and hemp products and effectively restricts the sale of intoxicating hemp products to licensed marijuana dispensaries. This legislation, which was signed into law in December of 2025 and became effective in March 2026 is intended to close existing loopholes strengthen enforcement by state regulators and federal agencies and direct THC-containing products into the regulated dispensary channel. We believe these changes should support a more consistent and regulated marketplace over time. In Massachusetts, lawmakers have advanced proposals to update the state's cannabis regulatory framework, including legislation passed by the House that would increase the number of retail licenses a single operator may hold, potentially allowing up to 6 locations over time. The Senate has proposed a smaller increase and the chambers continue working toward a final version. If enacted, these changes could support greater consolidation and influence competitive dynamics in the market. At the federal level, there has been incremental progress toward addressing the hemp regulatory gap created by the 2018 Farm Bill. In November 2025, Congress enacted legislation that narrows the federal definition of hemp, restricts synthetic intoxicating hemp-derived cannabinoids and establishes new limits on THC and finished products. These changes are scheduled to take effect in November 2026. We believe these measures could help direct intoxicating THC products into the state-regulated cannabis markets over time, though the timing and broader regulatory framework continue to evolve. On rescheduling, the process to move cannabis to Schedule III remains underway with regulatory review continuing and no final rule issued as of today. While we view this as a constructive development, the ultimate timing and scope of impact remains subject to federal rule-making process. We'd like to thank President Trump for his leadership by signing the EO at the end of 2025. Finally, potential federal reforms that could improve capital markets access for U.S. cannabis operators, including proposals such as the ClimACT remain uncertain and no legislation has been enacted. We will continue to monitor developments at the federal level. With that, I will turn the call over to Michelle for a detailed review of our financial results. Michelle Mosier: Thank you, Jim, and good afternoon, everyone. I will now provide more detail on our fourth quarter results. Revenue for the quarter increased by $2.5 million to $68.3 million compared to $65.9 million in the prior year quarter. Overall, the year-over-year increase in revenue was driven primarily by retail growth, reflecting contributions from new stores in Ohio and strong sales performance from all our Virginia stores. Revenue in our retail channel was $60.4 million compared to $58.1 million in the fourth quarter of 2024. The increase was primarily due to growth in Ohio and Virginia. Ohio represented the largest contributor due to new stores, while Virginia delivered growth across all stores, primarily driven by increased units sold, while average selling prices remained relatively flat. This growth was partially offset by continued price pressure and competitive dynamics in other markets. In addition, our focus on retail execution and customer engagement continued to support stronger performance of our Jushi branded product sales, which represented approximately 58% of retail revenue across the company's 5 vertical markets in the quarter compared to 55% in the prior year. Our delivery business in Virginia continues to thrive both within our health services area and outside our HSA. For the full year, delivery sales increased approximately 29% year-over-year in our HSA II area and approximately 76% out of our HSA II area, driven by growth in the number of orders, which increased approximately 20% and 79%, respectively. Wholesale revenue was $7.9 million compared to $7.7 million in the comparable quarter of the prior year. Year-over-year increase reflects higher sales across several wholesale markets led by Massachusetts and Ohio. In Massachusetts, growth was driven primarily by increased bulk sales and expanded wholesale distribution, including placement in new dispensaries. In Ohio, the increase reflects expanded distribution and higher sales volumes. Pennsylvania also delivered steady growth across the wholesale channels. These increases were partially offset by a $1.2 million decline in Virginia, where wholesale partners continue to prioritize their own vertical sell-through. Gross profit was $28.6 million or 41.9% of revenue compared to $25.4 million or 38.6% of revenue in the fourth quarter of 2024. The year-over-year increase in gross profit and gross profit margin was primarily driven by higher production volumes, improved product quality and stronger performance across our grower-processor facilities, reflecting the operational improvements implemented over the past year, particularly in Pennsylvania, Massachusetts and Ohio. These benefits were partially offset by continued pricing pressure across our footprint, which led to increased promotional activity. Operating expenses for the fourth quarter were $27.8 million compared to $27.2 million in last year's fourth quarter. As Jim mentioned earlier, we continue to add new retail locations while scaling the organization efficiently. The modest year-over-year increase in operating expenses primarily reflects costs associated with new store openings and a larger retail footprint, partially offset by the impacts of continued cost discipline. Other income and expense included $10.4 million of interest expense, which is partially offset by an $800,000 fair value gain on our derivatives and by other net of $500,000. Other net was primarily comprised of $3 million related to employee retention credit claims, including interest received from the IRS, partially offset by a $2.6 million noncash adjustment to our indemnification asset related to acquisitions made in prior years. As with prior periods, we continue to recognize the ERC refund claims and income as the refunds are received from the IRS. As of the end of the fourth quarter, we had approximately $700,000 of remaining ERC claims outstanding, all of which were not factored. Our net loss for the fourth quarter was $15.6 million compared to $12.5 million in the prior year. Adjusted EBITDA was $13.9 million compared to $8 million in the fourth quarter of 2024, and adjusted EBITDA margin was 20.4% compared to 12.2%. Moving to the balance sheet. As of December 31, 2025, the company had approximately $26.6 million of cash, cash equivalents and restricted cash. Cash provided by operations was $6.1 million compared to $7.2 million provided in the fourth quarter of 2024. The change reflects working capital improvements. As of December 31, 2025, we had $193.1 million of debt subject to repayment, excluding the $21.5 million of promissory notes issued to Sammartino that remain in dispute as well as leases and equipment financing obligations. Our term loan with a principal balance of $46.1 million and our second lien notes with a principal balance of $86.2 million were scheduled to mature at the end of 2026. As Jim mentioned earlier, subsequent to year-end, we completed a refinancing of these facilities, which extends our debt maturities and further strengthens the company's balance sheet. For the full year 2025, capital expenditures totaled $16.1 million, consisting of $4.8 million of maintenance CapEx and $11.3 million of growth CapEx. As we consider capital expenditures for 2026, we currently expect maintenance CapEx to be in the range of approximately $4 million to $5 million, consistent with our ongoing focus on maintaining and optimizing our existing asset base. Excluding capital associated with potential regulatory changes, we currently expect 2026 growth CapEx to be in the range of $5 million to $8 million. These investments would support targeted initiatives across our grower-processor footprint and select retail build-outs. This would result in total projected capital expenditures of $9 million to $13 million in 2026. As Jim mentioned earlier, regulatory developments, particularly in Virginia, will influence the timing and scale of future capital investments. In the case of Virginia, we're developing plans for grower-processor expansion contingent on adult use. We believe a significant portion of any such expansion could be financed through an expanded facility mortgage, and we would expect the majority of construction-related capital spending to occur in 2027 rather than 2026. And with that, I will turn the call back to Jim for closing remarks. James Cacioppo: Thank you, Michelle. As we reflect on 2025, it was a year defined by execution, operational recovery and disciplined decision-making. We entered the year focused on continuing to stabilize the business, improving product quality and strengthening our operational foundation, and we believe the progress we delivered across cultivation, retail and commercial demonstrates that those efforts are taking hold. Across the organization, we improved yields, potency and consistency at our grower-processor facilities, expanded and optimized our retail footprint and continue to shift our mix toward higher quality and branded products. These operational improvements are translating into stronger margins and a more resilient business model, even as pricing pressure and competitive dynamics remain elevated across the industry. Importantly, we are approaching growth with discipline. As we discussed today, we are making targeted high-return investments to support current demand while carefully sequencing larger opportunities around regulatory clarity. In Virginia and Pennsylvania, we are preparing thoughtfully for potential adult-use expansion while remaining prudent in our use of capital and focused on protecting the balance sheet. Looking ahead to 2026 and 2027, we are particularly excited about the transition to adult use in Virginia. With our cultivation, manufacturing and retail infrastructure already in place, we believe we are well positioned to participate in what will be a meaningful expansion of the Virginia cannabis market. Our focus remains on preparing thoughtfully for that opportunity while continuing to operate with the same discipline that defined our progress in 2025. More broadly, our priorities remain unchanged. We will continue to execute with discipline, focus and operational excellence, allocate capital thoughtfully and build a scalable platform capable of delivering sustainable profitability and long-term value for shareholders. Before we conclude, I want to thank the entire Jushi team for their dedication and hard work throughout the year. Their commitment across the organization is the foundation of the progress we have discussed today. Thank you all for joining us and for your continued support. Operator, please open the call to questions. Operator: [Operator Instructions] Our first question comes from Frederico Gomes with ATB Cormarkets (sic) [ Capital Markets ]. Frederico Yokota Gomes: My first question, I guess, 2 questions on the gross margins. Was a decline sequentially from 46.7% in Q3. So could you maybe talk about it? Is it related to seasonality maybe or any onetime items impacting the gross margin? And then second, you did report an adjusted EBITDA margin expansion sequentially. So maybe just to clarify, is that related to some of the items you mentioned that are included in the adjusted EBITDA number? Or how do you square that with the adjusted -- with the gross margin decline sequentially? James Cacioppo: I'll do this. Gross margin -- on the gross margin, in the September quarter, the third quarter, we had a bulge of packaged goods and that created a lower cost per unit, and we pulled back a little bit based upon elevated inventories. It wasn't really market related. It was just production related, and we pulled back in October and November, which causes your cost per unit to go higher if you follow what I'm saying. So that was a lot of what had to do with. But also in December, you have discounting related to the holiday activity, both during Thanksgiving, things like Black Friday, which should be expand to 3 or 4 days of discounting. And then, of course, in Christmas, we do the 12 days of Christmas and it's a promotional time of the year for everybody in the spirit of Christmas. In terms of EBITDA, Michelle, do you -- I didn't quite catch that. Michelle Mosier: Yes. I think EBITDA improved. We had some ERC credit income during this quarter of about $3 million, which was a large contributor to the improvement in EBITDA. Frederico Yokota Gomes: Got it. I appreciate that. And then I guess the second question, just on -- you are increasing the percentage of branded sales in your own stores quite substantially on a year-over-year basis. So how much higher can this go? Do you have a target in mind? Any sort of rough guidance on that for this year? James Cacioppo: Yes. I mean we don't really target it as much as we focus in on consumer demand, patient demand. And -- but I think it's running sort of in the 60s, mid-60s in most of the markets. The market that brings the average down is Ohio, where we don't have supply or haven't been able to buy bulk at the right prices to do more branded products. And we have been talking over the last 6 months about wanting to do an expansion in Ohio, including on this call when we did this in prepared remarks. So one of our items that we have along with Virginia, Pennsylvania growth due to regulatory change is Ohio increasing the vertical in that market, which would increase margins in that market. We spent money in 2025 on expanding Ohio retail primarily, and we did some of that in 2024. And so we have a certain amount of budget to spend, and we decided to get the sales before we build out the core processor. Operator: The next question comes from Luke Hannan with Canaccord Genuity. Luke Hannan: I wanted to follow up on the conversation on Virginia. Jim, if I heard you correctly, I think you said that the CapEx budget -- the CapEx budget for this year is $9 million to $13 million in total, including maintenance and growth. How much of that, if any, includes a build-out in Virginia? You did mention, I think, all the -- assuming when adult-use lands, most of that CapEx is going to be coming in 2027, you're going to also draw on mortgage for that. Can you just frame up to us also what the size of that spend could be? I know it's in 2027, but I just want to get an understanding of the funds that you could have available for that. James Cacioppo: Yes. So I believe Jon will confirm this. I'll say it, but he's shaking his head that he will confirm if I'm right. But I think what we haven't planned in this year is $2 million to $3 million related to building out in warehouse. So we have grower rooms built that need to be equipped and updated these kinds of things because we haven't needed that capacity for the medical market. So we have 2 additional grower rooms. As a reminder, we have 6, are all roughly the same size. So it's 2 over 6 is the growth. That's I think will be primarily, if not all, for adult use. We don't think that will be needed for the medical demand, but it may be, some of it may be. So that's -- and we're also doing the hydrocarbon extraction. And then next year, which is not in this year's budget at all. There's not even sort of a budget item for like a deposit, but we're in construction diagram phase of the expansion of the warehouse. It's really another warehouse then we join it together. And so those of you that followed us for a long time realize that we have a lot of land that we purchased very well in Virginia during the COVID crisis. We bought the building and it was associated land, and we're going to build the warehouse on some of that land that doubles -- roughly doubles our canopy. That is not in the budget. And as Michelle noted in the prepared remarks, we believe a substantial portion of that would be paid by expanding our credit facility. And we did overfund our deal for existing cash. So we believe we'll be able to have the funding for that. We're waiting for the governor signature and then we need to get some regulatory approval as any construction project requires. Luke Hannan: Okay. And then I think you also touched on in your prepared remarks, all the medical stores there in Virginia will transition to dual use, but it is subject to a conversion fee. Did I hear you correctly that $10 million and then it's -- there's a payment plan that's set up for that as well? James Cacioppo: That's correct. Trent, do you want to comment on that? Trenton Woloveck: Yes, sure. So Luke, we get to propose a payment plan to the CCA for what we want to structure that payment -- $10 million payment to look like over 3 years. Luke Hannan: Okay. Got it. And there's no -- is there any implicit interest rate that's included in that? Or it's just a flat, you can chop it up 1/3, 1/3, 1/3? Trenton Woloveck: 1/3 -- we could do 1/3, 1/3, 1/3. We could propose whatever we would like to do. First payment would have to be made by December 1 of this year with expectation of sales starting on 1/1/27, and then we can space it out however we see fit and agree with the CCA on that. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Jim Cacioppo for any closing remarks. James Cacioppo: Great. Thanks everybody for attending. We appreciate it, and have a good day, and thanks again to all the great Jushi employees. We appreciate your effort. Bye-bye. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Sean Peasgood: Good afternoon, and thank you for joining us for Intermap Technologies conference call to discuss its financial results for the fourth quarter and full year 2025. [Operator Instructions] Certain information in this presentation constitutes forward-looking statements, including statements regarding revenue growth, conversion of government awards, timing of revenue recognition, expansion of recurring commercial revenue, capital deployment, and future operating performance. Forward-looking statements are identified by words such as anticipate, expect, project, estimate, forecast, continue, focus, will and intend. These statements are based on current assumptions and involve risks and uncertainties, including availability of capital, revenue variability, timing and the structure of government contracts, customer concentration, economic conditions, competitive dynamics, technology risk, cybersecurity and other factors described in Intermap's public filings. Actual results may differ materially. The company undertakes no obligation to update forward-looking statements except as required by law. With that out of the way, I'd like to pass the call to CEO, Patrick Blott. Go ahead, Patrick. Patrick Blott: Thank you, Sean. Good afternoon, ladies and gentlemen, and welcome to Intermap's financial results conference call for the fourth quarter and full year 2025. I'm Patrick Blott, Chairman and CEO. Today, I'll provide highlights from the year, along with a business update and outlook. I'll then turn the call over to Jennifer to review our financial performance in more detail. Revenue was $10.6 million compared to $17.6 million in 2024. Fourth quarter revenue was $1.6 million compared to $7.4 million in the fourth quarter of 2024. As has been previously detailed, the decline in total revenue reflects delays with follow-on awards for Indonesia and U.S. government programs. Meanwhile, our commercial revenue grew strongly year-over-year, driven by customer adoption of our technology advances, including proprietary AI capabilities. In our Czech market, the beta introduction of the Risk Assistant saw 8 leading insurers representing more than 90% market share of the multi-perils market adopt Intermap's AI-assisted risk platform with major providers such as Generali already expanding their usage throughout Europe. Our precise object level evaluation supports more informed underwriting and reinsurance decisions at scale and with automation. We estimate this to be a $1.2 billion addressable market globally given the large protection gaps. Indonesia is progressing through a World Bank-sponsored procurement process, and we have been down selected across all 4 remaining lots, representing a potential $200 million opportunity. Intermap has positioned itself through advances in its commercial business and technology as a leader in the technologies required to achieve data sovereignty, provenance and custody objectives for governments as they increase focus on their national security. This is also happening in Indonesia. Governments around the world are worried about their sovereignty. They're worried about their data security, and Intermap is one of a small number of contractors that has both past performance and an installed base where we can provide military-grade data with assurances. We are also in final contracting on several U.S. government programs that were delayed due to the federal budget process. These are funded programs where we have a strong visibility toward award. Similar to our proven commercial offerings, these data solutions offer assured position, navigation and timing at scale with quality that is investment grade and suitable for large-scale automated deployments. Together, these government delays account for essentially all of the year-over-year revenue decline. The business itself is stronger than ever. Subscription and data revenue grew 29% to $5.2 million and is now our largest revenue category. We invested significantly in the business with over $1.8 million in technology upgrades, people, fixed asset and capacity expansion and $3.9 million to reduce liabilities and improve our working capital position and credit profile, lowering our cost of capital. Excluding currency fluctuations, working capital and the fixed asset investment, cash flow from operations improved 30% compared to last year. The business operated at cash flow breakeven while we invested in growth. We strengthened the balance sheet, ending the year with $22.5 million of cash and $24.6 million of shareholders' equity. We upgraded our audit to the more rigorous PCAOB standard and hired MNP to see Intermap through its road map towards an uplisting to the NASDAQ and a U.S. registration at the appropriate time. The underlying business is growing, scaling and better positioned than at any point in its history. We affirm our guidance of $30 million to $35 million revenue with a 28% EBITDA margin. And with that, I'll turn the call over to Jennifer to walk through the financials in more detail. Jennifer? Jennifer Bakken: Thank you, Patrick. As a reminder, we report our financial results in U.S. dollars. As Patrick mentioned, revenue for 2025 was $10.6 million compared to $17.6 million in '24. As we previously discussed, the decline was entirely attributable to delays in the follow-on work on Indonesia and U.S. government programs rather than any loss of existing programs. Operating loss for the year was $6.9 million compared to operating income of $2.5 million in the prior year. Net loss was $6.7 million compared to net income of $2.5 million in 2024. The year-over-year change was primarily driven by lower revenue related to contract timing, along with increased fixed costs as we continue to invest in our infrastructure and capacity to support expected growth in 2026. Turning to the balance sheet. We ended the year with cash of $22.5 million compared to $400,000 at the end of '24. Shareholders' equity increased to $24.6 million from $3.7 million over the same period. Our current ratio, which is defined as current assets divided by current liabilities, improved significantly to 5.2x at year-end '25 compared to approximately 1x at the end of the prior year, reflecting the substantial strengthening of our balance sheet and capital structure. These improvements were driven by financings completed during the year as well as the timing of government program execution and related revenue recognition. Overall, we believe our improved liquidity and capital position provide a solid foundation to support our expected growth in 2026. I'll now turn the call back to Patrick. Patrick Blott: Thank you, Jennifer. We're on Slide 5. The revenue mix shifted towards recurring and subscription data. Subscription and data revenue grew 29% to $5.2 million and represented 49% of total revenue. That growth was driven by expansion of our insurance analytic platform and broader enterprise adoption of our subscription offerings. While Acquisition Services declined due to the timing of large government programs, the overall business continues to shift towards recurring, higher-margin subscription and data revenue. During the year, we made substantial progress across the business. We strengthened the balance sheet through financings completed in February and September. We advanced large government opportunities, including with Malaysia, Indonesia and the U.S. government. We expanded our commercial insurance analytics platform. We deployed the AI-enabled Risk Assistant. We also completed infrastructure upgrades, including GPU capacity and security enhancements to support scalable delivery. In terms of priorities, we're focused on converting a large and growing government pipeline into contracted awards, particularly in Southeast Asia, starting with Indonesia and Malaysia. We're converting contracts in task orders for the U.S. Defense Department and FedCiv customers, and we're expanding geographically into South America and Europe. We're scaling recurring subscription data and analytics revenue, leveraging the Risk Assistant framework to accelerate adoption, growing deeper into the market opportunity globally, expanding into additional vertical markets that leverage our military-grade technologies and autonomous navigation and telecommunications. And we're allocating capital with discipline, both in partnership with previously announced DARPA programs that fund emerging dual-use geospatial technologies and while supporting key internal growth pursuits and product development with a focus on high-margin API-enabled recurring revenue. And we're leveraging our strengthened balance sheet to compete for larger, longer duration programs. We're now ready to move to the Q&A section of the call, and I will pass the call back to Sean. Sean Peasgood: Great. Thanks, Patrick. [Operator Instructions] First question, there are several questions on Indonesia. So do you have any color that you can share with respect to the drivers of the delays in the process? It looks like the technical component of the evaluation was completed last Thursday based on the publicly available schedule. How do you feel about the remaining milestones? And do you have any color on the competitors that cleared the technical component? Patrick Blott: Yes. I've mostly shared as much as we can share, but I can say that, I mean, it's a big program for them and us, but it's a big program for them. And it involves the World Bank. It involves layers of decision-making and approvals and a process that's new, and it's -- that's the driver of the delays. Sean Peasgood: Okay. And then no comment on the competitive side of things at this point. You don't have that information or not able to comment? Patrick Blott: Yes. Yes, we're not commenting on the competitive stuff. Sean Peasgood: Okay. Yes. So if that's it on the Indonesia stuff, I think we really don't have limited things that we can talk about. So on the Malaysia flood mapping contract, can you discuss if any revenue from Q4 was recognized from that contract? And then any insight of further opportunities from that initial contract in Malaysia? Patrick Blott: Yes. I mean that is actually several awards under a program there, which we've announced the award of one, but that is 2026 revenue, all of it. Sean Peasgood: Sorry, these questions are still coming in here. Can you speak about the uplift in the U.S.? Maybe just give everybody an update on that. Patrick Blott: Yes. I said before, I mean, it is a priority for the company. It is a strategic objective. And we're on a road map. There's a lot of things logistically that need to get done. A couple of big ones have occurred, including the foreign private issuer filings, the uplifted audit to the PCAOB standard, but the registrations and the uplisting are something that we're going to get done. Valuation is a factor. So it's going to get done at the appropriate time. Sean Peasgood: Can you -- while you can't talk about competitors, do you still feel that Intermap is the only company in the world that meets the technical capability to take on the contract? I'm assuming the Indonesia one is what they're referencing. Patrick Blott: I believe that. And most certainly, that applies to the past performance. Sean Peasgood: On the commercial side, obviously, there's a bunch of growth there. Can you talk about anything outside of insurance? Are there other drivers other than insurance in the commercial business that people should be looking at? Patrick Blott: Yes. I mean again, large-scale data problems, right? We sell it similarly. The customers consume it in a very similar fashion, but they consume it for different use cases. And -- but large-scale data problems, particularly things like autonomous navigation, which is a big one and also communications and signals, signals monitoring signals propagation, that's another big one. And so there's a variety of verticals that are benefiting greatly from the availability of what was once just high side classified military data. And now it's being used to solve big problems and at scale. So where there's commercial big problems at scale, that's where our data may be a good fit. Sean Peasgood: Next question. Given that AI companies seem to be eclipsing software companies these days. Where and how do you characterize Intermap on the spectrum of software versus AI? Patrick Blott: Yes. I mean that's a good question. I was invited to a government-led conference for mostly a government audience just a couple of weeks ago, military and intelligence where people are very focused on that and essentially leveraging the AI because from our perspective, where we use it, and we use it in about 5 different work streams at Intermap in terms of both product development and capability development. And then we market it, we have actually marketed and sold a product that is a agentic AI product. So we're pretty familiar with it. We've been working with machine learning and AI for a long time. We've had the GPUs in place for years now as we -- because we have one of the largest commercial archives in the world, right? We have training data that's unmatched at global scale. And so this is a capability that isn't new to Intermap. But what's happening is it is making our people much more effective, and it's making our customers and the products that we sell them much more accurate. And so speed and accuracy is where we focus and AI is helping us move the football there. But what -- I mean, Intermap fundamentally is a data company, right? People are consuming points. The more the more points I sell, the more money we all make. We're not -- people consume through various software features. And if I can find ways to make points easier to consume, especially for nonexpert users, I'm expanding my markets. So AI for us has been a huge help in terms of adoption, especially with new data sets as we try to get our customers to adopt more data and new data and integrate different data, AI has helped us do that. And I think it's a good thing. So that's where we -- I mean, we do definitely have software coders, but the software coders are using it, and it's making them more effective and faster. And we have also very strict -- I mean, it's not a consumer quality AI. We're dealing with, again, mil-spec data and some government and strict requirements. So things are happening pursuant to rules, and they're happening in ways that are very closely monitored as well. Sean Peasgood: Okay. Great. I had a few people asking this. So just back to Indonesia, this question says, Indonesia had a fairly limited number of bidders to begin with. So what does down selection mean in this context? And maybe just -- I don't know if you just described your term, down selection, but I did have some other people ask me right after the news release went out. Patrick Blott: It's a great question because it is a silly word. I mean it; means selection. How it became down selection, I'm not sure, but that's the universal term in government land, both in the U.S. and Canada and everywhere else when you get -- when you go through a process and you compete and you get selected, they call it down selected. Sean Peasgood: Right. Okay. Great. Just on the pipeline. So on other national mapping programs, what does the pipeline look like? And are any of these opportunities looking like a 2026 contract time line? Or should we think about those in 2027? And how important is winning Indonesia to winning these further programs? Patrick Blott: They're separate, not important at all, I would say, to the other programs. And they are in Southeast Asia, but also in other areas of the world. And there's a lot of activity going on. So I think the answer to the question is, yes, 2026, and they're not -- they're correlated in the sense that past performance matters everywhere, right, especially with larger programs. Nobody really wants to -- especially in governments, which tend to be risk-averse, they don't want to take a flyer on providers that have never done it before when the dollars are large. They might take a flyer for small dollars, but for large dollars, they want past performance. And so past performance matters. And to that extent, there's correlation there because it extends our past -- the first phase of Indonesia extends Intermap's past performance at an extremely high specification that then a lot of people around the world look at. So that's -- to that extent, they're correlated. But otherwise, they're not related at all. Sean Peasgood: Okay. Great. I do have a follow-up from the AI question. So how likely are large AI companies to replicate Intermap's technology? What is your competitive advantage in this regard? Patrick Blott: Yes. Again, I'll say it again, we're fundamentally a data company. So AI can't create data. And if it does create data, that's what we would call synthetic. So a synthetic data, you can't use for many things that our customers use data for, like you don't want to fly an airplane with a synthetic data. So it's not -- how we deliver and consume, we do try to make the consumption of our data as easy as possible. We use software to do that. And also, we want to do it at scale, right? Think of 1,000 points of light. We want to be able to deliver data into automated systems. Our insurance underwriters are pulling in excess of 5 million points a month. That's huge -- a human can't do that, right? Like a human can't look at a screen and underwrite risk at that scale. So in order to consume the data, we take every advantage we can in terms of software, AI, whatever that allows our customers to do their job in larger and larger ways. That also affects the military. Anybody can pick up the front page of any news recently and just see the evolution of targeting from looking for a bad dude in the war on terror 10 or 15 years ago to looking at literally hundreds concurrently in the current -- it's all about scale, it's all about automation. We're right in the sweet spot of all of that. AI is our helper. It's not particularly a threat because at the end of the day, people -- we want people to consume as much data as possible. Sean Peasgood: Okay. Next couple of questions on U.S. defense contracts. So have you got any traction on the key U.S. defense contracts? I know you mentioned it in your opening remarks, but any other comments there? And then are you -- again, on the pipeline there in the defense side, are there other opportunities that you haven't talked to that you're working on? Patrick Blott: Yes. And we'll announce when we can -- I mean, I can say this, we're in funded programs, and we're in contracting. So I have a pretty decent visibility, and we'll announce as soon as we can, but it's got to be inked. Sean Peasgood: Okay. This one on the World Bank. Does the World Bank have a time line on when the allocated funds need to be spent? Patrick Blott: That is a very good question. It's above my pay grade. That is a government to government Indonesia to World Bank. It's not us. Sean Peasgood: All right. I'm just looking here if there's anything else in here that we haven't hit on. Well, how many aircraft are you currently operating? And how many do you have in your fleet? Patrick Blott: We're not disclosing that, but we have more than we need, and it's not just aircraft. Sean Peasgood: Okay. Oh, from the revenue guidance for 2026, can you talk to how much of Indonesia is reflected in that 2026 number? Patrick Blott: I mean the way that we do it is we take a whole array of the pipeline, which is a factored pipeline, which is coming in from a whole bunch of different sales reps focused on a whole bunch of different things. And so it funnels through that and gets probability weighted and is basically a multi -- at the end of the day, becomes a multi-pathway. Any one of -- Indonesia is published -- it's a published budget. It's a published requirement. It's a published schedule. I'm pulling -- I don't have these numbers right in front of me, but 20% to 30% upfront of Indonesia is at least $40 million to $50 million a day the contract signed. So like pulling out any particular one is not the way that we do it, and I don't think it's the right way to do it. Sean Peasgood: So assuming you won Indonesia would be conservative. Okay. I don't think there's any other questions. And if there are, people can e-mail us if I've missed any. There are a lot in here, but a lot of them are just more on Indonesia, which we're not going to comment on or specific customers, which we're also not going to comment on. So I think with that, Patrick, I'm going to pass it back to you for closing remarks. Patrick Blott: Struggling with my mute here. Thank you for joining the call today. We look forward to updating you on progress in future quarters. Sean Peasgood: This concludes Intermap's Fourth Quarter of 2025 Conference Call. We thank you for joining us.
Operator: Greetings. Welcome to the Edible Garden AG Incorporated Full Year and Q4 2025 Business Update Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference you to Ted Ayvas, Investor Relations. The floor is yours. Ted Ayvas: Thanks, John. Good afternoon, and thank you for joining Edible Garden's 2025 Fourth Quarter and Full Year Earnings Conference Call and Business Update. On the call with us today are James Kras, Chief Executive Officer of Edible Garden; and Kostas Dafoulas, Interim Chief Financial Officer of Edible Garden. Earlier today, the company announced its operating results for the 3 months and year ended December 31, 2025. The press release is posted on the company's website, www.ediblegardenag.com. In addition, the company has filed its annual report on Form 10-K with the U.S. Securities and Exchange Commission, which can also be accessed on the company's website as well as the SEC's website at www.sec.gov. If you have any questions after the call and would like any additional information about the company, please contact Crescendo Communications at (212) 671-1020. Before Mr. Kras reviews the company's operating results for the quarter and year ended December 31, 2025, and provide a business update, we would like to remind everyone that this conference call may contain forward-looking statements. All statements other than statements of historical facts contained in the conference call, including statements regarding our future results of operations and financial position, strategy and plans and our expectations for future operations, are forward-looking statements. The words aim, anticipate, believe, could, expect, may, plan, project, strategy, will and the negative of such terms and other words and terms of similar expressions are intended to identify forward-looking statements. These forward-looking statements are based largely on the company's current expectations and projections about future events and trends that it believes may affect its financial condition, results of operations, strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to several risks uncertainties and assumptions as described in the company's filings with the SEC, including the company's annual report on Form 10-K for the year ended December 31, 2025. Because of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in the conference call may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Although the company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievements. In addition, neither the company nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. The company disclaims any duty to update any of these forward-looking statements, except as required by law. All forward-looking statements attributable to the company are expressly qualified in their entirety by these cautionary statements as well as others made on the conference call. You should evaluate all forward-looking statements made by the company in the context of these risks and uncertainties. Having said that, I would now like to turn the call over to Jim Kras, Chief Executive Officer of Edible Garden. Jim? James Kras: Thanks, Ted. Good afternoon, and thanks to everyone for joining us today. 2025 was a defining year for Enable Garden as we continue to build on our foundation and expand our long-term growth potential. Over the past several quarters, we have executed a deliberate strategy to grow beyond our core controlled environment agriculture platform into a broader innovation-driven consumer packaged goods business focusing on higher growth, higher margin opportunities aligned with what consumers and retailers are actively seeking. During the fourth quarter, we continued to build momentum across our core business, securing new and expanded placements with key retail partners, including Kroger, Weis Markets, Safeway, The Fresh Market and Busch's, increasing our distribution to nearly 6,000 store locations. This reflects growing demand for our products, our ability to gain market share and the strength of our retail relationships. We saw a strong performance across both our core produce and CPG categories, including double-digit growth in cut herbs, driven by expansion in existing accounts and the onboarding of Kroger as well as continued strength in our vitamin and supplement portfolio, where demand remains robust, both domestically and internationally. We also saw significant growth in our condiment platform, supported by new customer wins such as Wakefern and Safeway. Importantly, these efforts, along with targeted investments in customer onboarding, resulted in incremental distribution of more than 700 additional retail locations, further expanding our reach across key markets. At the same time, we are expanding our portfolio of better-for-you brands, including Kick. Sports Nutrition, Jealousy GLP-1, Vitamin Whey, Pickle Party and Pulp and broadening distribution across domestic e-commerce and international markets, including placements with Amazon, PriceSmart, Target.com at Walmart.com. This expanded retail footprint and brand portfolio positions us to support our next phase of growth into higher margin, shelf-stable and ready-to-drink categories. This is not a shift away from what we've built. It's a deliberate evolution of our business, supported by our national retail distribution and infrastructure, much of which is already in place and positioned to drive scale across higher value categories. Key next step in our strategy is expanding into the ready-to-drink, or RTD category. The fast-growing market where demand for clean label, shelf-stable nutrition continues to outpace supply. We're leveraging our Farm-to-Formula approach, our sustainable manufacturing infrastructure and our established relationships with leading retailers to enter this category from a position of strength. Importantly, we are not starting from scratch. Our products are already carried across approximately 6,000 store locations, giving us the ability to deepen existing relationships while expanding into a category that aligns closely with our brand portfolio. To support this expansion, we recently announced the development of a state-of-the-art RTD manufacturing initiative at our Midwest facility as part of our Zero-Waste Inspired platform. We have selected Tetra Pak, a global leader in food processing and packaging solutions to plan, install and integrate proprietary processing capabilities, which we expect will enable us to meet growing retailer demand at scale. When you look at broader market, the opportunity is significant. The global RTD category is estimated at approximately $842.5 billion in 2025 and is projected to reach roughly $1.26 trillion by 2033. We believe this represents a durable opportunity and builds naturally on our platform, combining controlled environment agriculture, scalable aseptic capabilities and our portfolio of differentiated brands across sports nutrition, performance nutrition, adult nutrition, kids nutrition, GLP-1 supportive and functional categories. Looking ahead, we are focused on scaling our presence in higher-margin RTD, shelf-stable categories while continuing to build a more diversified consumer packaged goods business beyond fresh produce. As we execute on the strategy, Edible Garden is evolving into a more vertically integrated, innovation-driven company with the ability to deliver more predictable and scalable results. We believe this positions us as a differentiated player in the evolving food and nutrition landscape with a clear path to sustainable long-term growth. With that, I'll turn the call over to Kostas to review the financials. Kostas Dafoulas: Thanks, Jim, and good afternoon, everyone. Starting with the fourth quarter results. Revenue for the 3 months ended December 31, 2025, was approximately $4.1 million compared to $3.9 million in the prior year period, reflecting a strong quarter across the business. We launched our USDA Organic herb programs with Kroger in October and recorded our first international CPG segment of Kick. Sports Nutrition to PriceSmart, marking our entry into the markets beyond domestic retail. These wins reflect the growing demand we are seeing for our products and the continued strength of our retail relationships heading into 2026. Cost of goods sold in Q4 was approximately $5.3 million compared to $3.8 million in the year prior. The increase reflects the cost profile of the company that was actively onboarding new retail customers during a seasonally compressed period. We made a deliberate investment in these new accounts that secures 2026 shelf space and builds the fulfillment track record that major retailers require. We expect the cost structure to normalize as those programs mature and volume increases. Gross profit was approximately a $1.2 million loss compared to flat in 2024. Q4 was a quarter where we made a deliberate decision to absorb elevated costs to secure a 2026 shelf space and deepen relationships with retailers like Kroger, Wakefern and Safeway. Bringing customers of that caliber requires front-loaded investment and we see this as necessary to support future growth and operational scalability. Selling, general and administrative expenses were approximately $4.6 million compared to $2.6 million in the prior year. Primary drivers were depreciation and rent tied to the NaturalShrimp asset acquisition, higher legal and professional fees from that acquisition and our capital markets activities, along with higher compensation expenses in 2025. While the absolute number is elevated, a meaningful portion reflects nonrecurring or deal-related costs rather than ongoing run rate expense. Turning to the full year. Revenue was approximately $12.8 million versus $13.9 million in 2024. The headline decline is largely a function of our strategic exit from floral and lettuce which together contributed approximately $1 million of 2024 revenue but at low margins. Excluding those exits, core revenue was essentially flat year-over-year, and Q4 was a genuine growth quarter, up approximately 5%. That trajectory is what we consider most indicative of where the business is headed. Full year cost of goods sold was approximately $13 million versus $11.6 million in 2024. The increase was concentrated in the second half and driven by the same Q4 onboarding dynamics I described earlier. Gross profit for the full year was approximately a loss of $0.2 million compared to a gain of $2.3 million in 2024. The first half ran at margins more consistent with our historical range. However, the full year result reflects Q4 specifically and we do not view it as a representative of our ongoing cost structure. Gross margin recovery is a top priority for 2026. As new programs scale, third-party procurement cost decline and fixed costs are absorbed over a larger revenue base. Full year SG&A was approximately $15.3 million versus $11.6 million in 2024 with the increase driven primarily by the NaturalShrimp acquisition, along with other capital markets activity. The balance reflects continued investment in the team and infrastructure supporting our long-term strategy. On the balance sheet, we ended the year in a stronger position. Stockholders' equity improved through the preferred stock issuance associated with the NaturalShrimp acquisition and total debt declined approximately $0.6 million year-over-year as we continue to reduce our outstanding notes. We remain focused on managing costs while investing in the infrastructure and capabilities needed to support our transition to a higher margin, more scalable business model. With that, I will turn the call over to the operator for any questions. Operator: [Operator Instructions] Our first question comes from Jeremy Pearlman with Maxim Group. Jeremy Pearlman: Firstly, as you transition your business, you expanded away from -- not away from it -- from the fresh to include more shelf-stable CPG and now the RTD. How should we view the margin from the fresh to the CPG products? And what do you think the revenue expectation and breakdown for CPG versus fresh through 2026? James Kras: Kostas, do you want to -- I can do this with you? How do you want to... Kostas Dafoulas: You want to talk high level, and I can get into some detail. James Kras: Yes, that would be great. So first of all, thanks for the question. Our expectation, obviously, is there's going to be much more of a robust margin as it relates to the RTD business and the consumer packaged items. The fact that they are shelf stable, we don't have to worry about some of the shrink issues that we have with fresh. The fresh business has been great to us. It's really opened doors. It's built our relationships with major retailers such as Walmart, Meijer, whatnot, where we have great performance as it relates to our in-stocks and our delivery capabilities. So when you have a 98% in-stock rate and acceptance rate with major retailers, they tend to want to do more business. And this business is really all about availability. So on the margin end, what will be nice here is that there's a much more stable business because you control much more in manufacturing with the shelf-stable products that you may with fresh goods. And fresh goods, like I said, our -- have been our staple. And I think it's really showed our -- how we can execute and our operational excellence to be able to deliver on time in full in a really difficult category, and that's really paying out for us, that investment. So you'll see. But in this business, you're going to see the margins, they're going to be much more stable. There will be, like I said, more robust as a function of that. And then the revenue side of it, just based on the size of the market, which I outlined in the call earlier in our script, is more than meaningful. And this is a big category with a lot of pent-up demand, with a lot of capacity issues out there. And so we're stepping in really at the request of retailers who trust us and want these products, and they want it from somebody who they know who can deliver in time, on full, on spec. So for us, it's a great evolution, leveraging our Farm-to-Formula approach and our wherewithal as a strong supplier to major accounts. So Kos, do you want to add to that at all? Kostas Dafoulas: Yes, sure. Thanks, Jim. Yes, Jeremy. So just to kind of add to what Jim said, we can think about the portfolio kind of in 3 pieces, right, the core CEA business, which I think we'll see kind of return to steady growth in the high single digits sort of range, maybe even higher depending on customer wins and customer growth. In the CEA space margins, we can kind of look to return to like normalized margins that we saw earlier this year and last year. In addition to that, the nutraceutical business actually showed really strong growth in kind of double-digit, 20%-ish range year-over-year. And that, I think, is going to be a larger component of our revenue growth story going into 2026. The trade-off there is most -- a good portion of that product is co-manufactured. So while it gives us a lot of stability and visibility into our cost structure, the margins are not as rich as if we were to do it ourselves. So I think blended margin kind of low double digits to mid-teens is a reasonable expectation going forward. And then the biggest upside we have in the whole portfolio is around this RTD business where we're looking at pretty significant revenue opportunity with margins kind of in the 20% to 30% range. We're working through that right now as we start scoping this project out and understand the input cost a little bit better, but that's sort of first [ plus ] expectations there. Jeremy Pearlman: Okay. Great. And maybe while we're talking about RTD, it is a broad category. Where specifically do you expect to put out your products within there? I don't know, energy drinks, more like the healthy green drinks. Just -- and then is that also -- is that going to be produced at the Midwest facility that you talked about? And then I have another question to follow up about that facility afterwards. James Kras: Okay. It's going to be primarily in the protein segment. Obviously, we'll have a few different formulations, but we've been requested by a major retailer to help develop this for their private label as a start. And then it just opened up the floodgates. We're at a point now where our goal is -- I don't think it's lofty, but is to sell out the plant in the next 90 days or so, which when you think about we're looking at capacity into the hundreds of millions of units within a couple of years. This is transformative for Edible Garden. It's a huge opportunity. The fact that we've got the type of association that we have with Tetra Pak, that's driven by the major retailers saying, hey, we trust these guys. These guys do a great job, not only in fresh, but also in the nutraceuticals. I've been doing nutraceuticals, I grew up in the business, I've been doing it for almost 30 years. So kind of all points have led to this. And so for us, we're going to be playing in the sports nutrition, performance nutrition arena. I don't want to use anybody out there as an example. I just know we're going to do it cleaner, we're going to do it better, and we're going to do it at massive scale. We'll be not only driving our own Kick, high protein, lower calorie, lower carb type of product, that's going to be something that we'll be providing. We'll be doing clean label, of course. We have a GLP-1 formula, supported formula under our Jealousy brand. So we'll have our own higher-margin brands. We'll also be taking on [ co-man ] opportunities with brands that are out there that don't have their own manufacturing. But then obviously, I would say, half of the facility will be private label, ranging from all the major players, from -- you name them, all the chains. And the existing -- what's great about Edible is the existing relationships we have. I mean we service Meijer. We service Walmart, Wakefern, Ahold Delhaize, Kroger, Safeway. So the investment that you saw in Q4 serves a couple of purposes, one of which obviously is, it's great to get their businesses. Our competitors had issues and they turned to us and we picked up the phone and we made the investment to service their business and capture that opportunity. We have a nice business with Weis Markets right now. We have a nice business with Kroger. Those conversations, when they're happy with you, they turn to RTDs for them as well, not whether it's looking at what you're currently making for yourself or for your brands or doing it for them. And so when you look at our roster of accounts, Walmart and Target and Meijer and Wakefern, and like I said, Ahold Delhaize and the list goes on and on, CVS and Walgreens. I mean, these are -- they're coming to us for innovation. They're coming to us for -- because they know that we'll get the job done. So for us, we're going to start -- [ the answer was so long awaited ] but excited about it. The -- it's really in the sports nutrition, then we'll move to the adult type of products. Many of these you're familiar with out in the marketplace, whether it's Ensure or BOOST or Premier Protein product. We'll be doing similar type of products in Tetra Pak, which is the world leader in this packaging. So sustainable as well, which really goes to our core as a company and what we stand for with sustainable -- using sustainable materials, using less resources. It's why we're Giga Guru with Walmart. So that's the plan. It's exciting. And it's -- I got an exciting team here. So I hope that answers your question. Jeremy Pearlman: No, that's great. It really sounds like a really great opportunity for the company. And maybe just a final question just around the Midwest facility. What can we expect some of the CapEx requirements for that and the build-out time line and when you expect to be -- what's the total scale of that, what you're hoping for and when you could reach that? James Kras: Well, yes, I mean it's -- I don't want to give any specific numbers, but -- and there's -- some of it's also we just don't -- it's such a huge opportunity. We're not the only ones who would want it, right? So -- but look, this is a significant -- we're talking about a big facility with considerable velocity coming out of it. We're working closely with the local and state areas to be able to support this with incentives. We've already gotten the nod on a few things, which is great. Obviously, we're going to need to buy machines and retrofit a building. So you're talking some real CapEx. But we've been there before. And we've built a significant greenhouse in New Jersey, and we did a beautiful retrofit in Grand Rapids for Meijer. So we're prepared as a company to take on the challenge. And our plan is to really hopefully be out in the marketplace probably towards the tail end of 2027. Operator: [Operator Instructions] The next question comes from [ Nick Pincus with Forest Capital. ] Unknown Analyst: Congrats on the progress. A lot of my questions have already been asked. But you highlighted the strong fourth quarter momentum, including new retail placements and expansion to nearly 6,000 locations. My question is how sustainable is this level of growth? And should we expect similar distribution gains and category performance going forward? James Kras: Oh, yes, yes, yes. The expansion into doors, I mean that has -- that's been a lot of us getting kind of organized on the greenhouse business and getting focused and getting rid of some of the product lines that just didn't make sense like floral and lettuce at the time because of the lack of margin. We really shored things up this past year. It's been challenging and tough because we are in a growth sector. People are eating better. People are buying more fresh goods. People are cooking -- continue to cook more and more at home, whether it's pressures with cost of eating out or just people being more creative because that's been a trend line. We benefited from that. Herbs, they make any average dish that much better, right, using fresh herbs. And so for us, it's really just about making sure that we continue to take care of our current customers. They're the ones who got us here. They continue to give us opportunity not only within this category, which means more penetration and ideally more velocity, sales velocity at current doors. And then there's a great story around our organic growth, by the way, Nick. And that's where we've seen good same-store sales over the last year. So for us, that's great kind of exit velocity out of the year. We're going to continue to focus on our core because that's what's gotten us here. And now when you look at something like RTD, which is just a huge massive business with just so much untapped opportunity and there's just a shortfall of capacity. It's very rare in your career that, that does intersect, and you've got people asking you right, for -- to take on their business because they trust you. It's -- it makes me sleep a little better at night knowing that the money that we spent over the last couple of years has really gone to unlock these opportunities. So look, you're going to see more store count, I think across -- I know you're going to see it across the whole business, whether it's the herbs, whether it's the pickles, which, by the way, is a sleeper. And then RTDs, I think you're going to see doors, you're going to see new accounts, you're going to see all kinds of -- it's just incredibly -- I mean those are sold everywhere in all kinds of classes of trade, including classes of trade that we're not even in like convenience store currently, right? And there's -- so the beverage business, it's a great business. People love the convenience. These are great items. Protein is hot, has been hot for a while. No one sees that slowing down. And we're going to have a state-of-the-art facility cranking the stuff out for the betterment of our supermarket partners. So yes, it's going to continue, Nick. Operator: Okay. We have no further questions in the queue. I'd like to turn the floor back over to management for any closing remarks. James Kras: So thanks again to everyone for joining us today. We believe 2025 was a year of meaningful progress for Edible Garden as we continued to build our -- build beyond our CEA foundation and expand into broader, higher-margin consumer packaged goods platform. We're seeing that progress reflected in our momentum across our business, growing demand for our products and our ability to continue to gain market share with our leading retail partners. At the same time, we believe our expansion into the ready-to-drink category represents a significant opportunity for Edible Garden, one that builds on our existing infrastructure, retail relationships and our product development capabilities and positions us to scale into a large and growing market where demand continues to outpace supply. As we look ahead, we remain focused on executing against that opportunity while continuing to expand higher-margin categories and leverage our retail network to support long-term growth. We believe this continued evolution of our business is positioning us to deliver greater scale, improved margins and long-term value for our shareholders, and we're confident in the path that we're on as we continue to execute and deliver on the opportunity ahead. We're encouraged by the progress we're making and look forward to updating you on our continued execution and success in the months ahead. So thank you, everybody. Appreciate it. Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Greetings. Welcome to the Abra Group's Q4 FY 2025 Performance Call. [Operator Instructions] Please note, this conference is being recorded. I would now like to turn the conference over to your host, Maria Ricardo, Head of Investor Relations. You may begin. Maria Cristina Ricardo: Thanks, operator. Good morning, and thank you for joining us today. With me are Adrian Neuhauser, Chief Executive Officer of Abra; Manuel Irarrazaval, Chief Financial Officer of Abra; Gabriel Oliva, President of Avianca; Nicolas Alvear, Chief Financial Officer of Avianca; Celso Ferrer, Chief Executive Officer of GOL; and Julien Imbert, Chief Financial Officer of GOL. Our financial statements for the year ended December 31, 2025, as well as the presentation we will reference today are available on our investor website, abragroup.net. This call is being recorded, and a replay will be available shortly after the call concludes. Before we begin, I would like to remind you that on June 6, 2025, GOL successfully emerged from Chapter 11 reorganization, at which point, Abra became the controlling shareholder of GOL and began consolidating its financial results. Accordingly, GOL's results are included in Abra's consolidated financial results from that date forward. To facilitate comparability of financial and operational performance, our remarks today will reference pro forma results as if Avianca and GOL were combined for the full year periods presented for both 2025 and 2024. Today's discussion may include forward-looking statements, which are not a guarantee of future performance or results and involve a number of risks and uncertainties that are outside the company's control, including those related to the company's current plans, objectives and expectations. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. The company assumes no obligation to revise or update any forward-looking statements. We'll begin with an overview of the business, followed by a review of our operational and financial performance for fourth quarter and full year 2025 and closing remarks before opening the call for questions. With that, I will turn the call over to Adrian. Adrian? Adrian Neuhauser: Thank you, Cristina. Everyone, thank you for joining us. If we can turn to Page 4, please. This is the first quarter where we are presenting our consolidated results as a group. We're really excited about this and proud of what we're going to show you. Slide 4, for those of you that have not joined us before, is just a summary of really what we are. We are today the second largest airline group in Latin America with the result of the consolidation of 3 main carriers: Avianca, which is the #1 airline in Colombia, Ecuador and in Central America; GOL, the second largest airline in domestic Brazil; and Wamos, a European ACMI provider. By putting together those groups over a few short years, we've created -- or those airlines over a few short years, we've created the second largest group in the region with over 300 aircraft, 375 routes, over 70 million passengers a year, 30,000 employees. Importantly, the strongest order book in the region, both on the narrow-body and wide-body side and also an agreement in principle to acquire SKY, which would add to our footprint domestic Peru and domestic Chile. Turning to Page 5. What did we achieve this year? First of all, we -- as Maria Cristina highlighted, we successfully completed GOL's restructuring, emerging as the -- with GOL emerging from its bankruptcy as a more sustainable and competitive airline and with Abra resulting as the controlling shareholder of GOL. We continue driving synergies. Today, we have over $180 million cumulative in value creation by increasing coordination across fleet, procurement network, commercial and loyalty. And we strengthened our leadership team as we drive more coordination through the group. We now have a Chief Procurement Officer, Chief Loyalty Officer and Chief Corporate Responsibility Officers at the group level. On the operational side, we announced a robust incremental fleet plan and the expansion of our wide-body strategies, adding 330s and 350s to enable the future growth and drive more efficient operations. We enhanced our value by coordinating our airlines more and beginning the process of aligning our products to drive an improved travel experience and operational excellence. And we continue progress in sustainability, delivering ongoing improvements in fuel efficiency while improving connectivity in the region. What does this mean financially? It means we achieved a pro forma adjusted EBITDAR growth of 26%, $2.7 billion for the year at a 27.4% margin. That's an over 300 basis point increase. We ended the year with liquidity at over $2.5 billion, about 25% of our LTM revenues and net debt to LTM EBITDAR decreasing sequentially to 3.3x. Both of our important additional business units, Cargo and Loyalty delivered strong performance. Cargo, in particular, delivering approximately $1.6 billion revenue generation on a pro forma basis. And importantly, and we'll talk about this later on, we aligned accounting policies across the airlines in line with market standards. Turning to Page 6. So what are we today? As we said, second largest group in the region, both of the key airlines in the region performing admirably, 98.3% schedule completion for Avianca and 99.2% for GOL. Both airlines with some of the strongest on-time performance in the world, continue to drive brand loyalty, one of the largest loyalty programs in the world combined with over 46 million members, a 34% increase in premium customers through our networks, 7% increase in gross billings and the program member share of our total passengers on average at about 50%. We drove an enhanced customer experience. We upgraded our premium offering through Avianca and VIP lounges and Insignia check-in in Bogota, and we enhanced our long-haul Insignia experience on the transatlantic routes. We've rolled out Business Class across the entire Avianca network, and we announced the fleet expansion, adding 7 A330-900s to support international growth for the group. Up to 5 of those will initially go to GOL and 2 to Avianca. Turning to Page 7, consolidated business indicators. ASKs growing nearly 12% on -- for the group with load factors holding at above 80%, passengers increasing by 5%, average fare in the network increasing, PRASK holding almost flat and PAX CASK holding about flat. Turning to Page 8. If you look at the 2 carriers to understand what's going on in the underlying, both carriers showing strong growth in their networks. GOL, if you'll remember, putting its fleet back in the air and recovering its operations as it worked through its bankruptcy, but also an important redesign in the network with GOL increasingly focused on strengthening its Rio hub. Avianca continuing to grow by extending stage length and expanding flights out from Bogota into the rest of the region. Passengers in Avianca decreasing slightly as we extended the stage length over 7%, average fare increasing at GOL, passengers increasing pretty much in line with the growth of the network. PRASK at both companies holding in spite of the very strong network expansion and CASK at both companies -- at Avianca continuing to decrease slightly and at GOL holding basically flat, passing through a little bit of inflation at about 4%. Turning to Page 9, handing it off to Manuel Irarrazaval, our CEO -- our CFO, sorry, to continue with the conversation. Manuel Irarrazaval: Thank you, Adrian, and good morning, everyone. I'll walk you through our financial performance for the full year. Maybe we start in Page 9 on the pro forma revenues. Pro forma revenue for this year has increased 11% to $9.7 billion. That is driven in about 8% by passenger revenue and as Adrian was explaining before, and a very strong increase in other revenues in cargo and others with that increase is about 31%, right? In terms of EBITDAR, we -- the company delivered a very strong pro forma adjusted EBITDAR growing almost 26% to almost $2.7 billion for the full year with a margin of 27%. If you look at that number as of the fourth quarter, in particular, it had a margin of 30.6%, which is a very strong margin and reflects the great performance of bringing in GOL and the improvement of GOL's margin over the fourth quarter and a very favorable seasonality in the fourth. I would like to highlight that we are not highlighting the metrics below EBITDAR as depreciation and interest are available under our current accounting policies and therefore, kind of the year-over-year comparison is not very meaningful. However, the numbers are in the back of this deck. If we go to Page 10 and we look at the balance sheet, we have ended the year with a strong liquidity, almost $2.5 billion of liquidity, which implies a 25% ratio of liquidity over revenues for the year, which we believe is a very strong point. In terms of net debt, we had a 16.6% reduction of net debt over the year, mainly coming from the restructuring of GOL, right? That has taken our net debt to EBITDAR, the net leverage metric down from 5x before in '24 to 3.3x. And this is an important driver for us, and we will continue kind of deleveraging as time goes on. If we go to the next slide, Slide 11, you can see the performance for the fourth quarter in particular. You can see ASKs at 31.2 with a load factor of 82.6%, which has helped us deliver an EBITDAR margin of 30.6%, as I said before, and again, highlight to you the level of leverage and liquidity that we are finishing the year. Going next to Page 12 exactly. I will also I will also touch on the point of the fuel volatility. As you all know, we have been monitoring very closely the events happening in Middle East and the impact that fuel has on our operations. In general terms, in these months, a $1 increase in jet fuel price has resulted in a $70 million impact on our monthly fuel expense, which means that to compensate that, we would need to increase prices in about 10% for every dollar that has increased. What have been we doing? On the right side, you can see that we have hedged 50% of our fuel needs for the months between March and May. putting in place a zero cost collar with a call strike at $2.45. That was a very good protective measure that we took right before the war started. And we have increased that hedging recently with another 14% of the fuel needs until the end of August at a strike price higher, of course, because the market has moved up significantly. In Brazil, in particular, the fuel pricing mechanism going through Petrobras allows the companies to feel the impact of fuel with a month of delay, and that has given the company time to try to pass through some of this into price. We continue to work with -- our commercial teams continue to work very disciplinedly on price management and being able to pass prices over to the tickets and to compensate for the increases of cost. With that, I finish this section on the financial results, and I will pass it over to Gabriel so that he can cover Avianca's full year performance. Gabriel, all yours. Gabriel Oliva: Thank you so much, Manuel, and welcome you all. If you turn to Page 14, I will give you highlights of Avianca's full year performance in 2025. More on the operational level, as Adrian commented, we're pretty proud of what we achieved. We continue expanding our network. We launched 13 new international routes with 4 new, completely new destinations, reaching more than 160 routes finishing the year, 83 destinations in 27 countries. As it was commented before, we finished that reallocation of capacity, moving -- expanding our stage length, moving capacity from Domestic Colombia into international markets, driving more than 7% our stage length and a much more healthier and balanced supply-demand dynamics. We continue -- and we continue investing. We invested and we continue investing in our product and brand loyalty. Right now, we have completed our rollout of Business Class in the entire network, including all our domestic markets. We opened new VIP lounges and dedicated Insignia, which is our transatlantic business class check-in space in Bogota and strengthening our premium customer and loyalty value proposition. And in the operational level, as it was touched upon before, we delivered a very robust performance, which we are proud of, while we navigated 3 industry-wide challenges with the engines that affected most of our family types of aircraft. On the financials, we achieved at Avianca an adjusted EBITDAR of $1.5 billion, which was more than 20% growth year-over-year at 26.5% margin, more than 200 basis points growth year-over-year. As Manuel was saying, on Avianca, we continue reducing our net leverage sequentially to 2.7x and liquidity reached $1.4 billion, which is close to 25% of last 12 months revenues. And that includes a $1,200 million undrawn revolving credit facility. And our business units were very proud of the performance they achieved. Cargo, a strong performance with market dynamics supporting that, and we completed our strategy of a network redesign, refleeting our cargo network right now having 9 A330 freighters across our cargo network. And in Lifemiles, we reached 16 million members and customers by year-end, which is more than 14% growth year-over-year. And at Wamos, we delivered its full year -- first full-year performance within the group, supported by very strong widebody demand. So turning to Nico to get more into the financials. Thank you very much. Nicolas Alvear: Thank you very much, Gabriel, and good morning, everyone. Turning to Slide 15, delving deeper into financial performance. You can see that Avianca generated EBITDAR of about $1.5 billion, up 21% year-over-year, with margins expanding by over 200 basis points to 26.5%. Importantly, fourth quarter EBITDAR, which you can see in the appendix, reached $463 million at a margin of almost 30%, which is about 60 basis points stronger versus last year. So overall, this reflects the combination of disciplined capacity growth, improved network efficiency, continued cost control and higher premium revenue generation driven by the rollout of Business Class across our network and the strengthening of our loyalty program. Also, as Gabriel mentioned, our Cargo business, Lifemiles and Wamos posted remarkable performance during the quarter and the year. You can appreciate that EBITDAR generation translated into continued balance sheet strength with liquidity increasing $110 million to roughly $1.4 billion, representing about 24% of last 12-month revenue. And notably, our net leverage declined to 2.7x, down sequentially from 2.8x in the prior quarter and from 3.3x in the prior year, driven by EBITDAR growth and relatively stable net debt. Between early 2025 and early 2026, we continue to strengthen our capital structure, refinancing approximately $1.75 billion of debt, mostly our bonds to 2028, pushing out maturities to 2030 and 2031 and optimizing the use of our collateral. So overall, our operating performance is giving us greater flexibility to manage through the cycles, continue investing in our business and our customers and contribute to the broader Abra platform. And with that said, I'll turn it over to Celso to discuss GOL's 2025 performance. Celso Ferrer: Thank you, Nico. And moving forward to Page 17. I want to share the GOL highlights for 2025, which was a really transformational year for GOL, as mentioned, marked by a successful completion of the Chapter 11 process in June and strengthening the capital structure of the company, which provides a solid foundation going forward. Operationally, the focus has been on increasing capacity with discipline. We saw a strong year-over-year capacity growth in international markets, reaching more than 13 countries. Domestic growth was supported by 11 aircraft returning to service and improved fleet availability. Importantly, that capacity has been deployed where the demand is strong and where returns justify it, consistent with the strategy that GOL has outlined over the course of the year. At the same time, GOL continues to benefit from its leading position in Brazil with a strong presence in key markets such as Sao Paulo, now more than ever, Rio de Janeiro and Brazil, including slot-constrained airports that support frequency and commercial relevance. The network is a high frequency with strong connectivity that drives both cost efficiently and customer preference, supporting health load factors as capacity increases. GOL is also beginning to selectively expand its long-haul operation in international markets, including the recently announced Rio JFK service. Operational quality remains a clear strength. GOL was the #1 airline in Brazil for on-time performance for the second consecutive year, which supports both customer loyalty and commercial performance. From a commercial perspective, Smiles continue to be the core driving of earnings quality with a large engagement from its base and diversified partnerships ecosystem that supports recurring high-margin cash flow generations. In Cargo, GOLLOG continues to perform very well, supported by the addition of 2 dedicated cargo aircraft, totaling 9 aircraft at the year-end, strengthening the Mercado Livre partnership and benefiting from a strong demand in e-commerce and express logistics. So overall, what you see in GOL is a disciplined recovery, increasing capacity, maintaining strong operational quality and strengthening the business commercial and earnings profile. Julien will speak about our financial results. Julien Imbert: Thank you, Celso. Moving to Slide 18. We are very happy to report that once again, we're outperforming on our plan since emergence. So it's the third quarter that GOL has been outperforming the [ 50 ] that we had published at emergence. If you look at EBITDAR, we reached an EBITDAR of $1.2 billion, which is an increase of 32% versus last year and a margin of above 30%. This is driven mainly by our growth on capacity growth plus price growth in local currency and our continued control on our cost. Liquidity also is ever stronger at $1 billion in liquidity, representing 25% of our last 12 months revenue and a significant increase versus the position of last year with 43% increase versus 2024. Regarding net leverage, we've been able to reduce our net debt over EBITDAR to 3 turns in 2025, accelerating the deleveraging of the company and pursuing our commitment to a healthy balance sheet. We are very happy with those results that underline our purpose of being the first airline for everyone, our clients, our investors and our teams. And we continue to deliver on our plan with consistency and discipline, building an ever stronger goal. With that, I will now turn the call back to Adrian for closing remarks. Adrian Neuhauser: Thanks so much, Julien. So to summarize, and as I said, really, really proud of the network of the results we're delivering this quarter. First of all, a continued focus on customer experience, boosted by differentiation and brand loyalty as we integrate the power of the 2 brands, but also take advantage of the increased connectivity and frankly, of the know-how that each of the 2 companies brings in creating a unified customer experience. Number two, revenue growth and disciplined cost management that drove higher margins; three, adjusted strong adjusted EBITDAR and liquidity and continued balance sheet deleveraging and very, very proud of the results our business units are delivering through the year. With that, I'd like to turn it over to I'd like to turn it over to Q&A. Operator: [Operator Instructions] Your first question for today is from Mike Linenberg with Deutsche Bank. Michael Linenberg: Great way to finish up 2025. And obviously, now as we look into 2026, the high energy prices are kind of the front and center of focus. I saw that you have these hedges, clearly opportunistic. What are you currently paying for jet fuel? I mean I saw that in the context of that $4 per gallon jet fuel hedge. What are we seeing today? And then can you kind of give us a view on how you're thinking about your capacity plan for this year? I mean I know we're starting to see other carriers sort of rethink near-term growth plans as they deal with higher fuel prices. Manuel Irarrazaval: Thanks, Mike, for the question. And yes, I mean, it's been an interesting start of the year with these movements. In terms of what are we paying for fuel today, there is a certain delay in kind of the cost of fuel as kind of our suppliers have some inventory. So we are today kind of spot price today where kind of outside of Brazil, I would say, is around $4, a little bit under that. In terms of the -- that is the fuel price that we're paying without kind of taking into account the hedging, right? In Brazil, it's going to be lower. I don't have the exact number here, but it's going to be lower than that. Then on top of that, you have the compensation that is coming from the hedges, right? From March, April and May, we have -- half of our volume is capped at the $2.45 that I referred to before. So that's what we're paying. And that is mostly -- that is the fuel that is being consumed outside of Brazil, right? And Brazil still hasn't seen -- we're just starting to see kind of the new price -- the price reset now on the 1st of April, right? So you're going to start to see an effect of the price increase going forward, right? Adrian Neuhauser: And so with regard to capacity, Mike, if you were to look at our sales curves today, what you'd see is the following, right? We've started pretty aggressively passing through the increased cost of fuel, right? So we're not relying on the hedges to boost margins. We're basically using them as a way to soften the transition to new pricing as we drive the pricing up. And obviously, there's a lag there, right? If you were to look at pricing in Brazil today, we're up, and I think the industry broadly is up about 30% from where we started a little over a month ago, which if that holds, right, that's pretty much a full pass-through of [ mid-4 ] fuel. Now obviously, because you've sold lots of bookings forward, there's a mix of bookings that you sold at lower prices, bookings that you sold at high prices, and it's going to take the better part of 3 months even with the new pricing levels for your average pricing to catch up. And then the second part of that is how much of that turns into reduced demand because that will ultimately answer your question, right? What we're seeing so far is that the short end of the booking curve is holding up pretty well. And -- but you're seeing the later bookings not come in, right? And the question is, do they show up later? Or do they -- which interestingly, if you think about what later means today, later sort of means the beginning of summer high season, right? And so it's not a crazy bet to assume that they will or do they fall off, right? We've started in Brazil, in particular, thinking about some tactical reductions sort of in the single -- low single-digit percentages of ASKs. But the reality is we don't know yet, right, how elastic is that going to prove and how much we need to react to that, right? So we're looking at it constantly. And as soon as we sort of start to see near-term bookings taper off, that will be a strong sign that we need to cut back on supply, right? On the Avianca side, the pass-through has been, I'd say, less effective. It's a more complex competitive set, right? You have over 20% of your ASKs deployed into Europe. The Europeans are largely hedged. You have 35% of your ASKs deployed into the U.S. The U.S. carriers, in spite of their big talk have actually been slower at sort of driving pricing up, at least in our region [indiscernible] and they've been slow followers as well. So we're slightly under 10% increase in pricing at Avianca. And again, we need to get to sort of the mid-20s, right? So call it 1/3 of the way there. And sort of the same dynamic, right, less to no impact on the near-term bookings, which is interesting because we've been in a low season. But a pretty strong drop-off in the long-term bookings, which is interestingly because -- which is interesting because those are high season bookings, right? So right now, I don't want to sound sanguine because this is obviously an unexpected sort of shock to the system, right? And it's not a positive shock. But between the hedges, between the effectiveness of our ability to pass through and between the near-term booking curve holding up even in low season, we're pretty optimistic about summer demand. You may see us pull back a little bit of capacity here and there, but we haven't yet decided to sort of make wholesale reductions, certainly not into the summer, right? If we see this dynamic holding up for a few more months and then sort of have to extend higher pricing into the much more elastic sort of post-summer shoulder season, that's a different discussion. Michael Linenberg: All right. Well, very encouraging that you guys are -- you appreciate the elasticity and are considering tactical moves if this fuel regime or environment continues, or it persists. So thanks for the thorough answer. Manuel Irarrazaval: Mike, to go back to your question around the fuel, in Brazil, in particular, the price announced by Petrobras for April is BRL 6.85 per liter, right? That translates into about $4.9 per gallon, which remember, that includes a non -- insignificant amount of taxes. And that -- so you have a reference is about a 55% increase against the price that was -- that we paid during March, right? Remember that in Brazil, the price kind of reflects the average of the previous month, right? So you're seeing -- you saw 55% increase when kind of world jet fuel prices increased kind of on spot is more, it's double, right? So it's a moderated increase by Petrobras for the month of April and then probably May, you're going to see the pull back, right? Adrian Neuhauser: And Mike, one more comment on your comment. We are cautious on elasticity. Again, like I said, we're monitoring it. The bigger concern, I think, for everybody should be less the price elasticity side, if you think. If you think about -- and this is an interesting data point, right? Because both GOL and Avianca have been pretty effective in keeping their costs in line and in driving higher loads, a 30% pass-through to fares would put 2026 fares on real terms at the same price we were charging in 2019, right? So you're actually interestingly not talking about sort of taking pricing to where it's never been, you're really sort of catching to inflation. So we are concerned about elasticity, but we're not panicked about it on the price elasticity side, right? If you have to think about what are we monitoring more long term, we're monitoring economic slowdowns and then income elasticity, right? Because that would have a much more significant impact, we believe, on demand than the fare pricing that we're passing through, in particular, when the entire market passes it through as well. Operator: Your next question for today is from Savi Syth with Raymond James. Savanthi Syth: I just -- maybe I appreciate the tactical capacity adjustments you might make. But I was wondering if you could talk a little bit about maybe the core capacity plan at Avianca and GOL this year and kind of where that kind of growth might be focused? Adrian Neuhauser: Sure. Celso, do you want to start with GOL and then we'll hand it to Gabriel for Avianca. Celso Ferrer: Yes, Adrian, I can. Savi, thanks for the question. And we have -- as I mentioned, 2025, we were like catching up the capacity that we lost during the pandemic. And basically, by creating connectivity, design the new network with the entire Abra team focused in regions where GOL used to be strong, but we see even higher potential for the company right now. I can give you two examples. One is Rio, the other one is Salvador that we are -- that both concentrates more than 86% of our growth in 2026. In Rio International, we have created a very strong position, high frequency where we believe if we need to do some tactical reductions, we will be able to recapture most of the demand as the whole industry continues to be and follow the rationalization. So we are monitoring very close. As Adrian mentioned, no decision, and we are not looking for restructuring of the network. We are confident. You saw our results, I mean, with ASK growth and unit revenue growth. So we are, I mean, monitoring close and doing these adjustments so far, okay? Gabriel Oliva: Sorry, Celso, go ahead. Celso Ferrer: No, no, please Gabriel. Please, go ahead. Gabriel Oliva: So on the Avianca side, as we commented and we were talking last year, we did this capacity shift to have a more healthy supply and demand balance, right? We extended the stage length more on the international side, and we did some adjustments in Domestic Colombia. As we think about 2026, our initial plan was a modest growth within the mid-single digits, right? And that comes on really not getting so much narrow-body fleet this year. So adjusting the network throughout the same pattern, but not a high growth. And on the wide-body side, it's really, as I said before, and we commented before, right, last year, we had this -- all these disruptions due to the wide-body engines that we commented on the last call. So it's more about putting our network on the wide-body side that getting all the [ 78s ] and all the 2 A330s that Adrian commented. So in a nutshell, we were not thinking on a high growth in the network this year, and it's basically keeping kind of the same pattern that we were having last year into this year. Operator: [Operator Instructions] Your next question for today is from Pablo Monsivais with Barclays. Pablo Monsivais: Just a quick question in terms of OpEx and CapEx. At this point, are you thinking of any measures to reduce the cash outlays, assuming the situation continues with a very high oil price? Manuel Irarrazaval: Pablo, thank you for the question. We are always looking at ways to optimize our OpEx and CapEx in particular, where kind of the amount of the CapEx around engines has turned to be more significant. We're also looking at ways, Pablo, of taking advantage of facilities or kind of using local facilities to be able to fix engines in Brazil, for example, which would give us also some kind of support in terms of being able to finance those. But yes, we are, of course, working on optimizing the CapEx and the OpEx plans. Operator: Your next question for today is from Guilherme Mendes with JPMorgan. Guilherme Mendes: I appreciate the comments on the first question about the demand outlook. Just following up into that, if you can break it down between different segments, think about leisure and corporate and domestic and international. When you say that you're increasing prices by 30% in Brazil and roughly 10% in Colombia, is this across the board for different segments? Or there's a difference between leisure and corporate and domestic and international? Adrian Neuhauser: No. What I'd say, we can dig into this more, right, offline. But what I'd say is, look, conceptually, it's across the board, right? We've tried to increase across the board. Obviously, there's some self-segmentation, right? If we're saying the shorter end of the booking curve is holding up very strong, the longer end of the booking curve is where we've seen some still TBD, if it's reduced demand or simply delayed demand. The shorter end of the booking curve tends to be more business focused, right? So we're passing through on everything. But what you're seeing is the leisure customer not book up as early as they would. And that's sort of natural, right? You'd expect the people that they thought the summer ticket was going to cost X, right now it's costing 1.3x. They look at it and they say, well, let's wait a bit before we book it and see if it drops, right? So I think there's some sort of self-selection there that's not us segmenting where we raise prices and where we don't, but sort of how people -- how different parts of the market react to changes in our pricing curves. In Colombia, as I said, it's a little different because even though we raise fares across the network and we intend and push for our pricing to go up and hope that our competitors will follow. The nature of the network means that you've got different competitive sets, right? So when you say international, again, our U.S. fares, we've been through -- don't quote me on this, but 3 or 4 price increases. I'd say 3 have stuck and we've had to pull back. And it has to do with whether competitors follow or not, right? And that has to do with sort of the competitive set you're playing against, right? In Europe, the European carriers have been much less willing to raise fares. I think that the position they're taking is they're more hedged and they're using that to try to capture market share. They're also driving some pretty extraordinary margins on their Far East routes, right, as connectivity sort of goes through Europe and avoids the Middle East, that's also giving them some incremental margins and allowing them to not pass through as quickly on the Americas route. So in those cases, we're probably 25% of the way passed through instead of 30%, right? So it depends more on who you're competing against than us segmenting international versus domestic versus what have you. Does that make sense? Guilherme Mendes: Very clear. Operator: Your next question for today is from Gavin McKeown with Amundi. Gavin McKeown: Just last question I have is in relation to the additional hedge that you mentioned. Can you give us any color as to whether or not that was at GOL or at Avianca? Manuel Irarrazaval: No. Look, the hedges themselves, we take them at Avianca, which is the company that has less -- has a more direct impact from changes in fuel prices, right? And of course, the company that has more ease to find with banks and other things, right? So -- but yes, they're being taken at Avianca today. Operator: Your next question for today is from Nicolas Fabiancic with Jefferies. Nicolas Fabiancic: Just had a few quick questions here. On GOL, if you could please expand a little bit about liquidity, especially when we look at liquidity without the credit card receivables, any thoughts there in terms of alternatives, things you could do with the intercompany loan or any contemplated reshuffling of the GOL capital structure at this stage? Regarding Abra, similar question. We have the '29s bond. I see that it's callable in October. So just any updated comments around liability management or refinancing for the Abra '29s or the term loan? And then at Avianca, you've made great progress with the refis there. There is the stub left over for the '28. If you could give us an update on liability management at Avianca. And also, I just wanted to ask about Avianca, the CapEx plan if you could give a little bit more detail on CapEx for 2026. Manuel Irarrazaval: Listen, let me -- thanks, Nicolas. Let me start by addressing Abra in general, and then we can go into the different points, right? The liquidity position that we have across each of the companies is very strong. In the case of Avianca, we have -- we finished the year with $1.4 billion of liquidity. That includes the revolving credit facility. At the level of GOL, we have about $1 billion, which includes the receivables, which, as you know, in Brazil, is a fairly liquid asset that you can get -- you can sell off. It's like having a revolving credit facility. Now in terms of kind of you're asking about the capital structure of GOL itself, there is no plans today to do anything around that. The company is in a strong position and has been deleveraging over time. Of course, we are looking at CapEx and OpEx and kind of how do we make sure that we keep our liquidity levels and our cash levels, in particular, at a reasonable amount going into this. But there is no plans or kind of things that I would comment on doing liability management at this point, right? And that's in general for the group. I think that given kind of the market environment today, I think liability management are not in discussions today. Same thing with Avianca, right? In Avianca, if you remember, we did a couple of refinancing at the beginning of the year. We brought down -- we repaid a big part of the '28 notes with a bond that we did at the beginning of the year and recap that we did in later in January. And there's about $400 million of the '28 notes outstanding. We have no plans on doing anything with those in the short term, right? And our financings at Abra, yes, we're approaching kind of the end of the non-call period, but that's a bigger question. In the market that we have today, I don't see that we're doing anything in the short term. And just to be clear, on the GOL liquidity that you see and the cash that you have there, that is real cash and liquid facilities, right? I mean, and liquid assets. So it's not -- we're just showing you there the cash and the factorable receivables. Anything -- any kind of receivables that is not factorable, we will not include there. Operator: [Operator Instructions] We have reached the end of the question-and-answer session, and I will now turn the call over to Adrian for closing remarks. Adrian Neuhauser: Thank you, everyone, for the time you spend looking at us. Again, really proud of the quarter we've delivered of the evolution of the company as we put it together in a very short time. The synergies we're driving, the growth that we've driven, the margins that we think are second to none in the region. We're really proud of what we've delivered. We're working through the fuel situation, as you can see, pretty effectively, the hedges have put us in a great position to work through it and pass through pricing as we head into summer high season. So all in all, even with the geopolitical backdrop that we're dealing with, very, very excited for what the year will bring. So again, thank you all for spending the time, and we'll be talking to you shortly. Manuel Irarrazaval: Thank you very much. Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Good afternoon, everyone. Thank you for participating in today's conference call to discuss Jones Soda's financial results for the fourth quarter and full year ended December 31, 2025. Before we begin, let me remind everyone of the company's safe harbor disclaimer. Certain portions of our comments today will concern future expectations, plans and prospects of the company that constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements containing verbs such as aims, anticipates, estimates, expects, believes, intends, plans, predicts, will, may, continue, projects or targets and negatives of these words and similar words or expressions. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated by the forward-looking statements. Factors that could affect our actual results include, among others, those that are discussed under the heading Risk Factors in our most recently filed reports with the SEC, including our annual report on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K. In addition, this call includes discussions of certain non-GAAP financial measures, including adjusted EBITDA. The most directly comparable GAAP measures and reconciliations for non-GAAP measures are available in the earnings release and other documents posted on the company's website under Investor Relations. A telephone replay will be available after the call through April 14, 2026, and a webcast replay of today's webinar will also be available for 1 year via the link provided in today's press release as well as on the company's website. Now I'd like to turn the call over to Jones Soda's CEO, Scott Harvey. Scott Harvey: Thank you, Shamali. Good afternoon, everyone, and thank you for joining our fourth quarter and full year 2025 earnings call. 2025 was a transformational year for Jones Soda, culminating in a strong fourth quarter that underscores the progress we've made both operationally and strategically. For the full year, we generated more than $25.3 million in revenue, representing a significant growth over the prior year and reflecting the impact of our expanded distribution, product innovation and operational execution. Throughout the year, channel focus along with operational improvements reinforced the company's foundation. We centralized our warehousing, optimized logistics and implemented just-in-time inventory practices, making the organization leaner and more efficient organization. These actions also reduced costs, enabling us to reinvest in areas of the business that we have the highest impact potential. Strategic divestitures, including the sale of our cannabis business, enabled us to fully focus on scalable beverage operations and sale proceeds reinforce our balance sheet. Partnerships with Bethesda and/or Fallout, Crayola, Folds of Honor, alongside our expansion into the Club Channel, further enhanced the brand's visibility and drove record purchase orders, demonstrating the combined power of operational discipline and strategic growth initiatives. As we closed out the year, we began shipping Fallout the Vault-Tec packs to club stores nationwide, dramatically increasing the availability of our Fallout Inspired beverages. We completed the first of multiple shipments to select locations across Canada as well. Fourth quarter revenues reached $11.7 million, the highest gross sales Jones Soda has ever delivered in its history, underscoring the strong consumer demand and the effectiveness of our strategic initiatives. The operational and strategic foundation we built in 2025 positions Jones Soda to leverage growth opportunities, scale efficiently and drive sustained value across its key business areas in the year ahead. Core soda remains the backbone of our business. Over the course of 2025, we expanded our distribution network, adding new partners and extending our reach in both the U.S. and Canada. Direct store delivery partners serving major national retailers strengthened our presence in key markets. Culturally relevant and collectible product launches drove strong engagement and expanded the Jones brand to reach millions of consumers across North America. Crayola Inspired packs sold out within hours, generating approximately $275,000. Our D2C channel further accelerated momentum with the launch of the Fallout inspired rocket bottles, which sold out within days, creating a meaningful online excitement, reinforcing the value of our partnerships with iconic brands and gaming platforms. As a result of our success of these launches, retailer demand and interest continue to grow with each subsequent release. These results highlight the impact of culturally relevant collectible products while underscoring our focus on disciplined execution within core soda. Operational improvements, including enhanced forecasting, centralized logistics and multi-SKU shipping capabilities enabled us to meet strong demand efficiently, maintain product quality and support continued growth. Modern soda delivered limited growth in 2025 despite operating in an increasingly crowded and competitive category. Demand for better-for-you beverage remains strong, particularly among consumers seeking functional benefits without compromising on taste. Pop Jones a functional soda expanded into 1,500 retail doors, including national chains and consistently performed well in consumer taste evaluations versus comparable offerings. Our work in this category is far from complete. In 2026, we'll introduce new flavors anchored in high-demand core profiles such as Root Beer and Cream Soda while evolving our go-to-market approach. We'll increase localized support for retailers through a focused 4 walls, 4 blocks, 4 miles strategy designed to drive awareness, trial and sustain velocity at the store level. Overall, Modern Soda's performance reinforces that while the category is highly competitive, consumer demand for healthier functional beverage continues to support steady growth and long-term opportunity. In adult beverage, regulatory changes were a key consideration. Federal legislation enacted in 2025 alters the framework for hemp-derived products, including certain intoxicating cannabinoids. While the law is not expected to take effect until late 2026 and enforcement still remains uncertain, we are actively evaluating potential impacts and have developed contingent plans to address a range of outcomes. We are more cautiously moving forward with trusted partners while closely monitoring developments in Washington, D.C. and engaging with industry advocates to determine the appropriate path forward. At the same time, evolving state-by-state regulations continue to create complexity, requiring ongoing vigilance to ensure our products remain compliant. While we do not expect HD9 to be a material growth product line in 2026, we will continue to support our dedicated partners. We remain focused on staying nimble, adapting quickly to regulatory changes while maintaining and supporting our distribution network and ready to enact our contingency plans as regulatory deadlines approach. Spiked Jones also faced challenges in 2025 as distribution declined in certain accounts due to the product's high alcohol by volume and sugar content. In 2026, we plan to reposition the brand with a revised 4% to 5% alcohol by volume, new flavors, refreshed packaging. We also intend to support the brand through a more targeted regional strategy, as mentioned earlier, enable us to launch in a specific market, provide appropriate local marketing support and drive consumer engagement more effectively. Across all of our areas of business, core, modern and adult, we built an operational discipline, drove consumer engagement, creating meaningful momentum heading into 2026. With that performance as context, I'd like to turn the call over to Brian to review our fourth quarter and full year financial results. Brian? Brian Meadows: Thank you, Scott, and good afternoon, everyone. I will first go over our full year 2025 results, starting with revenue. Jones achieved revenues of $25.3 million for the 12 months ended December 31, 2025, compared to $17.8 million in the prior year or a 42% increase in revenue. Two categories stood out to drive the increase. sales of Fallout licensed products to the Club Channel and sale of Fallout products to the direct-to-consumer channels. We also saw some increases in the Pop Jones SKUs. However, this will be a focus in 2026, as Scott has previously stated, to make more material progress in the modern soda category. I'll further discuss the company's outlook for revenue '26 later in my comments. Focusing next on adjusted gross margin. Adjusted gross margin is a non-GAAP measure. It effectively takes GAAP gross profit and adds back onetime inventory provisions and divide that into net sales. Full year adjusted 2025 adjusted gross profit margin was 32% compared to 27% in the prior period. We incurred $1.2 million of onetime inventory write-downs associated with an HD9 business and inventory stranded with a co-man we had a legal dispute with as we previously disclosed. The majority of the write-down was due to the federal legislative changes to the HD9 business enacted in November 2025. Our outlook for the HD9 business as a result of these changes and its impact on the Jones HD9 business in general necessitated a further write-down of our year-end 2025 HD9 inventories to a level that reflects today's HD9 marketplace. The good news here is that we improved our adjusted gross profit margin by 5 percentage points comparing to the prior fiscal year. Gains were driven twofold. Firstly, the reduction in trade spend from 20% incurred in 2024 to 10% on average in 2025. The reduction was achieved through a mix of channels that have lower trade spend as a percentage of gross sales, for example, Club Channel and direct-to-consumer as well as we exited a DSD relationship in Canada that had a very high trade spend negotiated in 2024. This relationship was effectively exited in Q1 2025, and we saw the impact from Q2 onwards. Secondly, we made improvements in the freight and warehousing from 17% of gross sales to 16% of gross sales in 2025. We see continued opportunities to also reduce our product COGS in 2026 based on our increased volumes. And we also see further opportunities to reduce warehousing costs in 2026. However, freight out most likely will be negatively impacted by the higher oil prices we're seeing currently. SG&A. Scott and I took the reins in February 2025. We had quite a challenge in front of us to aggressively cut the burn rate and institute the necessary cash controls urgently. We shared the progress across the last 3 quarters, and I'm pleased to update our shareholders on the full year results from our efforts. Looking at SG&A in total for the year ended December 31, 2025, we reduced SG&A by 14% -- now to dig a little deeper into the truly amazing reductions we achieved as some of the SG&A numbers increased in line with the 42% increase in revenues. For example, the 42% increase in revenues also drove up our broker payments and licensing costs. These 2 items alone increased $0.7 million for the year. If you remove the impact of those 2 items, our SG&A decreased 20% for the full year. More specifically, we took out $2.4 million out of SG&A compared to 2024 in consulting, travel, marketing and promotions, rent and utilities and legal expenses, whilst at the same time, driving up our revenues by over 40%. These decreases were necessary to turn around the Jones business. Scott and I instituted a variety of common sense business controls, including centralized controls over legal contract approvals, purchase orders, marketing expenditures, travel and, of course, cash disbursements. That financial discipline is now entrenched in the Jones business. Further, we also implemented discipline in how we evaluate new business opportunities, product pricing and promotions, all of P&L statements developed for review and approval by Scott and myself. Moving to net loss. Net loss for the 12 months ended December 31, 2025, was $1.8 million compared to $9.9 million in the prior period or an $8.1 million improvement year-over-year or 82% improvement. This is driven primarily by 2 things: the gain on sale of our cannabis business of $3.9 million, but more importantly, the reduction in operating loss of $5 million. Adjusted EBITDA. Adjusted EBITDA is a non-GAAP measure, reflects management's view of a more accurate reflection of ongoing cash flow generated or loss from its continuing operations. For the year ended December 31, 2025, adjusted EBITDA was a loss of $2 million compared to an adjusted EBITDA loss in the prior year of $7.2 million or an improvement of $5.2 million or a 72% reduction in adjusted EBITDA loss. Turning to the fourth quarter results. Revenue. Jones achieved revenues of $11.7 million for the quarter ended December 31, 2025, compared to $2.6 million in the prior period or a 450% increase in sales. Two channels stood out to drive the increase, sales of Fallout licensed products to the Club Channel as well as sale of Fallout licensed products in the DTC channels. I'll further discuss the company's outlook for revenue in 2026 later in my comments. Adjusted gross margin, again, non-GAAP measure, for the fourth quarter ended December 31, 2025, adjusted gross margin was 32% compared to 10% in the prior period. As previously discussed, we incurred a $1.2 million onetime inventory write-down associated with our HD9 business. These improvements were also driven by a reduction in trade spend as a percentage of gross revenues and a reduction in COGS and freight and warehousing costs. Trade spend as a percentage of gross sales reduced from 33% in the fourth quarter of 2024 to 10% in the fourth quarter of 2025. COGS as a percentage of gross sales reduced from 71% in Q4 '24 to 54% in the fourth quarter of 2025. We also made improvements in freight and warehousing from 20% of our gross sales to 18% in the quarter -- fourth quarter gross sales in 2025. We see continued opportunities to reduce our product COGS in 2026 based on our increased volumes. We also see some opportunities to further reduce warehousing costs in '26. However, freight out most likely will be negatively impacted by the higher oil prices we are now seeing. SG&A. Looking at SG&A for the fourth quarter, SG&A increased by $0.9 million or 28% up. This increase was primarily attributed to licensing fees on smaller revenues and increased broker payments on increased sales in the fourth quarter. Looking at the net loss for the quarter, it was $2.1 million compared to $4.5 million loss in the prior period or a $2.4 million improvement year-over-year or a 53% improvement. This is driven by the reduction in operating loss entirely of $2.4 million. Adjusted EBITDA for the quarter. For the quarter ended December 31, 2025, adjusted EBITDA was a positive $0.5 million compared to an adjusted EBITDA loss in the prior year of $2.7 million or an improvement of $3.2 million in adjusted EBITDA. Cash on hand, December 31, 2025, we ended the year with $3.6 million in cash on hand compared to $1.3 million at the end of '24. We also increased the size of the line of credit with our lending partner, Two Shores Capital from $5 million to $10 million. As of year-end '25, we had borrowed $3 million on this $10 million line. Subsequent to year-end, we also sold a promissory note owed to Jones from our cannabis business sale, which had a face value of $2 million or $1.4 million. We look at the payments that were associated with that $2 million that would have taken place from 2026 through to 2028 to collect the $2 million, and we determined that having cash in hand now would be the more prudent course of action to further give us the flexibility to finance the expected growth in '26 and help reduce some of the legacy payables. Looking at the outlook for '26, first quarter and 2026 revenue guidance. The following forward-looking statements reflect the company's expectations as of March 31, 2026. They are subject to substantial uncertainty and may be materially affected by many factors, many of which are outside the company's control. Based on the preliminary first quarter results of revenues recognized as of March 30, 2026, the company currently expects first quarter revenues to exceed $12 million or a 260% increase over the prior year first quarter revenues. Additionally, we expect the growth rate on our 2025 full year revenues to exceed 60% for fiscal 2026. Scott, back over to you for final remarks. Scott Harvey: Thanks, Brian. As we enter 2026, we expect our operating environment to remain dynamic, requiring continued laser focus on execution, innovation and discipline and strategic prioritization. Our strategy is clearly focused on our 3 core channels of growth: core soda, modern and adult beverages, where we are prioritized disciplined execution and targeted supported expansion. While our work is not done across these channels by any means, we are encouraged by the progress and remain optimistic given the strength of our innovation pipeline, increasing brand exposure and continued consumer demand. Innovation with each channel is well underway, and we're excited about the new offerings set to roll out across North America during this year, designed to strengthen our portfolio and drive incremental growth as well. Part of our direct-to-consumer and digital expansion strategy in 2026, we'll be reintroducing our D2C platform with a more focused and integrated approach aimed at strengthening consumer engagement and expanding higher-margin channels. Under this initiative, we're launching a new service-based offering and membership programs designed to deepen brand loyalty and increase lifetime customer value. These programs will provide consumers with exclusive access to reduce product pricing in exchange for participation, helping to establish more predictable and reoccurring revenue stream. A key component of our direct-to-consumer and digital expansion effort is the upgrade in our digital infrastructure. We are enhancing the website to deliver a more interactive brand experience, including improved navigation, richer brand storytelling and in addition to tools such as product locator to better connect consumer demand with the retail availability. Together, these initiatives reinforce our ability to capture direct-to-consumer insights, drive incremental revenue and further strengthen our brand ecosystem. Launching our technology enablement and operational integration strategy, we are investing in implementing systems that strengthen our ability to manage the business more effectively across all disciplines. These efforts include upgrading platforms that enhance customer engagement and response time, ensuring we are more connected and responsive to consumer needs across all touch points. In parallel, we're implementing an integrated transportation management solution to improve logistics visibility to optimize costs and drive greater efficiency across our supply chain. We're also advancing the adoption of project management tools and workflows to improve execution, accountability and cross-functional alignment. These systems provide real-time visibility into key initiatives, helping ensure that priorities are delivered on time and in line with our strategic objectives. Collectively, these technology investments are designed to improve operational discipline, enhance decision-making through better data visibility and support the scalable growth across our organization. In addition, we've also added and strengthened our key leadership roles across our sales group, marketing and supply chain, positioning the organization to execute more effectively against our 2026 and long-term objectives. At the same time, we continue to actively identify and attract high-impact talent across the organization to support our next phase of growth, enhance capabilities and elevate overall execution, all the while maintaining a sharp focus on controlling SG&A costs and driving operational leverage. Our focus remains unwavering, delivering channel execution, advancing innovation with each segment, maintaining cost discipline, deepening strategic partnerships and ultimately delivering shareholder value. Finally, and most importantly, I want to acknowledge the Jones teams. I refer to them as our village. Each individual has contributed meaningfully to our progress over the past 12 months. Our achievements would not have been possible without their focus on execution, adaptability and commitment to the brand. And for that, I thank each and every one of them. As we operate in 2026, our 30th anniversary, we expect our success to continue as the brand evolves and progresses. With that, we'll wrap up the call by addressing some of the questions submitted live by the shareholders through our webcast chat. Scott Harvey: That first question that we have relates to the Public Relations website section that we didn't have the correct information for a new IR firm on there. I can update you that, that was corrected this morning, and you will see over the next few weeks an actual transition from the existing company that's actually managing that site to another one. But if you go back and reference that site today, the new IR firm, which is Hayden IR, their information is listed on there. And again, you'll see further improvements as we start to transition that section over the next couple of weeks. Second question, given the global success of Fallout, is there any possibility to roll out products via licensing to countries abroad? Great question. As a matter of fact, we're already working down that path, not necessarily trying to secure a license, but actually exploring what it's going to take in order for us, one, to be able to ship it over water, what each one of these potential countries that we're interested in, what the regulations are, how do we get in there, what the restrictions, the timing and such. So it is a work in progress. It takes time because you want to make sure everything is aligned from paperwork to what kind of pallets you're shipping into these countries. So it's an exciting opportunity for us. We believe that the Fallout and Jones products will play in other countries around the world. But stay tuned, more to come on that, but we are actively pursuing that as we continue throughout the year. Question 3, and Brian, I'll turn this one -- throw this over to you. Can you provide an update on the S-1 process and potential uplisting time line? And how are you thinking about capital needs to support the next phase of growth? Brian Meadows: Thanks, Scott. So the Board and Scott and I are certainly committed to moving forward the S-1 process and uplisting to either NASDAQ or NYSE. We can't give a definitive time line today, but we are -- we do think it could happen in 2026. How we think about capital needs, we certainly have managed to not deploy equity last year despite a very difficult situation to manage through. So again, we thank our operating line partner with Two Shores Capital for their belief and support in us as a management team. And as a result of that, they did expand the line, successfully driven by the success in the Club Channel and DTC that they see. So Scott and I, as we evaluate other growth opportunities, there may be a role for additional equity at some point in the future. Certainly, if we do an uplift process, that would be part of it. But to date, you can see we have worked with our vendors and with our line of credit to support the 42% growth last year. And with the expansion of the line this year, we look like we're in a pretty good shape to manage growth this year. Back to you, Scott. Scott Harvey: Great. Thanks, Brian. Next question, can you comment on store count trends for Pop Jones and Fiesta Jones? Are those channels expanding or holding steady or being optimized? We're currently sitting around about 1,700 stores for the Pop Jones and Fiesta Jones combined product lineup. We have a relaunch plan that we're underway. And as I referenced within my comments, there's got to be a market strategy when we go into these markets. And what we've done in the past is that we were out selling the product. We didn't have the ability to support those. And I think people -- we sort of thought that people would just stumble upon us in the store, but that's not good enough. So when I think -- when I talked about earlier about the 4 walls, 4 blocks, 4 miles, we have to be able to tell consumers when we're into a store. So we're relaunching that strategy. We've got to test markets happening in 2 different states with 2 different markets to really put marketing efforts behind that, being able to communicate to consumers that Pop Jones is there, not only is Pop Jones there, but why you should come in and check out Pop Jones. So -- and the Fiesta segment of that as well. So we're taking a different approach to it. We expect it to accelerate. We're going to relaunch some more core flavors of Jones such as the Cream Soda and the Root Beer in the Pop Jones flavors. So I believe that we'll see some positive results, and it will give us some good trial. If we can go in and win a region, then it gives us something to go to the next region to be able to talk to. So I think strategically on how we go to market and how we reimpact in there is paramount on how we gain success on a go-forward basis. Next question. You demonstrated strong early success with Costco and licensed products. Can you help investors understand the road map to scaling success across national retailers and IP partnerships, including the benchmarks and operational investments required to support that expansion? I can tell you that, yes, we've had some really strong wins where we are currently with our club programs. We do have other club programs that are actually reaching out to us saying, how do we get on -- how do we help and how do we start to utilize some of those partnerships that we have. But it's just not the Fallout and the Fallout and through Bethesda. We also do the fold Honor, we've got Crayola, and we're actively speaking with other potential partnerships to be able to drive that. Currently, the way that we look at it now is that we've got Costco that we're rolling out through our club program and then subsequently, we roll that out through some of our other partners. What we're hoping to and working towards is being able to isolate some of those properties such as Fold of Honors and Crayola and create those experiences for either other clubs or other partnerships that are out there. What those terms look like and operational investments, quite honestly, it all depends. It depends on who you're partnering with, what the requirements are, how big they are. And those are active conversations that we're continuing to have day in and day out with a lot of these potential partnerships that we have. So yes, partnerships is a big thing. But what partnerships also does for us is it gives us the ability to be able to bring impressions of Jones, Jones, the name in front of people. reengaging consumers when they see that name. So yes, we're utilizing partnerships to gain share in some of the outlets that we're in, but we're also getting Jones in front of them. Perfect examples. We launched a Bethesda Fallout SKU. We did a very short stunt of doing a social media post. One social media post reflected on 19 million views of that just because of the partnership that we had. So I look at it as great for our partner, great for Jones because 19 million people got to see our name. So when you start to build impressions and people start to shop in stores, see our name, there's that connection. So super excited about that opportunity. We're going to maximize as much as we can on partnerships, but also using that as a springboard to continue to drive the Jones name into every household. Next question, how are you thinking about expanding core soda portfolio, particularly with respect to new flavors, formats, low-calorie multipack configurations that could drive higher velocity? Dan, great question. Yes, we have new formats. We have new flavors. So I approach the business is you introduce a new flavor, but it's got to replace something, right? And everything that we do, such as we've rolled out with a partnership with Fallout Sunset Sarsaparilla has done phenomenal for us. It's really moving. How does that get into our daily and our core products that we roll out in an everyday item? It will, but something has to fall off the chart because, again, we can't do SKU growth without being able to manage that. So yes, we are looking at different flavors. We've got a few new ones that I'll share with you on the upcoming calls that we'll be rolling out shortly. low calorie ready to go. So that's ready and on the shelf ready to go, and it will be -- you'll start to see some of that in our normal retailers. Multipack configuration, yes, we're looking at a couple of them. Right now, we've got the 12 packs to our club, but there may be a 6-pack coming to a store near you soon. But -- so there are, and we continue to look at that through our new sales leader and our operations leaders that we have and our supply chain is how do we optimize this. But more importantly, how do we get the name Jones in front of consumers when they come to the store. Next question, are there plans to bring successful limited or specialty formats like rocket bottles into a broader retail distribution? Yes, but it has to be the right mix. I can tell you rocket bottles are very unique. And they're not only unique in just the shape and form, but the weight, how they have to be manufactured, the glass itself, where they have to be manufactured, how are they decorated. But when you look at how do you get them into more mass retailers, it's really complicated because not every one of the manufacturers that we work with can run that product down the line. So it gets a little bit more tricky for that. But you'll see rocket bottles will be here for a while. But if there is something that comes up that we can do and we can duplicate to our manufacturers, absolutely take full advantage of everything that we can at the right time. Next question, does the company currently hold rights to expand into more mainstream licensed product like Nuka-Cola? And how should investors think about timing or scale of those opportunities? Well, you will see some more potential Fallout stuff coming out later on this year. We do have Folds of Honor stuff coming out. You'll see a lot of that this summer out there in the stores. Crayola will be making a reappearance again. And again, we have other partnerships that we're in active conversations with. So as soon as those come to life, we will bring those to you as well. Where will they go? I'm a big believer in spreading things out and not just focusing on one specific retailer because what we've learned through this is that other retailers are asking how do I play in this? How do I get involved with this? So it's advantageous for us to continue to build those partnerships and share that with other retailers out there that want that same kind of excitement that we see. Question -- the next question, with the addition of a new CMO, what strategic shifts should we expect to brand positioning, marketing investment and go-to-market execution? Should we expect a redesign or modernization of any of the product lines. Yes, all great questions, right? So I sort of alluded to this 4-wall, 4 blocks, 4 miles. It's really something I'm a firm big believer in that we've got to be able to communicate. We can't just assume we do a display in a store that people are going to come and buy us specifically if you don't go to that store. So the way that our CMO is looking at it in a more holistic thing is how do we get people in their use of social media today because it's so prevalent that's out there. It could be geofencing around stores. But I believe that we'll have more to report out after we complete these test markets that we're doing where we're actually deploying some of these strategies as to how do we reengage or engage consumers that are in this geographic circumference around stores and how do we get them in and one, not only to drive the new experience, but also drive velocities with inside those stores. Next question, how are you thinking about leveraging current trends like 90s nostalgic to accelerate brand awareness and the velocity? Well, Jones is -- that's where we play skateboarders and such, but also Fallout is coming from there. And I think, again, as we start to engage either through like the introduction of Zeroes, fans that may have loved the brand, but can't drink it because of sugar constraints, Zero is a great way. And let me tell you, they're absolutely phenomenal. So I believe by doing some of those things, we can reengage folks in there. We're still doing pictures. We're still doing that. myJones is bigger than life out there as well. So we continue and through our marketing efforts and looking at trends of how do we get involved, but it's got to be the right trend that matches Jones history of who we are. So it's got to be something that really succinct in what we think we are and how we want to be able to operate going forward. But definitely looking at those and to be able to drive brand awareness across all of our consumer bases. Next question, how are you approaching e-commerce fulfillment and channel control across platforms like Amazon, Walmart, Target to improve margin and customer experience? Well, the easy question is, one, we've got to fix what we have today, right? I'm not happy with the way that our D2C platform is operating today, and we've taken that challenge, and we've got -- we've brought in some new folks to help us bring the back of house and the front of house to life, be able to serve consumer needs. I talked about in the first section about subscription base, really signing up folks and signing up consumers so that they get the first look at what's coming out, potential discounts that are. We really got to work on our cost of shipping and such. And we've got a full robust plan in place to be able to start delivering on this here in the near term. And I'll be excited to get it all out in front of you when we're getting ready to launch. So you stay tuned to the website as you start to see things change, but super excited about what that brings to us. Once we get that in place, then that lets us springboard into the Walmarts, the Amazons, the Targets. Once we have a platform that's operating functionally, I don't believe in jumping ahead without making sure that we have the platform that's executing correctly to be able to do so. Next question. Can you provide any update on the regulatory landscape for hemp-derived products, particularly around the potential for a multiyear extension and how do those factors into your planning? I addressed that in the earlier comments. The multiyear extension, I haven't heard about it yet. So I'm always a firm believer on anything that we do. I don't want to be the first one in and I don't want to be the last one out. So we will stay in the game, and we will monitor and monitor what's happening within that environment. Should the extension go, we've got great partners that say, "Hey, if it continues to go, you're going to be our soda guide because you stood with us during these times." So we'll continue to monitor it, but closely monitored because, one, we don't want to be overexposed as well as it goes into effect, it's actually illegal for us to be able to do that. So we'll have to go back to a more of a state-by-state thing. So we've worked through a ton of contingency plans. We stay close to be able to monitor it. State complexity is ramping up because each one of them is starting to position themselves almost like the cannabis business did. As that does, it becomes a little bit more complicated to do scale of anything because each one of the states has their own set of criteria of how they want to, how the boxes are labeled, the cans are labeled, what the milligrams per can, not to bore you with all the details, but it's getting more and more complex as the states start to split apart from the national guidelines based upon what they perceive coming. Next question, can you provide an update on Spiked Jones reformulation and whether the broader or national retail rollout is still planned, including how you're thinking about positioning the segment with an overall portfolio? I talk about our channels. So adult is still a channel that we are not going to abandon. We're examining different ways of bringing Spiked Jones back to the market in its form of reduced alcohol by volume, lower sugar and some other avenues that we're currently exploring. But I still believe that we have a play in that piece. We are looking to get in front of consumers here later on this year as we reformulate the alcohol by volume, look at the flavor profiles as well as continue down some of the other paths that we're talking about internally as to how do we make it more robust. But our channels are our channels. We stay with our channels. I've always said, stay narrow, go deep, and we will continue to do that. and do whatever we can in order to get that to make sure that we're innovative and that we're addressing consumer needs. So stay tuned. More to come on that as we progress throughout the year. Next question. As demand increases, how are you ensuring consistency and customer experience across fulfillment, shipping and direct-to-consumer. I mentioned that earlier in there as well. So we're looking at, one, we've boosted some talent within our D2C on the back of the house and the front of the house. We've partnered with some customer service software to help us get back to consumers when it's needed. But really, it's just reworking the website to make it more friendly and more friendly for users to work as well as easier for us to be able to respond, whether it is a hey, here's your tracking number. Here's what your receipts are, really looking at shipping costs. So again, lots of initiatives going around there. I'm super excited about the 2 individuals that have joined us to help us bring this to life. So again, stay tuned in the works, but I think it's going to be a viable piece for us as we look to launch other innovative things like the rocket bottle. So we need to fix it because it has to work in order for us to be successful in there. Are there investments underway to further strengthen digital infrastructure and online presence? Again, I think that goes to the last question about our D2C piece. Again, in addition to that, when you look at marketing, it's about how do we utilize social media, how do we engage influencers to do the talking for us. And again, we've seen this through some of our club rollouts that, hey, we did one post or we engage with one influencer, and it just exploded across social media. So great learnings for us to be able to do that. And I think we have to be strategic and they have to be meaningful with what is it that we're trying to get out to. And more importantly, we have to be able to understand what's the return that we're getting for any investment that we do on here. So we will not just throw money at influencers, but we definitely have to understand what the return is and how is it impacting our business on a go-forward basis. Next question, are there plans to offer the 12 multipacks through grocery and retailers? 12 packs, really competitive. I think that you'll see some different packs going in there, but I'm not sure 12 packs today will be something that we could do specifically because we're glass and I have not seen any glass 12 pack. doesn't mean that's not a great idea. But it's probably not something that we're looking at in the short term. But I will say stay tuned because you will see some different packs coming through in some of the test markets that we've earmarked for the balance of the year. Next question, do you have any -- do you have a plan for more flavors for Fallout throughout the year? Yes, we do. So not going to peek under the hood at this moment. But yes, there are more flavors coming out. I don't want to ruin the excitement, but stay tuned. It's all exciting for us. I think it's going to be engaging for our consumers, for the Fallout fans, for our consumers with the different flavors that are coming out. But yes, stay tuned. There's more flavors and stuff coming out. Will the company consider canned products like 12-pack cans to reach more customers possibly using the Fallout IP? We've looked at it. We're not there yet. Again, the 12-pack, super competitive with Big Red and Big Blue that are out there. Again, it's a -- you have to have volume in order to drive margins with this. So we have to be very convinced that we have a great path to market to be able to do so. But we'll never say never. But currently, it's not on the docket today. When we've rolled out the -- some of these packs, the inserts in there has driven great success for the consumers. It's drawn great success for the fans that, hey, it's -- I can go out and find this, get something inside there as well as enjoy the phenomenal product that we put in those containers for them. But it's not something that, like I said today, but a great idea, but it will definitely something that we'll keep on the docket on a go-forward basis as well. Does the second quarter have things in the pipeline that will support continued quality revenue growth? Yes, we do. We put a forward-looking statement in there, and we take those things very seriously when we do that. The team has worked really hard with our partners, with our retailers to secure different promotions and such throughout the balance of the year. So yes, there's great stuff coming. And again, we'll be back here in a short 45 days reporting on the success of Q1, and we'll be well into Q2 by that time. And as a matter of fact. Brian Meadows: Can I just add something there, Scott. So I think when I read the questions about continued quarterly revenue growth, I think we have to root ourselves again. We guided for the year 60% revenue growth over 2025 revenues, right? There is seasonality that Jones has typically experienced in the business. So I think I would look at the overall year number. It may ebb and flow a little bit between quarters. And did you want me to go back over some of these other questions. Scott Harvey: Yes, if you could, Brian, that would be great. Brian Meadows: There's a multipart question here. I'm going to take it one piece at a time. Who is the note receivable with? I think it's the question. That is -- we sold our cannabis business in June and the private company called MJ Disrupters purchased it. Part of the sale for $3 million, we took a $2 million -- $2.5 million prom note. And so that was the receivables related to that. What inventory write-down was the impairment coming from, primarily our HD9 business based on the legislative change, we had to look at how our business was performing in the recent months, how much inventory we have on hand and what was the likelihood we were going to sell through that before, let's say, the November deadline happens in 2026. So we thought it was reasonable and prudent to write down the HD9 inventory at year-end. Next part of this was COGS seems incredibly high. Do you expect this to continue in Q1? I would go back to what I said earlier, we actually reduced our COGS to 54% from 71% in the prior year in the fourth quarter. We do see opportunities to further reduce our COGS because we are looking at higher volumes, right? There's a real volume and lower cost relationship in this business. Next part of the -- do we -- once -- there was a question about expected sales in Q1. Today, we guided a minimum of $12 million for Q1. And do we expect to see a GAAP profit? We haven't guided on GAAP profit or EBITDA for 2026. But what I could say is if you look at the fourth quarter, we did generate $0.5 million on $11.7 million in revenue. We see, Scott, I think that -- I think the last one is yours. Scott Harvey: Yes. With the engagement of your new investor relationship, how are you thinking about increasing investor visibility, investor demand? And are you setting a path towards uplisting to a real exchange? We've just transitioned over to Hayden IR. So the point will be is try to get out in front of more investors, have more calls, more visibility. They're a great team. We're super excited to partner with them as our IR firm going forward. So stay tuned. Again, I was going to close the call. Again, any type of questions or comments or one-off calls that you want to have, I'll give you their e-mail address. And again, it's been updated on the website as well. And again, setting -- is there a path that you're setting to uplisting to a real exchange? And I think Brian covered that before. It's always something on our radar. And again, we've done a couple of things that maybe kick that in the gear. But yes, there is that idea to get uplisted to either the NYSE or NASDAQ on a go-forward basis. So more to come on those pieces, but we're super excited about the partnership with the Hayden team and to be able to start to develop that and get us more out in front of the investors and new investors that are interested in the brand based upon the results that we've been able to deliver and we will continue to deliver through the balance of the year. So with that, those are all the questions that we're going to answer at this time. We'd like to thank everyone for taking the time to listen today. I would welcome further questions, and we'd be happy to take your one-on-one calls later this week or early in the next week. Please direct any inquiries to James@haydenir.com. I'd be happy to address accordingly. If I don't speak to you soon, I look forward to addressing you all when we report our first quarter results in May. Thanks again, and have a great day. And Shamali, back to you. Operator: Thank you. And this does conclude today's conference, and you may disconnect your lines at this time. Thank you, and have a great day.
Operator: Good afternoon. My name is Dave, and I will be your conference operator today. At this time, I would like to welcome everyone to Jushi Holdings, Inc.'s Fourth Quarter and Full Year 2025 Earnings Conference Call. Today's call is being recorded. I will now turn the call over to Trent Woloveck, Co-Chief Strategy Director. Thank you. Please go ahead. Trenton Woloveck: Good afternoon, and thank you for joining us today on Jushi's Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Trent Woloveck, and I am the Co-Chief Strategy Director at Jushi Holdings, Inc. With me on today's call are Jim Cacioppo, our Chairman and Chief Executive Officer; Michelle Mosier, our Chief Financial Officer; and Jon Barack, our President and Chief Revenue Officer. This call is also being broadcast live over the Internet and can be accessed from the Investor Relations section of the company's website at ir.jushico.com. In addition to the company's GAAP results, management will provide supplementary results on a non-GAAP basis. Please refer to the press release issued today for a detailed reconciliation of GAAP and non-GAAP results, which can be accessed from the Investor Relations section of the company's website. Additionally, we would like to remind you that during this conference call, we will make forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. Although Jushi believes our estimates and assumptions to be reasonable, they are subject to a number of risks and uncertainties beyond our control and may prove to be inaccurate. We caution you that actual results may differ materially from any future performance suggested in the company's forward-looking statements. The risk factors that may affect actual results are detailed in Jushi's Form 10-K and other periodic filings and registration statements, which may be accessed via EDGAR and SEDAR as well as the Investor Relations section of our website. These forward-looking statements speak only as of the date of this call, and Jushi expressly disclaims any obligation to update this forward-looking information. I will now turn the call over to Jim. James Cacioppo: Thank you, Trent, and thank you, everyone, for joining our call today. This afternoon, I will provide a high-level overview of our performance for the fourth quarter and full year 2025, followed by an update on our recent refinancing. I will then discuss key regulatory developments, including progress towards adult use in Virginia before turning to our operational execution across the business and broader industry dynamics. I will conclude with a review of the regulatory landscape across our key markets before turning the call over to Michelle for a detailed financial review. Beginning with our financial results, revenue for the fourth quarter was $68.3 million, representing year-over-year growth of approximately 4% compared to the fourth quarter of 2024. On a full year basis, revenue increased to $262.9 million, up just over 2% from 2024. While the top line growth remains modest, these results reflect continued stabilization across our retail footprint. Contributions from new stores opened throughout the year and enhanced product availability and quality driven by improved operational execution at our grower-processor facilities. Gross profit for the fourth quarter was $28.6 million, representing 41.9% of revenue compared to $25.4 million or 38.6% of revenue in the prior year quarter. For the full year, gross profit was $114 million or 43.4% of revenue compared to $118.3 million or 45.9% of revenue in 2024. While margins were down modestly on a full year basis compared to 2024, the year-over-year improvement in the fourth quarter reflects the benefits of ongoing operational improvements at our grower-processor facilities, which have driven product quality improvements, yield and potency gains and better product mix. These benefits were partially offset by promotional retail activity amid ongoing pricing pressure in certain markets. Adjusted EBITDA for the fourth quarter was $13.9 million, representing a margin of 20.4% compared to $8 million or 12.2% in the prior year period. The improvement reflects the cumulative impact of the operational turnaround we began executing in late 2024, continued discipline around cost structure and better utilization of our production footprint as well as $3 million of employee retention credits recognized in the quarter. For the full year, adjusted EBITDA increased to $50.3 million, up from $46.2 million in 2024, with margin expanding to 19.1% from 17.9%. Full year results include approximately $10.6 million of employee retention credits recognized during 2025. Building on this strong operating foundation, we took an important step subsequent to year-end to strengthen our balance sheet and position the company for the next phase of growth. On March 27, 2026, we refinanced our existing term loan and second lien notes, which had outstanding principal balances of approximately $46 million and $86 million, respectively, and were scheduled to mature within the next 12 months. We completed the refinancing through the issuance of a $160 million first lien secured term loan due in 2029 with a 12.5% coupon structured as interest-only payments over the 36-month term. The proceeds were used to fully repay the existing term loan and second lien notes, including accrued interest and related fees with excess proceeds to be used for general corporate purposes. The transaction was completed with the participation from a syndicate of lenders, including our 2 largest shareholders, myself included. As part of the refinancing, I contributed additional capital, increasing my overall position relative to my prior participation in the first and second lien debt, reflecting my continued confidence in the strength of our business and our long-term strategy. Overall, the refinancing strengthens our balance sheet and improves our financial flexibility. Importantly, this financing was completed without issuing any warrants or equity-linked securities, unlike prior debt transactions, resulting in no dilution to shareholders. Additionally, the new term loan provides $13 million of incremental liquidity to our balance sheet and includes a single financial covenant requiring the maintenance of a minimum cash balance, which we believe provides a meaningful flexibility going forward. With a stronger balance sheet and improved liquidity in place, we believe the company is well positioned to capitalize on several growth opportunities ahead, including the anticipated transition to adult use in Virginia. In Virginia, several bills were introduced during the 2026 legislative session, including HB642 and a Senate companion SB542 as well as SB671 that established the framework and sequencing for a regulated adult-use market. Earlier this month, the Virginia legislature reconciled the competing bills via conference committee and sent the final bill to the governor for her signature. Under the reconciled bill, all existing medical operators will transition to a dual-use license with applications expected to be released on or before September 1, 2026, and license issuance on or before December 1, 2026. Converted licenses will pay a $10 million conversion fee subject to an agreed-upon payment plan with the regulator. Retail sales are expected to commence on January 1, 2027. We are encouraged by the regulatory process made and are very excited about the opportunity to transition Virginia to adult-use sales on January 1, 2027. In preparation, we are expanding cultivation capacity at our current facility and exploring development of a second cultivation site to support future demand. Importantly, our manufacturing and retail infrastructure are currently prepared to support adult-use sales with minimal incremental capital investment. In markets that have expanded from medical only to also allow for adult-use sales such as New Jersey, the overall market increased significantly following the transition. Based on publicly available data, when comparing annualized medical sales prior to the launch of adult-use with the first 4 full quarters of adult-use sales, total market revenue increased by approximately 3.2x. Assuming a similar market response, we would expect Virginia to experience comparable growth as adult-use sales begin. We also want to thank Speaker Scott, Madam Chair Lucas, Delegate Krizek, Senator Aird and countless others for their leadership in advancing this legislation and positioning Virginia to become the first southern state to pass an adult-use cannabis program. We are hopeful that Governor Spanberger signs the bill within the next couple of weeks. Stepping back, 2025 was a year of execution and recovery relative to 2024. We focused heavily on rebuilding operational consistency, improving product quality and aligning capital allocation with high-return opportunities. While the macro environment remains competitive and price constrained, particularly in adult-use markets, we believe the business is now meaningfully stronger than it was a year ago. From a macro perspective, the competitive landscape remains tight. Pricing pressure persists across most markets, driven by supply imbalances and consumer value sensitivity. At the same time, enforcement against illicit and intoxicating hemp products remains uneven in certain regions, and we continue to engage constructively with regulators and policymakers on these issues. Against this backdrop, our strategy remains centered on execution, quality and disciplined capital deployment, prioritizing margin, cash flow and long-term value creation. Operational execution at our grower-processor facilities was the most important driver of improvement in 2025. Investments in genetics, facility upgrades and enhanced cultivation and production practices translated into materially better yields, higher potency and improved product consistency. In the fourth quarter, average yield across the portfolio increased approximately 28% on a per square foot basis year-over-year, alongside an increase in [ AB bud ] flower production across the portfolio. Potency remained strong in the mid- to upper 20% THCa range. Together, these improvements supported a more favorable product mix across both our retail and wholesale channels. We continue to deploy high-return capital into our grower-processor footprint to meet current demand in Virginia, Pennsylvania and Ohio. In Virginia, we brought one additional flowering room online during the fourth quarter of 2025, adding approximately 3,000 square feet of canopy within our existing footprint. Additionally, we are planning to add 2 more flowering rooms of similar size within the existing footprint over the course of 2026 and early 2027, increasing canopy by approximately 33%. In conjunction with this canopy expansion, we are adding hydrocarbon extraction capabilities to support a broader mix of higher-value concentrate products, process more throughput and expand product selection for patients and consumers. We are also in the design phase for a new 65,000 square foot warehouse expansion in Virginia that would roughly double our canopy there and support expanded processing capabilities. In parallel, we are evaluating a potential expansion of our mortgage and other possible traditional financing options to support this build-out. In Pennsylvania, Phase 1 of our cultivation expansion involved converting a legacy flower room into 3 modernized flowering rooms, effectively creating new productive capacity. Two of those rooms completed their first harvest in January, and the third room is on track to complete its first harvest shortly. Phases 2 and 3 involve reengineering unutilized space with the potential to add approximately 4 additional flowering rooms and increase total canopy by roughly 40%. We have begun ramping up Phase 2 by completing targeted prework and other sequencing activities while deliberately limiting capital deployment at this stage. This approach is intended to shorten the time line required to bring capacity online once there is greater visibility into adult-use sales in Pennsylvania. Importantly, these activities are being funded from our existing balance sheet, and we would not pursue additional financing to fund these projects until there is clear regulatory direction. In Ohio, canopy increased approximately 2.4x year-over-year, allowing us to expand production capacity while maintaining quality and consistency across the facility. We are in the design phase for a warehouse expansion that would add additional canopy, though we would only proceed if market conditions and cost of capital are favorable. Turning to retail. Since the end of the third quarter of 2024, we have added 8 retail locations through the end of 2025, including Toledo, Oxford, Warren, Mansfield and Parma in Ohio, Linwood in Pennsylvania, Peoria in Illinois and Little Ferry in New Jersey. As of year-end, we operated 42 retail stores across our footprint. Subsequent to year-end, we opened an additional location in Springdale, Ohio in January of 2026, and we entered into an agreement to sell our Peoria, Illinois location, subject to regulatory approval. We are actively evaluating 4 to 5 potential store relocations to improve profitability, and we continue to evaluate retail license and store acquisition opportunities in Ohio, Massachusetts and New Jersey. We will not be moving forward with the previously contemplated Mount Laurel, New Jersey location following our termination of the underlying transaction. At year-end, Jushi had approximately 1,288 employees compared to 1,234 employees at the end of 2024. During this time, we grew from 38 stores to 42 stores while maintaining lean staffing levels and driving productivity improvements across the network. While our store count increased by approximately 11% year-over-year, headcount only increased by approximately 4%, reflecting our ability to scale efficiently. The performance underscores the effectiveness of our corporate and retail operating model and the execution of our leadership team. Commercially, we are evolving into what we believe is a genetics-driven product strategy. We've made substantial progress building a robust genetics pipeline and rolled out new strains across all our grower-processor facilities in 2025, with plans to refresh approximately 20% to 30% of our cultivator menu annually. We believe this disciplined approach to genetics supports product differentiation and strengthens our competitive position across markets. We also continue to see growth in our private label portfolio during the fourth quarter, supported by ongoing innovation across both emerging brands such as Hijinks and Flower Foundry and established brands such as Seche and The Lab. During the quarter, we added approximately 280 new unique SKUs, including new offerings across these brands. These launches reflect our continued focus on refreshing assortments, expanding premium and value offerings and meeting evolving consumer preference. As we aim to provide patients and guests with enhanced variety and as part of our ongoing focus on retail execution, we are exploring an e-commerce AI agent to drive growth, further optimize online ordering and recommend our expanded product offerings. On the regulatory front, in Pennsylvania, the state continues to face a significant budget gap and progress toward passing an on-time and balance budget remains an ongoing challenge. While adult-use legalization efforts have not yet produced enacted legislation, there has been movement on establishing a dedicated regulatory framework for cannabis oversight through SB 49. During the fourth quarter, bipartisan legislation to create a stand-alone Cannabis Control Board advanced out of the Senate Law and Justice Committee and is now awaiting consideration by the full Senate. The proposed Board would oversee the existing medical marijuana program and align state regulation of intoxicating hemp products with federal regulations. We continue to monitor these developments closely as regulatory clarity will be important for long-term planning. In Virginia, in addition to the adult-use bill, legislation was passed strengthening enforcement around intoxicating hemp products via SB 543, which enhances the enforcement authority and HB 26 and SB 62, which updates unlawful cannabis criminal penalties. In Ohio, the state enacted SB 56, which updates the regulatory framework for cannabis and hemp products and effectively restricts the sale of intoxicating hemp products to licensed marijuana dispensaries. This legislation, which was signed into law in December of 2025 and became effective in March 2026 is intended to close existing loopholes strengthen enforcement by state regulators and federal agencies and direct THC-containing products into the regulated dispensary channel. We believe these changes should support a more consistent and regulated marketplace over time. In Massachusetts, lawmakers have advanced proposals to update the state's cannabis regulatory framework, including legislation passed by the House that would increase the number of retail licenses a single operator may hold, potentially allowing up to 6 locations over time. The Senate has proposed a smaller increase and the chambers continue working toward a final version. If enacted, these changes could support greater consolidation and influence competitive dynamics in the market. At the federal level, there has been incremental progress toward addressing the hemp regulatory gap created by the 2018 Farm Bill. In November 2025, Congress enacted legislation that narrows the federal definition of hemp, restricts synthetic intoxicating hemp-derived cannabinoids and establishes new limits on THC and finished products. These changes are scheduled to take effect in November 2026. We believe these measures could help direct intoxicating THC products into the state-regulated cannabis markets over time, though the timing and broader regulatory framework continue to evolve. On rescheduling, the process to move cannabis to Schedule III remains underway with regulatory review continuing and no final rule issued as of today. While we view this as a constructive development, the ultimate timing and scope of impact remains subject to federal rule-making process. We'd like to thank President Trump for his leadership by signing the EO at the end of 2025. Finally, potential federal reforms that could improve capital markets access for U.S. cannabis operators, including proposals such as the ClimACT remain uncertain and no legislation has been enacted. We will continue to monitor developments at the federal level. With that, I will turn the call over to Michelle for a detailed review of our financial results. Michelle Mosier: Thank you, Jim, and good afternoon, everyone. I will now provide more detail on our fourth quarter results. Revenue for the quarter increased by $2.5 million to $68.3 million compared to $65.9 million in the prior year quarter. Overall, the year-over-year increase in revenue was driven primarily by retail growth, reflecting contributions from new stores in Ohio and strong sales performance from all our Virginia stores. Revenue in our retail channel was $60.4 million compared to $58.1 million in the fourth quarter of 2024. The increase was primarily due to growth in Ohio and Virginia. Ohio represented the largest contributor due to new stores, while Virginia delivered growth across all stores, primarily driven by increased units sold, while average selling prices remained relatively flat. This growth was partially offset by continued price pressure and competitive dynamics in other markets. In addition, our focus on retail execution and customer engagement continued to support stronger performance of our Jushi branded product sales, which represented approximately 58% of retail revenue across the company's 5 vertical markets in the quarter compared to 55% in the prior year. Our delivery business in Virginia continues to thrive both within our health services area and outside our HSA. For the full year, delivery sales increased approximately 29% year-over-year in our HSA II area and approximately 76% out of our HSA II area, driven by growth in the number of orders, which increased approximately 20% and 79%, respectively. Wholesale revenue was $7.9 million compared to $7.7 million in the comparable quarter of the prior year. Year-over-year increase reflects higher sales across several wholesale markets led by Massachusetts and Ohio. In Massachusetts, growth was driven primarily by increased bulk sales and expanded wholesale distribution, including placement in new dispensaries. In Ohio, the increase reflects expanded distribution and higher sales volumes. Pennsylvania also delivered steady growth across the wholesale channels. These increases were partially offset by a $1.2 million decline in Virginia, where wholesale partners continue to prioritize their own vertical sell-through. Gross profit was $28.6 million or 41.9% of revenue compared to $25.4 million or 38.6% of revenue in the fourth quarter of 2024. The year-over-year increase in gross profit and gross profit margin was primarily driven by higher production volumes, improved product quality and stronger performance across our grower-processor facilities, reflecting the operational improvements implemented over the past year, particularly in Pennsylvania, Massachusetts and Ohio. These benefits were partially offset by continued pricing pressure across our footprint, which led to increased promotional activity. Operating expenses for the fourth quarter were $27.8 million compared to $27.2 million in last year's fourth quarter. As Jim mentioned earlier, we continue to add new retail locations while scaling the organization efficiently. The modest year-over-year increase in operating expenses primarily reflects costs associated with new store openings and a larger retail footprint, partially offset by the impacts of continued cost discipline. Other income and expense included $10.4 million of interest expense, which is partially offset by an $800,000 fair value gain on our derivatives and by other net of $500,000. Other net was primarily comprised of $3 million related to employee retention credit claims, including interest received from the IRS, partially offset by a $2.6 million noncash adjustment to our indemnification asset related to acquisitions made in prior years. As with prior periods, we continue to recognize the ERC refund claims and income as the refunds are received from the IRS. As of the end of the fourth quarter, we had approximately $700,000 of remaining ERC claims outstanding, all of which were not factored. Our net loss for the fourth quarter was $15.6 million compared to $12.5 million in the prior year. Adjusted EBITDA was $13.9 million compared to $8 million in the fourth quarter of 2024, and adjusted EBITDA margin was 20.4% compared to 12.2%. Moving to the balance sheet. As of December 31, 2025, the company had approximately $26.6 million of cash, cash equivalents and restricted cash. Cash provided by operations was $6.1 million compared to $7.2 million provided in the fourth quarter of 2024. The change reflects working capital improvements. As of December 31, 2025, we had $193.1 million of debt subject to repayment, excluding the $21.5 million of promissory notes issued to Sammartino that remain in dispute as well as leases and equipment financing obligations. Our term loan with a principal balance of $46.1 million and our second lien notes with a principal balance of $86.2 million were scheduled to mature at the end of 2026. As Jim mentioned earlier, subsequent to year-end, we completed a refinancing of these facilities, which extends our debt maturities and further strengthens the company's balance sheet. For the full year 2025, capital expenditures totaled $16.1 million, consisting of $4.8 million of maintenance CapEx and $11.3 million of growth CapEx. As we consider capital expenditures for 2026, we currently expect maintenance CapEx to be in the range of approximately $4 million to $5 million, consistent with our ongoing focus on maintaining and optimizing our existing asset base. Excluding capital associated with potential regulatory changes, we currently expect 2026 growth CapEx to be in the range of $5 million to $8 million. These investments would support targeted initiatives across our grower-processor footprint and select retail build-outs. This would result in total projected capital expenditures of $9 million to $13 million in 2026. As Jim mentioned earlier, regulatory developments, particularly in Virginia, will influence the timing and scale of future capital investments. In the case of Virginia, we're developing plans for grower-processor expansion contingent on adult use. We believe a significant portion of any such expansion could be financed through an expanded facility mortgage, and we would expect the majority of construction-related capital spending to occur in 2027 rather than 2026. And with that, I will turn the call back to Jim for closing remarks. James Cacioppo: Thank you, Michelle. As we reflect on 2025, it was a year defined by execution, operational recovery and disciplined decision-making. We entered the year focused on continuing to stabilize the business, improving product quality and strengthening our operational foundation, and we believe the progress we delivered across cultivation, retail and commercial demonstrates that those efforts are taking hold. Across the organization, we improved yields, potency and consistency at our grower-processor facilities, expanded and optimized our retail footprint and continue to shift our mix toward higher quality and branded products. These operational improvements are translating into stronger margins and a more resilient business model, even as pricing pressure and competitive dynamics remain elevated across the industry. Importantly, we are approaching growth with discipline. As we discussed today, we are making targeted high-return investments to support current demand while carefully sequencing larger opportunities around regulatory clarity. In Virginia and Pennsylvania, we are preparing thoughtfully for potential adult-use expansion while remaining prudent in our use of capital and focused on protecting the balance sheet. Looking ahead to 2026 and 2027, we are particularly excited about the transition to adult use in Virginia. With our cultivation, manufacturing and retail infrastructure already in place, we believe we are well positioned to participate in what will be a meaningful expansion of the Virginia cannabis market. Our focus remains on preparing thoughtfully for that opportunity while continuing to operate with the same discipline that defined our progress in 2025. More broadly, our priorities remain unchanged. We will continue to execute with discipline, focus and operational excellence, allocate capital thoughtfully and build a scalable platform capable of delivering sustainable profitability and long-term value for shareholders. Before we conclude, I want to thank the entire Jushi team for their dedication and hard work throughout the year. Their commitment across the organization is the foundation of the progress we have discussed today. Thank you all for joining us and for your continued support. Operator, please open the call to questions. Operator: [Operator Instructions] Our first question comes from Frederico Gomes with ATB Cormarkets (sic) [ Capital Markets ]. Frederico Yokota Gomes: My first question, I guess, 2 questions on the gross margins. Was a decline sequentially from 46.7% in Q3. So could you maybe talk about it? Is it related to seasonality maybe or any onetime items impacting the gross margin? And then second, you did report an adjusted EBITDA margin expansion sequentially. So maybe just to clarify, is that related to some of the items you mentioned that are included in the adjusted EBITDA number? Or how do you square that with the adjusted -- with the gross margin decline sequentially? James Cacioppo: I'll do this. Gross margin -- on the gross margin, in the September quarter, the third quarter, we had a bulge of packaged goods and that created a lower cost per unit, and we pulled back a little bit based upon elevated inventories. It wasn't really market related. It was just production related, and we pulled back in October and November, which causes your cost per unit to go higher if you follow what I'm saying. So that was a lot of what had to do with. But also in December, you have discounting related to the holiday activity, both during Thanksgiving, things like Black Friday, which should be expand to 3 or 4 days of discounting. And then, of course, in Christmas, we do the 12 days of Christmas and it's a promotional time of the year for everybody in the spirit of Christmas. In terms of EBITDA, Michelle, do you -- I didn't quite catch that. Michelle Mosier: Yes. I think EBITDA improved. We had some ERC credit income during this quarter of about $3 million, which was a large contributor to the improvement in EBITDA. Frederico Yokota Gomes: Got it. I appreciate that. And then I guess the second question, just on -- you are increasing the percentage of branded sales in your own stores quite substantially on a year-over-year basis. So how much higher can this go? Do you have a target in mind? Any sort of rough guidance on that for this year? James Cacioppo: Yes. I mean we don't really target it as much as we focus in on consumer demand, patient demand. And -- but I think it's running sort of in the 60s, mid-60s in most of the markets. The market that brings the average down is Ohio, where we don't have supply or haven't been able to buy bulk at the right prices to do more branded products. And we have been talking over the last 6 months about wanting to do an expansion in Ohio, including on this call when we did this in prepared remarks. So one of our items that we have along with Virginia, Pennsylvania growth due to regulatory change is Ohio increasing the vertical in that market, which would increase margins in that market. We spent money in 2025 on expanding Ohio retail primarily, and we did some of that in 2024. And so we have a certain amount of budget to spend, and we decided to get the sales before we build out the core processor. Operator: The next question comes from Luke Hannan with Canaccord Genuity. Luke Hannan: I wanted to follow up on the conversation on Virginia. Jim, if I heard you correctly, I think you said that the CapEx budget -- the CapEx budget for this year is $9 million to $13 million in total, including maintenance and growth. How much of that, if any, includes a build-out in Virginia? You did mention, I think, all the -- assuming when adult-use lands, most of that CapEx is going to be coming in 2027, you're going to also draw on mortgage for that. Can you just frame up to us also what the size of that spend could be? I know it's in 2027, but I just want to get an understanding of the funds that you could have available for that. James Cacioppo: Yes. So I believe Jon will confirm this. I'll say it, but he's shaking his head that he will confirm if I'm right. But I think what we haven't planned in this year is $2 million to $3 million related to building out in warehouse. So we have grower rooms built that need to be equipped and updated these kinds of things because we haven't needed that capacity for the medical market. So we have 2 additional grower rooms. As a reminder, we have 6, are all roughly the same size. So it's 2 over 6 is the growth. That's I think will be primarily, if not all, for adult use. We don't think that will be needed for the medical demand, but it may be, some of it may be. So that's -- and we're also doing the hydrocarbon extraction. And then next year, which is not in this year's budget at all. There's not even sort of a budget item for like a deposit, but we're in construction diagram phase of the expansion of the warehouse. It's really another warehouse then we join it together. And so those of you that followed us for a long time realize that we have a lot of land that we purchased very well in Virginia during the COVID crisis. We bought the building and it was associated land, and we're going to build the warehouse on some of that land that doubles -- roughly doubles our canopy. That is not in the budget. And as Michelle noted in the prepared remarks, we believe a substantial portion of that would be paid by expanding our credit facility. And we did overfund our deal for existing cash. So we believe we'll be able to have the funding for that. We're waiting for the governor signature and then we need to get some regulatory approval as any construction project requires. Luke Hannan: Okay. And then I think you also touched on in your prepared remarks, all the medical stores there in Virginia will transition to dual use, but it is subject to a conversion fee. Did I hear you correctly that $10 million and then it's -- there's a payment plan that's set up for that as well? James Cacioppo: That's correct. Trent, do you want to comment on that? Trenton Woloveck: Yes, sure. So Luke, we get to propose a payment plan to the CCA for what we want to structure that payment -- $10 million payment to look like over 3 years. Luke Hannan: Okay. Got it. And there's no -- is there any implicit interest rate that's included in that? Or it's just a flat, you can chop it up 1/3, 1/3, 1/3? Trenton Woloveck: 1/3 -- we could do 1/3, 1/3, 1/3. We could propose whatever we would like to do. First payment would have to be made by December 1 of this year with expectation of sales starting on 1/1/27, and then we can space it out however we see fit and agree with the CCA on that. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Jim Cacioppo for any closing remarks. James Cacioppo: Great. Thanks everybody for attending. We appreciate it, and have a good day, and thanks again to all the great Jushi employees. We appreciate your effort. Bye-bye. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to Purple Innovation Fourth Quarter Full Year 2025 Earnings. [Operator Instructions] I would now like to turn the call over to Stacy Turnof, Investor Relations. Please go ahead. Stacy Turnof: Thank you for joining Purple Innovation's Fourth Quarter and Full Year 2025 Earnings Call. A copy of our earnings press release is available on the Investor Relations section of Purple's website at www.purple.com. Before we begin, I'd like to remind you that certain statements made in this presentation are forward-looking statements. These statements reflect Purple Innovation's judgment and analysis as of today and are subject to a variety of risks and uncertainties that could cause actual results to differ materially from current expectations. You should not place undue reliance on these forward-looking statements. For more information, please refer to the risk factors outlined in our filings with the SEC. Additionally, today's presentation will reference non-GAAP financial measures such as adjusted gross margin, adjusted operating expenses, adjusted EBITDA, adjusted net loss and adjusted net loss per share. A reconciliation of these measures to the most comparable GAAP measures can be found in the earnings release available on our website. With that, I'll turn the call over to Rob DeMartini, Purple Innovation's Chief Executive Officer. Robert DeMartini: As we close out 2025, I'm proud of how far the business has come over the past year. While the broader market remains challenging, the progress we're making at Purple is increasingly evident in our results. The fourth quarter marked an important inflection point for the company. Revenue increased approximately 9% year-over-year. We delivered gross profit expansion and profitability improved meaningfully across the business. In the quarter, we generated adjusted EBITDA of approximately $8.8 million and finished the year profitable. This performance was driven by the benefits of the strategic actions we've taken. Those actions include our cost initiatives that are now fully embedded in the business, including consolidating our manufacturing footprint as well as a full quarter of expanded Mattress Firm distribution and a significant expansion of our Costco program. Looking at the full year, 2025 was a period where the business became meaningfully stronger. We continue to build on our path to premium sleep strategy and delivered positive adjusted EBITDA for the year, finishing within the guidance range we established at the beginning of 2025. Importantly, we achieved profitability levels that we haven't seen since 2021. That progress was driven by the execution and by the changes we put in place, not by a recovery in the broader market, which speaks to the durability of the model we've been building. Our focus throughout the year was not on short-term fixes, but on creating a business that can perform more consistently. Taken together, this represents more than a strong finish to the year. It marks a clear shift from defense to offense. Growth, margin expansion and profitability are showing up in the numbers and that's in a market which is down low single digits. The direction is clear, the momentum is real, and we're entering 2026 with a playbook designed to scale profitably as demand continues to improve. We've made meaningful progress across each of our sales channels in 2025. And in the fourth quarter, 2 of our 3 channels delivered positive growth for the second consecutive quarter. Comparable sales in our showrooms increased 8.8% in the quarter and showrooms continued to grow in profitability for the full year. Sales execution improved, the updated selling model gained traction and Rejuvenate 2.0 represented over 50% of showroom mattress revenue during the quarter with more than 80% of showroom's 4-wall profitable for the full year. Wholesale was a key driver in 2025 with a robust 39.8% growth in the fourth quarter. E-commerce performance was mixed during the year and declined in the fourth quarter, though we did see pockets of strength around Black Friday and Cyber Monday. At the same time, we saw solid marketplace performance, particularly on Amazon and meaningful improvements to the website experience tied to our less pain, better sleep positioning. Stepping back, the way we're thinking about the business today is fundamentally different than a year ago. Last year was about reshaping the business for a tougher market, rightsizing our cost structure, strengthening the foundation and restoring profitability. Today, we're focused on growth. Going forward, our focus is centered on 3 priorities: deepening our understanding of the consumer, delivering better sleep through product experience and expanded distribution and executing with financial discipline across the business. This approach builds on what's already working and reflects how we're running our business. With that framing, let me walk you through our progress against these priorities and what they mean for the business going forward. Number one, knowing our consumer. Over the past year, we've sharpened our focus on understanding who our consumers are, what matters most to them and how they make their purchase decisions across the channels. Our work is shaping how we communicate, shifting us away from promotionally led messaging towards clear benefit-driven storytelling, focusing on GelFlex Grid technology that helps consumers understand how Purple delivers better sleep. Our less pain, better sleep positioning continues to resonate, providing a consistent consumer-led message that translates across e-commerce, retail and wholesale channels. Importantly, we're focused on reaching our consumers with the right message in the right place at the right point in their decision journey. We're seeing early signs of improved brand momentum with increased awareness, beginning to translate into brand consideration. As a result, we're improving our clarity across touch points, strengthening engagement and supporting higher quality conversion as consumers better understand the value of our product. In e-commerce, we're encouraged by the progress we're making. As part of better meeting consumers where they're shopping, our expanded presence on Amazon is gaining traction. Improvements in availability, delivery speed and conversion are strengthening the consumer experience and broadening our reach particularly among new-to-brand consumers. This expanded assortment is driving a healthy lift in Amazon sales, especially in pillow and seat cushions and introduces new consumers to our technology. We're also seeing this consumer-focused approach resonate through our partnerships. Our participation in Mattress Firm's Sleep Easy marketing campaign drove sales conversion and improved aided awareness scores. At the heart of better sleep is better product. From there, we focus on how we bring innovation to life through the consumer experience and expanded distribution. Innovation remains at the core of Purple's differentiation and our Rejuvenate 2.0 collection continues to validate that approach. Performance exceeded our expectations in 2025 with strong traction across both showrooms and wholesale as retail partners expanded Rejuvenate 2.0 placement on their floors. Through our direct channels, Rejuvenate 2.0 is performing well at an average selling price of almost $5,800, demonstrating our ability to drive demand at meaningfully higher price points and reinforcing the value consumers place on better sleep. We also completed development work on Purple Royale, a new premium offering developed in close partnership with Mattress Firm. This is an important product for us and a meaningful step forward in our premium strategy. Purple Royale is complementary to our Rejuvenate 2.0 collection, with similar price points across the curated floor model lineup. The launch is on track with initial floor models arriving now. The Purple Royale collection was originally planned for over 2,800 slots bringing us to a total of 12,000 slots across Mattress Firm's 2,200 stores. Encouragingly, the quality and design of the final product has exceeded expectations, and as a result, Mattress Firm is adding incremental slots as the product launches. Beyond the product itself, we continue to focus on delivering a differentiated end-to-end consumer experience, anchored by compelling in-store presentations across our own stores and wholesale partners. This includes elevating how we educate our consumers around pain relief and the role of GelFlex Grid technology, which we are seeing drive strong engagement when brought to life through in-store demonstrations and digital content. We're also continuing to strengthen white-glove delivery services to ensure that Purple shows up consistently incredibly whenever the consumer chooses to engage. This focus is strengthening the brand and improving conversion by reinforcing the value of our technology across channels. Part of delivering better sleep is expanding our distribution presence, meeting more consumers where they shop. The premium innovation is translating directly into expanded distribution. With Purple Royale now launching across Mattress Firm, we've expanded our footprint and deepened our presence across their network. Additionally, we're seeing strong performance with Costco, where our program continues to resonate with members and provide an important opportunity to introduce Purple to new customers at scale. With both Mattress Firm and Costco, our initial launches significantly exceeded expectations, driving immediate demand for expanded placement. In Costco's case, early performance was exceptional, supported by the introduction of unrolled beds on floor displays, which allowed members to see and feel our differentiated product. The strength of those results led Costco to quickly expand the program in the fourth quarter to approximately 450 clubs bringing us to nearly nationwide distribution. We're also making progress in new channels, including Walmart and Sam's Club, which are helping us reach new consumers, diversify demand and drive incremental volume. Importantly, expanding into these large far-reaching retail platforms strengthens distribution for our pillow portfolio and positions us to drive meaningful incremental pillow sales through highly scaled high-traffic partners. And in owned retail, we continue to focus on showroom profitability. In 2025, we closed 4 underperforming stores as part of optimizing the sleep. And looking forward to 2026, we plan to open 7 new stores. Our showrooms continue to be an important part of the model that showcases our GelFlex Grid technology and premium positioning. Our showrooms drive traffic to wholesale locations, helping convert interest into purchases. Finally, let me talk about how we're executing with financial discipline across the business. Last year, our focus was on rightsizing the business, so we could operate profitably at current scale. That work is now behind us. And importantly, the actions we took were structural, not temporary. We're increasingly focused on driving growth from a much stronger foundation. Gross margin improvement remains a key focus, and we continue to see the benefits of the actions we've taken to simplify the business and improve efficiency across sourcing, operations, fulfillment and product quality. Mix has become an increasingly important tailwind led by the growth of Rejuvenate 2.0. The shift towards higher ticket products, combined with strong attachment rates for adjustable smart bases and pillows, is driving higher average transaction values and incremental profit dollars. As a result, the operating discipline we put in place over the past year is now clearly showing up in our margins and profitability. We continue to view 40% gross margins at a sustainable level, and we expect further improvement as we move into 2026 as efficiencies continue to flow through the business. Todd will provide more detail on specific margin drivers and cost actions in his remarks. Turning to our guidance. As we look ahead to 2026, we're entering the year with improved stability and a structurally stronger operating model. For the full year, we expect revenue in the range of $500 million to $520 million and adjusted EBITDA of $20 million to $30 million. This outlook reflects continued momentum in our premium product portfolio, expanded wholesale distribution and the operating leverage in the business as volume grows. Importantly, this guidance is driven by execution, not by a recovery in the broader market. It reflects the progress we've made across product, distribution and operations, with gross margin sustainably above 40% and disciplined expense management we believe we're well positioned to deliver meaningful earnings growth in 2026. Before I close, I'd like to briefly readdress the Board's ongoing review of strategic alternatives. The process remains ongoing, and we've engaged with multiple parties across a broad range of opportunities to maximize shareholder value, including a potential merger, sale or other strategic or financial transaction. We'll continue to evaluate all options and will provide updates as appropriate. As a reminder, we will not be commenting further or taking questions on this topic during today's Q&A. With that, I'll turn the call over to Todd. Todd Vogensen: Thank you, Rob. I'll begin by walking through our fourth quarter financial performance and then the year ended December 31, 2025. Net revenue for the fourth quarter was $140.7 million, representing growth of 9.1% year-over-year. The increase was driven primarily by wholesale, reflecting a full quarter of expanded Mattress Firm placements and continued momentum with Costco, partially offset by a decline in e-commerce. By channel, direct-to-consumer net revenue for the quarter was $71.9 million, down 9.9% compared to last year. Within DTC, showroom revenue increased approximately 4.5%, up for the second consecutive quarter and comparable sales were up 8.8%, reflecting continued strength in Rejuvenate 2.0. E-commerce revenue continued to be down with a decline of 15.3%. Wholesale revenue increased approximately 39.8%, driven by our expansion with Mattress Firm and Costco. Gross margin for the quarter was approximately 41.9%, remaining well above our 40% quarterly margin target and down 100 basis points from last year. We're pleased with the durability of our gross margin, particularly given the strength of last year's results when gross margin rose 970 basis points driven by sourcing initiatives and the profitable liquidation of inventories. Viewed over a 2-year period, gross margin increased by nearly 870 basis points, reflecting durable improvements to the business. The margin continues to be driven by direct material savings, plant efficiencies, restructuring benefits and volume leverage. On an adjusted reported basis, gross margins for the quarter, excluding restructuring costs, was 41.9%, down 300 basis points from last year. Operating expenses for the quarter were $61.2 million, down 2.9% versus $63 million last year. The decrease reflects the benefits from restructuring activities and other cost-savings initiatives. Our fourth quarter adjusted loss per share was $0.02 compared to an adjusted loss per share of $0.11 last year. Adjusted EBITDA in the fourth quarter was $8.8 million, a notable improvement over the $2.9 million EBITDA last year. Turning now to full year results. Net revenue for the full year 2025 was $468.7 million, reflecting a 3.9% decline versus the prior year. By channel, direct-to-consumer net revenue for the year was $261.3 million, down 7.9% compared to last year. For the full year, showrooms generated strength with sales up 1.5% versus last year to $78.5 million and comparable revenue was up 6.6%. We delivered net revenue of up 4% or more in 3 of the past 4 quarters with only the second quarter being impacted by the timing related to the Rejuvenate 2.0 launch. Wholesale has been sequentially improving over the last 4 quarters, up 1.6% versus last year to $207.4 million, benefiting from expanded partnerships and nontraditional revenue streams, while e-commerce remained soft throughout the year. Full year gross margin increased 310 basis points to 40.2% versus last year, reflecting the impact of restructuring, sourcing initiatives and manufacturing efficiencies. On an adjusted basis, full year gross margin, excluding restructuring costs, improved slightly to approximately 40.4%, up approximately 10 basis points year-over-year. Our cost initiatives delivered $25 million in annual savings in 2025, with $25 million to $30 million of sustainable savings expected going forward, giving us greater flexibility to reinvest in marketing and innovation while continuing to expand margins. Just as importantly, it reflects a business that is operating with greater discipline and a structurally stronger cost base. Full year operating expenses declined by 15.3% to $231.6 million, driven by restructuring savings and productivity initiatives. Adjusted net loss was $34.3 million versus an adjusted net loss of $55.1 million in the prior year. Adjusted EBITDA for the full year was $1.9 million, representing a significant improvement versus the adjusted EBITDA loss of $20.8 million last year and adjusted net loss per share in 2025 was $0.32 compared to an adjusted net loss per share of $0.51 in the full year of 2024. Now turning to the balance sheet. We ended the quarter with cash and cash equivalents of $24.3 million versus $29 million on December 31, 2024. Net inventories on December 31, 2025, were $59.7 million, up 5% compared to December 31, 2024. We're pleased to exit the quarter with cash over $24 million, and we believe we are well positioned from a liquidity standpoint. We also extended our debt maturities from December 31, 2026 to April 30, 2027, enhancing our financial flexibility and reflecting continued strong support and confidence from our lending partners. Now let's turn to the outlook. Given that we are through most of the quarter, we will be providing guidance for the first quarter. We plan total revenue to be in the range of $100 million to $105 million and adjusted EBITDA to be in the range of a loss of $7 million to a loss of $4 million. As Rob walked you through earlier, for the year, we expect revenue in the range of $500 million to $520 million and adjusted EBITDA of $20 million to $30 million. We plan for revenue to continue to be driven by strength in Rejuvenate 2.0 as well as our expanded distribution with Mattress Firm and Costco. We also anticipate continued improvement in EBITDA, driven by further operational efficiencies and ongoing restructuring actions benefiting both gross margin and operating expenses. These initiatives are expected to support improved profitability and cash generation, reflecting the full impact of our cost actions, product innovation and expanded distribution. Robert DeMartini: Thank you, Todd. This morning, we filed our annual report on Form 10-K for the fiscal year ended 2025. As disclosed in the filing, our independent auditor has included a going concern qualification. While this notification is not necessarily a surprise, given the liquidity challenges of the past year and our historical cash burn, we want to provide clear context why the decisive, transformative actions we've already taken are expected to continue stabilizing our financial position and driving the business forward. The fruits of our labors are already evident in our recently improved operating and financial performance. Following a rigorous period of restructuring, we achieved profitability levels in the second half of 2025 that we haven't seen since 2021. This momentum is driven by 3 core strategic pillars: supply chain reorganization. We've optimized our footprint to ensure a more agile, cost effective flow of goods. Disciplined cost management. Structural savings initiatives implemented in 2025 have led to significant margin expansion and profitability at revenue targets meaningfully lower than past years. Channel momentum. We're seeing robust volume growth across both our wholesale and showroom channels as our path to premium sleep strategy takes hold. We entered 2026 on much firmer footing. We expect to conclude Q1 '26, historically our seasonally weakest quarter with neutral cash burn. Furthermore, we're grateful for the strong continued support of our lenders. Our recent agreement to extend debt maturities to April 2027 provides us with the runway and the financial flexibility to execute our long-term vision. We believe these factors, combined with our improved liquidity profile, directly address the concerns raised in our 10-K and position us for a year of consistent growth and profitability, as evidenced by our 2026 guidance. We appreciate the patience and the confidence of our shareholders. Like you, we are disappointed by the current stock price. Our team remains focused on executing our clear plan to build on recent business momentum and deliver sustainable shareholder value on your behalf. With that, operator, we can turn it over for questions. Operator: [Operator Instructions] Your first question comes from the line of Brad Thomas with KeyBanc Capital Markets. Bradley Thomas: Rob, I wanted to start off asking about recent trends. There's no question that the fourth quarter showed some nice momentum and your outlook for this full year is very encouraging. It does look like maybe the first quarter had maybe a step back in the pace of the business. Can you just talk a little bit more about what you've been seeing here? Robert DeMartini: Yes, Brad, thank you for the question. And I think there's a couple of things going on. We had a very strong fourth quarter. And the way the fourth quarter shipped, it did impact demand in January as that sell-through and consumption happened. Particularly, we've got the club customer that had a significant buy-in in December that was part of loading the floor, and so there wasn't much follow-up in that. As Todd said, we think we'll be between $100 million and $105 million. And I think the momentum also includes all those floor samples at Mattress Firm going out, and that obviously has a short-term push down on revenue as they sell in at floor sample prices. So we're encouraged. Q1 has always been our weakest quarter. It's not a strong quarter, but we think the momentum in the business dictates the strong rest of the year that we've predicted. Bradley Thomas: And just to be clear, Rob, it sounds like aside from the January, you've seen an improvement in trends of late. Is that fair to assume? Robert DeMartini: Yes. I mean Q1 is not robust by any means, but we've seen us kind of lapping last year right at about equal to comp levels. And obviously, we're close to ending March, and we expect kind of the same performance in March. Bradley Thomas: Great. And then just following up about the outlook for the year, we can obviously back into it a bit through your guidance. But the question is really how to think about the flow-through margin? You've done a great job of improving the cost structure of the business. As you start to drive this volume, how do we think about it flowing through to the bottom line? Todd Vogensen: Yes, flow-through actually should be quite good for us. If you look at the guidance, we're guiding to revenue that's $30 million to $50 million better than last year and looking at EBITDA that's going to be around $20 million to $30 million better. That's a pretty healthy flow-through. I think on a normal basis, our sales should be generating about a 30% flow-through. This year will be a little bit more because we're also seeing margin expansion and a lot of cost control that is helping us along the way. Bradley Thomas: Great. And if I could squeeze in just one more regarding the macro environment as it relates to raw materials. Can you just remind us the degree that you have exposure to petrochemicals or other inputs that may be at risk of some price pressure here? And what are you hearing from suppliers? Todd Vogensen: Yes. So mixed bag, we obviously are not importing oil or anything like that directly, but we do have products that have a petroleum base to it. You can think foam, some of our -- to a lesser degree, the mineral oil that's going into the gel. Overall, we've looked at it. And if the price of oil stays around that $100 a barrel range, effectively, the savings we're going to get this year off of tariffs from being able to get -- well, lower rates on tariffs, but also tariff mitigation would roughly offset the exposure from any oil. We continue to monitor it. We're hearing noises about price increases, but it's just very, very early on at this point. Operator: Your next question comes from the line of Matt Koranda with ROTH Capital. Matt Koranda: I wanted to hear a little bit more about how you're thinking about the seasonality of the year, just given the visibility you have into the product launches with your wholesale partners. So maybe just a little bit more around the ramp that's implied in guidance for the remainder of '26. Todd Vogensen: Yes. So you should see revenue growing -- sorry, Rob. You should see revenue growing pretty consistently across the course of the year. In Q2 -- typically, Q2 would be relatively flat to Q1. But this year, we have the Purple Royale launch at Mattress Firm that literally just got out on floors last week officially. So that will help out the Q2 pace. And then we have a natural build that we see virtually every year going into Q3 and Q4. So it really should build pretty consistently as we go across the course of the year. Matt Koranda: Okay. And then maybe just wanted to hear you unpack the drivers of the flow-through. You mentioned there's likely some more restructuring actions. Does that benefit operating expenses? Or are there gross margin benefits embedded in the actions that you're taking? Are the actions already taken? Or is this incremental stuff that still needs to happen during the second quarter to hit the flow-through sort of that's implied in the '26 EBITDA guide? Todd Vogensen: Yes. So the actions that I kind of referenced were actions that have already been taken at this point. We don't have plans for additional actions that are needed right now. We feel like we're positioned very well for the full year. But we did take a little bit of an action in January that will continue to benefit the operating expense line. And then from a gross margin perspective, we actually just have a very strong team on the operations side of the world that is always looking for room for improvement from an efficiency perspective, overall scrap and yield, looking at sourcing opportunities. There's a number of opportunities that should play out across the course of the year to help that flow through. Operator: Your next question comes from the line of Dan Silverstein with UBS. Daniel Silverstein: Maybe just to start, looking at the sales guidance, up $30 million to $50 million this year. I think the Mattress Firm expansion was supposed to drive around $70 million of additional sales and it sounds like it's doing really well right off the gate. If this is the case, what other areas might be driving a bit of a drag to kind of net out below $70 million? Robert DeMartini: Yes. First of all, I think that the $70 million, we've got to grow into that number. It's probably somewhere between $50 million and $70 million. And obviously, it's just hitting the floor right now. But we've got -- we expect growth from Costco as well. We expect growth from showrooms, modest. And then we have assumed a flat e-commerce business in the roll-up. We want to do better than that. But given the performance of the last few years, we tried to show some conservatism there. Daniel Silverstein: Super helpful. And that was kind of my second question. Why is the Amazon business doing well relative to your own e-com channel? How can you capitalize on this? And how can you reinvigorate your own e-com channel looking ahead? Robert DeMartini: Yes, Dan, I'll separate the 2 questions because they really are different drivers. I mean our own e-commerce business, we've got to figure out a way as we've expanded our availability across both our own showrooms and partner showrooms. The specialness of reaching our product online has been challenged and the product assortment while proving to be a benefit in a physical environment is either a neutral or a negative in a digital environment, and we're still trying to figure that out. So that's what's going on with e-com. On Amazon, it's quite a different situation where because of the cube of mattresses, we have a very underdeveloped shape of business at Amazon. So the progress you're seeing is kind of getting our fair share relative to the pillow business that we have there. And so it is a bit of a development opportunity, and that has to do with availability and prime badging that we're starting to figure out. So it really is 2 different drivers across those otherwise seemingly consistent channels. Operator: [Operator Instructions] Your next question comes from the line of Bobby Griffin with Raymond James. Alessandra Jimenez: This is Alessandra Jimenez on for Bobby Griffin. First, I wanted to follow up on current demand trends. What are you seeing from growth in your retail partners outside of Mattress Firm and the incremental Costco program? Robert DeMartini: Alessandra, on our own business, you're asking not the overall market? Alessandra Jimenez: Yes. Robert DeMartini: Yes. It's a mixed bag. We've got some customers where we're seeing nice growth, and we've got others where we've got to figure out why we're not seeing that. So it is a bit mixed across total sale. I think if you backed out the 2 customers that we spoke about in our script, we're probably seeing a net down about 5%. And I think that's about consistent with the market, but it is definitely mixed in the performance. Alessandra Jimenez: Okay. That's helpful. And then what are you expecting from a cash flow perspective for 2026 on the improved EBITDA profitability? Do you anticipate positive free cash flow for the year? Todd Vogensen: Yes, we would expect positive free cash flow for the year. Apologies, I was getting an echo. Positive free cash flow for the year. And as we look at it, we'll have CapEx that we'll be reinvesting in and $20 million to $30 million of adjusted EBITDA that would get us modestly positive. And coming off of a Q1 where we're ending Q1 with our cash actually equal to where we ended Q4. That's the first time that we've been in that range in over 7 years. So we're off to a good start for the year for sure. Alessandra Jimenez: That's really helpful. And if I can just sneak one more in. I wanted to revisit the showroom channel. It's encouraging to see that strong comp growth. Can you speak to what you're seeing from a demand perspective and what's kind of accelerating there? And then how do you think about the roughly 20% of locations that are not yet 4-wall profitable? Robert DeMartini: Yes, Alessandra, let me try to tackle that. So Scott Kerby, who runs that channel, has been doing an excellent job in establishing a selling system. And what's driving the results is positive mix. As I mentioned in the script, our mattress percent to total of the premium line is now over 50% of dollar revenue. And so that obviously helps the stores be much more profitable. Of the 20% of stores, that's about 9 stores that are not 4-wall profitable, we think at least 5 of those can get there with continued development and maybe 3 to 4 of them we really have to look at and figure out if we have -- are we in the right location with the right rent structure. But it's been mix, tight labor discipline and really looking at the cost structure of those stores that have led to the significant improvement over the last 2 years. Operator: Your next question comes from the line of Brian Nagel with Oppenheimer. Brian Nagel: So I have a couple of questions. First off, just with regard to the newer products, the more innovative products, is that rollout now complete? Or should we expect further rollout here, I guess, through '26? And then my follow-up question, I guess, mostly for Todd. I mean maybe just outline kind of the capital needs from an operational standpoint, the capital needs of the business. Robert DeMartini: All right, Brian, let me take the first one, and then I'll let Todd answer the second one. Yes, that rollout is physically completed. We completed our Rejuvenate rollout probably in the middle of fourth quarter and then started the Royale, which is a curated version of similar price points. The official launch at Mattress Firm was March 20. It's on all the slots that it was aimed for at this point. But we still have significant opportunity to develop that line. I spoke about the percent to total in showrooms. It's much, much lower in wholesale and in e-commerce. And that's a business development opportunity. So we think we can continue to grow that as a percent to total, but the physical expansion is completed, and we're now looking to a very full innovation pipeline for other products starting in early '27. Todd Vogensen: And from a capital needs perspective, I should have said before, our target for the year is $10 million to $12 million in capital. That's just up modestly from the $8 million that we had in 2025. So the base CapEx is going to always be kind of the normal maintenance CapEx that we've had for the past several years, particularly in our operations. We do have a little bit of innovations CapEx this year as we innovate for new products going forward. And then the -- probably the big chunks that are incremental versus last year, with the new products going out this year, we are looking to expand some of the fixtures that go into stores. So you can think about that being the headboards. We have some branded walls that go in and a number of things that just help with the overall environment around the Purple products that we think help sell the products through. And then Rob mentioned, we have 5 new stores that we're planning for this coming year. There's a modest amount of CapEx that goes for those as well. Operator: I will turn the call back over to Robert DeMartini for closing remarks. Robert DeMartini: I just want to thank all of our shareholders and investors and lenders for the support we've gotten and I want to thank the Purple associates for the hard work they've put in on the business. I believe from the Q3 and Q4 results, you can see our turnaround is taking hold, and I want to say thank you to everybody for that. Todd Vogensen: Thank you, operator. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.